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BSAD 102 Mike’s Bikes Business Simulation

BSAD 102 Mike’s Bikes Business Simulation. St. Francis Xavier University. Introduction. The importance of Operations Management OM is one of the three major functions of any organization OM is central to the production of goods and services OM is a costly part of an organization

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BSAD 102 Mike’s Bikes Business Simulation

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  1. BSAD 102Mike’s BikesBusiness Simulation St. Francis Xavier University

  2. Introduction • The importance of Operations Management • OM is one of the three major functions of any organization • OM is central to the production of goods and services • OM is a costly part of an organization • OM is a key organizational link to a firm’s supply chain • The aim of Operations Management is to be efficient and effective • Faster, cheaper, better St. Francis Xavier University

  3. Objectives • OM is central to the production of goods and services • Developing an understanding of effective and efficient production in your companies • OM is a costly part of an organization • Developing an understanding of the drivers of costs (capacity utilization, wastage, idle time, quality orientation, inventory) in your companies • Finding relevant operations management reports St. Francis Xavier University

  4. Decision Scenario • Your design team has announced that they are now only one year away from releasing three new bike designs, an improved Mountain bike, and one design each for the Road and Youth bike segments.   • Your main challenge for this year is to create a capacity and quality management plan that takes into account that you will have new products available for launch next year. St. Francis Xavier University

  5. Concepts • Capacity • Amount of output a system is capable of achieving over a specified period of time or the amount of a good that a firm can produce under normal conditions • Determines the maximum number of bikes that can be produced in your factory and your ability to satisfy demand • Depends on the number, skill level, and productivity of people working, the size and layout of facilities, quantity and quality of equipment, availability of inputs, and overall scheduling of operations • Relevant Mike’s Bikes Concepts • Capacity – maximum capable output of bikes • Wastage – time spent on activities such as setting up and maintenance of machines • Idle time – non-production time St. Francis Xavier University

  6. Decisions • Capacity re: Mike’s Bikes (see “The Year Ahead”) • How is capacity measured? • What is your capacity situation? • How can you change your capacity? What impact does a change in capacity have on your firm? • Should you increase, maintain or decrease your capacity? St. Francis Xavier University

  7. Decisions • Capacity re: Mike’s Bikes • How is capacity measured? • Standard Capacity Unit (SCU) is the amount of production resources required to manufacture one bike • Varies by type of bike • Mountain bike = 0.5 SCU • Road bike = 1.0 SCU • Youth bike = 0.25 SCU • What is your capacity situation? • Refer to “Production Planner” • 20,000 SCUs means at full capacity you can produce 30,000 mountain bikes with .5 SCU – with 5,000 SCUs wastage St. Francis Xavier University

  8. Decisions • Capacity re: Mike’s Bikes • How can you change your capacity? • Two ways to increase capacity • Buy capacity (Asset on B/S and accounted on I/S) – this is adding to or expanding your current production system • Reduce wastage (COGS) – this is a method to improve the efficiency of your current production system • Sell capacity St. Francis Xavier University

  9. Decisions • Capacity re: Mike’s Bikes • Should you increase, maintain or decrease your capacity? • Are you launching a new bike? • Do you have enough capacity? Do you have too much? • Idle time • You have too little if your idle time is 0% • You have the right amount if your idle time is 1-10% • You have too much capacity if your idle time is more than 10% • Forecast(s) • Maintain Mountain Bike? Adjust forecasts? • Demand for new bike? • Competition? St. Francis Xavier University

  10. Concepts • Capacity • Key input to your firm’s costs, production speed, and ability to generate a quality product • Production incurs direct and indirect outlays of labour, materials and machine hours – see COGM and Gross Margin Report • Production efficiency improvements cost the firm and lead to cost reductions – see Factory Overhead Allocation Rates St. Francis Xavier University

  11. Concepts • Quality • “The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs” American Society for Quality • “Quality refers to the satisfaction experienced by customers from a product and is an important determinant of demand” Mike’s Bikes Handbook • Implications re: company reputation, customer satisfaction, future growth, product liability, competitiveness, marketing mix, manufacturing strategy (faster, cheaper, better) St. Francis Xavier University

  12. Benchmarking ISO 9000 Re-engineering Competitive product analysis Value-added analysis Statistical process control Quality/cost studies Quality improvement teams Control charts Adding value through supply chains Quality Assurance Tools St. Francis Xavier University Quality Control: Ensuring goods meet the firm’s quality standards. Quality control requires attention to both efficiency (quantity produced) and quality (the ability of the product to deliver the consumers’ expectations)

  13. Decisions • Quality re: Mike’s Bikes • There are three basic quality targets: • Low quality 0.50 • Medium quality is 0.75 • High quality is a rating of 0.95 • Do you have the quality rating your current market demands? • Market Scenario Report and Product Dimension Sensitivities • Are you launching a new bike? Do you have the quality rating for your future market demands? St. Francis Xavier University

  14. Decisions • Quality re: Mike’s Bikes • Implementing Quality Decisions – Capacity Planner • How much quality can you afford given the price of your bike and your other functional decisions (marketing, ops)? • Accounted as COGS • Quality effectiveness improvements cost the firm but should lead to fewer warranty returns (the measure of quality in Mike’s Bikes) – see Factory Overhead Allocation Rates and All Product Details St. Francis Xavier University

  15. Concepts • Physical Distribution • Those activities needed to move a product from the manufacturer to the end customer, including warehousing (storage of goods) and transportation (delivery of goods) • Warehousing costs include space rental or mortgage payments, insurance, wages, inventory control • Transportation costs include speed of delivery (timeliness), weight of product, insurance, ease of handling, and distance, as well as cross-border considerations St. Francis Xavier University

  16. Next Class • Have your decisions input by 4 pm Tuesday • Wednesday’s class will focus on the Beothic case – please read and prepare questions • Mike’s Bikes Report II due today or tommorrow by 3:00pm • Mike Bikes’ Report III due March 21st and available on-line next class St. Francis Xavier University

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