IE3104: Supply Chain Modeling:
Manufacturing & Warehousing
Instructor: Spyros Reveliotis
Office: Room 316, ISyE Bldng
tel #: (404) 894-6608
e-mail: spyros@isye.gatech.edu
homepage: www.isye.gatech.edu/~spyros
“Course Logistics”
• TA: Mr. Karin Boonertvanich
• Office Hours: 1:15-2:30pm MW (ow, an open-door policy
will be generally adopted, but an appointment arranged by
e-mail is preferred)
• Grading policy:
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Homework: 25%
Midterm I: 20% (Tent. Date: June 10)
Midterm II: 20% (Tent. Date: July 8)
Final: 35% (Tent. Date: July 29)
Exams closed-book, with 2 pages of notes per exam
Make-up exams and Incompletes: Only for very serious reasons,
which are officially documented.
• Reading Materials:
– Course Textbook: “Operations Management” by J. Heizer and B.
Render, Prentice Hall, 6th ed.
– Material posted at my homepage or the library electronic reserves
Course Objectives
(What this course is all about?)
• How to design and operate manufacturing and
warehousing facilities (and more…)
– A conceptual description and classification of modern production
and warehousing environments and their operation
– An identification of the major issues to be addressed during the
planning and control of the production and warehousing activity
– Decomposition of the overall production planning and control
problem to a number of sub-problems and the development of
quantitative methodologies for addressing the arising sub-problems
– Computational implementation of the presented techniques (e.g.,
Excel, LP solvers, etc.) primarily through the homework
assignments
– Emerging trends, including the implications of a globalized and
internet-based economy
Organizational Operations
• Organization / Production System: A transformation
process (physical, locational, physiological, intellectual,
etc.)
Inputs
Outputs
•Materials
•Capital
•Labor
•Manag. Res.
Organization
•Goods
•Services
• Supply or Value Chain / Network:
Stage 1
Stage 2
Stage 4
Suppliers
Stage 3
Stage 5
Customers
The growth of the service sector in
modern economies
• Figure 1.5, pg. 14
• Table 1.4, pg. 15
• Figure 1.4, pg. 13
The major functional units of a modern
organization
Strategic Planning:
defining the organization’s mission and
the required/perceived core competencies
Production/
Operations:
product/service
creation
Finance/
Accounting:
monitoring of
the organization
cash-flows
Example: Figure 1.2, pg. 9
Marketing:
demand
generation
and
order taking
Operations Management (OM)
Definition: The study and improvement / optimization of the set of
activities that create goods and services in an organization.
Typical issues addressed:
• Service and product selection and design
• Quality Management
• Process and capacity design
• Facility Location
• Layout design
• Human resources and job design
• Supply-chain management
• Inventory management
• Production planning and control
• Maintenance
Productivity:
Basic Organizational Performance Measure
Productivity = Units produced / Input used
= Output / (Labor + Material + Capital + Energy + Miscellaneous)
Remarks:
• Typically both the numerator and the denominator are measured in $$$. If the
output corresponds to actual sales, then productivity measures both
effectiveness (doing the right thing) and efficiency (in the right way).
• Yet, an accurate measurement of the system productivity is a difficult
proposition due to the large number of intangible/external factors that can affect
it: e.g., a political/military crisis leading to higher energy prices.
• Traditional measures of input and/or output can be very poor measures for
issues like quality of product/service, customer satisfaction, etc.
• From an economic standpoint, major emphasis is placed on the annual
percentage change (hopefully increase) of productivity.
• For the entire US economy, the current annual increase in productivity is 1.7%
(38% of this increase is due to capital improvements, 10% to labor
improvements and 52% to management improvements).
Major Productivity Variables and their
contribution to productivity increase
• Labor
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Better basic education
Better diet
Better social infrastructure like transportation and sanitation
Better labor utilization and motivation
• Capital
– Steady and well-planned investments on equipment and its timely
maintenance
– Research & Development
– Controlling of the cost of capital
• Management
– Exploitation of new (information) technologies
– Utilization of accumulated knowledge
– Education
Knowledge
Society
Example of Productivity Improvement
through better Management Practices:
Taco Bell
• The challenge: Control costs through better operations design
and control.
• The approach:
– adopt meals easy to prepare (product design)
– Shift a substantial portion of food preparation to suppliers (SCM;
economies of scale)
– layout improvements
– adoption of automation, whenever possible
– increase of the span of management from 5 to 30 restaurants, through
training and empowerment
• The results
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cut the taco and burrito preparation to 8 secs (enhanced responsiveness)
cut in-store labor by 15 hours per day (labor cost reduction)
reduce floor space by 50% (facility cost reduction)
73% share of the Mexican fast-food market
OM history, achievements, and
current trends
• Early concepts (1776-1880)
– Labor specialization (Smith, Babbage)
– Standardized parts (Whitney)
• Scientific Management Era (1880-1910)
– Gantt Charts for systematic scheduling (Gantt)
– Motion & Time Studies (Gibreth)
– Process Analysis (Taylor - employee selection, training, work
methods and tools, work incentive system)
– Queueing theory (Erlang)
• Mass Production Era (1910-1980)
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Moving Assembly Line (Ford/Sorensen)
Statistical Sampling (Shewhart)
Economic Order Quantity (Harris)
Linear Programming (Dantzig)
Material Requirements Planning (MRP)
OM history, achievements, and
current trends (cont.)
• Lean Production Era (1980-1995)
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Just-In-Time (JIT)
Pull Production Systems
Total Quality Management (TQM)
Empowerment
Baldrige Award
Computer Aided Design (CAD)
Electronic Data Interchange (EDI)
• Mass Customization Era (1995-2002)
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Globalization
Internet
Enterprise Resource Planning (ERP)
Supply Chain Management (SCM)
E-commerce
International Quality Standards
Learning Organization
Agile Manufacturing
Reading Assignment
• Chapter 1 from your textbook (including the inset
examples and case-studies)