SESSION 1: INTRODUCTION

WHAT IS THE MOST IMPORTANT THING OF A COMPANY KEEP THINGS SIMPLE

“If you want different results do not keep on doing the same”

 Do not confuse being different with drawing attention

 Ex of After Fosbury (athletics). Lessons learnt:
o It was not easy: took 5 years perfect his innovation to a level sufficient to
compete  Changes in companies are difficult to implement, and evidence of
returns, sometimes is not immediately apparent
o Easier to stay the same
 Straddle technique had been used for centuries
 By implementing major changes in business, the resistors are usually
very large
o Detractors always appear:
 American Federation took 6 yrs to recommend the Fosbury Flop
despite obvious technical supremacy
 The investments in improvement projects are always subject to
criticism, and more in the post-bubble (2000) era and now the global
financial crisis
o It was not fast
 Innovation took a full decade to begin to be used extensively in this
sport
 Changes do not take place overnight
o It was efficient
 adoption of innovation rose records by more than ten centimeters
almost immediately
o It was fulminating
 All who chose to ignore innovation, failed miserably, could not be
competitive

 “The companies that survive are not the strongest, nor the most intelligent, but the
most adaptable to change "

Moore’s law: perception that the number of transistors on a microchip doubles every two
years, though the cost of computers is halved.

 In the industrial revolution the machines were equipped with electric power…
  Now machines are endowed with cognitive capacity, thinking about making decisions

How is the customer today?

1) Likes luxury and is poorly educated, ignores authorities and has no respect for the older
ones. Our children today are real tyrants. They do not stand up when an elderly person enters.
They respond to their parents and are simply bad. ' Socrates (470-399 BC.)

2) 'I no longer have any hope in the future of our country if today's youth take power
tomorrow, because that youth is unbearable, unbridled, simply horrible.' Hesiod (720 BC.)

3). 'Our world reached its critical point. Children no longer listen to their parents. The end of
the world cannot be far' priest of the year 2,000 BC.

4). 'This youth is spoiled to the bottom of the heart. Young people are criminals and idlers.
They will never be like the youth of before. The youth of today will not be able to maintain our
culture ' written in a clay vase discovered in the ruins of Babylon (Current Baghdad) and with
more than 4,000 years of existence

Customer loyalty LOVE (“money can’t buy me love

WHAT IS MORE IMPORTANT IN A PROJECT= GENERATE CASH FLOW

Does IT add value?

The productivity paradox was analysed and popularized in a widely cited article by Erik
Brynjolfsson, which noted the apparent contradiction between the remarkable advances in
computer power and the relatively slow growth of productivity at the level of the whole
economy, individual firms and many specific applications

 "You can see the computer age everywhere but not in the productivity statistics”
 Return on technology investments is extremely difficult to measure

In IT, accounting profit comes from non-traditional sources of value creation such as:
SESSION 2

OPERATIONS ARE INTERCONNECTING PROCESSES. Everything that happens from the very first
moment a customer comes in until he goes out we

GNP [Gross National Product]: The output of G+S produced by the nation in a given time

 Goods: physical objects, something we can touch, feel, or see.

 Services are the performance of some useful function such as banking, medical care,
restaurants, clothing stores, or social services.

Amount of G+S produced where does it comes from?

 Although a country may have rich natural resources (mineral deposits, farmland and
forest only potential sources)
 Production function is needed to transform our resources into useful goods

Operation environment:
Government: Regulation of business by the various levels of gov is extensive. Applies to areas
like; environment, safety, product liability and taxation

 Gov or the lack of it, affects way business is conducted

Global Economic:
 Economic conditions influence demand for a company’s products or services and the
availability of inputs.
 During economic recession demand for many products ↓ while others may ↑.
 Materials and labour shortages or surpluses influence decisions management makes.
 Shifts in the age of the population, needs of ethnic groups, low population growth,
freer trade bt countries, and increased global competition all contribute to changes in
the marketplace

Competition:
 Manufacturing companies face competition from throughout the world
 Transportation and movement of materials are relatively less costly than before
 Worldwide communications are fast, effective, and cheap. Information and data can
be moved almost instantly halfway around the globe. The Internet allows buyers to
search out new sources of supply from anywhere in the world as easily as they can
from local sources

Customer:
 Adequate price
 Quality product
 Quality services
 Stock Availability
 Better presales and after sales
 Flexibility on demand

ORDER QUALIFIER ORDER WINNER

Minimum requirements to be considered a To win orders a supplier must have
viable competitor in the marketplace. characteristics that encourage customers to
BUT being considered does not mean choose its products and services over
winning the order competitors. Those competitive, or
combination of characteristics that persuade
company’s customers to choose its G+S
Reason why people choose your product
 If you are able to sell a product LNG is because you are solving a problem
 Impossible to be the best in eery dimension of competition
 Firms should strive to provide at least a min level of acceptance for each of the order
qualifiers but should try to be THE BEST in the market for order winner(s)
 Order winners and qualifiers for any product/market combination are not static
 If your product doesn’t work= no order winner
 Order winner= what you HAVE NOT WHAT YOU THINK YOU HAVE
Delivery lead time: time from receipt of an order to the delivery of the product

 Customers want delivery lead time to be as short as possible

 Today longer than before (online vs purchase on point)

 Make-to-Stock: Process is activated to meet expected demand.

o Customer orders are served from target stocking level.
 Make-to-Order: Process is activated in response to an order.
o i.e., Tasks are performed only after an order is placed.
Conflicts in Traditional Systems:

To get the most profit, a company must have at least four main objectives:
1. Provide best customer service.
2. Provide lowest production costs.
3. Provide lowest inventory investment.
4. Provide lowest distribution costs.
UNCERTAINTY is the biggest conflict in any business!
Maintian and ↑ Keep operating costs as (MUST) Keep invesmt
FINANCE
MAEKETING

PRODUCTION

revenue by providing low as possible and costs low

best customer service Long production runs of ↓ Inventory so its I is at a
maintain high inventories so relatively few products. min
goods are always available Fewer changeovers will be ↓ number of plants and
interrupt production runs so needed and specialized warehouses
that a nonoinventoried item equipment can be used, thus Produce large quanitites
can be manufactured quickly ↓the cost of making product. using long production runs
Create extensive and costly Maintain high Mnf only to customer order
distribution system so goods inventories of raw
can be shipped rapidly materials and work-in-
process so production is
not disrupted by
shortages

Pull & Push strategy

Sales Price:
What is the sales Price I need If I buy a product at 100 $, and I want to get 20% margin?

Actually, based on willingness to pay. Two ways to alter this:

1) Modify/Improve order winner
2) Marketing
SESSION 3: PRODUCTION PLANNING SYSTEM

 Manufacturing complex, some firms make a few different products, whereas others make many
products. However, each uses a variety of processes, machinery, equipment, labour skills +
material

 To be profitable a firm must organise all these factors to make the right goods at the right time
at top quality and do so as economically as possible

A good planning system must answer 4 questions:

1. What are we going to make?

2. What does it take to make it?
3. What do we have?
4. What do we need?

Capacity in the SHT, capacity is the quantity of work that labour and equipment can perform in a given
period

Manufacturing Planning and control system MPC:

Strategic business plan

Production Plan
 The quantities of each product group that must be produced in each period.
 The desired inventory levels.
 The resources of equipment, labour, and material needed in each period.
 The availability of the resources needed

Master Production Scheduling:

(MPS) is a plan for the production of individual end items. It breaks down the production plan to show,
for each period, the quantity of each end item to be made. Inputs include:
- the production plan
- forecast for individual end items
- sales orders
- inventories
- existing capacity.

Material Requirements Plan

(MRP) is a plan for the production and purchase of the components used in making the items in the
master production schedule. It shows the quantities needed and when manufacturing intends to make
or use them. Purchasing and production activity control use the MRP to decide the purchase or
manufacture of specific items.

(PAC) Purchasing and production activity control:

Purchasing is responsible for establishing and controlling the flow of raw materials into the factory.
PAC is responsible for planning and controlling the flow of work through the factory.
Sales and Operation planning:
SOP is a cross-functional business plan that involves sales and marketing, product development,
operations, and senior management

Manufacturing Resource Planning (MRP II)

Enterprise Resource Planning (ERP):

“Framework for organizing, defining, and standardizing the business processes necessary to effectively
plan and control an organization so the organization can use its internal knowledge to seek external
advantage.”. Essentially, ERP encompasses the total company and MRP II is manufacturing.
  Production planning problem characteristics:
o Time horizon of 12 months used, with periodic updating perhaps every month or
quarter
o Production demand consists of one or a few product families or common units
o Demand is fluctuating or seasonal
o Plant and equipment are fixed within the time horizon
o Variety of mng objectives are set, such as low inventories, efficient plant operation,
good customer service, and good labour relations

There are three basic strategies that can be used in developing a production
plan:
1. Chase strategy: producing amounts demanded at any given time.
Inventory levls remain stable while production varies to meet
demand
a. Company must have enough capacity to be able to meet the
peak demand
b. Inventories can be kept to a min
c. Companies have to hire and train people for the peak
periods and lay them off when the peak is past 
sometimes they have to put on extra shifts and
overtime (add costs)
2. Production levelling: continually producing an amount equal to
avg demand
a. Calculate total D over time span of plan and on average
produce enough to meet min inventory levels
b. Advantage  results in smooth level of operation that
avoids the cost of changing production levels
c. Firms don’t need to have excess capacity to meet peak
demand
d. Disadvantage is that inventory will build up in low
demand periods
3. Subcontracting: always producing at the level of minimum
demand and meeting any additional demand though
subcontracting
 a. Costs associated with excess capacity are avoided, and because production is levelled,
there are no costs associated with changing production levels
b. Disadvantage: cost of purchasing (item, transportation, inspections)> if item made in
plant

MPS

ATP (available to promise): that portion of firm’s inventory and planned production not already
committed and available to the customer
- Calculated by adding scheduled receipts to the beginning inventory and then subtracting actual
orders scheduled before the next scheduled receipt (order issued either to mnf or to supplier)

 MAKE TO STOCK ENVIRONMNET: CUSTOMERS ORDERS ARE SATISFIED FROM INVENTORY

 MAKE TO ORDER (or assemble to order): DEMAND SATISFIED FROM PRODUCTION CAPACITY
o ATP in a make to order = 0!!!!

Product Process Matrix: a framework depicting when the different production process types are
typically used, depending on product volume and how standardized the product is.
  Project layout: setup in which product remain at one location, and equipment is moved to the
product
 WorkCentre: (job shop) a process structure suited to low volume production of a great variety
of nonstandard products. Sometimes referred to as departments and are focused on particular
type of operations. Produce together by sets or lots
o Ex: Toy industry (low volume): drilling machines in one are, plastic moulding/stamping
machines in another and painting machines in another.
 Manufacturing Cell: dedicated area where a group of similar products are produced. Computer
chip mnf, assembly work
 Assembly line: setup in which item produced though fixed sequences of workstations, designed
to achieve a specific production rate
o Ex: Beers or cars production
 Continuous process: concerts raw materials into finished product in one continuous process
o Ex: petroleum
3 PRODUCTION WAYS

JOB PRODUCTION BATCH PRODUCTION FLOW PRODUCTION

One product made from start to When group of identical When parts added to the
finish before another one. products made one at a time. products as it moves along the
Product made to customer own All products move onto next production line. Final product
requirements (unique or one- stage at same time. Machinery will be complemented by the
off product). Usually handmade and equipment can be cleaned time it reaches the end of the
by skilful professional and/or changed between production line. Sometimes
batches to produce a different called line production (moves
product along production line,
machinery and workers have
very specific tasks to do)
 One person produces  Product made in stages  Product continuously
product  Each stage must be worked on
 Takes long time prepared  When one task finished
 Costs of labour high  Each stage monitored for next task must start
 Low volume production defaults immediately
(one or small nº items)  Larger quantities can be  Each product identical 
 Quality often emphasized made time taken must be =
 Each product is unique  Batches can be modified  Faster production times
 Undertaken by small,  Similar products produced  Very high volume made
specialist b/s together  High technological costs
 Each batch goes though one
stage before moving onto
next stage
 Concentrate skills
  Achieve better use of
equipment and so produce
good quality products
 Customer requirements and  Cost savings can be  Cost/ unit reduced though
changes can be handled achieved by buying in bulk improved work and
 Associated with higher  Still allows customers some material flow
quality choice  Suitable for mnf of large
 Employees can be better  Products can be worked by quantities
motivated (more job specialist or equipment at  Capital intensive which
satisfaction) each stage means it can work
 Flexible production method  Allows a firm to handle constantly
unexpected orders  Less need for training &
skills
 Individual cost (unit) high  Takes time to switch  Very long set uo time &
 Often labour intensive: high production of one batch to reliant on high quality
labour costs another machinery
 Requires close consultation  Requires the business to  High raw metirals and
with client maintain higher stocks of finished stocks unless lean
 Usually reliant on high skills raw materials and WiP production used
 Tasks may become boring  Goods are mass produced:
(repetitive) ↓ motivation less differentiation for
 Size of batch dependent on customer
capacity allocated  Production is shut down if
flow stopped

CASE OF AMAZON DELIVERING WITH DRONES NOT PRACTICAL

SESSION 4: MRP [Material Require Planning]

 Main objective of MRP= to have right materials in the right quantities available at the right time
to meet the demand for the firms products
o to determine what components are needed to meet the master production schedule
o based on lead time, to calculate the periods when the components must be available
 Determines the following:
o WHAT, HOW MUCH, WHEN TO ORDER
o WHEN TO SCHEDULE DELIVERY
 3 Inputs to MRP systems:
o Master production schedule: statement of which end items are to be produced, the
quantity of each, and the dates they are to be completed
o Inventory records: when calculation is made to find out how many are needed, the
quantities available must be considered
o Bills of material: a listing of all subassemblies, intermediates, parts and raw materials
that go into making the parent assembly showing the quantities of each required to
make an assembly
 Shows all parts required to make one of the items
 Each part or item has only one-part number: if a nº appears on 2 different
bills of materials (part identified is the same)
 Part is defined by its form, fit, or function: if any of these changes then not
the same
Lead time: The span of time needed to perform a process
 In manufacturing it includes time for order preparation, queuing, processing, moving, receiving
and inspecting and any expected delays
 In procurement  time bt you send a purchase order and you receive the goods

 LOT-FOR-LOT RULE: TO ORDER EXACTLY WHAT IS NEEDED MRP system (production and just
in time)
  FIXED ORDER QUANITTY: specify nº of units to obey ordered each time an order placed for ind
item or SKU.
o Quantity usually arbitrary (200 units at a time)
o Advantage: easily understood)
o Disadvantage: doesn’t min costs involved
 MIN-MAX SYSTEM: Variation on fixed order order placed when Q available falls below order
point. Assumptions based:
1. Demand is relatively constant and is known.
2. The item is produced or purchased in lots or batches and not continuously
3. Order preparation costs and inventory-carrying costs are constant and known.
4. Replacement occurs all at once.

ORDER POINT SYSTEM: concept of an economic order quantity, addresses the question of how
much to order at one time. Important also: when to place replacement order

SAFETY STOCK most common way of buffering against uncertainty and is the method
described in this text. Depends on the following:

- Variability of demand during the lead time.

- Frequency of reorder
- Service level desired.
 - Length of the lead time. The longer the lead time, the more safety stock has to be
carried to provide a specified service level. This is one reason it is important to reduce
lead times as much as possible.

- High average inventory - Less average inventory

- Stock out risk only one time / year - Stock out risk several time / year
- Less transport cost - High transport cost
- High storage capacity - Less storage capacity
- Not appropriate if volatile industry
(product might become obsolete)

*Days of stock (DOS): days you are able to survive with your current stock

Mismanagement of stock 1) inactive, 2) obsolete or 3) surplus

1) You should write off stock not sold in the last 12 months (0 sales at all)
2) Products you can not sell for technical reasons or obsolescence
3) You have inventory >24 months on stock (everything above 2 years)

Forecast evolution
Some comapnies It is the start point It means whatever “the best wrong answer”
happens in the
People included:
past will continue
- New products
in the future
- Economic
EFECTO PORTAFOLIO: - Environment
 The more data/transactions/customer buying products the
more constant is the demand (less variance) since it ends
of stabilizing
 Plus, the fewer the range of products available to choose, the easier to control
o Min as much as possible but offering demanded range to appeal to your
customers

SUPPLY CHAIN MANAGEMENT

What is SCM?

 All activities involved, directly or indirectly in fulfilling a customer request

o Includes suppliers, mnf, transporters, warehouses, retailers and customers
 Within each company:
o Includes all functions involved in fulfilling a customer request
o Product development, mkt, operations, distribution, finance and customer
service
 Dynamic network systems that require effective coordination of information up and
down the supply chain
 AGGREGATE DEMAND!!

THE RIGHT PRODUCT + THE RIGHT PRICE + THE RIGHT STORE + THE RIGHT QUANTITY + THE
RIGHT CUSTOMER + THE RIGHT TIME = $$$$
A.D = Reason why we have warehouses, each shop has different individual demands (increases volatility)
but having one warehouse you aggregate demand and reduce standard deviation

McKinsey Supply Chain:

TECHNOLOGY  DESIGN  PRODUCTION  MARKETING  DISTRIBUTION SERVICE

What is missing?

In the future, companies will no longer compete for products to focus on value chains

Ex: Supply chain of Ford (1940)  whole assembly line in the same geographical space
 1) Physical supply: movement and storage of goods from suppliers to manufacturing
2) Physical distributions: movement and storage of finished G from end of production to
the customer
a. Responsible for delivering to customer what is wanted on time and at min cost
b. Objective of distribution mng= to design and operate a distribution system
that attains the required level of customer service and does so at least cost.
c. Activities therefore must be organised into an integrated system

Activities in the Physical Distribution System:

1) Transportation: moving G outside firms’ buildings

a. For many single highest costs in distributions (30-60%)
b. Adds place value to the product
2) Distribution inventory: all finished G inventory at any point in the distribution system.
a. Second most important item in distribution (25-30% of distribution costs)
b. Inventories create time value by placing the product close to customer
3) Warehouses (distribution centres): used to store inventory
a. Makes decisions on site selection; number of distribution centres in the system; layout; and
methods of receiving, storing, and retrieving goods
4) Materials handling: movement and storage of goods inside distribution centre
a. Types of materials used affects the efficiency and cost of operating the distribution centre
b. Represents a capital cost trade-off exists bt capital cost and O.C of distribution centre
5) Protective packaging: must be contained, protected, and identified + fit into dimension of the storage
spaces and the transportation vehicles.
6) Order processing and communication: all activities needed to fill customer orders
a. represents a time element in delivery and is an important part of customer service
b. Many intermediaries involved in the movement of goods, and good communication is essential to a
successful distribution system.

The particular path in which the G move- through distribution centres, wholesalers, and
retailers- is called the channel of distribution

Transportation cost elements:

Knowledge of these enables shipper to get a better P by selecting the right shipping mode.

1. Line haul. G shipped in moving container that has weight and volume capacity. The
carrier, private or for hire, has basic costs to move container (exist whether full or not)
a. costs vary with distance travelled, not weight carried.
 2. Pickup and delivery. Cost depends more on time spent vs distance travelled.
a. Charged for each pickup and the weight picked up
3. Terminal handling. depend on nº of times shipment loaded, handled, and unloaded.
a. Full truckloads go directly to the consignee (no need to handle in terminal)
b. Part loads  taken to terminal, unloaded, sorted, and loaded onto a highway
vehicle.
c. At destination, G must be unloaded, sorted, and loaded onto local delivery
vehicle.
4. Billing and collecting. Every time a shipment is made, paperwork must be done and an
invoice made out. Billing and collecting costs can be reduced by consolidating
shipments and reducing the pickup frequency.

WAREHOUSE: PALET  PICKINGPACKAGING

In e-commerce no limited physical space  reason why companies losing money (lower
margins)  can only compete wih EoS. E-COMMERCE= YOU DON’T NEED SPACE

Service functions (warehouse)  2 KINDS:

1) General warehouse
a. Goods stored for long periods and prime purpose= protect G until needed
b. Minimal handling, movement and relationship to transportation
c. Ex: Furniture storage or a depository for documents + type used for
inventories accumulated in anticipation of seasonal sales
2) Distribution warehouse: dynamic purpose of movement and mining
a. G received in large-volume uniform lots, stored briefly, and then broken down
into small individual orders of different items required by the customer in the
marketplace
b. Emphasis is on movement and handling rather than on storage.
c. Widely used in distribution systems.
d. Size of warehouse not so much its physical size as it is the throughput, or
volume of traffic handled.

Role of Warehouses  3 IMPORTANT ROLES

1) Transportation consolidation
a. Transport C ↓ using warehouse consolidating small LTL shipments into large
TL (supply and distribution systems)
b. TL shipments can be made to a distant warehouse and LTL shipments made to
local user
c. = Break-bulk =the bulk (TL) shipments from factories to distribution centres
divided into small shipments going to local markets
 2) Product mixing: deals with grouping of different items into an order and the
economies that warehouses can provide doing this
a. When customers place orders, often want mix of products produced in
different locations.
b. Without a distribution centre, customers would have to order from each
source and pay for LTL transport from each source.
c. With distribution centre, orders placed and delivered from central location.

3) Service

PROCUREMENT

 Don’t allocate costs for nothing

 Don’t divide costs into FC and VC
 Some KPIs (alone especially) not useful  ROA

Why purchase matter?

Eve
ry single procurement reduction has a positive impact in cash flow
What levers do you have as a CEO?

1. ↑ SALES (+++)
2. ↑ MARGIN (++)
3. ↓COSTS (-----)

*Procurement responsible for costs (direct  things you need to buy to produce) and
(indirect)

SRM: SOURCING CONTRACTING PROCUREMENT ANALYSES

- Aftersales service very challenging

- Direct procurement act of acquiring raw materials and goods for production. These
purchases are generally done in large quantities, acquired from a pool of suppliers at
the best possible cost, quality and reliability
- Rent vs lease (transfer of ownership over period of time, own at the end)
- Good managers have to be able to make good decisions even when lacing invofmation
In PROCUREMENT you affect 1) Working capital, 2) Inventory, 3) P (cost of your company)

A. Requirement planning
 The process of identifying those needs arising from the business will be met by
acquiring products and/or services
 Should be consistent with objectives of the project and the culture of the organisation
 Purchasing decisions that the project team can take should be specified, such as
multiple suppliers, contract types to be used and coordination with other aspects of
the project are managed.
  Planning process should consider to whom, how, what, how, when and at what
price to paid
o What: make or buy, standard or custom, quality or price
o How much? Large orders, contracting policy
o Who? Centralized or decentralized, project team or apartment, project team
or apartment, staff quality
o When? Now or later, futures markets and hedging of changes
o What P? premium, based on costs, leasing/renting/purchase
o How? Partnerships with suppliers/single supplier, marketplaces, existing
administrative processes EDI, VMI, E-procurement, reverse actions, sealed bids
B. Specifications Development and Market Analysis (RFI)
 RFI= REQUEST FOR INFO
 1st step  know what we need (important to consider the future)
 >70% improvement occur during definition phase
 Attention to differences between standardization and simplification
 Involve supplier: provide info on new materials, technologies, production methods
 Search for sources of info
o Catalogs, press, fairs, directories, signs, colleagues, visits to suppliers, the
Department file. Purchasing.
o It is very flexible, e-procurement may not be suitable for all sectors but despise
environments ...
 Technical specifications should always include:
o Quality control methods and systems for troubleshooting.
o Procurement methods, delivery
o Physical delivery conditions:
 Labelling
 Packaging.
 Type pallet units per pallet, height ......
 Price and payment terms, billing methods, administrative circuits,
contact persons

Procurement matrix:

Processes are considered high degree of criticality those who simultaneously met the following
characteristics:

 The good or service has a high impact on the availability or supply to customers or in
the income statement
 In general, approved goods and services
  It is difficult to find substitutes in time to incidents in the supply

Supplier qualification:

C. RFQ [e-sourcing]
a. Collection of information. Meeting with potential suppliers. Tabulation and
evaluation
b. Formal evaluations vs. informal.

Vendor valuation example

 Subject to generalisations,
good for an overall
impression, but has flaws

How to get better results from suppliers?

 Always make more than three requests for proposals, under same conditions, and you
can always convene new suppliers.
 Rationalize the number of suppliers.
 Progress in the relationship with the supplier:
 Quality agreements. perform "productive" audits.
 Logistics: give her the same forecasts of supply that you use and the maximum
possible
 Product development: Integrate the supply chain and production supplier.
 Improve administrative circuits.

How to make a RFQ with a platform:

 Through a website / portal new supplier are invited to submit an application and to
submit offers for current orders. You can find the following information:
o Description of the organization, the market, demanded products.
o Structure of the purchasing department.
o List of contact persons.
o Supplier prequalification questionnaire.
o Description of the quality system.
o Call for tenders for products or services.
o Terms of shopping.
o Press information that may be relevant to the supplier.

ePurchasing solutions:
Automatable main aspects in the process of e-souring:

 Setting request for proposals: creating templates request bids, financial tables to offer
 Sending request for offers: same independent effort on the nº of suppliers
 Communication and tracking of queries or modifications to the statement
 Receipt of tenders: Automatic file and record deals
 Tabulation and evaluation of tenders:

Depending on the results of the analysis of the tenders received it is decided if negotiation is
closed by:

- direct award to the best / is offer / s received.

- Negotiations with the best placed suppliers.
- Auction with the best placed supplier
E-tender

Conditions to make auction:

 High specifiability the product or service to be acquired.
 High number of potential suppliers.
 High degree of competition among suppliers.
 High economic volume of the product or service to be acquired
 Low complexity of the product or service delivery.
 Low cost of changing supplier.

ADVANTAGES RISK
Price reduction exponential curve (diluted "Consensual" from suppliers to the process.
over time). Reaction
Reduction of time and effort / resources for Loss of suppliers who do not want to
negotiation participate in the process.
Transparency of the procurement process Problems with the successful tenderer but is
for suppliers. successful validation of the scope of the
solicitation
Generally negative reaction from suppliers.
Costs:

A large portion of costs associated with task post purchase which should also be taken into
account hence businesses now more concentrated in reducing these indirect costs rather
than simply reducing P of acquisition
 SIOP PROCESS

Sales & Inventory Operations Planning

is the single process to
engage all functions in
creating aligned,
forward looking plans
& make decisions that
will optimise
resources & achieve a
balanced set of goals

 A cohesive process to plan our

main business activities
 A robust monthly process of
continuous improvement

Why Do We Need SIOP? – Focuses on key business goals via agreed metrics

1) Increasing concentration on inventory & working capital within the business

2) Drive towards demand growth in new markets
3) Maximise customer service & satisfaction
4) ‘Glues’ key Demand & Supply functions together
5) Focus on the future business performance rather than the past
6) Drive consistent business processes

MAX CUSTOMER SERVICE, MIN O.C AND INVENTORY

SIOP Principles:
 World class businesses have supply chains that are:
o Demand driven
o Collaborative involving all departments
 We will advocate a SIOP process that reflects this:
o Demand-led; it begins with the Voice of the Customer (VOC)
o Inventory management as an integral part
o Strong demand-supply links through information & feedback
o Structured and disciplined monthly meetings with ‘buy in’ & clear
objectives
 We believe in:
o Actively involving Marketing & Sales in the process
 Sharing and discussing stocking policies and customer needs.
 Actively seeking consensus (agreement)
o Translating the plan into cash terms & linking to AOP to give relevance to
the whole business
 A robust SIOP process will lead to:
o Improved customer focus and service
o Lower finished goods inventory levels
o Reduced IOS via strong NPI management / product lifecycle management
BENIHANA CASE STUDY:

Problems faced by restaurants:

- Food waste
- DTL  Deliver lead time (↑D consumers= anxiety, complains)
- Location (linked with rent expenses!)
- Staff (skills, wages, etc)
- SPACE!!!  most important problem difficult to fulfil ALL space
o In many restaurants like Benihana bar serves as a buffer (to maximize space)
 also allows cross-selling

Good things of Benihana:

- Elimination of kitchen saves costs (reduced not complete elimination)

- Fewer waitress, cooks part of delivery service
- Set up created so that everything finishes in an hour  can max table utilisation, using
an operation technique
o Ex: 4 shifts in one service (lunch/dinner)
- Cues created for people to leave  start cleaning tables and turn off lights a little
- Globalisation adaptation good but challenging (different environments)  need to
adapt. They added music in Latin American locals

There is always a trade off between catalogue of products and profits!

CATEGORY MANAGEMENT

 Something between management and operations

 Category= a distinct manageable group of products/services that consumers perceive
to be interrelated and/or substitutable in meeting a consumer need
o you consider before buying something
 Category management: retailer/supplier process of managing categories as strategic
units, producing enhanced business results by focusing on delivering consumer value
o Split company into categories rather than departments each of them have
different strategries

What is the idea?

 Helps manufacturers and retailers focus together on the consumer vs past retailers
focused on departments + manufacturers on brands and products
 Satisfy consumer needs and stimulate consumer to buy more
 Critical part of ECR led initiatives
 Consumer insights are fundamental CM based on simple learning process (cycle)
 1) Philosophy: manging a retail business that recognises categories as strategic business
units
2) Process that results in joint retailer supplier business plans
3) Organisational concept that integrates distribution, procurement, merchandising and
service decisions

Themes:

 Focus on the Consumer: about driving consumer value. Nº1 Focus= consumer.
 Total Systems Approach: Not just buying and selling nor is it just shelf planning.
 Agree to Common Approach: no ‘one-way’ to do CM. Different retailers and suppliers
are likely to develop different approaches

Benefits (different for retailers and manufacturers)

RETAILER MANUFACTURER
 helps leverage manufacturer  opportunity to influence retailer
research and insight into consumer decisions on range, layout etc.-
 channels mnf resource into category especially if category captain
analysis on behalf of retailer  opportunity to learn from access to
 forces mnf to focus on improving retailer data - especially loyalty card
retailer business not trying to sell in data
ideas that only benefit the mnf - e.g.  opportunity to target specific
new products which duplicate consumer segments via retailer
existing competitor offers loyalty data
 drives/facilitates efficiency  improved likelihood for new
improvements in supply side products to be listed and promoted
in store
 more efficient and effective
promotion execution
 Wh
y do it?

1) Consumer changes - retailers and suppliers must better understand and meet
consumer needs. This is at the heart of Category Management.
2) Competitive pressures: meet challenges of today’s inense and varied competition
a. New store formats and “category killers”
b. Difficulty for retailers and suppliers to differentiate their stores, brands and
products
3) Economic/Efficiency Considerations - can provide work process and organisational
designs to achieve greater efficiency and growth
a. Driving or capturing growth during economic lows and highs
b. Consolidation in the retail industry across Asia Pacific
c. Revenue and share price performance
4) Information Technology Advances
a. Availability of data - Syndicated, POS, Consumer panel data
b. Common languages amongst retailers and suppliers
c. Unlock data to make decisions

Challenges & barriers:

  Unwillingness to change culture
 Implementing without skills
 Inaccessibility of information
 Unwillingness to share information
 Not understanding the importance of partnering
 Performance measures out of alignment
 Poor execution at a store level
 Brand vs category focus
 Lack of skills and resources

The way forward:

1. Start somewhere: no need for perfect information to begin developing a category

business process
2. Keep initial steps simple don’t overcomplicate objectives or strategies/tasks
a. Results must be measurable!
3. Overly theoretical approaches simply don’t work
4. Retailers and suppliers need to adopt an iterative approach
a. Ability to deliver quick wins
5. Implementation must be viewed as continual journey
6. Building strong partnerships takes trust and time

LA GARRIGA/FABORIT/IKEA/E-COMMERCE

La Garriga:

 Layout is key
 Order winner= speed
 Location important
 Space constraints=major problem (too big kitchen)
 To max space  particularly important in restaurants
 Barra very big (servers have more save than customers and necessary)
 Ex: most sold products spread out to encourage more sales (supermarkets)
 People (waiters) fundamental!  great relationship with customer, one of the biggest
competitive advantages  customer behaviour and satisfaction crucial

E-commerce:

 Delivery cost
 Shipping times
 Warehouse and store allocation
 Logistics very expensive
 Implementation and big investments in automation and warehouse efficiency
 Picking & delivery
 Customers if international orders/shipping
 Operational resources for making transactions online
 Logistics very expensive
 Conclusions:
o Unless you are in the top 20 very difficult to compete
o You need to find a niche!--> be specific
 o Transport very expensive
o Not easy only big and top are worthy and profitable
o In online you can max product catalogue (better to have a wide) vs physical
physical supermarkets limited by space, but this is not the case for e-
commerce platforms

IKEA:

 Store distribution though to Aggregate demand

 “IKEA hates air”
 Packaging is one of its competitive advantages
 ↓ cost= ↓ nº employees

ZARA CASE STUDY:

 Zara takes 2 weeks to create a new product vs 6-10 months rest fastest company in
the world. How? SUPPLY CHAIN MANAGEMENT
 Uses vertical integration: own your supply chain (ex: raw materials)
o Greater quality control
o Consistent
o Quicker process
o Increase flexibility to mid-season changes
 Zara is going back to the past  having everything under control with V.I
o High dependence on information  data collected daily
 Keep storage levels to min
 Owning entire production and supply chain
 In-house production
 Vs Louis Vouitoon :
o Market driver= seek to influence market
o 1 designer/season vs Zara 500 designers
o Zara does not need to forecast trends/demands  why? Launching products
every 2 weeks, already know what customers want
 “playing safe”= integrated info= capture trends and provide feedback
to design team
o Observe people and copy new trends & ideas
o Zara don’t always copy: sometimes create products from 0
 Best things about Zara= PEOPLE & PROCESS
o Simple process (modify standard process) vs other companies more complex
(difficulties in reacting to change)
o The simpler you are the better agile, fast, dynamic, effort, etc
 Decoupling (where tradition systems meet)
o Product differentiation
o Capacity (most max capacity utilization)
 Is it possible to copy Zara? Not really  people
 Recipe for success:
o Inspo in high end designers= save costs (designers)
o Own entire SC more agile + flexible process  ↑quality +↓ costs
o Find cheaper labour  developing countries
 o Keep storage levels to a min  to react quickly to changes in fashion trends
and reduce risks
o Provide stock to stores 2 weeks nothing stays stored for more than 72h

LEAN PRODUCTION

What is “LEAN”?

Some mistakes about LEAN:

1. It is not just another “trend” or “wave”

2. It is a waste of time and does not add value
3. LEAN means fire people. Do more with less people
4. Lean only works in “Production environment”
5. We did some business process reengineering and does not work

LEAN objective:

Relentless pursuit of the elimination of "waste" in every business process with the essential
purpose of offering customers products and world class services at the lowest possible cost.

LEAN methodology:

LEAN is not a tool to discover solutions…

LEAN is not the solution itself …

LEAN history:

The implementation of LEAN has multiple benefits:

Value Added vs no added value:

  Valuable for b/s processes that add no value but are critical (e.g: security, legal, tax).
 The aim is to minimize the resources consumed by these processes

Only the client can identify tasks “value added”

Productive Practices that can be eliminated:

Terms originated in the Toyota Production System, and calls 3M

Definition of 8 Waste “Muda”

The goal of LEAN “relentless pursuit and elimination of waste from all business process”
KAIZEN event

 An attitude of continuous improvement  "Change for the Better"

 Quick Change (days or hours, not weeks)
 Everything we do today can be improved
 Kaizen has no end

Harnessing the waves “kaizen” for continuous improvement

Kaizen cycles continually

drive new levels of
performance, rather than...

Invest in a sequence of
improvements to regain
past performance
The continued rise:

Eliminating or minimizing:

 Activities that do not create value, but, while they remain current technologies and
production facilities are inevitable
 Activities that don’t create value can be eliminated at once

Core concepts of LEAN

1) Id. Value streams

a. "Value Stream"  all actions and process steps required to bring a product or
service to the customer.
b. "Value object"  a unit of work that runs along the value stream end-to-end.
i. Ex: In a process of Income Order, the order is the work unit.
ii. In some value streams, the work unit can change "form" within a value
stream. Ex: an order sent by fax can become a SAP Sales Order. •
c. Value Flows usually business processes end to-end and can cross departmental
boundaries and the organization itself
2) Batch vs Continuous flow
a. Complete a group of transactions before proceeding to the next step.
b. Extends the delivery
c. Reduces quality
Delivery times extended because each work unit must wait until the other units in the lot are
completed so that the batch can advance to the next step.

d. Movement of information, services and knowledge through the value stream.

e. A perfect presents a continuous flow process in which the info, services and
knowledge are continuously transferred without delay to the next step.
f. The continuous flow is created by removing rows and arrests, providing
greater flexibility and reliability of the process.

Using continuous flow delivery is reduced and quality is improved!

3) Demand pull
a. Each step in the process takes information or knowledge you need, when
required by the above process.
b. Only required amount is taken  customer initiates the process of demand
c. No action is undertaken in a step of the process until the subsequent process
starts from the end of the chain
d. When continuous flow is not possible, processes are coupled with the
"demand pull" (PULL)
4) Rhythm (Takt time)
a. (DEF) frequency with which a product must produce to meet customer D
b. "Takt" using a conductor for regulating speed, rhythm or time with musicians
playing.
c. Takt time  used to help synchronize all steps of the process among
participants at the proper speed.
5) Common tools
a. Standard work:
i. minutely detailed work in terms of content, sequence, time use and
results.
ii. A document that defines in detail implementation of a continuous
process sequence by only one person / one role.
iii. Designed to meet customer demand (Ritmo - tiempoTakt).
iv. IT IS NOT:
o A policy or procedure of a division or department.
o A working standard (specifications, etc.) a manual
b. Poka Yoke: Creation of a process fool proof taking steps to ensure that errors
or abnormalities may not occur
i. May involve using checklists (checklists), quality control, design of
parts or tools, machine modification, establishment of tolerance limits,
ii. Error prevention is an excellent method for process control
iii. Leads to a reduction of the failure rate and improving the quality
iv. Reduces bottlenecks and helps business productivity
 c. Visual communication
i. A set of signs that can be seen and allow us to understand an
operation.
ii. A tool for use by managers and their teams to lead the daily work.
iii. A clear indication of how we are vs the objectives set out an operation
iv. IT IS NOT:
o A Blackboard Metric (although good Visual Management can
be good measurements).
o A complicated analysis of the current state.
o A recurring performance report
d. 5S  to sort and standardize to allow efficiency

Sort Delete what Stabilize Sort and Delete Dirt Clean Standardizing, Continue to
is unnecessary and locate necessary the area Signpost Run improve Sustain
identify the items. Create a thoroughly and Abnormalities Discipline.
frequency of use place for identify the processes to Develop and
than necessary everything and sources of dirt. maintain + sustain a culture
put everything in improve the 1st 5S of disciplined 5S in
place. the workplace.
LEAN take away

o Focus on cycle time and quality

o Elimination of “useless” activities
o Standard work and role definition
o Choreography and synchronization
o Concentration in each and every one of the steps required
o What should be done exactly?
o How long will each activity?
o Who will do what happened?
o How to synchronize our work to minimize the total time?
o How can we ensure quality?
o Standard push Labour and tools to enable efficient execution
o "Constant focus on improving" - using metrics to gauge our performance and
determine how to improve.
o ↑ complex customer D require constantly develop new skills and advance efficiency
o The improvement cycles ultimately lead to new perspectives and opportunities to
improve performance.
o Evolves reaching the essence of how we conduct our business every day.

CORONAVIRUS & OPERATIONS

 Operations is crucial  solve the issues

 Capacity major constrain problem (not enough beds and breathers)
 You need to be flexible enough to adapt to change (ex: Zara production of masks)
 Bottlenecks in a process is the thinner area  your highest limitation
 TOYOTA CASE STUDY:

Toyota Production System:

Providing the best quality at min cost and with min delivery time by eliminating waste:

- Optimizes the whole not the parts

- Practical + pragmatic: no absolute truths
- Sturdy: designed to manage uncertainty and complexity (both volume and mix)
- Balance of objectives following SQDC (Safety, Quality, Delivery and Cost)
- Will deteriorate without constant attention (like any system)  entropy naturally ↑

Elements:

1) Process: under the control, able, repeatable, reliable and stable

a. Under control: Within its boundaries defined
b. Capable: The ability to meet or exceed customer expectations
c. Stable: No drift over time (monitoring and recalibration)
2) Problem: unavoidable and source of learning
a. Usually not follow the standard
b. Every problem has its root cause and its countermeasures
c. Must be visible to be solved
d. Minimize WIP, use jidoka, andon and cleaning
e. Fit the facts, not the symptoms
f. 5 whys, eliminate guilt
g. Report the problem at the point of occurrence
h. Andon tools and jidoka
i. Kaizen constantly changing the process better
3) Activity: As the set value aggregator
 a. Remove molting (7 -u 8- waste)
b. Search flow of one unit
c. Minimize need for complex information systems
d. Kanban
e. Define levels of stock (buffer) based on physical laws
f. Suppliers producing defined inventory levels
g. Kaizen process to add more value
4) Heijunka: Connecting the value chain from the supplier to the customer
5) Based on the human resources infrastructure
a. Select and invest in knowledge and skills of employees
b. Not amount to few people
c. Operator: Training and discipline to add value through daily work and process
improvement
d. Team leader: most experienced and skilful work area. The best leader and
teacher (coach)
e. Group leader: This wider knowledge of the system
f. based on facts, without blame, built on trust and interdependence system

PROCESS ANALYSIS

 The choice of which specific equipment to

use in a process often can be based on an
analysis of cost trade-offs
 Often a trade off between more and less
specialised equipment
 Less specialised equipment “general
purpose” used easily in many ways if set
up properly
 More specialised equipment “special-
purpose” available as an alternative to
general-purpose machine

 Why? Delivery mechanism

 What? Restrictions of each process
 How? By understanding how the use of resources can improve our deliver of KSFs
 Process analysis needed can help us:
o Diagnose problems
o Solve problems
o Expand capacity, services, product line, etc
o Reduce cost
o Improve customer service
o Improve process performance
Break even analysis:

 Defined as standard approach to choosing among alternative processes or equipment.

 Determine point in u produced where company start making profit on the process.
 Seeks to determine the point in units produced where TR =TC

Example:

 Buy to a supplier for $200/unit (no fixed cost)

 Make on lathe for $75/unit (fixed costs: 80.000$)
 Make on machining centre for $15/unit (fixed cost: 200.000$)

TC for each option

 Purchase  $200 x Demand

 Produce using lathe $80,000 + $75 x Demand
 Produce Using Machining Centre  $200,000 + $15 x Demand

If expected D>2,000 units (point A)=

machine centre best choice  lowest TC

If D 640-2,000 u (point B) 
semiautomatic lathe cheapest

If D <640 (bt 0 and point B)  buy the

product

Manufacturing Process Flow design

 A method to evaluate the specific processes that raw materials, parts, and
subassemblies follow as they move through the plant.
 The most common production management tools used in planning and designing the
process flow are: Assembly drawings ➢ Assembly charts ➢ Route sheets ➢ Flow
process charts

Assembly drawings: simply an exploded view of the product showing its component parts
Assembly charts: Uses information presented in assembly drawing and defines (among other
things) how parts go together, order of assembly, and often overall material flow pattern

Operation and route sheet: Specify operations and process routing for a particular part.
Conveys such information as the type of equipment, tooling, and operations required to
complete the part.
Process flowchart:

Denotes what happens to the product as it

progresses through the productive facility.

Focus in analysing a manufacturing operation should

be the identification of activities that can be
minimized or eliminated, such as movement and
storage within the process

Rule  fewer moves, delays, and storages = better

A process usually consists of

 A set of tasks
 A flow of material and info connecting set of tasks
 Storage of material and information
- Each task accomplishes transformation input  output
- Flow in process= material flor + flow of information (what has been done and what
remains to be done)
- When neither task is being performed nor part is being transferred, it has to be stored
 goods in storage, waiting to be processed by next task= WiP
 - Involves adjusting capacities and balance among different parts of the process to max
output or min costs with available resources

CAPACITY= how many things you are able to produce in a certain period of time

EXERCISE (description in slides):

Example Manufacturing Process Analysis

 15 workers, eight-hour shift

 Incentive pay of 30¢ per good part
 Can hire 15 more workers for second shift if needed
 All but molding from outside vender

Example 7.2: Molding

 11 Machines  One usually down + 1 operator per machine

 25 parts per hour
 Paid 20¢ per part
 Overtime is 30¢ per part
 Employment is flexible  Currently 6 employees + 4 more available

Example 7.2: Remaining Costs

 Raw materials are 10¢ per part

 Electricity is 2¢ per part
 Purchased parts cost 30¢ per component
 Other weekly expenses Rent is $100 , Other employees receive $1,000, Accounting
depreciation is $50

A) Determine capacity (number of components produced/week) of entire process: Are the

capacities of all the processes balanced?

Capacity of molding process: only 6 workers employed, each working full time operator for
one machine. Thus, only 6 of the 11 machines are operational at present
 Molding capacity= 6 machines x 25 parts per hour per machine x 8 hours per day x 5 days
per week = 6,000 parts per week

Capacity of assembly process:

Assembly capacity: 150 components/hour x 8 hours per day x 5 days per week= 6,000
components per week  CAPACITIES ARE BALANCED
B) If molding process were to use 10 machines instead of 6, and no changes were to be
made in the final assembly task, what would be the capacity of the entire process?
Molding capacity with 10 machines
Molding capacity= 10 machines x 25 parts per hour per machine 8 hours per day x 5 days
per week= 10,000 parts per week  CAPACITIES NO LONGER BALANCED

Because no change has been made in the final assembly task, the capacity of the
assembly process remains 6,000 components per week. Thus, even though the molding
capacity is 10,000 per week, the capacity of the entire process is only 6,000 per week
because in the LNG the overall capacity cannot exceed the slowest task

C)If our company went to a second shift of eight more hours on the assembly task, what
would be the new capacity
A second shift on the assembly task:
As calculated in the previous section, molding capacity= 10,000
Assembly capacity= 150 components per hour x 16 h/day x 5 days/week = 12,000
components/week  NEW CPACITY = 10,000

Even though here assembly capacity is 12,000/ week, the capacity of the entire process
remains at 10,000 per week because now the slowest task is the molding process (capacity
of 10,000/week). Thus, we can note here that capacity of a process is not a constant
factor, it depends on the availability of inputs and sequence of tasks.

Example 7.2: cost for 6,000 parts per week

Example 7.2: cost for 10,000 parts per week

Process design and analysis:

 Ex: UPS  Design delivery routes to avoid left turns (not waste time waiting, workers
walk at “brisk pace”)
o Drivers replace keys by digital remote fob to turn on the ignition and unlock
the bulkhead door = save $70 million
o Automatic door opening saves 1.75 secs/ stop, or 6.5 minutes per driver per
day, while also reducing motion and fatigue
o Daily collection of data analysis allows to shape new procedures

PROCESS: any part of an organization that takes inputs and transforms them into outputs
1) Honda Motors: parts and components  automobiles (Using labour, equipment along
an assembly line, and energy, these parts and components)
2) McDonald’s: inputs (hamburger meat, lettuce, tomatoes, and potatoes)
hamburgers, French fries, and other foods (using trained about, capital equipment,
order takes)
3) Hospital: Patient: healthy patient through proper treatment and care, specialized
equipment and highly trained doctors, nurses, and technicians
4) An airline: airplanes, ground equipment, flight crews, ground crews, reservation
personnel, and fuel to transport customers between locations all over the world.

CYCLE TIME: the average successive time between completions of successive units. Total time
from the beginning to the end of your process, as defined by you and your customer (in the
case of services)
TAKT TIME: the average time between start of production of one unit and the start of
production of the next unit, when these production starts are set to match the rate of
customer demand.
simply reflects rate of production needed to match the demand.
Assuming a product is made 1 unit at a time at a constant rate during the net available work
time, the takt time = amount of time that must elapse between two consecutive unit
completions in order to meet the demand.

 If total of 8 h (or 480 mins) in a shift (gross time) less 30 mins lunch, 30 mins for breaks
(2 × 15 mins), 10 mins for a team briefing and 10 mins for basic maintenance checks,
then the net Available Time to Work = 480 - 30 - 30 - 10 - 10 = 400 minutes.
 If customer demand were 400 units a day and one shift were being run, then the line
would be required to output at a minimum rate of one part per minute in order to be
able to keep up with customer demand

Practical example (old vs new machine being considered)

 Slot machines are often called “one-armed bandits” designed to payback typically
90-95% of what is taken, casino keeps 5-10%
 EX: a mechanical slot machine that pays out 95 % of the coins played, with average
player feeds coins into the machine at a pace of one coin each 15 seconds.
o CYLCE TIME=15-second interval
o Money process in 1h= (60 seconds/15 seconds) per min, or $240 ($4/minute ×
60 minutes) per h.
o Money made in 1h=228 (240 × 0.95) give and keep $12/ hour in operation
 Analysing new electronic slot machine (“electronic coins” and 10 secs to process bet)
o CYLCE TIME: 10 secs
o Money Process= (60secs/10) per min, or $6/min x 60 min= $360/h. with 95%
pay-out machine would give customer $360x0.95= 342 and keep $18 each h
UTILISATION: the ratio of the time that a resource is actually activated relative to the time that
it is available for use
How much does electronic vs mechanical slot machine make for the casino in 24h  One piece
of info needed) = How long will the slot machine operate over the 24 hours?
 12/24 h = expected utilisation of machine  Adjusting for utilization, expected
revenue from mechanical machine is $144/day ($12/hour × 24 hours × 0.5) compared
to revenue of $216/day ($18/hour × 24 hours × 0.5) for the electronic machine
 Other services (ex: food) at the casino important makes money based on how long
customers gamble= more time spent; more money made.
 Every min customer sitting in the restaurant, they are not feeding silver dollars into a
slot machine speed is crucial = impacts revenue generated at the games

PROCESS FLOWCHARTING: use of diagram to present major elements of a process

 Basic elements can include tasks or operations, flows of materials or customers,
decisions points and storage areas or queues
 ideal methodology by which to begin analysing a process.
o Set of tasks connected by a flow of goods and information that transforms
inputs to outputs

TYPES OF PROCESSES:
1) SINGLE STAGE PROCESS
 a. all activities involved in the operation of the slot machine collapsed and
analysed using a single cycle time to represent the speed of the slot machine
2) MULTISTAGE PROCESS
a. Multiple groups of activities linked through flows.
b. Term stage used to indicate that multiple activities pulled together for analysis
purposes

1) 2)

BUFFERING, BLOCKING AND STARVING:

1) BUFFERING: storage area between stages where output of a stage is placed prior to
being used in a downstream stage
a. Buffering allows stages to operate independently.
b. If one stage feeds a second stage with no intermediate buffer, then the
assumption is that the two stages are directly linked.
c. When a process is designed this way, the most common problems that can
happen are blocking and starving
2) BLOCKING: when the activities in a stage must stop because there is no place to
deposit the item
3) STARVING: when the activities in a stage must stop because there is no work
4) BOTTLENECK: stage that limits the capacity of the process
a. Activity in a process for which capacity is less
Practical example:
 2 stage process (1st stage cycle time= 30 secs and 2nd cycle time=45secs).
 If process needs to produce 100 units, for each unit produced, the first stage would be
blocked for 15 seconds.
 What would happen if inventory buffer placed between the two stages?
 How much time do you need to produce 100 units?
 How much will be the total inventory waiting to be processed in the second place?
In this case, the first stage would complete 100 units in 3,000 seconds (30 seconds/unit × 100
units). During these 3,000 seconds, the second stage would complete only 66 units ((3,000 –
30) seconds/45 seconds/unit). The 30 seconds are subtracted from the 3,000 seconds because
the second stage is starved for the first 30 seconds.
This would mean that the inventory would build to 34 units (100 units – 66 units) over that first
3,000 seconds.
All of the units would be produced in 4,530 seconds.
The second stage in this case is called a bottleneck because it limits capacity of the process.
 What would happen if the first stage required 45 seconds and the second stage had
the 30second cycle time?
In this case, the first stage = bottleneck, and each unit would go directly from the first
stage to the second. The second stage would be starved for 15 seconds waiting for each
unit to arrive; however, it would still take 4,530 seconds to complete all 100 units.

Example: Hamburger process (development)

 Traditional restaurant making hamburgers.
Before fast food= made to order process:

Order placed (specific degree of doneness)

 requests specific condiments cook
takes raw hamburger meat from inventory
cooks the hamburger and warms the bun
hamburger is then assembled and delivered
to the customer.

The quality of hamburger highly dependent

on the skill of the cook. This make-to-order
process is activated only in response to an
actual order.

Inventory (both WIP and finished goods) is

kept to a min. Theoretically, one would
expect that response time would be slow
because all the activities need to be
completed before the product is delivered to
the customer

Other types of processes:

 Serial flow process: a single path for all stages of production
 Parallel process: some of production has alternative paths where two or more
machines are used to increase capacity
 Logistics processes: movement of things such as materials, people, or finished goods

Measuring process performance

 Run time: time required to produce a batch of parts.

o =time required to produce each unit X batch size.
  Setup time: time required to prepare a machine to make an item.
o Machines with significant setup time will typically run parts in batches.
 Throughput rate: output rate process is expected to produce over a period of time.
 Value-added time: time in which useful work is actually being done on the unit.
o Assuming all activities included in the process are value-added activities, VAT=
sum of the activity operation times in the process

Production Process Mapping and Little’s Law

 Total average value of inventory= Sum of the value of raw materials, work-in-process,
and finished goods inventory
 Inventory turns = COGS/ average inventory value
 Days-of-supply= Inverse of inventory turns scaled to days (Nº of days able to deliver
from buffer stock)
 Little’s law
o There is a long-term relationship among inventory, throughput, and flow time
o Inventory = Throughput rate x Flow time

For a system to be in equilibrium  I =R*T

Practical exercise:
An automobile company assembles cars in a plant and purchases batteries from a vendor in
China.
 Average cost of each battery is $45 automobile company takes ownership of the
batteries when they arrive at the plant.
 It takes 12 hours to make a car in the plant and the plant assembles 200 cars per 8-
hour shift (currently the plant operates one shift per day).
 Each car uses one battery.
 Company holds on avg 8,000 batteries in raw material inventory as a buffer.
Assignment: Find the total number of batteries in the plant on average (in work-in-process at
the plant and in raw material inventory). How much are these batteries worth? How many
days of supply are held in raw material inventory on average?
WIP= Throughput x Flow time
WIP = 25 batteries x 12 hours = 300 batteries
 Total = 8,000 + 300 = 8,300 batteries
Value = 8,300 x $45 = $375,000
Flow time = Inventory/Throughput Flow time = 8,000/200 = 40 days

GANTT DIAGRAM
 KRISTEN COOKIES COMPANY:
Production process

How long does it take to fill a rush order?

How many orders can you fill 4h/night?
Considering the fact, it takes 26 mins to complete the first order and 10 minutes after
that to complete the next order, we can fulfil 22 dozen orders in one night (4 hours)
1st order  26 mins Total time available= 4h=240 mins
2nd, 3rd, etc  10 mins Total time av. after 1st order=214
(Do rule of 3) If 1 order  10 mins ? orders 214 mins =21.4 orders
st
TOTAL ORDERS= 21.4 +1 (1 order) =22.4 (round up to smallest whole number= 22)

How much valuable time will it take to fill each order?

Discounts? How much?

  Decreasing cost/dozen
 4th dozen would increase labour and material costs due to increased time

How many electric mixers and baking trays?

 1 mixer  adding more mixers will not help productivity since oven is the bottleneck,
just one with one tray with capacity of a dozen
 3 trays  mixer can make batch of up to 3 dozen, since each tray holds 1 dozen
include two more BUT will this affect the outcome of the cookies?? At what position
in the oven they are placed (might need to change operations, timing, displaying
positions)

Changes in Production plans?

Discounts or special rates?

 Discounts should not be offered for rush orders  orders from discounts can pile up
orders
 Can you fulfil priority while fulfilling current order? YES
o Cookies are already in the oven
o Make batter while current order cooking baking
o Only change premium if you have to stop or postpone current order 
compensation  avoid losing clients

Promised delivery & safety margin:

 Promised delivery after cookies are packed in boxes

 Time until order is ready= time to finish current order + (26 mins x nº order on board)
 Factors to consider:
1) Demand for cookies on campus
2) Cost of materials
3) Number of workers
4) Capital

Changes in the production system?

 Reduce number of ingredients (reduces time and cost)  less customization options or
even move to a standard cookie
 Create a surplus even if not as fresh and have a mechanism for preheat  selling to
universities students not in a nice cafeteria or salon
CUSTOMER EXPERIENCE:
Schmitt’s 10 rules for successful experiential marketing:
1. EXPERIENCES DON’T JUST HAPPEN: THEY NEED TO BE PLANNED. In that planning
process, be creative, use surprise, intrigue, and at times, provocation  shake things
up (good companies think from the time you enter the shop/location)
2. THINK ABOUT CUSTOMER EXPERIENCE FIRST and then about the functional features
and benefits of your brand  you need to think as if you are a customer (put yourself
in customer shoes)  don’t think in yourself!
3. BE OBSESSIVE ABOUT DETAILS OF THE EXPERIENCE (every detail counts!): Traditional
satisfaction models are missing the sensory, gut-fell, brain blasting, all-body, all-
feeling, all mind “EJ experience. (EJ= Execulate Jubilate). Let the customer delight in
exultant jubilation.
4. FIND THE “DUCK” FOR YOUR BRAND: every company needs to have a little element
that triggers, frames, summarizes, stylizes the experience
5. THINK CONSUMPTION SITUATION NOT JUST PRODUCT. You need to think when
people are using the product. Ex: “grooming in the bathroom” not “razo”, “casual
meal” not “hot dog”, and “travel” not “transportation”. Move along the sociocultural
dimension
6. STRIVE FOR “HOLISTIC EXPERIENCE that dazzle the senses, appeal to the heart,
challenge the intellect, are relevant to people’s lifestyles, and provide relational, i.e.,
social identity, appeal.
7. Profile and track experiential impact with the “Experiential Grid.” Profile different
types of experiences (Sense, Feel, Think, Act, and Relate) across experience providers
(logos, ads, packaging, advertising, Web sites, etc.)
8. USE METHODOLOGIES ECLECTICALLY. Some quantitative (questionnaire analyses or
logit); others qualitative (a day in the life of the customer). Some verbal (focus group);
others visual (digital camera techniques). Some conducted in artificial lab settings,
others in pubs or cafes. Anything goes! Be explorative and creative, worry about
reliability, validity, and methodological sophistication later.
9. CONSIDER EXPERIENCE CHANGES WITH BRAND EXTENSION into new categories, web
and globally. How can the brand be leveraged? Ex: in a different culture
10. ADD DYNAMISM AND “DIONYSIANISM” TO COMPANY AND BRAND. Most
organisation and owners too timid/slow/bureaucratic. Be ecstatic, passionate,
creative. Let this spirit breath and watch changes!
Customer Journey Map:

…visually illustrates customers’ processes, needs, & perceptions throughout their interaction
and relationship with an organization

 Understanding & diagnosing experiences

 Designing experiences and solutions (redesign existing, create new)
 Implementing and Measuring Improvement (the gap between current experience and
ideal one)
 Communicating In (orient, train, align) and Out (consistent value proposal)

Elements of customer journey:

1. Touch Points and moments of truth: moments you are connecting (customer
and company)
 ex: airplane  check in (moment you speak with the women, security
point, queue to enter, settling in the plane, during the plane service,
leaving the plane, when you wait for baggage)
 during these points you need to be focused (customer can be happy or
unhappy)
Ex : Startbucks: Antcipate  Enter  Engage Exit  Reflect

 Explore customer needs: gain deeper understanding of functional and emotional

needs
 Evaluate and frame: Re-examine issue / opportunity based on deep customer
understanding
 Design new experiences: innovate to influence attitudes and change behaviours

2. Pain Point: points that are bad (and know they are bad) ex: security control in
airplane
3. WOW Factor: something not expected from the customer (ex: coffee with ice
of coffee) and you really like it. try to do something different that not everyone
can do or has thought about it  what can I do that no one has invented yet
(not a matter of expensive but innovation)
 Ex: engagement proposal with magic trick (Jose Luis Portela)
4. Bottlenecks: pay attention, is where you are having a problem

[FOUR KEY CAPABILITIES that determine memorable experience]

1. Automation (technology)
2. Proactive Personalization & customisation
3. Contextual Interaction (human touch)
4. Journey Innovation (WOW factor)

Class notes
TOTAL QUALITY MANAGEMENT:

 A lot of books talking about quality

 Cost of quality increases  low quality always comes with a cost
o Prevention costs, appraisal costs (evaluating or measuring), internal failure
costs , external failure (after delivery)
o MIRAR OTAL COST OF QUALITY  [Link]
quality
 QULITY IS VERY IMPORNTNAT  to prevent costs you need to do 4 things
o Prevention costs (design, implementation, or management system) occur
before operations. With employment management is not easy to understand
 what you don’t foresee you cant prevent. Ask someone else who has
already done it (experienced) to avoid travel
o Appraisal costs: associated with measuring and monitoring activities related to
quality
 Everything you do internal to try to prevent problems in the quality
spectrum , you want to make sure the shape is correct, all works well,
surface ok. Everytime you produce something you do a quality audit
ex: Mercedes van quality check (checkmans) at the end of the
production line (1, 3, 5 or 7)  something they can solve in the future
1 or 3 because customer wont realise. 5 and 7 visible defect, but 7
more important, go back to production line to correct defect. If
number 5 even if small it still affects customer, if more than 2 defects
you have to change. One small mistake not worthy to repair and
customer doesn’t care, but if more than one you have to take into
account
o Internal failure costs: costs detected before it goes to customer, when
customer discovers something
o External failure costs  specially true for software (so complex)
 Key element is to be able to react quickly to customer
 Admit mistakes and assume blame , change and provide new
 Most happy customers are the ones who have had a problem and you
are able to solve the problem quickly
 “the customer is always right” the customer has its right (actual correction) it is my
point of view regardless if its right or wrong you have to solve my problems
o Ex: client wants well done meet vs a very good restaurant says that you
destroy the quality of the meet if you overcook it
o It is not about who is right or wrong but rather about whose opinion or point
of view counts  how consumers want to consume their product
 9sigma is almost perfection  6sigma very low level of defect
  Quality is the relationship between value paid  quality formula

OTHER CLASS (ADDITIONAL) NOTES:

Capacity management:

 Capacity flexibility= ability to rapidly increase or decrease capacity. How?

o Flexible Plants: easily movable equipment, easily accessible and reroutable
utilities. E.g. circus and fairs.
 o Flexible Processes: flexible production systems, easy and low-cost switching
between products. E.g., Mc Donalds
o Flexible Workers: Cross-trained workers, need managers to coordinate
workers switching between jobs. E.g., staff at Carrefour
 Considerations:
o System balance: output of stage 1= input of stage 2
o Frequency of change
 Cost of frequent upgrades: purchase, install training equipment, etc
 Cost of infrequent upgrades: excess inventory, unhappy customers,
high c/u, low employee morale, lost rev (high D)
o External capacity: alternatives to building internal  sharing, ,outsourcing
 Based level capacity:

 THM:
o System designed for real life situations where contingencies occur
o Design of system offers trade-offs bt efficiency (cost, capacity) and flexibility
(TPT, customisation)  ways to partially bridge the gap between the 2
o Bottleneck not necessarily longest process, but that with lowest capacity (it
can coincide though)

Process design

 Poka yoke: “fail safing”= procedures that block a mistake from becoming a service
defect. Effective if:
o Simple, inexpensive, easy to implement, immediate feedback and corrective
action
o 2 categories: prevention and detection
o Effective if: simple, inexpensive, easy to implement, immediate feedback and
corrective action
 Long-thin vs Short-fat

 How reliable is the process?

o Very: go with whatever saves cost and investment (long-thin)
o Not very: go with whatever reduces idle time and waste (short-fat)
o Be aware that if your value offering is based on cost, then you MUST have a
reliable process.
 Theory of constraints (T.O.C) Drum- buffer- rope
o THEORY OF CONSTRAINTS = output of a system determined by the capacity of
the slowest process. This process is denominated BOTTLENECK.
o DRUM-BUFFER-ROPE= tool to apply TOC for scheduling a production flow.
 Drum: bottleneck (sets rhythm or whole chain)
 Buffer: centralised protection for system against variability as
temporary stock before bottleneck
  Rope: the bottleneck “pull” or tie the rest of processes in the system,
new order is introduced only at the right time.
 Variability
o In the D (inter-arrival times of units to be processed)
o In time taken to perform activities at each stage
o Variability and Protection capacity
 Buffers protecting the bottleneck can be constructed thanks to the
excess of capacity in non-limiting processes
 Protection capacity= excess of capacity to perfect balance
 +vely correlated to variability of system (higher variability,
bigger capacity protection needed
 Idle time: end of activity- start of activity
 Wait time=start of activity-arrival time
 Process utilisation vs waiting time

 Types of inventory

Process layout design:

 A good process dein help achieve business objectives

 Processes and tasks within them
 Mapping your processes on the basis of throuput time, resource utilisation and waiting
time
 Operatinal processes:
 Positioning maps

 Process, volume and variety

 Basic labour types

Global operations:

 What is operations strategy?

o Pattern of decisions and actions that define the LNG vision objective and
capabilities of how operations contribute to overall strategy
o Wat to create sustainable competitive adv
o Involves design, planning and controlling and development of processes
 Do operations have a strategy?
o How can it contribute to business
o Deifned performance objectives
o Id broad decisions hat help achieve objectives
o Reconcile strategic decisions with performance objectives
 Four stage model:
  Focused factory approach
o Advantages:
 Higher asset utilization
 Improved production load
 More stable demand? (market aggregation Vs product aggregation)
 Lower quality costs
o Disadvantages
 Distance to customers
 Transportation costs and lead-time
o 5 key characteristics:
 Process technologies: unproven and uncertain techs limited to one per
factory vs proven and mature
 Market demands
 Product volumes
 Quality levels
 Manufacturing tools
 Risk pooling: demand variability is reduced If one can aggregate demand (across
locations, produces or even ime) = reduction in variability decreases safety stock and
therefore reduces average inventory
o Inventory management: apple = few products and opions  highest inventory
o Warehouse location and product flow
o Postponement: common trunk for products to be customized at a later stage
o Product design: standardisation
 SPEED, RELIABILITY AND GROWTH = SUCCESS

Process Design: Behavioural Science

 Customer point of view matter a lot

  Service encounters: transactional interactions where one person provides service or
good to another person
 Customer journey: aggregation of experiences customer has over time during the
purchase cycle across multiple touchpoints
 Perception = reality
o Important= how each customer remembers service encounter + (more) whole
experience afterwards
 Sequence effects  People remember snapshots
 Duration effects meet expectations (if exist) + fragment or aggregate (if possible)
 Rationalisation effects empower and engage
 5 principles of behavioural science
1. Finish strong (first impressions matter but last endure)
2. Get the bad experiences out of the way early (manage pain)
3. Segment the pleasure, combine the pain
4. Build commitment through choice
5. Give people rituals, and stick to them (rituals provide comfort, breaking them
invite blame)
 Design for ETC:
1. Emotions (influence what we remember)
2. Trust (lack=no engagement)
3. Control (achieved by trust and engagement)
 Coping with service errors
 Clear communications
 Follow up
 Active involvement
 Likeability
 Willingness to take the high road
 Knowing your customer
 Allocating decision rights when design for control depends on 1) impact of decision
and 2) required depth of knowledge

Queuing Theory:

 What? How long people or goods need to wait to be served

 Why? Helps reduce throughput time or variability and improve customer satisfaction
 results are often used when making business decisions about the resources needed to
provide a service.
 Capacity problems very common in industry  process redesign one of the main
drivers
 Important for service systems especially  large cost of waiting and lost sales of
waiting
 View network as collections of queues  FIFO data-structures
 Assumptions (despite them, queiing theory gives good results)
o Independent arrivals
o Exponential distributions
o Customers do not leave or change queues.
o Large queues do not discourage customers.
 Components of a basic queuing process:
 1. Calling population (finite vs infinite) and (homogenous vs heterogeneous)
2. Arrival Process (pattern)
3. Service Process (timing)
4. Number of Servers available

5. Queue Discipline (section)  most common FCFS

Managing customer behaviour in service operations:

 2 groups of business model  employee operated (ex: traditional restaurant) and

customer operated (ex: buffet)
 Manging lateness
o Charging late fee -> “punishment”
o Reward on time  “reward”
o Introduce time buffer
 Normative controls work best when :
o A foundation of trust exists
o Customer interdependence makes notion of customer community sensible
o Customers understand their actions matter

Product, service and process innovation:

 Organisation barriers to operational innovation

o Business culture
o Behind-the-scene and out-of-sight  change is hard (don’t understand, lack
information)
 Operational innovation defies an assumption about how work is done:
o Cross-docking defies the assumption that goods must be stored in a
warehouse
o Build to order: goods must be produced to meet forecasted demand
o Qualified limited choice: supermarket must offer as many choices as possible
 Operational innovation is disruptive, to make it work:
o Gian commitment to highest level (communicate and manage expectations)
o Keep short implementation periods
o Develop in interactive mode
o Start small
 Is it sustainable?
o Competitors seldom rush to copy them
 Denial of competitor superiority
 Organisational inertia
 Cultural aspects are difficult to imitate or even to identify
 Even if they attempt to, you are one step ahead.
 Product development:
o Market pull:
 Firms sees market opportunity
 Selects and refines technology to meet customer needs
 Develops products to meet demand
o Technology push:
 Firm has a new technology and looks for market  tech pushes
development
o Platofmr: existin platform used to build new product, already adopted by users
o Process intensive: existing process defines new product, used to manufacture
bulk quantities and cost of changing process high
o Customised produces: response to customer order, adjust to specificiations
o High risk products: via design and testing if high uncertainties
o Quick build products:
o Complex systems:
 THM:
o Innovation born by questioning the question
o Get commitment for change. Do not overestimate the power of ideas. Work to
convince: start small, gain credibility, and aim high
o Strategic benefits
 Higher customer retention
 Greater market share
 Ability to execute strategies
 Ability to enter new markets
o Marketplace benefits
 Lower prices
 Greater customer satisfaction
 Differentiated offerings
 Greater Agility
o Operational benefits
 Lower direct costs
  Better use of assets
 Faster cycle time
 Increased accuracy
 Greater customisation of precisión
 More added value
 Simplified processes

Quality: Most basic premise of your value proposition

 Totality of features and characteristics of a product or service that bears its ability to
satisfy stated or implied needs
 Meeting customer requirements
 Quality assumance: is product or service developed meeting specified requirements?
 TQM: managing entire organisation so that it excels on all dimensions of products and
services  full orientation towards same quality goals
 Cost of quality (earlier defect detected lower the cost)
o Prevention costs
 Id cause of defect
 Implement corrective action to eliminate cause of defect
 Train personnel
 Redesign product, process or service
 Review supplier capability
o Appraisal cost (testing for defective products): inspection, testing and test
equipment
o Internal failure cost (while in system or factor): scrap, rework, reinspection,
retesting,
o External failure cost (after delivered): customer returns, handling compliants,
loss of goodwill, product recalls
 Six sigma: means to minimise defects in products and processes
o produces less than 3.4 defects per million units.
o Defect item does not meet customers specifications
o Opportunity each step or activity defect can occur
o Unit item being produced
  ISO (International Organization for Standardisation) certification:
o Provides competitive edge (customer prefer it vs non certified)
o Provides legal advantages

EOQ and Fixed Time Period Models:

 Inventory control: when and how much to order?

 Multi-period inventory models
o Fixed order quantity model: place ordern when inventory reaches x level
(reorder level)
o Fixed time period model: place order end of pre-determined time period
 Inventory costs= Holding cots + ordering costs + purchase cost
 Assumptions
o Constant and uniform demand
o Constant cost/u
o Constant holding costs
o Constant ordering costs
o Constant lead time (time between placing order and receiving goods)

Determne inventory orders (min= reduce costs) optimal level to keep on hand and when new
orders generating

Ordering (shipping and employ) + carrying costs= inventory costs counterbalance each other
  Reorder point calculation:
o Constatnt demand and supply  ROP = AD * LT
o Variability in demand  ROP = AD * LT + Z*√(LT*σ2d)
o

Inventory Control.

 Important trade-off between overstocking and stocking out

 Why control inventory? Inventory= money
o High inventory= obsolescence insurance, (costs)
o Avoid excessive or shortages
o Reduces inefficiencies
o Avoids inaccurate forecasting
 Harder to control when:
o Unpredictable demand
o Customer demnd must be met quickly (make to order)
 Purpose of inventory:
o Maintain independence of operations (operate at its most efficient schedule)
o Meet demand variations
o Allows flexibility in production scheduling
 Cost of inventory:  commonalities= single period inventory= one time purchase
o Set up costs: if high batch lots larger= higher inventory
o Holding costs: storage facilities, breakage, obsolescence, depreciation,
Opportunity cost of capital
o Ordering costs
o Shortage costs
 Newsvendor problem

JIT:

 Manufacturing philosophy involving an integrated set of procedures/activities

designed to achieve a volume of production using minimal inventories
 Highly coordinated processing system in which goods move through the system and
services are performed jus as they need
 Adopted by GE
o TOYOTA – ‘Toyota System’
o IBM – ‘Continuous flow manufacturing’
o GE- ‘Management by sight’
o HEWLETT- PACKARD- ‘stockless production & repetitive manufacturing system’
 7 Wastes:

 JIT synchronisation: scheduling and movement information from operations planning

and control system

 Traditional vs JIT approach

 0 invenoty key for JIT:

o Eliminate ssafety stock= zero invenoty
 Steps in JIT process:
1. Introduce speed
2. Reduce or eliminate stock
 3. Introduce Kanban as a way to replenish WIP inventory
4. Design the plant for efficiency
5. Reduce and avoid setups
6. Introduce preventive maintenance
7. Reduce or eliminate defects
8. Introduce speed
9. Reduce or eliminate stock
10. Introduce Kanban as a way to replenish WIP inventory
11. Design the plant for efficiency
12. Reduce and avoid setups
13. Introduce preventive maintenance
14. Reduce or eliminate defects
 KANBAN: to do, doing, done  project management productiy tools
 Used for short term
 5S’s od JIT
 Sort (Seiri): organization
 Make work easier eliminating obstacles
 Reduced distraction with uncecessary items
 Prevent accumulation of unnecessary items
 Evaluate necessary items with regard to cost or toher factors
 Remove parta and toolsnot in use
 Segregate unwanted material from workplace
 Define red tag area (disponse when possible)
 Meed fully skilled supervisor for cheking on regular basis
 Waste removal
 Set in order (Seiton): keep in order
 Arrange for easy selction to use
 Prevent loss and waste of time  close proximity tooling/equipment
 Make it easy to pick and find items
 FIFO basis
 Make workflow smooth and easy
 Maintain safety
 All of the above don on regular basis
 Shine (Seiso): cleanliness
 Clean up completely
 Use it as inspection
 Prevent machienery and equipment deeiriotation
 Safe and easy environment , clean and pleasant
 Standardize (Seiketsu): Maintaining the three above
 Does best practices
 Maitian high standards at all time s
 Maintain orderliness in its place
 Every process has a standard
 Sustain (Shitsuke): always obey rules correctly so they become a habit.
 Not harmful to anyone
 Do without being told  self discilpline
 Perform regular audits
 Training and discipline  goal oriented (+ feedback necessary)
  QM
 Seek long-term commitment
 Quality must be a higher priority than cost
 Minimize Waste
 Production management
 Pull System vs. Push System
 Pull = Made to order
 Push = Made for inventory
 Communication Techniques
 Completion of task-Kanban
 Problem- Andon or siren/light
 Flexibility of the system
 Design For Testability
 Poka-Yoke= Mistake-proofing
 HR MNG:
 Company-wide Involvement
 Motivation for continuous improvement
 Problem Solving
 Diversified Employees capable of multiple tasks and self-rebalancing
 Management Support and Empowerment of workforce
 JIT MNF BUIDLING BLOCKS:

 Requirements of JIT:
o Respond to Customer Requirements
o Integrate all Processes
o Employee Participation
o Company -wide Commitment to education
o Eliminate redundancy
o Reduce all Inventory
o Establish Continuous Improvement Goals
o Use a pull Production System
o Design products for Manufacturing
o Develop Controllable Production Processes
o Have Defect Prevention Program
o Reduce Setup Times
o Build Products to Specification
  OBSTACLES IN CONVERION: lack of discipline, flexibility, equality, autonomy,
development of personnel, quality of working life, creativity, total people involvement
 Advantages of JIT
o High quality
o Flexibility
o Reduced setup times
o Reduced need for indirect labor
o Less waste
o Low warehouse cost
o Synchronization between production scheduling and work hour
 Disadvantages of JIT:
o Time consuming
o No spare product to meet unexpected order
o Supply Shock : If products do not reach on time
o High risk factor

Process improvement:

 ERP (bill of materials MRO ERP)

 Activity of closing the gap between the current and desired state of operations


 Types of improvement
o Breakthrough improvement: changing dramastically through innovation the
way the operation works
o Re-engineering (BPR): rethinkjng processes, strive for dramatic improvement ,
see if internal customer can be their own supplier, don’t separate control and
performance
o Continuous improvement
  How to make improvement stick?
o Take responsibility of improvement as ongoing activity
o Understanding antecedents of a new idea
o Prepared to adat
o Commit to education and learning
o Avoid overselling new idea

LEAN MANAGEMENT

 What is it? Philosophy and methodology that can help orgnisaiton achieve their
objectives
 Applied to service industry  ex: healthcare
 Improve quality by reducing errors and waiting time + cost + perfeorm better
 Toyota production system= lean management
o 2 MAIN PHILOSOPHIES : REDUCE WASTE AND RESPECT PEOPLE
 Waste= anything that does not add value (something customer is
willing to pay)
 8 TYPES OF WASTE

BENIHANA CASE STUDY:

 CAPACITY: MAX OUTPUT OF A SYSTEM IN A GIVEN PERIOD

 Designed capacity: max capacity that can be achieved under ideal conditions
 Effective capacity: percent of design capacity actually expected
 Bottleneck= activity with lowest output if its below demand
o Capacity is defined by the bottleneck:
 Utilisation: measure of planned or actual captiy usage of a facility, work centre or
machine

 Efficiency: measure of how well a facility or machine is performing when used

 Attaining Lean Production/Services:
o Fundamental rethinking and radical redesign of business processes to bring
about dramatic improvements in performance
o Focus on inventory reduction
o Modulation, postponed differentiation
o Develop close relationships with suppliers
o Eliminate all but value-added activities
o Revaluating the process of planning, scheduling, and transport across
boundaries
 Techniques for improving process efficiency of service