131 terms

Production Management


Terms in this set (...)

Human Resource Strategy
The object of human resource strategy is to manage labor and design jobs so people are effectively and efficiently utilized
Ensure that...
1) People are effectively utilized
2) Have a reasonable quality of work life
Employment Stability Policies
1) Follow demand exactly
2) Hold employment constant
Follow demand exactly
-Matches labor costs to production
-incurs cost of hiring, termination, unemployment insurance, and premium wages
-Labor is treated as a variable cost
Hold employment constant
Standard Work schedule - 8 hour work days 5 days a week
Flextime - allows employees within reason to set their own schedule
Flexible Work Week - fewer days but longer hours
Job Classification and Work Rules
-Specify who can do what
-When they can do it
-Under what conditions they can do it
-often result of union contract
-restricts flexibility in assignments and consequently efficiency of product
Job Design
-Specifying the tasks that constitute a job for an individual or a group
1. Job Specialization
2. Job Expansion
3. Psychological Components
4. Self directed work teams
5. Motivation and incentive systems
Labor Specialization
Division of labor into unique tasks
Job Expansion
Adding more variety to jobs
Intended to reduce boredom associated with labor specialization
Psychological Components
Hawthorne Studies
They studied light levels, but discovered productivity improvement was independent from lighting levels
Introduced psychology into the workplace
The workplace social system and distinct roles played by individuals may be more important than physical factors
Individual differences may be dominant in job expectation and contribution
Core Job Characteristics
Jobs should include the following
-skill variety
-job identity
-job significance
Self Directed Work Teams
employee empowerment
Benefits of Teams
improved quality of work life, job satisfaction, motivation, productivity, and quality
employees get more responsibility
Reduced turnover and absenteeism
Limitations of Job Expansion
1. Higher capital cost
2. Individuals may prefer simple jobs
3. Higher wage rates for greater skill
4. smaller labor pool
5. Higher training costs
Motivation and Incentives
Profit sharing
Gain sharing
Incentive plans
Knowledge based systems
designing tools and machines that facilitate human work
Method Analysis
-Focuses on how tasks are performed
1. movement of individuals or materials
2. Activities of human and machine crew
3. Body movement
Visual Workplace
-Visual signs can take many forms and serve many functions
1. Present big picture
2. Performance
3. Housekeeping
Labor Standards
-Effective manpower planning is dependent on knowledge about labor required
-Labor standards are the amount of time required to perform a job or part of a job
-Accurate labor standards help determine labor requirements, costs, and fair work
-Important in manufacturing and service and for incentives
Meaningful Standards Help Determine....
1. Labor content of items produced
2. staffing needs
3. Cost and time estimates
4. crew size and work balance
5. expected production
6. basis for wage incentive plans
7. efficiency of employees
Labor Standards
May be set in four ways
1. historical experience
2. time studies
3. predetermined time standards
4. Work sampling
Work Sampling
-Estimates percent of time a worker spends on various tasks
-Requires random observations to record worker activity
-Determines how employees allocate their time
-Can be used to set staffing levels, reassign duties, estimate costs, and set delay allowances
Work Sampling Steps
1. Take preliminary sample to obtain estimates of parameter values
2. Compute the sample size required
3. Prepare a schedule for random observations at appropriate times
4. Observe and record worker activities
5. Determine how workers spend their time
-Less expensive than time study
-Observe and Record worker activities
-Determine how workers spend their time
-Does not divide work elements as completely as time study
-Can yield biased results if observe does not follow a random pattern
-Less accurate, especially when job element times are short
Be fair and equitable
Important issues equal opportunity, equal pay for equal work, and safe working conditions
Helpful to work with government agencies, trade unions, insurers, and employees
Supply Chain Management
The objective of Supply Chain Management is to coordinate activities within the supply chains competitive advantage and benefits to the ultimate consumer
Strategic Importance of SCM
-Coordination of all supply chain activities starting with raw materials and ending with a satisfied customer
-Includes suppliers, manufactures, and or service providers, distributors, wholesalers, retailers, and final customer
-large portion of sales dollars spent on purchasing
-supplier relationships increasingly integrated and long term
improve innovation, speed, design, and reduces cost
-managing supplier relationships has added emphasis
Sourcing Issues
-Make or Buy vs Outsourcing
Efficiency in specialization
Focus on Core Competencies
Six Sourcing Strategies
Many Suppliers
Few Suppliers
Vertical Integration
Joint Venture
Keiretsu Networks
Virtual Companies
Many Suppliers
-Commodity products
-Buying based on price
-Suppliers compete with one another
-Suppler is responsible for technology, expertise, forecasting, cost, quality, and delivery
Few Suppliers
-Buyer forms long term relationship with few suppliers
-Create value through economies of scale and learning curve improvement
-Suppliers more likely to participate in JIT, contribute to design, and technological expertise
-Cost of changing suppliers is huge
-Trade secrets and other alliances
Vertical Integration
-May be forward towards consumers and backwards to suppliers
-Can improve costs, quality, and inventory but requires a lot of capital managerial skills and demand
-Risky in industries with rapid technological change
Joint Venture
Formal Collaboration
-Enhanced skills
-Secure supply
-Reduce costs
Cooperation without diluting brand or conceding competitive advantage
Keiretsu Networks
-A middle ground between few suppliers and vertical integration
-Supplier becomes part of the company coalition
-Often provide financial support for suppliers through ownership
-Members expect long term relationships and provide technical expertise and stable deliveries
-May extend through several levels of the supply chain
Virtual Companies
-Rely on variety of suppliers to provide services on demand
-Fluid organizational boundaries that allow the creation of unique enterprise to meet changing market demands
-Relationships may be short or long term
-Lean performance, low capital investment, flexibility, and speed
Supply Chain Risk
-More reliance means more risk
-Fewer suppliers increases dependence
-Compounded by globalization and logistical complexity
-Vendor reliability and quality risk
-Political and currency risks
Risk and Mitigation
-Research and assess possible risks
-Innovative planning
-Reduce potential disruptions
-Prepare responses for negative events
-Flexible secure supply chains
-Diversified supplier base
Security and JIT
-Shipments get misrouted, stolen, damaged, or delayed
-Technological innovations are improving security and inventory management
-Tracking can help expediate shipments
Bullwhip Effect
occurs when orders are relayed through the supply chain increasing at each step
Managing Integrated Supply Chain (Issues)
-Local optimization can magnify fluctuations
-Incentives push merchandise into the supply chain for sales that have not occurred
-Large lots reduce shipping costs but increase inventory holding and do not reflect actual sales
Managing Integrated Supply Chain (Opportunities)
-Accurate "pull" data, shared information
-Lot size reduction, shipping, discounts, reduced ordering costs
-Single stage control of replenishment
-Single supply chain member responsible for ordering
-Vendor managed inventory (VMI)
Managing Integrated Supply Chain (Opportunities)
-Collaborative planning, forecasting, and replenishment (CPFR) through the supply chain
-Blanket orders against which actual orders are released
Managing Integrated Supply Chain (Opportunities)
-Postponement withholds modification as long as possible
-Electronic ordering and funds transfer speed transactions and reduce paperwork
-Drop shipping and special packaging bypasses the seller and reduces costs
Building Supplier Base
-Supplier Evaluation
-Supplier Development
Building Supplier Base (Supplier Eval.)
-Supplier evaluation
-Finding potential suppliers
-Determine likelihood of their becoming good suppliers
-Supplier certification
1. Qualification
2. Education
3. Certification
Building Supplier Base (Supplier Development)
Integrate the supplier into the system
-Quality requirements
-Product specifications
-Schedules and delivery
-Procurement policies
-Engineering and production help
-Information transfer procedures
Building Supplier Base (Negotiations)
-A significant element in purchasing
-Highly valued skills
+Cost-based price model
+Supplier opens books
-Market-based price model
+Based on published, auction, or indexed prices
-Competitive bidding
+Common policy for many purchases
+Does not generally foster long-term relationships
Building Supplier Base (Contracting)
Share risks, benefits, create incentives
Centralized purchasing
-Leverage volume
-Develop specialized staff
-Develop supplier relationships
-Maintain professional control
-Devote resources to selection and negotiation
-Reduce duplication of tasks
-Promote standardization
Building the Supply Base
Speeds purchasing, reduces costs, integrates supply chain
-Online catalogs and exchanges
Standard items or industry-specific web sites
-Online auctions
Low barriers to entry
Reverse auctions for buyers
Price not always the most important factor
Logistics Management
-Objective is to obtain efficient operations through the integration of all material acquisition, movement, and storage activities
-Is a frequent candidate for outsourcing
-Allows competitive advantage to be gained through reduced costs and improved customer service
Third Party Logistics (3PL)
-Outsourcing logistics can reduce inventory, costs, and improve delivery reliability and speed
-Coordinate supplier inventory with delivery services
-May provide warehousing, assembly, testing, shipping, customs
Shipping Systems
Moves the vast majority of manufactured goods
Chief advantage is flexibility
Capable of carrying large loads
Little flexibility though containers and piggybacking have helped with this
Shipping System (Continued)
Fast and flexible for light loads
May be expensive
Typically used for bulky, low-value cargo
Used when shipping cost is more important than speed
Shipping Systems (Continued)
Used for transporting oil, gas, and other chemical products
Combines shipping methods
Common, especially in international shipments
Aided by standardized containers
Cost and Speed of Shipments
-Faster shipping is generally more expensive than slower shipping
-Faster methods tend to involve smaller shipment sizes while slower methods involve very large shipment sizes
-May be expensive, but alternatives may be more so
-Fundamental purpose is to store goods
-May provide other functions
Channel assembly
Distribution Management
-The outbound flow of products
1. Rapid response
2. Product choice
3. Service
Increasing the number of facilities generally improves response time and customer satisfaction
Total costs are important
Distribution Management (Continued)
Facilities, packaging, and logistics
Selection and development of dealers or retailers
Downstream management as important as upstream management
Ethics and Sustainable Supply Chain Management
Personal ethics
-Critical to long term success of an organization
-Supply chains particularly susceptible
Ethics within the supply chain
Ethical behavior regarding the environment
Institute for Supply Chain Management Principles and Standards
-Promote and uphold responsibilities to one's employer
-Avoid perceived impropriety
ISM Ethical Standards
Perceived Impropriety
Prevent the intent and appearance of unethical or compromising conduct in relationships, actions and communications
Conflicts of Interest
Ensure that any personal, business or other activity do not conflict with the lawful interests of your employer
Issues of Influence
Ensure that any personal, business or other activity do not conflict with the lawful interests of your employer
Responsibilities to Your Employer
Uphold fiduciary and other responsibilities using reasonable care and granted authority to deliver value to your employer
Supplier and Customer Relationships
Promote positive supplier and customer relationships
Sustainability and Social Responsibility
Champion social responsibility and sustainability practices in supply management
Confidential and Proprietary Information
Protect confidential and proprietary information
Avoid improper reciprocal agreements
Applicable Laws, Regulations, and Trade Agreements
Know and obey the letter and spirit of laws, regulations and trade agreements applicable to supply management
Professional Competency
Develop skills, expand knowledge and conduct business that demonstrates competence and promotes the supply management profession
Establishing Sustainability in the Supply Chain
-Return or reverse logistics
*Sending returned products back up the supply chain for resale, repair, reuse, remanufacture, recycling, or disposal
-Closed-loop supply chain
*Proactive design of a supply chain that tries to optimize all forward and reverse flows
*Prepares for returns prior to product introduction
-Benchmarking useful
-May not be adequate
-Audits may be necessary
*Continuing communication, Understanding, Trust, Performance, Corporate strategy
-Foster a mutual belief that "we are in this together"
Chapter 12
Inventory Management
The objective of inventory management is to strike a balance between inventory investment and customer service
Importance of Inventory Management
-One of the most expensive assets of many companies representing as much as 50% of total invested capital
-Operations managers must balance inventory investment and customer service
Functions of Inventory
1. To provide a selection of goods for anticipated demand and to separate the firm from fluctuations in demand
2. To decouple or separate various parts of the production process
3. To take advantage of quantity discounts
4. To hedge against inflation
Types of Inventory
-Raw material
Purchased but not processed
-Work-in-process (WIP)
Undergone some change but not completed
A function of cycle time for a product
-Maintenance/repair/operating (MRO)
Necessary to keep machinery and processes productive
-Finished goods
Completed product awaiting shipment
Managing Inventory
-How inventory items can be classified (ABC analysis)
-How accurate inventory records can be maintained
ABC Analysis
-Divides inventory into three classes based on annual dollar volume
Class A - high annual dollar volume
Class B - medium annual dollar volume
Class C - low annual dollar volume
-Used to establish policies that focus on the few critical parts and not the many trivial ones
ABC Analysis
-Other criteria than annual dollar volume may be used
High shortage or holding cost
Anticipated engineering changes
Delivery problems
Quality problems
ABC Analysis
-Policies employed may include
1. More emphasis on supplier development for A items
2. Tighter physical inventory control for A items
3. More care in forecasting A items
Record Accuracy
Accurate records are a critical ingredient in production and inventory systems
Periodic systems require regular checks of inventory
Two-bin system
Perpetual inventory tracks receipts and subtractions on a continuing basis
May be semi-automated
Record Accuracy
I-ncoming and outgoing record keeping must be accurate
-Stockrooms should be secure
-Necessary to make precise decisions about ordering, scheduling, and shipping
Cycle Counting
-Items are counted and records updated on a periodic basis
-Often used with ABC analysis
Cycle Counting Advantages
-Has several advantages
1. Eliminates shutdowns and interruptions
2. Eliminates annual inventory adjustment
3. Trained personnel audit inventory accuracy
4. Allows causes of errors to be identified and corrected
5. Maintains accurate inventory records
Control of Service Inventories
-Can be a critical component of profitability
-Losses may come from shrinkage or pilferage
Techniques for Controlling Service Inventories
Applicable techniques include
1. Good personnel selection, training, and discipline
2. Tight control of incoming shipments
3. Effective control of all goods leaving facility
Inventory Models
Independent demand
Dependent demand
Holding costs
Ordering costs
Setup costs
Independent Demand
the demand for item is independent of the demand for any other item in inventory
Dependent Demand
the demand for item is dependent upon the demand for some other item in the inventory
Holding Costs
the costs of holding or "carrying" inventory over time
Ordering Costs
the costs of placing an order and receiving goods
Setup Costs
cost to prepare a machine or process for manufacturing an order
May be highly correlated with setup time
Inventory Models for Independent Demand
-Need to determine when and how much to order
1. Basic economic order quantity (EOQ) model
2. Production order quantity model
3. Quantity discount mode
Basic Economic Order Quantity
1. Demand is known, constant, and independent
2. Lead time is known and constant
3. Receipt of inventory is instantaneous and complete
4. Quantity discounts are not possible
5. Only variable costs are setup (or ordering) and holding
5. Stockouts can be completely avoided
Robust EOQ Model
-The EOQ model is robust
-It works even if all parameters and assumptions are not met
-The total cost curve is relatively flat in the area of the EOQ
Reorder Points EOQ
-EOQ answers the "how much" question
-The reorder point (ROP) tells "when" to order
-Lead time (L) is the time between placing and receiving an orde
Minimizing Cost
-By minimizing the sum of setup (or ordering) and holding costs, total costs are minimized
-Optimal order size Q* will minimize total cost
-A reduction in either cost reduces the total cost
-Optimal order quantity occurs when holding cost and setup cost are equal
Production Order Quantity Model
1. Used when inventory builds up over a period of time after an order is placed
2. Used when units are produced and sold simultaneously
Quantity Discount Model
-Reduced prices are often available when larger quantities are purchased
-Trade-off is between reduced product cost and increased holding cost
Steps in Quantity Discount Model
1. For each discount, calculate Q*
2. If Q* for a discount doesn't qualify, choose the lowest possible quantity to get the discount
3. Compute the total cost for each Q* or adjusted value from Step 2
4. Select the Q* that gives the lowest total cost
Probabilistic Models and Safety Stock
-Used when demand is not constant or certain
-Use safety stock to achieve a desired service level and avoid stockouts
ROP = d x L + ss
Annual stockout costs = the sum of the units short x the probability x the stockout cost/unit
x the number of orders per year
Probabilistic Demand
-Use prescribed service levels to set safety stock when the cost of stockouts cannot be determined
Other Probabilistic Models
-Demand is variable and lead time is constant
-Lead time is variable and demand is constant
-When data on demand during lead time is not available, there are other models available
1. When demand is variable and lead time is constant
2. When lead time is variable and demand is constant
3. When both demand and lead time are variable
Single Period Model
-Only one order is placed for a product
-Units have little or no value at the end of the sales period
Fixed Period Systems
-Orders placed at the end of a fixed period
-Inventory counted only at end of period
-Order brings inventory up to target level
Only relevant costs are ordering and holding
Lead times are known and constant
Items are independent of one another
Fixed-Period Systems (Continued)
-Inventory is only counted at each review period
-May be scheduled at convenient times
-Appropriate in routine situations
-May result in stockouts between periods
-May require increased safety stock
Quiz 10
1) The objective of a human resource strategy is to:
A) hire the most diversified workforce possible.
B) produce the demand forecast at the lowest possible labor cost.
C) achieve a reasonable quality of work life at low cost.
D) match employment levels with demand.
E) manage labor and design jobs so people are
2) The two most basic policies associated with employment stability are:
A) employment for life and guaranteed minimum wage.
B) follow demand exactly and hold employment constant.
C) incentive plans and piece-rate plans.
D) full-time and part-time.
E) job enrichment and job enlargement.
3) One of the elements of ergonomics is
A) assembly line balancing.
B) designing tools and machines that facilitate human work.
C) the cost justification of technology.
D) allocating work time based on economic studies.
E) the establishment of time standards
4) The difference between job enrichment and job enlargement is that:
A) enriched jobs enable an employee to do a number of boring jobs instead of just one.
B) enriched jobs involve vertical expansion, while enlarged jobs involve horizontal expansion.
C) job enrichment is suitable for all employees, whereas job enlargement is not.
D) enlarged jobs involve vertical expansion, while enriched jobs involve horizontal expansion.
E) job enlargement is more psychologically satisfying than job enrichment
5) A manufacturing plant allows its engineers to come in at 7 A.M. plus or minus an hour but still requires them to work 8-hour days. Which of the following scheduling techniques is the firm employing?
A) flextime
B) compressed workweek
C) constant employment
D) flexible workweek
E) part-time status
6) The visual workplace:
A) replaces difficult-to-understand paperwork.
B) uses low-cost visual devices to share information.
C) is an effective means of rapid communication in a dynamic workplace.
D) eliminates non-value-added activities by making problems and standards visual.
E) All of the above describe the visual workplace
7) Labor standards are defined as the:
A) amount of space required by a specific crew to perform the job.
B) preset activities required to perform a job.
C) standard labor agreements.
D) standard set of procedures to perform the job.
E) amount of time required to perform a job or part of a job.
8) Labor standards can help to determine which of the following?
A) staffing needs
B) efficiency
C) labor content of a product
D) incentive plans
E) all of the above
9) Timing a sample of a worker's performance and using it as a basis for setting a standard time describes which of the following?
A) time studies
B) left-hand, right-hand charting
C) methods time measurement
D) work sampling
E) predetermined time standards
10) What is a technique for estimating the percent of time a worker spends on various tasks?
A) simultaneous motion study
B) work sampling
C) stopwatch time study
D) standard elemental (historical) times
E) predetermined (published) time standards
Quiz 11
1) Among which of the following industries are purchasing costs the LOWEST percentage of sales?
A) chemicals
B) petroleum
C) automobiles
D) restaurants
E) lumber
2) For which corporate strategy(ies) should supply chain inventory be minimized?
A) low cost
B) low cost and response
C) response
D) low cost and differentiation
E) differentiation
3) A disadvantage of the "few suppliers" sourcing strategy is:
A) the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.
B) the risk of not being ready for technological change.
C) possible violations of the Sherman Antitrust Act.
D) the high cost of changing partners.
E) the lack of cost savings for customers and suppliers.
4) Which sourcing strategy is particularly common when the products being sourced are commodities?
A) many suppliers
B) few suppliers
C) keiretsu
D) vertical integration
E) virtual companies
5) When Daimler and BMW pooled resources to develop standardized auto components, the sourcing strategy could best be described by which of the following?
A) joint venture
B) virtual companies
C) keiretsu
D) few suppliers
E) vertical integration
6) Local optimization is a supply-chain complication best described as:
A) the result of supply chains built on suppliers with compatible corporate cultures.
B) obtaining very high production efficiency in a decentralized supply chain.
C) optimizing one's local area without full knowledge of supply chain needs.
D) the prerequisite of global optimization.
E) the opposite of the bullwhip effect.
7) What are the three classic types of negotiation strategies?
A) many suppliers, few suppliers, and keiretsu
B) supplier evaluation, supplier development, and supplier selection
C) cost-based price model, market-based price model, and competitive bidding
D) traditional auctions, reverse auctions, and online exchanges
E) Theory X, Theory Y, and Theory Z
8) What are the four stages of supplier selection?
A) negotiations, contracting, centralized purchasing, and E-procurement
B) supplier evaluation, supplier development, negotiations, and centralized purchasing
C) supplier evaluation, negotiations, supplier acquisition, and supplier development
D) introduction, growth, maturity, and decline
E) supplier evaluation, supplier development, negotiations, and contracting
9) Designing distribution networks to meet customer expectations suggests what three criteria?
A) rapid response, cost, and process choice
B) rapid response, product choice, and service
C) rapid response, service, and cost
D) cost, process choice, and service
E) product choice, cost, and service
10) In supply chain management, ethical issues:
A) become more complex the more global is the supply chain.
B) are particularly important because of the enormous opportunities for abuse.
C) may be guided by the principles and standards of the Institute for Supply Management.
D) may be guided by company rules and codes of conduct.
E) All of the above are true.