AEM1200 2-4 - AEM1200, Introduction to Business Management....

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Unformatted text preview: AEM1200, Introduction to Business Management. AEM1200, Wednesday 2/4 Definition Operations Management (I) Economies of scale as potential Activities Facility location and outsourcing Facility layout and production scheduling Philosophies Definition of Total Quality Management Operations Management Operations The management of the conversion or The transformation of resources (including human resources) into goods and services. services. A Compressed History Compressed (from “Factory Physics”, Hopp & Spearman, 2002) Vertical integration Integrated production processes Specialized supply chains Economies of scale “Interchangeable” labor Emphasis on “generalist” management Economies of scale High speed of production High investment Economies of scale Interchangeable parts Specialized machines Economies of Scale Economies Reduction in cost per unit resulting from increased Reduction production, realized through operational efficiencies. Economies of scale can be accomplished because as production increases, the cost of producing each additional unit falls. unit Short term economies of scale are the result of spreading Short fixed costs across all throughput; fixed Intermediate term economies of scale are the result of Intermediate having longer production runs; having Long term economies or scale are the result of physics, Long which dictate that unit cost as a function of capacity is equal to a function aC^(b-1), where b lies between 0.6 and 1. to Cost Structures of Craft Production and Mass Production (from “The Second Industrial Mass Divide”, Piore & Sabel, 1986) Piore Operations Management Functions Operations Facility Location Facility Layout and Production Scheduling Quality Control Inventory Management Facility Location Facility Resources Labor Raw Material Infrastructure Retail sites Customer interaction “Just in time” Silicon Valley (IT) Boston, New Jersey (chemicals, pharmaceuticals) Manhattan (financial services) Customers “Clusters” Outsourcing Outsourcing + Time to focus on Time company’s primary function function + Increased level of Increased expertise expertise + Cost effectiveness + Decreased overhead + Risk reduction + Flexibility + Technology - Less personal approach - Less control by owner in Less planning, implementing & carrying out company’s future future - Potential for competing Potential for the outsourcing firm’s time time Types of Operations Types Craft production High customization and variability in the product Eg. Glass blowing, fine musical instruments High standarization and uniformity in the product Eg. Car manufacturers Undifferentiated products Chemicals, agriculture Mass production, assembly line Mass production, process plant MRP, ERP and beyond MRP, Materials Requirement Planning A computer-based production management system computer-based that uses sales forecasts to make sure that needed parts and materials are available at the right time and place; place; A software solution that addresses enterprise needs software taking the process view of the organization to meet the organizational goals tightly integrating all functions of an enterprise. of Enterprise Resource Planning Virtual Organizations Virtual A temporary networked organization made up of temporary replaceable firms that join and leave as needed; replaceable Reduces fixed costs Obtains needed expertise quickly Promotes flexibility We act as an extension of your own business to We manage all aspects of your global supply chain. We take care of all vital aspects of the supply chain so that our customers - leading retailers and brands can focus on their customers.” can Example: Li and Fung Dimensions of Quality Dimensions Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived Quality Total Quality Management Total An integrated, principle-based, organization-wide An strategy for improving product and service quality; strategy Customer focus and satisfaction Continuous improvement and reduction of variation Teamwork Six-Sigma Paradigm Six sigma quality is a quality measure that allows only 3.4 Six defects per million of opportunities. defects 6 Sigma 3.4 230 6,210 66,800 308,538 690,000 50 150 250 350 450 550 650 750 Sigma Quality Level 5 Sigma 4 Sigma 3 Sigma 2 Sigma 1 Sigma Defects Per Million Parts (000) Take-Aways Take-Aways Operations management refers to the set of Operations activities by which an enterprise transforms resources into the products and services it offers; resources Operations management comprises: Location Layout Quality management Scheduling (including MRP and ERP technologies) Inventory management The tools of continuous improvement and JIT are The an effective way to improve operations consistently and sustainably; consistently ...
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