Slides 2015 for contact 6

Operations ManagementPBSB 813 Contact 6

Johan Jordaan

[email protected]

Note on the use of these slides

• These slides provide the basic theory that I would like you to know. There are many more techniques on the slides that came with the textbook, which are also available on eFundi. As I talk you through this slide show, please stop where you don't understand, go to either the textbook (Heizer and Render) or the Heizer & Render slides and make sure you understand them. If you still do not understand, on the first page that you have to submit is space for you to tell me what you do not understand so that I can cover it in class.

• Once you have gone through the slides, go to the template on eFundiand prepare your submissions for the next contact session.

Operations &

productivity (1)

Topics covered: Contact 6

Global envi-

ronment &

strategy (2)

Managing

projects (3)

Forecasting

demand (4)

Product

design (5)

Quality

management

(6)

Process

design (7)

Location

decisions (8)

Layout

decisions(9)

Job design &

work mea-

surement (10)

Supply chain

management

(11)

Inventory

management

(12)

Scheduling

(13 & 15)

MRP & ERP

(14)

JIT & Lean

operations

(16)

Maintenance

& reliability

(17)

Study school

Contact 1

Contact 2

Contact 3

Contact 4

Contact 5

Contact 6

Contact 7

Outcomes for today's contact

OUTCOMES OF THEME M

• Practically apply scheduling concepts in optimising production

• Systematically integrate knowledge of budgeting and demand planning to optimise operations

• Demonstrate a thorough understanding of the concepts by applying the theory to a real-life organisation.

OUTCOMES OF THEME N

• Coherently present their understanding of inventory management principles demonstrating that they can set up a manual ERP system

• Integrate knowledge of inventory, demand and MRP systems into an ERP system design

• Demonstrate a thorough understanding of the concepts by applying the theory to a real-life community organisation

Chapter 13 Theory

Operations planning

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

Top executives

Operations managers

Operations managers, supervisors, foremen

Responsibility Planning tasks and horizon

Aggregate Planning

Figure 13.2

Capacity Options

Demand Options

Influencing demand

Use advertising or promotion to increase demand in low periods

Attempt to shift demand to slow periods

May not be sufficient to balance demand and capacity

Aggregate Planning in Services

Controlling the cost of labor is critical

1. Accurate scheduling of labor-hours to assure quick response to customer demand

2. An on-call labor resource to cover unexpected demand

3. Flexibility of individual worker skills

4. Flexibility in rate of output or hours of work

Operations ManagementChapter 14 –Material Requirements Planning (MRP) and ERP

PowerPoint presentation to accompany

Heizer/Render

Principles of Operations Management, 7e

Operations Management, 9e

A typical MRP system

Dependent Demand

1. Master production schedule

2. Specifications or bill of material

3. Inventory availability

4. Purchase orders outstanding

5. Lead times

Effective use of dependent demand inventory models requires the following

The Planning Process

Figure 14.1

Change production

plan?Master production schedule

ManagementReturn oninvestmentCapital

EngineeringDesigncompletion

Aggregate production

plan

ProcurementSupplierperformance

Human resourcesManpowerplanning

ProductionCapacityInventory

MarketingCustomerdemand

FinanceCash flow

Accurate Records

Accurate inventory records are absolutely required for MRP (or any dependent demand system) to operate correctly

Generally MRP systems require 99% accuracy

Outstanding purchase orders must accurately reflect quantities and scheduled receipts

MRP Structure

Figure 14.5

Output Reports

MRP by period report

MRP by date report

Planned order report

Purchase advice

Exception reports

Order early or late or not needed

Order quantity too small or too large

Data Files

Purchasing data

BOM

Lead times

(Item master file)

Inventory data

Masterproduction schedule

Material requirement

planning programs

(computer and software)

MRP Management

MRP is a dynamic system

Facilitates replanning when changes occur

System nervousness can result from too many changes

Time fences put limits on replanning

Pegging links each item to its parent allowing effective analysis of changes

MRP and JIT

MRP is a planning system that does not do detailed scheduling

MRP requires fixed lead times which might actually vary with batch size

JIT excels at rapidly moving small batches of material through the system

Finite Capacity Scheduling

MRP systems do not consider capacity during normal planning cycles

Finite capacity scheduling (FCS) recognizes actual capacity limits

By merging MRP and FCS, a finite schedule is created with feasible capacities which facilitates rapid material movement

Material Requirements Planning II

Once an MRP system is in place, inventory data can be augmented by other useful information Labor hours

Material costs

Capital costs

Virtually any resource

System is generally called MRP II or Material Resource Planning

MRP in Services

Some services or service items are directly linked to demand for other services

These can be treated as dependent demand services or items

Restaurants

Hospitals

Hotels

Distribution Resource Planning (DRP)

Using dependent demand techniques through the supply chain

Expected demand or sales forecasts become gross requirements

Minimum levels of inventory to meet customer service levels

Accurate lead times

Definition of the distribution structure

Enterprise Resource Planning (ERP)

An extension of the MRP system to tie in customers and suppliers

1. Allows automation and integration of many business processes

2. Shares common data bases and business practices

3. Produces information in real time

Coordinates business from supplier evaluation to customer invoicing

Enterprise Resource Planning (ERP)

ERP modules include

Basic MRP

Finance

Human resources

Supply chain management (SCM)

Customer relationship management (CRM)

ERP and MRP

Figure 14.11

Advantages of ERP Systems

1. Provides integration of the supply chain, production, and administration

2. Creates commonality of databases

3. Can incorporate improved best processes

4. Increases communication and collaboration between business units and sites

5. Has an off-the-shelf software database

6. May provide a strategic advantage

Disadvantages of ERP Systems

1. Is very expensive to purchase and even more so to customize

2. Implementation may require major changes in the company and its processes

3. Is so complex that many companies cannot adjust to it

4. Involves an ongoing, possibly never completed, process for implementation

5. Expertise is limited with ongoing staffing problems

ERP in the Service Sector

ERP systems have been developed for health care, government, retail stores, hotels, and financial services

Also called efficient consumer response (ECR) systems

Objective is to tie sales to buying, inventory, logistics, and production

Operations ManagementChapter 15 –Short-Term Scheduling

PowerPoint presentation to accompany

Heizer/Render

Principles of Operations Management, 7e

Operations Management, 9e

Strategic Importance of Short-Term Scheduling

Effective and efficient scheduling can be a competitive advantage

Faster movement of goods through a facility means better use of assets and lower costs

Additional capacity resulting from faster throughput improves customer service through faster delivery

Good schedules result in more dependable deliveries

Scheduling Issues

Scheduling deals with the timing of operations

The task is the allocation and prioritization of demand

Significant issues are

The type of scheduling, forward or backward

The criteria for priorities

Figure 15.1

Scheduling Flow

Different Processes/ Different ApproachesProcess-focused facilities

Forward-looking schedulesMRP due datesFinite capacity scheduling

Work cells Forward-looking schedulesMRP due datesDetailed schedule done using work cell priority rules

Repetitive facilities Forward-looking schedule with a balanced linePull techniques for scheduling

Product-focused facilities

Forward-looking schedule with stable demand and fixed capacityCapacity, set-up, and run times knownCapacity limited by long-term capital investmentTable 15.2

Scheduling Services

Service systems differ from manufacturing

Manufacturing Services

Schedules machines and materials

Schedule staff

Inventories used to smooth demand

Seldom maintain inventories

Machine-intensive and demand may be smooth

Labor-intensive and demand may be variable

Scheduling may be bound by union contracts

Legal issues may constrain flexible scheduling

Few social or behavioral issues

Social and behavioral issues may be quite important

Operations elements in ERP systems

• Material management

• Plant maintenance

• Quality management

• Production planning & control

• Project management systems

Dilbert on ERP

Your assignment• Step 1: Make sure you understand the concepts that are covered in this slide show. If

necessary, go through it again or study the textbook. The slides by Heizer & Render (available on eFundi) also give valuable extra information.

• Step 2: Prepare a one-page summary of the theory. Make sure it fits into the template in the study guide. Remember to make a note of those issues that you want explained in class.

• Step 3: Find out how planning, scheduling takes place in your organisation and describe its ERP system. Give a one-page summary on the template.

• Step 4: Critique the way planning and scheduling takes place in your organisation. Where necessary, suggest improvements. Also discuss the efficiency of your ERP system and suggest improvements if possible. Give a one-page summary on the template. (If there are diagrams, you are allowed a fourth page for them).

• Step 5: Submit your three-page report on efundi before Thursday night 23:59. This counts towards your individual assignment and your final pass mark!

• Step 6: For your group assignment, prepare a three-slide PowerPoint show: Slide 1: Briefly present the essence of planning, scheduling, MRP and ERP systems to your community organisation. (This could really add value to them, especially if they have no system: You help them with designing one, even on Excel). Slide 2: Explain whether/how their present systems work. Slide 3: Give them advice on how to improve their systems. Use the template that is on eFundi. One group member must submit on efundi before Thursday night 23:59 as well!

• Names of both documents must be as indicated in your study guide.