Definition of OM The design & management of systems or processes that are both efficient and effective in producing products or services

to achieve the organizational goals Value-added: The difference between the cost of inputs and the value or price of outputs OM deals with production of goods and services Corporate Strategy How the firm plans to use all its resources (people, machines) and functions (marketing, finance, operations) to gain competitive advantage. How do firms compete? What are their objectives? What is the GOAL? And how is it measured? Growth / Market Share Survival Measures: ROI Return on Investment; ROA Return on Assets

Corporation and Operations Strategy ‡ Operations strategy is formulated and aligned with corporate strategy. ‡ Operations strategy must also align with the strategies of other functions, e.g. marketing ‡ A successful Operations Strategy creates value within its ± Distinctive Competencies: What the firm can do well ± Environment: Aspects of market and competition that firm can exploit What is customer satisfaction? ‡ Satisfaction = f (perception of experience - customer expectations) It is important to have customer satisfaction, more satisfaction the better you are and so is your company ‡ What is Quality? ± Multi-dimensional . ‡ It is a bundle of Attributes ‡ All products and services = A bundle of Attributes/Features ± Defined by the customer, hence very subjective ± Quality = Perception of Performance ± A product/service can be perceived to be of high/low quality even without a purchase. Key Operational Competences/Capabilities ‡ Cost ‡ Quality ‡ Time dependability/accuracy/response time ‡ Flexibility volume/product (new, variety)/process ‡ Innovation product/process What is a process? ‡ A way of getting things done. ‡ A means for converting various inputs (land, labor, capital, information) into outputs (goods and services) Process Selection is the set of strategic choices that determine how the transformation is achieved.

± The slowest work center. How much and When needed ± High volume production using minimal inventories (raw materials. etc. limited variety Assembly Line flow Continuous High Volume. and finished goods) ± Elimination of waste in production activities (materials. single product Flow Automated. rigid flow Thruput time = WIP/Output rate Thruput time = WIP * Cycle time What are the characteristics of Just-In-Time (JIT)? ± What. time. high variety products Flow varies by product Batch Flow Small/Medium batches of products one dominant flow Line Flow Med. Job Shop Low volume. work in process. ± Complex systems with multiple products may have different bottlenecks for different products./High Volume.Process Types Capacity: The amount of output that a system is capable of achieving over a specific period of time with no yield loss or downtime ± The most useful way to define capacity is in output per time period so it is often referred to as OUTPUT RATE: ‡ Laser printer ‡ Ford plant ‡ Logan airport ‡ HMO doctor ‡ Capacity is often divided into two time periods: ± Set-up time .time required to prepare for processing (includes time for start and time for finish of the job) ± Run time .) ± Timing of production resources ± Pull management system ‡ How does a lean production system differ from a traditional production system? ± No inventory for breakdowns or demand fluctuations . human relations.time required for actual processing ‡ Task Time: Time required at a particular task to complete the activities ‡ Throughput Time (Thruput time): Time interval between two points in a process flow ‡ Cycle Time: The average interval between two successive units of output ‡ Lead Time (LT) or Response Time: Time spent from the point of order to the point of delivery The bottleneck in a process: ± The work center with the least amount of capacity. ± The capacity of the bottleneck defines the capacity of the entire process! ± Bottleneck pacing: Release raw material into the system at the pace the bottleneck could work.

± Must be ready for production volumes and products ± No finished goods inventory ± No overtime or second shifts Pull system: System for moving work where a workstation pulls output from the preceding station as needed. 3. speed of repairs and the courtesy and competence of the repair staff. e. Just-In-Time (JIT) ‡ What. Push system: System for moving work where output is pushed to the next station as it is completed. 3. Courtesy: How are customers treated by employees? . Aesthetics: How a product looks. 4. word-of-mouth. Special features: The extra items added to basic features. such as a DVD in a car. sounds. How much and When needed ‡ Pull production ‡ Information kept close to the physical flow of the part ‡ Evening out or balancing the total production order daily ‡ Dynamic and responsive to changes in demand Cell Systems ‡ CELL SYSTEMS EVOLVED BY GROUPING LIKE PRODUCTS TOGETHER. assurance Dimensions of Service Quality 1. 5. Reliability: Is everything the customer asked for provided? Accuracy: Is the service performed right every time? Time: How long must a customer wait for service? Responsiveness: How well does the company react to unusual situation? 6. a TV will work without repair for about seven years 7. 6. credibility. etc. Convenience: How easy is it to obtain the service? 2. 4. 9. feels. Serviceability: The ease. 5. Durability: How long the product lasts 8. Performance: The basic operating characteristics of a product (How well a car handles or gas mileage) 2. Reputation: Past performance.g. INITIALLY FOR DESIGN PURPOSES BUT LATER FOR MANUFACTURING PURPOSES ‡ CELLS ARE DEDICATED TO A GROUP OF PRODUCTS & MUST BE REDESIGNED FOR A DIFFERENT PRODUCT GROUP ‡ CELLS HAVE FOUND COMMON USE IN CONJUNCTION WITH JIT SYSTEMS ‡ THE CONCEPT HAS BEEN USED IN FINANCIAL SERVICES TO GREAT ADVANTAGE QUALITY Quality is the ability of a product or service to consistently meet or exceed customer expectations Dimensions of Product Quality 1. Conformance: The degree to which a product meets the specifications required by design Safety: Assurance that customer will not suffer injury Reliability: The product will operate properly within an expected time.

Service after delivery What is the ultimate objective in managing conformance quality? ZERO DEFECTS ‡ What steps can companies take towards this objective? ± Total Quality Management: A philosophy that advocates continuous evaluation and improvement of processes ‡ Total quality management is defined as managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. ± Identify a firm that is the world leader in performing the process. appearance of personnel. ± Management believes that employee involvement and team efforts are the key to improvement. ‡ Extend these concepts to suppliers and distributors. Ease of use ± EX: Directions.7. ‡ Customer satisfaction ‡ Involvement of everyone ‡ Continuous improvement ± 6-sigma: An idea that restricts the variance (and o precision) of processes. planned quality ± The degree to which quality characteristics are designed into the product ± EX: Designed size 2. training 4. Elements of TQM (1) ‡ Kaizen: Continuous improvement. bells & whistles Determinants of Quality 1. ‡ Design processes that facilitates doing the job right the first time. executed quality ± The degree to which goods or services conform to the specifications required by the design ± EX: Actual size 3. Design. instructions. ‡ Design a product or service that meets or exceeds customer expectations. ± Kaizen is the Japanese word for Continuous Improvement. smell. ‡ Keep track of results. Elements of TQM (2) ‡ Competitive benchmarking ± Identify those processes needing improvement. Customer desires 5. feel. sound. look. . The TQM Approach ‡ Find out what the customer wants. Tangibles: Physical facilities. Conformance to design (standards). ± Philosophy that seeks to make never-ending improvements to the process of converting inputs into outputs.

Analyze . ± Team approach. Elements of TQM (3) ‡ Employee empowerment ± Quality at the source: The philosophy of making each worker responsible for the quality of his or her work.Define Performance Objective . Define . ± Analyze data. ± Champion TQM throughout the organization.Define Performance Standards .Project Selection 2.Select Characteristics . Measure . ‡ Decisions based on facts rather than opinions ‡ Knowledge of tools ‡ Supplier quality Basic Steps in Problem Solving ‡ The Seven Step Method ± Select a problem and describe it clearly ± Study the present system/Collect data ± Identify possible causes/Analysis ± Plan and implement a solution ± Evaluate effects ± Standardize any effective solutions ± Reflect on the process and develop future plans The DMAIC Cycle (6 sigma) ± 1.Identify Variation Sources ‡ Improve ± Screen Potential Causes ± Discover Variable Relationships ± Establish Operation Tolerance Control ± Validate Measurement System\Determine Process Capability ± Implement Process Control ‡ Basic Quality Control Tools ‡ Flowcharts ‡ Histograms ‡ Pareto Charts ‡ Scatter diagrams or plots (correlation) ‡ Control charts .Establish Product Capability .Validate Measurement System 3.Contact the managers of that company and make a personal visit to interview managers and workers.

Good for Problem Prioritization. Help detect the correctable causes of variations. You can track improvements Run Chart A run chart shows the history and pattern of variation over time and is used to detect trends or shifts in the data. May indicate a relationship between the variables Control Chart ..Look for non-normal distribution and outliers. frequency . process mapping Histogram . A bar chart of the frequency of outcomes Pareto Chart . Could A be causing B?. ‡ The concept of process capability builds on the six sigma quality concept. Process Capability ‡ Process capability refers to the inherent variability (random variation) of the process relative to the variation allowed by the design specifications. ‡ Process capability ± Process variability relative to specifications Six Sigma Quality ‡ A philosophy and set of statistical methods companies use to eliminate defects in their products and processes. Used to focus on the problems that offer the greatest potential for improvement by showing their relative frequency Scatter Diagram.‡ Run charts (line plot or time series plot) ‡ Cause-and-effect diagrams: Fishbone or Ishikawa diagrams Flow Chart A Diagram of the steps in the process . .Is the process changing?. trend and patterns Fish Bone (Cause and Effect Diagram) .Good for Root Cause Determination What quality means to us ± Dimensions ± Costs ± Consequences ± Ethics What companies can do to achieve high quality ± Total Quality Management ‡ Customer satisfaction ‡ Involvement of everyone ‡ Continuous improvement Quality Control Tools are essential in collecting data and analysis for improvement.Are A and B correlated? . ‡ Process variability ± Natural variability in a process ‡ Specifications ± design tolerances specified by engineer or customer.

Operational Excellence Operation Excellence is providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience Operational excellence describes a specific strategic approach to the production and delivery of product and services Lead the industry in price and convenience Want to minimize overhead costs. refers to the relationship of the customer specification to the process variation. ± Statistically. reduce transactions. that is plus or minus six standard deviations of the process mean. Southwest . o Seeks to reduce variation in the processes that lead to product defects. Processes have acceptable upper and lower limits. o Process specifications (design tolerances specified by engineer or customer). six sigma . and other friction cost and optimize business processes Dell and GE are good at that.99% of the products are acceptable Six sigma thus merges design quality to conformance quality!!! ‡ Customer Intimacy I. The name. this ensures that 99.± ± ± Employed in ± ± ± ± - Improve quality Save time Cut costs Design Production Service Inventory management Delivery Six sigma requires using facts. ± Achieved by reducing the standard deviation of the process. ‡ The actual specifications (lower and upper limits of acceptable quality) are specified by downstream processes. Six Sigma is concerned with reducing the variations to get more output within those limits. Six sigma rests on the comparison of the following two important concepts: o Process variability (uncontrollable random variation in the process). the ball s center must not be too far from the center of the basket ± The aim is to control the process such that variations within 3 standard deviations on either side of the mean are acceptable. data and statistical analysis tools. ± For a successful free throw. The Greek symbol W (sigma) refers to the amount of variation in a process around the mean value for that process. eliminate intermediate production steps.

each piece is operated on singly until all are complete WIP is higher in batch operation that line operation Consequently. and commercialize their ideas quickly Relentlessly pursue new solution to the problems that their own latest product or service has just solved Always scan the landscape for new product or service possibilities Avoid bureaucracy at all costs because it slows down commercialization Their strength lies in reacting to situations as they occur. . II. - - Customer Intimacy Customer intimacy combine detailed customer knowledge with operational flexibility to that they can respond quickly to almost an need. thereby making rivals goods obsolete They strive to produce a continuous stream of state of the art products and services Must be creative. Production Line Process High volume assembly.II. job shops are often organized by skill types or capabilities rather than the flow of a particular product. relatively standard output that allows car firms to create stable processes that are dedicated to motor vehicle assembly Each task time also called operation cycle time Shorter cycle times means that the worker skills are low since little training is needed for worker to become task proficient Batch Process Is a group of similar or homogenous items that accompany each other through a process. and whole foods and apple Basic Process Types I. Amazon Product Leadership Product leadership means offering customers leading edge products and services that consistently enhance the customers use or application of the product. from customizing a product or filling special request Customer intimacy is to continually tailor and shape products and service to fit an increasingly fine definition of the customer Can be expensive but builds customer loyalty for the long term Value customer lifetime value to the company and not the value of a single transaction Kraft and Home Depot was good at that. Although work is grouped here into batches. - III. then break more new ground They possess the infrastructure and management system needed to manage risk well Acuve and Vitakon good at that . Fast reactions times are an advantage when dealing with the unknown Continually cross a frontier. III. throughput time for the process is much greater Batch process worker skills are generally higher than skills in line processes Batch sizes are usually a function of technology or scale economies Job Shops distinguishing feature of a job shop process is the haphazard nature of the physical product flows.

- many job shops operate to maximize people utilization and may have excess capacity elsewhere. Project If we now extend our process types in a different direction to a unique or very low volume process. the process is called a project.- IV. - . Many projects are one-offs but some are repeated in form many times. Job shops usually contain multi-purpose processes that can be very flexible in terms of the task range they can handle.