Relative Resource Manager 1

7/29/2019 Relative Resource Manager 1

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Operations

Management5230Session 3


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Before everything else,

getting ready is the secretof success.

Henry Ford


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News You Can Use Schedule

Class Date: At Start of Class Before Break After Break End of Class

Feb 5 Jane Girard Patricia Vondrak Marta Aranda Brad Gronke

Feb 12 Tushar Agarwal Nilesh Patel Christine Weber Wil Benjamin

Feb 19 Mary Fetting Alana Bogart Lori Davis Larry Schwartz

Feb 26 Martha Hunt Hilda Newborn Karina Formento Sharon Shlimoun

Mar 5 Thomas Mozny Michael Duggan Rachel Vincent Patience Gallegos

Mar 12 Christine Walker Zi Zhuan Wu Johnny Vincent Janelle Zervan


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News You Can Use

Jane Girard


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Previously


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Strategies forOperational Competitive Advantage

1. Differentiation

2. Cost leadership

3. Responsive

Name them

Everything that impacts customers

perception of value

Provide the maximum value as perceivedby customer

Flexibility // Reliability //Timeliness


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Finance

CompanyStrategy

HR / JDLocationLayout

CA

Process

Capacity

DesignG // S

QualityMaint -

Reliability

Marketing

SCM

Inventory

Scheduling

SO


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Process Strategies Are?

1. Process Focus

2. Repetitive Focus

3. Product Focus

4. Mass Customization

StrategySelection

Based on

Volume

&Variety

Which relate to

What you do & Strategy Selected


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Tools for Process Design

Flow Diagrams

Time-Function/Process Mapping

Work Flow Diagrams

Process Charts Work Flow Analysis

Value Stream Mapping -- VSM

Service Blue Printing w/ Poke-Yokes

Pp 266 269


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Value-Stream Mapping

Figure 7.8


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Process Chart

Figure 7.9


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Aggregate Planning


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Operations Management & PlanningSuccess Over a Time Horizon

Optimize capacity--Modify or

Medi-

range

3

3

0mon

Short-

Range

1wkto3m

on

Long-

Range

12+//

244

8mon

Add facilitiesAdd long lead time equipment /

components

Optimally Use capacity

Key Planning

Driver

ModelingStatisticalmulti-variant &other

Market

Integrated

DemandForecastingVolume &Resource

Agency Add FTEs Add ShiftsEquip --Spare Rent Subcontract

*Limited options existTimeFrame

Schedule servicesSchedule personnel

Registry

Allocate Facilities~ EquipmentWork Center LoadingWork sequencingOrdering Supplies

Time

PlanningObjectives


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The Planning Process

Figure 13.1

Long-range plans(over one year)Research and DevelopmentNew product plansCapital investmentsFacility location/expansion

Intermediate-range plans

(3 to 18 months)Sales planningProduction planning and budgetingSetting employment, inventory,

subcontracting levelsAnalyzing operating plans

Short-range plans

(up to 3 months)Job assignmentsOrderingJob schedulingDispatchingOvertimePart-time help

Topexecutives

Operationsmanagers

Operations managers,supervisors, foremen

Responsibility Planning tasks and horizon


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Aggregate

Planning

Figure 13.2


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Aggregate Planning

Objective is to minimize cost over theplanning period by adjusting

Production rates

Labor levels

Inventory levels

Overtime work

Subcontracting rates

Other controllable variables

Determine the quantity and timing ofproduction for the immediate future


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Aggregate Planning Strategies

Cap

acity

1. Use inventories to absorb changes in demand

2. Accommodate changes by varying workforcesize

3. Use part-timers, overtime, or idle time to absorbchanges

4. Use subcontractors and maintain a stableworkforce

5. Change prices or other factors to influencedemand


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Aggregate Planning Options

Table 13.1

Option Advantages Disadvantages Some Comments

Changinginventorylevels

Changes inhumanresources aregradual or

none; no abruptproductionchanges.

Inventoryholding costmay increase.Shortages may

result in lostsales.

Applies mainly toproduction, notservice,operations.

Varyingworkforce

size byhiring orlayoffs

Avoids the costsof other

alternatives.

Hiring, layoff,and training

costs may besignificant.

Used where sizeof labor pool is

large.


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Table 13.1


Varyingproductionratesthrough

overtime oridle time

Matchesseasonalfluctuationswithout hiring/

training costs.

Overtimepremiums; tiredworkers; maynot meet

demand.

Allows flexibilitywithin theaggregate plan.

Sub-contracting

Permitsflexibility andsmoothing of

the firmsoutput.

Loss of qualitycontrol;reduced profits;

loss of futurebusiness.

Applies mainly inproductionsettings.


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Table 13.1


Using part-timeworkers

Is less costlyand moreflexible thanfull-time

workers.

High turnover/training costs;quality suffers;scheduling

difficult.

Good forunskilled jobs inareas with largetemporary labor

pools.

Influencingdemand

Tries to useexcesscapacity.Discounts draw

new customers.

Uncertainty indemand. Hardto matchdemand to

supply exactly.

Createsmarketingideas.Overbooking

used in somebusinesses.


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Table 13.1


Backorderingduringhigh-

demandperiods

May avoidovertime.Keeps capacityconstant.

Customer mustbe willing towait, butgoodwill is lost.

Many companiesback order.

Counter-seasonalproduct

and servicemixing

Fully utilizesresources;allows stable

workforce.

May requireskills orequipment

outside thefirms areas of

expertise.

Risky findingproducts orservices with

oppositedemandpatterns.


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Methods for Aggregate Planning

A mixed strategy may be the best wayto achieve minimum costs

There are many possible mixedstrategies

Finding the optimal plan is not alwayspossible


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Mixing Options to Develop a Plan

Chase strategy Match output rates to demand forecast for each period

Vary workforce levels or vary production rate

Favored by many service organizations

Level strategy Daily production is uniform

Use inventory or idle time as buffer

Stable production leads to better quality and productivity

Some combination of capacity options, amixed strategy, might be the best solution


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Law Firm Example

Table 13.9

Labor-Hours Required Capacity Constraints

(2) (3) (4) (5) (6)(1) Forecasts Maximum Number of

Category of Best Likely Worst Demand in QualifiedLegal Business (hours) (hours) (hours) People Personnel

Trial work 1,800 1,500 1,200 3.6 4

Legal research 4,500 4,000 3,500 9.0 32

Corporate law 8,000 7,000 6,500 16.0 15

Real estate law 1,700 1,500 1,300 3.4 6

Criminal law 3,500 3,000 2,500 7.0 12

Total hours 19,500 17,000 15,000Lawyers needed 39 34 30


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Yield Management

Allocating resources to customers atprices that will maximize yield or revenue

1. Service or product can be sold in

advance of consumption2. Demand fluctuates

3. Capacity is relatively fixed

4. Demand can be segmented5. Variable costs are low and fixed costs

are high


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DemandCurve

Yield Management Example

Figure 13.5

Passed-upcontribution

Money lefton the table

Potential customers exist who arewilling to pay more than the $15variable cost of the room

Some customers who paid$150 were actually willing topay more for the roomTotal

$ contribution= (Price) x (50

rooms)= ($150 - $15)x (50)

= $6,750

Price

Room sales

100

50

$150Price charged

for room

$15Variable cost

of room


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Total $ contribution =(1st price) x 30 rooms + (2nd price) x 30 rooms =

($100 - $15) x 30 + ($200 - $15) x 30 =$2,550 + $5,550 = $8,100

DemandCurve

Yield Management Example

Figure 13.6

Price

Room sales

100

60

30

$100Price 1

for room

$200Price 2

for room

$15Variable cost

of room


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Yield Management Matrix

D

urationofuse

Unpredicta

ble

Predic

table

Price

Tend to be fixed Tend to be variable

Quadrant 1: Quadrant 2:

Movies Hotels

Stadiums/arenas AirlinesConvention centers Rental carsHotel meeting space Cruise lines

Quadrant 3: Quadrant 4:

Restaurants Continuing careGolf courses hospitals

Internet serviceproviders

Figure 13.7


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Making Yield Management Work

1. Multiple pricing structures must befeasible and appear logical to thecustomer

2. Forecasts of the use and duration ofuse

3. Changes in demand


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H

HH

C

ost

Optimize

How to Go in the Three Required Directionsat Once?


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FoldRiteTeam 3 Team Bud


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News You Can Use

Patricia Vondrak


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News You Can Use

Marta Aranda


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Location Strategies


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2011 PearsonEducation, Inc.publishing as Prentice

Location Strategy

One of the most important decisions afirm makes

Increasingly global in nature

Significant impact on fixed andvariable costs

Decisions made relatively infrequently The objective is to maximize the

benefit of location to the firm


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Location Decisions

Country Decision Key Success Factors1. Political risks, government rules,

attitudes, incentives

2. Cultural and economic issues

3. Location of markets

4. Labor talent, attitudes, productivity,costs

5. Availability of supplies,communications, energy

6. Exchange rates and currency risks

Figure 8.1


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Location Decisions

Region/CommunityDecision

Key Success Factors1. Corporate desires

2. Attractiveness of region

3. Labor availability and costs

4. Costs and availability of utilities

5. Environmental regulations

6. Government incentives and fiscal policies

7. Proximity to raw materials and customers

8. Land/construction costs

MNWI

MI

IL INOH

Figure 8.1


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Location Decisions

Site Decision Key Success Factors1. Site size and cost

2. Air, rail, highway, and waterwaysystems

3. Zoning restrictions

4. Proximity of services/ suppliesneeded

5. Environmental impact issues

Figure 8.1


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Global Competitiveness Indexof Countries

Country 2009 Rank 2005 Rank

Switzerland 1 4USA 2 1Japan 8 10Canada 9 13

UK 13 9Israel 27 23China 29 48Italy 48 38India 49 22Mexico 60 59

Russia 63 53

Table 8.1


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2011 Pearson Education

Ranking CorruptionRank Country 2011 CPI Score (out of 10)

1 New Zealand 9.52 Demark, Finland 9.45 Singapore 9.26 Norway 9.08 Australia, Switzerland 8.8

10 Canada 8.712 Hong Kong 8.414 Germany, Japan 8.016 UK 7.824 USA 7.1

32 Taiwan 6.143 South Korea 5.460 Malaysia 4.375 China 3.6112 Vietnam 2.9

143 Russia 2.4

LeastCorrupt

MostCorrupt


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Clustering of Companies

Industry Locations Reason for clustering

Theme parks(Disney World,UniversalStudios)

Orlando, Florida A hot spot forentertainment, warmweather, tourists, andinexpensive labor

Electronicsfirms

Northern Mexico NAFTA, duty freeexport to US

Computer

hardwaremanufacturers

Singapore, Taiwan High technological

penetration rate andper capita GDP,skilled/educatedworkforce with largepool of engineers

Table 8.3


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Locational Break-Even AnalysisExample

$180,000

$160,000 $150,000

$130,000

$110,000

$80,000

$60,000

$30,000

$10,000

Annualcost

| | | | | | |

0 500 1,000 1,500 2,000 2,500 3,000

Volume

Akronlowestcost

Bowling Greenlowest cost

Chicagolowestcost

Figure 8.2


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Center-of-Gravity Method

Finds location of distributioncenter that minimizes distributioncosts

Considers

Location of markets

Volume of goods shipped to thosemarkets

Shipping cost (or distance)


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Center-of-Gravity MethodNorth-South

East-West

120

90

60

30

| | | | | |

30 60 90 120 150Arbitraryorigin

Chicago (30, 120)New York (130, 130)

Pittsburgh (90, 110)

Atlanta (60, 40)

Center of gravity (66.7, 93.3)+

Figure 8.3


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2011 Pearson

Education, Inc.publishing as Prentice

Transportation Model

Finds amount to be shipped fromseveral points of supply to severalpoints of demand

Solution will minimize totalproduction and shipping costs

A special class of linearprogramming problems


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2011 Pearson


Worldwide Distribution of

Volkswagens and Parts

Figure 8.4


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2011 Pearson


Service Location Strategy

1. Purchasing power of customer-drawing area2. Service and image compatibility with

demographics of the customer-drawing area

3. Competition in the area

4. Quality of the competition

5. Uniqueness of the firms and competitorslocations

6. Physical qualities of facilities and

neighboring businesses

7. Operating policies of the firm

8. Quality of management


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2011 Pearson


Geographic InformationSystems (GIS)


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Capacity Simulation


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Modify capacity Use capacity

Planning Over a Time Horizon

Intermediate-rangeplanning

Subcontract Add personnelAdd equipment Build or use inventoryAdd shifts

Short-rangeplanning

Schedule jobsSchedule personnel

Allocate machinery

*

Long-rangeplanning

Add facilitiesAdd long lead time equipment /components *

* Limited options exist


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6

Scheduling Objectives

1. Meet due dates / commitments

2. Minimize lead time

3. Minimize setup time or cost

4. Minimize work-in-process inventory

5. Maximize machine utilization


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1. What is your teams ops posture

2. What actions your team took to manage / control the factory

3. Why your team took the actions above

4. Show analysis to justify conclusions

5. Identify key operational management themes (correlate to

material in text and present)

6. Identify & explain key lessons learned from the simulations

7. What course objective does this assignment relate to & why

Littlefield Capacity Management Simulation Presentation


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As of noon todayDay = 143

(Tuesday 5J an)

Total = 268 Days

(125 to go!)

75 more days(hours) ofInteraction

Followed by 50hour run


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Maintenance & Reliability


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Strategic Importance of

Maintenance and ReliabilityFailure has far reaching effects on a

firms

Dissatisfied customers Reputation

Operation

Profitability

Idle employees

Profits becominglosses

Reduced value ofinvestment in

plant andequipment


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Maintenance and Reliability

The objective of maintenance and reliability isto maintain the capability of the system whilecontrolling costs

Maintenance is all activities involved inkeeping a systems equipment inworking order

Reliability is the probability that amachine will function properly for aspecified time


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Maintenance Strategy

Employee Involvement

Information sharingSkill trainingReward systemEmployee empowerment

Maintenance and ReliabilityProcedures

Clean and lubricateMonitor and adjustMake minor repairKeep computerized records

Results

Reduced inventoryImproved qualityImproved capacityReputation for qualityContinuous improvementReduced variability

Figure 17.1


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Reliability

Improving individual components

Rs = R1 x R2 x R3x x Rn

where R1 = reliability of component 1

R2 = reliability of component 2and so on


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Overall System Reliability

Relia

bilityofthesystem(

percent)

Average reliability of each component (percent)

| | | | | | | | |

100 99 98 97 96

100

80

60

40

20

0

Figure 17.2


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Providing Redundancy

Provide backup components to increase reliability

+ xProbability offirstcomponent

working

Probability ofneedingsecond

component

Probabilityof second

componentworking

(.8) + (.8) x (1 - .8)

= .8 + .16 = .96


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Maintenance

Two types of maintenance Preventive maintenance routine inspection and servicing to keep

facilities in good repair

Breakdown maintenance emergency or priority repairs on failedequipment


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Maintenance Costs

Figure 17.4 (a)

Traditional View

Totalcosts

Breakdownmaintenance costs

Costs

Maintenance commitment

Preventivemaintenance costs

Optimal point (lowestcost maintenance policy)

Typically this approachfailed to consider the truetotal cost of breakdowns

Inventory

Employee morale

Scheduleunreliability

M i t C t


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Maintenance Costs

Figure 17.4 (b)

Full Cost View

Costs

Maintenance commitment

Optimal point (lowestcost maintenance policy)

Totalcosts

Full BreakdownCost

Preventivemaintenance costs


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News You Can Use

Brad Gronke

The Goal E ec ti e E al ation Pape


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The Goal Executive Evaluation Paper

AssignmentPrepare an executive brief of what transpired in The Goal as the basis fordemonstrating your work and general understanding of materials considered duringthe segment. The assignment will be evaluated on your presentation related to thefollowing elements, each of which should be focused on with equal emphasis:

Identify examples of Ten OM Decisions in The Goal. (describe and elaborate onthe examples and the impact on the companys performance)

Evaluation of essential operational decisions / strategies / principles exercisedin the The Goal

Key lessons learned from The Goal

Paper Format:is to be submitted by the start of session four. Do not include a cover sheet or

presentation folder. Use a header at the top of the paper to include student nameand date. Paper should have reasonable margin and font.

is limited to maximum 3 pages.(papers that exceed 3 pages will not be graded)

The Goal Executive Evaluation Paper


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The Goal Executive Evaluation PaperGuidelines & Considerations

Start with a Thesis {Avoid "In this paper I will"}; Make your point(s) leveraging theconcepts with evidence to support your assertions and Provide a conclusion.Writing should clearly use and reflect Ops Mgt - language, terms, concepts,theories, etc.

Include organizational elements to enhance flow / concise presentation - usebullets, section breaks paragraphs, section breaks, headings, attachments and

other organizational elements in a manner that leads the reader through the work aclear linkage is made between each section.

All papers are to be written in accordance with the LFGSM writing guidelinescriteria, and to conform to an expected level of excellence for graduate level work.Spelling, grammar and structural errors will subtract from the overall grade level.

Rubric: Total Value 15 points

Identification of 10 DOMs in The Goal: 5 pointsConnection to course materials, critical thinking, connection to operationsdecisions: 4 pointsKey Learnings: 4 points

Paper structure (organization, thesis, grammar, punctuation) : 2 points


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Next Week (week 4)

News You Can Use X4

Review Session 3

Supply Chain Management Discussion

Outsourcing as a Supply Chain Strategy

Littlefield Simulation Presentation Preparation

The Goal paper is Due!

Relative Resource Manager 1

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