Engineering Operations Management

Module Leader:
Dr Ken Robson, St Peters Campus
 ENGM1C Module Information

 Text and readings:

 Core text
 Other texts
 Journal Papers (need to access before relevant session)

 Assignments: 2 individual assignments

 Ass 1 – Operations Strategy
 Ass 2 – Lean Manufacturing Research Paper
Wk Unit Subject Reading
1 1 Intro to Module/ Operations Management  Slack et al , Chapter 1 – 3
2 1 Intro to Module/ Operations Strategy  Slack et al , Chapter 1 – 3
 Hayes & Wheelwright (1984). Voss C (1992).
3 2 Processes and Process Organisations  ‘Tenner & Detoro, (1997):
Tutorial 1: Process Enterprises  Hammer & Stanton,(1999)
4 3 Process Improvement – CI & RE methodologies  Slack et al , Chapter 18
5 3 Process Improvement – CI & RE methodologies  Zinser et al,(1998)
Tutorial 2a: BPR  RD Case-study
6 3 Process Improvement – CI & RE methodologies  Zinser et al(1998)
Tutorial : 2b: RD Case study  RD Case-study
Tutorial 3: JIT Simulation Exercise  Plug and play exercise
7& 4 Lean/JIT  Slack et al , Chapter 15
8 JIT Elements: Layout & flow, Planning & Control, TPM
Ass1 issued
9 4 Tutorial 4:Lean /JIT Relevance  Cooney, R (2002) ‘Is Lean a universal production system’,
International Journal of Operations and Production Management,
22 (10)
 White et al (1999) ‘JIT Manufacturing: A survey of Implementations
in small and large US manufacturers’. Management Science, 45 (1)
10 5 SCM,  Slack et al Chapters 6 & 13
Network Design  ‘The machine that changed the world’ (Womack et al,1990)
ASS 1 hand in
ASS 2 Hand out
11 5 SCM and Modular Manufacture  Pires (1998).Takeishi & Fujimoto (2002)
 Doran, D (2003),Kane & Trimble (2008)

12 Assignment 2 Discussion Session

Ass 2 hand-in
 Core Text

 The module is driven by the following

text:
 Slack et al ‘Operations Management’,
Fourth,Fifth or Sixth Editions, FT
Prentice Hall.
 This text will be used extensively
throughout the lectures and students are
expected to obtain a copy.
 Contact Details

Email: ken.robson@sunderland.ac.uk

Study material - CANVAS

I reside in room 103C, David Goldman building, St

Peters Campus

Telephone: 01915152881
Introduction to Operations
Management

UNIT 1

Based on:
 Slack et al (2010) Chapters 1,2,3
 Additional journal sources
 Introduction to Operations Management

Chapter 1: Introduction to Operations Management

 What is Operations Management?
 Why is Operations Management important?
 How do Operations Managers manage?
 The different characteristics of operations
Chapter 2: Operations Performance
 Why is the performance of operations important?
 What role can operations play in achieving business
success?
 What generic performance measures can be used?
 What are the ‘trade offs’?
 Introduction to Operations Management

Chapter 3: Operations Strategy

 The strategic role of operations

 What is strategy?
 What is operations strategy?
 4 perspectives – Top down, Bottom up, Resource
Based View (RBV), Market Led View
 The process and content of strategy
 Process: The steps defined by models and frameworks
 Content: What strategy consists of, the structure and
infrastructure
Operations Management - CHAPTER 1

 The best way to start understanding the

nature of “Operations” is to look around you
 Every service you consumed today (radio
station, bus service, lecture, etc.) has been
produced by an operation
 Operations Managers create everything you
buy, sit on, wear, eat, and throw away
 Back office Kitchen unit
operation in a manufacturing
bank operation

Operations
are all around
you!

Take-out /
Retail restaurant
operation operation
 What is Operations Management?

 All organizations have an operations function

 Operations Management is the management of

resources to produce outputs

 Operations managers manage transformation

processes
All operations are transformation processes!

TRANSFORMED ENVIRONMENT
RESOURCES

MATERIALS
INFORMATION
CUSTOMERS
TRANSFORMATION GOODS AND
INPUTS OUTPUTS SERVICES
PROCESS

FACILITIES STAFF

TRANSFORMING
RESOURCES
ENVIRONMENT
 Importance of Operations Management

“The transformation/conversion process tends

to occupy the effort and attention of 80% of
all available resources within a business.
Consequently, incurs 80% of the total costs”
(Hill,2000)

“Operations is seldom neutral - it is either a

competitive weapon or a corporate millstone”
(Skinner,1969)
How businesses gain competitive advantage

The “technological”
specifications of
their products and Product/
services? Service
Technology

The way they

The way they produce their
position goods and
themselves in Marketing Operations services?
the market?
 How do the following companies gain
competitive advantage?

1. Miele, BMW,Sony
2. Asda,M&S
3. Toyota,Ryanair

Discuss in small groups!

 Operations managers have to
balance three key activities

‘Day to day
business’.
Make widgets!
Safety, budgets,
OPERATE
planning,
people management AND
MAINTAIN
Significant
• BPR
• Capital
Incremental e.g. REGENERATE Projects
Reduce IMPROVE • Equipment
downtime re-design
Changeovers
scrap
The output from most operations is a
mixture of goods and services

PURE GOODS
Tangible
CRUDE OIL PRODUCTION

Can be stored
Production precedes
CAR MANUFACTURING

consumption
Low customer
SPECIALIST MACHINE
MANUFACTURER
contact
Can be transported
Quality is evident

FINANCIAL SERVICES
RESTAURANT

FASHION RETAIL SHOP

Intangible
Cannot be stored

HAIRDRESSING
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
PURE SERVICES
Importance of Operations Management

 Effective Operations Management can

provide four key advantages

 Reduce costs of producing products and

services
 Increase revenue by increasing customer
satisfaction through quality and service
 Reduce investment both in terms of capital
and working capital
 Provide a platform for future innovation
Where does the Engineering function
sit within a business?
Core functions Engineering/
technical
function Support functions

Accounting
and finance Product/services
function development
function

Others
Operations Marketing
function function

Human
resources
function
Information
technology (IT) A broad definition of
function operations
management
 Operations have different characteristics

They can differ by:

 Volume or output
 Variety of products
 Variation in demand of their output
 Degree of Visibility that customers have of
their products and services

These four dimensions invariably impact costs

 A typology of Operations

IMPLICATIONS How 4 V’s impact on cost IMPLICATIONS

Low repetition High repeatability
Each staff member performs Low Volume High Specialization
more of job Systemization
Less systemization Capital intensive
High unit costs Low unit cost

Well defined
Flexible
Routine
Complex High Variety Low Standardized
Match customer needs
Regular
High unit cost
Low unit costs

Changing capacity Stable

Anticipation Routine
Flexibility High Variation in demand Low Predictable
In touch with demand High utilization
High unit cost Low unit costs

Short waiting tolerance Time lag between production

and consumption
Satisfaction governed by Standardized
customer perception
Customer contact skills Low contact skills
needed High Visibility Low High staff utilization
Received variety is high Centralization
High unit cost Low unit costs
 A typology of Operations

EXAMPLES EXAMPLES
Electricity generator factory Television plant
Gourmet restaurant Fast food restaurant
Pioneering surgery Low VOLUME High
Routine surgery
Taxi service
Mass rapid transport

Bespoke tailor Off-the-peg suit plant

University tutorials University lectures
Corporate tax advice
High VARIETY Low
Financial audits
Department store Jeans shop

Electricity utility Bread bakery

Financial audits Consultancy advice
High VARIATION IN DEMAND Low
Emergency service Shopping mall security
London underground Trucking operation

Health care Most manufacturing

"Cook at your table" Prepackaged sandwich
restaurant High VISIBILITY Low maker
Dentist Dental technicians
Music teacher Distance learning
The profiles of two different operations
These can be modeled using the 4 V’s

Low Volume High

High Variety Low

High Variation Low

High Visibility Low

Mwagusi
Formula 1 Hotel
Safari Lodge

Slack(2010) pg 21
 Worked Example – Quentin Cakes pg. 30
Slack (2010)
Quentin Cakes make about 20,000 cakes per year in two sizes, both based on the same
recipe. Sales peak at Christmas time when demand is about 50%higher than the more quiet
summer period. The company’s customers(the stores which stock the products) order their
cakes in advance through a simple internet-based ordering system. Knowing that the company
has some surplus capacity, one of the customers has approached it with two potential new
orders.
• The Custom Cake option – this would involve making cakes in different sizes where
consumers could specify a message or greeting to be ‘iced’ on top of the cake. The
consumer would give the inscription to the store which would email it to the factory. The
customer thought that demand would be around 1000 cakes per year, mostly at celebration
times such as Valentines Day and Xmas
• The Individual Cake option – this option involves Quentin Cakes introducing a new line of
very small cakes intended for individual consumption. Demand for this was forecast at
around 4000 cakes per year, with demand to be more evenly distributed throughout the
year
The total revenue from both options is roughly the same but the company only has capacity to
adopt one of the ideas. Using a 4V analysis, determine which option to take.
Map the two Quentin Cake options here!

Low Volume High

High Variety Low

High Variation Low

High Visibility Low

Solution – Quentin Cakes

Customised Individual Current

cakes cakes Products

Low Volume High

High Variety Low

High Variation Low

High Visibility Low

Operations Performance – UNIT 1 LESSON 2

 Why is Operations performance important?

 What are the performance objectives of
operations?
 (QDSFC) Quality, Dependability, Speed,
Flexibility, Cost
 But can be business specific e.g. Safety, Cost
Customer service, Quality, People
 The concept of ‘trade offs’
Why is operations performance important?

Doing things RIGHT Gives a QUALITY advantage

Doing things FAST Gives a SPEED advantage

Doing things ON TIME Gives a DEPENDABILITY advantage

CHANGING what you do Gives a FLEXIBILITY advantage

Doing things CHEAPLY Gives a COST advantage

Note: Companies might also set their own in-house performance objectives
e.g. safety, cost, customer service, quality, delivery on-time and in-full
Quality can mean different things

Automobile
plant
• All assembly is to specification
• The product is reliable
• All parts are made to specification
• The product is attractive and
• blemish-free
 Quality

“Quality” has several meanings, the two most common are……

• Quality as the specification of a

product or service

• Quality as the conformance with which

the product or service is produced
 Quality

Irrespective of a product or service’s specification quality, producing it so

it conforms to its specification consistently brings benefits to any
operation
Externally -- it enhances the product or service in the market, or at least
avoids customer complaints

Internally -- it brings other benefits to the operation

It prevents errors slowing down throughput speed

It prevents errors causing internal unreliability and low
dependability
It prevents errors causing wasted time and effort, therefore saving
cost
Speed can mean different things

Automobile
plant
• Minimizing the time between dealers
requesting a vehicle of a particular
specification and receiving it
• Minimizing the time to deliver spares to
service centres
Speed again has different interpretations
externally and internally

Externally – it means the elapsed time between a customer asking

for a product or service and getting it (in a satisfactory condition)
It often enhances the value of the product or service to customers

Internally -- it brings other benefits to the operation

It helps to overcome internal problems by maintaining dependability

It reduces the need to manage transformed resources as they pass

through the operation, therefore saving cost
Dependability can mean different things

Automobile
plant

• On-time delivery of
vehicles to dealers
• On-time delivery of spares
to service centres
 Dependability

Externally -- it enhances the product or service in the market, or at least

avoids customer complaints

Internally -- it brings other benefits to the operation

It prevents late delivery slowing down throughput speed

It prevents lateness causing disruption and wasted time and effort,

therefore saving cost
Flexibility can mean different things

Automobile
plant
• The introduction of new
models
• A wide range of options
• The ability to adjust the
number of vehicles
manufactured
• The ability to reschedule
manufacturing priorities
Flexibility has several distinct meanings but is always associated
with an operation’s ability to change

Change what ?
The products and services it brings to the market –
Product/service flexibility

The mix of products and services it produces at any one time –

Mix flexibility
The volume of products and services it produces –
Volume flexibility
The delivery time of its products and services –
Delivery flexibility
Manpower: The flexible working of people, multiskilling,
temporary staff, out sourcing, zero hour contracts
 The distribution of Costs can vary
according to the business
Hospital Automobile
plant
Bought-in Technology Bought-in Technology
materials and failities materials and and facilities
and services costs services costs

Staff
Staff
costs
costs

Bus company
Supermarket
Bought-in
Technology Technology
materials
and facilities Bought-in and facilities
and
costs materials costs
services
and services
Staff
Staff
costs
costs
 Cost

The cost of producing products and services is influenced by

many factors such as input costs, but two important sets are…..

The 4 V’s volume

variety
variation
visibility

The internal performance of the operation in relation to:

quality
speed
dependability
flexibility
 Trade offs

• Concept first raised by Whickam Skinner

• Operations Managers must be cognisant of the potential trade
offs between objectives.
• These can have effects both internally and externally
 Trade off examples

Internal Effects

• Speeding up processes can lead to reduced quality, increased

cost and reduced dependability
• Trying to improving quality may reduce the speed of processes
and therefore increase cost and reduce flexibility

External effects

• Reducing variety of products in order to reduce changeovers

and improve speed means a reduction in the range of
products and choice for customers
 Operations Strategy - CHAPTER 3

 The strategic role of operations

 What is strategy?
 What is operations strategy?
 4 perspectives – Top down, Bottom up, Resource
Based View (RBV), Market Led View
 The process and content of strategy
 Process: The steps defined by models and frameworks
 Content: What strategy consists of, the structure and
infrastructure
 The role of the operations function
OPERATIONS
STRATEGIC
ENVIRONMENT
OBJECTIVES
THE
INPUT OPERATIONS
TRANSFORMED OPERATIONS Operations COMPETITIVE
RESOURCES STRATEGY strategy ROLE AND
MATERIALS POSITION
INFORMATION Operations
CUSTOMERS management IMPROVEMENT
DESIGN GOODS AND
INPUT OUTPUT SERVICES
PLANNING AND
FACILITIES STAFF CONTROL

INPUT
TRANSFORMED
RESOURCES ENVIRONMENT
 The role of the operations function

Operations as Operations Operations

implementer as as driver
supporter

Strategy Ops
Strategy

Ops
Ops Strategy

Operations Operations Operations

implements strategy supports strategy drives strategy
 The strategic role of operations
(Hayes and Wheelwright,1984)

Give an Redefine the

industry’s Externally
Operations ns supportive
Advantage it o expectations
era
f op
Link Strategy o Be clearly
n
With tio the best in Internally
u
Operations ri b the supportive
o nt industry
c
i ng Be as good as
as
Adopt best c re competitors Externally
Practice In neutral

Stop holding
Correct the the Internally
Worst organization neutral
Problems back
STAGE 1 STAGE 2 STAGE 3 STAGE 4
The
The The ability ability
ability to to
to support Drive strategy
Implement Strategy
 What is strategy?

 Term originated from the Greek word ‘strategia’

meaning ‘generalship’ or “The General’s Way”

 Much is written about strategy, but a single

definition remains elusive

 Many different definitions e.g.“The art of

distributing and applying military means to fulfil
the ends of policy” (Hart,1967)

 But many more exist…..

 What is strategy?

(Mintzberg and 5 p’s - Plan, ploy, position, pattern, perspective

Waters, 1985)
(Johnson and The matching of the activities of an organisation to its environment and its
Scholes, 1993) resource capabilities. Strategic, choice, analysis and implementation
(Stacey, 1996) Games that people play. Perceived pattern of actions past or yet to come.
(Ackoff, 1981) The use of planning to create the corporate future - formulate the ‘mess’,
specify ‘ends’, select ‘means’, obtain resources and implement
(Certo, 1991) A continuous iterative process aimed at keeping an organisation as a
whole appropriately matched to its environment
(Ansoff, 1988) Strategy consists of a set of product or market choices. Withdraw /
consolidate / penetrate markets, develop new markets or products,
diversify into related and unrelated products and markets
(Porter, 1985) To achieve competitive advantage, four types of generic strategy can be
employed, cost leadership, differentiation, cost focus and differentiation
focus. Companies should avoid being ‘caught in the middle’ between
strategies
(Genus,2000) A continuum between determinism and voluntarism
What is operations strategy made up of?

The content of The process of

operations strategy operations strategy

A statement of the principles The way in which the guiding

and policies which guide the principles and policies are developed,
operation’s activities formulated and implemented. The models
Structural & infrastructual and frameworks steps deployed
decisions

Prioritised performance Strategies for each

objectives for each decision area
product/service group

Planning and
Design Improvement
control
How is strategy formed and implemented?

Top - down
Perspective
What the business
wants operations
to do

Operations Market
resources requirement
Perspective Perspective
Operations
strategy
What the market
What operations position requires
resources can do operations to do

What day-to-day
Penrose (1959) experience suggests
operations should do Hill (1985)

Bottom - up
Perspective

Together they provide an idea into the pressures which go to

form the content of operations strategy.
The top - down perspective in context with
other strategic schools
 There are many schools of thought relating to
strategy – see ‘Strategy Safari’ (Mintzberg et
al,1998)

 Determinism versus Voluntarism (Genus,2000)

 The ‘Rational Planning paradigm’ …. As used in

Corporate Strategy i.e. Strategy can be
determined, planned and cascaded through the
organisation
 The top - down perspective
According to Mills et al (1995) Strategy occurs at 3 levels

Corporate strategy decisions

What business should we be in, i.e. how diversified to be?
What businesses to acquire and what to divest?
How to allocate cash to different businesses?
How to manage the relationships between different businesses?

Business strategy decisions

How to compete?
Defining the mission of the business such as:
- growth targets
- return on investment
- profitability targets
- cash generation
- make or buy decisions
Setting the way that the business wishes to compete in its markets

Functional strategy decisions

How can functions contribute to the competitive advantage of the
business
How to translate business and competitive objectives into
functional objectives?
How to manage the function’s resources so as to achieve
functional objectives?
What performance improvement priorities to establish?
But strategies can also emerge bottom-up!

Deliberate and emergent strategies

Source: (Mintzberg & Waters, 1985)

 Key concept - Logical incrementalism (Quinn,1980)

The top-down and bottom-up perspectives
(Slack et al, 2010)

Corporate strategy

Business strategy

Operations strategy

Emergent sense of what

the strategy should be

Operational experience
 The Hard Systems Model (Bignell et al,1984)

 Stage 1 – (Where are you now?) - situation or problem

 Stage 2 – (Where would you like to get to?) – objectives
and constraints
 Stage 3 – (How could you get there?) – generation of
routes to objectives
 Stage 4 – (How will you know you have arrived?) -
measures of performance
 Stage 5 – (Will it be as nice as you thought?) – model
/test out likely outcomes
 Stage 6 –Choice of routes to objectives – ok? Go ahead
 Stage 7 – Implementation
 An example of a Strategy Process
The Hard Systems Model (Bignell et al,1984)

CURRENT
Strategy Execution
STATE

Where are we
now?
DO RESULTS
PLAN

Actions Outputs
How do we get
there?

REVIEW
Where do we
need to be ?
modify Manage feedback

FUTURE
STATE targets
 Market Requirements Perspective
(Hill, 2000)

The need to link Operations strategy to the

needs of the market
‘Order winners’- those product attributes that
customers desire and cause them to buy goods
from on supplier rather than a competitor e.g.
the styling, technology and kudos offered by
BMW cars versus buying a Ford!
‘Order qualifiers’- those product attributes that
customers expect as standard e.g. all washing
machines wash clothes so they are clean i.e.a
pre-requisite to being in the market
 Market Requirements Perspective

Competitive factors Performance objectives

If the customers value these ... Then, the operations will need
to excel at these ...
Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products/services)

Wide range of products and services Flexibility (mix)

The ability to change the timing or Flexibility (volume and/or delivery)

quantity of products and services
 Customers and Competitors

 Clearly different customers have different

needs:

 Companies need to determine the order

winners, qualifiers and less important
factors for each group.

 The performance of competitors also

influence the choice of performance
objectives.
 Competitor activity can affect the
importance of performance objectives
Original Strategy
Order winners Fast delivery

Qualifiers Range price

Competitor’s Strategy Performance Speed

objectives
Order winners Fast delivery
range

Qualifiers Price

Performance Speed and

objectives flexibility

Alternative Strategy 1 Alternative Strategy 2 Alternative Strategy 3

Order winners Fast delivery Order winners Faster delivery Order winners Price
range

Qualifiers Price Qualifiers Range price Qualifiers Fast delivery

range

Performance Speed and Performance Speed Performance Cost

objectives flexibility objectives objectives
 The Resource Perspective
 Another view on how ‘competitive advantage’ can
be gained
 First postulated by Edith Penrose 1959
 Considers that an organisation’s performance is as
a result of the competence and capabilities of its
resources.
 No organisation can decide what part of the market
it wants to be in without considering its ability to
produce products and services.
 Therefore operational constraints need to be taken
into account.
 This approach can identify constraints to some
markets, but also capabilities to exploit others.
 The Resource Perspective

Strategic decisions relating to the ‘content’ of

strategy need to consider both structure and
infrastructure (Hayes & Wheelwright, 1984)

 Structure = equipment, technology, buildings etc

 Infrastructure = people, planning and control, HR,
training etc
 They are the ‘tangible’ and ‘intangible’
resources which drive the business
 Overview of 4 perspectives

 The four perspectives are different, but

interrelated and each influences strategy
content.
 There is a need to consider the corporate and
business strategies conveyed ‘top down’ but..
 The most important ones are considered to be
the linking of ‘market requirements’ to the
‘operations resources’.
 This reconciliation is key to delivering the goods
and services that customers need and from this
drives competitive advantage for the business.
 Operations strategy is the strategic
reconciliation of market requirements

Tangible and
Customer
Intangible
Needs
Resources

Operations Operations Market

Performance
Capabilities Strategy Decision Positioning
Objectives
Areas

Operations Competitors’
Processes Actions

Understanding Strategic Required Understanding

resources and decisions performance markets
processes
Processes and Process Organisations

UNIT 2

Based on:
 Process Redesign, Tenner & Detoro, (1997)
 Organisational Structures

Traditional Structures
 Were based on military model
 The decision‑making and direction‑setting roles of
traditional organisations were concentrated among
the leaders at the top.
 This type of organisation responded to problems in
three steps:
 Communicate information up the chain of command.
 Analyse information and set direction at the top.
 Issue orders down the chain of command for deployment
at the bottom.
Traditional Structures
 Organisational Structures

 Today's work differs from the traditional model in three

significant ways.
1. Employees are better informed, better educated, and less
tolerant of work for the sake of work. Most people are not
satisfied with merely being employed: they want
meaningful productive work. When people see problems
today, they want to be able to correct them.
2. Work itself has changed: physical labour has been
replaced by information and knowledge work, supervision
by direct observation is often impossible.
3. Expectations are different: the rapid pace of change now
demands that decisions must be made at the working
level.
 Organisational Structures

 Another key difference today is that competition is not

between people, products, or companies: it is between
processes.
 e.g. the personal computer industry, which introduces
new models with increased capability every several
months.
 Industries in which product life cycles are shrinking,
demand an increasing number of new products in a firm's
pipeline merely to maintain revenue levels and market
share.
 Industries in which products enjoy long life cycles, demand
an increasing capability to effectively and efficiently deliver
these products to the marketplace.
 Organisational Structures

 The type of structure depicted by the traditional organisation

chart fails to offer an accurate description of contemporary
businesses:

 The traditional view enforces the view that individuals need to be

directed and supervised as they perform their jobs.

 The traditional chart does not acknowledge customers, suppliers,

or how work flows horizontally across the organisation.

 The traditional view focuses on the boss, and not the customer.
Workflows Horizontally
 Organisational Structures: An
alternative approach

 Problems that today's organisation encounter are usually between

functions and not within them.

 Focus - The process view focuses on customers and processes instead of

bosses. This view identifies the customer-supplier chain along which
products and services are produced and delivered.

 Functional roles and titles reflecting the traditional hierarchical structure

are replaced by process owners, leaders who are responsible and
accountable for the operation and improvement of the core processes.

 Businesses can be described as a network of processes that can be

identified, documented, controlled, and improved. This process
orientation overcomes the problem in traditional organisations where
information flows up the chain of command so that decisions can be
made at the top.
Process View
 Organisational Structures: An
alternative approach

 The Process view combines a number of operational building

blocks with several functional ones.

 This represents a hybrid of the functional and process

oriented structures. This hybrid offers the best of both worlds.
 Functional structures can be retained where specialised
expertise is of paramount importance.

 At the same time, the responsiveness of the flatter,

process-oriented structure can be tapped.
 Tutorial 1 - Process Organisation

 Selected Paper:
 How Process Enterprises Really Work ,
Hammer & Stanton, Harvard Business
Review- Nov-Dec 1999.
 Process Organisation Tutorial

 In groups of 2-3 review the paper and provide

answers to the following key questions relating
to process organisations.

1.What is the suggested missing element that

is required to fully realise the full benefits of
the process enterprise.

2 A ‘cognitive dissonance’ is said to exist in

organisations who have only partially changed
– explain this term.
 Process Organisation Tutorial

3.What are suggested as being the essential elements

required to achieve the process enterprise.

4 In the TI example, why didn’t the process work and how

was it overcome.

5. Identify the role of the ‘Process Owner’ and how it

differs from the traditional unit managers role. How was
this implemented at Duke Power.

6. What do you believe is the most significant change in

order to achieve a process enterprise. Justify you decision.
 Process Improvement

UNIT 3

Based on:
 Slack et al (2010) Chapters 18
Measuring and Improving Performance

 We need to know how good our

processes are before we can decide
which improvement approach to take.
 Performance measurement is a
prerequisite to improvement.
 PM is this context is how an operation
fulfils the 5 performance objectives at
any point in time.
Measuring and Improving Performance

 The 5 generic performance measures,

according to Slack et al were:
 Quality: (defects, warranty claims etc)
 Speed: (lead-time, cycle time etc)
 Dependability: (% orders delivered late)
 Flexibility: (time for NPI, range of products,
time to change schedules)
 Cost: (added value, efficiency, cost rate)
How operations can measure performance

Dependability Dependability

Quality Cost Quality Cost

Speed Flexibility Speed Flexibility

Market requirements and operations performance change over time

How to prioritise Competitive Objectives

Priorities should be determined by ......

The Your
IMPORTANCE PERFORMANCE

of each in each of
competitive competitive
objective objectives

IMPROVEMENT PRIORITIES
 Improvement Priorities

 Two key influences on improvement priorities are:

 Customer needs
 Competitor performance

 Customer- particularly important as their needs have to be

met if products/services are to be attractive. (Influence
importance of key objectives)

 Competitors are used as a point of performance comparison.

 Both need to be brought together to make a judgement as to

relative importance.
 Improvement Priorities

 Two key points to remember:

 Do not need to change because customer rates something as
important, if your performance is a lot better than your
competitors.

 If your competitor is better at something, no need to change if

your customers do not value this performance factor.
 9 Point Importance Scale
For this product group does this performance objective ......

1 - Provide a crucial advantage with customers

ORDER
WINNING 2 - Provide an important advantage with most customers
OBJECTIVES
3 - Provide a useful advantage with most customers

4 - Need to be up to good industry standard

QUALIFYING
OBJECTIVES 5 - Need to be around median industry standard
6 - Need to be within close range of the rest of the industry

7 - Not usually important but could become more so in future

LESS
IMPORTANT 8 - Very rarely rate as being important
OBJECTIVES
9 - Never come into consideration
 Assessment of ‘order winners’ and
‘order qualifiers’

ORDER-WINNING QUALIFYING LESS IMPORTANT

OBJECTIVES OBJECTIVES OBJECTIVES
+ve +ve +ve

Competitive

Competitive
Competitive

Benefit

Benefit
Benefit

neutral neutral neutral

qualifying
-ve -ve level -ve

Low High Low High Low High

Achieved performance Achieved performance Achieved performance
 Performance of competitors vs
importance to customers grid
GOOD

better 2 EXCESS ?
than
3 APPROPRIATE
PERFORMANCE

COMPETITORS

same 5
AGAINST

as
6 IMPROVE
7

worse
8 URGENT
than ACTION
9
BAD

9 8 7 6 5 4 3 2 1

less order
important qualifying winning
IMPORTANCE
LOW FOR HIGH
CUSTOMERS
 Importance –Performance Matrix

 Considering the worked example on pg

615- 616 (591 -593)
 It has allowed various factors to be
positioned on the matrix to highlight which
factors require improvement
 In this case there are two factors, cost and
communication which have been identified as
requiring improvement.
 Matrix gives structure to the improvement
priority debate.
 Improvement Approaches

 Once priorities have been identified then

two broad approaches are possible:

 Breakthrough (BPR )
 Continuous Improvement (PDCA)
 Improvement Approaches

 Breakthrough
 Used when major or dramatic improvement
is needed, i.e. big gap to make up in
relatively short space of time.
 Step change in performance is required.
 Normally expensive due to cost of disruption,
capital equipment, team.
 High risk approach
Intended performance improvement
with breakthrough improvement
Performance

Breakthrough
improvements

Time
Actual performance improvement
with breakthrough improvement
Performance

Actual improvement

Time
 Improvement Approaches

 Continuous Improvement
 Assumes much smaller incremental
improvement steps are needed.
 Small improvement follows small
improvement.
 Also called kaizen.
 It is not the rate of improvement which is
important rather the commitment to
continuous improvement, i.e. ongoing.
 Performance improvement with
Performance continuous improvement

Standardize and maintain

Improvement

“Continuous”
improvement

Time
 Comparison between breakthrough
and continuous improvement

Innovation... ...Kaizen
Short-term, Effect
Short-term,dramatic
dramatic Pace
Long-term,
Long-term,undramatic
undramatic
Large steps
Large steps Small
Smallsteps
steps
Intermittent Timeframe
Intermittent Continuous,
Continuous,incremental
incremental
Abrupt, Change
Abrupt,volatile
volatile Involvement
Gradual
Gradual andconsistent
and consistent
Few
Fewchampions
champions Everyone
Everyone
Individual Approach
Individualideas
ideas&&effort
effort Mode
Group
Groupefforts,
efforts,systematic
systematic
Scrap
Scrapandandrebuild
rebuild Protect
Protectand
andimprove
improve
New Spark
Newinventions/theories
inventions/theories Capex
Established
Establishedknow-how
know-how
Large
Largeinvestment
investment Low investment
Low investment
Low Maintenance
Loweffort
effort Focus
Large
Largemaintenance
maintenanceeffort
effort
Technology
Technology People
People
Profit Evaluation
Profit Process
Process
 Comparison between breakthrough
and continuous improvement

 Differences between the two approaches:

 Breakthrough – requires creative solutions,
free thinking, clean sheet of paper, ignore
constraints.
 CI – less ambitious in short term
 Not radical
 Builds upon experience of people who operate
in existing system.
 Sprint v Marathon analogy
Continuous and breakthrough improvement

Breakthrough
improvement

improvement
Cumulative

Continuous
improvement

Time

Combination is often preferred choice to

hold the gains.
 Continuous Improvement

 Key concept is one of never ending

questions concerning detailed operation
of an activity or service.
 This concept is best represented by the
improvement cycle.
 Many exist - most famous is the Deming
PDCA model.
 The Deming (Shewart) – PDCA Cycle
Identify issue, collect data
establish a plan for
improvement
(PLAN)

Consolidate and standardise Implement the plan

To sustain improvement (DO)
(ACT)

Observe, has the necessary

improvement been achieved?
(CHECK)

A four-step approach to problem solving

The DMAIC Cycle – Six sigma (6σ) approach

Define-identify
problem, define
requirements and
set the goal

Control-establish Measure-gather
performance data, refine problem
standards and and measure inputs
deal with any and outputs
problems

Improve-develop Analyse-develop
improvement problem hypotheses,
ideas, test, identify “root causes”
establish solution and validate
and measure hypotheses
results
 Breakthrough

 Most well known approach is BPR:

Business Process Reengineering.
 BPR in its original form emerged in early
1990s in the USA, devised by Hammer &
Champy (1993).
 BPR has a number of key concepts at its
heart:
 JIT concepts (removal of waste), process
flow, customer focused operations.
 BPR

 Defined by Hammer & Champy as:

 “The fundamental rethinking radical design
of business processes to achieve dramatic
improvements in critical, contemporary
measures of performance, such as cost,
quality, service and speed.”
 BPR

 Key belief of BPR is that operations

should be organised around the total
process, rather than functions. (see
earlier work on process organisations)
 Business process re-engineering

Functional structure Proces s structure

Process 1
Function 2

Function 3
Function 1

Customers

Customers
Suppliers
Suppliers

Process 2

Process 3
 BPR

 Key Principles include:

 Business process should be cross-functional and organised
around the nature of flow.

 Achieve dramatic improvements by radical redesign.

 Have those who use the output perform the process. [this
means forming into a process grouping all those who
contribute to the output of the process]

 Decision points where the work is performed.

 See example on pg 659-660
 BPR Literature

 Al-Mashari et al (2000) have provided a comprehensive

literature review of BPR, which includes:

BPR is best defined by:

 It’s focus on business processes
 It’s radicalness
 It’s use of IT as a ‘tool’ and ‘enabler’
 It’s resulting need for organisational change
 Additional BPR aspects

 Confusion exists to what exactly is BPR- due to similar tools and

outcomes. i.e.
 TQM has similarities, but some fundamental differences in its:
 Approach, scope, outcome and the importance of IT.
 Although it is suggested that integration of the two methods can
achieve better results. ( Davenport, 1993)

 Organisational Change is often confused with BPR

 Restructuring or downsizing has the goal of reducing personnel and not
to reinvent processes
 BPR may reduce headcount but this is not its main aim .

 Automation:
 Automation alone is not BPR as IT is only used in BPR to automate
new efficient processes.
 Additional BPR aspects

 BPR Methodologies
 Many exist.
 A Methodology is ‘an organised set of methods, techniques
and tools developed to guide the whole life cycle of a
process to meet its objectives’ (Saracelli & Bandat, 1993).
 Many of the existing methodologies have similar elements,
such as:
 strategies and goal setting
 feasibility analysis
 process analysis
 top management commitment
 understand customer requirements
 cross functional teams
 Process mapping techniques etc…..
Sample BPR Framework
 Additional BPR aspects

 BPR - the present state:

 Seen by some as a fad, however others ( Coulson-Thomas)
see it as essential and Dickinson (1997) does not want the
potential of BPR to be lost as a result of false reengineering
failures.

 Success rates vary from – 67- 77 percent. [However what

is failure.]
 Reengineering

Some useful papers:

 Revisiting BPR: a holistic review of practice and
development, Al-Mashari et al, Business Process
Management Journal, (6) 1, 2000.
 Zinser et al– Best practice in reengineering, Business
Process Management Journal, 4 (2), 1998
 Critical review of existing BPR methodologies, Valiris
et al, Business Process Management Journal, (5) 1,
1999.
 There are many more, but be selective: read the abstract!!
 Tutorial 2a Reengineering

Zinser et al– Best practice in reengineering, Business

Process Management Journal, 4 (2), 1998

1. What is the stated aim and benefit of reengineering.

2. Using a matrix compare the methodology outlined in the

paper with another reengineering methodology, i.e.
Tenner & Detoro (1997) or the one from the Al-Mashari
paper outlined earlier. Comment upon the similarities and
differences.

3. How in the Porsche case-study has the lead-time

reduction being achieved, comment upon the methods
employed and their success.
 Tutorial 2b Re-engineering Exercise

 The purpose of this exercise is to familiarise

yourself with the RD case-study and reengineer
the customer interface process.
Produce a reengineered process which in
addition to a flow diagram should contain a
narrative explaining the function of each
element and a justification for its inclusion
Compare the key metrics from the existing
process with your reengineered process and
comment upon the expected improvement
with respect to the reengineering concept.

 Flow diagrams are covered on pg 664 of Slack.

 Lean/Just in Time(JIT)

UNIT 4

LESSON 1

Based on:
 Slack et al (2010) Chapters 15
 JIT definitions

JIT aims to meet demand instantly, with perfect quality and no waste

more fully:

Improved overall productivity and elimination of waste

Cost-effective production and delivery of only the necessary quantity of

parts at the right quality, at the right time and place, while using a
minimum amount of facilities, equipment, materials and human
resources

It is accomplished through the application of elements which require

total employee involvement and team-work

A key philosophy of JIT is simplification

 JIT material flow
Traditional approach:
buffer buffer
inventory inventory
Stage A Stage B Stage C

JIT approach:
orders orders

Stage A Stage B Stage C

deliveries deliveries
 Seven Wastes

• Overproduction
• Waiting time
• Transport
• Process
• Inventory
• Motion
• Defective goods

• JIT seeks to reduce all these wastes

 Discussion Exercise

 JIT helps organisations to cope with the

complexities of the ‘real’ world.

1. To understand why JIT is needed create

two lists which describe (1) the ideal and
(2) the real production scenario.
2. Consider how non-JIT organisations cope
with reality.
 Discussion Exercise

Ideal Real
1. Only produces one product 1. Companies produce a variety of
products
 Discussion Exercise

Ideal Real
1. Only produces one product 1. Companies produce a variety of
2. Demand is constant products
3. All resources needed are available 2. Demand is not uniform or
at production site predicable
4. All materials are without defects 3. Equipment and personnel are
5. Work allocation to stations is able shared
to be allocated as desired 4. Suppliers do supply defective
6. No randomness in production time products and materials.
7. No defects are produced 5. Tasks in process are lumpy
8. Machines never wear out or 6. Production times do vary due to
breakdown technical and human factors
9. Employees always show up for 7. Mistakes are made, defects are
work and never make mistakes. caused
8. Machines break down
9. People are absent.
 How non – JIT organisations cope

 Increase in raw material stocks

 Over production leading to large in-process
inventories
 High FGI
 All contributing to EXCESSIVE INVENTORIES

 In spite of this still get poor product quality and

late deliveries
 The problem with inventory

WIP Reduce the level of

Productivity
Defective materials
inventory (water) to
problems
Scrap Rework
reveal the operational
Downtime problems

WIP
Defective materials

Productivity
problems Scrap Rework
Downtime
 The Lean Philosophy
The lean philosophy of operations
Eliminate waste Involve everyone Continuous improvement

JIT as a set of techniques for managing operations

JIT as a method of
1. Flow layout 6.TPM planning and control
2. Basic working 7. Set-up reduction
practices • Pull scheduling
8. Total people • Kanban control
3. Design for involvement
• Levelled
manufacture
9.Visibility scheduling
4. Operations focus • Mixed modelling
10, JIT supply
5. Small, simple • Synchronization
machines

The lean philosophy of operations is the basis for JIT techniques that
include JIT methods of planning and control
 Lean Philosophy

 High dependency theory

 From lower inventory buffers

 From empowerment of staff
 Lean Philosophy

 Eliminate waste – in all its forms

 Waste is any activity that does not add value
to the final product.
 Engine example on pg 524 – what percentage
of the time was the engine actually being
worked upon.
 In the flight example pg 525, how much of the
time was value added
 Objectives are to remove NVA and enhance
VA activities.
 Waste Identification Exercise

 Look at the example given for the petrol

station – carry out an activity analysis.
What are the value added activities.
 Lean Philosophy

 Involve everyone
 A total system; therefore needs guidelines which
cover both people and process.
 All staff are involved and the culture of the company
is important.
 Requires teamwork in problem solving, job rotation,
multi-skilling etc.
 Intention to give high degree of personal
responsibility and ownership of the job.
 There are criticisms of the approach as it is
patronising - what are your thoughts on this issue?
 Lean Philosophy

 Continuous Improvement
 Believe that the ideal can begotten nearer to over
time.
 The ideals it sets out to achieve may not be (or can
not be) reached, but they act as a motivation to
achieving it.
 The Japanese term is kaizen and we will consider this
in detail later in the module.
 Lean/Just in Time(JIT)

UNIT 4

LESSON 2

JIT Techniques
Based on:
 Slack et al (2010) Chapters 15
 JIT Elements

 (1)Flow Layout
 Poor layout (long) can cause delays, large
inventories and poor throughput.
 JIT attempts to minimise these issues by
placing workstations closer together, small
cells etc.
Process Layout Cellular Layout
 JIT Elements
(2) The basic working practices of JIT

flexibility of working
practices
discipline and equality of
standards conditions

basic working practices

creativity autonomy to
quality of development of intervene
working life personnel
 (3)Design for Ease of Processing

 Essentially suggests that changes that can be

made to the product design can have a
substantial impact upon production costs.

 Design can determine 70-80% of production costs.

 Examples include:
 Reductions in the number of components
 Better use of materials and processing
techniques considered during the design phase.
 (4) Emphasize Operations Focus

 Based upon the concept that simplicity,

repetition and experience breed
competence. Focus therefore can be
achieved by:

 Focus the process – limited, manageable set

of products, volumes etc.
 Ensuring operations structures and policies
are supportive and coherent. (all areas of
organisation have aligned objectives)
 (5)Small machines
 conventional western approach is to purchase large machines
to get “economies of scale”
 these often have long, complex set-ups, and make big batches
quickly creating “waste”

JIT small machines approach:

• easy to move (layout)

• quick set-up
• flexible scheduling options
• cheaper tooling
• planned maintenance easier
• fewer set-ups are needed

flexibility
emphasis:
economies of scope
(6) Total productive maintenance (TPM)

 Unreliable processes create waste, for

example, waiting time, delays in downstream
operations. In a JIT system:

operate correctly
operators taught to detect problems
care for lubricate, clean, inspect,
processes: adjust
collect data

maintenance
training operators
personnel’s
long-term planned
role changes:
maintenance
condition monitoring

operator involvement
emphasis: care for equipment
ensuring total
reliability
 (7) Reducing Set-Up Times

 The quicker a resource can be changed over

from one product to another the more
flexible and responsive the system.

 SMED – single minute exchange of dies is

one famous approach to achieving this goal.
 Based upon converting internal operations
to external activities.
 The following examples are taking from: Waller,
D, 2003 Operations Management- a Supply Chain Approach, 2nd edition
Thomson Learning
 (8) Ensure Visibility

 Concept of Visual Factory

 Transparency – is needed to all management and
improvement.
 Problems are easily detectable and resolved.
 Examples include:
 Displaying performance measures
 Lights on a line indicating stoppages
 Operators ability to stop the line if problem detected.
 Control systems such as kanbans
 Layouts which are open and clear
 (9) JIT purchasing
In conventional businesses, vendors are often viewed as adversaries, not
to be trusted. Buyers prefer several competing vendors to drive down
purchase prices

JIT businesses recognise that:

purchase price is not the only cost

suppliers can be • helping to design products

valuable partners by: • eliminating uncertainties of
quality and delivery
• eliminating overheads (e.g.
paperwork)
local suppliers reduce purchasing costs
emphasis: positive relationships
mutual benefits
supplier development
 Lean/Just in Time(JIT)

FOCUS ON LAYOUT AND FLOW

 Volume & Variety

 Product volume and variety have a big influence on process

design.
 The two dimensions normally go together:
 Low volumes operations normally have a high degree of product
variety. [automotive component supplier]
 High volume operations normally have a low degree of product
variety.[canning plant]
 The same organisation can have different parts of the
operation organised differently – [large automotive OEM]
 Volume/Variety is seen as having a large Influence upon the
process type deployed
 Volume & Variety

 Process types in manufacturing are generally considered as:

 Project Processes
 Jobbing Processes
 Batch Processes
 Mass Processes
 Continuous Processes
 The volume/variety position points to the most appropriate
process
 Project Processes

 One-off, complex, large scale, high work

content “products”
 Specially made, every one customized
 Defined start and finish: time, quality and
cost objectives
 Many different skills have to be coordinated
 Fixed position layout, resources brought to
product
 Jobbing Processes

 Very small quantities: “one-offs”, or only a few required

 Specially made. High variety, low repetition. “Strangers”
 Skill requirements are usually very broad
 Skilled jobber, or team of jobbers complete whole product
 Fixed position or process layout (routing decided by
jobbers)
 Batch Processes

 Higher volumes and lower variety than for

jobbing
 Standard products, repeating demand. But can
make specials
 Specialized, narrower skills
 Set-ups (changeovers) at each stage of
production
 Process or cellular layout, predetermined
planned routing
 Mass (Line) Processes

 Higher volumes than Batch

 Standard, repeat products (“runners”)
 Low and/or narrow skills
 No set-ups, or almost instantaneous ones
 Cell or product layout: a fixed sequence of
operations
 Continuous Process

 Extremely high volumes and low variety: often

single product
 Standard, repeat products (“runners”)
 Highly captial-intensive and automated
 Few changeovers required
 Difficult and expensive to start and stop the
process
 Product layout: usually flow along conveyors or
pipes
Manufacturing process types

High Project

Jobbing
Variety

Batch

Mass

Contin-
Low

-uous

Low Volume High

 Deviating from the ‘natural’ diagonal on the
product-process matrix has cost and flexibility
consequences
Manufacturing Volume Service operations
operations process process types
types Variety

Project None
Professional
More process service
flexibility
Jobbing than is
needed so
high cost
Less process Service
Batch flexibility Shop
than is
needed so
high cost
Mass
Mass
service
Continuous None

The ‘natural’ line of fit of process

to volume/variety characteristics
 The Product/Process Matrix
INCREASING VARIETY
INCREASING VOLUME

PRODUCT CHARACTERISTICS
Low volume Low volume Higher volume High volume
Low Multiple products Few major High
standardization products standardization

Random
flow
PROCESS CHARACTERISTICS

(project) Custom
furniture
Jumbled
flow maker Machine
(jobbing)
tool maker
Disconnected
line flow
(batch)
Automobile
Connected
line flow
factory
(mass) Petro-
Smooth flow
chemical
(Continuous) refinery
 Layout and Flow

• Layout decisions have to be carefully thought out:

• Size and complexity of equipment involved
• Cost
• Resource and time
• Disruption to production and customer service
• Complex production flows achieved as a result of
poor design.
 Process types are the broad approach ,
layouts are the actual physical arrangement

Volume and
Project process
variety
Decision 1 Jobbing process
Batch process
Process type
Mass process
Continuous process
Strategic
performance
objectives Fixed position layout
Decision 2
Process layout
Basic layout type
Cell layout
Product layout

Decision 3
The physical position of
Detailed design of all transforming
layout resources

The flow of the

operation’s transformed
resources
 Layout

 Product volume and variety dictate the process type

selected.
 Areas of overlap exist where more than type could be
applicable – in this case operational objectives are used to
make decision: cost, flexibility, known future areas of growth
etc.
 There are four broad layouts

 Fixed position
 Process
 Cell
 Product
 Layout

 It is important to note that one process type does not mean

one layout type.

 There are normally choices associated with jobbing processes,

batch processes and mass processes.
The nature of the basic layout types

Manufacturing B asic layout Service

process types types process types
Project processes
Project processes Fixed Professional
position layout services

Jobbing processes
Process layout
Service shops
Batch processes
Cell layout

Mass processes Mass services

Product layout
Continuous processes
 Fixed Position

 Equipment and resources move to the product which is

stationery.
 Normally as product is too large, i.e. shipbuilding, aero-
engine, power generators.
 Main problems associated with this type of operations are
space and scheduling issues:
 Adequate space for groups to work without interference
 Storage for materials and equipment
 Scheduling of material and people is key to FP success
 Fixed Position

 Case study exercise – ALSTROM

 Pg 209
 In groups of 2-3 discuss the set questions.
 Process Layout

 Resource types dominate layout decision

 Similar process are located together – for convenience or
utilisation
 Parts are routed through the operation based upon their
requirements
 Flow patterns are different and complex
 Control and visibility is also an issue
 Ownership of products??
 Example of use – production of aero-engine parts – many
different processes involved.
Process Layout Cellular Layout
 Cellular Layout

 Where all the required resources are available in one area to

meet the processing needs.

 Can be of the product or process layout type.

 After completion the product may be finished or go to another

cell.

 Cells attempt to bring order to product flow and ownership

 Product Layout

 Each product follows the same route

 Can also be known as flow-line

 Flow is clear predictable and therefore offers visibility and

ease of control.

 Products produced are standardised (although small

variations are possible) – but flow route is the same.

 Examples – car assembly, electronic goods etc.

 Advantages and disadvantages

Fixed Process Cell Product

position layout layout layout
layout
Very high product High product and Can give good
and mix flexibility. mix flexibility. compromise. Low unit costs for
high volume.
Product/customer Relatively robust Fast throughput.
A dvantages not moved. in the case of Opportunities for
disruptions. Group work can specialization of
High variety of result in good equipment.
tasks for staff. Easy to supervise. motivation.

Can have low mix

Very high unit Low utilization. Can be costly to flexibility.
costs. rearrange existing
Can have very layout. Not very robust to
Disadvantages Scheduling space high WIP. disruption.
and activities can Can need more
be difficult. Complex flow. plant. Work can be very
repetitive.
Detailed design techniques

Fixed position - resource location analysis.

Process layout - flow charts and relationship charts.

Cell layout - product flow analysis.

Product layout - assembly line balancing techniques.

 Detailed Design - Product Layout

 Key decisions are concerned with ‘what to place where’ – in terms of what to
allocate to each of the workstations.
 This is termed line balancing
 Other key decisions are:
What cycle time is needed
 How many stages are needed
 How should the layout be balanced
 How should the stages be arranged.

 Cycle time = time available/ number to be processed

 Number of stages = work content/required cycle time

 Balancing worktime allocation can be difficult due to individual activity times

and the max cycle time.
 Can lead to excessive stations being required.
Balancing loss is the proportion of the time
invested in processing a product or service
not used productively
An ideal ‘balance’ where work is But if work is not equally allocated the
allocated equally between the stages cycle time will increase and ‘balancing
losses’ will occur
3 Cycle time = 2.5 mins 3.5 Cycle time = 3.0 mins
2.5 3
3.0
2.5
2 2.5

Load
Load

2 2.3 2.2
1.5
1.5
1
1
0.5 0.5
0 0
1 2 3 4 1 2 3 4
Stage Stage
Calculating balancing loss:
Idle time every cycle = (3.0 - 2.3) +
Work allocated to stage (3.0 - 2.5) +
(3.0 - 2.2) = 2.0 mins
Idle time Balancing loss = 2.0
4 x 3.0
= 0.1667
= 16.67%
Element listing and precedence diagram
for Karlstad Kakes

Element a- - De-tin and trim 0.12 mins

Element b - Reshape with off-cuts 0.30 mins

Element c - Clad in almond fondant 0.36 mins

Element d - Clad in white fondant 0.25 mins

Element e - Decorate, red icing 0.17 mins

Element f - Decorate, green icing 0.05 mins

Element g - Decorate, blue icing 0.10 mins

Element h - Affix transfers 0.08 mins

Element i - Transfer to base and pack 0.25 mins

Total work content = 1.68 mins
0.17 mins
e
0.30 mins 0.25 mins 0.05 mins 0.25 mins
a b c d f g i
0.12 mins 0.36 mins 0.10 mins
h
0.08 mins
 Allocation of elements to stages and
balancing loss for Karlstad Kates

Stage 1 Stage 2 Stage 3 0.17 mins Stage 4

e
0.30 mins 0.25 mins 0.05 mins 0.25 mins

a b c d f g i
0.12 mins 0.36 mins 0.10 mins

h
0.08 mins

0.6
Cycle time = 0.48 mins
0.5
0.4 Idle time every cycle = (0.48 - 0.42) + (0.48 - 0.36) + (0.48 - 0.42) = 0.24 mins
0.3 Proportion of idle time per cycle = 0.24 = 12.5%
4 x 0.48
0.2
0.1
0
1 2 3 4
 Stage Arrangement

 Two main options:

 Long thin line
 Short fat line

 Advantages of long thin:

 Easy to manage flow of materials
 Simplified material handling
 More efficient operation

 Advantages of short fat:

 Higher mix flexibility
 Higher volume flexibility
 Higher robustness
 Less monotonous work
 Line Balancing Exercise

 SMC Ltd are developing a new process. The process has the following
tasks and linkages.
Activity Time (sec) Predecessor
A 12
B 8 A
C 10
D 16 C
E 20 B,D
F 9
G 15
H 11 E,F,G
I 8 H
J 15 I
K 8 I
L 13 J,K [adapted from
Martinich, 1997]
 Line Balancing Exercise

 Your task is to :
 Calculate the max cycle time if 1100 units
are to be produced/8 hour day.
 Calculate the minimum number of
workstations.
 Design a line that minimises the number of
workstations.
 Calculate the actual cycle time, production
rate and efficiency
Tutorial Questions
 Line Balancing Case Study

 Read the Weldon Case study on pgs 240-241.

 Working in groups of 2-3 answer the following questions:

 How many people will be needed to assemble the product, during

(i) yr1 qtr 1 and (i) yr2 qtr 4. Comment upon the sales forecast
profile.

 Design a layout for production during yr 1 qtr 1, consider both

the short fat and long thin options. Discuss the arguments
associated with each model.
 Cellular Design

 We have looked how flow-lines can be designed

and analysed using the line balancing technique.
 If we want to design a manufacturing cell to
produce a specified set of components we can use a
variety of techniques.
 One of the most commonly used methods is
‘Product Flow Analysis.
 Cellular Design
 PFA is a technique for planning to change
from a process oriented layout (functional)
to one which is focused upon the product
(cellular).

 By finding product families of work centre

groupings it simplifies material flow
systems.

 Rank Order Clustering (ROC) is a widely

used technique for this purpose. It uses a
binary system based on 2s to give each
row and column an identity based upon its
content.

 It traces the flow of components from

machine to machine and helps to form
families and cell designs.

 The accuracy of the product data is

important - why
 ROC Discussion

 Remember the output from the ROC process is just

an indicator
 Other issues to consider include:
 Capacity – i.e. how many resources of each type
are needed. [Important as any particular cell
may be to large]
 BOM relationship
 Resource restrictions:
 Space
 H+S
 Cost of resource duplication
 Product Flow Analysis
Tutorial Example

1. Sort the given matrix using the ROC technique

2. What cells are you suggesting and why
3. Are there any issues which require additional consideration
 Product Flow Analysis
Tutorial Example

Product no
4 10 11 12 14

1 1 1 1
2 1 1
Resource 3 1 1 1
4 1 1 1
5 1
6 1 1 1 1 1
7 1 1
8 1 1
9 1 1 1
10 1 1 1
11 1 1
12 1 1 1
13 1 1
14 1 1
 Product Flow Analysis
Tutorial Example (2)

Allocate row values

Product Flow Analysis
Tutorial Example (3)
 Product Flow Analysis
Tutorial Example (4)

16 8 4 2 1
Product no
4 10 11 12 14

1 6 1 1 1 1 1 31
2 1 1 1 1 22
4 Resource 3 1 1 1 22
8 4 1 1 1 22
16 9 1 1 1 22
32 10 1 1 1 22
64 12 1 1 1 22
128 8 1 1 18
256 2 1 1 9
512 7 1 1 9
1024 11 1 1 9
2048 13 1 1 9
4096 14 1 1 9
8192 5 1 1

255 7937 127 255 16129

Product Flow Analysis
Tutorial Example (5)
Product Flow Analysis
Tutorial Example (6)
Tutorial Question
Tutorial Solution
Lean/Just in Time(JIT)

UNIT 4

LESSON 3

JIT Planning and Control

 JIT Planning and Control

 There are many approaches to the planning and

control of products through a process.
 The main issue is to ensure inventory timing is
predictable. (parts arrive on time) without
excessive build up of inventory
 The following methods will be considered:
 ‘Push’ and ‘Pull’ systems – the two main approaches to
planning and control. (Chapter 10 – p347 (309)gives a
useful account of these two systems).
 Will also consider the elements of ‘Theory of constraints’
proposed by Eli Goldratt (1984)
 Levelled scheduling
 Push philosophy of planning and
control

PUSH CONTROL

CENTRAL OPS. PLANNING AND CONTROL SYSTEM FORECAST

Instruction on OR
what to make
and where to
send it

Work Work Work Work DEMAND

centre centre centre centre

• Activities are scheduled centrally

• There are always errors in the forecast – Why?
• Each work-centre produces work irrespective of whether the
next centre needs it or not
• This inevitably leads to queues and inventory build up
Alternative ‘systems’ approach to control of the
Operation
• To apply control to specific parts of the process
• To ensure that production plans are happening
• A simple view of control might be adopted

Input Operation Output

Intervention Monitor

Plans

Compare /
replan
 Drum, Buffer, Rope Concept

• Eli Goldratt (1984) uses this idea in his book ‘The

Goal’
• He suggests that the control should be placed
around the ‘bottleneck’
• Remember the bottleneck ‘constrains’ the whole
process so therefore it is important to keep this
part of the process running
• The bottleneck is known as the ‘drum’ or the
heartbeat of the process .
• Because it does not have sufficient capacity
Goldratt suggests it should always have a
‘buffer’ of stock in front of it
 Drum, Buffer, Rope Concept

• It is not necessary for processes before the

bottleneck to run at full capacity
• Some form of feedback is necessary from the
bottleneck to the input of the process to ensure
earlier activities do not overproduce
• This is called the ‘rope’.
• The whole system can be represented in a
diagram as follows
 The drum, buffer, rope, concept

Buffer of
inventory

Activity A Activity B Activity C Activity D Activity E

Bottleneck
Communication rope controls
drum sets
prior activities
the beat
 JIT Planning and Control
 Kanban Control

 A key method used to implement a pull-based planning and

control system.

 Kanban – Japanese word for card or signal

 Card used by customer to inform supplier to send more material

or product.

 There are different types:

 Move – the signal to transfer inventory to a specific destination.

 Production – the signal to a process that it can start producing a part.
 Vendor – signal to external suppliers to send material
 Kanban

 Principle is the same irrespective of what type is used –

‘Receipt of a kanban triggers the movement, production or
supply of one unit or a standard container of units’.

 JIT system - tight linkage and co-ordination of production

activities needed
 Kanban seen as a means to meet this demand
 When stock is used (customer demand met) Kanban is
sent to last production department.
 Kanban can be in the form of card which specifies product
type and qty required.
 Kanban

 Calculation of the number of kanbans required in a

particular system is not covered in the text,
 A simple formula can be used to estimate the
number of kanbans (N) required in a system:

N = (R*T*(1+X))/C

Where:

R is the utilisation rate for the components (units/hr)

T is the delay in receiving a container (production, transfer
and waiting time) (hr)
C is the capacity of the container, i.e. number of units
X is the variation in the operation expressed as %
 Kanban

WORKED EXAMPLE:
Calculate the number of kanbans for the given
data:
R = 100 units/hour
T = 0.33 hours
C = 10 units
X = 10%
Where N = (R*T*(1+X))/C
N= (100*.33*(1.1))/10
N= 3.63, therefore 4 kanbans.
 Kanban

b) Calculate the number of Kanbans a

company requires for the following
situation. (5)

R = Utilisation rate = 600/hr

T = Delay time = 45 mins
C = Capacity = 150 units
X = Operation Variation = 15%
 Kanban

b) Using N = (R*T*(1+X))/C
- students should calculate that 3.45
kanbans are needed, this would be
rounded up to 4.
R 600
T .75
X 15
C 150
N 3.45
 Kanban

c) The following options have been proposed to

reduce the inventory level for the situation
outlined in (b), which option would you choose
and why?

Option A: Variation rate becomes 5%

Option B: The delay time is halved
Option C: The capacity is increased to 300 units.

The calculations for each option must be shown.

 Kanban

(X becomes 5%) (T is halved) (Capacity increased to 300)

ORIGINAL OPTION A OPTION B OPTION C
R 600 R 600 R 600 R 600
T 0.75 T 0.75 T 0.375 T 0.75
X 15% X 5% X 15% X 15%
C 150 C 150 C 150 C 300

N 3.45 N 3.15 N 1.725 N 1.725

4 4 2 2

Inventory 600 600 300 600

R is the utilisation rate for the components (units/hr)

T is the delay in receiving a container (production, transfer and waiting time) (hr)
C is the capacity of the container, i.e. number of units
X is the variation in the operation expressed as %
 Kanban

Comments
 Although options B and C reduce the
number of kanbans, the inventory is at its
lowest with option B where the delay time
is halved.
 This should be the option chosen as it
presents the lowest inventory level for a
constant utilisation rate
 Kanban example

b) Calculate the number of Kanbans a company requires for the

following situation and the relative inventory level

Utilisation rate = 850/hr

Delay time = 60 mins
Capacity = 50 units
Operation Variation = 12%

c) The following options have been proposed to reduce the

inventory level for the situation outlined in (b). Which option
would you choose and why?

Option A: Variation rate becomes 6%

Option B: The delay time is halved
Option C: The capacity is increased to 250 units.
.
 Kanban example

(X becomes 6%) (T is halved) (Capacity increased to 250)

ORIGINAL OPTION A OPTION B OPTION C
R 850 R 850 R 850 R 850
T 1 T 1 T 0.5 T 1
X 12% X 6% X 12% X 12%
C 50 C 50 C 50 C 250

N 19 N 18 N 9.52 N 3.808

19 18 10 4

Inventory 950 900 500 1000

R is the utilisation rate for the components (units/hr)

T is the delay in receiving a container (production, transfer and waiting time) (hr)
C is the capacity of the container, i.e. number of units
X is the variation in the operation expressed as %
 Kanban example

Comments
 Although options B and C reduce the
number of kanbans, the inventory is at its
lowest with option B where the delay time
is halved.
 This should be the option chosen as it
presents the lowest inventory level for a
constant utilisation rate
 What is Levelled Scheduling?

 Attempts to ensure mix and volume are

even over time.
 Plans regular runs of the full range of
components, i.e. every day rather than
once/month.
 Requires that batch sizes are
reduced and therefore set-up times
must be reduced also ----why?
 Levelled Scheduling

 Key benefits are:

 Allows batches of all products to be produced each
day.
 Provides basis for good material flow, i.e. smaller
batches.
 WIP reduced
 Regular production runs so easier Planning & Control.
 Customers benefit from predictable supply.
 Can be applied to supplier delivery schedules.
 Inventory
levels

Inventory
levels

Delivering smaller quantities more often can reduce

inventory levels
 Lean/Just in Time(JIT)

UNIT 4

LESSON 4

Total productive maintenance (TPM)

Background - Maintenance Strategies

 What is a maintenance strategy in machine or equipment context?

 If machines fail then all aspects of the business can be effected

Safety, Cost, Customer Service, Quality

 Most organisations try to prevent equipment failures by taking care

of their resources.
 What are the benefits of effective maintenance?
 Increased safety
 Increased reliability
 Higher quality
 Lower operating costs
 Longer life span
Background - Maintenance Strategies
Technique Philosophy Advantages Disadvantages
RTB Equipment of low priority, low Simple, no up-front effort needed Failures occur randomly
(Run to consequential loss, easily apart from the assessment of
Breakdown) repaired are allowed to fail. criticality and cost and speed of
repair.
PM Equipment is regularly Simple, cheap in terms of training Equipment needs to be out of service.
(Preventative maintained at fixed intervals; , craftsman normally already Difficulty in determining the ’right’
Maintenance) the failure modes are known have the skills frequency: too early and effort is wasted
and can be observed. , too late and failure is likely
TPM Zero defect philosophy. Should bring production and Time consuming and initially can have
(Total Eliminate the small defects and maintenance together. Simple little return for a lot of effort. Cross
Productive the large defects less likely to approach which makes common functional difficulties might occur if not
Maintenance) occur. sense. Clean machines and managed as operators take on
standards for operating and traditional maintenance tasks.
maintaining. Part of JIT.
CBM Monitor machine health so that Monitoring takes place whilst the Fixed installations can be expensive
(condition interventions can be planned at machines are running. especially if remote monitoring is
Based the appropriate time, averting Catastrophic and consequential needed. Either in house technicians
Maintenance) machine failure. damage is minimised need to be highly trained or need
external support.
RCA If equipment fails, then find the Maintenance resource effort is Reactive approach machines have
(Root Cause primary reason or reasons and targeted on machines that have already failed, at least once.
Analysis) eliminate, so that there is not a actually failed. If applied Dedicated resources are needed so
reoccurrence. appropriately can significantly that they are not disturbed in their
reduce overall breakdowns by problem solving and improvement
eliminating repetitive failures. efforts. RCA, facilitation skills needed.
FMEA Identify the possible failure Pro-active approach which can Time consuming and somewhat open
(Failure Mode modes of a machine or system, be carried out whilst the machine ended, therefore must be focused and
and Effect their effect and consequences if or system is are running have a clear set of priorities. Resources
Analysis) they fail, also, how critical in need to be specially trained and
terms of agreed criteria would competent in the technique. Not as
such a failure be? involves as RCM.
RCM Similar to FMECA but more Highly successful in the aviation Time consuming and somewhat open
( Reliability focussed on reliability and the industry ended, therefore must be focused and
Centred probability of failure have a clear set of priorities. Highly
Maintenance) analytical, resources need to be
specially trained and competent in the
technique.
 Maintenance

 There are three basic approaches to maintenance:

 Run to Breakdown (RTB)

 Preventive Maintenance (PM)

 Condition Based Monitoring (CBM)

 Run to Breakdown

 Allow the equipment to run until it fails.

 Maintenance work performed only when failure has taken

place

 Can be used when failure is not critical, but is often used as

the main maintenance approach in a lot of organisations,
particular SMEs.

 Examples of equipment that might be allowed to ‘Run to

breakdown’
 Telephone, lightbulb, non-critical pump or motor
 Preventive Maintenance

 Attempts to reduce the chance of failure by servicing the

equipment at pre-planned intervals.

 Servicing can include cleaning, lubricating, replacing and

checking.
 Examples include, regular cleaning and lubricating of machine
tools.

 Often managed using a computerised maintenance

management system (CMMS)

 Based prescribed examination procedures/checklists

 Equipment generally needs to be out of service whilst

inspections and work is carried out
 Condition based monitoring

 Attempts to identify when maintenance on the equipment is

needed.
 Achieved through measuring the ‘condition’ of the machine
 This could be simple measurements, temperature, pressure,
current, voltage etc. or more sophisticated techniques such
as:
 Vibration analysis
 Thermography
 Oil analysis

 The results of these approaches would be analysed to

determine whether any maintenance action was required.
 Technology
 Vibration  Inspection
 DI 225 Windows CE  ID 602 System DOS /
Single / Dual Channel Windows CE Handheld
Data Collector
 Technology

Infrared
Temperature
Gun

Oil
Analyser

Vibration Level
Meter

Portable
Particle
Counter
 Vibration Analysis

Multi-Level
Hierarchy
• Facilities
• Equipment Overall Trends
• Components Spectrum
• Meas. Points Time Domain
Phase Polar
Plots
 Lubricant Analysis

Data displayed
both as graphs
and data tables

Spectrography
Histogram
 Inspections

Graphical
presentation
of
inspection
User defined data in
point types many
can be used formats.
for inspect-
ions, failure
analysis,
etc.
 Expert Systems
Condition
Assessments
can be
applied to
vibration,
lubrication,
performance
or any other
type of data.

Rule
Editor is
set-up to
perform
error
checking
 Mixed Approaches

 Each approach is appropriate for different contexts.

 RTB often used when:

 Repair is simple
 Regular maintenance (PM) is costly
 Failure is unpredictable

 PM is used when:
 Cost of unplanned failure is high and
 Where failure is not totally random
 Mixed Approaches

 CBM is used when maintenance activity is expensive through the

cost of disruption or the cost of the maintenance activity.

 Most operations adopt a mixture of these approaches as different

parts of the business having different characteristics, i.e. uptime is
essential, cost of maintenance and failure is high.
 Breakdown v Preventive

 Most operations have an element of preventive maintenance,

which limits, but does not remove, the chance of breakdowns.

 The balance between Planned Maintenance and Run to

Breakdown is to reduce the total cost of breakdowns.

 Low level of PM is cheaper but will obviously increases the

likelihood of failures
 High levels of PM is very expensive and can be disruptive to
production but should reduce level of failures.
 Total Productive Maintenance (TPM)

 Definition:

‘the productive maintenance carried out by all employees

through small group activities’

 Where productive maintenance is

‘ maintenance management which recognises the
importance of reliability, maintenance and economic
efficiency in plant design.’

 Originated in Japan , seen as natural extension in the

evolution from RTB to PM.
 Total Productive Maintenance (TPM)

 Involves the following elements:

 Team working
 Empowerment
 Continuous Improvement
 Views maintenance as a company wide activity
 TPM – THE FIVE PILLARS

OVERALL EQUIPMENT EFFECTIVENESS

1. Improve/maximise Equipment effectiveness:
 OEE%isa
Availabilty x %Performance
way of measuring x %Quality
all the losses associated with
equipment and facilities. Down –time losses, speed losses
and defect losses.

AVAILABILITY PERFORMANCE QUALITY

Breakdown Losses Idling and minor Start up and
stoppages shutdown losses
Set-up, start-up and
adjustment losses Reduced speed Quality losses
losses

DOWNTIME SPEED DEFECTS

 TPM – THE FIVE PILLARS

2. Achieve Autonomous Maintenance

 Requires the operators of equipment to take some
responsibility for some maintenance tasks.

Maintenance Staff Operating Staff

Roles To develop: To Take on:

Preventive Maintenance Ownership of facilities
Breakdown services Care of facilities

Responsibilities Train Operators  Corrective Action

Devise Maintenance practice  Routine PM
Problem solving  Routine CBM
Assessing operating performance  Problem detection
 TPM – THE FIVE PILLARS

3. Establish a thorough system of preventive maintenance

for the equipment’s entire lifespan.

 Develop a maintenance strategy for all equipment. Outline the required

levels of PM, where CBM is to be applied and clear responsibilities for
all staff.

4. Train all staff in relevant maintenance skills – TPM requires

a appropriate and continuous training programme

5. Achieve early equipment management. Stresses

maintenance prevention by early consideration of maintenance issues
at the design stages.
 Examples of TPM basics- CANDO/5S

 Clean up  Sort
 Arrangement  Straighten
 Neatness  Sweep
 Discipline  System
 Ongoing  Sustain
Improvement
 Good Workplace Organisation
A Place for everything

And everything in its

place

BEFORE AFTER
Set standards of housekeeping

5S workplace

O 
organisation for all
areas

O 
Store only essential
equipment

O Maintain standards at
all times

 Start with the basics- Lighting

Provide the required

conditions and
environment
Use Visual Management
 Use Visual Management

Improvement plans,
dashboards,
scorecards,to
communicate to the
whole organisation
The 6 Big Losses
 Breakdowns
 Important to know how much Down Time your
machines are experiencing (and when)
 Be able to attribute the lost time to a specific
reason
 Normally achieved by giving codes to specific
downtime events
 Often manually entered into a mainframe or pc
system.
 The data is collected and analysed to provide
direction on which areas to tackle first.
 Data is typically sorted by frequency of occurrences
or severity of duration
 Using techniques such as root cause analysis, team
problem solving, potential causes are identified and
eliminated in a systematic way.
 Typical data analysis
Pareto of C&F line downtime for Dec (mins)

1800

1600

1400

1200

1000

800

600

400

200

0
80 115 140 170 117 116 110 124 111 143 125

Code Downtime cause Dec

80 Product Change 1612
115 Cleaning 1550
140 Mech failure 746
170 Electrical failure 343
117 Lack of material 285
116 Tear-off 207
110 Start-up 200
124 Running leader 119
111 Shutdown 109
143 Computer/Printer failure 78
125 Leader roll tear 55
 Set ups and adjustments

 Set-up time refers to the time taken to

physically make the changes to the line in order
to run the new product
 Generally measured as the time between the
last good part produced before Setup to the first
consistent good parts produced after Setup
 This often includes substantial adjustment
and/or warm-up time in order to consistently
produce parts that meet quality standards
 Tracking is critical to reducing this loss together
with an active program to reduce this time
 Small stops and reduced speed

 Are the most difficult of the Six Big Losses

to monitor and record
 Evident in deviations between the Ideal
Cycle the Cycle Times, planned vs actual
throughput
 Can only be identified by monitoring
process, speaking to operators, recording
reasons for stoppages and speed
reductions
 Startup and Production Rejects

 Root causes of startup and steady-state

production are different
 Parts that require rework of any kind
should be considered rejects
 Again measurement is key
 Resolving chronic abnormalities can take
a long time – weeks, months
 Often have more than one cause
 Beyond the capability of single individual
 Team Problem solving often used
 Significance of OEE

 OEE = availability% x quality% x speed

%
 > 85% is considered ‘world class’
 85% OEE = .95x.95x.95
 Percentages below this need to be
‘worked on’ in some way
 How can issues be addressed?
 OEE – (Slack , Chapter 11)

Not worked Availability rate = a =

Loading time (unplanned) total operating time / loading time
Set-up and
change-
overs
Total operating time Availability
losses Breakdown
failure Performance rate = p =
net operating time/total
Slow operating time
Net operating time Speed running
losses equipment

Equipment
“idling” Quality rate = q =
Valuable Quality valuable operating time / net
operating time losses Quality operating time
losses

OEE = a x p x q
 OEE – Worked Example (p369)

 In a 7 day period, the planning department programme a

particular machine to work for 150 hours – its loading time.
Changeovers and set-up take an average of 10 hours and
breakdown failures average 5 hours every 7 days. The time
when the machine cannot work because it is waiting for
material deliveries from other parts of the process is 5 hours
on average and when the machine is running it averages
90% of its rated speed. 3% of parts are subsequently found
to be defective.

 Calculate the OEE value for this process.

 OEE – Tutorial

 An automated press line produces metal components for the

automotive industry. Performance data has been collected
for the line. You are required to calculate its OEE value
and discuss the results you have obtained.

Three shifts of 8 hours, 5 days/week

Breaks of 30 min /shift
Data for an average week:
 15 breakdowns totalling 43 hours
 5 product changeovers averaging 4 hours each
 15,500 components produced plus 80 units scrapped
and 150 units requiring rework.
 Allowed time for products produced by production
control = 37 hours.
 Financial Benefits of Increasing OEE

 Concept of added value is important.

 Value of processed product is worth more
than raw material. Added value is the
difference.
 Being able to show the financial benefits
of OEE improvement is key to gaining
approval and organisational acceptance.
 Financial Benefits of Increasing OEE

 Simple example:
 Cost of raw material = £7
 Value of product produced = £13
 Added Value = £13-£7 = £6
 If expected throughput is 60
products/hour then av/hour is
 6 x 60 = £360/hour
 Financial Benefits of Increasing OEE

 If the OEE for the particular machine has

been measured at 65%, then the actual
loss per hour =£360 x 0.35
 £126/hour

 To calculate cost over a year we use

availability information, eg. 48 weeks/yr;
35 hours/week and single shift basis.
 Financial Benefits of Increasing OEE

 Loading time = 35*48 = 1680/year.

 Annual loss = 1680 *£126 = £211680
 A considerable figure.

 For every 1% increase in OEE the

machine has an additional earning
capacity of £6048.
 Financial Benefits of Increasing OEE

 Calculate the additional earning capacity for the

earlier OEE tutorial example.

 Operates 48 weeks/year. Added value/unit = £4.00.

 You will need to estimate the planned volume/hr from the
data given.
 S.M.E.D.(Single Minute Exchange of Dies)

 Measure the current changeover times and record

them in order to monitor improvement
 Separate “External” and “Internal” activities
 “External” - jobs that can be carried out while the
machine is running (e.g. fetching new tooling and tools
required for changeover).
 “Internal” - jobs which cannot be carried out while the
line is running (e.g. changing moulds).
 Convert “Internal” to “External” activities
 Where this is not possible reduce the time to carry
out internal tasks
 Suggestions
 Video changeovers, analyse, address 7 wastes
 Practice changeovers like a formula 1 pit stop crew
S.M.E.D
S.M.E.D
S.M.E.D
S.M.E.D
 Tutorial 5 - Group Exercise

Working in groups of 3-4.

 Is JIT suitable for all manufacturing environments?

1. Using the White paper and the Cooney paper address the
above question by considering (a) size of organisation and
(b) product and market context,

2. Draw clear conclusions from the above research and present

your findings. Critically appraise your findings. (5 mins – 2
slides max).
Supply Chain Management (SCM)

Based on:
 Slack et al (2004) Chapters 6 & 13
 TMTCTW, Womack et al (1990)
 Takeishi & Fujimoto(2002) -Modularisation in the Auto Industry
 What is a supply chain? (Slack et al)

 A supply network is all the operations

linked together to provide goods and
service to the customer
 A supply chain is a strand of linked
operations within a supply network
 ‘Supply chains’ should seek to meet the
requirements of ‘end customer’
 Supply Chains – what are they

 Slack et al suggest taking a supply

network approach where the operation
is set in the context of all the other
operations it interacts with.
 It’s a way of ordering and perceiving the
connections between an OEM and its
suppliers and customers
 Obviously involves both supply and
demand side organisations.
Total and Immediate Supply Networks

“Second tier” “First tier” “First tier” “Second tier”

Suppliers Suppliers Customers Customers

The
The Operation
Operation

Supply side of the Demand side of the

network network

The Total Supply

The Immediate Network
Supply Network

Internal Supply Networks

 Supply Chains

 Key benefits suggested from taking this

type of perspective are:

 It is essentially a strategic process map of

the business from raw materials supply and
manufacture to delivery to the end customer

 Identifies significant links.

 Seeks to identify which parts of network
contribute to the objectives valued by customer.
 Supply Chains

 Helps see how company can compete

effectively.
 Seeks to look beyond immediate suppliers and
customers to understand competitive
requirements.
 Helps company focus on long term position in
the network.
 Need to review chain for weaknesses and decide
long term strategy to the situation.
 Replace or assist seem to be the clear choices,
but taking a longer term view on the relative
advantages of each decision is required.
 Terms used to describe the management of different
parts of the Supply chain

Second tier First tier First tier Second tier End

supplier supplier customer customer customer

Supply side Demand side

Purchasing and Physical distribution

Information supply management
flow management Logistics
Physical
flow Materials management

Supply chain management

 Network Design Decisions

 Two important design decisions are:

(1) Network configuration:

 Shape, ordered (1st tier, 2nd tier etc), unordered,
 Make or buy decisions….. vertical integration

(2) Location of new Manufacturing plants

 Network Design Decisions

 Vertical integration:
 No one does everything
 Decisions are normally made on cost,
expertise, flexibility issues, intellectual
property
 Key decision are based upon:
 Make or Buy(outsource)
 Direction of expansion
 Extent of process span required
 Direction, extent and balance of
vertical integration
Should excess capacity be used
To supply other companies?

Raw
Component Assembly
material Wholesaler Retailer
maker operation
suppliers

Narrow process span/perspective

Wide process span/perspective

Backward integration Forward integration
Up stream
v ertical Downstream
integration v ertical
integration
 Consequences of
Network Design Decisions
OBJECTIVE Vertically integrated in-
house supply
Quality  Easy to trace problems
 Improvements more immediate.
 Possibility of complacency
Speed  Closer synchronisation of
schedules
 Internal/external customer
conflict
Dependability  Better communication achieved
 Internal/external customer
conflict
Flexibility  Closeness to operations
 Response may be limited by
scope of internal ops.
Cost  Able to retain supplier profit
 Difficult to achieve suppliers
economies of scale
No vertical integration –
outsourced supply
 More experience, but other market
pressures.
 Communication of problems more difficult
 Can be built into contract
 Possibility of transport delays
 Can be built into contract
 Possibility of transport delays
 Enhanced ability to respond
 Conflicts of different customers
 Can achieve economies of scale.
 Additional costs need to be taken into
account.
(2) Factors affecting location of operations

Supply-side Demand-side
factors Operation factors

Labour costs Labour skills

Land costs Suitability of

site
Energy costs
Image
Transportation
costs Convenience
tax, environmental for customers
Community controls, planning
Factors restrictions, political
stability, history of
labour relations etc.
 Levels of Location Decision

 Three levels are often used:

 Region/country
 Area of region/country
 Largely a revisiting of the factors which were
used to decide the country e.g. infrastucture,
labour cost and availability, governmental
incentives, taxes etc.
 Specific site within the area.
 Available sites, shape, access, utilities, room for
expansion etc all are required to be considered.
 Location Decision Techniques

 Two techniques which allow location

decision to be made based upon
quantitative techniques are:
 Weighted score method- based upon identifying
the evaluation criteria, their relative importance and using
these to rate each location. (See worked example on pg 179-
180)
 Centre of gravity method – is used to find a
location which minimises transportation costs.
 Centre of Gravity Method

 All locations have a value based upon sum of transportation

costs to/from that location.
 The best location is the weighted centre of gravity of all
points to and from which goods are transported.
 Two suppliers (A & B) each send 20 tonnes of parts/month to
a factory (D) for assembly. These are then sent to customer
(C). C receives twice as many tonnes as A & B, therefore it
has twice the weighting.
 The lowest cost location for D is then calculated based upon
location (to scale) and weightings equivalent to the number of
tonnes they send or receive.
 Worked example pg. 180-181.
 Centre of Gravity Method

4.50

Location Description X-variable Y-variable Demand 4.00

1 a 1.00 2.00 10.00 3.50
2 b 5.00 3.00 10.00 3.00
3 c 5.00 1.00 10.00
2.50
4 d 9.00 4.00 10.00
5 2.00
6 1.50
1.00
OUTPUTS 5.00 2.50 40 0.50
Mean X Mean Y Sum Demand
0.00
0.00 2.00 4.00 6.00 8.00 10.00
Location desicison is theoretical in practice. There
may exist undesirable aspects to the output decision,
but does however, provide an indication of
approximately where a firm should locate.
 Centre of Gravity Method

INPUTS
4.50

Location Description X-variable Y-variable Demand 4.00

1 a 1.00 2.00 5.00 3.50
2 b 5.00 3.00 10.00 3.00
3 c 5.00 1.00 12.00
2.50
4 d 9.00 4.00 8.00
5 2.00
6 1.50
1.00
OUTPUTS 5.34 2.40 35 0.50
Mean X Mean Y Sum Demand
0.00
0.00 2.00 4.00 6.00 8.00 10.00
Location desicison is theoretical in practice. There
may exist undesirable aspects to the output decision,
but does however, provide an indication of
approximately where a firm should locate.
 Where should the company locate its
assembly plant.

Supplier Location Tonnage Shipped

(X, Y)
A (2, 2) 100
B (10, 14) 100
C (14, 18) 100
D (14, 6) 100
E (2, 14) 200
F (6, 10) 300
 Centre of Gravity Method

20.00
18.00
Location Description X-variable Y-variable Demand
1 a 2.00 2.00 100.00 16.00
2 b 10.00 14.00 100.00 14.00
3 c 14.00 18.00 100.00 12.00
4 d 14.00 6.00 100.00 10.00
5 e 2.00 14.00 200.00 8.00
6 f 6.00 10.00 300.00
6.00
4.00
OUTPUTS 6.89 10.89 900 2.00
Mean X Mean Y Sum Demand
0.00
0.00 5.00 10.00 15.00
Location desicison is theoretical in practice. There
may exist undesirable aspects to the output decision,
but does however, provide an indication of
approximately where a firm should locate.
 Supply Chain Management

 Major benefits can be achieved from managing

supply chains to satisfy end customers.
 Therefore three objectives of supply chain
management are:
1. Focus on satisfying end customer:
 Individual organisations will have own objective
of satisfying immediate customer.
 Need to be aware of how all can satisfy end
customer.
 Supply Chain Management

2. Focus on managing the SC correctly:

 Focus on analysis of problems in chain, bottlenecks, high
inventory buffers etc.
 Removal of problems and waste in SC is important.
 Lean –supply approach
 Pull
 Transparency
 Defined supply level agreements
 Continuous Improvement
 Supply Chain Management

3. Focus on SC flexibility:
 Ability to cope with uncertainty and disruption
 Flexibility can be considered as agility.
 Agility considered as:
 Market focus
 Leanness
 Fast movement of goods and information
 Creative in finding ways of adapting
 Possible conflict with ‘lean’ and ‘agility’
 Lean could bring about rigidity due to reducing
inventories, - not flexible to market changes.
 Focus on ‘Lean Supply’

JIT production requires deliveries

once/twice a day rather than once/twice a
month.
Supplier performance on delivery and
quality is essential otherwise system will
stop.
Therefore new relationships between
customer and supplier are suggested.
 Supply Strategies

1913 - Ford - ‘Do it all yourself’

 Problems with coordinating
 Dedicated factory in downturn
1920s- Sloan - ‘dedicated parts making
division’
 Imposes cost/efficiency of market whilst
maintaining co-ordination
1950s - Ford - ‘Lowest Bidder’
 Lowest bidder, 1 yr. contract
1980s - Both approaches used by mass
production organisations.
 Supply Strategies (2)

Context dependant
 Size of organisation
 Existing investment

Womack et al (1990) suggest neither

work very well!!
 Cost of part is not key but relationship
with supplier.
 Supply Strategies (3)

Mass Production:
Detail design done before suppliers are
involved.
Characteristics of Relationship
 Price
 Delivery schedule
 Quality
 Short term contract
 Supply Strategies (4)

Outcomes
 Suppliers tempted to bid low to secure business

 Once gained contract go back and increase price.

 Problems encountered in assembly

 No trust in relationship - regarding product data

 Supplier under cost pressure from buyer who does

not understand process.
 No incentive to communicate learning with others.
 Supply Strategies (5)

Lean Approach
Suppliers selected from the outset- normally
suppliers on existing models/parts
Fewer suppliers involved, say 300 (1000-2500 in
mass system)

Selected not on bid, but on past performance.

Change in supply system.
 Tiered Hierarchy

OEM

F irs t T ie r F irs t T ie r F irs t T ie r

S e c o n d T ie r S e c o n d T ie r S e c o n d T ie r

T h ird T ie r T h ird T ie r
 Supply Strategy (6)

First Tier take on responsibility for

elements of supply chain, development of
modular system, i.e seats, etc
Issues-
 OEM may know little about parts
 Limited delegation of detail design to supplier,
not high tech or sensitive parts.
 Long term relationship based upon open
framework based on cost, price and profit.
 Lean Supply in Practice

Price setting-
 Assembler sets price of car
 Work backwards to determine how it can be
done, whilst making profit for both.
Work together to reduce cost-
 , kaizen, value engineering etc
 Openness about costs - suppliers’ need to
make profit has to be respected.
 Lean Supply in Practice

Declining prices over model life.

 Awareness that costs should fall in
subsequent yrs
 Key in doing so is ability to retain some profit
from improvements.
Price set at 1200yen - 1st year
Improvements allow it to be made for 1100 yen,
pay 1150 yen - both share profits
Independent supplier improvement to 1080 yen
- keeps profits.
 Lean Supply in Practice

Quality
 No incoming inspection
 Accepted that problems should be sorted
quickly as no safety net. Work on basis of
problem solving not inquisition.
 Can switch % of business as a penalty.
Number of Suppliers
 Japan -170, West - 509-442 per plant.
 Modular - A new dimension?

 Modular manufacture has many meanings and

purposes.
 It can be be broadly considered as ‘having larger
units in subassembly and often involves
outsourcing these to suppliers.(Takeishi &
Fujimoto, 2002)
 Mainly a European automotive trend.
 Can involve (1) design, (2) production and
(3)inter firm systems.
 VW and Mercedes have set up new assembly
plants based upon modular approach.
 Modular - A new dimension?

 Plants have two characteristics:

 Assemble cars from relatively large subassemblies, not
from individual components.
 Outside suppliers develop and assemble subassemblies,
cockpits, rear axle modules.
 Why are Western supplies doing this:
 Take advantage of low cost labour in suppliers.
 Cuts their investment
 In line with policy to reduce number of first tier suppliers.
 Some OEMs are restrictive in their use of modular
manufacture - Why
 Modular - A new dimension?

 Japan automakers have not adopted this approach:

 Cost advantage may be less
 Difficulty on locating next to OEM plant
 Reliability
 Doubts about capability of suppliers.
 Modular - A new dimension?

Considering the ‘Modular’ approach to

supplier relations, what are the
implications for OEMs and suppliers?