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OPERATIONS:. Producing Goods and Services. Learning Objectives. Understand the strategic value-adding role operations plays in the supply chain. Explain the concept of a transformation process and its application to goods and services.
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OPERATIONS: Producing Goods and Services
Learning Objectives • Understand the strategic value-adding role operations plays in the supply chain. • Explain the concept of a transformation process and its application to goods and services. • Appreciate the tradeoffs and challenges involved in production operations. • Understand the primary production strategies and types of planning.
Learning Objectives, continued • Discuss the primary assembly processes and production methods for creating goods. • Describe various production process layouts. • Explain the role of productivity and quality metrics for improving operations performance. • Know how IT supports efficient production of goods and services.
Figure 14.1The Production Process Source: Brian J. Gibson, Ph.D.
Production Operations in SCM The Role of Production Operations • Manufacturing and service production supplies an economic utility called form utility. • Effective production operations are supported by and support the supply chain. • Supply chain tradeoffs must be understood and made. Production Modes • Make to stock vs. Make to order • No two processes are organized exactly alike or perform to the same level. • Make-to-order methods are more complex, more labor intensive, and require longer lead time than the make-to-stock, mass-production-oriented operations • Process functionality helps the success of an organization.
The Role of Production Operations in SCM, continued Production Tradeoffs • Economies of scope • The capability of being able to produce a range of products (product mix) • Changing customer demand • To be met by efficient production runs for a wide variety of products in low volume. • Tradeoff decisions among production methods • Based on good understanding of mfg. processes for goods and their costs • Production and supply chain costs • Which vary among make-to-stock, assemble-to-order, and build-to-order products.
Figure 14.2Total Cost of Manufacturing Source: Adapted from Bowersox, Closs & Cooper, Supply Chain Logistics Management, 3rd ed. (2010)
The Role of Production Operations in SCM, continued • Production Challenges • Intensified competition, • more demanding customers, and • relentless pressure for efficiency as well as adaptability. • Competitive pressures for many established (and focused) manufacturers and service providers (OEMs and ODMs) • (End) customers’ demand for choice and rapidly changing tastes.
Operations Strategies and Planning • Production (operation) strategies • Focus on waste reduction, operation efficiency, and scale-ability. • Use push-based strategies for immediate delivery of off-the-shelf, low-cost, standardized goods. • Use pull-based systems to coordinate production and distribution with actual customer demand. • Apply lean production concepts to minimize material flow time, by having materials arriving at the needed location just in time for processing and rapidly flowing them through the production system.
Figure 14.3Evolution of Production Strategies Source: Adapted from Manufacturing Strategy: An Adaptive Perspective (SAP 2003)
Table 14.1TPS Seven Deadly Wastes Source: Ohno, Toyota Production System: Beyond Large Scale Production (1988)
Operations Strategies and Planning, continued • Production Strategies, continued • Machine flexibility • General purpose machines and equipment staffed by cross-trained workers provide the ability to produce different types of products • Routing flexibility • Provides managers with a choice between machines for a part’s next operation • Offshoring • Activity be relocated to a contract manufacturer in another country • Adaptive manufacturing • Provides companies with the ability to replace planning and replanning with execution based on real-time demand
Operations Strategies and Planning, continued • Production Planning • Long-range plans • Covering a year or more, focus on major decisions regarding capacity and aggregate production plans • Medium-range plans • Span 6 to 18 months and involve tactical decisions regarding employment levels and similar issues • Short-range plans • Ranging from a few days to a few weeks
Figure 14.4Production Planning Activities Source: Adapted from Wisner, Tan, & Leong, Principles of Supply Chain Management, 2nd ed. (2009)
Operations Strategies and Planning, continued • Production Planning, continued • Resource requirements planning (RRP) • Long-run, macro-level planning tool • Rough-cut capacity plan (RCCP) • Checks the feasibility of the master production schedule • Capacity requirements planning (CRP) • Checks the feasibility of the materials requirement plan • Aggregate production plan (APP) • Long-range materials plan that translates annual business plans, marketing plans into production plan • Master production schedule (MPS) • Medium-range plan that is more detailed than the APP
Production Execution Decisions • Assembly Processes • (MTS), make to order • (ATO), assemble-to-order • (BTO), build-to-order • (ETO), engineer-to-order • Production Process Layout • Facility layout • Involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility.
Production Execution Decisions, continued • Production Process Layout, continued • Successful layout is one that does the following: • Reduces bottlenecks in moving people or materials • Minimizes materials-handling costs • Reduces hazards to personnel • Utilizes labor efficiently • Increases morale and ease of supervision • Utilizes available space effectively and efficiently • Provides flexibility • Facilitates coordination and face-to-face communication • Fixed location (project) layout • Fixed location layout where the product remains in place for the duration of production • Process layout (based on workcenter) • Process-focused layout that groups together similar equipment or functions
Production Execution Decisions, continued • Production Process Layout, continued • Manufacturing cell (cellular manufacturing) • Process-focused layout that dedicates production areas to a narrow range of products that are similar in processing requirements • Continuous (process) line • Similar to assembly lines, with product flowing through a predetermined sequence of stops. • Assembly line • Product-focused layout in which machines and workers are arranged according to the progressive sequence of operations
Figure 14.5Facility Layout Matrix Source: Adapted from Jacobs & Chase, Operation and Supply Chain Management: The Core (2008)
Production Execution Decisions, continued • Packaging • Design issues can affect labor and facility efficiency. • Can provide another level of product differentiation. • Design impacts ability to use space and equipment. • Ease of handling during materials handling and transportation. • Protecting the goods in the package.
Production Metrics • Total cost • All money spent on manufacturing must be summarized and the total compared to the previous period. • Quality • This may vary by company but it must focus on quality from the perspective of the customer. • Total Cycle Time • Total cycle time is a measure of manufacturing performance that is calculated by studying major purchased components and determining the total days on hand of each one.
Production Metrics, continued • Safety • The standard metrics of accident/incident frequency, severity, and cost are important to monitor, with continuous improvement (i.e., reduction) as the goal. • Delivery performance • Is the percentage of customer orders shipped when the customer requested them to be shipped.
Production Technology • Manufacturing Execution Systems (MES) • Central software used to monitor and control production operations. • Linked to other enterprise tools like ERP systems, PLM tools, and scheduling and planning systems.
Table 14.3MES Key Functionality Source: Manufacturing Execution Solutions Association International, MES Functionality & MRP to MFS Data Flow Possibilities, (2011)
Summary • Production operations include all activities and processes involved in changing the composition of a good or service—component fabrication, product assembly, and service request execution—for the purpose of creating form utility. • Numerous tradeoffs must be made regarding production: volume versus variety, responsiveness or efficiency, make or outsource, and focusing on a limited number of competitive dimensions. • Intensified competition, more demanding customers, and relentless pressure for efficiency as well as adaptability are driving significant changes across many manufacturing industry settings.
Summary, continued • There have been significant development and shifts in production strategy. Organizations have advanced from forecast-driven mass production to demand-driven lean, flexible, and adaptive approaches. • Capacity planning and materials planning are used to balance inputs, capacity (resources), and outputs so that customer demand can be fulfilled without creating waste. • Most manufacturers use a combination of four production methods—make-to-stock, assemble-to-order, build-to-order, and engineer-to-order—to satisfy demand for their products. • Within the make-to-order method, companies can leverage assemble-to-order, build-to-order, or engineer-to-order options, based on product complexity and weakness.
Summary, continued • Facility layout involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility. • Facility layout is influenced by the product characteristics, production strategy, and assembly process employed by the organization. • Packaging plays important roles in the smooth transfer of finished goods from the plant to the distribution center and customer locations. • Sustainability is a key consideration in packaging selection, and companies are turning to recyclable and reusable materials for exterior and interior packaging. • Production KPIs must be linked to corporate goals and objectives, customer requirements, and overall performance of the production operation.
Summary, continued • Critical production KPIs address total cost, total cycle time, delivery performance, quality, and safety. • Manufacturing execution software solutions (systems) improve an organization’s ability to manage production operations and make them more responsive to disruptions, challenges, and changing marketplace conditions.
