A Presentation on Operations îProducing Goods and Services M.Tariq Yousafzai [email protected]
Learning Objectives
Discuss the strategic value adding roles operations play in the supply chain
Appreciate the tradeoffs and challenges involved in production operations
Understand the primary production strategies
Discuss the primary assembly processes and production methods for goods creation
Describe various production process layouts

Operations focus on the make/build portion of supply chain.
They focus on production of goods and services needed to fulfill customer requirements.

Involves the transformation of inputs into outputs that customers demands
For example Dell

In the execution of these processes, production facilities must interact with supply chain functions that have been discussed

Both manufacturers and service providers need ready access to inventories of key inputs from their suppliers.
The Role of Production Operations in SCM
Many supply chain and logistics activities focus on operations î
Procurement operations that provide access to materials;
Transportation operations that supports the floe of goods;
Distribution operations that streamline order fulfillment and so on
The Role of Production Operations in SCM continued
It takes a great deal of effort and coordination to run an effective production operation that is supported by and also supports supply chain

Consider the success of Apple iPhone. A great Product design, procurement-assembly-synchronization, and savvy marketing all contributed to the success of commercial juggernaut

Production Process Functionality
The Production Process funtionality
No two processes are organized exactly alike or perform to the same level
For example Burger King, McDonalds, and Subway each make sandwiches but have slightly different product strategies that derive their process design and assembly methods

Subway and Burger King (to a lesser extent) offer assemble-to-order products
McDonald produces products in anticipation of demand using standardized product components.

Production Tradeoffs
One of the most important issues for supply chain professional to understand is the tradeoffs involved within production operations and between production operations, other supply chain functions, and corporate strategy.
All decisions are interrelated and can impact costs, productivity, and quality in other areas.
Common tradeoffs
Volume-variety tradeoff is a primary issue in production.
In situations where production processes have high fixed costs and equipment like chemical production and paper manufacturing, it makes sense to use Volume
In contrast, processes that can produce a range of products are said to have economies of scope.
(2) Responsiveness and efficiency
Related to production facility decisions
Centralized production facilities provide operating cost and inventory efficiencies

While regional production facilities allow companies to be closer to customers and more responsive
Product focused facility and process focused facilities
Total Costs of Manufacturing
Production tradeoffs continued
Make Versus Buy decision
Whether to conduct your own production operations or to outsource production to external suppliers.

Internal production processes are more visible and easier to control from quality viewpoint
Outsourced production may lead to lower product costs and allow the company to focus its resources on other, more strategic needs.
Production Challenges
For example US automobile Industry
GM and For Needs to compete with Toyota lean production capabilities, Honda product quality,, and be responsive to low cost producers like Hyundai and Kia.
Henry Ford mass customization is out of order
What he said
Production Strategies
Lean manufacturing wastes
Adaptive manufacturing
The goal of this strategy is to provide companies with the ability to replace planning and replanning with execution based on real-time demand.
In simple words technologies in this process can enable companies to sense and respond to exceptions that impact manufacturing
Limited adoption of this technology

Assembly Processes
Products can be built either according to plan or demand
Each assembly process is appropriate for a given situation
Make-to-stock (MTS)
Traditional Production method where ent-item products are usually finished before receipt of a customer order
Customer orders filled from finished goods inventories.
Makes it cost effective and shortens lead time
Accurate forecasting and inventory control are critical issues in MTS, and warehousing of end products is the norm
ATO Assemble-to-order
Commences after receipt of order from customer
The finished product is generally a combination of standard components and options or accessories specified by the customer

In configure-to-order production processes, the manufacturer or customer selects a base product and configures all the variable parameters associated with that product. This is also known as mass customization process
BTO (Build/Make-To-Order)
Delays assembly until a confirmed order is received (postponement).
The end item is generally a combination of standard and custom-designed components that meet the unique needs of a customer
It differs from ATO in the higher level of customization and lower volume level of production.
ETO Engineer-to-Order
Focuses on the creation of highly tailored products for customers whose specifications require unique engineering design or significant customization
No two products are identical
Each order requires detailed cost estimates and tailored pricing
Long lead times
Raw materials may be stocked but are not assembled into the finished good until a customer order is received and the product is designed
Delayed Differentiation
Delayed differentiation is one hybrid strategy in which a common product platform is built to stock.
It is later differentiated by assigning to it certain customer-specific features, only after demand is realized.
Hence manufacturing occurs in two stages
(a) An MTS stage where one or more undifferentiated platforms are produced and stocked
(b) An ATO stage where product differentiation takes place in response to specific customer orders

Production Process Layout
One of the key drivers of how production activities will be carried out is facility layout.
It involves the arrangement of machines, storage areas, and other resources within the four walls of a manufacturing or an assembly facility
The layout is influenced by the production strategy and assembly process employed by organization

Facility Layout Matrix
A project layout
Is a fixed location layout where the product remains in place for the duration of production
Materials and labor are moved to production
For example
Home building
Road construction
Tunnels etc
A workcenter
A process focused layout that groups together similar equipment and or functions
The materials move from department to department for completion of similar activities and tasks

Manufacturing cell
Process focused layout that dedicates production areas to narrow range of products that are similar in processing requirements
Four activities involved in its set up
(1) Identifying families of parts with similar flow paths
(2) Grouping machines to cells based on part families
(3) Arranging cells so material movement is minimized and
(4) locating large shared machines at the point of use
Assembly Line
Product focused layout in which machines and workers are arranged according to the progressive sequence of operations need to make a product.

Often used for mass production of goods, the assembly steps are completed at workstations that are typically linked to materials handling equipment.
Continuous Process facilities
Similar to assembly lines, with a product flowing through a predetermined sequence of stops.
The main difference is the continuous, rather than discrete nature of flow.

Widely used for high volume products such as gasoline, paper towels, and soft drink concentrates
These highly automated, capital intensive facilities need to run almost nonstop to gain maximum efficiency

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