217-711 Operations Strategy

1. 217-711Operations Strategy Samar Mukhopadhyay University of Wisconsin-Milwaukee Samar Mukhopadhyay

2. Trade-off, Customization Process Design University of Wisconsin-Milwaukee Samar Mukhopadhyay

3. Trade-offapproach • Identify the most important variables and the impact of their manipulation on others. Then design the system accordingly. • Performance Frontier • Effect of new technology University of Wisconsin-Milwaukee Samar Mukhopadhyay

4. Trade-offapproach Limitation: (a) Trade-off may not exist. (e.g.. cost Vs. conformance quality (b) Optimal point may not be identifiable. (large multi-dimensional problems) University of Wisconsin-Milwaukee Samar Mukhopadhyay

5. Example Performance Frontier University of Wisconsin-Milwaukee Samar Mukhopadhyay

6. New Technology Results in Shift of Performance Frontier University of Wisconsin-Milwaukee Samar Mukhopadhyay

7. Continuum of Customization University of Wisconsin-Milwaukee Samar Mukhopadhyay

8. Advantages of Standardization • Minimizes number of parts needed to stock • Minimizes number of equipment setups • Simplified operations procedures • Quantity discounts due to larger purchases • Minimized service and repair problems University of Wisconsin-Milwaukee Samar Mukhopadhyay

9. Disadvantages of Standardization • Possible lower design quality because standard parts used rather than specially made parts • Inflexible production • Changes are hard University of Wisconsin-Milwaukee Samar Mukhopadhyay

10. Customization • Ability to offer a product or service exactly suited to the customer’s desires or needs • Closer matches to customers needs • Ability of offer full product line with minimal inventory • Need faster design-to-market time to meet new customer needs University of Wisconsin-Milwaukee Samar Mukhopadhyay

11. Mass Customization • Deliver goods and services that meet individual customers' needs with near mass production efficiency • Producing in volume, but at the same time giving each individual customer something different according to his or her unique needs. • A manufacturing environment in which many standardized components can be combined to produce custom-made products to customer order. University of Wisconsin-Milwaukee Samar Mukhopadhyay

12. Enablers of Mass Customization • Modularization of product design: the capability to efficiently deliver individual modules of customer value within the structure of the modular architecture. • Use of technology • Stable but still flexible and responsive processes that provide a dynamic flow of products University of Wisconsin-Milwaukee Samar Mukhopadhyay

13. Forms of Transformation Systems University of Wisconsin-Milwaukee Samar Mukhopadhyay

14. Flow Shop • Standardized products in large volumes • Heavily automated special purpose equipment • High volume - low variety • Both services and products can use flow shop form of processing University of Wisconsin-Milwaukee Samar Mukhopadhyay

15. Advantages of the Flow Shop • High efficiency • Specialized high volume equipment • Bulk purchasing • Lower labor rates • Low in-process inventories • Simplified control • Less material handling University of Wisconsin-Milwaukee Samar Mukhopadhyay

16. Disadvantages of Flow Shop • Low flexibility • Variety of output difficult to obtain • Difficult to change rate of output • Minor design changes may require substantial changes to the equipment • Worker boredom and absenteeism • Vulnerable to equipment breakdowns University of Wisconsin-Milwaukee Samar Mukhopadhyay

17. Disadvantages of Flow Shop continued • Line balanced to slowest element • Large support staff required • Planning, design, and installation very complex task • Difficult to dispose of or modify special purpose equipment University of Wisconsin-Milwaukee Samar Mukhopadhyay

18. Job Shop • High variety - low volume • Equipment and staff grouped based on function • Each output processed differently University of Wisconsin-Milwaukee Samar Mukhopadhyay

19. Advantages of the Job Shop • High flexibility • Less expensive general purpose equipment used • Maintenance and installation of general purpose equipment easier • General purpose equipment easier to modify and therefore less susceptible to becoming obsolete University of Wisconsin-Milwaukee Samar Mukhopadhyay

20. Advantages of the Job Shop continued • Hazardous activities can be segregated from other operations • Higher skilled work leading to pride of workmanship • Pace of work not dictated by moving line • Less vulnerable to equipment breakdowns University of Wisconsin-Milwaukee Samar Mukhopadhyay

21. Disadvantages of the Job Shop • Low efficiency • General purpose equipment is slower • Higher direct labor cost • High WIP inventories • High material handling costs • Management control very difficult University of Wisconsin-Milwaukee Samar Mukhopadhyay

22. The Cell Form • Combines flexibility of job shop with high efficiency of flow shop • Based on group technology • First identify part families • Then form machine cells to produce part families University of Wisconsin-Milwaukee Samar Mukhopadhyay

23. Advantages of Cellular Production • Reduced machine setup times • increased capacity • economical to produce in smaller batch sizes • smaller batch sizes result in less WIP • less WIP leads to shorter lead times • shorter lead times increase forecast accuracy and provide a competitive advantage • Parts produced in one cell University of Wisconsin-Milwaukee Samar Mukhopadhyay

24. Advantages of Cellular Production continued • Capitalize on benefits of using worker teams • Minimal cost to move from job shop to cellular production • Can move from cellular production to “mini-plants” University of Wisconsin-Milwaukee Samar Mukhopadhyay

25. Disadvantages of Cellular Production • Volume may be too low to justify highly efficient high volume equipment • Vulnerable to equipment breakdowns • Balancing work across cells difficult • Does not offer the same high degree of customization as the job shop University of Wisconsin-Milwaukee Samar Mukhopadhyay

26. Cellular Layout • Teams of workers and equipment to produce families of outputs • Workers cross-trained • Nominal cells versus physical cells. • Remainder cell University of Wisconsin-Milwaukee Samar Mukhopadhyay

27. Process Selection Suppose you need to select between a hi-tech process and a low-tech process Use Breakeven Analysis for this decision Hi-tech: Fixed cost = FH, Variable cost = VH Low-tech: Fixed cost = FL, Variable cost = VL Assume: FH > FL andVH < VL Total cost to produce Q: FH + VH Q for hi-tech and FL + VL Q for low tech University of Wisconsin-Milwaukee Samar Mukhopadhyay

28. Breakeven Graph Total Cost graph Low-tech FL + VL Q Hi-tech FH + VH Q FH FL Q* University of Wisconsin-Milwaukee Samar Mukhopadhyay

29. Decision Rule At breakeven volume Q*, both total costs are equal. Gives Q* = Decision rule: If Volume < Q*, use low-tech otherwise use hi-tech Note that hi-tech process is associated with high volume production University of Wisconsin-Milwaukee Samar Mukhopadhyay

30. Service Processes • Often implemented with little development or pretesting • Need to consider amount of customer contact • Customers may not arrive at smooth and even increments • Including customer in service process provides opportunities to improve service University of Wisconsin-Milwaukee Samar Mukhopadhyay