SHOJON_MGT311_2

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cover page will NOT be accepted. Learning Outcomes: Understand fundamental supply chain management concepts.Apply knowledge to evaluate and manage an effective supply chain.Understand the foundational role of logistics as it relates to transportation and warehousing.How to align the management of a supply chain with corporate goals and strategies. Go through the given case scenario Choose an organization operating in any part of the globe (preferably a super market, hyper market chain (or) a fast-food industry or an electronics equipment manufacturer/distributor, automobile manufacturer or automotive parts or retail products / services. The organization that you choose should either manufacture or market or distribute some products / services. The competition in these businesses majorly depends upon price, quality, timely delivery and service (which are core aspects of Supply Chain Management). Hence there is immense pressure on all the organizations in these businesses to keep the four aspects mentioned to their supreme best. As these businesses are the most emerged industries in the recent past, the supply chain has seen huge transformations. These businesses are getting to the maturing stage and so as the transformations in the supply chain management of these business become more and more competitive, the customer gets only the best products / service. Note: In case your chosen organization is operating in many countries and deals with many products, it is enough you consider the operations in any one country and indicate some materials that are part of the business and select 2 or 3 materials out of them for providing answers to the questions given below. Students can make use of graphs, tables, illustrations, maps, pictures, images to add clarity to your answers. Examine and evaluate your chosen organization’s Supply Chain, describe its basic working, strategy used by them, key drivers for achieving an integrated supply chain. What is the SCM model used?(2MM) Go through the typical Working of the chosen Organization’s logistics process, Is there a role for reverse logistics for your chosen organization’s products / services ? If there is a role, explain the process that is applicable.(2MM) Analyse and understand the different modes of transportation employed by your chosen organization. Indicate whether the current arrangements are effective. Suggest improvements for making the transportation sustainable and new modes of transportation. (2MM) What is the Warehouse design used by the chosen organization and provide your idea on the appropriate warehouse design that will be suitable for the future. Justify your choice with proper reason. (2MM) Given the nature of the products that you have selected for your chosen organization, what is the type of Inventory management control that your chosen organization should adopt? Give reasons. (2MM) Note: You must include at least 5 references.Format your references using APA style.Each answer must not be less than 300 words Answers Answer-Answer-Answer- Answer- Answer-

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‫المملكة العربية السعودية‬
‫وزارة التعليم‬
‫الجامعة السعودية اإللكترونية‬
Kingdom of Saudi Arabia
Ministry of Education
Saudi Electronic University
College of Administrative and Financial Sciences
Assignment 2
Introduction to Operations Management (MGT 311)
Due Date: 11/11/2023 @ 23:59
Course Name:
Student’s Name:
Course Code: MGT 311
Student’s ID Number:
Semester: First
CRN:
Academic Year:2023-24-1st
For Instructor’s Use only
Instructor’s Name:
Students’ Grade:
Marks Obtained/Out of 10
Level of Marks: High/Middle/Low
General Instructions – PLEASE READ THEM CAREFULLY
•
•
•
•
•
•
•
•
The Assignment must be submitted on Blackboard (WORD format only) via allocated
folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced
for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other
resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No
pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Learning Outcomes:
•
•
•
•
Understand fundamental supply chain management concepts.
Apply knowledge to evaluate and manage an effective supply chain.
Understand the foundational role of logistics as it relates to transportation and
warehousing.
How to align the management of a supply chain with corporate goals and
strategies.
Go through the given case scenario
Choose an organization operating in any part of the globe (preferably a super
market, hyper market chain (or) a fast-food industry or an electronics
equipment manufacturer/distributor, automobile manufacturer or automotive
parts or retail products / services.
The organization that you choose should either manufacture or market or
distribute some products / services. The competition in these businesses
majorly depends upon price, quality, timely delivery and service (which are
core aspects of Supply Chain Management). Hence there is immense pressure
on all the organizations in these businesses to keep the four aspects mentioned
to their supreme best.
As these businesses are the most emerged industries in the recent past, the
supply chain has seen huge transformations. These businesses are getting to
the maturing stage and so as the transformations in the supply chain
management of these business become more and more competitive, the
customer gets only the best products / service.
Note: In case your chosen organization is operating in many countries
and deals with many products, it is enough you consider the operations
in any one country and indicate some materials that are part of the
business and select 2 or 3 materials out of them for providing answers to
the questions given below.
Students can make use of graphs, tables, illustrations, maps, pictures,
images to add clarity to your answers.
1. Examine and evaluate your chosen organization’s Supply Chain,
describe its basic working, strategy used by them, key drivers for
achieving an integrated supply chain. What is the SCM model used?
(2MM)
2. Go through the typical Working of the chosen Organization’s logistics
process, Is there a role for reverse logistics for your chosen
organization’s products / services ? If there is a role, explain the process
that is applicable. (2MM)
3. Analyse and understand the different modes of transportation employed
by your chosen organization. Indicate whether the current arrangements
are effective. Suggest improvements for making the transportation
sustainable and new modes of transportation. (2MM)
4. What is the Warehouse design used by the chosen organization and
provide your idea on the appropriate warehouse design that will be
suitable for the future. Justify your choice with proper reason. (2MM)
5. Given the nature of the products that you have selected for your chosen
organization, what is the type of Inventory management control that
your chosen organization should adopt? Give reasons. (2MM)
Note:
•
•
•
You must include at least 5 references.
Format your references using APA style.
Each answer must not be less than 300 words
Answers
1. Answer2. Answer3. Answer4. Answer-
5. Answer-
Chapter 1:
Introduction to Operations
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Chapter 1 Learning
Objectives
•LO 1.1 Define operations and supply chain management.
•LO 1.2 Review the role of operations in the firm and the economy.
•LO 1.3 Describe the five main decisions made by operations and supply chain
managers.
•LO 1.4 Explain the nature of cross-functional decision making with operations.
•LO 1.5 Describe typical inputs and outputs of an operations transformation
system.
•LO 1.6 Analyze trends in operations and supply chain management.
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ALL RIGHTS RESERVED.
1-2
Definition of Operations
Management
Operations management
focuses on decisions for the
internal production of the
firm’s products or services.
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1-3
A Typical Supply Chain
(Figure 1.1)
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1-4
Operations and Supply Chain
Management
Deals with the sourcing,
production, and distribution of the
product or service along with
managing the relationships with
supply chain partners.
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1-5
Importance of
Operations and Supply Chain
Providing the
products and
services that we
use and enjoy
Sustaining our
way of life while
working to
protect the planet
Constantly
improving both
productivity and
innovation
Creating revenue
from products &
services to drive
firm profitability
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1-6
Role of Operations in the
Economy
Gross Domestic Product (GDP) – monetary value of all goods
and services produced in a country.
Productivity – value of goods/services output, relative to input.
Productivity =
output
capital + labor
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1-7
Productivity Example
A retail (quick) clinic has the following output (revenue) and labor expenses.
Did productivity improve from Year 1 to Year 2? (assume equivalent capital costs)
Year 1
Annual
Year 2 Inflation
Output (revenue) $thousands
Labor $thousands
$280
$842
$292
$883
4%
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2%
1-8
Productivity Example Solution
A retail (quick) clinic has the following output (revenue) and labor expenses.
Did productivity improve from Year 1 to Year 2? (assume equivalent capital costs)
Productivity year 1 = Output year 1 = 842 = 3.01
Labor year 1
280
Productivity year 2 = Output year 2 = 883(.98) = 3.09
Labor year 2
292(.96)
Change in productivity = 3.09 = 1.027 which is a 2.7% increase
3.01
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1-9
Why Study Operations
Management?
Challenging and interesting career
opportunities – domestic, international
Cross-functional nature of decisions
– what every major needs to know
Principles of process thinking can be
applied across the organization
ammentorp/123RF
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1-10
Careers in
Operations and Supply Chain
Management
Supply Chain Analyst
Supply Chain Analytics
Plant Lead on Sustainability
Sourcing Specialist
Global Sourcing Analyst
Transportation Planner
Risk Consultant
NetPics/Alamy Stock Photo
Customs Specialist
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1-11
3 Aspects of
Operations and Supply Chain
Management
Decisions:
The operations manager must decide:
• Process, quality, capacity, inventory, and supply chain
Function:
Major functional areas in organizations:
• Operations, marketing, finance
Process:
Planning and controlling the transformation process and its interfaces
(internal/external)
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1-12
Let’s Manage Operations
at Pizza USA!
Steve Mason/Getty Images
Managing operations
is about making decisions.
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1-13
Major Decisions at Pizza
USA
Process
◦ How should we produce pizzas?
Quality
◦ How do we meet quality standards and ensure a good customer experience?
Capacity
◦ How much output do we need at various times?
Inventory
◦ Which ingredients, when & how much?
Supply Chain
◦ How to source inputs and manage logistics?
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1-14
Framework for Operations
Decisions (Figure 1.2)
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1-15
Cross-Functional Decision
Making
Operations is critical in every firm.
Marketing = create demand
Operations = produce and distribute goods and services
Finance = acquire and allocate capital
Supporting functions: human resources, information systems, accounting
Cross-functional decision making – see Table 1.2
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1-16
Operations as a Process
Inputs
Transformation
(Conversion)
Process
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Outputs
1-17
Operations as a Process
(Figure 1.3)
Energy
Materials
Labor
Capital
Transformation
(Conversion)
Process
Goods or
Services
Information
Feedback information for
control of process inputs
and process technology
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1-18
Transformation Process
Examples (Table 1.3)
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1-19
Trends in
Operations and Supply Chain
Management
▪ Sustainability – triple bottom line
▪ Services
▪ Digital Technologies
▪ Integration of Decisions Internally and Externally
▪ Globalization of Operations and the Supply Chain
StreetVJ/Shutterstock
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1-20
Chapter 1 Summary
•LO 1.1 Define operations and supply chain management.
•LO 1.2 Review the role of operations in the firm and the economy.
•LO 1.3 Describe the five main decisions made by operations and supply chain
managers.
•LO 1.4 Explain the nature of cross-functional decision making with operations.
•LO 1.5 Describe typical inputs and outputs of an operations transformation
system.
•LO 1.6 Analyze trends in operations and supply chain management.
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1-21
Questions for Discussion
•What do you hope to learn in this course?
•Review the operations and supply chain trends on slide 1-20. Which of
these is most interesting to you and why?
•What production systems have you seen in person? How do they
produce the intended product or service?
•Describe a transformation process that you recently experienced. Think
about a medical or dental clinic visit, or a restaurant visit.
•Why are global factors important in operations and supply chain?
•How is operations and supply chain related to environmental
responsibility?
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1-22
Chapter 2:
Operations and Supply Chain Strategy
McGraw-Hill Education
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Chapter 2 Learning
Objectives
LO 2.1 Define operations strategy.
LO 2.2 Describe the elements of operations strategy and alignment with business
and other functional strategies.
LO 2.3 Differentiate the ways to compete with operations objectives.
LO 2.4 Compare product imitator and innovator strategies.
LO 2.5 Explain the nature of global operations and supply chains.
LO 2.6 Analyze two types of supply chain strategies.
LO 2.7 Illustrate how operations and supply chain can become more sustainable.
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2-24
Operations Strategy
“A consistent pattern of business decisions for operations and the
associated supply chain …
… that are linked to the business strategy and other functional
strategies, leading to a competitive advantage for the firm.”
The operations strategy at Southwest
Airlines includes using only one type of
airplane.
This lowers staff training and
maintenance costs, and reduces on
hand spare parts.
These decisions support the business
strategy of being a low cost carrier.
Markus Mainka/123RF
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2-25
Operations
Strategy
Process (Figure 2.1)
Corporate strategy
Operations Strategy
Mission
Objectives: (cost, quality,
delivery, flexibility, sustainability)
Strategic Decisions: (process,
quality, capacity, inventory, supply chain)
Functional strategies in
marketing,
finance,
engineering,
human resources,
and
information systems
Distinctive
Competence
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2-26
Operations Strategic Objectives
Cost – resources used
Quality – conformance to customer expectations
Delivery – quickly and on time
Flexibility – ability to rapidly change operations
Sustainability – environmental, social, economic
How do firms
use these
objectives to
gain
competitive
advantage?
What tradeoffs exist
among the
objectives?
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2-27
Examples of Important
Strategic Decisions in Operations
(Table 2.2)
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2-28
Distinctive Competence
This operations capability is something an
organization does better than any
competing organization that adds value for
the customer.
Examples:
• patents, proprietary technology,
operations innovations
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2-29
Linking Operations to Business
Strategy
Business strategy alternatives
◦ Product Imitator
◦ Operations must focus on keeping costs low.
◦ Product Innovator
◦ Operations must maintain flexibility in processes, labor, and suppliers.
Customer perspective
◦ Order Qualifier
◦
Objective that must be delivered at an acceptable level for customer to consider
product/service. Can be an order loser if not met.
◦ Order Winner
◦
Objective that causes customer to choose a particular product/service.
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2-30
Linking Operations to Business
Strategy
◦ Product Imitator
◦ Order Winner = price (low cost)
◦ Order Qualifiers = flexibility, quality, delivery
◦ Product Innovator
◦ Order Winner = flexibility (rapid introduction of new products)
◦ Order Qualifiers = cost, delivery, quality
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2-31
Example:
McDonald’s Operations Strategy
Mission
fast product/service, consistent quality, low cost, clean/friendly environment
Operations Objectives
cost, quality, service
Strategic Decisions
process, quality, capacity, inventory, supply chain
Distinctive Competence
today: continuous improvement of the transformation system, and brand
(originally: unique service/supply chain)
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2-32
Characteristics of “Global
Corporations”
 Facilities located worldwide, not country by country.
 Products & services can be shifted among countries.
 Sourcing on a global basis.
 Supply chain is global in nature.
 Product design & process technology are global.
 Products/service fit global tastes.
 Demand is considered on worldwide basis.
 Logistics & inventory control is on worldwide basis.
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2-33
Supply Chain Strategy
To achieve competitive advantage for entire supply chain, rather
than individual entities.
Two supply chain strategies:
◦ Imitative Products (e.g. commodities)
◦ Predictable demand
◦ Efficient, low-cost supply chain
◦ Innovative Products (e.g. new technologies)
◦ Unpredictable demand
◦ Flexible, fast supply chain
Firms design supply chain for each product/service or group of
products/services
◦ Avoid “one size fits all” strategy
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2-34
Supply Chain Strategy (Table
2.4)
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2-35
Sustainability is in Operations
Operations Sustainability:
* minimizing or eliminating environmental impact of operations
* social and financial viability of the firm for future generations
Operations ‘greening’ may include:
◦ Curtailing air, water, landfill pollution
◦ Reducing energy consumption
◦ Minimizing transportation and total carbon footprint
◦ Working with suppliers to use recyclable and biodegradable packaging
◦ Incorporating product reuse, end-of-life return, recycling
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2-36
TEA/123RF
British retailer Marks & Spencer has met goals to
send zero waste to landfills and is the first major
retailer to be carbon neutral.
Supply chain partners have been an important
source of support for this effort.
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Chapter 2 Summary
LO 2.1 Define operations strategy.
LO 2.2 Describe the elements of operations strategy and alignment with business
and other functional strategies.
LO 2.3 Differentiate the ways to compete with operations objectives.
LO 2.4 Compare product imitator and innovator strategies.
LO 2.5 Explain the nature of global operations and supply chains.
LO 2.6 Analyze two types of supply chain strategies.
LO 2.7 Illustrate how operations and supply chain can become more sustainable.
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2-38
Questions for Discussion
•Describe operations strategy in your own words.
•What is the relationship between a firm’s business strategy and its
operations strategy?
•Think of examples of manufacturing and service firms that pursue the
operations objectives of cost, quality, delivery, flexibility, sustainability.
•How do Apple’s operations and supply chain characteristics support their
product innovator strategy?
•What are some operations or supply chain challenges facing global
corporations?
•Describe recent examples you have seen in person or in the media that
illustrate how operations is closely tied to environmental, social, and
financial sustainability.
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2-39
Chapter 3:
Product Design
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3-40
Chapter 3 Learning
Objectives
LO 3.1 Compare the three strategies for new product introduction.
LO 3.2 Describe the three phases of new product development.
LO 3.3 Evaluate how concurrent engineering deals with misalignment.
LO 3.4 Describe the criteria for selecting suppliers for collaboration.
LO 3.5 Evaluate an example of Quality Function Deployment.
LO 3.6 Explain the benefits of modular design.
McGraw-Hill/Irwin
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3-41
Product Design:
Why Does Operations Care?
In the past: Throw product design “over the wall”
Today:
◦ Must be able to produce the product (design the process)
◦ technology
◦ availability of resources
◦ Must have the right type and amount of capacity
◦ Must deliver a quality product or service
◦ Must have right inventory at right time
The LEGO Group is investing over $100 million
and hiring 100 workers to redesign its product.
The goal is to make the product entirely from
plant or recycled materials by 2030.
McGraw-Hill/Irwin
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Milosh Kojadinovich/12RF
3-42
Strategies for New Product
Introduction
Market Pull: “Make what we can sell”
◦ Organize resources to fulfill customer demand
◦ Food industry
Technology Push: “Sell what we can make”
◦ Develop superior technologies and products
◦ Electronics
Interfunctional View: most difficult
◦ Cross-functional design team – marketing, engineering, operations, finance
◦ Challenge to gain cooperation of all functions
◦ Consider existing and new markets
McGraw-Hill/Irwin
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3-43
McGraw-Hill/Irwin
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3-44
New Product Development
Process
Concept Development
◦ Idea generation and evaluation of alternative ideas
Product Design
◦ Design of the physical product
◦ Design of the production process
Pilot Production/Testing
◦ Testing production prototypes (e.g., 3D printing)
Shutterstock/Gorodenkoff
◦ Finalizing production process
◦ Finalizing ‘information package’ specifying product and process design details
McGraw-Hill/Irwin
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3-45
New Product Design Process
(Figure 3.2)
Concept development
McGraw-Hill/Irwin
Product design
Preliminary process design
Pilot production/testing
Final process design
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3-46
Production Prototypes
Robert Clark/Getty Images
3D Printing or Additive Manufacturing
–
McGraw-Hill/Irwin
Creates physical prototype
Allows rapid production of prototype designs
Software and hardware continue to improve
Now possible to print metal and human cells
Speeds entire product design process
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47
Cross-Functional Product
Design
Sequential approach
◦ Functions (marketing, engineering, operations) work independently
before passing work to next step. This is the ‘over the wall’ approach.
◦ Often results in misalignment of market needs, design, and production
process.
Concurrent approach
◦
◦
◦
◦
McGraw-Hill/Irwin
Also called concurrent engineering.
Functions cooperate, work together over the same time frame.
Cross-functional teams are common.
Not always “best” approach (e.g. high uncertainty of market or
technology).
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3-48
Cross-Functional Product
Design (Figure 3.3)
McGraw-Hill/Irwin
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3-49
Supply Chain Collaboration
Relationships with Customers
◦ Ask right questions
◦ Align incentives to share knowledge
◦ Create collaborative technology platform
◦ Include as advisors to design team
McGraw-Hill/Irwin
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3-50
Supply Chain Collaboration
Relationships with Suppliers
◦ Technical expertise
◦ Capabilities – cost, time, quality targets
◦ Capacity availability
◦ Low risk
McGraw-Hill/Irwin
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3-51
Quality Function Deployment
(QFD)
“House of Quality”
Tool for coordinating and communicating between functions
Helps identify tradeoffs
Customer Attributes
“Voice of the
Customer”
McGraw-Hill/Irwin
Engineering Characteristics
“Voice of the
Engineer”
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3-52
House of Quality (QFD) (Figure
3.4)
McGraw-Hill/Irwin
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3-53
House of Quality
(Figure(QFD)
HOUSE(QFD)
OF QUALITY
3.5)
McGraw-Hill/Irwin
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3-54
HOUSE
QUALITY (QFD)
QFD for Pizza
USAOF
Delivery
(Figure 3.6)
McGraw-Hill/Irwin
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3-55
Modular Design
Allows greater product variety through ‘mixing and
matching’ modules
Design, develop, and manage basic components
(modules) to (re)use in multiple products
Controls costs while enabling customer choice
Small number of components creates large number of
combinations, e.g., Dell notebooks, IKEA cabinets
McGraw-Hill/Irwin
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3-56
Modular Design
Most automobile manufacturers use modular design.
MINI Cooper’s basic model has
many choices:
◦ 4 body colors
◦ 3 wheel designs
◦ 8 interior finishes
◦ 2 engines
◦ 11 styles
The theoretical number of different
cars that can be produced:
4 × 3 × 8 × 2 × 11 = 2112
McGraw-Hill/Irwin
Robert Wilson/123RF
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Chapter 3 Summary
LO 3.1 Compare the three strategies for new product introduction.
LO 3.2 Describe the three phases of new product development.
LO 3.3 Evaluate how concurrent engineering deals with misalignment.
LO 3.4 Describe the criteria for selecting suppliers for collaboration.
LO 3.5 Evaluate an example of Quality Function Deployment.
LO 3.6 Explain the benefits of modular design.
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Questions for Discussion
•Can you think of examples of new products that did not function well for
the customers who bought them? What went wrong?
•Describe what can happen if product design and process design are
approached separately by different work teams.
•What are the key activities in pilot production?
•What do you know about 3D printing? 4D printing?!
•What do marketing, finance, and HR do when they are involved in a crossfunction concurrent engineering team?
•How can suppliers be involved in new product development?
•Can you think of products you own that include modular design
elements?
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Chapter 4:
Process Selection
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Chapter 4 Learning
Objectives
LO 4.1 Contrast and compare the five types of product-flow processes.
LO 4.2 Describe the differences among order fulfillment processes.
LO 4.3 Explain how companies should make process selection decisions.
LO 4.4 Correctly place examples of products on the product-process matrix.
LO 4.5 Describe the features of focused operations.
LO 4.6 Discuss the uses of mass customization and 3D printing.
LO 4.7 Contrast pollution prevention, pollution control and pollution practices.
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Product-Flow Characteristics
Types of Product Flow
◦ Continuous process
◦ Assembly line
◦ Batch flow
◦ Job shop
◦ Project
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Product-Flow Characteristics:
Continuous Process
Highly standardized and automated
Flexibility limited
High volumes of production
Commodity products
Low cost is the ‘Order Winner’
Process industries (sugar, paper, oil, electricity, etc.)
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Product-Flow Characteristics:
Assembly Line
Linear sequence of operations (often paced)
Large capital investment, use of automation
Very efficient
High-volume, standardized products
Low flexibility to product and volume changes
Discrete products (autos, appliances, computers, etc.)
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Assembly Line: Metal Bracket
(Figure 4.1)
cut
drill
bend
paint
Task or work station
Product flow
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Product-Flow Characteristics:
Batch Flow
Production of batches or lots
Batches flow as a unit (set) from one work center to another
Process layout of work centers (by tasks)
Flow is jumbled and intermittent
Flexible labor and equipment (general purpose)
Low to high volume, variety of products
Many types of products (furniture, dishes, boats)
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Batch Flow: Metal Brackets (Figure
4.2)
Bend
Paint
Cut
Batch A
Batch B
Batch C
Drill
Task or work station
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Product flows
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Product-Flow Characteristics:
Job Shop
Customized to customer order
Production of small batches or lots
Layout/flow similar to Batch Flow
Flexible labor and equipment (general purpose)
Many types of made-to-order products (plastic parts, machine
components, sheet metal parts, custom signs, artificial limbs, etc.)
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Product-Flow Characteristics:
Project
Production of customized single products
Labor and materials brought to site
Planning, scheduling challenges
Little automation, general purpose equipment
Highly skilled and flexible labor
Unique, one of a kind products (bridges, building construction, large
aircraft, etc.)
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Throughput Ratio: Process
efficiency
TR =
Total processing time for the job
X 100%
Total time in operations
Typically:
90-100% in continuous process & assembly line
10-20% in batch flow & job shop
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Order Fulfillment
Make-to-Stock (MTS)
Make-to-Order (MTO)
Assemble-to-Order (ATO)
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Make-to-Stock (MTS)
•Produce finished goods according to production schedule
•Customer buys from inventory
Advantage
Faster fulfillment of
customer demand,
lower cost, smooth
production rate
Disadvantage
Inventory holding costs,
slower to respond to
changes in customer
preferences
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Make-to-Stock (Figure
4.3)
Forecast
orders
Customer
Product
Customer
order
Finished goods
inventory
Product
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Production
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MTS Performance Measures
Service level (orders filled when requested)
Inventory replenishment time
Inventory turnover (sales/avg. inventory)
Capacity utilization
Time to fill back order
Others, such as shrinkage rate
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Make-to-Order (MTO)
Start production after customer orders
No finished goods inventory
Advantage
Higher flexibility to customize
order; no finished goods
inventory costs
Disadvantage
Intermittent production (i.e.,
lumpy demand pattern),
slower response to customer
demand
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Make-to-Order (Figure
4.3)
Customer
Customer order
Product
Production
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MTO Performance Measures
Lead time
Orders completed on time (%)
Customer request date
Promise date
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Assemble-to-Order (ATO)
Produce parts and subassemblies (modules); complete production
when customer places order
Advantage
Less finished goods
inventory, faster fulfillment
of customer order
Disadvantage
Work-in-process
inventory
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Assemble-to-Order (Figure
4.3)
Forecast
orders
Customer
Product
Customer
order
Order
assembly
Holding inventory
of subassemblies
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Production of
subassemblies
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MTS and MTO Comparison
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Order Penetration Point (Figure
4.4)
MTO
∇———-∇
Raw
materials
MTO
ATO
∇
Fabrication
MTS
∇
Assembly
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Distribution
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Process Selection Decisions
Produce how?
Produce when?
Continuous process
Assembly line
Batch flow
Job shop
Project
MTS
MTO
ATO
Factors affecting process choice
◦ Market conditions
◦ Capital requirements
◦ Availability and cost of labor
◦ Technology options
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Process Characteristics Matrix
(Table 4.2)
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Product-Process Strategy
Strategy must consider:
◦ Product characteristics
◦ Process capabilities
Product life cycle:
◦ Often begins in Job shop, then Batch flow, then Continuous/Assembly line.
Example:
◦ Bread was first produced by hand in individual units in traditional bakeries. It
is now produced in very large batches in modern automated bakeries.
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