OPERATNS AND PRODUCTION MGT
OPERATNS AND PRODUCTION MGT MGT 329
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CHAPTER 1 INTRODUCTION TO THE FIELD Review and Discussion Questions I What is the difference between OM and ORMS Between OM and IE Operations Management OlI is a synthesis of concepts and techniques that relate directly to production systems and enhance their management Operations Management has a distinct management role that differentiates it from OR and IE Operations Managers use the tools of OR in decision making and are concerned with many of the same issues as Industrial Engineers Operations ResearchManagement Science ORMS is a branch of applied mathematics while Industrial Engineering IE is an engineering discipline 2 How would you distinguish OM from management and organizational behavior as taught at your university Management and organizational behavior is concerned with the formulation of corporate strategic policy Operations Management is concerned with the operations strategy which specifies how the firm will employ its production capabilities to support its corporate strategy 5 Using Exhibit 12 as a model describe the inputtransformationoutput relationships found in the following systems a An airline Inputs passengers Components planes crews equipment terminals imary functions transportation Output satisfied safe customers b A state penitentiary Inputs criminals Components legal system physical plant prison guards and support staff Primary functions segregation of prisoners from society punishment rehabilitation Output reformed society members c A branch office of a bank Inputs customers Components tellers bank officers teller windows systems Primary functions deposit and withdrawal handling loan initiation storing money and valuables Output satisfied customers positive return on loan ratios d The home office of a major banking firm Inputs paperwork from customers and other institutions Components loan underwriters clerks computer systems Primary function recordkeeping loan processing coordinating cash flows Output satisfied customers sound investment portfolios CHAPTER 12 LEAN PRODUCTION Review and Discussion Questions 1 Equot W 5 What lean principles are being used by Arvin Meritor Inc see the box on pages 482 and 483 Use the categories from Exhibit 128 to develop your answer Arvin Meritor Inc uses a variety of lean techniques including teams continuous improvement Visual communications on the shop oor to control the ow of materials pull system using kanban signals and production leveling quick changeover exibility small lot production and quality at the source Is it possible to achieve zero inventories Why or why not In reality zero inventories are a challenging if not impossible goal for most organizations The concept is theoretical because the ideal production unit is one Nothing is made until the customer expresses an unmet need for the product In reality inventories will always exist due to the timing between the expressed need and the actual delivery of the completed units Nevertheless this goal aids in understanding of the lean concepts and remains a reference point to continually remember in the ongoing improvement process Stopping waste is a vital part of lean Identify some sources of waste in your home or dorm and discuss how they may be eliminated Waste can include work in process raw materials and nished goods that are not being directly worked on or being shipped to the customer Any processes or procedures not needed to complete the product or deliver the service are wastes Material sitting in stores and queues are also sources of waste as is excess or inef ciencies Through applications of lean principles of streamlining ows and only performing work as it is needed these wastes can be reduced and possibly eliminated Answers will vary to this question but some obvious choices can be found in the refrigerator with bills waiting to be paid and of course laundry For example if laundry were done in small lots on a regular basis fewer clothes would be needed Of course many people might not consider this an improvement Discuss lean in ajobshop layout and in a line layout Lean can be applied in a variety of organizational process ows While pure lean applications are often thought of as a line improvement lean can work in services or in job shops In a job shop any repetitive work can be organized and arranged as a line ow This visibility of the process allows application of lean 143 Chapter 12 U 9 gt1 00 0 Why must lean have a stable schedule Because any changes in the nal product schedule are magni ed backward along the line a stable schedule is necessary This schedule must be frozen at some point Also because suppliers and vendors are delivering in small batches just as materials are needed they need accurate information about the build schedule so they can plan their corresponding deliveries Will lean work in service environments Why or why not Lean is already achieving successes in a number of service environments As services identify their components that resemble an assembly line and are repetitive in nature the concepts will work Also the philosophy of reducing waste and streamlining ows to eliminate waste can work in any setting Discuss ways to use lean to improve one of the following a pizza restaurant a hospital or an auto dealership Any number of answers would be correct For example in a pizza restaurant streamlining the pizza preparation and baking operations would speed the product to the customer Fast and efficient customer ordering and payment would allow the system to process more customers Possibly letting customers re ll their own drinks or serve themselves would speed processing In a hospital or automobile dealership procedures can be streamlined and altered to serve the customer Which objections might a marketing manager have against uniform plant loading Uniform plant loading might upset a marketing manager who is planning a special promotional campaign for a speci c product If production did not make enough of the units during the promotional period backorders or lost sales might result Also because some products have different life cycles and sales patterns this smoothing might hinder the marketing activities What are the implications for cost accounting of lean production Cost accounting can bene t lean analysis but outdated measures tied to labor rates and productivity no longer apply Overhead is the key variable to measure under lean Labor is only a small part of the entire production dollar Also labor and machinery may be idle under lean because goods are only produced as needed Labor and machinery variances may not re ect the lean philosophy What are the roles of suppliers and customers in a lean system Lean involves customers and suppliers as an integral part of the process Customers provide product enhancement modi cation and usage data Suppliers work with the manufacturing organization to coordinate delivery and raw material or other input production Both groups may sit on lean teams and participate in improvement activities as all groups will bene t from changes 144 Lean Production 11 Explain how cards are used in a Kanban system 4 N W U Cards in a kanban system represent a visual work order As material is moved from the line to the customer the last operator in the process goes to the next workstation up the line and pulls a bin of work for further processing This employee removes a card from the bin and leaves it at the previous station This card represents a work order for this station to make or process more products This sequence continues in a backward fashion through the line and back to the suppliers In which ways if any are the following systems analogous to Kanban returning empty bottles to the supermarket and picking up lled one running a hot dog stand at lunchtime withdrawing money from a checking account raking leaves into bags All the systems represent work orders when the empty containers are returned The empty bottles at the supermarket will be picked up by the soda bottler and represent a need to clean and re ll the bottles and return them to customers A hot dog stand at lunchtime has hungry customers as work orders to process The customers in line represent needs for the hot dogs Withdrawing money from a checking account serves as a receipt and also a tickler to the individual to deposit more money in the account at the next pay period Raking leaves into bags is also a kanban Once a bag is lled the individual pulls an empty bag from the box and continues to ll bags until the yard is free of leaves or no empty bags remain Why is lean so hard to implement in practice A key implementation difficulty is the lack of emphasis on lean on an ongoing basis The lean improvements are slow take time and are never ending Initial enthusiasm may wane over time Other problems in implementation include poor supplier quality a lack of employee commitment and problems in reducing machine set up times Explain the relationship between quality and productivity under the lean philosophy Under JIT quality and productivity are key and equal partners As quality improves so does productivity as only good units are assembled No work is wasted on preparing inferior quality items Both are necessary in the lean philosophy Why would a TIT advocate have a problem with the system proposed for the BMW AG s U S Factory discussed in the box BMW moves beyond justintime production Most of the system characteristics are in line with lean or TIT production The obvious area of disagreement is using the vehicle stacking center to solve scheduling problems In some respects it is a monument to inventory 145 W U CHAPTER 10 SUPPLY CHAIN STRATEGY P 1m 1 A l u ad IInnl Innquot up mi With so much productive capacity and room for expansion in the United States why would a company based in the United States choose to purchase items from foreign rm Discuss the pros and cons The use of foreign rms can provide a US rm more alternatives in selecting a supplier The pros are more choices potentially reduced costs in the areas of materials transportation production and distribution and potentially moving closer to a foreign market The cons are the distance is generally increased communications problems are increased due to distance culture and tec o ogy There may be problems with customs government regulations political stability etc Describe the differences between functional and innovative products Functional products are staples that people buy in a wide range of retail outlets Typically they do not change much over time have low pro t margins stable predictable demand and long life cycles Innovative products on the other hand give customers additional reasons to buy Fashionable clothes and personal computers are examples of innovative products Innovative products have short life cycles high pro t margins and volatile demand rillnrl39n A um Au 1 u 391 quotMn hair quota 11111 As a supplier which factors would you consider about a buyer your potential customer to be important in setting up a longterm relationship The nancial stability and credit worthiness of the company is of primary importance The reputation of the company visavis their supplier is also very important For example is this a company that is fair with its suppliers and honors its payables in a timely fashion Is the technological match between supplier and customer sufficient Will delivery schedules and quantities be stable facilitating smooth operations What are the advantages of using the postponement strategy Process postponement delays the process step that differentiate the product to as late in the supply chain as possible The advantages of this approach are that lower levels of inventory and fewer models are needed to match customer requirements This results in higher levels of customer satisfaction at a lower cost CHAPTER 18 SYNCHRONOUS MANUFACTURING AND THEORY OF CONSTRIANTS Review and Discussion Questions State the global performance measurements and operational performance measurements and rie y de ne each of them How do these differ from traditional accounting measurements Global performance measurement Net pro timeasurement in dollars 0 Return on investmentigenerally a percent of the investment Cash owithe amount of cash available for day to day operations From an accounting standpoint deductions such as for depreciation are added back in since depreciation is not really money spent 0 perational measurement Throughputithe actual rate of sales generated by the system Inventoryiall the money invested in things that are intended to be sold This includes raw materials equipment etc but at the cost price less any depreciation which is operating expense This includes Operating expenseimoney spent to convert inventory into throughput direct and indirect labor materials depreciation administrative costs etc Traditional accounting methods work with such things as standard costs allocation of burdens whic may consist of indirect labor administrative costs insurance taxes depreciation etc and gross pro ts net pro ts cost centers pro t centers all of which may be based on standards and allocations These may not have any basis in reality Many examples can be cited where traditional accounting forces wrong decisions One speci c example that one of the authors has confronted is of a V P of manufacturing who is terminating a very pro table product line because on paper this product line is losing money Why Because overhead is allocated based on the amount of direct labor and this product line is almost alldirect labor with very little equipment involved His allocation of everyone else s burden creates a paper loss Under these circumstances he would lose his annual bonus and be rated down in his performance Other areas of accounting differences inventory in traditional accounting is carried the same as cost of goods sold ie with all the labor and burdens included In operational measurement s terminology inventory is carried as the cost of the raw materials 264 Synchronous Manufacturing and Theory of Constraints 2 Discuss process batch and transfer batches How might you determine what the sizes should be Process batch size is the total number of units that are scheduled to be processed within the same setup Larger process batches involve fewer setups and therefore have more output The reverse is true for smaller process batches Transfer batches refers to the movement of part of the process batch rather than waiting for the entire job to be completed A process batch of 1000 for example can be transferred in ten batches of 100 each Process batch and transfer batch sizes can be controlled from a bottleneck or capacity constrained resource 3 Compare and contrast JIT MRP and synchronized manufacturing stating their main features such as where each is or might be used amounts of raw materials and workin process inventories production lead times and cycle times and methods for control Synchronized Question JIT MRP 39 f 39 Where used Continuous ow Job shop custom Job shop custom maketostock shop shop WIP Very low Very high low Production cycle time Very short Very long Short Schedule exibility Level production for MRP frozen for 30 Can be changed daily min of 30 days days but variable in as needed work centers Regard for capacity High Tries to Terrible May start Is founded on limits balance capacity off 0k but quickly capacity limitations becomes inaccurate Labor skills Multiskilled to help Specialized in own Same as MRP out other areas work area 4 Compare the importance and relevance of quality control in JIT MRP and synchronous manufacturing Quality control is extremely important at each workstation in JIT JIT cannot tolerate poor quality since the result is loss of throughput Therefore each worker or workstation is responsible for ensuring that only high quality work passes through Quality control in MRP is somewhat haphazardly applied Defects can occur anywhere and full responsibility for quality does not lie within each workstation Inspection points are placed within the system generally with the placement decided by the algorithm when the expected cost of bad quality output exceeds the cost of inspection we will place an inspection point there Quality control in synchronous manufacturing is speci cally decided based on importance First a bottleneck or CCR is identi ed as the constraint of the system This critical resource 265 Chapter 18 U 9 will then be guaranteed that it will not waste time working on bad parts since inspection will be done on its incoming side Flow after this bottleneck should not be interrupted or scrapped Therefore all parts that join into this product after the bottleneck will have passed inspection Also all processing after the bottleneck will be of high quality so that scrap will not be created In summary inspect before the BN and inspect all parts entering the ow after the BN also perform high quality work at all stations after the BN Discuss what is meant by forward loading and backward loading Forward loading is similar to project scheduling Tasks are scheduled from some pint into the future When resources are limited tasks are assigned until capacity is reached and then carried forward to the next period Backward loading is the MRP type scheduling where the nished product or required part is needed From that future point a schedule is created back to the present allowing for processing and lead time requirements at each step of the way De ne and explain the cause or causes of a moving bottleneck Generally a moving bottleneck is caused by batch sizes that are too large What happens is that a large batch scheduled on a machine or resource whichon the average has excess capacityprevents other products from being completed that also need the same resource This interrupts the ow and starves downstream resources From their perspective looking upstream they see that particular resource as the bottleneck However days or weeks later because of the product mix this apparent bottleneck will disappear Another large batch size somewhere else in the system will appear which does the same thing ie starves downstream operations Explain how a nonbottleneck can become a bottleneck A nonbottleneck can become a bottleneck when it is scheduled with a batch size that is too large For example assume that machine 1 provides work to machine 2 and machine 3 Say that machine 1 works 7 hours out of each 8 hours and so is not a bottleneck Suppose however that someone decides to save some setup time by scheduling work on machine 1 in much larger batchessay 20 hours for machine 2 and 15 hours for machine 3 5 times larger batch sizes Machine 3 will be starved for work since it will be dealing with a 40 hour cycle rather than an 8 hour cycle and will have to wait until machine 1 produces the parts which it needs Thus from machine 3 s point of view machine 1 has become a bottleneck What are the functions of inventory in MRP JIT and synchronous manufacturing scheduling MRP assumes WIP inventories and times the production of these inventories to coincide with the preplanned delivery dates The costs of inventories are computed based on carrying costs Inventories are seen as necessary MRP systems allow for economic order quantities buffer stocks and safety stocks In MRP systems inventories are pushed through the productive processes Justintime on the other hand sees inventories as wasteful Means are sought by which inventories can be reduced or eliminated Constant attention is given to the reduction of unnecessary inventories This creates a productive system where stability is important and 266 0 N Synchronous Manufacturing and Theory of Constraints quality must be assured Synchronous manufacturing treats inventory as a loan given to the manufacturing unit Inventories are measured by raw materials cost Buffer inventories are utilized to assure throughput Overall synchronous manufacturing discourages inventory if it serves no purpose Inventory is measured in terms of dollar days with the goal of minimizing dollar days De ne process batch and transfer batch and their meaning in each of these applications MRP HT and bottleneck or constrained resource logic In an assembly line process batch refers to the batch size associated with a production process Theoretically this batch size can be in nite The transfer batch refers to the number of parts produced in a sequence This may be as small as one In MRP process batch refers to the overall output of production process while transfer batch would be equal to the calculated requirements for a given time bucket In JIT the transfer batch size is preferably one Process batches are in nite as exible production lines are capable of producing an entire product family with minimal setups Process batch might be synonymous with the daily production quotas In synchronous manufacturing a process batch is of a size large enough to be processed in a particular length of time Transfer batches refer to the movement of part of the process batch This allows parts to be moved to succeeding workstations in the process A transfer batch can be equal in size to a process batch but not larger Discuss how a production system is scheduled using MRP logic TIT logic and synchronous manufacturing logic In MRP production is scheduled based on lead time requirements for a particular part of subassembly Production dates for components are calculated based on lead times offset from delivery due dates In JIT production is controlled using a kanban or visual record When work is completed at a downstream station a move kanban is released and materials are transferred from the upstream station Daily production schedules are determined based on a daily production quota Smooth production schedules are sought to minimize quot l 39 to quotpewtinns In manufacturing the production ows are controlled by the drum The drum regulates the ow of materials throughout the entire system Discuss the concept of drumbufferrope The drum is a bottleneck It is referred to as the drum because it strikes the beat that the rest of the system uses to function The buffer is inventory that is provided typically prior to the drum to make sure that the drum always has something to do Buffers are also used to make sure that throughput is maintained throughout the production system The rope is upstream communication from the bottleneck so that prior workstations only produce the materials needed by the drum This keeps WIP inventories from building up From the standpoint of the scheduling process how are resource limitations treated in an MRP application and how are they treated in a synchronous manufacturing application With MRP requirements are exploded using MRP logic Planned order release schedules are calculated by the system Capacity requirements planning CRP provides feasibility check of these schedules CRP matches planned production with actual capacity to ensure that schedules can be met synchronous manufacturing paces the entire production process by the bottlenecks Therefore if additional less capacity is needed capacity is added restricted at 267 Chapter 18 4 U Most manufacturing rms try to balance capacity for their production sequences the bottlenecks In this way the ow is controlled at each bottleneck or CCR to bring the capacities in line What are operations people s primary complaints against the accounting procedures used in most rms Explain how such procedures can cause poor decisions for the total company The primary complaints against accounting departments have to do with the fact that accounting systems measure the wrong things are in exible and reward counterproductive or dysfunctional behavior Accounting systems conform to rigid guidelines established by GAAP As such accounting data are often not useful for accomplishing the superordinate goals of the rm An example is machine utilization Machine utilization measures the proportion of time that a machine is in use In an accounting sense high machine utilization is preferable because it means that the investment in the machine is producing a return From an operations point of view this behavior results in high WIP inventory Another example is quality The generally accepted accounting de nition of quality is that of conformance However manufacturing may desire to adopt a de nition of quality that considers customer needs Accounting would be unable to accept the latter de nition as it is more difficult to quantify The two alternative de nitions of quality will reward different behavior within the rm Some believe that this is an invalid strategy Explain why balancing capacity does not work In synchronous manufacturing balancing all capacities is viewed as a bad decision If capacity is truly balanced completion deadlines may not be met due to variability in processing times A better strategy is to balance the ow of product through the system Discuss why Transfer batches and process batches many times may not and should not be equal Transfer batches may be equal to or smaller in size than process batches Rather than wait for an entire batch to be nished it may be preferable to release part of a batch to the next downstream workstation so that smooth product ow can be maintained This will also result in lower levels of WIP inventory 268