AEM1200-0915ToPost (1)

AEM1200-0915ToPost (1) - AEM1200 Introduction to Business...

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Unformatted text preview: AEM1200, Introduction to Business Management. AEM1200, Wednesday 9/15 Operations Management Definition / Economies of scale as potential Activities Facility location and outsourcing Facility layout Inventory management and production scheduling Quality and Total Quality Management Modern production techniques Automation Re-engineering 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 Inventory: A (Necessary?) Cost Costs of maintaining an inventory Ordering costs Setup costs Holding costs Stockout costs Economic Order Quantity EOQ = SQRT (2*Demand*Ordering Cost/Holding Cost) 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 Quality Reliability Ability of a product to continue working to specification; Service reliability: Ability to consistently perform a service well. Ease to fix. Service recovery: Restoring customer satisfaction to strongly dissatisfied customers. Serviceability Durability 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 Just-in-Time and Lean Production Just-in-Time Reducing setup times Increasing flexibility Reducing inventory costs Increasing quality Quality circles Authority to “stop the line” “Lifetime” employment Integrate suppliers into the design and planning process “Kanban” Promote networking across suppliers Worker empowerment Managing the supply chain Modern Production Techniques Modern Just-In-Time (JIT) Just-In-Time Inventory Inventory Mass Customizing Purchasing and Supply Competing in Time Purchasing Chain Management Chain Flexible Manufacturing Lean Manufacturing Technology Assisted Computer-Aided Computer-Aided Design (CAD) Design Computer-Aided Computer-Aided Manufacturing (CAM) Manufacturing Reengineering Reengineering “The fundamental rethinking and radical redesign of “The business processes” (Hammer and Champy, 1994) business Comparison of Assembly Costs as a Function of Annual Volume (from “The Second Industrial Divide”, Piore & Sabel, 1986) Piore Take-Aways Take-Aways Operations management refers to the set of activities by Operations which an enterprise transforms resources into the products and services it offers; and Operations management comprises: Location Layout Quality management Scheduling (including MRP and ERP technologies) Inventory management Automation – Based on Machines Re-engineering – Based on Systems Total Quality Management – Based on people Three approaches to operational improvement Total Quality Management is the hardest, but it sticks… Recommended Reading Recommended Any good Operations Management textbook, such as Any “Operations Management”, Render and Heizer (Pearson/PrenticeHall) (Pearson/PrenticeHall) “The Machine that Changed the World”, Womack et al., 1989 “The Goal”, Goldratt, 1992 “Reengineering the Corporation”, Hammer and Champy, 1993 ...
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