Operations Management: Strategies, Processes, and Techniques

Posted on Sep 8, 2024 in Other subjects

Operations Management Decisions

Strategic Decisions

Long-term decisions that shape the supply chain, including:

• Location and layout of facilities
• Product and service design and processes
• Human resources management

Tactical Decisions

Mid-term decisions focused on optimizing operations, such as:

• Quality control and maintenance
• Sourcing, distribution, and logistics

Operational Decisions

Short-term decisions related to daily operations.

Sequential Planning

A hierarchical planning process that includes:

• Operations strategy (years): Process design and logistics
• Aggregate planning (months): Forecasting and capacity decisions
• Production planning (months-weeks): Inventory and material requirement planning
• Production scheduling (days-hours): Job assignment to machines and workers

Theory of Constraints

A methodology for identifying and managing bottlenecks in a system.

Steps in Theory of Constraints:

1. Identify the bottleneck: Analyze the system to find the constraint that limits overall throughput. Consider hidden bottlenecks and the impact of product mix and lot sizes.
2. Exploit the bottleneck: Optimize the bottleneck’s utilization by eliminating idle time and ensuring it is used effectively.
3. Subordinate processes to the bottleneck: Synchronize other processes with the bottleneck’s pace to avoid overproduction or delays.
4. Elevate the bottleneck: Consider investments or process changes to increase the bottleneck’s capacity.
5. Repeat the process: Continuously monitor the system for new bottlenecks as the original constraint is addressed.

Operations Strategy

Competitive Dimensions

Key areas where businesses can achieve competitive advantage:

• Cost leadership: Offer maximum value to customers at the lowest cost.
• Differentiation: Create unique products with superior design, quality, or additional services.
• Quick response: Provide fast delivery, adapt to demand changes, and offer flexibility.

Product Design

Stages of product design:

1. Planning: Define the target market and product specifications.
2. Concept development: Explore different product forms, functions, and features.
3. System-level design: Determine the product architecture and components.
4. Design detail: Develop detailed product specifications.
5. Testing and refinement: Build and evaluate prototypes.
6. Production ramp-up: Start initial production, train the workforce, and resolve any issues.

Service Design

Considerations for designing services:

• Active customer involvement
• Potential for reduced productivity due to customer variability
• Techniques to reduce costs (e.g., delaying customization, modularization, service division)
• Types of service designs (e.g., personal attention, assembly line, self-service)

Process Strategy

Determining the most effective way to produce goods or services to meet customer needs and achieve efficiency.

Process Structures

• Project: Create a unique product or service.
• Workcenter: Group similar equipment or functions together.
• Manufacturing cell: Produce products with similar processing requirements in a dedicated area.
• Assembly line: Arrange work processes in a sequential flow.
• Continuous process: Similar to an assembly line but focused on a single product.
• Mass customization: Offer personalized products on a large scale.
• Make-to-order: Produce goods only after receiving customer orders.
• Make-to-stock: Produce standard products and store them in inventory to meet anticipated demand.
• Hybrid: Combine elements of make-to-order and make-to-stock.

Process Flowcharting

Using diagrams to visually represent the steps and elements of a process.

Common flowchart symbols:

• Square: Task or operation
• Diamond: Decision point
• Inverted triangle: Waiting line
• Arrow: Flow of material or information

Types of Processes

• Single-stage process
• Multiple-stage process

Process Flow Issues

• Buffering: Using storage areas between stages to manage variations in flow.
• Blocking: Activities stop due to a lack of space to deposit completed work.
• Starving: Activities stop due to a lack of units to process.

Linear Programming

A mathematical technique for optimizing an objective function subject to constraints.

Properties of Linear Programming

• Objective function and constraints are linear.
• Seeks to maximize or minimize the objective function.
• Involves decision variables.
• Deals with limited resources.

Conditions for Linear Programming

• Certainty
• Proportionality
• Additivity
• Divisibility
• Non-negativity

Limitations of Linear Programming

• May produce non-integer solutions.
• Does not handle uncertainty well.
• Requires linearity.

Integer Programming

A variation of linear programming where one or more variables must be integers.

Properties of Integer Programming

• Objective function and constraints are linear.
• Seeks to maximize or minimize the objective function.
• One or more variables are integers.
• Deals with limited resources.

Types of Integer Programming

• Pure integer programming: All variables are integers.
• Mixed integer programming: Some variables are integers, others are continuous.
• Binary integer programming: Some variables are binary (0 or 1).

Queueing Theory

A mathematical approach to analyzing waiting lines and optimizing service systems.

Parts of a Waiting Line System

• Arrival characteristics: How customers arrive (e.g., arrival rate, distribution).
• Waiting line characteristics: Length of the queue, queue discipline (e.g., FIFO).
• Service characteristics: Service design, service time distribution.

Queuing System Factors

• Length: Infinite or limited queue capacity.
• Number of lines: Single or multiple.
• Discipline: Priority rule (e.g., FCFS, reservations).
• Service time distribution: Exponential, constant, etc.

Waiting Line Models

Different models are used depending on the characteristics of the queuing system.

Inventory Management

Managing the flow and storage of goods to meet demand efficiently.

Inventory Costs

• Holding costs: Costs associated with storing inventory (e.g., warehousing, insurance).
• Ordering costs: Costs of placing an order (e.g., paperwork, shipping).
• Acquiring costs: Purchase cost of the inventory items.
• Shortage costs: Costs of not having enough inventory to meet demand (e.g., lost sales, backorders).

ABC Classification

A method for categorizing inventory items based on their importance and value.

• A items: High value, 20% of items, 70% of value.
• B items: Moderate value, 30% of items, 25% of value.
• C items: Low value, 50% of items, 5% of value.

Economic Order Quantity (EOQ)

A model for determining the optimal order size to minimize total inventory costs.

EOQ Assumptions

• Demand is constant and uniform.
• Lead time is constant.
• Price per unit is constant.
• Inventory holding cost is based on average inventory.
• Ordering or setup costs are constant.
• All demands will be satisfied without backorders.

EOQ Formula

Qopt = √(2DS/H)

Where:

• Qopt: Optimal order quantity
• D: Annual demand
• S: Ordering or setup cost per order
• H: Annual holding cost per unit

Just-In-Time (JIT)

A lean manufacturing philosophy focused on eliminating waste and improving efficiency.

Objectives of JIT

• Eliminate waste
• Respect for people

Five Zeros of JIT

• Zero defects
• Zero inventory
• Zero breakdowns
• Zero delays
• Zero paper

Key Features of JIT

• Guaranteed quality
• Rapid response
• Frequent deliveries in small lots

Pull System

Material flow is triggered by customer demand, moving from suppliers to final assembly based on actual needs.

Push System

Material flow is based on forecasts and production plans, pushing inventory through the system regardless of immediate demand.

Kanban System

A pull system that uses cards or signals to authorize production and movement of materials.

Shojinka

Flexibility in adapting to market demand through workforce agility and process adjustments.

Soikufu

Continuous improvement through employee suggestions and idea generation.

Jidoka

Autonomous defect control and quality assurance at the source.

Aggregate Planning

Intermediate-term planning (3-18 months) that focuses on setting production rates, workforce levels, and inventory levels for product categories.

Forecasting

Predicting future demand to inform production planning decisions.

Forecasting Methods

• Qualitative methods: Based on judgment and intuition.
• Time series methods: Use historical data to identify patterns and trends.
• Causal methods: Relate demand to underlying factors.
• Simulation: Model different scenarios to assess potential outcomes.

Production Planning Strategies

• Chase strategy: Adjust production levels to match demand by hiring and laying off employees.
• Stable workforce: Maintain a constant workforce size but vary work hours.
• Level strategy: Keep production levels constant and absorb demand fluctuations through inventory or backlogs.
• Hybrid strategy: Combine elements of different strategies.

Process Analysis

Evaluating and improving business processes to enhance efficiency and effectiveness.

Key Process Metrics

• Operation time: Setup time + run time
• Capacity: Maximum output rate of a process
• Throughput (TH): Units produced per unit of time
• Cycle time (CT): Time required to complete one unit of output
• Throughput time (TT): Total time a unit spends in the system
• Work in process (WIP): Number of units in the system at any given time
• Efficiency: Actual output / standard output
• Utilization: Time a resource is used / time a resource is available

Components of Production Time

• Setup time: Time to prepare a resource for processing
• Processing time: Time to actually process a unit
• Queue time: Time a unit waits in line for a resource
• Wait time: Time a unit waits for another part or process
• Idle time: Time a resource is not being used