OSCM

Forecasting Models

2009-02-28T01:15:00.000-08:00

Forecasting Models
Everyday a shop owner thinks how many items he would be able to sell.
The florist at the roadside keeps flower thinking in mind how much he would be able to sell by the end of the evening.
Here they are applying forecasting- albeit on a miniscule scale.
So we all forecast something each and every day.
What is Forecasting?
Planning is an important function of any management which based of forecasting. Hence, Forecasting is the art and science of predicting future events. Forecasts are required throughout an organization and at all levels of decision making in order to plan for the future and make effective decisions. The principal use of forecasts in operations management is in predicting the demand for manufactured products and services for time horizons ranging from several years down to 1 day. Depending on the planning horizon, forecasting can be classified in three ways:
Short – range forecasting (up to 1 year)
Medium – range forecasting ( up to 3 years)
Long – range forecasting (more than 3 years)
Types of forecasts
In general, a contemporary business organization employs three distinct types of forecasts.
These are given under:
1. Economic forecasts
2. Technological forecasts
3. Demand forecasts
Economic forecasts address the business cycle by predicting inflation rates, money supplies, housing starts, and other planning indicators.
Technological forecasts are concerned with rates of technological progress, which can result in the birth of exciting new products, requiring new plants and equipment.
Demand forecasts are projections of demand for a company’s products or services. These forecasts, also called sales forecasts, drive a company’s production, capacity, and scheduling systems and serve as inputs to financial, marketing, and personnel planning.
What is the strategic importance of forecasting?
Forecasting plays a very important role in the following areas:
Human resource management
Hiring, training and laying-off workers all depend on anticipated demand.
Capacity planning

Quantitative Methods
The chief Quantitative methods are:
1. Moving averages
2. Exponential smoothing Time series models
3. Trend projection
4. Linear regression  Causal model
The time series models of forecasting predict on the basis of the assumption that the future is a function of the past. In other words, they look at what has happened over a period of time and use a series of past data to make a forecast. If we are predicting weekly sales of washing machine, we use the past weekly sales for washing machine in making the forecast.
A causal model incorporates into the model the variables or relationships that might influence the quantity being forecast. A causal model for washing machine sales might include relationships such as new housing, advertising budget, and competitors’ prices.
Moving over to a structured approach to forecasting, let me introduce the basic steps involved in this process:-
Steps in Forecasting
There are eight steps to a forecasting system.
These are:
1. Determine the use of the forecast –
(What objectives are we trying to achieve?)
2. Select the items that are to be forecasted
3. Determine the time horizon of the forecast –
(Is it short, medium, or long – range?
4. Select the forecasting model
5. Gather the data needed to make the forecast
6. Validate the forecasting model
7. Make the forecast
8. Implement the results
We now focus our attention to one of the most widely used and effective method of forecasting.
Time Series Forecasting
A time series is based on a sequence of evenly spaced (weekly, monthly, quarterly, and so on) data points. Forecasting time series data implies that future values are predicted only from past values and that other variables, no matter how potentially valuable, are ignored.
Decomposition of a Time Series
There are four main ways of decomposing the time series:
􀂃 Trend
􀂃 Seasonality
􀂃 Cycles
􀂃 Random variations

QualitativeMethods:

Market Survey

Build-up forecast

Life cycle analog method

Panel consensus forecasting

Delphi method

Capacity management

2009-02-28T01:13:00.000-08:00

Capacity management
What is Capacity?
Capacity is the maximum rate of output for a process. The operations manager must provide the capacity to meet current and future demand; otherwise, the organization will miss opportunities for growth and profits.
Capacity plans are made at two distinct levels:
Long term capacity plan –
( it covers at least two years in future.g. investment in new facilities and equipments)
Short term capacity –
(it covers week-to-week operation e.g. it focuses on workforce size, overtime budgets, inventories, etc)
The relevant questions in this regard are:
􀂃 How much of cushion is needed to handle variable, uncertain demand?
􀂃 Should we expand capacity before the demand is there or wait until demand is more certain?
Measures of capacity –
There are two main methods of measuring capacity. These are expressed as:
􀂃 Output measures (choice for high volume process)
􀂃 Input measures (choice for low volume flexible processes)
Output measures
Output measures are best utilized when the firm provides a relatively small number of standardized products and services, or when applied to individual process within the overall firm. Nissan Motor Company states capacity at its Tennessee plant as 4,50,000 vehicles per year. That plant produces only one type of vehicle, making capacity easy to measure. However, many organizations produce more than one product or service. For example, a restaurant may be able to handle 50 sit-down or 100 take-out customers per hour. It might also handle 25 sit-down and 50 take-out customers or many other combinations of the two types of customers. As the amount of customization and variety in the product mix becomes excessive, output-based capacity measures become less useful.
Input measures
Input measures are useful for low-volume, flexible processes. For example in a photocopy shop, capacity can be measured in machine hours or number of machines. Just as product mix can complicate output capacity measures, so as demand can complicate input measures. Demand, which is expressed as an output rate, must be converted to an input measure. Only after making the conversion can a manager compare demand requirements and capacity on an equivalent basis. For example, the manager of a copy center must convert its annual demand for copies from different clients to the number of machines required.
When we talk about capacity planning it requires knowledge of the current capacity of a process and its utilization.
My next question to you would be:-
What is capacity utilization?
Capacity utilization is the degree to which equipment, space, or labour is currently being used. It is expressed as a percent.
Mathematically, it can be expressed as under:
Utilization = %100capacity Maximumrateoutput Average×
The unit of measurement for both Numerator and Denominator should be same.
Utilization indicates the need for adding extra capacity or eliminating unneeded capacity.
Two definitions of maximum capacity, i.e.:
Peak capacity and
Eeffective capacity
are quite useful.
Let us focus on these aspects.
Peak capacity
The maximum output that a process or facility can achieve under ideal conditions is called peak capacity. It can be sustained only for a short time, few hours a day or few days in a month. A process reaches it by using marginal methods of production, such as excessive overtime, extra shifts, temporarily reduced maintenance activities, overshifts, and subcontracting.
Effective capacity
The maximum output that a process or firm can economically sustain under normal conditions is its effective capacity. In some organizations, effective capacity implies a one-shift operation; in others, it implies a three-shift operation. For this reason, Census Bureau surveys define capacity as the greatest level of output the firm can reasonably sustain by using realistic employee work schedules and the equipment currently in place.
When operating close to peak capacity, a firm can make minimal profits or even lose money despite high sales levels.
Let us now see how to calculate these measures of utilization through an example.
Example
If operated around the clock under ideal conditions, the fabrication department of an engine manufacturer can make 100 engines per day. Management believes that a maximum output rate of only 45 engines per day can be sustained economical over a long period of time. Currently, the department is producing an average of 50 engines per day. What is the utilization of the department relative to peak capacity? Effective capacity?
Solution.
The two utilization measures are
Utilizatio = peakncapacityPeakrateoutputAverage = 10050×100% = 50%
effectivenUtilizatio = capacityEffectiverateoutputAverage = 4550×100% = 111%
Note- Even though the fabrication department falls well short of the peak capacity, it is well beyond the output rate judged to be the most economical. Capacity expansion options could be evaluated.
To increase the maximum capacity the process need to be focused more. Most processes involve multiple operations, and often their effective capacities are not identical. A bottleneck is an operation that has the lowest effective capacity of any operation in the process and thus limits the system’s output. Figure 5.1 shows a process where operation 2 is a bottleneck, whereas Figure 5.2 shows the process when the capacities are perfectly balanced, making every operation a bottleneck.
A project or job process does not enjoy the simple line flows. Its operations may process many different items, and the demand on any one operation could vary considerably from one day to the next. Bottlenecks can still be identified by computing the average
Inputs
utilization of each operation. In this situation, management prefers lower utilization rate, which allow greater slack to absorb unexpected rise in demand. The long-term capacity of bottleneck operation can be expanded in various ways. Investments can be made in new equipments, The bottleneck’s capacity also can be expanded by operating it more hour per week, such as going from a one-shift operation to multiple shifts, or going from five workdays week to six or seven workdays per week. Managers also might relieve the bottleneck by redesigning the process, either through process reengineering or process improvement.
Theory of constraints (TOC) refers to an approach that focuses on bottlenecks of a firm’s financial performance.
Long-term capacity expansions are not the only way to ease bottlenecks. Overtime, temporary or part-time employees, or temporarily outsourcing during peak periods are short – term options. Managers should also explore ways to increase the effective capacity utilization at bottlenecks, without experiencing the higher costs and poor customer service usually associated with maintaining output rates at peak capacity.
The key is to carefully monitor short-term schedules, keeping bottleneck resources as busy as practical. They should also minimize the time spent unproductively for setups. When a changeover is made at a bottleneck operation, the number of units or customers processed before the next changeover should be large, compared to the number processed at less critical operations. Maximum the number processed per setup means that there will be fewer setups per year and thus less total time lost to set ups.
The TOC is an approach to management that focuses on whatever hinders progress toward the goal of maximizing the flow of total value – added funds or sales less sales discounts and variable costs. The impediments or bottlenecks might be overloaded processes such as order entry, new product development, or a manufacturing operation. The fundamental idea is to focus on the bottlenecks to increase their throughput, thereby increasing the flow of total value – added funds. .
Application of TOC involves the following steps
It’s basically a five step process.
1. Identify the system bottleneck
2. Exploit the bottleneck
3. Subordinate all other decision to step 2
4. Elevate the bottleneck
5. Do not let inertia set in
Factors that determine capacity
Ultimately, the output from a production facility or system is not determined simply by the physical size of the facility, the sizes or types of machines, or the number of employees working. Production capacity, especially effective capacity, is affected by the design of the products and processes, the training of employees, the management of quality, and many other factors. The most important factors affecting production capacity are:
1. Process design. In multistage production processes the maximum rate of output that can be achieved is governed by the slowest) lowest capacity stage.
2. Product design. With exactly the same personnel and equipment, the capacity for making a product that is well designed for production will be greater than for a poorly designed one.
3. Product variety. The fewer types of products made by a production unit and the more similar they are, the more specialized equipment and jobs can be, and the less time lost on product changeovers and machine set-ups.
4. Product quality. The way products are made, tested, and inspected will affect the rate at which products of acceptable quality can be produced.
5. Production scheduling. Scheduling that keeps product flows well balanced and synchronized and unproductive time minimized will utilize machines and personnel better and result in greater effective capacity.
6. Materials management. Shortages of materials can cause work stoppages, while excess inventories can cause congestion and wasted time searching for materials.
7. Maintenance. Equipment breakdowns and defects due to machine wear are two majors sources of lost production.
8. Job design and personnel management. The amount of output a production system actually produces is greatly determined by the personnel operating the system. Inadequate training, poor job design, overwork, and absenteeism all lead to lost production.

Design of product layouts

2009-02-28T01:10:00.000-08:00

Design of product layouts
In product layout, equipment or departments are dedicated to a particular product line, duplicate equipment is employed to avoid backtracking, and a straight-line flow of material movement is achievable. Adopting a product layout makes sense when the batch size of a given product or part is large relative to the number of different products or parts produced
Assembly lines are a special case of product layout. In a general sense, the term assembly line refers to progressive assembly linked by some material handling device. The usual assumption is that some form of pacing is present and the allowable processing time is equivalent for all workstations. Within this broad definition, there are important differences among line types. A few of these are material handling devices (belt or roller conveyor, overhead crane); line configuration (U-shape, straight, branching); pacing (mechanical, human); product mix (one product or multiple products); workstation characteristics (workers may sit, stand, walk with the line, or ride the line); and length of the line (few or many workers). The range of products partially or completely assembled on lines includes toys, appliances, autos, clothing and a wide variety of electronic components. In fact, virtually any product that has multiple parts and is produced in large volume uses assembly lines to some degree.
Assembly-line systems work well when there is a low variance in the times required to perform the individual subassemblies. If the tasks are somewhat complex, thus resulting in a higher assembly-time variance, operators down the line may not be able to keep up with the flow of parts from the preceding work station or may experience excessive idle time. An alternative to a conveyor-paced assembly line is a sequence of workstations linked by gravity conveyors, which act as buffers between successive operations
Line balancing
Assembly-line balancing often has implications for layout. This would occur when, for balance purposes, workstation size or the number used would have to be physically modified.
The most common assembly line is a moving conveyor that passes a series of workstations in a uniform time interval called the workstation cycle time (which is also the time between successive units coming off the end of the line). At each workstation, work is performed on a product either by adding parts or by completing assembly operations. The work performed at each station is made up of many bits of work, termed tasks, elements, and work units. Such tasks are described by motion-time analysis. Generally, they are grouping that cannot be subdivided on the assembly line without paying a penalty in extra motions.
The total work to be performed at a workstation is equal to the sum of the tasks assigned to that workstation. The line balancing problem is one of assigning all tasks to a series of workstations so that each workstation has no more than can be done in the workstation cycle time, and so that the unassigned (idle) time across all workstations is minimized. The problem is complicated by the relationships among tasks imposed by product design and process technologies. This is called the precedence relationship, which specifies the order in which tasks must be performed in the assembly process.
The steps in balancing an assembly line are:
1. Specify the sequential relationships among tasks using a precedence diagram.
2. Determine the required workstation cycle time
3. Determine the theoretical minimum number of workstations Nt =
4. Select a primary rule by which tasks are to be assigned to workstations, and a secondary rule to break ties.
5. Assign tasks, one at a time, to the first workstation until the sum of the task times is equal to the workstation cycle time, or no other tasks are feasible because of time or sequence restrictions. Repeat the process for Workstation 2, Workstation 3, and so on until all tasks are assigned.
6. Evaluate the efficiency of the balance derived
7. If efficiency is unsatisfactory, rebalance using a different decision rule.
Process layout design
The analysis involved in the design of production lines and assembly lines relates primarily to timing, coordination, and balance among individual stages in the process. For process layouts, the relative arrangement of departments and machines is the critical factor because of the large amount of transportation and handling involved.
Procedure for designing process layouts
Process layout design determines the best relative locations of functional work centers. Work centers that interact frequently, with movement of material or people, should be located close together, whereas those that have little interaction can be spatially separated. One approach of designing an efficient functional layout is described below.
1. List and describe each functional work center
2. Obtain a drawing and description of the facility being designed
3. Identify and estimate the amount of material and personnel flow among work centers
4. Use structured analytical methods to obtain a good general layout
5. Evaluate and modify the layout, incorporating details such as machine orientation, storage area location, and equipment access.
The first step in the layout process is to identify and describe each work center. The description should include the primary function of the work center )drilling, new accounts, or cashier_; its major components, including equipment and number of personnel; and the space required. The description should also include any special access needs (such as access to running water or an elevator) or restrictions (it must be in a clean area or away from heat).
For a new facility, the spatial configuration of the work centers and the size and shape of the facility are determined simultaneously. Determining the locations of special structures and fixtures such as elevators, loading docks, and bathrooms becomes part
of the layout process. However, in many cases the facility and its characteristics are a given. In these situations, it is necessary to obtain a drawing of the facility being designed, including shape and dimensions, locations of fixed structures, and restrictions on activities, such as weight limits on certain parts of a floor or foundation.
To minimize transport times and material-handling costs, we would like to place close together those work centers that have the greatest flow of materials and people between them. To estimate the flows between work centers, it is helpful to begin by drawing relationship.

Service Process

2009-02-28T01:01:00.000-08:00

Service Process
In planning manufactured products, a great deal of attention must be paid to technical specifications such as size, weight, and engineering specifications. For physical characteristics, standard may be determined and the conformance to these standards can be monitored for quality assurance. The quality of services, on the other hand, depends on the skill and training of personnel who produce the services. It is more difficult to set standards on performance, and consistent quality is more difficult to ensure.
For example, all meals on an airline may be of the same quality, but service may vary considerably with different flight crews.
Another important difference between manufactured products and services is that manufactured products can be stored for future use, whereas services must be made available to the customer on demand. This difference is another important consideration for quality assurance. That is, major quality considerations must be planned and designed into the service just as it should be with manufactured products; however, finished goods may be inspected prior to being released from the factory. For services, this cannot be done.
Additional considerations should be given when designing service products are as follows:
1. To what extent will the customer be involved in the process? For example, will a retail operation be primarily self-service (Big Bazaar)? Will a financial institution allow customers to execute their own transactions using automatic teller machines or telephones (Citibank)? Normally, greater customer involvement is incorporated into the product either to reduce costs or to provide grater convenience to the customer by, for instance, eliminating the need to wait for a salesperson.
2. How quickly will service be provided? Human queuing systems are an important aspect of product quality for services. The intended speed of service will affect staffing, job design, scheduling, and facility layout.
3. How standardized or customized will the service be? For example, freight rail service is usually highly standardized: trains are scheduled
to run between specific locations, and if customers want to ship or receive materials, they must be ready at those times.
4. What variety of services will be offered? If a fast-food restaurant will provide only carry-out service, there is no need for seating space in the facility or extra service personnel to clean the tables.
5. What geographical area will be served? American Express Corporation, which sells its products based on quick worldwide replacement of lost or stolen traveler’s checks and credit cards. This product characteristic requires a large international network of American Express offices and agents with a telecommunications system linking them.

Approaches to Improving Product and Service Designs

2009-02-28T00:16:00.000-08:00

Approaches to Improving Product and Service Designs

Quality Function Deployment- “method to transform user demands into design quality, to deploy the functions forming quality, and to deploy methods for achieving the design quality into subsystems and component parts, and ultimately to specific elements of the manufacturing process.”

Computer-aided design- Computer-Aided Design (CAD) is the use of computer technology to aid in the design and particularly the drafting (technical drawing and engineering drawing)

Computer-added manufacturing-The process of using specialized computers to control, monitor, and adjust tools and machinery in manufacturing

Design for Manufacturability-It is the general engineering art of designing products in such a way that they are easy to manufacture. The basic idea exists in almost all engineering disciplines, but of course the details differ widely depending on the manufacturing technology.

Design for Maintainability-Design for Maintainability When human factors engineering is applied to minimize the time and effort required to perform preventive and unscheduled

Design for the Environment- It is a general concept that refers to a variety of design approaches that attempt to reduce the overall environmental impact of a product, process or service, where environmental impacts are considered across its life cycle

Target costing- Method used in the analysis of product design that involves estimating a target cost, via a desired profit and sales price, and then designing the product/service to meet that cost.

Product Design and Development Process

2009-02-27T23:55:00.000-08:00

Product Design and Development Process
Process decisions must be made when:-
A new or substantially modified product or service is being offered
Quality must be improved
Competitive priorities have changed
Demand for a product or service is changing
Current performance is inadequate
The cost or availability of inputs has changed
Competitors are gaining by using a new process; or
New technologies are available

Process decisions directly affect the process itself, and indirectly the products and services that it provides. Let’s focus on the relevant common process decisions. In general, Operations managers must consider five common process decisions.
These are:
1. Process choice - Whether resources are organized around products or processes. It depends on volume and degree of customization to be provided
2. Vertical integration -Backward integration, and forward integration
3. Resource flexibility -ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions
4. Customer involvement
5. Capital intensity- mix of equipment and human skills in a process
A common classification of production process structures
We often classify processes based on their physical configuration, material and product flow, flexibility, and volume expectation.
There are five different process types, which a manager can choose, keeping in mind the relative importance of the following attributes:-
Quality,
Time,
Flexibility, and
Cost.
These are:
1. Project process
Selecting location for new plant
2. Job process
Machining precision metal tubes
3. Batch process
Producing a batchof textbooks
4. Line process
Auto assembly
5.Continuous process
Oil-refining process

Statistical Quality Control

2009-02-09T00:54:00.000-08:00

Statistical Quality Control

It helps in verify that the business processes are indeed meeting the specifications. Under this we are using statistical methods and mathematical formulas to control over quality.

Tools of Statistical Quality Control
Process Capability
Upper Tolerance Limit
Lower Tolerance Limit
Six –sigma Quality
Control Chart
Acceptance Sampling
Taguchi’s Quality Loss Function
With the help of above tools we can compare the standards with actual results and take decisions to improve quality and increase profitability.

Continuous Improvement tools

2009-02-03T00:41:00.000-08:00

Lecture-8

Continuous Improvement tools
In today's turbulent business environments everyone is looking for continuous improvements in the products and services which they offer and the ways in which they produce them. Whether these come through the occasional 'big bang' breakthrough innovation, or through the more typical incremental improvements and adjustments, constant change is essential, not just to remain competitive but often for the survival of the business itself.
Faced with this challenge we need to rethink our views on innovation and how it is carried out. In particular, we need to think again about who can be involved in the process. Whilst innovation used to be the responsibility of a few specialists in R&D or production engineering, there is no reason why most people in the organisation should not be able to participate in thinking of — and implementing — small changes on a regular basis. After all, most of the innovation task is about incremental problem-solving, getting the 'bugs' out of the system or product. And everyone in the firm comes fully equipped for the task — 'with every pair of hands you get a free brain'!

Why and when is it used?
… because continuous improvement (CI) represents a huge missed opportunity. By tapping in to the creativity of all the staff in the organisation — not just a handful of specialists — it's possible to become much more innovative. After all, with every pair of hands you also get a free brain — it's an awful waste not to use it! The experience of those who have gone down this road might help persuade you — they've managed to trigger hundreds and thousands of small ideas. Whilst these may never win a Nobel prize, they add up to impressive bottom line savings — in reduced waste, reduced time, greater flexibility, higher quality and better service …
CI can be used to deliver performance improvement along any dimension of the business (eg costs, quality, time reduction, etc.) through high involvement of the workforce.

How does it work?
Although obvious, this potentially huge source of innovation was largely neglected in UK manufacturing until comparatively recently. It was only when the messages from Japan became hard to ignore that we began to realise that their success across a range of sectors was due in no small measure to a different approach to innovation. In addition to the traditional use of specialists, Japanese firms built on high involvement of the workforce in regular incremental innovation — a process called kaizen but which is more familiar to us as 'continuous improvement' (CI).
Continuous improvement (CI) is a generic name given to a range of activities designed to engage a high degree of involvement amongst the workforce in innovation. It is really an umbrella term for an organisational approach (high involvement) supported by a range of specific tools.
CI is about an approach to change which is high in involvement but which stresses incremental innovation as its key feature — a 'little and often' rather than a 'big bang' view. Since it is a philosophy it is often linked with more specific change programmes — for example, in business process re-engineering, total quality management or versions of the 'lean' concept. In each case the contribution of CI is to maintaining and extending progress through a regular stream of small improvements.

Specific techniques

CI involves an extended journey, gradually building up skills and capabilities within the organisation to find and solve problems. Not surprisingly there are many different techniques which can help enable the process, and for a full account of them you should look at the further information sources. What follows here are some brief explanations of basic tools.
Specifically we will look at:
problem solving cycle
brainstorming
cause and effect diagrams
checksheets
flow diagrams
and an outline of policy deployment.

Explaination:-

Problem-solving cycle

In the first stage — identify — the organisation recognises that there is a problem to solve. This may be an emergency or it may be a minor difficulty which has been nagging away for some time; it may not even be a 'problem' but an experiment, an attempt to find out a new way of doing something.
Whatever the initial stimulus, finding a problem then triggers the next stage which is to define it more clearly. Here the issue is often to separate out the apparent problem (which may only be a symptom) from the underlying problem to be solved. Defining it also puts some boundaries around the problem; it may be necessary to break a big problem down into smaller sub-problems which can be tackled — 'eating the elephant a spoonful at a time'. It can also clarify who 'owns' the problem — and thus who ought to be involved in its solution, if the solution is to stick for the longer-term.
Having analysed the nature of the problem, the next stage is to explore ways of solving it. There may be a single correct answer, as in crossword puzzles or simple arithmetic — but it is much more likely to be an open-ended problem for which there may be a number of possible solutions. The challenge at this stage is to explore as widely as possible — perhaps through the use of brainstorming or other group tools — to generate as many potential solutions as possible.
Next comes the selection of the most promising solutions to try out — essentially the reverse of the previous stage since this involves trying to close down and focus from a wide range of options. The selected option is then put into practice — and the results, successful or otherwise, reviewed. On the basis of this evaluation, the problem may be solved, or it may need another trip around the loop. It may even be the case that solving one problem brings another to light.
In terms of learning, this is essentially a model for experimenting and evaluating. We gain knowledge at various steps in the process — for example, about the boundaries of the problem in defining it, or about potential solutions, in exploring it or about what works and what doesn't work in implementing it. The point is that if we capture this learning it puts us in a much better position to meet the next problem; if it is a repeat, we already know how to solve it. If it is similar, we have a set of possible solutions which would be worth trying. And if it is completely new, we still have the experience of a structured approach to problem-solving.

Brainstorming
Brainstorming is the rapid pooling of all and any ideas that a group of people can come up with before any discussion or judgement takes place. Every idea is recorded no matter how bizarre or irrational.
How to Brainstorm
Keep a relaxed atmosphere. Meetings should be disciplined but informal. If possible, choose an informal venue.
Get the right size of team. The technique seems to work best with groups of 5 to 7 people.
Choose a leader. The leader checks that everyone understands what is going on and why.
Define the problem clearly.
Generate as many ideas as possible.
Do not allow any evaluation and discussion.
Give everyone equal opportunity to contribute.
Write down EVERY idea — clearly and where everyone can see them.
When all the ideas are listed, review them for clarification, making sure everyone understands each item. At this point you can eliminate duplications and remove ideas the group feels are no longer appropriate.
Allow ideas to incubate. Brainstorm in sessions with perhaps a few days in between. This gives time for the team to let the ideas turn over in their mind, which often results in new ideas at a later session.
Approaches to Brainstorming
One-at-a-time
A member of the group offers one idea and the session continues this way until everyone has had a chance to add to the list.
Open Door or Freewheeling
Anyone who has a contribution speaks whenever he or she wants.
Write-it down
Ideas are written down rather than stated out loud, but everyone must be able to see each idea listed.

Cause and effect diagram
Also called the 'Fishbone Diagram', this participatory exercise explores the links between the effects and the possible causes of an issue. This tool encourages a group setting for problem —solving and demonstrates that problems can have a number of causes.
What is it?
Cause and effect analysis is a technique for identifying the possible causes of a problem or effect. The technique uses a Cause and Effect Diagram to record the possible causes as they are suggested.
When should you use it?
Use this tool when you want to establish the cause of an effect. The effect may be either a problem or a desirable effect — when something desirable has happened it is useful to find out what caused it so you can make it happen again.
Constructing a Cause and Effect Diagram
Establish what the problem, or effect, is. It must be stated in clear and concise terms, agreed by everyone.
Write the effect (problem) in a box on the right and draw a long line pointing to the box.
Decide the major categories of causes. This may be done in several ways:
Brainstorming
Using standard categories such as the 4Ms (Machines, Materials, Methods, Manpower) or PEMPEM (Plant, Equipment, Materials, People, Environment, Methods).
When the effect results from a recognisable process or set of activities, the major steps in the process can be used.
Write the major categories in boxes parallel to, and some distance from, the main line. Connect them to the main line with slanting arrows.
Brainstorm for possible causes.
Add the causes to the diagram clustered around the major causes they influence. Divide and sub-divide the causes to show how they interact, and draw links between causes that are related. If the diagram becomes too crowded, move one or more categories to a new sheet of paper.
Evaluate and analyse the possible causes.
Decide and act.
This will probably involve using other tools. For example, in order to verify some of the possible causes identified you may need to collect data (using checksheets) and analyse it (Pareto Analysis, graphs, etc.).

Checksheets
What is it?
A Checksheet is a tool for recording and organising data.
There are three kinds of Checksheets:
Recording Checksheet
Counts how many times something happens in pre-specified categories.
Checklist Checksheet
A list of items to be addressed in some predetermined manner eg an inspection sequence that prevents steps or procedures from being left out.
Location Checksheet
Records the relative or specific locations of defects, injuries, accidents etc … Usually it is a picture or map of the item/area under consideration on which the location of the defect etc. is marked with a dot or a cross.
Why use it ?
Checksheets will help you to gather and classify data. Checksheets ensures that everyone collects comparable data in the same form, and in a format that allows easy analysis.

Constructing a Checksheet
Decide what data you need to collect.
Decide how often the events will be observed (the frequency) and over what total period (the duration).
Design a draft Checksheet. Put the items to be monitored on the left and the time periods across the top. Allow space for totals on the right for each item being observed and along the bottom for the observation periods. Label the Checksheets clearly.
Test the draft Checksheet by getting someone who did not help design it to use it.
Make any revisions that are necessary as a result of step 4.
Distribute the Checksheets to the people collecting the data and explain how to use them.
Act on the data collected.

Flow charting
What is it?
A flowchart is a diagram illustrating the activities in a process.
Why use it?
A flowchart can tell you a lot about a process and the activities involved eg Are all the activities really necessary? What controls are in place?
Flowcharts are a useful tool to use when improving a process, especially when you are planning to collect data or to implement a solution. They can also be used to document a new process or to compare an existing process with an 'ideal' process.
Flowcharts are a good communication tool — by using standard symbols everyone will have the same understanding of the process.

Constructing a flowchart
Decide what level of detail the flowchart is to represent.
This will depend on the purpose for constructing the flowchart. On a higher level flowchart several tasks which make up an activity will be shown as one activity whereas on a lower level flowchart each task will be shown separately.
List the activities in the process.
Draw the flowchart (sometimes this is done using standard symbols — for example:
stretched circle- start or end of process
rectangle-step or activity in the process
diamond-decision point
arrow-direction of flow

Policy deployment
As the name suggests the basic concept in policy deployment is the development of mechanisms for breaking overall strategic objectives of the business down into small units, each of which can provide the target for groups or individuals in their CI activities over a sustained period. For example, in Nissan Cars the overall strategic target is cascaded down through the organisation via the appraisal process, where everyone has the chance to discuss and agree to certain objectives over the coming year, including a range of targets for their own CI activities. This process — which is essentially 'management by objectives' — is a two-way one but the outcome is agreed targets and a commitment on the part of the employee to achieving them, a recognition that this is what will be used to assess performance over the coming year, and an understanding that achievement will be related to rewards.
Its value in CI is to provide a focus and targeting process which moves on from simply improving things on a project by project basis. In policy deployment targets are linked to strategic objectives and local activities mesh together to contribute to meeting these. For example, if the overall target includes an objective to become competitive by reducing customer lead-time by 25%, then policy deployment would ask, for each area, how they could cut 25% of time out of their overall operations. In turn this would cascade down to the individual units within the area, and down to the individual teams, with the same question. Each individual team will then use CI tools to explore the sources of wasted time, and the kinds of thing which might cut it down — and on a project by project basis they would chip away at the time taken within their area. In aggregate form this would result in major savings.
Two key features are important here — the use of 'stretch' targets which give impetus, and the use of monitoring and measurement against these targets as a way of guiding the process and maintaining momentum. In addition there is a strong component of 'know why' as well as know-how — in other words, there is an attempt to explain the rationale behind the strategy and how improvements in a particular area contribute to it. For example, in a chemical plant working towards the target of 'zero breakdowns' each machine has detailed operating and maintaining instructions attached. These have been developed through CI activity and include not only the new operating procedures but also a section on why these steps are important. There is thus an element of organisational learning, of turning tacit into formal knowledge. Similar functions are performed by the storyboards which characterise progress along the road to meeting strategic targets.
Policy deployment is concerned with strategic objectives so the timescales for typical 'campaigns' are long. For example, in Japan the 'mid-term plan is the key driver in firms, and this represents a clear statement of objectives and targets over the next 3 years.

Benefits
'Total quality', 'lean manufacturing' and a host of other prescriptions to explain the productivity and performance gap between Japanese firms and the rest of the world repeatedly stressed the high level of involvement of most employees in the day-to-day problem-solving. The scale of this is impressive — firms like Toyota receive annually around two million suggestions, whilst Kawasaki Engineering report a staggering 7 million — and they implement the vast majority of these. (To put that in perspective, it was estimated in 1989 that workers in the Japanese car industry made an average of 1 suggestion per worker per week; the European equivalent figures were 0.5 suggestions, per worker, per year!)
That picture is changing fast — recent survey data suggests that 65% of companies consider CI to be of strategic importance, and around 50% have instituted some form of systematic programme to apply these concepts. A further 19% claim to have a widespread and sustained process of CI in operation, and of those firms using CI 89% claim it has had an impact on productivity, quality, delivery performance or some combination of these.

TQM & Cost

2009-02-03T00:28:00.000-08:00

Lecture 7

Total Quality Management & Cost

Total quality management is an effective system for integrating the quality development, quality-maintenance, and quality-improvement efforts of the various groups in an organization so as to enable marketing, engineering, production, and service at the most economical levels which allow for full customer satisfaction.

The content and its essentiality to the achievement of business results make total quality control a new and important area of management. As a focus of managerial and technical leadership, total quality control has produced outstanding improvements in product quality and reliability for many organizations throughout the world Moreover, total quality control has achieved progressive and substantial reductions in quality costs.
Through total quality control, company managements have been able to deal from strength and confidence in the quality of their products and services, permitting them to move forward in market volume and product mix expansion with a high degree of customer acceptance and profit stability and growth.
Total quality control provides the fundamental basis of positive quality motivation for all company employees and representatives, from top management through assembly workers, office personnel, dealers, and service people. And a powerful total-quality-control capability is one of the principal company strengths for achieving vastly improved total productivity.

Core Idea behind TQM

Customer focus

Leadership involvement

Continuous improvement

Employee empowerment

Quality assurance

Supplier partnership

Strategic quality plan

TQM Cost

Various kind of cost incurred in TQM are as follows:

Internal Failure CostExternal Failure Cost

Appraisal Cost

Prevention Cost

Bench Marking strategies for business process improvement

2009-01-27T00:41:00.000-08:00

Lecture-6
Bench Marking & strategies for business process improvement

Definition
Benchmarking is the process of identifying "best practice" in relation to both products (including) and the processes by which those products are created and delivered. The search for "best practice" can taker place both inside a particular industry, and also in other industries (for example - are there lessons to be learned from other industries?).
The objective of benchmarking is to understand and evaluate the current position of a business or organization in relation to "best practice" and to identify areas and means of performance improvement.
The Benchmarking Process
Benchmarking involves looking outward (outside a particular business, organization, industry, region or country) to examine how others achieve their performance levels and to understand the processes they use. In this way benchmarking helps explain the processes behind excellent performance. When the lessons learnt from a benchmarking exercise are applied appropriately, they facilitate improved performance in critical functions within an organization or in key areas of the business environment.
Application of benchmarking involves four key steps:
(1) Understand in detail existing business processes
(2) Analyze the business processes of others
(3) Compare own business performance with that of others analyzed
(4) Implement the steps necessary to close the performance gap
Benchmarking should not be considered a one-off exercise. To be effective, it must become an ongoing, integral part of an ongoing improvement process with the goal of keeping abreast of ever-improving best practice.
Types of Benchmarking
There are a number of different types of benchmarking, as summarized below:

Most Appropriate for the Following Purposes
Strategic Benchmarking
Where businesses need to improve overall performance by examining the long-term strategies and general approaches that have enabled high-performers to succeed. It involves considering high level aspects such as core competencies, developing new products and services and improving capabilities for dealing with changes in the external environment. Changes resulting from this type of benchmarking may be difficult to implement and take a long time to materialise
Most Appropriate for the Purposes of- Re-aligning business strategies that have become inappropriate.
Performance or Competitive Benchmarking
Businesses consider their position in relation to performance characteristics of key products and services. Benchmarking partners are drawn from the same sector. This type of analysis is often undertaken through trade associations or third parties to protect confidentiality.
Most Appropriate for the Purposes -Assessing relative level of performance in key areas or activities in comparison with others in the same sector and finding ways of closing gaps in performance.
Process Benchmarking
Focuses on improving specific critical processes and operations. Benchmarking partners are sought from best practice organizations that perform similar work or deliver similar services. Process benchmarking invariably involves producing process maps to facilitate comparison and analysis. This type of benchmarking often results in short term benefits.
Most Appropriate for the Following Purposes- Achieving improvements in key processes to obtain quick benefits
Functional Benchmarking
Businesses look to benchmark with partners drawn from different business sectors or areas of activity to find ways of improving similar functions or work processes. This sort of benchmarking can lead to innovation and dramatic improvements.
Most Appropriate for the Following Purposes- Improving activities or services for which counterparts do not exist.
Internal Benchmarking
Involves benchmarking businesses or operations from within the same organization (e.g. business units in different countries). The main advantages of internal benchmarking are that access to sensitive data and information is easier; standardized data is often readily available; and, usually less time and resources are needed. There may be fewer barriers to implementation as practices may be relatively easy to transfer across the same organization. However, real innovation may be lacking and best in class performance is more likely to be found through external benchmarking.
Most Appropriate for the Following Purposes- Several business units within the same organization exemplify good practice and management want to spread this expertise quickly, throughout the organization.
External Benchmarking
Involves analysing outside organisations that are known to be best in class. External benchmarking provides opportunities of learning from those who are at the "leading edge". This type of benchmarking can take up significant time and resource to ensure the comparability of data and information, the credibility of the findings and the development of sound recommendations.
Most Appropriate for the Following Purposes- Where examples of good practices can be found in other organisations and there is a lack of good practices within internal business units
International Benchmarking
Best practitioners are identified and analysed elsewhere in the world, perhaps because there are too few benchmarking partners within the same country to produce valid results. Globalization and advances in information technology are increasing opportunities for international projects. However, these can take more time and resources to set up and implement and the results may need careful analysis due to national differences.
Most Appropriate for the Following Purposes- Where the aim is to achieve world class status or simply because there are insufficient” national" businesses against which to benchmark.

Measuring process performance & reducing cycle time

2009-01-27T00:34:00.000-08:00

Lecture 5
Measuring process performance & reducing cycle time
“People do what you inspect, not what you expect.” [Anon.]
Developing capable processes
When we work with clients to help them implement Process Management we often introduce a simple “Process Capability and Maturity Model”. This framework can be used to help plan what needs to be done at an organizational level, but can also be applied at the level of individual processes. It’s something that can be used by Process Owners and Managers to guide them in building capable processes.
Balanced Measurement
Every process should have a balanced set of measurements (Key Performance Indicators - KPIs) against which its Performance can be tracked, communicated and improved.
There are three types of measurement required:
Internal measures
Output (or quality) measures
Satisfaction measures

Internal measures enable you to assess the basic Performance of the process itself.
Output measures enable you to assess the quality of the intermediate or final outputs. Both (Internal and Output) can be measured without involving the customer(s) of the process.
Satisfaction measures are direct assessments of the customer’s view of the process and can only be gathered by asking the customer.
The measurements you select should be based on the purpose of the process and what you are trying to achieve. For example, a process to recruit new staff exists to ensure you can employ the right people, in the right place, with the right skills at the right time. So, you will almost always need to know how many people
(Volume) are being recruited. The time it takes to recruit someone (cycle- time) is probably irrelevant; what’s important is Timeliness – is the person available, when needed? Quality of recruit is also important – do they meet agreed criteria? Finally, you will want to measure the customer’s views – Line Manager perception of the process and of the employees it supplied.
As a process Owner, you will probably only need 4-7 KPIs in order to manage and continuously improve any process. If you have too many, it probably means you don’t understand what is really important about your process’ Performance.
For each measurement you select, you need to define:
what it is (a precise definition)
how you will gather the data (including sample sizes)
how often you will gather the data
how often you will report and review the data (including the format in
which the data will be presented)
any targeted levels of Performance (if known)
who is responsible for measurement
Data collection tools include:
Check sheets (Tally sheets)
Concentration Diagrams (pictorial Check sheets)
Traveller Time-logs
Surveys/Questionnaires
Interviews/Focus Groups
In many cases, we obtain data through sampling; often because it is simply not possible to measure every single item, or to log every activity, transaction or incident. The purpose of sampling is to collect an unbiased subset which will give you a manageable amount of data. When you take samples, they should be representative (statistically correct and reliable) and economic to collect(quick and cost-effective). Moving beyond “Defined”
Three activities need to be carried out to achieve the “Quantitatively Managed” level of Performance
1. Measure Performance (gather data and analyze it)
2. Implement Corrective Actions (address any immediate Performance gaps)
3. Review Performance (regularly check that the process is “fit for purpose”)
Three activities need to be carried out to achieve the “Optimizing” level:
1. Establish DMAIC Improvement Projects (teams to make bigger changes than from Corrective Action)
2. Establish Statistical process Control (SPC)
3. Benchmark Externally (compare with known Performance leaders).
Measuring Process Improvements - Cycle Time?
One of the challenges with agile methods is to get a clear perspective on how to measure process improvements. I recently had a brief discussion with a C-level executive at a small organization about this. His concern was that cycle time was meaningless because it depended so much upon the size of the work package. So how do we use cycle time as a meaningful measurement? What else can we use to measure process improvement?
Let’s look at the difference in measuring cycle time in an agile vs. non-agile environment. Then we’ll get to other measurements.
Cycle Time
Cycle time is the total time from the beginning to the end of your process, as defined by you and your customer. Cycle time includes process time, during which a unit is acted upon to bring it closer to an output, and delay time, during which a unit of work is spent waiting to take the next action.
The following are the high-level steps:
Customer / User / Stakeholder sees a need, validates it and submits a request to have that need fulfilled. This is when we start the clock on cycle time.

The fulfillment organization (IT, Product Development, R&D) puts the request in a queue, backlog or requirements management system.

Along with other requests, the fulfillment organization schedules the work on the request, usually by creating a project to fulfill it and other related requests. The project is estimated at a high level, the current status of in-flight projects is noted, and the new project is prioritized relative to other projects.

At some point, based on the schedule and the reality of the work on other projects, the project containing our customer’s request is started. Here, “started” means that detailed requirements are gathered.

After sufficient requirements are gathered, a detailed technical analysis is done including architecture, high-level design, risk analysis, etc.

Development begins. (Note: many people mistakenly start measuring cycle time here.)

Developers and testers work to validate the results of development and fix any problems discovered.

Final acceptance testing is done.

The results of the project are deployed to users, sold to the client, or in some other way passed back to the original requestor. This is when we stop the clock on cycle time.

Course Material

2009-01-21T23:31:00.000-08:00

Lecture 4
Business Process Mapping
In order to effectively analyze business processes, reviewers need a tool that takes into account the objectives of the business, the actual work being accomplished, and, most importantly, the impact of processes on customers. Business process mapping is just that tool. In a four-step process, analysis can be performed that accomplishes this holistic approach. At the same time, business process mapping also helps gain employees' buy-in and can result in an increased sense of pride for employees.

Steps of Business Process Mapping

Process identification -- attaining a full understanding of all the steps of a process.
Information gathering -- identifying objectives, risks, and key controls in a process.
Interviewing and mapping -- understanding the point of view of individuals in the process and designing actual maps
Analysis -- utilizing tools and approaches to make the process run more effectively and efficiently.
1) The first step is process identification. Many companies think they know their processes -- manufacturing, sales, accounting, building services. But it is just this silo mentality that causes processes to lose their customer-centric approach. Instead of defining processes based on the company's understanding, they must be defined by the customer's understanding. Walking through customer experiences helps the reviewer identify those trigger points that can make or break success. These then form the basis for process identification.

2) Once the processes are identified, the second step begins -- information gathering. There is a large volume of information that should be obtained before trying to learn the intricacies of a process. Primary among these is identifying who the true process owners are -- the ones who can effect change. Their buy-in and agreement throughout the analysis is paramount. Additional information that should be obtained includes the objectives of the process, risks to the process, key controls over those risks, and measures of success for the process.

3) In order to effectively record and maintain this information, some important worksheets have been developed. Two of the most important are the Process Profile Work Sheet, and Work Flow Surveys. The Process Profile Work Sheet includes such information as the process owner, the trigger events (beginning and ending), inputs, outputs, and, as mentioned above the objectives, risks, key controls, and measures of success. Work Flow Surveys are completed by individuals actually working on the process and request from them a list of tasks -- including inputs and outputs -- which they perform in support of the process. Only after all this is done is actual "Process Mapping" completed. This involves sitting with each employee and having him or her describe what it is they do. This information is recorded using a sticky-note method. Each step in the process is recorded on a sticky-note and built in front of the individual completing the work. This allows them to interactively ensure the final map matches their understanding of their work. The final process maps are developed using flowcharting software. Time flows down the page, and each individual involved is represented by a separate column. In this manner, a simple map can result from a complicated process.
4) While Analysis is considered the fourth step, analysis must really occur throughout the review. While defining the processes, the reviewer may determine that objectives are not in line with the processes in place. In gathering information, it may become apparent that measures of success do not correspond to department objectives. These are just some of the examples of ongoing analysis. However, there are some specific examples of analysis that can be completed once maps are done. These include identifying unnecessary approvals, isolating rework, removing duplicate forms, eliminating useless holdfiles, and investigating decision requirements that lead to no discernable result. In and of themselves, no single incident is necessarily wrong. But each must be analyzed in the context of the map to ensure it supports the objectives.

Course Plan OSCM

2009-01-21T22:10:00.000-08:00

Operation and Supply Chain Management
Lesson Plan
The readings referred to in the table below are recommended material from:
I) Lee J. Krajewski Larry P. Ritzman , Opreation Management process and value chain.(PHI)
II) Upendra Kachru, Production and Operation Management (EB)
III) Cecil C. Bozarth, Introduction to Operation and Supply Chain Management (Pearson)
Lecture
Topics
Readings

Lecture 1-unit-I
Introduction – operation & supply chain Mgmt.
Page No: 2,10-13,395-400(I),374-379,384-406(II), 4-11(III)
Lecture 2
Linkage between OSCM
Page No: 420-422(I), 13-14(III)
Lecture 3
OSCM strategies
Page No: 17-18(I), 23-32(III)
Lecture-4
Business process & Mapping
Page No: 46-51(III)
Lecture-5
Measuring process performance & reducing cycle time
Page No: 321-325(I), 55-60(III)
Lecture-6
Bench Marking & strategies for business process improvement
Page No: 151-152(I), 61-63(III)
Lecture-7
Total Quality Management & cost
Page No: 73-77(III), 275-281(II)
Lecture-8
Continuous improvement tools & statistical quality control
Page No: 200-202(I), 298-303(II),82-90(III)
Lecture-9-unit-II
Product design and development process
Page No: 69-74, (I), 146-148(III)
Lecture-10
OSC & design,
Page No: 421-422(I), 149-152(III)
Lecture-11
Org. role in product development, approaches to improving product
Page No: 64-74 (I), 155-158(III)
Lecture-12
Manufacturing process- types
Page No: 6,7,104-116(I)
Lecture-13
Product customization with in supply chain
Page No: 177-179(III),
Lecture-14
Service process
Page No: 6,7,97-98(I), 180-184(III)
Lecture-15
Layout design model
Page No: 185-190(III)
Lecture-16
Capacity- strategies& methods of evaluating capacity
Page No: 117-125(II), 209-220(III)
Lecture-17
Forecasting- demand & supply & laws
Page No: 536-566(I), 245-247(III)
Lecture-18
Forecasting Methods-qualitative method & time series
Page No: 539,539(I), 248-271(III)
Lecture-19-unit-III
Importance & process of purchasing
Page No: 404, (I), 305-312(III)
Lecture-20
Sourcing decisions and strategies
Page No: 411-415(I), 297-302(III)
Lecture-21
Multicriteria decision model – sourcing & purchasing
Page No: 312-320(III)
Lecture-22
Importance & strategies of logistic
Page No: 394-396(II), 350-353(III)
Lecture-23
Logistic decision-area & model
Page No: 389,390,394-396(II)
Lecture-24
Sales and operation planning –strategies & process
Page No: 373-375(III)
Lecture-25
Approaches to S&OP planning
Page No: 376-387(III)
Lecture-26
Organizing for & implementing S&OP planning
Page No: 389-391(III)
Lecture-27
services consideration
Page No: 278-280(I), 393-395(III)
Lecture-28-unit-IV
Inventory- its role, types & drivers
Page No: 666-680(I), 413-416(III)
Lecture-29
Dependent demand inventory
Page No: 589(I), 418(III)
Lecture-30
Periodic & continuous review system
Page No: 672-682(I), 418-420(III)
Lecture-31
EOQ, SS & QD, single period inventory system
Page No: 667-669(I), 421-427(III)
Lecture-32
Inventory in supply chain
Page No: 433-437(III)
Lecture-33
Master scheduling – Material requirement planning
Page No: 729-730,725-735(I), 454-469(III)
Lecture-34
Production activity control & Vendor order mgmt. system
Page No: 346-352(I), 471-473(III)
Lecture-35
Synchronizing planning & control across the supply chain
Page No: 473-474(III)
Lecture-36
Just-in-time & Kan-ban system
Page No: 483-497(I), 492-501(III)
Lecture-37
SCM information needs & improving SCM
Page No: 511-514(III)
Lecture-38
SC information system
Page No: 517-520(III)

Assignments

2009-01-21T22:04:00.000-08:00

Gurgaon Institute of Technology and Management

Department: MBA
Semester : IInd
Subject Name &Code : OSCM

Faculty :Sachita Yadav

Assignment-I
Issue date: 27th jan 2009 Due date: 3rd feb. 2009
Q1. Explain the linkage between OSCM
Q2. Explain TQM with an example of any existing organization.

Assignment-II
Issue date: Due date:
Q1. What do you understand by Product design and development process explain with example?
Q2. Explain qualitative method of Forecasting.

Assignment-III
Issue date: Due date:
Q1. What do you understand by followings:-
logistic
purchasing
sourcing
Assignment-IV

Issue date: Due date:
Q1. Explain importance of inventory in supply chain with example.
Q2. Explain followings:
JIT & KANBAN
EOQ

Course Material- OSCM

2009-01-21T21:43:00.001-08:00

Lecture-I
Operation and Supply Chain Management

WHY STUDY OPERATIONS AND SUPPLY CHAIN MANAGEMENT?
Operations function
The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services.
Supply chain
A network of manufacturers and service providers that work together to convert and
move goods from the raw materials stage through to the end user. These manufacturers
and service providers are linked together through physical flows, information flows,
and monetary flows.
Need for Supply Chain Management
1. Every organization must make a product or provide a service that someone values.
Otherwise, why would the organization exist? Think about it. Manufacturers produce physical goods that are used directly by consumers or other businesses. Transportation companies provide valuable services by moving and storing these goods. Design firms use their expertise to create products or even corporate images for customers. The need to
provide a valuable product or service holds true for nonprofit organizations as well. Consider the variety of needs met by government agencies, charities, and religious groups, for example. The common thread is that each of the above organizations has an operations function, or operations, for short. The operations function is the collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services. Regardless of what career path you might choose, you will need to know something about your organization's operations function. As important as the operations function is to a firm, few organizations can-or even want to-do everything themselves. This leads to our second reason for studying operations and supply chain management.
2. Most organizations function as part o/larger supply chains.
A supply chain is a network of manufacturers and service providers that work together to convert and move goods from the raw materials stage through to the end user. These manufacturers and service providers are linked together through physical flows, information flows, and monetary flows. Put another way, supply chains link together the operations functions of many different organizations. Consider a store at the local mall that sells athletic shoes. Although the store doesn't actually make the shoes, it provides valuable services for its customers-a convenient location and a wide selection of products. Yet the store is only one link in a much larger supply chain that includes:
• Plastic and rubber producers that provide raw materials for the shoes;
• Manufacturers that mold and assemble the shoes;
• Wholesalers that decide what shoes to buy and when;
• Transportation firms that move the materials and finished shoes to all parts of the world;
• Software firms and Internet service providers (ISPs) that support the information
systems that coordinate these physical flows; and
• Financial firms that help distribute funds throughout the supply chain, ensuring that the
manufacturers and service firms are rewarded for their efforts.
3. Organizations must carefully manage their operations and supply chains in order to prosper, and, indeed, survive.. Some fundamental operations decisions that it must make include likes "How many shoes should we make and in what styles and sizes?" "What kind of people skills and equipment do we need?" "Should we locate our plants to take advantage of low-cost labor or to minimize shipping costs of the finished shoes?" In addition to these operations issues, the shoe manufacturer faces many decisions with regard to its role in the supply chain: "From whom should we buy our materials-the lower-cost supplier or the higher-quality one?" "Which transportation carriers will we use
to ship our shoes?" The right choices can lead to higher profitability and increased market
share, while the wrong choices can cost the company dearly, or even put it out of business.
Operation Management
Operations a little more fully and explaining what we mean by operations management. As we noted earlier, all organizations must make products or provide services that someone values, and the operations function has the primary responsibility for making sure this happens.
Steps includes in operation
Inputs
• Materials
• Intangible needs
• Information
Transformation Process
• Manufacturing operations
• Service operations
Outputs
• Tangible goods
• Fulfilled needs
• Satisfied customers
Operations management, then, is "the planning, scheduling, and control of the activities that transform inputs into finished goods and services." Operations management decisions can range from long-term, fundamental decisions about what products or services will be offered and what the transformation process will look like to more immediate issues, such as determining the best way to fill a current customer order. Through sound operations management, organizations hope to provide the best value to their customers while making the best use of resources.
Supply Chain Management
The traditional view of operations management still puts most of the emphasis on the activities a particular organization must perform when managing its own operations. But, as important as a company's operations function is, it is not enough for a company to focus on doing the right things within its own four walls. Managers must also understand how the company is linked in with the operations of its suppliers, distributors, and customers-what we refer to as the supply chain. As we noted earlier, organizations in the supply chain are linked together through physical flows, information flows, and monetary flows. These flows go both up and down the chain.
Example: Supply of good and services from one to another by various parties as follows:
A to B
Second-tier supplier to First-tier supplier
B to C
First-tier supplier to Producing Firm
C to D
Producing Firm to Wholesaler
D to E
Wholesaler to Retailer
E to F
Retailer to Final Customer
First-tier supplier
A supplier that provides products or services directly to a particular firm.
Second-tier supplier
A supplier that provides products or services to a firm's first-tier supplier.
Supply chain management
The active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible. Finally, the supply chain must be very efficient, as the final price of the good must cover all of the costs involved plus a profit for each participant in the chain.
While you were reading through the above example, you might have thought to yourself,
"Supply chains aren't new" -and you'd be right. Yet most organizations historically performed their activities independently of other firms in the chain, which made for disjointed and often inefficient supply chains. In contrast, supply chain management is the active management of supply chain activities and relationships in order to maximize customer value and achieve a sustainable competitive advantage. It represents a conscious effort by a firm or group of firms to develop and run supply chains in the most effective and efficient ways possible.Wal Mart is an important example of supply chain management.

Lecture- 2
Important Trends and OSCM
Three major developments that have brought operations and supply chain management to the forefront of managers' attention:
Electronic commerce
Increasing competition and globalization
Relationship management
Electronic Commerce (e-commerce)
Electronic commerce (or e-commerce, for short) refers to the use of information technology (IT) solutions to automate business transactions. Electronic commerce promises to improve the speed, quality, and cost of business communication. The late 1990s and early 2000s, for example, saw the emergence of Internet-based "trading communities" that put hundreds of buyers and sellers in touch with one another. Now, instead of looking through a catalog, filling out a paper order form, and faxing it a supplier, buyers in many companies can search for what they need via their computer and, with a couple of clicks, place an order. Many paper transactions are becoming increasingly obsolete. At the same time, the proliferation of new telecommunications and computer technology has made instantaneous communications a reality. Such information systems-for example, Wal-Mart's satellite network-can link together suppliers, manufacturers, distributors, retail outlets, and, ultimately, customers, regardless of location.
Increasing competition and globalization
The second major trend is the increasing level of competition and globalization in the, world economy. The rate of change in markets, products, and technology is escalating, leading to situations where managers must make decisions on shorter notice, with less information, and with higher penalty costs. Customers are demanding quicker delivery, state-of-the-art technology, and products and services better suited to their individual needs. At the same time, new competitors are entering into markets that have traditionally been dominated by "domestic" firms. Despite these challenges, many organizations are thriving. In later chapters, for example, you will read how such companies as Dell Computers, Honda, The Procter & Gamble Company, and Herman Miller have embraced the changes facing today's markets and have put a renewed emphasis on improving their operations and supply chain performance. In some ways, the increased competition and globalization of businesses have given many firms the chance to break away from the pack.
Relationship Management
The information revolution of the last 20 years has given companies a wide range of technologies for better managing their operations and supply chains. Furthermore, increasing customer demands and global competition have given firms the incentive to improve in these areas. But this is not enough. Any efforts to improve operations and supply chain performance are likely to be inconsequential without the cooperation of other firms. As a result, more companies are putting an emphasis on relationship management. Of all the activities operations and supply chain personnel perform, relationship management is perhaps the most difficult, and therefore the most susceptible to breakdown. Poor relationships within any link of the supply chain can have disastrous consequences for all other supply chain members. To avoid such problems, organizations must manage the relationships with their upstream suppliers as well as their downstream customers.
So it becomes more important to choose a few, select suppliers, thereby paving the way for informal interaction and information sharing.
Cross functional and inter-organizational linkage
Operations and Supply Chain Activities include followings:
Process Selection- Design and implement the transformation Engineering processes that best meet the needs of the customer and the firm
Key inter-functional Participants
Engineering
Marketing
Finance
Human Resources
IT
Key Inter-organizational Participants
Customers
Forecasting- Develop the planning numbers needed for effective decision making.
Key inter-functional Participants
Marketing
Finance
Accounting
Key Inter-organizational Participants
Customers
Suppliers
Capacity Planning- Establish strategic capacity levels ("bricks & mortar") and tactical capacity levels (workforce inventory)
Key inter-functional Participants
Finance
Accounting
Marketing
Human Resources
Key Inter-organizational Participants
Customers
Suppliers
Inventory Management- Manage the amount and placement of inventory within the company and the supply chain.
Key inter-functional Participants
IT
Finance
Key Inter-organizational Participants
Customers
Suppliers
Planning and Control- Schedule and manage the flow of work through an organization and the supply chain; match customer demand to supply chain activities.
Key inter-functional Participants
Marketing
IT
Key Inter-organizational Participants
Customers
Suppliers
Purchasing- Identify and qualify suppliers of goods and services; manage the ongoing buyer- supplier relationships.
Key inter-functional Participants
Engineering
Finance
Marketing
Key Inter-organizational Participants
Suppliers
Logistic- Manage the movement of physical goods throughout the supply chain.
Key inter-functional Participants
Marketing
Engineering
Key Inter-organizational Participants
Suppliers
Customers
In this way we can say that Operation and Supply Chain Management is an very integral part of an organization.

Lecture-3
Operation and Supply chain Strategies
The operations and supply chain strategy is a functional strategy that indicates
how structural and infrastructural elements within the operations and supply chain areas
will be acquired and developed to support the overall business strategy. Executing
successful operations and supply chain strategies means choosing and implementing the
right mix of structural and infrastructural elements. What constitutes the best mix of these structural and infrastructural elements is a subject of ongoing debate among business and academic experts alike.
Nevertheless, we can identify three primary objectives of an operations and supply chain strategy:
To help management choose the right mix of structural and infrastructural elements, based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved;
To ensure that the firm's structural and infrastructural choices are strategically aligned with the firm's business strategy; and
To support the development of core competencies in the firm's operations and supply chains.
INFRA STRUCTURAL STRUCTURAL DECISION CATEGORIES DECISION CATEGORIES
Capacity • Amount of capacity
• Type of capacity
• Timing of capacity changes (lead, lag, or match market demands)
Facilities
• Service facilities
• Manufacturing plants
• Warehouses
• Distribution hubs
• Size, location, degree of specialization
Technology
• M;anufacturing processes
• Services processes
• Material handling equipment
• Transportation equipment
• Computer systems
Organization
• Structure-centralization/ decentralization
• Control/reward systems
• Workforce decisions
Sourcing decisions & purchasing process
• Sourcing strategies
• Supplier selection
• Supplier performance measurement
Planning & control
• Forecasting
• Tactical planning
• Inventory management production planning and control
Quality management
• Total quality management (TQM)
• Continuous improvement
• Statistical quality control
Product t& service development
• Development process
• Organizational and supplier roles
Operations and supply chains can have an enormous impact on business performance.
Experience suggests that four generic performance dimensions are particularly relevant to operations and supply chain activities. These are:
1. Quality;
2. Time;
3. Flexibility;
4. Cost.
QUALITY.
Quality is defined as the characteristics of a product or service that bear on its ability to satisfy stated or implied needs. The concept of quality is broad, with a number of sub dimensions, including performance quality (What are the basic operating characteristics of the product or service?), conformance quality (Was the product made or the service performed to specifications?), and reliability quality (Will a product work for a long time without failing or requiring maintenance? Does a service operation perform its tasks consistently over time? One buyer may be more interested in performance, another in reliability. To compete on the basis of quality, a firm's operations and supply chain must consistently meet or exceed customer expectations or requirements on the most critical quality dimensions.
TIME.
Time has two basic characteristics: speed and reliability. Delivery speed generally refers to how quickly the operations or supply chain function can fulfill a need, once it has been identified. Delivery reliability refers to the ability to deliver products or services when promised. Note that a firm can have long lead times, yet still maintain a high degree of delivery reliability. Typical measures of delivery reliability include the percentage of orders that are delivered by the promised time and the average tardiness of late orders. Delivery reliability is especially important to companies that are linked together in a supply chain. Consider the relationship between a fish wholesaler and its major customer, a fish processing facility. If the fish arrive too late, the processing facility may be forced to shut down. On the other hand, fish that arrive too early may go bad before they can be processed. Obviously, these two supply chain partners must coordinate their efforts so that the fish will arrive within a specific delivery window, which is defined as the acceptable time range in which deliveries can be made.
FLEXIBILITY.
Many operations and supply chains compete by responding to the unique needs of different customers. Both manufacturing and service firms can demonstrate flexibility. A full-service law firm, for instance, will handle any legal issue a client faces. (Some law firms specialize in only real estate transactions or divorce settlements.) A full- service hotel will go to great lengths to fulfill a guest's every need. Many firms distinguish among several types of flexibility, including mix flexibility (the ability to produce a wide range of products or services), changeover flexibility (the ability to provide a new product with minimal delay), and volume flexibility (the ability to produce whatever volume the customer needs).
Flexibility has become particularly valuable in new product development. Some firms
compete by developing new products or services faster than their competitors, a competi-
tive posture that requires operations and supply chain partners who are both flexible and
willing to work closely with designers, engineers, and marketing personnel.
COST
Cost is always a concern, even for companies that compete primarily on some other dimension. However, "cost" covers such a wide range of activities that companies commonly categorize costs in order to focus their cost management efforts. Some typical cost categories include:
Labor costs
Material costs
Engineering costs

At the time of selecting OSCM strategies all the above major points should be kept in mind by management.