Production and Operations Management

PROD 2100-2110 Production and Operations Management 2004-2005 Pierre Semal Prod 2100/2110 Introduction 0

Rules of the Game Tutorials Readings Morgan, Mechanization Takes Command in Images of Organizations, Sage Press, 1986. Meal, Putting production decisions where they belong, HBR, 1984. Zeithaml, Berry, Parasuraman, Communication and control processes in the delivery of service quality, Journal of marketing, 1988. Working Sessions: Manuals: Individual Computerized Classical commented transparencies (Culb IAG, web) exercise manual (Culb IAG, web) readings (Culb IAG) personal notes Chase and Aquilano, Production and Operations Management, Irwin (Edt). McLain, Thomas and Mazzola, Operations Management: Production of goods and services, Prentice Hall (Edt). Objectives / Exam... Winnie the Pooh spent the rest of the day by walking and happily humming a new hum, all about the common sense approach and what The Stranger has been teaching them and the hum went like this: Select the problem of the day Finding one that s right to do, You can choose it either way, You pick it ot it picks you. Observe it very carefully, Where do I start? Where am I going? And don t forget about the bee, What s in the way of doing or knowing? Prod 2100/2110 Introduction 1

Introduction What is POM? What kind of problems are studied in POM? 1. DEFINITIONS...3 1.1 PRODUCTION AND OPERATIONS...3 1.2 PRODUCTION SYSTEM...4 1.3 EXAMPLES OF PRODUCTION SYSTEMS...5 1.4 SUMMARY...8 2. PROBLEMS STUDIED IN POM...9 2.1 THE MAKOFFEE PRODUCTION SYSTEM...9 2.2 LIST OF POM QUESTIONS... 12 2.3 LIFE CYCLE OF A PRODUCTION SYSTEM... 13 2.4 TABLE OF CONTENTS... 14 2.5 THE GETUP PRODUCTION SYSTEM... 15 3. PRODUCTION AND THE OTHER DEPARTMENTS...16 Prod 2100/2110 Introduction 0

1. Definitions The terms production management and operations management are often interchanged. See, for example, the titles of the above mentioned books. 1.1 Production and Operations In order to define what is "production management" or "operations management", clear definitions of the terms production and operations are needed. Roughly: Production is directly related to the manufacturing of goods (products are produced). In the world of services, production refers to the service delivery. Operations has to be understood as in: Military operations or in Stock Exchange operations. It refers to the daily actions necessary for the production system to work. What is production? What is production management? What is operations What is operations management? Everybody has his/her own perception of what production is. Let us consider the following kinds of "industries" and try to determine what is produced in each of them. Examples of industry - products Steel Works Production: steel beams or sheets from iron ore. Automobile factory Production: complete cars from components or from metal sheets? Bakery The bakery produces breads, cakes, pies. The baker's shop exchanges these products. It is not clear what is really the job. Restaurant The problem is the same here: the kitchen produces meals and these meals are delivered in the dining room. A restaurant can be a meal factory, a meal delivery system or both. Airlines Here travel units are produced. They can be used to transport goods or people. Bank University Recreation center In these industries, the goods/services that are produced are very different. Nevertheless, in each of them, a kind of production system has been designed and installed. Here is a very general definition of a production system : Prod 2100/2110 Introduction 1

1.2 Production System Definition: A Production System is a system whose function is to transform an input into a desired output by means of a process (the production process) and of resources. Production Process The definition of a production system is thus based on four main elements: the input, the resources, the production process and the output. The examples in the following three pages illustrate what these elements are in different types of industries. Why such a broad Definition? This definition is so broad that most of the activities of a person can be seen as production systems. This is the goal we pursue with this definition. Indeed, the concepts, models and techniques developed in this course first apply to the industry world and to the classical manufacturing activities. However, most of these concepts, models and techniques apply to the normal activities of a person too. Looking at these activities as if they were production processes will show them in a different light. The example of preparing coffee that is given at the end of this section is a perfect example of such a light. Prod 2100/2110 Introduction 2

1.3 Examples of Production Systems Automobile Factory Process raw material complete cars fabrication, assembly assembly line, workers There are different levels of input: raw material such as steel or chestnut wood and semi-final products such as doors, seats or motors. Bakery Process Here is the bakery described, not the shop. Hospital Process water, flour breads, cakes fabrication oven, workers patients healthy individuals health care medical doctors, nurses, medical supplies, equipment All three examples show processes which correspond to physical transformation of the input. Prod 2100/2110 Introduction 3

Examples of Production Systems Department Store Process shoppers sales to satisfied customers transport, storage, promotion, information, exchange displays, stock of goods, clerks The input here is not the goods but the shoppers. They undergo the transformation. Restaurant Process hungry customers satisfied customers prepare meals, serve customers in a comfortable environment food, chef, waiter, stove, environment The process here is twofold: prepare the meal and serve it. Some restaurants focus on the meal preparation only, some on the service only and some on both. University Process students educated individuals imparting knowledge and skills teachers, books, classrooms Other output can be specified for a university. After this course, should you be able to solve all the basic production problem, should you be able to deal with any new problem related to production or should you have a diploma that states you followed a course in production management? Prod 2100/2110 Introduction 4

Examples of Production Systems Here we want to show other dimensions in the service industry. They are production systems too. Carrier Process things things at another place transport cars, trucks, planes, sorting devices, storage areas Examples are express carriers such as DHL, Federal Express or UPS and classical carriers such as the mail or the railway organizations. Warehouse Process Think at banks, at movers or at parking lots. things things at a later time store and preserve vaults, storage areas, storage devices Prod 2100/2110 Introduction 5

1.4 Summary Let us try to summarize the various forms the four elements of a production system can take. Production Process Process types raw material people with requests products service serviced people physical exchange location storage educational tools labor energy Definition of POM: Production and Operations Management (POM) provides: tools, techniques, concepts, models, ideas, to: design, dimension, control, improve production systems Prod 2100/2110 Introduction 6

2. Problems Studied in POM In this section we will first look at an example which will allow us to list the kind of problems studied in POM. Then, we will try to structure these problems. 2.1 The Makoffee production system Preparing coffee in the morning is a nice example of a production system. coffee machine electricity operator water, filter, coffee Prepare drinkable coffee When somebody prepares coffee in the morning, she/he performs different operations and makes different decisions. Here we will review these operations and decisions and draw a parallel between the problems the coffee maker faces and those faced by a production manager in his/her company. 0. When do you make coffee in the morning? Before washing is convenient because it is ready when you come back from the bathroom. You must here schedule the production of coffee and the other activities. scheduling / project management In a company, you need to organize the different activities (sequence, priority,...) 1. Get water, coffee, filter and coffee machine. Where is the coffee machine? Usually, the coffee machine is in the kitchen where you get the water and drink the coffee. You locate the production system where you get the raw materials and where you use the finished products. location Where are the different ingredients? Usually, the coffee and the filters are together and close to the coffee machine. The coffee machine is close to the water faucet. You place the different elements to avoid useless trips and handling. layout In a company, where to locate your plant or your shop is a strategic question. The layout is also critical. It usually follows the material flow. 2. Estimate how much coffee must be prepared. How many people will drink coffee today and at what time? You take into account your experience, the day of the week and anything you know. forecasting Then, you must decide whether you prepare the coffee for the breakfast or for the whole day. Your aim is a compromise between work and quality. lot sizing You do no want to run out of coffee this morning but you do not want to waste coffee either. inventory control The baker faces the same problem when he decides how many loaves of bread to bake in the morning. Prod 2100/2110 Introduction 7

3. Prepare the coffee How do you really prepare coffee? Which operations are needed? In which order? If it takes a long time to fill the can with water, you prepare the filter with coffee while the can is filling. Here, you want to minimize the time needed to prepare the coffee. process design You measure each operation in order to check whether your process is still optimal. If it takes too much time, perhaps you should buy other filters or a new machine? productivity measurement In a company, the production processes are specified with lots of details. They are permanently controlled and many redesigns take place. 4. drink coffee You want to check the quality of the products and of the process. By drinking a single cup, you decide about the quality of the whole pot. You do not want to drink the whole pot before deciding it's a good coffee. quality control: statistical process control 5. wash and descale the coffee machine If you do not want the machine to require one hour for one coffee can, you should descale it from time to time. maintenance You should keep your production system in good shape. Keeping a clean environment also prevents dirt from mixing with the coffee when you prepare it. quality control : total quality management Getting the opinion of the customers is another important quality control check. 6. buy filters and coffee How much coffee and how many filters are required depends on the consumption of coffee. material requirement planning (MRP) If you have to drive a long way to buy the raw material, you will buy in big quantities. If the coffee is very expensive, you will buy quite often small quantities. A compromise must be found. lot sizing You do not want to run out of coffee or of filters. But if the shop is quite often closed, you could keep some safety stock of raw material.. inventory control How to choose between different coffee qualities at different prices in different shops which are accessible at different times? purchasing 7. buy a new coffee machine? You must choose between different options here too. However, the size (or type) of the machine will first depend on the amount of coffee you drink every day. Prod 2100/2110 Introduction 8

If you can foresee that the people you will invite in the near future are hard coffee drinkers, you could perhaps already buy a higher capacity machine. Furthermore, this machine can be used for normal coffee in the morning and for expresso in the evening. forecasting aggregate/capacity planning If you need this higher capacity only in a few months, delaying the investment could perhaps be more profitable. investment analysis Prod 2100/2110 Introduction 9

2.2 List of POM Questions Here is the list of problems/subjects encountered during the description of the Makoffee production system. Scheduling / project mngt. when do you schedule "makoffee"? Facility location where is the coffee machine? Facility layout where are the components? Forecasting how much coffee for today? Lot sizing do I prepare coffee for the whole day? Inventory control what is the risk of running out of coffee? Process design how do I make coffee? Work measurement can I improve the time it takes? Quality control is the coffee good? Maintenance and reliability Material req. planning how many filters do I need and when? Lot sizing do I buy them one by one? Inventory control what if the shop is closed? Purchasing what is the best shop? Forecasting will I always drink as much coffee? Aggregate planning shall I buy a bigger pot now? Investment analysis or do I go on with my small pot? All these subjects can be organized according to the length of the time horizons to which they refer. Decision Horizons Short (hours / days) Scheduling Forecasting Lot sizing Inventory control Quality control Maintenance Intermediate (weeks / months) Measurement Process review MRP Lot sizing Inventory control Purchasing how often do I clean the coffee machine? Long (year or years) Facility location Facility layout Process design Forecasting Aggregate planning Investment analysis Prod 2100/2110 Introduction 10

2.3 Life Cycle of a Production System These POM subjects/problems can also be organized according to the life of the product itself. Period Birth of the system Product design Process selection Design of the system Decisions Goals of the firm? What product or service is offered? What is the product form? How to make the product? What capacity is needed? Where should the facility be located? How should the facility be organized? How long does each job take? What job will each worker perform? How will the job be measured? Startup of the system How do we start the system? How long will it take to reach the desired output rate? Control of the system Termination How do we manage daily activities? How do we maintain the system? How can we improve the system? How do we revise the system if corporate strategy changes? How does the system die? How can the resources be salvaged? Prod 2100/2110 Introduction 11

2.4 Table of Contents Week from Courses with P. Semal Prod2100: Mont03 Prod2110: Mont01/Agor13 5 1/2 Introduction + Exercises with M. Créteur Exercises in groups or alone Prob/Stat. revisions Product & Process 1 6 8/2 Product & Process 2, 3 7 15/2 half-time 8 22/2 Product & Process 4, 5 Xcell + Simulation 9 1/3 Strategic Planning 10 8/3 Aggregate Planning 11 15/3 MRP + Lot Sizing Q/A on P&P + AP Aggregate planning Miscellaneous 22/2, 12.45,? soft introd. 15/3, 12.45,? soft introd. 12 22/3 JIT + Inventory Control 1 MRP CEMS on 24-26th/3 13 29/3 Inventory Control 2, 3 2/4, 12.45,? soft introd. 14 5/4 Easter holiday Inventory control 15 12/4 Easter holiday Inventory control 16 19/4 Forecasting Methods Inventory control 17 26/4 Quality Management Q/A on Inventory control 18 3/5 Project Management Q/A on Forecast. 19 10/5 Project Mngt. 20 17/5 Forecast. methods 26/4, 12.45,? soft introd.; IAG Fellow Prod 2100/2110 Introduction 12

2.5 The GETUP production system This example aims at illustrating the theme: project management. This is a special kind of production system since only one piece of output is produced at a time. You cannot automate the process for producing several units of output because of time constraints. In other words you cannot wash yourself in advance. Such a process is usually called a project. Project features cannot be automated This project is of the type: one-of-a-kind. Examples are: building a bridge or a house, transferring a plant or analyzing a problem. can be decomposed into a set of tasks The project is made of a set of tasks which are rather independent. You need to get up, to wash, to prepare coffee, to eat breakfast, to dress and finally to go to the auditorium. show precedence aspect Some of the tasks cannot be done at any time. You need to wash before dressing and prepare coffee before having breakfast. However, you can eat before or after getting dressed. All you can do is to organize the different tasks in the best possible way. Project Management Objectives Here is a rough list of objectives: On time Quality Cost soap, clothes, food alarm clock, coffee machine bathroom, kitchen friend, parents Student asleep "Morning" Student listening Prod 2100/2110 Introduction 13

3. Production and the other departments How is the production function related to the other functions, such as marketing, finance, etc.? Such relationships are key questions for a company. In some cases, the cooperation between the different functions is more important than the individual performance of each function. Here we briefly sketch the kind of relationships between the production department and the other departments. More information will be given in due time. 1. Production and Marketing Design (R&D) Production Market Analysis Promote Product Customers Distribution-Sales At the interface between production and marketing are discussed all the product (production) specifications and the production characteristics: lead times, flexibility, inventory strategy, forecasts. 2. Production and Human skills motivation formation labor specialization For example, TQM and JIT require highly motivated, responsible and respected people. 3. Production and Finance investments cash flows The large investments required by large scale production plants must be evaluated through a clear financial plan. Productivity increases obtained at the cost of increased inventories must also be carefully analyzed. 4. Production and Information Systems Do I get the information I need for deciding? or how much would it cost me to get this information on-line? are the kind of questions to be debated at this interface. Question: buffer or integrate Production? All the interfaces call for the following basic question, for which no absolute answer exists. Two attitudes are possible. Either you keep a tight contact with all these perturbing factors (the market, mainly) or you build a wall to protect your production unit. In the first case, you will try to follow the market and the reality at the cost of an under-optimized ever-disturbed production system. Your priority is then flexibility. The danger is a complete disorganized system. In the other case, the wall allows you to operate in a stable and optimized way. However, the weakness of the contact with the reality could be extremely dangerous. Prod 2100/2110 Introduction 14