Topic 1_introduction Operations Management
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M. del Mar Viñas
Operations Management
Production & Operations Management
• PRODUCTION is defined as the collection of processes, procedures, methods and techniques that result in goods and services. This is possible thanks to decisions that increase the value of these products in order to satisfy the customer needs.
• OPERATIONS MANAGEMENT implies the management of the production system which transform the inputs (raw material, machinery, labor,…) into outputs (goods and services). Operations Management
Production & Operations Management
Production Production factors factors
Value Value transformation transformation process process
Final Final goods goods and services and services
Control system
• PRODUCTION SUBSYSTEM includes the planning, decisions and activities that convert the inputs (raw material, machinery, labour,…) into outputs (goods and services). Operations Management
MARKET
Sources Sources of of supply supply
Operations Management at present PRODUCTION DIRECTOR Experis España - Barcelona Published 24 days ago SENIOR PRODUCT EXPERT DOGA - Barcelona y alrededores, España Published 19 days ago PROCESS ENGINEER Concep Arquitectura y Diseño de Farmacias Rentables SA Barcelona y alrededores, España Published 31 days ago CUSTOMER SERVICE SUPERVISOR Abertis autopistas España - Barcelona y alrededores, España Published 25 days ago
Operations Management
Strategic and tactical decisions
• Decisions concerning Operations Management can be divided in : – Strategic decisions in the long term. – Tactical decisions in the short term.
• Characteristics of Strategic Decisions: – They affect products, processes and installations in the long term. – Usually they’re unstructured. – Difficult or very expensive to correct them in the short term. – Important to coordinate with other functional departments. Operations Management
Strategic and tactical decisions
• Examples of Strategic Decisions: – The selection of the good or service to be produced. – Appropriate design for the good or service to be produced. – Machinery and technology selection to produce the goods and services of the company according to cost, quality and time delivery requirements. – Strategic planning of the operations system. – Production capacity of the company facilities. – Facilities location taking into account the market and suppliers location. – Plant distribution of machinery and labour to assure an efficient production flux.
Operations Management
Strategic and tactical decisions
• Characteristics of Tactical Decisions: – They affect products, processes and installations in the short term. – Usually they’re structured and repetitive. – Possibility to correct them in the short term. – Also related to planning control to detect deviations between the reality and the planning. Possibility to apply corrective actions.
Operations Management
Strategic and tactical decisions
• Examples of Tactical Decisions: – Medium term planning and production programming. – Level of stocks to cover the market demands. – Development of standard procedures. – Decisions to assure the quality level of the products. – Decisions about preventive maintenance of the machinery.
Operations Management
Production subsystem
• Strategic level: – Product or service? – Capacity? – Dimension? – Resources? – Location? – Plant distribution?
• Tactical level: – Production objectives – Planning of global quantities and timing of goods/services production. – Programming of specific product quantities and the purchase of its components . – Short term programming. Activities in different production plants. – Planning of resources and capacities. – Planning and management of stocks (raw material, product models,…)
Operations Management
Operations function
• Planning – Projecting the future: resources and activities
• • •
Production Control Integral management
Operations Management
Operations Planning
• Strategic planning
• Operational Planning
•
3 – 5 years
•
1 year – Several weeks
•
Senior Management
•
•
Problems in the long term
Refines the strategic planning
• Tactical planning •
1 – 3 years
•
Connection between strategic and Operational planning
Operations Management
• Adaptative Planning •
Removal of deviations between real results and objectives
Planning and control process Strategic Planning Objectives, Strategies, Global policies and Long term Business Plan.
Tactical Planning Mid term objectives and plans
Operational Planning Short term objectives and plans
Objectives Execution
Comparison Operations Management
Adaptive planning Corrections of divergences
Units
• Components. Elements that compose the final product.
• Products. Final result of the production process that it’s delivered to the market.
• Families. Group of products that have similar market requirements, production process, materials,..
• Types. Group of families that share a similar market behaviour. Operations Management
Production planning and control
• Strategic planning
• Aggregate planning
(Long Term)
(Medium Term)
– Demand forecasts L.T.
– Objective: To carry out strategic planning at least cost.
– Sales planning L.T. – Production planning L.T.
– 18 months planning. Monthly periods.
– Financial planning L.T.
– Family level – Capacity evaluation.
Operations Management
Production planning and control
• Master Production Schedule (M.P.S) – Specific products planning. – 1 year planning. Weekly periods.
• Materials Planning – Detailed components programming. – Detailed capacity programming.
• Execution and control
– Stable and flexible
– Components programming
– Capacity analysis (rough cut).
– Purchase orders
Operations Management
Production planning and control Step Strategic
Long term planning
Long term production planning
Capacity aggregate planning
Master Production programming
Master Production Schedule
Approximate capacity planning
Components programming
Materials Requirement Planning
Detailed capcity planning
Shop floor management
Operations programming
Capacity Control Priority Control Purchase actions
Execution & control
Purchases
manag ement
Operations Management
Long term capacity planning
Aggregate planning
Tactical
Operacional
Activity
Capac ity
Business planning
Mid term planning
Planning
Stocks Suppliers Raw Material External items
Production Intermediate products
Assembly Final products
CUSTOMERS Operations Management
Industrial supplies and spare parts
Planning and Control of Stocks
• Inventory. Resources that are not being used. They are kept in the warehouse waiting to be used.
• Stocks = Retained capital • Profitability equation. Pe Pr ofit Ec . profitabil ity A Assets
Operations Management
Why do we need inventories? – To satisfy the market demands of our final products. – To avoid interruptions in the production process. • External supplies • Internal supplies – To balance the production. – To obtain economic benefits. – Low fitting between production and market demands. – To get savings or speculation. Operations Management
Fundamental questions in materials planning
When do we need to order the materials?
How many materials/elements do we have to order? Which is the adequate lot size for each material?
The answer depends on several factors
Operations Management
Factors to be considered
• Demand characteristics • Inventory costs • Unique inventory planning • Multi-periodic inventory planning • Independent demand
• Cp: Possession cost • Ce: Emission cost • Cr: Breakup cost • Ca: Acquisition cost
• Dependent demand
• Supply timing
Operations Management
Cp: Possession cost
• • •
Associated cost to maintain an inventory. Proportional to the level of stocks Includes: Fixed capital in stocks BUT also in space, buildings, equipment,... Taxes, insurances, labour, energy, materials depreciation, materials damage, materials theft.
Operations Management
Ce: Emission cost
• Associated costs that appear each time that we set an order.
• Independent to the lot size of the different orders
• Proportional to the number of orders • Includes: Cost of preparing the order (necessary documentation, phone calls, emails,...), reception and inspection, manipulation and transport.
•
In case of internal orders Launching order. This includes: machinery preparation and tooling changes.
Operations Management
Cr: Breakup cost
• It appears when we need an article and it is not available.
• Proportional to the unsatisfied market demand.
• Includes: Breakup in internal supplies: Machinery stops due to lack of material. Costs are incremented due to acceleration of the production process (overtime hours, subcontracting) Breakup in customer orders: loss of sales, company image,... Operations Management
Ca: Acquisition cost
• It is the purchase cost (in external orders) or production cost (in internal orders) of the lots required.
• Independent of the lot size and number of orders. Sometimes this is NOT accurate : discounts for quantities, lower production costs for higher batches.
Operations Management
Supply time
• Interval of time that passes from the request of a materials order to the moment that the order material is available to be used (after inspection and storage). – External supply – Internal supply
Operations Management
External supply time
• It’s determined based on: – Supplier compromise – Past supplier behaviour – Security time
• The company looses control over it. It depends on the supplier.
Operations Management
Internal supply times
• Order preparation time: Necessary time to prepare the order documentation and to send to the workplace.
• Travelling and transport time: Travelling of materials to the workplace, transfer of intermediate products to the workplace and transfer of final products to workplace.
• Queue time: Waiting time of the material in the workplace before it enter the production process.
Operations Management
Internal supply times
• Preparation time in the workplace to carry out the order.
• Execution time of the order. • Waiting time: Time that passes from the end of the production process until the lot is transferred to another workplace or to the warehouse.
• Inspection time.
Operations Management
Operations Management
Production & Operations Management
• PRODUCTION is defined as the collection of processes, procedures, methods and techniques that result in goods and services. This is possible thanks to decisions that increase the value of these products in order to satisfy the customer needs.
• OPERATIONS MANAGEMENT implies the management of the production system which transform the inputs (raw material, machinery, labor,…) into outputs (goods and services). Operations Management
Production & Operations Management
Production Production factors factors
Value Value transformation transformation process process
Final Final goods goods and services and services
Control system
• PRODUCTION SUBSYSTEM includes the planning, decisions and activities that convert the inputs (raw material, machinery, labour,…) into outputs (goods and services). Operations Management
MARKET
Sources Sources of of supply supply
Operations Management at present PRODUCTION DIRECTOR Experis España - Barcelona Published 24 days ago SENIOR PRODUCT EXPERT DOGA - Barcelona y alrededores, España Published 19 days ago PROCESS ENGINEER Concep Arquitectura y Diseño de Farmacias Rentables SA Barcelona y alrededores, España Published 31 days ago CUSTOMER SERVICE SUPERVISOR Abertis autopistas España - Barcelona y alrededores, España Published 25 days ago
Operations Management
Strategic and tactical decisions
• Decisions concerning Operations Management can be divided in : – Strategic decisions in the long term. – Tactical decisions in the short term.
• Characteristics of Strategic Decisions: – They affect products, processes and installations in the long term. – Usually they’re unstructured. – Difficult or very expensive to correct them in the short term. – Important to coordinate with other functional departments. Operations Management
Strategic and tactical decisions
• Examples of Strategic Decisions: – The selection of the good or service to be produced. – Appropriate design for the good or service to be produced. – Machinery and technology selection to produce the goods and services of the company according to cost, quality and time delivery requirements. – Strategic planning of the operations system. – Production capacity of the company facilities. – Facilities location taking into account the market and suppliers location. – Plant distribution of machinery and labour to assure an efficient production flux.
Operations Management
Strategic and tactical decisions
• Characteristics of Tactical Decisions: – They affect products, processes and installations in the short term. – Usually they’re structured and repetitive. – Possibility to correct them in the short term. – Also related to planning control to detect deviations between the reality and the planning. Possibility to apply corrective actions.
Operations Management
Strategic and tactical decisions
• Examples of Tactical Decisions: – Medium term planning and production programming. – Level of stocks to cover the market demands. – Development of standard procedures. – Decisions to assure the quality level of the products. – Decisions about preventive maintenance of the machinery.
Operations Management
Production subsystem
• Strategic level: – Product or service? – Capacity? – Dimension? – Resources? – Location? – Plant distribution?
• Tactical level: – Production objectives – Planning of global quantities and timing of goods/services production. – Programming of specific product quantities and the purchase of its components . – Short term programming. Activities in different production plants. – Planning of resources and capacities. – Planning and management of stocks (raw material, product models,…)
Operations Management
Operations function
• Planning – Projecting the future: resources and activities
• • •
Production Control Integral management
Operations Management
Operations Planning
• Strategic planning
• Operational Planning
•
3 – 5 years
•
1 year – Several weeks
•
Senior Management
•
•
Problems in the long term
Refines the strategic planning
• Tactical planning •
1 – 3 years
•
Connection between strategic and Operational planning
Operations Management
• Adaptative Planning •
Removal of deviations between real results and objectives
Planning and control process Strategic Planning Objectives, Strategies, Global policies and Long term Business Plan.
Tactical Planning Mid term objectives and plans
Operational Planning Short term objectives and plans
Objectives Execution
Comparison Operations Management
Adaptive planning Corrections of divergences
Units
• Components. Elements that compose the final product.
• Products. Final result of the production process that it’s delivered to the market.
• Families. Group of products that have similar market requirements, production process, materials,..
• Types. Group of families that share a similar market behaviour. Operations Management
Production planning and control
• Strategic planning
• Aggregate planning
(Long Term)
(Medium Term)
– Demand forecasts L.T.
– Objective: To carry out strategic planning at least cost.
– Sales planning L.T. – Production planning L.T.
– 18 months planning. Monthly periods.
– Financial planning L.T.
– Family level – Capacity evaluation.
Operations Management
Production planning and control
• Master Production Schedule (M.P.S) – Specific products planning. – 1 year planning. Weekly periods.
• Materials Planning – Detailed components programming. – Detailed capacity programming.
• Execution and control
– Stable and flexible
– Components programming
– Capacity analysis (rough cut).
– Purchase orders
Operations Management
Production planning and control Step Strategic
Long term planning
Long term production planning
Capacity aggregate planning
Master Production programming
Master Production Schedule
Approximate capacity planning
Components programming
Materials Requirement Planning
Detailed capcity planning
Shop floor management
Operations programming
Capacity Control Priority Control Purchase actions
Execution & control
Purchases
manag ement
Operations Management
Long term capacity planning
Aggregate planning
Tactical
Operacional
Activity
Capac ity
Business planning
Mid term planning
Planning
Stocks Suppliers Raw Material External items
Production Intermediate products
Assembly Final products
CUSTOMERS Operations Management
Industrial supplies and spare parts
Planning and Control of Stocks
• Inventory. Resources that are not being used. They are kept in the warehouse waiting to be used.
• Stocks = Retained capital • Profitability equation. Pe Pr ofit Ec . profitabil ity A Assets
Operations Management
Why do we need inventories? – To satisfy the market demands of our final products. – To avoid interruptions in the production process. • External supplies • Internal supplies – To balance the production. – To obtain economic benefits. – Low fitting between production and market demands. – To get savings or speculation. Operations Management
Fundamental questions in materials planning
When do we need to order the materials?
How many materials/elements do we have to order? Which is the adequate lot size for each material?
The answer depends on several factors
Operations Management
Factors to be considered
• Demand characteristics • Inventory costs • Unique inventory planning • Multi-periodic inventory planning • Independent demand
• Cp: Possession cost • Ce: Emission cost • Cr: Breakup cost • Ca: Acquisition cost
• Dependent demand
• Supply timing
Operations Management
Cp: Possession cost
• • •
Associated cost to maintain an inventory. Proportional to the level of stocks Includes: Fixed capital in stocks BUT also in space, buildings, equipment,... Taxes, insurances, labour, energy, materials depreciation, materials damage, materials theft.
Operations Management
Ce: Emission cost
• Associated costs that appear each time that we set an order.
• Independent to the lot size of the different orders
• Proportional to the number of orders • Includes: Cost of preparing the order (necessary documentation, phone calls, emails,...), reception and inspection, manipulation and transport.
•
In case of internal orders Launching order. This includes: machinery preparation and tooling changes.
Operations Management
Cr: Breakup cost
• It appears when we need an article and it is not available.
• Proportional to the unsatisfied market demand.
• Includes: Breakup in internal supplies: Machinery stops due to lack of material. Costs are incremented due to acceleration of the production process (overtime hours, subcontracting) Breakup in customer orders: loss of sales, company image,... Operations Management
Ca: Acquisition cost
• It is the purchase cost (in external orders) or production cost (in internal orders) of the lots required.
• Independent of the lot size and number of orders. Sometimes this is NOT accurate : discounts for quantities, lower production costs for higher batches.
Operations Management
Supply time
• Interval of time that passes from the request of a materials order to the moment that the order material is available to be used (after inspection and storage). – External supply – Internal supply
Operations Management
External supply time
• It’s determined based on: – Supplier compromise – Past supplier behaviour – Security time
• The company looses control over it. It depends on the supplier.
Operations Management
Internal supply times
• Order preparation time: Necessary time to prepare the order documentation and to send to the workplace.
• Travelling and transport time: Travelling of materials to the workplace, transfer of intermediate products to the workplace and transfer of final products to workplace.
• Queue time: Waiting time of the material in the workplace before it enter the production process.
Operations Management
Internal supply times
• Preparation time in the workplace to carry out the order.
• Execution time of the order. • Waiting time: Time that passes from the end of the production process until the lot is transferred to another workplace or to the warehouse.
• Inspection time.
Operations Management
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