A Presentation on Operations—Producing Goods and Services M.Tariq Yousafzai ibc208tamu@gmail.com

1. A Presentation on Operations—Producing Goods and ServicesM.Tariq Yousafzaiibc208tamu@gmail.com

2. Learning Objectives • Discuss the strategic value adding roles operations play in the supply chain • Appreciate the tradeoffs and challenges involved in production operations • Understand the primary production strategies • Discuss the primary assembly processes and production methods for goods creation • Describe various production process layouts

3. Introduction • Operations focus on the “make/build” portion of supply chain. • They focus on production of goods and services needed to fulfill customer requirements. • Involves the transformation of inputs into outputs that customers demands • For example Dell • Hospital?

4. Introduction • In the execution of these processes, production facilities must interact with supply chain functions that have been discussed • Both manufacturers and service providers need ready access to inventories of key inputs from their suppliers.

5. The Role of Production Operations in SCM • Many supply chain and logistics activities focus on operations— • Procurement operations that provide access to materials; • Transportation operations that supports the floe of goods; • Distribution operations that streamline order fulfillment and so on

6. The Role of Production Operations in SCM continued… • It takes a great deal of effort and coordination to run an effective production operation that is supported by and also supports supply chain • Consider the success of Apple iPhone. A great Product design, procurement-assembly-synchronization, and savvy marketing all contributed to the success of commercial juggernaut

7. Production Process Functionality

8. The Production Process funtionality • No two processes are organized exactly alike or perform to the same level • For example Burger King, McDonalds, and Subway each make sandwiches but have slightly different product strategies that derive their process design and assembly methods • Subway and Burger King (to a lesser extent) offer assemble-to-order products • McDonald produces products in anticipation of demand using standardized product components.

9. Production Tradeoffs • One of the most important issues for supply chain professional to understand is the tradeoffs involved within production operations and between production operations, other supply chain functions, and corporate strategy. • All decisions are interrelated and can impact costs, productivity, and quality in other areas.

10. Common tradeoffs • Volume-variety tradeoff is a primary issue in production. In situations where production processes have high fixed costs and equipment like chemical production and paper manufacturing, it makes sense to use Volume • In contrast, processes that can produce a range of products are said to have economies of scope.

11. (2) Responsiveness and efficiency • Related to production facility decisions • Centralized production facilities provide operating cost and inventory efficiencies • While regional production facilities allow companies to be closer to customers and more responsive • Product focused facility and process focused facilities

12. Total Costs of Manufacturing

13. Production tradeoffs continued… • Make Versus Buy decision • Whether to conduct your own production operations or to outsource production to external suppliers. • Internal production processes are more visible and easier to control from quality viewpoint • Outsourced production may lead to lower product costs and allow the company to focus its resources on other, more strategic needs.

14. Production Challenges • For example US automobile Industry • GM and For Needs to compete with Toyota lean production capabilities, Honda product quality,, and be responsive to low cost producers like Hyundai and Kia. • Henry Ford mass customization is out of order • What he said

15. Production Strategies

16. Lean manufacturing wastes

17. Adaptive manufacturing • The goal of this strategy is to provide companies with the ability to replace planning and replanning with execution based on real-time demand. • In simple words technologies in this process can enable companies to sense and respond to exceptions that impact manufacturing • Limited adoption of this technology

19. Assembly Processes • Products can be built either according to plan or demand • MTS • ATO • BTO • ETO • Each assembly process is appropriate for a given situation

20. Make-to-stock (MTS) • Traditional Production method where ent-item products are usually finished before receipt of a customer order • Customer orders filled from finished goods inventories. • Makes it cost effective and shortens lead time • Accurate forecasting and inventory control are critical issues in MTS, and warehousing of end products is the norm

21. ATO Assemble-to-order • Commences after receipt of order from customer • The finished product is generally a combination of standard components and options or accessories specified by the customer • In configure-to-order production processes, the manufacturer or customer selects a base product and configures all the variable parameters associated with that product. This is also known as mass customization process

22. BTO (Build/Make-To-Order) • Delays assembly until a confirmed order is received (postponement). • The end item is generally a combination of standard and custom-designed components that meet the unique needs of a customer • It differs from ATO in the higher level of customization and lower volume level of production.

23. ETO Engineer-to-Order • Focuses on the creation of highly tailored products for customers whose specifications require unique engineering design or significant customization • No two products are identical • Each order requires detailed cost estimates and tailored pricing • Long lead times • Raw materials may be stocked but are not assembled into the finished good until a customer order is received and the product is designed

24. Delayed Differentiation • Delayed differentiation is one hybrid strategy in which a common product platform is built to stock. • It is later differentiated by assigning to it certain customer-specific features, only after demand is realized. • Hence manufacturing occurs in two stages • (a) An MTS stage where one or more undifferentiated platforms are produced and stocked • (b) An ATO stage where product differentiation takes place in response to specific customer orders

25. Production Process Layout • One of the key drivers of how production activities will be carried out is facility layout. • It involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility • The layout is influenced by the production strategy and assembly process employed by organization

26. Facility Layout Matrix

27. A project layout • Is a fixed location layout where the product remains in place for the duration of production • Materials and labor are moved to production • For example • Home building • Road construction • Tunnels etc

28. A workcenter • A process focused layout that groups together similar equipment and or functions • The materials move from department to department for completion of similar activities and tasks

29. Manufacturing cell • Process focused layout that dedicates production areas to narrow range of products that are similar in processing requirements • Four activities involved in its set up • (1) Identifying families of parts with similar flow paths • (2) Grouping machines to cells based on part families • (3) Arranging cells so material movement is minimized and • (4) locating large shared machines at the point of use

30. Assembly Line • Product focused layout in which machines and workers are arranged according to the progressive sequence of operations need to make a product. • Often used for mass production of goods, the assembly steps are completed at workstations that are typically linked to materials handling equipment.

31. Continuous Process facilities • Similar to assembly lines, with a product flowing through a predetermined sequence of stops. • The main difference is the continuous, rather than discrete nature of flow. • Widely used for high volume products such as gasoline, paper towels, and soft drink concentrates • These highly automated, capital intensive facilities need to run almost nonstop to gain maximum efficiency