Intropduction to Production Management

1. Intropduction to Production Management

2. Outline • Introduction to production planning • Definition and classification of production systems • Decisions and performance measure for production systems. • Product and process life cycle concepts • Goods vs. services and their shares in the Economy. • Productivity • Changing challenges in production management

3. Essential functions in any organization • Marketing – generates demand • Production/Manufacturing/operations – creates the product • Finance/accounting – tracks how well the organization is doing, pays bills, collects the money

4. Production/Manufacturing Production/manufacturing is the process of converting raw materials or semi-finished products into finished products that have value in the market place. This process involves the contribution of labor, equipment, energy, and information.

5. The Production System Production System Raw materials Finished products Energy Labor Scrap Equipment Waste Information

6. Inventory Inventory is both an input and output of the production process. Inventory can be in the form of raw materials, semi-finished, and finished products.

7. The Inventory System Supply source Demand source Inventory

8. Distribution and sales Suppliers Fabrication Assembly Raw materials Component parts inventory Finished goods inventory The Production-Inventory System

9. The Supply Chain Assembly/ Manufacturing 1st tier suppliers Distribution centers 2nd tier suppliers Retailers

10. Supply Chain Management Supply Chain Management (SCM) is the set of functions concerned with the effective utilization of limited resources that may reside with one or more independent firms and the management of material, information, and financial flows within and between these firms, so as to satisfy customer demands and create profits for all firms. Check out: WalMart,7 eleven Japan, vendor managed inventory, Collaborative forecasting and replenishment planning

11. Production Planning and Inventory Control Production planning and inventory control is the subset of SCM functions that focus on managing production operations and inventory throughout the supply chain.

12. Examples of Decisions in Production Systems • What should we produce, how much, and when (forecasting)? • How much can we produce (capacity planning)? • How much components/finished goods do we have and how much do we need (inventory management)? • When should we produce and using which resoursces (production planning and scheduling)?

13. Examples of Performance Measures • Cost (are products being created at minimum or acceptable cost?) • Quality (what are the specifications of the products? What percentages of shipped products meet specification?) • Variety (how many types of products are - or can be – simultaneously produced?) • Service (how long does it take to fulfill a customer order? how often are quoted lead times met?)

14. Examples of Performance Measures (continued…) • Flexibility (how quickly can existing resources be reconfigured to produce new products?) • Worker satisfaction (are workers and managers throughout the supply chain happy and motivated?) • Safety (are work environments safe for workers and the surrounding community?) • Environmental impact (how environmentally friendly are the supply chain processes and the products?)

15. Company Objectives Income = Revenue - Expense • Need to increase income with: • Best customer service • Lowest production costs (labor, material, energy etc.) • Lowest inventory investment • Lowest distribution costs

16. Conflicts in Traditional Systems Figure 1.3 Conflicting Objectives

17. Conflicts in Traditional Systems Marketing Production Finance Objective High Revenue Low Cost Cash Flow Implications Customer Service High Low Low Production Disruptions Many Few Few Inventories High High Low

18. Classification of the Production Process • Production quantity • Mass production • Batch production • Job shop production

19. Classification of the Production Process • Production quantity • Mass production • Batch production • Job shop production • Product variety

20. Classification of the Production Process • Production quantity • Mass production • Batch production • Job shop production • Product variety • Single product or product line • Family of similar products • One-of-a-kind products

21. Mass Production Systems

22. Mass Production Systems • Low product variety • High production volumes • Specialized labor • Dedicated equipment • High reconfiguration costs • Make-to-stock production • Example; Sugar production, Automobile assembly lines

23. Batch Production Systems

24. Batch Production Systems • Medium product variety • Products are made in larger lots • Products are made to stock • Programmable/reconfigurable equipment • Significant setup costs • Example: Apparel or Pharmaceuticals production

25. Job Shops

26. Job Shops • High product variety • Products are made in small lots • Products are made to order • Flexible equipment and labor • Small setups • Example; Metal parts or PCBs production

27. Classification of Production Systems (continued…) • Order fulfillment

28. Classification of Production Systems (continued…) • Order fulfillment • Make-to-stock systems (MTS) • Make-to-order systems (MTO) • Hybrid MTO/MTS

29. Classification of Production Systems (continued…) • Order fulfillment • Make-to-stock systems (MTS) • Make-to-order systems (MTO) • Hybrid MTO/MTS • Resource configuration

30. Classification of Production Systems (continued…) • Order fulfillment • Make-to-stock systems (MTS) • Make-to-order systems (MTO) • Hybrid MTO/MTS • Resource configuration • Product layout • Process layout • Cellular layout • Fixed position layout

31. Product layout • Product layouts are found in flow shops (all product follows the same sequence of operations. Repetitive assembly and process or continuous flow industries). • Flow shops produce high-volume, highly standardized products that require highly standardized, repetitive processes. • In a product layout, resources are arranged sequentially, based on the routing of the products. • Two types of lines are used in product layouts: paced (moving) and unpaced.

32. Product layout

33. Process Layout • Process layouts are found primarily in job shops, or firms that produce customized, low-volume products that may require different processing requirements and sequences of operations. • Process layouts are facility configurations in which operations of a similar nature or function are grouped together. • Their purpose is to process goods or provide services that involve a variety of processing requirements. • Example; A machine shop; general-purpose machines are grouped together by function (e.g., milling, grinding, drilling, hydraulic presses, and lathes)

34. Process Layout

35. Cellular Layout • Cellular manufacturing is a type of layout where machines are grouped according to the process requirements for a set of similar items(part families) that require similar processing. • These groups are called cells. • A cellular layout is an equipment layout configured to support cellular manufacturing.

36. Cellular Layout

37. Fixed position layout • A fixed-position layout is appropriate for a product that is too large or too heavy to move. • Fixed-position layout examples include construction (e.g., buildings, dams, and electric or nuclear power plants), shipbuilding, aircraft, aerospace, farming, drilling for oil, home repair, and automated car washes • For services, other reasons may dictate the fixed position (e.g., a hospital operating room where doctors, nurses, and medical equipment are brought to the patient).

38. Fixed position layout

39. Classification of Production Systems (continued…) • Inputs/outputs

40. Classification of Production Systems (continued…) • Inputs/outputs • Discrete production systems (discrete inputs and outputs - cars, computers, machine tools, etc) • Continuous production systems (continuous inputs and outputs - chemicals, textiles, food processing, pharmaceuticals) • Hybrid systems (Discrete inputs/continuous outputs or continuous inputs/discrete outputs - steel, plastics, recycling)

41. Product-Process Matrix High Volume, High Standard- ization Low Volume, One of a Kind Multiple Products, Low Volume Few Major Products, Higher Volume Flexibility (High) Unit Cost (High) Metal parts produced in machining shop JobShop- Jumbled flow Batch- Disconnected line flow Apparel Pharmaceuticals Automobile Assembly Burger King AssemblyLine- Connected line flow Mass production Continuous Flow Sugar Refinery Paper towel Flexibility (Low) Unit Cost (Low) Nahmias (2009)

42. Manufacturing Strategies • More stable demand • More quantity • Less customer involvement in design • Less variety • Less lead time Manufacturing strategy and lead time Arnold, Chapman, & Clive: Intro Materials Management, 6th ed.

43. Manufacturing Strategies • Engineer-to-order • Customer’s requirements determines the design of the product. High customization • Normally no inventory is held • Long lead time (includes design lead time) • Example: Manufacturing of special purpose machines • Make-to-order • Manufacturing starts after the customer orders • Mixture of standard products and custom designed products • Inventory is mostly in the form of raw material • Shorter lead time than engineer-to-order • Manufacturing of a meal in a restourant

44. Manufacturing Strategies • Assemble-to-order • Product is made from standard components • Delivery lead time is further reduced • Inventory is held as components • Customer only selects component options. • Example: Car assembly plants • Make-to-stock • No customer involvement in product design. • Manufacturer satisfies demand from a finished good inventory. • Production is planned based on inventory levels. Demand is quite stable and the per unit cost of product is low. • Example: Diaper/paper towel production

45. The Product Life-Cycle

47. The Product Life Cycle

48. The Product Life-Cycle • Demand for new products goes trough an identifiable cycle called product life cycle • Start-up • Market for the product developed,High manufacturing cost, Design problems corrected,Low competiton • Rapid growth • Demand picks up quickly, standardization in manufacturing and cost reduction, competition starts. Right pricing strategies to establish the product in the market

49. The Product Life-Cycle • Maturation • Demand stabilizes, management should protect and improve market share and brand loyalty through competitive pricing, focus on cost reduction. • Stabilization or decline • Market gets saturated by the competitiors and/or product becomes obsolete. Reduced investment in promotions and new manufacturing technologies

50. The Product and Process Life Cycle Manufacturing Cost Automation, economies of scale and learning effects