Operations Management & Management Science (Course Introduction)

Operations Management & Management Science(Course Introduction) Mark A. Thompson Rawls College of Business mark.thompson@ttu.edu 806-742-1535

Course Syllabus • Course Description • Learning Outcomes • Course Materials • Course Requirements and Assignments • ALL ASSIGNMENTS SHOULD BE TURNED IN OR EMAILED TO MARK THOMPSON (mark.thompson@ttu.edu) • In subject line, “ISQS 5343 Assignment #X” and group (i.e., A09, WeekBlock 10G or 10M)

Overall Perspective of Course • Ways to increase VALUE? • Increase REVENUES • Decrease COSTS • Decrease (or manage) your RISKS

Course Schedule(Saturday, May 28) • Increasing REVENUE through operations management • Mark Thompson and Lowell Lay • Decreasing COSTS through operations management • Phil Flamm

Course Schedule(Sunday, May 29) • Managing operational RISKS • Mark Thompson • Supply chain management and case study • Qing Cao and Brad Ewing

Due Dates • Project Presentations & Assignments #1-4 • Due Saturday, August 13 • Assignments #5 & #6 • Due Monday, December 5

Questions All assignments go to: Mark Thompson mark.thompson@ttu.edu

Operations Management 5343JIT/Lean Operations“Decreasing Costs and Adding Value”Phillip Flamm

Just-In-Time and Lean Operations: • Is a philosophy of continuous and forced (corporate culture) problem solving via a focus on throughput and reduced inventory • Emphasizes continuous improvement, respect for people, and standard work practices • Supplies the customer with their exact wants when the customer wants it without waste © 2011 Pearson Education, Inc. publishing as Prentice Hall

Lean Operations in Services • The JIT techniques used in manufacturing are used in services • Suppliers • Layouts • Inventory • Scheduling © 2011 Pearson Education, Inc. publishing as Prentice Hall

Five Basic JIT/Lean Principles Include Continuously: • Eliminating Waste: eliminate any activities that do not add value in an organization. Includes overproduction, waiting time, processing, inventory, and motion. • Increasing Speed and Response (throughput): better process designs allow efficient responses to customers needs and the competitive environment. Lean/JIT is market driven. Theory of Constraints. • Improving Quality (reducing variability): Poor quality creates waste, so improving quality is essential to the lean environment. • Reducing Cost: simplifying processes and improving efficiency translates to reduced costs. • Maintaining respect for all workers : people, not machines make things happen

Impact of JIT/Lean Implementation • Alcoa in 1999 …..1/4 billion dollars in inventory reduction • One 5 year study of JIT/Lean implementations yielded: • 50% reduction in space required • 50% less need for material handling equipment • 80% reduction in inventory required • 80% reduction in lead time • 75% reduction in rework or product failures

Another 1999 Study of Different Sized Companies

Why do companies not see improvement through JIT/Lean?

Upper Management Buy In and/or Leadership Style

1. Eliminating Waste

1. Eliminate Waste • Waste is anything that doesn’t add value: • Unsynchronized production (too early or too late) • Scrap & rework (defects) • Excess inventory & WIP (overproduction) • People waste (waiting time) • Unnecessary material handling (stalled work flows) • Inefficient & un-streamlined layouts (reducing travel distances) • Visibility - waste can only be eliminated after it’s discovered • Clutter hides waste • JIT requires good housekeeping

Good Housekeeping -The 5 Ss • Sort/segregate – when in doubt, throw it out • Simplify/straighten – methods analysis tools • Shine/sweep – clean daily • Standardize – remove variations from processes • Sustain/self-discipline – review work and recognize progress © 2011 Pearson Education, Inc. publishing as Prentice Hall

Good Layouts Consider: • That layout must support competitive priorities & core competencies • Material handling equipment • Capacity and space requirements • Environment and aesthetics • Flows of information • Cost of moving between various work areas • Employee morale, customer satisfaction © 2011 Pearson Education, Inc. publishing as Prentice Hall

JIT Layout Tactics Build work cells for families of products Include a large number operations in a small area Minimize distance Design little space for inventory Improve employee communication Use poka-yoke devices Build flexible or movable equipment Cross-train workers to add flexibility JIT/Lean Layout Reduce waste due to movement Table 16.1 © 2011 Pearson Education, Inc. publishing as Prentice Hall

Methods Analysis • Focuses on how task is performed • Used to analyze • Movement of individuals or material • Flow diagrams and process charts • Activities of human and machine and crew activity • Activity charts • Body movement • Operations charts © 2011 Pearson Education, Inc. publishing as Prentice Hall

Process-Oriented LayoutJob/Batch Shop • Like machines and equipment are grouped together • Flexible and capable of handling a wide variety of products or services • Scheduling can be difficult and setup, material handling, and labor costs can be high © 2011 Pearson Education, Inc. publishing as Prentice Hall

Patient A - broken leg ER triage room Emergency room admissions Patient B - erratic heart pacemaker Surgery Laboratories Radiology ER Beds Pharmacy Billing/exit Process-Oriented Layout Figure 9.3 © 2011 Pearson Education, Inc. publishing as Prentice Hall

A Process (batch or job shop) Focus

Process (job or batch) Layouts • Flexible resources including workers • More customization ability • Higher worker satisfaction • Higher labor cost - workers more skilled • Processing rates are slower • Material handling costs are higher/more WIP • Scheduling resources & work flow is more complex • Space requirements are higher

Process-Oriented Layout • Arrange work centers so as to minimize the costs of material handling • Basic cost elements are • Number of loads (or people) moving between centers • Distance loads (or people) move between centers © 2011 Pearson Education, Inc. publishing as Prentice Hall

Designing Hybrid Layouts • One of the most popular hybrid layouts uses Group Technology (GT) and a cellular layout • GT has the advantage of bringing the efficiencies of a assembly line layout to a process layout environment

Advantages of Assembly Line Work Cells (reduced waste) • Reduced work-in-process inventory • Less floor space required • Reduced raw material and finished goods inventory • Reduced direct labor • Heightened sense of employee participation • Increased use of equipment and machinery • Reduced investment in machinery and equipment © 2011 Pearson Education, Inc. publishing as Prentice Hall

Requirements of Assembly Line Work Cells Identification of families of products A high level of training, flexibility and empowerment of employees Being self-contained, with its own equipment and resources Test (poka-yoke) at each station in the cell © 2011 Pearson Education, Inc. publishing as Prentice Hall

Traditional Process (Job Shop) Focused Layout • Jumbled flows, long cycles, difficult to schedule

JIT Hybrid Cellular Manufacturing (increased responsiveness to customer demand) • Product focused cells, flexible equipment, high visibility, easy to schedule, short cycles

Improving Layouts Using Work Cells Current layout - workers in small closed areas. Improved layout - cross-trained workers can assist each other. May be able to add a third worker as additional output is needed. Figure 9.10 (a) © 2011 Pearson Education, Inc. publishing as Prentice Hall

Pros/Cons of Assembly Lines • Processing rates are faster • Material handling and labor costs are lower • Less space required for inventories • High capital cost & wide use of automation • Less volume or design flexibility • Specialized equipment required • Support staff expensive • Balancing difficult

Imagine One Person at Each Station

Utilizing 3 People Instead of 9! 55 55 55 Now everyone has the same amount of work…….hard to do in most cases.

Improving Assembly Lines Utilizing “U” Shaped Lines Current layout - straight lines make it hard to balance tasks because work may not be divided evenly Improved layout - in U shape, workers have better access. Four cross-trained workers were reduced. U-shaped line may reduce employee movement and space requirements while enhancing communication, reducing the number of workers, and facilitating inspection Figure 9.10 (b) © 2011 Pearson Education, Inc. publishing as Prentice Hall

Warehousing and Storage Layouts Material Handling Costs • All costs associated with the transaction • Incoming transport • Storage • Finding and moving material (how to reduce time requirements) • Outgoing transport • Equipment, people, material, supervision, insurance, depreciation • Minimize damage and spoilage © 2011 Pearson Education, Inc. publishing as Prentice Hall

Cross-Docking • Materials are moved directly from receiving to shipping and are not placed in storage in the warehouse • Requires tight scheduling and accurate shipments, bar code or RFIDidentification used foradvanced shipmentnotification as materialsare unloaded © 2011 Pearson Education, Inc. publishing as Prentice Hall

Office Layouts (1/2 US workers in offices) • Grouping of workers, their equipment, and spaces to provide comfort, safety, and movement of information • Movement of information is main distinction • Typically in state of flux due to frequent technological changes • Trade offs between proximity and privacy • Open concept promotes trust & understanding © 2011 Pearson Education, Inc. publishing as Prentice Hall

Break Room Storage Typing- Dictation Copy Room Entrance Close Proximity Desirable Boss

Designing Service/Office Layouts • Step 1: Gather information: • Space needed, space available, importance of proximity between various units • Step 2: Develop alternative block plans: • Using trial-and-error or decision support tools • Step 3: Develop a detailed layout • Consider exact sizes and shapes of departments and work centers including aisles and stairways • Tools like drawings, 3-D models, and CAD software are available to facilitate this process

Operations Management & Management Science (Course Introduction)