Chapter 1
Operations and Competitiveness
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
What Do Operations
Managers Do?
 What is Operations?

a function or system that transforms
inputs into outputs of greater value
 What is a Transformation Process?

a series of activities along a value chain
extending from supplier to customer
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Operations as a
Transformation Process
INPUT
•Material
•Machines
•Labor
•Management
•Capital
TRANSFORMATION
PROCESS
OUTPUT
•Goods
•Services
Feedback
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Next sub topic
Competitiveness and
Productivity
 Competitiveness

degree to which a nation can produce goods and
services that meet the test of international
markets
 Productivity

ratio of output to input
 Output

sales made, products produced, customers
served, meals delivered, or calls answered
 Input

labor hours, investment in equipment, material
usage, or square footage
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Competitiveness and
Productivity (cont.)
Measures of Productivity
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Changes in Productivity
for Select Countries
Internet-enabled
productivity
- Dot com bust
- 9/11 terrorist attacks
Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor
Statistics, U.S. Department of Labor, September 2003. U.S. figures for 2002–2003 from “Major Sector Productivity and
Costs Index,” Bureau of Labor Statistics, U.S. Department of Labor, March 2004
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Productivity Increase
 Become efficient

output increases with little or no increase in input
 Expand

both output and input grow with output growing
more rapidly
 Achieve breakthroughs

output increases while input decreases
 Downsize

output remains the same and input is reduced
 Retrench

both output and input decrease, with input
decreasing at a faster rate
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Competitiveness and
Productivity
Breakthrough
Performance
More Efficient
Retrench
Productivity as a Function of Inputs and Outputs, 2001–2002
Source: “International Comparisons of Manufacturing Productivity and Unit Labor Cost Trends, 2002,” Bureau of Labor
Statistics, U.S. Department of Labor, September 2003
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Operations–Oriented
Barriers to Entry
 Economies of Scale
 Capital Investment
 Access to Supply and Distribution
Channels
 Learning Curve (can be quite steep)
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Chapter 2
Operations Strategy
Copyright 2006 John Wiley & Sons, Inc.
Four Steps for Strategy
Formulation
 Defining a primary task

What is the firm in the business of doing? (TGV?, JUSCO?)
 Assessing core competencies
What does the firm do better than anyone else?
(exceptional service? Lower cost? Higher quality?)
 Determining order winners and order qualifiers (look at
customer)

OW: What wins the order? (characteristic of the product?)

OQ: What qualifies an item to be considered for purchase?
(Price range? A set of features that is compulsory for a
product? Eq: mobile phone)

 Positioning the firm

How will the firm compete? (Choose important things on
which to concentrate and doing them extremely well. What
unique value it will deliver to customer? Eg: Air Asia)
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Competitive Priorities




Cost
Quality
Flexibility
Speed
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Competitive Priorities: Cost
(eliminating all waste)
 Lincoln Electric


reduced costs by $10 million a year for 10 years
skilled machine operators save the company millions that
would have been spent on automated equipment
 Southwest Airlines (local example: Air asia)



one type of airplane facilitates crew changes, recordkeeping, maintenance, and inventory costs
direct flights mean no baggage transfers
$30 million annual savings in travel agent commissions by
requiring customers to contact the airline directly
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Competitive Priorities:
Quality (Please the customer)
 Ritz-Carlton - one customer at a time




Every employee is empowered to satisfy a guest’s wish
Teams at all levels set objectives and devise quality
action plans
Each hotel has a quality leader
Quality reports tracks




guest room preventive maintenance cycles
percentage of check-ins with no waiting
time spent to achieve industry-best clean room
appearance
Guest Preference Reports are recorded in a database
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Competitive Priorities:
ability to adjust to changes in product
Flexibility (The
mix, production volume, or design)
 Andersen Windows: (Product mix)


number of products offered grew from 28,000 to 86,000
number of errors are down to 1 per 200 truckloads
 Custom Foot Shoe Store: ( ? ?)



customer’s feet are scanned electronically to capture measurements
custom shoes are mailed to the customer’s home in weeks
prices are comparable to off-the-shelf shoes
 National Bicycle Industrial Company: ( ? ?)


offers 11,231,862 variations
delivers within two weeks at costs only 10% above standard models
Are your business operation flexible enough to have flexibility in
the three aspect above????
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Competitive Priorities:
Speed (Fast moves, fast adaptations, tight linkages)
 Citicorp

advertises a 15-minute mortgage approval
 Domino’s Pizza

30 minutes delivery or your pizza free
 Wal-Mart

replenishes its stock twice a week
 Hewlett-Packard

produces electronic testing equipment in five days
 General Electric

reduces time to manufacture circuit-breaker boxes into three
days and dishwashers into 18 hours
 Dell

ships custom-built computers in two days
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Operations’ Role in Corporate
Strategy (cont.)
Operations’ Role in Corporate Strategy
Strategic Decision in Operations (next slides)
Dec. must be made in the following area:
a. Products and Services
b. Processes and Technology
c. Capacity and Facilities
d. Human Resources
e. Quality
f. Sourcing
g. Operating Systems
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Operations Strategy:
Products and Services
 Make-to-Order

products and services are made to customer
specifications after an order has been received
 Make-to-Stock

products and services are made in anticipation of
demand (customer then chooses from avail. Product or
services)
 Assemble-to-Order

products and services add options according to
customer specifications
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Production Strategy:
Processes and technology
 Project (eg.

Construction project, shipbuilding, aircraft mfg)
one-at-a-time production of a product to customer order
 Batch Production (eg. Bakeries,

furniture making)
systems process many different jobs at the same time
in groups (or batches)
 Mass Production (eg. ???)

large volumes of a standard product for a mass market
 Continuous Production (eg. ???)

used for very high volume commodity products (very
standardized product, highly automated, operates 24 hrs)
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Continuous Production
A paper manufacturer produces a
continuous sheet paper from wood
pulp slurry, which is mixed, pressed,
dried, and wound onto reels.
Mass Production
Here in a clean room a worker performs
quality checks on a computer assembly line.
Batch Production
At Martin Guitars bindings on the guitar frame are
installed by hand and are wrapped with a cloth
webbing until glue is dried.
Project
Construction of the aircraft carrier USS Nimitz was a huge
project that took almost 10 years to complete.
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Service Strategy:
Processes and Technology
 Professional Service eg. Lawyer

highly customized and very labor intensive
 Service Shop eg. Hospital, school

customized and labor intensive
 Mass Service Offer same basic service to all customer (eg ???? )

less customized and less labor intensive
 Service Factory eg ????

least customized and least labor intensive
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Service Factory
Electricity is a commodity available
continuously to customers.
Mass Service
A retail store provides a standard array of
products from which customers may choose.
Service Shop
Although a lecture may be prepared in advance, its
delivery is affected by students in each class.
Professional Service
A doctor provides personal service to each patient based
on extensive training in medicine.
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Operations Strategy:
Capacity and Facility
 Capacity strategic decisions include:

When, how much, and in what form to alter
capacity
 Facility strategic decisions include:



Whether demand should be met with a few large
facilities or with several smaller ones
Whether facilities should focus on serving certain
geographic regions, product lines, or customers
Facility location can also be a strategic decision
Copyright 2006 John Wiley & Sons, Inc.
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Operations Strategy:
Quality
 What is the target level of quality for our
products and services?
 How will it be measured?
 How will employees be involved with
quality?
 What will the responsibilities of the
quality department be?
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Operations Strategy:
Quality (cont.)
 What types of systems will be set up to
ensure quality?
 How will quality awareness be maintained?
 How will quality efforts be evaluated?
 How will customer perceptions of quality be
determined?
 How will decisions in other functional areas
affect quality?
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Operations Strategy:
Sourcing
 Vertical Integration (eg?)

degree to which a firm produces parts that go
into its products
 Strategic Decisions




How much work should be done outside the
firm?
On what basis should particular items be
made in-house?
When should items be outsourced?
How should suppliers be selected?
Copyright 2006 John Wiley & Sons, Inc.
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Operations Strategy:
Sourcing (cont.) If you
outsourced… ask





What type of relationship should be
maintained with suppliers?
What is expected from suppliers?
How many suppliers should be used?
How can quality and dependability of
suppliers be ensured?
How can suppliers be encouraged to
collaborate?
Copyright 2006 John Wiley & Sons, Inc.
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Chapter 3
Quality Management
Copyright 2006 John Wiley & Sons, Inc.
What is quality in the eye of
beholder?
What are the different quality
characteristics you (as a consumer)
would expect to find in the following three
products: a DVD player, a pizza, running
shoes? Conduct threaded discussion on
each selected product.
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The Meaning of Quality
1. Quality from the Consumer’s Perspective
a.
Dimensions of Quality: Manufactured
Products (what do you look at ?)
Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Safety
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b. Dimensions of Quality: Services








Time and timeliness
Completeness
Courtesy
Consistency
Accessibility
Convenient
Accuracy
Responsiveness
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The Cost of Achieving good
Quality
1. The Cost of Achieving Good Quality
a. Prevention Costs
b. Appraisal Costs
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The Cost of Achieving good
Quality
Prevention Costs ( Cost of trying to prevent poor- quality from
a.
reaching the customer)





Quality planning costs: The cost of developing and
implementing quality management program
Product-Design costs: The costs of designing products
with quality characteristics.
Process costs: The cost expended to make sure the
productive process conforms to quality specification
Training costs: The cost to train employee
Information costs: The cost of acquiring and maintaining
(typically on computers) data related to quality, and the
development and analysis of reports on quality performance
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The Cost of Achieving good
Quality
b. Appraisal Costs ( Costs of measuring, testing, and
analyzing materials, parts, products, and the productive
process to ensure product-quality specifications are being met)



Inspection and testing cost
Test equipment costs
Operator costs
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The Cost of Poor Quality (The cost of
nonconformance)
Normally accounts for 70% -90% of total
quality cost.
a. Internal Failure Costs
b. External Failure Costs
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The Cost of Poor Quality
a. Internal Failure Costs: Costs incurred when
poor quality products are discovered before they are
delivered to the customer (eg)
 Scrap costs
 Rework costs
 Price- downgrading costs
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The Cost of Poor Quality
b. External Failure Costs : Costs incurred after
the customer has received a poor-quality products and
primarily related to customer service. Eg:
 Product return cost
 Lost sale cost: customer dissatisfied with poor quality product
and do not make future purchase.
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Measuring and Reporting Quality
Costs
 Example H & S Motor Company
(pg: 101)
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The Effect of Quality Management
on Productivity
1.Productivity
2.Measuring Product Yield and Productivity
3.The Quality-Productivity Ratio
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Measuring Product Yield and
Productivity
The UMRO Company starts production for a special
sport bag. The production process begins with 100
bags each day. The percentage of good bags
produced each averages to 80% and the percentage
of poor-quality bags that can be reworked is 50%.


What is the company’s daily product yield?
If the percentage of good-quality bags increased to
90%, what is the effect on productivity?
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Computing product cost per unit
The UMRO company has a direct manufacturing cost
per unit of RM30, and bags that are inferior quality can
be reworked for RM12 per unit. 100 bags are produced
daily, 80% are good quality and 20% are defective. Of
the defective bags, half can be reworked to yield goodquality products. Through its quality management
program, the company has discovered a problem in its
production process that, when corrected (at a
minimum cost), will increase the good-quality product
to 90%.
What is the direct impact on the direct cost per unit of
improvement in product quality?
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Computing product yield for a
multi stage process
At UMRO Company, bags are produced in a fourstage process. Bags are inspected following in each
stage, with percentage yield (on average) of goodquality work-in-process units as follows.
Stage
1
2
3
4


Average percentage Good
Quality
0.93
0.95
0.97
0.92
What is the daily product yield for product input of 100
units per day ?
How many input units it would have to start with each
day to result in a final daily yield of 100 goof-quality
units?
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Computing the QualityProductivity Ratio (QPR)
UMRO Company produces bags at processing cost of
RM30 per unit. Defective bags can be reworked for
RM12 per unit. 100 bags are produced daily, 80% are
good quality, resulting in 20% defects, 50% of which can
be reworked prior to shipping to customers. The
company wants to examine the effects of:
1.
2.
3.
4.
Increasing the production rate to 200 bags per day
Reducing the processing cost to RM26 and the rework
cost to RM10
Increasing, through quality improvement, the product
yield of good-quality products to 95%
The combination of 2 and 3
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Chapter 5
Products and Services
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Compare product design
 Have you ever experienced looking or
buying a particularly well-designed or
particularly poorly designed product?
What is it?
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 Cup holders in cars that, when occupied, hide
the radio buttons or interfere with the stick shift
 Salt shakers that must be turned upside down
to fill (thereby losing their contents)
 Doors that you can’t tell whether to pull or push
 Pen drive (memory stick) ?
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Perceptual Map of
Breakfast Cereals
GOOD
TASTE
Cocoa Puffs
LOW
NUTRITION
HIGH
NUTRITION
Rice
Rice
Krispies
Krispies
Cheerios
Cheerios
Wheaties
Wheaties
Shredded
Shredded
Wheat
Wheat
BAD
TASTE
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Feasibility Study
 Market analysis
 Economic analysis
 Technical/strategic analysis (Does the new
product require certain technology? Does the company have
sufficient labor capabilities, expertise, resources to do it?)
 Performance specifications (What the product
should do to satisfy customers)
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Form and Functional Design
 Form Design

how product will
look?
 Functional Design



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reliability
maintainability
usability
1-49
Computing Reliability
Components in series
0.90
Parts A
0.90
0.90 x 0.90 = 0.81
Parts B
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Computing Reliability
Components in parallel
0.90
Reliability of backup component
R2
0.95
If the original component fail, at 5%
chances, backup will effective only in 90%
of the time
R1
Reliability of original component
Reliability of the system
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0.95 + 0.90(1-0.95) = 0.995
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Determine the reliability of the
system of components shown below
0.90
0.98
0.98
0.92
0.98
0.92+(1-0.92)(0.90)=0.99
0.98
0.98 x 0.99 x 0.98 = 0.951
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Reliability: Length of time product or
services in operation before it fails
 MTBF = Mean Time before Failure=
1/failure rate.
Eg if laptop batery fail 4 times in 20 hour,
failure rate = 4/20 = 0.20, its MTBF =
1/0.20 = 5 hours.
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Maintainability (also
called serviceability)
PROVIDER
MTBF (HR)
MTTR (HR)
A
B
C
60
36
24
4.0
2.0
1.0
SAA = 60 / (60 + 4) = .9375 or 93.75%
SAB = 36 / (36 + 2) = .9726 or 97.26%
SAC = 24 / (24 + 1) = .9473 or 94.73%
System Availability = MTBF/(MTBF + MTTR)
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Usability
 Ease of use of a product or service
Examples:


ease of use (volume control at steering)
frequency and severity of errors (wedding
door gift – soap instead of sweets)


user satisfaction with experience (web page)
Easy to learn (web page)
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Production Design
 Simplification

reducing number of parts, assemblies, or options in a product
(remote control. Too many buttons?)
 Standardization

using commonly available and interchangeable parts (eg –
PC)
 Modularity

combining standardized building blocks, or modules, to create
unique finished products (eg same basic chasis, same basic
brooth (beef, chicken, tomato) then adding special ingredients
to produce more varieties of final product.
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Production Design (con’t)
Think about the tension between Design
department, production department,
finance department, and HR department.
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Design Team
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Technology in the
Design Process
 Computer Aided Design (CAD)


assists in creation, modification, and
analysis of a design
includes

computer-aided engineering (CAE)
 tests and analyzes designs on computer screen

computer-aided manufacturing (CAM)
 ultimate design-to-manufacture connection
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Improving Quality of
Design
 Review designs to prevent failures
and ensure value
 Design for environment
 Measure design quality
 Use quality function deployment
 Design for robustness
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Design Review
 Failure mode and effects analysis (FMEA)

a systematic method of analyzing product failures
 Fault tree analysis (FTA)

a visual method for analyzing interrelationships
among failures
 Value analysis (VA)

helps eliminate unnecessary features and functions
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FMEA for Potato Chips
Failure
Mode
Cause of
Failure
Effect of
Failure
Corrective
Action
Stale
low moisture content
expired shelf life
poor packaging
tastes bad
won’t crunch
thrown out
lost sales
add moisture
 cure longer
better package seal
shorter shelf life
Broken
too thin
too brittle
rough handling
rough use
poor packaging
can’t dip
poor display
injures mouth
chocking
perceived as old
lost sales
change recipe
change process
change packaging
Too Salty
outdated receipt
process not in control
uneven distribution of salt
eat less
drink more
health hazard
lost sales
experiment with recipe
experiment with process
introduce low salt version
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Fault tree analysis (FTA)
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Value analysis (VA)





Can we do without it?
Does it do more than is required?
Does it cost more than it is worth?
Can something else do a better job?
Can it be made by



a less costly method?
with less costly tooling?
with less costly material?
 Can it be made cheaper, better, or faster by
someone else?
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Design for Environment
 Design for environment





designing a product from material that can be recycled
design from recycled material
design for ease of repair (so do not discard if out of order)
minimize packaging
minimize material and energy used during manufacture,
consumption and disposal
 Extended producer responsibility
holds companies responsible for their product even after its
useful life
In Minnesota: agreement Sony takes back and recycle Sony
electronic product.

EU: Auto makers pay for the recycling of old cars
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Design for Environment (cont.)
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Quality Function
Deployment (QFD)
 Translates voice of customer into technical
design requirements
 Displays requirements in matrix diagrams


first matrix called “house of quality”
series of connected houses
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Importance
House of Quality
5
Trade-off matrix
3
Design
characteristics
1
4
2
Customer
requirements
Relationship
matrix
Competitive
assessment
6
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Target values
1-68
Competitive Assessment
of Customer
Requirements
Competitive Assessment
Easy and
safe to use
Irons
well
Customer Requirements
1
2
3
Presses quickly
9
Removes wrinkles
8
AB
X
Doesn’t stick to fabric
6
X
BA
Provides enough steam
8
AB
Doesn’t spot fabric
6
X AB
Doesn’t scorch fabric
9
A XB
Heats quickly
6
Automatic shut-off
3
Quick cool-down
3
X
Doesn’t break when dropped
5
AB
Doesn’t burn when touched
5
AB X
Not too heavy
8
X
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B A
4
X
5
X
B
X
A
ABX
A B
X
A
B
1-69
Irons
well
Presses quickly
-
Removes wrinkles
+
Doesn’t stick to fabric
-
Provides enough steam
+
+
+ +
-
-
+ - +
+
-
Automatic shut-off
+
Quick cool-down
Doesn’t break when dropped
-
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- +
+ + +
Doesn’t burn when touched
Not too heavy
Automatic shutoff
+ +
+ + +
+ -
-
Protective cover for soleplate
+ + +
+
Heats quickly
Time to go from 450º to 100º
-
+
Doesn’t scorch fabric
Time required to reach 450º F
Flow of water from holes
Size of holes
Number of holes
- + + +
Doesn’t spot fabric
Easy and
safe to use
Material used in soleplate
Thickness of soleplate
Size of soleplate
Weight of iron
Customer Requirements
Energy needed to press
From Customer
Requirements
to Design
Characteristics
+
+ -
-
- +
+
+
+ + +
1-70
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Automatic shutoff
Protective cover for soleplate
Time to go from 450º to 100º
Time required to reach 450º
+
Flow of water from holes
-
Size of holes
Designers must take
into account when
designing
Number of holes
Material used in soleplate
Thickness of soleplate
Size of soleplate
Weight of iron
Energy needed to press
Tradeoff Matrix
+
+
1-71
Copyright 2006 John Wiley & Sons, Inc.
Protective cover for soleplate
in.
cm
ty
ea
3
1.4
8x4
2
SS
27
15
0.5
45
500
N
Y
4
1.2
8x4
1
MG
27
15
0.3
35
350
N
Y
2
1.7
9x5
4
T
35
15
0.7
50
600
N
Y
3
4
4
4
5
4
3
2
5
5
3
0
3
3
3
3
4
3
3
3
4
4
5
2
1.2
8x5
3
SS
30
30
500
*
*
*
*
*
*
*
Automatic shutoff
Number of holes
Time to go from 450º to 100º
Material used in soleplate
Time required to reach 450º
Thickness of soleplate
lb
Flow of water from holes
Size of soleplate
ft-lb
Size of holes
Weight of iron
Objective
measures
Units of measure
Iron A
Iron B
Our Iron (X)
Estimated impact of change
Estimated cost
Targets
Design changes (impact>cost)
Energy needed to press
Targeted Changes in
Design
mm oz/s sec sec Y/N Y/N
1-72
Completed
House of Quality
SS = Silverstone
MG = Mirorrglide
T = Titanium
Copyright 2006 John Wiley & Sons, Inc.
1-73
A Series of Connected
QFD Houses
Part
characteristics
Process
characteristics
A-2
Parts
deployment
Which components parts are
affected by reducing the
thickness of the soleplate?fasteners soleplate to iron, depth
of holes)
Copyright 2006 John Wiley & Sons, Inc.
Operations
A-3
Process
planning
Change dies
used for
stamping the
plate
Process
characteristics
House
of
quality
Part
characteristics
A-1
Product
characteristics
Customer
requirements
Product
characteristics
A-4
Operating
requirements
- Operator training
- Adjustment preven.
1-74
maintenance
Special Considerations in
Service Design




Services are
intangible
Service output is
variable
Service have higher
customer contact
Services are
perishable
Copyright 2006 John Wiley & Sons, Inc.
 Service inseparable
from delivery
 Services tend to be
decentralized and
dispersed
 Services are
consumed more often
than products
 Services can be easily
emulated
1-75
Service Design Process
 Service concept

purpose of a service; it defines target market
and customer experience (Mc D – Starbuck –
Domino pizza)
 Service package

mixture of physical items, sensual benefits, and
psychological benefits
 Service specifications



performance specifications
design specifications
delivery specifications
Copyright 2006 John Wiley & Sons, Inc.
1-76
High v. Low Contact
Services
Design
Decision
High-Contact Service
 Facility  Convenient to
location
customer
 Facility
layout
Low-Contact Service
 Near labor or
transportation source
 Must look presentable,  Designed for
accommodate
efficiency
customer needs, and
facilitate interaction
with customer
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-77
High v. Low Contact
Services (cont.)
Design
Decision
High-Contact Service
Low-Contact
Service
 Quality
control
 More variable since
 Measured against
customer is involved in
established
process; customer
standards; testing
expectations and
perceptions of quality
and rework possible
may differ; customer
to correct defects
present when defects
occur
 Capacity
 Excess capacity
required to handle
peaks in demand
 Planned for average
demand
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-78
High v. Low Contact
Services (cont.)
Design
Decision
High-Contact Service
Low-Contact
Service
 Worker skills
 Must be able to
interact well with
customers and use
judgment in decision
making
 Technical skills
 Scheduling
 Must accommodate
customer schedule
 Customer
concerned only
with completion
date
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-79
High v. Low Contact
Services (cont.)
Design
Decision
High-Contact Service
Low-Contact
Service
 Service
process
 Mostly front-room
 Mostly backactivities; service may
room activities;
change during delivery
planned and
in response to
customer
executed with
minimal
interference
 Service
package
 Varies with customer;
includes environment
as well as actual
service
 Fixed, less
extensive
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-80
Chapter 6
Processes, Technology, and Capacity
Operations Management - 5th Edition
Roberta Russell & Bernard W. Taylor, III
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Make or Buy Decisions
 Cost
 Capacity
 Quality
Copyright 2006 John Wiley & Sons, Inc.
 Speed
 Reliability
 Expertise
1-82
Sourcing Continuum
Vertical
Integration
(100%
ownership)
Joint
Venture
(equity
partner)
Strategic
Alliance
(long-term
supplier
contract;
collaborative
relationship)
Arms-Length
Relationship
(short-term contract
or
single purchasing
decision)
Source: Adapted from Robert Hayes, Gary Pisano, David Upton, and
Steven Wheelwright, Operations Strategy and Technology: Pursuing
the Competitive Edge (Hoboken, NJ: 2005), p. 120
Copyright 2006 John Wiley & Sons, Inc.
1-83
Types of Processes
Type of
product
Type of
customer
Product
demand
PROJECT
BATCH
MASS
CONT.
Unique
Made-toorder
Made-tostock
Commodity
(customized)
(standardized )
Few
individual
customers
Mass
market
Mass
market
Fluctuates
Stable
Very stable
One-at-atime
Infrequent
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-84
Types of Processes (cont.)
PROJECT
BATCH
MASS
CONT.
Demand
volume
Very low
Low to
medium
High
Very high
No. of
different
products
Infinite
variety
Many, varied
Few
Very few
Production
system
Long-term
project
Discrete, job
shops
Repetitive,
assembly
lines
Continuous,
process
industries
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-85
Types of Processes (cont.)
PROJECT
BATCH
MASS
CONT.
Equipment
Varied
Generalpurpose
Specialpurpose
Highly
automated
Primary
type of
work
Specialized
contracts
Fabrication
Assembly
Mixing,
treating,
refining
Worker
skills
Experts,
craftspersons
Wide range
of skills
Limited
range of
skills
Equipment
monitors
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive
Advantage (New York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-86
Types of Processes (cont.)
PROJECT
Advantages
Disadvantages
Examples
BATCH
MASS
CONT.
Custom work,
latest technology
Flexibility,
quality
Efficiency,
speed,
low cost
Highly efficient,
large capacity,
ease of control
Non-repetitive,
small customer
base, expensive
Costly, slow,
difficult to
manage
Capital
investment;
lack of
responsiveness
Difficult to change,
far-reaching errors,
limited variety
Construction,
shipbuilding,
spacecraft
Machine shops,
print shops,
bakeries,
education
Automobiles,
televisions,
computers,
fast food
Paint, chemicals,
foodstuffs
Source: Adapted from R. Chase, N. Aquilano, and R. Jacobs, Operations Management for Competitive Advantage (New
York:McGraw-Hill, 2001), p. 210
Copyright 2006 John Wiley & Sons, Inc.
1-87
Process Selection with
Break-Even Analysis
 Cost

Fixed costs


constant regardless of the number of units produced
Variable costs

vary with the volume of units produced
 Revenue

price at which an item is sold
 Total revenue

is price times volume sold
 Profit

difference between total revenue and total cost
Copyright 2006 John Wiley & Sons, Inc.
1-88
Break-Even Analysis: Graph
Total
cost
line
$3,000 —
$2,000 —
$1,000 —
Total
revenue
line
400
Break-even point
Copyright 2006 John Wiley & Sons, Inc.
Units
1-89
Process Flowchart
Symbols
Operations
Inspection
Transportation
Delay
Storage
Copyright 2006 John Wiley & Sons, Inc.
1-90
Process
Flowchart
of Apple
Processing
Description
of
process
1
Unload apples from truck
2
Move to inspection station
3
Weigh, inspect, sort
4
Move to storage
5
Wait until needed
6
Move to peeler
7
Apples peeled and cored
15
8
Soak in water until needed
20
9
Place in conveyor
5
10
Move to mixing area
11
Weigh, inspect, sort
Page 1 0f 3
Copyright 2006 John Wiley & Sons, Inc.
Distance
(feet)
Location: Graves Mountain
Process: Apple Sauce
Time
(min)
Operation
Transport
Inspect
Delay
Storage
Step
Date: 9-30-02
Analyst: TLR
20
100 ft
30
50 ft
360
20 ft
Total
20 ft
30
480
190 ft
1-91
From Function to Process
Sales
Manufacturing
Purchasing
Accounting
Product Development
Order Fulfillment
Supply Chain Management
Customer Service
Function
Copyright 2006 John Wiley & Sons, Inc.
Process
1-92
Chapter 7
Facilities
Copyright 2006 John Wiley & Sons, Inc.
Beni Asllani
University of Tennessee at Chattanooga
Facility Layout
Arrangement of areas within a facility to:
 Minimize material-handling
costs
 Utilize space efficiently
 Utilize labor efficiently
 Eliminate bottlenecks
 Facilitate communication and
interaction
 Reduce manufacturing cycle
time (max time at each work
station for a product)
 Reduce customer service time
 Eliminate wasted or redundant
movement
 Increase capacity
Copyright 2006 John Wiley & Sons, Inc.
 Facilitate entry, exit, and
placement of material, products,
and people
 Incorporate safety and security
measures
 Promote product and service
quality
 Encourage proper maintenance
activities
 Provide a visual control of
activities
 Provide flexibility to adapt to
changing conditions
1-94
BASIC LAYOUTS
 Process layouts Layouts (eg.Furniture making)

group similar activities together according to
process or function they perform
 Product layouts (also known as assembly line)

arrange activities in line according to
sequence of operations for a particular product
or service
 Fixed-position layouts

are used for projects in which product cannot
be moved
Copyright 2006 John Wiley & Sons, Inc.
1-95
Eg.Process layout in furniture
factory
-
Cutting the wood
Polishing the wood
Designing the wood
Assemble the parts
Paint and further polishing
Copyright 2006 John Wiley & Sons, Inc.
1-96
Product layout (page 261)
 eg: Krispy Kreme (or dunkin donut)
Dough mixer – shaping – fried –
glazing(topping style) – cold – boxed
* Disadvantage of assembly line ?
Copyright 2006 John Wiley & Sons, Inc.
1-97
Fixed-Position Layouts


Typical of projects
Equipment, workers,
materials, other resources
brought to the site (Because
the product produced is too:
fragile, bulky, or heavy to move)




Highly skilled labor
Often low fixed (equipment
normally leases by the
company)
Typically high variable costs
(high labor rate)
Eg: Ships, houses, aircraft
Copyright 2006 John Wiley & Sons, Inc.
1-98
Designing Service
Layouts
 Must be both attractive and functional
 Types
 Free flow layouts


Grid layouts


encourage browsing, increase impulse purchasing, are flexible
and visually appealing
encourage customer familiarity, are low cost, easy to clean and
secure, and good for repeat customers
Loop and Spine layouts

both increase customer sightlines and exposure to products,
while encouraging customer to circulate through the entire
store
Copyright 2006 John Wiley & Sons, Inc.
1-99
Types of Store Layouts
Encourage
familiarity
Forcing customer to
travel through aisles
of merchandise that
might prompt
additional purchases
: eg. Book store)
Copyright 2006 John Wiley & Sons, Inc.
Maximize customer
exposure to as many
goods as possible
1-100
Pintu
Pintu
Kawasan
Menunggu
Pejabat
Pintu
Bay 2
Bay 1
Bilik
Perbincangan
Kaunter
Penerimaan
Perkhidmatan
Bilik
Air
Surau
K
A
U
N
T
E
R
Bay 3
Bay 4
Ruang pameran kereta
P
E
L
A
N
G
G
A
N
Workshop
Ra
Pintu
Pintu
Rajah 5 : Pelan susunatur kedudukan mengikut bahagian di Global Amity.
1
Copyright 2006 John Wiley & Sons, Inc.
1-101
Foreman sedang melakukan servis sebuah kereta di dalam kawasan bay 2 (petak berwarna biru)
Copyright 2006 John Wiley & Sons, Inc.
1-102
Gambar G : Ruang legar pameran kereta Honda di Global Amity
Copyright 2006 John Wiley & Sons, Inc.
1-103
Designing Product
Layouts
Eg. Imagine the
making of kuih
karipap
 Objective

Balance the assembly line
 Line balancing

tries to equalize the amount of work at each
workstation
 Precedence requirements

physical restrictions on the order in which operations
are performed
 Cycle time

maximum amount of time a product is allowed to
spend at each workstation If the targeted production rate is to be
reached
Copyright 2006 John Wiley & Sons, Inc.
1-104
Cycle Time Example
Wants to produce
karipap 120 units in
8 hour day
Desired cycle time
Cd =
Cd =
production time available
desired units of output
(8 hours x 60 minutes / hour)
(120 units)
Cd =
Copyright 2006 John Wiley & Sons, Inc.
480
120
= 4 minutes
1-105
Flow Time vs Cycle Time
 Cycle time = max time spent at any station
 Flow time = time to complete all stations
1
2
3
4 minutes
4 minutes
4 minutes
Flow time = 4 + 4 + 4 = 12 minutes
Cycle time = max (4, 4, 4) = 4 minutes
Copyright 2006 John Wiley & Sons, Inc.
1-106
Efficiency of Line
Efficiency
Minimum number
of workstations
i
t
i
t
i
i=1
E = nC
a
N=
i
i=1
Cd
where
ti
j
n
Ca
Cd
= completion time for element i
= number of work elements
= actual number of workstations
= actual cycle time
= desired cycle time
Copyright 2006 John Wiley & Sons, Inc.
1-107
Line Balancing Procedure
1. Draw and label a precedence diagram
2. Calculate desired cycle time required for the line
3. Calculate theoretical minimum number of
workstations
4. Group elements into workstations, recognizing cycle
time and precedence constraints
5. Calculate efficiency of the line
6. Determine if the theoretical minimum number of
workstations or an acceptable efficiency level has
been reached. If not, go back to step 4.
Copyright 2006 John Wiley & Sons, Inc.
1-108
Line Balancing: Example
WORK ELEMENT
A
B
C
D
The company need
to produce 6000
fruits strips every 40
hr week
PRECEDENCE
TIME (MIN)
—
A
A
B, C
0.1
0.2
0.4
0.3
Press out sheet of fruit
Cut into strips
Outline fun shapes
Roll up and package
0.2
B
0.1 A
D 0.3
C
Copyright 2006 John Wiley & Sons, Inc.
0.4
1-109
The company need
to produce 6000
fruits strips every 40
hr week
Line Balancing: Example (cont.)
WORK ELEMENT
A
B
C
D
Press out sheet of fruit
Cut into strips
Outline fun shapes
Roll up and package
PRECEDENCE
TIME (MIN)
—
A
A
B, C
0.1
0.2
0.4
0.3
40 hours x 60 minutes / hour
2400
Cd =
=
= 0.4 minute
6,000 units
6000
0.1 + 0.2 + 0.3 + 0.4
1.0
N=
=
= 2.5  3 workstations
0.4
0.4
Copyright 2006 John Wiley & Sons, Inc.
1-110
Line Balancing: Example (cont.)
WORKSTATION
1
2
3
ELEMENT
REMAINING
TIME
REMAINING
ELEMENTS
0.3
0.1
0.0
0.1
B, C
C, D
D
none
A
B
C
D
0.2
Cd = 0.4
N = 2.5
B
0.1 A
D 0.3
C
Copyright 2006 John Wiley & Sons, Inc.
0.4
1-111
Line Balancing: Example (cont.)
Work
station 1
Work
station 2
Work
station 3
A, B
C
D
0.3
minute
0.4
minute
0.3
minute
Cd = 0.4
N = 2.5
1.0
0.1 + 0.2 + 0.4 + 0.3
E=
=
= 0.833 = 83.3%
1.2
3(0.4)
Copyright 2006 John Wiley & Sons, Inc.
1-112
The company has 5 step process to prepare its product for shipment. If
the company needs a new product off the line every 10 minutes,
determine the efficiency of the line and calculate the expected output for
an eight-hour day
Task
A
B
C
D
Precedence
None
A
A
A
E
B,C,D
Copyright 2006 John Wiley & Sons, Inc.
Time (mins)
5
2
4
7
5
1-113
Exercise:
1.The following are the list of tasks, task time, and precedence
requirement of an activity at X-pac company. If the mission is to
produce a 100 unit of product in a fourty-hour period? balance the line
and calculate the efficiency.
Task
A
B
C
D
E
F
G
H
I
J
Precedence
None
A
A
A
B
C,E
D
G
F,H
I
Copyright 2006 John Wiley & Sons, Inc.
Time (mins)
8
4
7
3
7
11
2
8
5
7
1-114
Domino pizza is revamping its order processing and pizza making
procedure. Domino must produce 600 pizza in a 40-hour week. Use the
following information to draw and label a precedence diagram, compute
cycle time, theoretical min. number of WS, balance the assembly line, and
calculate its efficiency.
Task
A. Receive order
B. Shape dough
C. Prepare toppings
D. Assemble pizza
E. Bake Pizza
F. Deliver pizza
Copyright 2006 John Wiley & Sons, Inc.
Precedence
None
A
B
A,E
none
C,D
Time (mins)
1
2
2
4
3
4
1-115
Construct precedence diagram and compute the lead time for
the process. If demand for pizza is 120 per night (5pm to 1
am), what is cycle time?. Balance the line and calculate its
efficiency.
Task
A. Receive order
B. Shape dough
C. Prepare toppings
D. Assemble pizza
E. Bake Pizza
F. Deliver pizza
Copyright 2006 John Wiley & Sons, Inc.
Precedence
None
A
A
B,C
D
E
Time (mins)
2
1
2
3
3
3
1-116
Computerized Line
Balancing
 Use heuristics to assign tasks to
workstations





Longest operation time
Shortest operation time
Most number of following tasks
Least number of following tasks
Ranked positional weight
Copyright 2006 John Wiley & Sons, Inc.
1-117