COMPLETE Operations & Technology Management Study guide [4.0ed this final]

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Operations & Technology Management
SMG OM 323
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OM 12: Distribution Challenges Trade Offs: -transportation costs -inventory costs -customer responsiveness E-Business (e-commerce): the use of electronic technology to facilitate business transactions -includes interactions of different business organizations and interaction of individuals with business -Table 11.3 (p. 301) illustrates advantages -2 main functions 1. Web Site (front-end) 2. Order fulfillment (back-end): processing, billing, inventory management, packing, shipping -internet capability leads to demand fluctuations -somewhere in the supply chain, there needs to be a “bricks and mortar” facility -B2B Market Enablers 1. Financial: provide finance and other resources for web-enhanced commerce 2. Technology: provide software, applications, and expertise -ex) Fingerhut handles the back end of high-volume retailers such as Walmart Order fulfillment: the processes involved in responding to customer orders -fulfillment time is important criterion for customers -dependent on the level of products’ customization -4 approaches: 1. Engineer-to-Order (ETO): products designed/built to customer specification (long fulfillment time) 2. Make-to-Order (MTO): standard product design is used, but production of final product is linked to the final / customer’s specs (generally shorter than ETO but still fairly long) 3. Assemble-to-Order (ATO): products are assembled to customer specs from stocks of standard/modular components (fairly short ~1 week or less) 4. Make-to-Stock (MTS): productions based on forecast; products sold from finished goods inventory (fulfillment time is immediate but in e-commerce there is lag for shipping) Logistics: the movement of materials, services, cash, and info in supply chain -incoming vehicles  receiving  storage  work center (s)  temporary storage  last operation  final storage  packing/shipping  outgoing vehicle -Traffic Management: oversee shipment of incoming/outgoing goods -Radio frequency identification (RFID): use of radio waves to identify objects such as goods in supply chain -tags are like barcodes but contain more information -unlike barcodes, RFID tags scanned be scanned simultaneously and automatically -Managing Returns -defective products -recalled products -obsolete (out of date) products: 1 -unsold products returned from retailers -parts replaced in the field -items for recycling -waste -NOTE: firms are beginning to see the value in the returned products; no longer discard them -Reverse Logistics: process of physically transporting returned items -Gate Keeping: screening returned goods to prevent incorrect acceptance of goods -Avoidance: finding ways to minimize the number of items that are returned -Closed Loop Supply Chain: manufacturer controls both the forward and reverse shipment of product Third Part Logistics (3PL): outsourcing logistics management -takes advantage of specialists’ knowledge, their well-developed IS, and their ability to obtain more favorable shipping rates -enables company to focus on its core business -direct shipment: items are shipped directly from suppliers to retail stores -warehousing: items are stocked in warehouses (aka distribution centers) and shipped to stores as required -cross docking: warehouses function as shipping coordination points rather than inventory storage points; items are transferred between trucks so outbound trucks to retailers have products from multiple suppliers An Entrepreneur Seeks the Holy Grail of Retailing -Wal-Mart is the ideal retailer; can transform niche product into a household name -10,000+ suppliers vie for opportunity to be on Wal-Mart Shelves -includes interview + trial run -only 2% of vendors given trial run (only ¾ pass trial run) -does not want to account for more than 30% of suppliers business -PenAgain = ergonomic writing instrument (wishbone shaped) -Giants such as BIC and PaperMate have done little to improve comfort (worked on length and grip) -big break came from unconventional channel – Doctor’s Offices -provided testimonials/ additional exposure -expanded product line (pencil, highlighter, color, textures, etc.) -moved productions overseas to increase volume manufacturing capability and lowering price points -Roche and Ronse needed to sell 85% of product @ 500 stores in 42 days (trial period) -Goal is to balance commercial success with Wal-Mart and loyalty of small retailers (CHANNEL CONFLICT) OM 13: Location and Layout Planning -location decisions are made infrequently but tend to have significant impact -impact capacity and flexibility -long term commitment Objectives of Location Decisions -for profit: find location that maximizes profit potential -for nonprofits: find location that achieves balance between cost and level of customer service -aim to find “acceptable” locations rather than spend time and money searching for the one “best” location Supply Chain Considerations -Consider: centralized vs. decentralized distribution -Centralized: yields scale economies as well as tighter control (sometimes higher transportation costs) -Decentralized: more responsive to local needs Location Options -Managers of existing firms consider FOUR options: 1. Expand an existing facility (cheapest alternative) 2. Add new locations while retaining existing locations 3. Shut down location and relocate 4. Do nothing Procedure for Making Location Decisions 1. Decide on criteria for evaluating location alternatives (managerial preference) 2. Identify important factors 3. Develop location alternatives require elaboration 4. Evaluate alternatives and Make selection NOTE: identify countrygeneral region/locationsmall number of communitiessite alternatives -In terms of country, consider gov., labor, resources, financial incentives (taxes), market potential, culture, safety -In terms of location, consider location of raw materials -necessity -perishability -transportation costs -geographic information system: tool for collecting, storing, retrieving and displaying demographic data -some communities will offer incentives -community factors: education, recreation, transportation, religious worship, quality of police/medicine attitude toward company, community size (economy of small communities could be seriously hurt after relocation) -locate suppliers near customers to reduce lead times (Just-In Time Trend) -microfactories: small factory with a narrow product focus, located near major markets (reduce response time) -Product Plant Strategy: entire products/product lines are produced in separate plants (decentralized approach) -economies of scale -Market Area Plant Strategy: plants are designed to serve a particular geographic segment of a market -higher operating costs/lower shipping costs -Process Plant Strategy: different plants concentrate on different aspects of project -best suited for products that have numerous components -requires highly organized centralized administration -economies of scale/higher shipping costs -General Purpose Plant Strategy: plants are flexible/capable of handling a range of products -allows plants to be adaptive to market/product changes 3 Factor Rating: general approach to evaluating locations (qualitative and quantitative inputs) -provides a rational basis for evaluation by establishing a composite value for each alternative 1. Determine which factors are relevant 2. Assign a weight to each factor that indicates its relative importance (sum to 1.00) 3. Decide on a common scale for all factors (set minimum acceptable core, if necessary) 4. Score each location alternative 5. Multiply factor weight by the score for each factor; sum results 6. Choose highest composite score (unless it fails to meet minimum acceptable score) Center of Gravity Method: method for locating a distribution center that minimizes shipping cost/travel time -use a map (drawn to scale) -find weighted averages of coordinates Process Selection Strategy: deciding how to organize the production of goods/services -capital intensity: mix of equipment/labor that will be used by the organization -process flexibility: degree to which system can be adjusted to changes in processing requirements -technological innovation: discovery and development of new or improved products or processes -technology: application of scientific discoveries -product/service technology -process technology -information technology -NOTE: depends on variety in products, expected volume, degree of flexibility needed Process Types: there are FIVE basic types 1. Job Shop: used when a low volume of high variety goods is needed 2. Batch: used when a moderate volume of goods is desired and it can handle a moderate variety of goods 3. Repetitive: when higher volumes of more standardized goods are needed 4. Continuous: for very high volume of not discrete, highly standardized output is desire 5. Project: a non-repetitive set of activities directed toward a unique goal within a limited time frame NOTE: it is not unusual to find hybrid processes Facilities Layout: configuration of departments, work centers, and equipment with particular emphasis on movement of work through the system 1. Require substantial investments in money and effort 2. Involve long-term commitments, which make mistakes hard to overcome 3. Significant impact on cost and efficiency of operations -basic objective: facilitate smooth flow of work, material and info through system -Product Layouts: layout that uses standardized processing operations to achieve smooth, rapid high- volume -high rate of output -low unit cost due to high volume -labor specialization (reduces training costs and time) -low material-handling cost per unit -establishment of routing and scheduling in the initial design of the system -fairly routine accounting, purchasing, and inventory control -system is highly susceptible to shutdowns and equipment breakdowns -Production Line: standardized layout arranged according to a fixed sequence of production tasks -Assembly Line: standardized layout arranged according to a fixed sequence of assembly tasks -Preventative Maintenance: periodic inspection and replacement of worn parts or those with high failure rates which reduces the probability of breakdowns during the operations -U-shaped Layouts: increased communication and teamwork -Process Layouts: layouts that can handle varied processing requirements (nonrepetitive) -intermittent processing: nonrepetitive processing -variety of jobs causes constant adjustments -common in service environments -less vulnerable to shutdown or malfunction -Fixed Position Layouts: Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed -useful in large construction large construction projects -much higher administrative burden -NOTE: -Sequential Product Layouts (ex assembly line) -high utilization of specialized labor/equipment -low material handling cost and WIP inventory -routine scheduling, accounting and inventory control -low unit cost -Functional Product Layouts -handles variety of processing requirements -not particularly vulnerable to equipment failures -general purpose equipment is cheaper -possible to use individual incentive systems The Detailer (B) -plant location + rollout plan -target only the south and Midwest -focus advertising expense on the places where the most “do-it-yourself” car nuts live -build sales force early -proxy for sales volume: # of distribution centers that serve retailers in each state -limited distribution  can distribute economic volumes via own truck -can find someone to make plastic parts in any major city -rest of components are so small that freight costs are negligible OM 15 Process Analysis and Job Design -goal of product layout is to arrange workers/machines in the sequence that operations need to be performed -Line Balancing: process of assigning tasks to workstations in such a way that the workstations have approximately equal time requirements -minimizes the idle time along the line  higher utilization of workers/equipment -slower stations can create morale problems b/c workers must work continuously -it may not be feasible to combine certain tasks in the same time bundles -Cycle Time: maximum time allowed at each workstation to complete its set of tasks on a unit -establishes the output rate of a line/ 5 -Precedence Diagram: shows elemental tasks and their precedence requirements -managers apply several heuristic rules to provide good set of assignments 1. Assign tasks in order of most following tasks 2. Assign tasks in order of greatest positional weight (positional weight: sum of each task’s time and the times of all following tasks) -Job Design: specifying the contents and methods of jobs (who, what, when, where, how) 1. Efficiency Approach: emphasizes a systematic, logical approach 2. Behavioral Approach: emphasizes satisfaction of wants and needs -job enlargement: giving a worker a larger portion of the total tasks, by horizontal loading -horizontal loading: additional work is on the same skill/responsibility level -job rotation: workers periodically exchange jobs -job enrichment: increase level of responsibility for planning and coordination tasks (vertical loading) NOTE: job enlargement/enrichment contribute to lean operations -Specialization: work that concentrates on some aspect of a product or service -main rationale for specialization is so one can concentrate one’s efforts and become proficient -MGMT: simplifies training, leaders to higher productivity, and low wage costs -LABOR: low education and skills requirement, minimum responsibility, and little mental effort needed Motivation -influence quality and productivity -contributes to work environment -in ideal work environment, there is a high level of trust between workers and management -self directed teams: groups empowered to make certain changes in their work processes -workers close to the process have the best understanding of it; thus, more effective than management to make the most effective changes -increase quality, productivity, and worker satisfaction -Ergonomics: incorporation of human factors in the design of the workplace 1. Physical: repetitive movements, layout, health, safety 2. Cognitive: mental workload, decision making, human—computer interaction, work stress) 3.Organizational: communication, teamwork, work design -Methods Analysis: analyzes how a job is done (good source of productivity improvements) -done for both existing and new jobs (common sense analysis; does this task really need to be done?) 1. Identify the operation to be studied, and gather all pertinent facts about tools, equipment, and materials 2. For existing jobs, discuss with the operator or supervisor to get their input 3. Study and document the present method of an existing job using process charts. For new jobs, develop charts based on information about the activities involved 4. Analyze the job (flow process charts, worker-machine charts) 5. Propose new methods 6. Install new methods 7. Follow up -Selecting an Operation to Study -Have a high labor content - Are done frequently - Are unsafe, tiring unpleasant, loud - Are designated as problems -flow process charts: chart used to examine the overall sequence of an operation by focusing on movements of the operator or flow of materials -worker machine charts: chart used to determine portions of a work time cycle during which an operator and equipment are busy or idle -Motion Study: systematic study of the human motions used to perform an operation -purpose is to eliminate unnecessary motions and identify the best sequence of motions for maximum efficiency 1. Motion study principles: guidelines for designing motion-efficient work procedures A. principles for the use of the body B. principles for arrangement of the workplace C. principle for the design of tools and equipment 2. Therbligs: basic elemental motions that make up a job -approach is to break jobs into basic elements and base improvements on eliminating, combining or rearranging - search: hunt for item with hands or eyes - select: choose forma group of objects - grasp: take hold of an object - hold: retention of an object after it has been grasped - transport load : movement of an object after hold - release: deposit the object 3. Micromotion Study: use of motion pictures and slow motion to study motions that otherwise would be too rapid to analyze 4. Charts (ex. Simo chart) Process Analysis Notes -process: any conversion where inputs are transformed into outputs 1. Create a process flow diagram 2. Analyze the operating unit structure 3. Analyze the work flow 4. Evaluate the overall process -The Process Flow Diagram -tasks = circles or rectangles -flows = arrows - decision points = diamonds -storage = inverted triangle -work order: specifies # of units to be produced at a time (batch size) and sequence of steps (flow/routing) 7 -The Operating Unit -within the operating unit, work centers perform transformation operations -run time: sum of the times required to complete the work for each task -set up time: time to prepare and clean up task (INDEPENDENT OF NUMBER OF ITEMS IN BATCH) -jobs: desired output for the operating unit/work center -throughput (elapsed) time: time required for a unit to pass through an operating unit including waiting time between operations -associated with a particular job -cycle time: rate at which operating unit produces an item; time between job completions (time available/capacity units) -characteristic of the system -capacity = time available / cycle time -capacity utilization = capacity required/capacity available -Work Flow -bandwidth: ability of an operating unit to tolerate wide variances in work order requirements -tolerance to volume surges -balance: relationship between cycle times in a process (capacities of different work centers are similar)
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