Chapter 5

Operations Management

5-1

Lecture Outline
What is Operations Management?
Product Design
Process Design
Facility Layout
Line Balancing in Product Layouts
Process Automation

5-2

What is Operations Management?

(Operations management, OM)

Transformation Role

OM (finished goods) ( services)

5-4

OM Decisions
(Product Design)
(Product features)
(Process Design)
(Production process)
(Quality Management)
(Quality standards)
(Inventory Management)

5-5

 (Facility Layout)

(Facility Location)

(Scheduling)


5-6

Manufacturing vs. Service Operations

(Manufacturing Operations)


(Service Operations)

5-7

Evolution of Operations
(Operation)

(Production Management)

(Production and Operations Management)
(Operations Management)

5-8

Impact on the Organization

:
(Marketing)

(operations capabilities)
(Sourcing)
(material availability)
(operational requirements)
Supply Chain Leaders Box: Wal-Mart
5-9

Impact on SCM

:
(upstream delay)

(suffer) (downstream
delay)
(excess costs)

5-10

What is Product Design?

(exact
features) (characteristic)
OM

(desired product)

5-11

Designing Services

(entire service concept)

:
(physical element of the service)
(psychological benefits)
(sensual elements)

5-12

Product Design Process

1.

(Idea Development)
marketing, competitors, early supplier involvement,
reverse engineering

2.

(Product Screening)
viability of
the product based on the needs of each of the business functions.

3.

(Preliminary Design and Testing)

performance specifications translated into technical specifications

4.

(Final Design)
specifications translated into production instructions

Functional concerns at the product screening stage

Global Insights Box: Smartcup

Break-Even Analysis
(Break-even analysis)
(product screening stage)
Break-Even Point
(cover cost)
total cost = revenue
(total cost)
(fix cost) (variable
cost)
5-15

Break-Even Analysis Continued

Total Cost = Fixed Costs + Variable Costs

Total Cost = F + VC Q
: F = fixed cost
VC = variable cost per unit
Q = # of units sold
Q = 0 () Total Cost = Fixed Cost
Revenue = SP Q
where: SP = selling price per unit
5-16

5-17

Break-Even Analysis Continued

Total Cost = Total Revenue
F + VC Q = SP Q
Solve for Q:
QBE =

F
SP - VC

where QBE is the break-even quantity

5-18

Break-Even Example
Shu Chen plans a new line of childrens scarves. She estimates a variable cost of
$25 per scarf and a fixed cost per year of $15,000. If the selling price is $30, how
many scarves must she sell to break even? If Shu sells 4,000 scarves at the $30
price, what will be the contribution to profit?
Shu Chen (childrens
scarves) $ 25
15,000 $ 30
? Shu 4,000 $ 30
?
5-19

Break-Even Example QBE

Break-Even Quantity:
QBE =

QBE =

F
SP - VC
$15,000
$30 - $25

= 3,000 scarves

5-20

Break-Even Example Profit

Profit = Total Revenue Total Cost

= (SP) Q [F + (VC) Q]
= $30 (4,000) [$15,000 + $25 (4000)]
= $5,000

5-21

Factors Impacting Product Design Decisions

Design for Manufacture (DFM)

Product Life Cycle
(introduction) (growth) (maturity)
(decline)
Concurrent Engineering

Remanufacturing

What is Process Design?

(Process design)

Two categories of Processes:
(Intermittent)
(Repetitive)

Intermittent Processes
(Characteristics)
(Large variety of products)
(different processing
requirements)
(Low volume)
()
(Labor intensive)
(highly skilled workers)
5-24

 (variety of tasks)
(general purpose equipment)
(flexible)
life cycle

5-25

Repetitive Processes
:
( )
(high volume)
(line flow)
life cycle
(capital-intensive) (labor-intensive)

5-26

Continuum of Process Types

Project Processes

Batch Processes

Line Processes

Continuous Processes

5-28

Continuum of Process Types

5-29

Rapid Manufacturing
(Rapid Manufacturing)
(when needed)
:
3 (Three-dimensional (3D) printing technologies)
Additive layer manufacturing (ALM)

Managerial Insights Box A New Manufacturing Process

Facility Layout
Facility Layout Planning

(Facility layout)

5-31

Facility Layout Types

Fixed Position Layout

Process Layout
Product Layout
Cellular Layout

Fixed Position Layout

(
)

5-33

Process Layout

(intermittent processes)
(grouped by process)

5-34

Product Layout

(repetitive processes)

(almost exactly the same)

5-35

Cellular Layout
(product layout)
(process layout)
(product family)

(workstation)
(cell)

Managerial Insights Box: Mazzis Versus Totonos Pizza
5-36

Designing Product Layouts

Product Layout
(sequence of tasks)

(order of tasks)


Process is called Line Balancing
5-37

Step 1: Identify Task Times And Precedence Relationships

1

5-38

Task Times and Precedence Relationships

Sum of Tasks Times = 60 + 30 + 35 + 25 + 35 + 22 + 15 + 23 = 245 sec

5-39

Step 2: Determine Cycle Time

2: (Cycle Time takt time)

(Cycle Time)
(Cycle Time) =
(workstation)

 Pizza Operation
runs 8 hours per day = 28,800 seconds
want to produce 300 pizzas per day
Cycle Time =
Cycle Time =

available production time per day

desired number of units per day
28,800 seconds/day
300 pizzas/day

= 96 seconds per workstation

5-41

Step 3: Determine the theoretical minimum number of workstation

3:

Sum of task times = 245 Cycle time = 96 /

Step 4: Assign Tasks to Workstations

4
sum of task times cycle time
2

Longest Task Time Rule

(longest task time)
Number of Followers Rule
select the task with the most number of followers
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5-44

Step 5: Compute Efficiency

5-45

Process Automation

(production consistency)
(enhances speed)

enables handling of jobs beyond human capabilities

5-46

Process Automation
:

Global Insights Box: KUKA Robotics Corp.

5-47

Automation in Services

5-48

Review
1.

Operations Management (OM), or operations, is the business function

responsible for producing a companys goods and services, in an efficient and
cost effective way. It is the function responsible for transforming a companys
inputs, obtained by the sourcing function, into the finished goods or services,
which marketing sells to final customers.

2.

The operations function performs the transformational role of the organization. It

has evolved from being a strictly production function to having a strategic
organizational role.

3.

OM involves making many varied decisions. These include product and process
design, quality management, inventory management, facility layout and location,
and scheduling. Competitive bidding and negotiation are two different methods
used to reach agreement and develop contracts with potential suppliers.
5-49

Review Continued
4.

Product design is the process of deciding on specific characteristics and

features of products. Process design is developing the process needed to
produce the product.

5.

Layout planning is deciding on the best physical arrangement of centers of

economic activity. There are four types of layouts: fixed position, process,
product, cellular.

6.

Line balancing is the process of designing product layouts. It involves

assigning tasks to workstations considering their precedence relationships,
cycle time, and task times.

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