Basic OM terminology

&
Concepts
 Key Terms
• Cycle time
• Setup time
• Run time per unit
• Batch/Order Size
• Throughput Time
• Bottleneck
• Capacity
• Utilization
Job Shop/Process Layout
 Functional Process Layout
• Job shop layout
• Why is it chosen?
• What are the implications of the layout?
• Video
Product Layout
 Products & Services
• Make-to-order
– Made to customer specifications after order
received
• Make-to-stock
– Made in anticipation of demand
• Assemble-to-order
– Add options according to customer
specification
 Customer Order Decoupling Point

Decoupling Point:

the point that indicates how deeply the

customer order penetrates into the goods
flow
Positions of CODP
 Push-Pull Supply Chains

Suppliers

PUSH STRATEGY PULL STRATEGY

Low Uncertainty High Uncertainty

Push-Pull Boundary
 Distinguishing Design Features
Features Push Pull
Product Characteristics
 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics
 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics High economies of scale Low economies of scale
Order Winners/Basis of
Competition
 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics High economies of scale Low economies of scale
Order Winners/Basis of Price Variety
Competition
Qualifiers Quality/Delivery Reliability Quality/Delivery Reliability
 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics High economies of scale Low economies of scale
Order Winners/Basis of Price Variety
Competition
Qualifiers Quality/Delivery Reliability Quality/Delivery Reliability

Supply Chain Design

 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics High economies of scale Low economies of scale
Order Winners/Basis of Price Variety
Competition
Qualifiers Quality/Delivery Reliability Quality/Delivery Reliability

Supply Chain Design Efficient Responsive

Manufacturing Challenge
 Distinguishing Design Features
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand
Process Characteristics High economies of scale Low economies of scale
Order Winners/Basis of Price Variety
Competition
Qualifiers Quality/Delivery Reliability Quality/Delivery Reliability

Supply Chain Design Efficient Responsive

Manufacturing Challenge Low cost manufacturing, Manufacture to customer
maintaining high stock specs, achieve short and
availability at CODP reliable lead time
KPIs
 Distinguishing Design Features
Features Push
Product Characteristics Standard Component, High
Volume, Predictable
Demand, long shelf life
Process Characteristics High economies of scale
Order Winners/Basis of Price
Competition
Qualifiers Quality/Delivery Reliability
Supply Chain Design Efficient
Manufacturing Challenge Low cost manufacturing,
maintaining high stock
availability at CODP
KPIs Efficient production, cost
per unit
Improvement Priorities
Pull
Customized, high variety,
Wide Range, Unpredictable
Demand
Low economies of scale
Variety
Quality/Delivery Reliability
Responsive
Manufacture to customer
specs, achieve short and
reliable lead time
Flexibility, setup time/cost,
number of changeovers
Features Push Pull
Product Characteristics Standard Component, High Customized, high variety,
Volume, Predictable Wide Range, Unpredictable
Demand, long shelf life Demand

Process Characteristics High economies of scale Low economies of scale

Order Winners/Basis of Price Variety

Competition

Qualifiers Quality/Delivery Reliability Quality/Delivery Reliability

Supply Chain Design Efficient Responsive

Manufacturing Challenge Low cost manufacturing, Manufacture to customer
maintaining high stock specs, achieve short and
availability at CODP reliable lead time

KPIs Efficient production, cost Flexibility, setup time/cost,

per unit number of changeovers

Improvement Priorities Cost Reduction Lead Time

Reduction/Service level