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ProductionandOperationsManagement

XZhujunGuangdongPolytechnicNormalUniversityProductionandOperationsMana1

(1)Introduction(2)OperationsStrategy(3)ProductandServiceDesign(4)StrategicCapacitymanagement

(5)Processselection(ProductionprocessesandProcessAnalysis)（6）Jobdesignandworkmeasurement（7）FacilityLayout

(8)Serviceprocesses

2（9）Waitinglineanalysis（10）ManagingQuality(11)Supplychainmanagement(12)DemandmanagementandForecasting（13）Inventorycontrol（14）Materialrequirementsplanning（9）Waitinglineanalysis3PARTTWOMANUFACTURING,PRODUCTION,ANDSERVICEPROCESSES

(4)StrategicCapacitymanagement-1PARTTWOMANUFACTURING,PRODUC4ChapteroutlineRecognizetheconceptofcapacityandhowimportantitisto“manage”capacity.Explaintheimpactofeconomiesofscaleonthecapacityofafirm.Understandhowtousedecisiontreestoanalyzealternativeswhenfacedwiththeproblemofaddingcapacity.Describethedifferencesinplanningcapacitybetweenmanufacturingfirmsandservicefirms.ChapteroutlineRecognizethec5CapacitymanagementinoperationsDefinitionofcapacity:theabilitytohold,receive,storeoraccommodate.Capacitydecisionmustbealignedwiththeoperationsstrategyofafirm.(longrange,mediumrange,andshortrange)Capacitymanagementinoperati6CapacityplanningconceptsCapacityBestoperatinglevelreferstothelevelofcapacityforwhichtheprocesswasdesigned.Itisthevolumeofoutputatwhichaverageunitcostisminimized.Capacityutilizationraterevealshowcloseafirmistoitsbestoperatinglevel.（therelationshipbetweenactualoutputandcapacity.）Capacityused(Actualoutput)Capacityutilizationrate=---------------------------------------Bestoperatinglevel(Capacity)CapacityplanningconceptsCapa7ForexampleIfourplant’sbestoperatinglevelwere500carsperdayandtheplantwascurrentlyoperatingat480carsperday,thecapacityutilizationratewouldbe…96%Otherrestriction:requiresthenumeratoranddenominatorbemeasuredinthesameunitsandtimeperiods.ForexampleIfourplant’sbest8FACILITIESDECISIONSHowmauchcapacityisneeded?Howlargeshouldeachfacilitybe?Whenisthecapacityneeded?Whereshouldthefacilitiesbelocated?Whattypeoffacilities/capacityareneeded?FACILITIESDECISIONSHowmauch9FacilitiesstrategyAmountofcapacitySizeoffacilitiesTimingoffacilitydecisionsFacilitylocationTypesoffacilitiesFacilitiesstrategyAmountofc10AmountofcapacityDeterminingcapacityrequirements1)Useforecastingtechniquestopredictsalesforindividualproductswithineachproductline.2)Calculateequipmentandlaborrequirementstomeetlineforecasts.3)Projectlaborandequipmentavailablitiesovertheplanninghorizon.Capacitycushiondescribeshowmuchcapacitytoprovideinrelationtoexpecteddemand.AmountofcapacityDetermining11CapacitycushionLargecushion.Moderatecushion.Smallcushion.CapacitycushionLargecushion.12Whenplanningthecapacitycushion,firms:

assesstheprobabilityofvariouslevelsofdemandandthenusedthoseestimatestomakedecisionsaboutplannedincreasesordecreasesincapacity.Forexample,afirmhascapacitytoproduce1200units,50percentprobabilityof1000unitsofdemand,and50percentprobabilityof800unitsofdemand.Thenaveragedemandisestimatedtobe:Utilizationrateofproducing900units:Basedontheexistingcapacity,thecushionis:(900/1200)*100%=75%100%-75%=25%(.5*1000)+(.5*800)=900unitsWhenplanningthecapacitycus13Predicteddemand.Costoffacilities.Likelybehaviorofcompetitors.Businessstrategy.Internationalconsiderations.Predicteddemand.14SizeoffacilitiesECONOMIESANDDISECONOMIESOFSCALESizeoffacilitiesECONOMIESAN15FacilitylocationselectionImportanceoffacilitylocationselection:Regionselection:AglobalpointofviewLocateinregionscompetewithexistingcustomersorcreatedemandfortheproductandserviceSpecificplace:Expansionoffacility：Movefacilitysite：FacilitylocationselectionImp16InfluencingfactorsinsiteselectionquantitativefactorsqualitativefactorsInfluencingfactorsinsitese17QualitativefactorsTypesofregionselectionInfluencingfactorsCountryStabilityofpoliticalsituationGovernmentpolicyandincentivesEconomyandculture,religiousbeliefInterestratesRegionorcityRegionalpolicy…Targetmarket…Supplysourceofrawmaterial…Transportationcondition…Correspondingsiteofcooperationmanufacturers…Laborresources…Weathercondition…InfrastructureconditionDetailedlayoutPlacesizeConditionsthatcanbeexpandedGeologicalconditionSurroundingenvironmentQualitativefactorsTypesofre18HowmuchdidAlabamaspendtowinthenameofautoindustrybaseIn1993,Benzwasconvincedtostarthisfirstautofactoryinacityofthestate(incentives$253million),providing1500workingpositions,=$169,000foreachW.P.Taxpayersvoteagainstthegovernor2005,expandto4000W.P2003,Hondaentered,correspondingincentives,producingmotorengine2005,HyundaiMotorentered,motorvehicleassemblyplantNow,84000workingpositionsCASEHowmuchdidAlabamaspendto19TargetmarketGeographicallynearmaybegoodforproductsenteringonemarketandreducingthelogisticcostConvenience.Serviceindustryisobvious:nearcenterlocation,e.g.restaurants,shoppingmalls,laundries,communityhospital,banks,etc.Forexample,whymostsupermarketshavechainstores?Scaleor…?Manufactureindustry.Cococolabuildfactoryinchina,humanresources,andproductenterthemarkettoo.Fillingfactoriesindifferentregions.Marketsegments.TargetmarketGeographicallyne20SupplysourceofrawmaterialSitenearthetargetmarketorrawmaterialdecidedbythreefactors:Necessity.Mining,agriculture,forestry,andfishery.Vulnerability,orfragilegoodsoreasilyrottenfood.esp.seafood,freshfruitorvegetable,dairyproduct,etc.Transportationcost.Neartheproducingfield/originreducethecost.E.g.papermill,sugarproduction,steelsmelting,etc.Supplysourceofrawmaterial21TransportationconditionsConvenientNearrailway,portsorhighwayTransportationconditionsConve22CorrespondingsiteofcooperationmanufacturersSiliconvalley,Industrypark,automotivezone(motorcity)Industrychain,cooperativeprovidersE.g.mold,injectionmolding,metal,aluminumalloydie-castingCorrespondingsiteofcooperat23LaborresourcesLaborcostisimportanttoLabor-intensiveindustriesLowsalaryvs.laborproductivityAcaseinpoint:QualityCoilsSalary:1/3ofAmerica,laternearlybankruptcyReasons:CaseLaborresourcesLaborcostisi24WeatherconditionHumidity,temperature,airpressureshouldbeconsidered.Zhuhai,Nansha,Huangpu,asanexample,engineproduction,Damp,corrosionandrustWeatherconditionHumidity,tem25WaystodecideplantsiteselectionFactorevaluationmethod:ChooserelatedfactorsGiveweight,toshowcomparableimportance(weighttotal1.00,100%)Giveeachunifiednumericalrange(say,0-10or0-100)Multipleeachscorewithitsweight,addtogethertogetthetotal.ChoosethehighestscoreWaystodecideplantsitesele26UsingdecisiontreestoevaluatecapacityalternativesAdecisiontreeisaschematicmodelofthesequenceofstepsinaproblemandtheconditionsandconsequencesofeachstep.Seeexample4.2Usingdecisiontreestoevalua27E-Educationisanewstar-upthatdevelopsandmarketsMBAcoursesofferedovertheInternet.ThecompanyiscurrentlylocatedinChicagoandemploys150people.Duetostronggrowththecompanyneedsadditionalofficespace.ThecompanyhastheoptionofleasingadditionalspaceatitscurrentlocationinChicagoforthenexttwoyears,butafterthatwillneedtomovetoanewbuilding.AnotheroptionthecompanyisconsideringismovingtheentireoperationtoasmallMidwesttownimmediately.AthirdoptionisforthecompanytoleaseanewbuildinginChicagoimmediately.Ifthecompanychoosesthefirstoptionandleasesnewspaceatitscurrentlocation,itcan,attheendoftwoyears,eitherleaseanewbuildinginChicagoormovetothesmallMidwesttown.ExerciseE-Educationisanewstar-upt28Thefollowingaresomeadditionalfactsaboutthealternativesandcurrentsituation:1.Thecompanyhasa75%chanceofsurvivingthenexttwoyears.2.LeasingthenewspacefortwoyearsatthecurrentlocationinChicagowouldcost$750,000peryear.3.MovingtheentireoperationtoaMidwesttownwouldcost

$1million.Leasingspacewouldrunonly$500,000peryear.4.MovingtoanewbuildinginChicagowouldcost$200,000,andleasingthenewbuilding’sspacewouldcost$650,000peryear.5.Thecompanycancanceltheleaseatanytime.6.Thecompanywillbuilditsownbuildinginfiveyears,ifitsurvives.7.Assumeallothercostsandrevenuesarethesamenomatterwherethecompanyislocated.WhatshouldE-Educationdo?Thefollowingaresomeadditio29KFC’sfollow-upstrategyinsiteselectionBusinessdivisionandchoice.GuestgatheringPointmeasurementandchoice.KFC’sfollow-upstrategyinsi30ProductionandOperationsManagement

XZhujunGuangdongPolytechnicNormalUniversityProductionandOperationsMana31

(1)Introduction(2)OperationsStrategy(3)ProductandServiceDesign(4)StrategicCapacitymanagement

(5)Processselection(ProductionprocessesandProcessAnalysis)（6）Jobdesignandworkmeasurement（7）FacilityLayout

(8)Serviceprocesses

32（9）Waitinglineanalysis（10）ManagingQuality(11)Supplychainmanagement(12)DemandmanagementandForecasting（13）Inventorycontrol（14）Materialrequirementsplanning（9）Waitinglineanalysis33PARTTWOMANUFACTURING,PRODUCTION,ANDSERVICEPROCESSES

(4)StrategicCapacitymanagement-1PARTTWOMANUFACTURING,PRODUC34ChapteroutlineRecognizetheconceptofcapacityandhowimportantitisto“manage”capacity.Explaintheimpactofeconomiesofscaleonthecapacityofafirm.Understandhowtousedecisiontreestoanalyzealternativeswhenfacedwiththeproblemofaddingcapacity.Describethedifferencesinplanningcapacitybetweenmanufacturingfirmsandservicefirms.ChapteroutlineRecognizethec35CapacitymanagementinoperationsDefinitionofcapacity:theabilitytohold,receive,storeoraccommodate.Capacitydecisionmustbealignedwiththeoperationsstrategyofafirm.(longrange,mediumrange,andshortrange)Capacitymanagementinoperati36CapacityplanningconceptsCapacityBestoperatinglevelreferstothelevelofcapacityforwhichtheprocesswasdesigned.Itisthevolumeofoutputatwhichaverageunitcostisminimized.Capacityutilizationraterevealshowcloseafirmistoitsbestoperatinglevel.（therelationshipbetweenactualoutputandcapacity.）Capacityused(Actualoutput)Capacityutilizationrate=---------------------------------------Bestoperatinglevel(Capacity)CapacityplanningconceptsCapa37ForexampleIfourplant’sbestoperatinglevelwere500carsperdayandtheplantwascurrentlyoperatingat480carsperday,thecapacityutilizationratewouldbe…96%Otherrestriction:requiresthenumeratoranddenominatorbemeasuredinthesameunitsandtimeperiods.ForexampleIfourplant’sbest38FACILITIESDECISIONSHowmauchcapacityisneeded?Howlargeshouldeachfacilitybe?Whenisthecapacityneeded?Whereshouldthefacilitiesbelocated?Whattypeoffacilities/capacityareneeded?FACILITIESDECISIONSHowmauch39FacilitiesstrategyAmountofcapacitySizeoffacilitiesTimingoffacilitydecisionsFacilitylocationTypesoffacilitiesFacilitiesstrategyAmountofc40AmountofcapacityDeterminingcapacityrequirements1)Useforecastingtechniquestopredictsalesforindividualproductswithineachproductline.2)Calculateequipmentandlaborrequirementstomeetlineforecasts.3)Projectlaborandequipmentavailablitiesovertheplanninghorizon.Capacitycushiondescribeshowmuchcapacitytoprovideinrelationtoexpecteddemand.AmountofcapacityDetermining41CapacitycushionLargecushion.Moderatecushion.Smallcushion.CapacitycushionLargecushion.42Whenplanningthecapacitycushion,firms:

assesstheprobabilityofvariouslevelsofdemandandthenusedthoseestimatestomakedecisionsaboutplannedincreasesordecreasesincapacity.Forexample,afirmhascapacitytoproduce1200units,50percentprobabilityof1000unitsofdemand,and50percentprobabilityof800unitsofdemand.Thenaveragedemandisestimatedtobe:Utilizationrateofproducing900units:Basedontheexistingcapacity,thecushionis:(900/1200)*100%=75%100%-75%=25%(.5*1000)+(.5*800)=900unitsWhenplanningthecapacitycus43Predicteddemand.Costoffacilities.Likelybehaviorofcompetitors.Businessstrategy.Internationalconsiderations.Predicteddemand.44SizeoffacilitiesECONOMIESANDDISECONOMIESOFSCALESizeoffacilitiesECONOMIESAN45FacilitylocationselectionImportanceoffacilitylocationselection:Regionselection:AglobalpointofviewLocateinregionscompetewithexistingcustomersorcreatedemandfortheproductandserviceSpecificplace:Expansionoffacility：Movefacilitysite：FacilitylocationselectionImp46InfluencingfactorsinsiteselectionquantitativefactorsqualitativefactorsInfluencingfactorsinsitese47QualitativefactorsTypesofregionselectionInfluencingfactorsCountryStabilityofpoliticalsituationGovernmentpolicyandincentivesEconomyandculture,religiousbeliefInterestratesRegionorcityRegionalpolicy…Targetmarket…Supplysourceofrawmaterial…Transportationcondition…Correspondingsiteofcooperationmanufacturers…Laborresources…Weathercondition…InfrastructureconditionDetailedlayoutPlacesizeConditionsthatcanbeexpandedGeologicalconditionSurroundingenvironmentQualitativefactorsTypesofre48HowmuchdidAlabamaspendtowinthenameofautoindustrybaseIn1993,Benzwasconvincedtostarthisfirstautofactoryinacityofthestate(incentives$253million),providing1500workingpositions,=$169,000foreachW.P.Taxpayersvoteagainstthegovernor2005,expandto4000W.P2003,Hondaentered,correspondingincentives,producingmotorengine2005,HyundaiMotorentered,motorvehicleassemblyplantNow,84000workingpositionsCASEHowmuchdidAlabamaspendto49TargetmarketGeographicallynearmaybegoodforproductsenteringonemarketandreducingthelogisticcostConvenience.Serviceindustryisobvious:nearcenterlocation,e.g.restaurants,shoppingmalls,laundries,communityhospital,banks,etc.Forexample,whymostsupermarketshavechainstores?Scaleor…?Manufactureindustry.Cococolabuildfactoryinchina,humanresources,andproductenterthemarkettoo.Fillingfactoriesindifferentregions.Marketsegments.TargetmarketGeographicallyne50SupplysourceofrawmaterialSitenearthetargetmarketorrawmaterialdecidedbythreefactors:Necessity.Mining,agriculture,forestry,andfishery.Vulnerability,orfragilegoodsoreasilyrottenfood.esp.seafood,freshfruitorvegetable,dairyproduct,etc.Transportationcost.Neartheproducingfield/originreducethecost.E.g.papermill,sugarproduction,steelsmelting,etc.Supplysourceofrawmaterial51TransportationconditionsConvenientNearrailway,portsorhighwayTransportationconditionsConve52CorrespondingsiteofcooperationmanufacturersSiliconvalley,Industrypark,automotivezone(motorcity)Industrychain,cooperativeprovidersE.g.mold,injectionmolding,metal,aluminumalloydie-castingCorrespondingsiteofcooperat53LaborresourcesLaborcostisimportanttoLabor-intensiveindustriesLowsalaryvs.laborproductivityAcaseinpoint:QualityCoilsSalary:1/3ofAmerica,laternearlybankruptcyReasons:CaseLaborresourcesLaborcostisi54WeatherconditionHumidity,temperature,airpressureshouldbeconsidered.Zhuhai,Nansha,Huangpu,asanexample,engineproduction,Damp,corrosionandrustWeatherconditionHumidity,tem55WaystodecideplantsiteselectionFactorevaluationmethod:ChooserelatedfactorsGiveweight,toshowcomparableimportance(weighttotal1.00,100%)Giveeachunifiednumericalrange(say,0-10or0-100)Multipleeachscorewithitsweight,addtogethertogetthetotal.ChoosethehighestscoreWaystodecideplantsitesele56UsingdecisiontreestoevaluatecapacityalternativesAdecisiontreeisa

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