INTRODUCTION : EVOLUTION OF OPERATIONS

1st industrial rev.

- Hand to Machine.
- Using steam power
- Textile

Division of labor (Adam Smith,1776)

Interchangeable Part (Eli Whitney,1790) – make a standardize of part

2nd industrial rev.

- Fixed location Production > every step go to single location

- Scientific Mgt (Fredrick Taylor,1900) > Idea working several thing at a time
- Mass Production > Cycle time, Takt time
- HRME (Elton Mayo) > Horthorne effect : about light

3rd industrial rev.

- Using IT system in production

- Quality Revol. > Focus on quality > KAIZEN > Cont. improvement

Now 4.0

- Big Data
- Internet of things
- Smart factory

STRATEGY FORMULATION

1. Define primary task > Firm’s purpose

2. Identify core competencies
3. Order winner and qualifier
4. Position the firm > Need SWOT > Diff,cost leader, Dynamic
5. Deploy strategy
PROCESS STRATEGY
- It’s an org. approach to transform resources into goods and serv.
- L-T Effects

Type of products and services

- Make to order (MTO)

o Produce after customer make order
o Use more time to complete
- Make to stock (MTS)
o For standard customer
o Forecast demand
- Assembly to order
o Produce in a standard module and option added by customer ex.PC
- Project
o Starting and Ending time Ex. Construction
- Job shop ( Need high labor skilled)
o Low volume, high variety products
o Ex. Bakeries ,Education
- Assembly Line
o Large vol of standard products: better in cost and time ex. Motorcycle making
- Product focus ( Continuous Process)
o High vol, low-variety ex. Oil, glass, paper
- Mass Customization Focus
o Rapid change and low cost production Ex. Shoes with color choosing

Process Measurement

1. Productivity > Output/input = Higher ratio mean High productivity

2. Capacity > Capacity Utilization = Actual output/Designed Capacity
3. Quality > Defect rate
4. Speed of delivery
a. Lead time (Since received order until reach customer)
b. Delivery time (Variability)
5. Flexibility > response quickly to the demands
a. Changes of products, volume, more than 1 products simultaneously

Bottleneck > - The relationship b/w various stage (highly dependence will create BN) -
Higher buffer inventories, higher independence b/w stage - The stage with a
lowest capacity

Which products should be produced? > Calculating of max production in bottleneck station.
QUALITY MANAGEMENT
Producer’s view > Quality of conformance> conformance to spec., and Cost
Customer’s view > Quality of design > characteristic and Price.

Fitness for use – How well product does as it supposed to be. Ex. Car and Truck

Quality of design – MB and Ford have same use but diff in perf. Feat. Size etc.

Quality of conformance – Making sure that products produced according to the design at acceptable cost.

Poor quality > higher cost

QPR – Quality productivity ratio; the index that include productivity and quality cost
> 1/production cost (Cost which include the defect and rework) Higher QPR is good

Walter Shewhart > Term Quality Assurance by using statistical control method

W.Edward Deming > Father of quality control

Armand V. > Father of Total quality mgt

TQM > Encompass the entire org. from supplier to customers.

Principles of TQM

1. Cust.’s need are top priority

2. Top mgt. must provide leadership for quality
3. Quality is strategic issue
4. Quality is responsibility of all staff
5. All func. Of Co. must focus on Cont. Quali. Improvement (CQI)
6. Quality problems are solved thru cooperation among staff and mgt
7. Problem solving and continuous quality imp. Use statistical control method
8. Traning and edu. Of all staff are basis of CQI

Cost of Quality (COQ) > Cost of achieving good quality or QA

- Prevention cost > trying to prevent poor quality

- Appraisal cost > testing
- Internal failure > Poor quality discovered bfr delivered
- External Failure > incurred after cust. received product. ( Highest Cost)

KAORU USHIKAWA – Developed Fishbone diagram (What make machine cause prob)

GENICHI TAGUSHI – Quality loss.

SIX Sigma – 99.9997% or return no more than 3.4 defects per million(DPMO)

Six sigma improvement model (DMAIC)

1. Define critical output and gaps for improvement

2. Measure work and collect data
3. Analyze data
4. Improve process
5. Control new process

Employee Empowerment – Let they involve in product and process improvements (85% of quality problems are
from process and materials
JIT > High WIP hide problems. Pull system. Cut cost of quality

7 Basic QC Tools

Generating ideas

1. Check sheet
2. Scatter diagrams
3. Cause and effect diagram

Organizing data

4. Pareto chart (80-20 rule)

5. Flow charts – step of process

Identifying problems

6. Histogram – show normal distribution

7. Statistical process control chart – UCL , LCL
SUPPLY CHAIN MGT
Encompass all activities associated the flow of goods from raw material to customer

- Outbound > ex. We are DC so store will be OB

- Inbound > ex. We are DC so Factory supplier will be IB.

4 mains SC Process

1. Procurement
2. Production
3. Distribution
4. Information

Bullwhip effect – w/o sharing information (move back upstream) so the farest from customer will have high cost.

To prevent BW effect

1. Vendor Managed Inventory – Supplier will manage our inventory. They will check stock and decide
themselves when to reorder. We just send them a plan.
2. JIT
3. Information sharing
4. Strategic partnership

Risk Pooling – is another way to reduce uncertainty. Have a center WH to share inventory

3 indicator to measure SC Performance

1. Inv. t/o – higher is better

2. Inv. Days of supply – Avg. aggregate value of inv. / (COGS/365)89
3. Fill rate – The rate we can fill cust. demand. higher is better
FORECASTING

S-T > 3-12 months : Ex. Inventory, machine, purchasing

M-T > 3 months – 3 years Ex. OT, hiring/firing workers

L-T > 3 years up – Strategic Planning, R&D

Approaches

1. Naïve – next is the same at last

2. MA - used if little or no trend. To smoothing
3. Weighted MA – Older data is less important. Ex. 3 x Latest month and 1 x 3 month ago
 MA not good for trend
4. Expo. Smoothing – Use Alpha 0-1. Small alpha > more smooth but it’s less sensitive to change
- Ft = Ft-1 + alpha(At-1 – Ft-1)
5. Expo. With trend Adj. – Formula
6. Least Sq. –
7. Seasonal Variation

Measures of Errors

1. MAD – Sum l Actual – Forecast l / n

2. MSE – take Square so it can better predict during high volume
3. MAPE – (MAD / actual )/n x100

Tracking Signal – One model cannot use forever so we have to track RSFE/MAS

-+
INVENTORY MGT
It’s items kept to meet demand. Ex. RM, WC, Tool, machine, equip or labor.

Inv. Can reduced by reducing uncertainty

Reasons to keep Inv.

1. Uncertainty
2. Support strategic plan
3. Take adv. Of EOS > Disc.for larger quantity order

ABC Classification

A : 5-15% will account for 70-80% of total $

B: 30% will account for 15% of total $

C: 50-60% will account for 5-10% of total $

Inventory Cost

- Carrying or holding cost

o Storage
o Capital
o Obsolescence
- Setup or ordering
- Shortage or stock-out
- Purchase