Engineering Management 1
Tutorial Week 6
Dr Farhad Anvari
Exercise 1
Give examples of Order Winning and Order Qualifying factors for two different organisations.
Exercise 2
Discuss about the applications of KPIs.
Identify 3 KPIs for the following organisations.
1-UWS 2-NHS Greater Glasgow and Clyde (NHSGGC) 3-Royal Mail 4-ScotRail 5- Irn-Bru
Exercise 3
Define Supply Chain Management.
Discuss about internal and external integration in Supply Chain.
Exercise 4
Critically compare different aspects of Outsourcing within your organisation.
Exercise 1
Give examples of Order Winning and Order Qualifying
factors for two different organisations.
Order Winners and Qualifiers
Order Winner Order Qualifier
Sales (£)
Sales (£)
Low High Low Threshold High
Achievement of competitive priority Achievement of competitive priority
• Order Winning factors are those things which directly and significantly contributes to the
winning business.
• Order Qualifying factors may not be major the major competitive determinants of success,
but are important in another way.
Order winners and qualifiers: Example
Industry Order Qualifiers Order
Winners
Air Line
Price
Safety
Accessibility
Appliance Functionality
Price
standard sizes and
Durability
power requirements
After Service
Fast food
Restaurant Price
Speed of service
Quality
Range of foods
Exercise 2
Discuss about the applications of KPIs.
Identify 3 KPIs for the following organisations.
1-UWS 2-NHS Greater Glasgow and Clyde (NHSGGC) 3-Royal
Mail 4-ScotRail 5- Irn-Bru
.
Information for improvement
“If you can’t measure it, you
can’t manage it.”
Example :- Performance management
The Operations Management Perspective
Performance
Cost effectiveness
Production cost
£££:Cost Inputs Outputs Outcomes
Economy Efficiency Effectiveness
Acquiring human and
material resources of the Producing the maximum output Having the organisation
appropriate quality and for any given set of resource meet the
quantity at the lowest cost. inputs for the required quantity Customer requirements
and quality of product/service
provided.
Performance
Performance Performance
Key Performance Indicators
Items (KPI) are what we measure to see how
our company is performing.
It looks at areas of the company that are
important to our business objectives and
measures them. It sets our goals and sees
how far we are on course to achieving them.
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Key Performance Indicators
It can also identify areas where we need to
improve and
areas where we have improved and should
be trying out the techniques used to achieve
this elsewhere. This explains what some of
our KPI should be and how to find them.
10
Example 1
Total absenteeism (%) =
(Total number of days off for all employees)
------------------------------------------------------------------ X 100
(Total number of working days for all employees)
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Example 2
Machine downtime (%) =
(Total hours machine is offline)
---------------------------------------------- X 100
(Total number of working hours )
12
Example 3
Quality Level (%) =
(Number of products without failures)
--------------------------------------------------------- X 100
(Total number of products produced )
13
Example 4
Work Cost Over Budget (%) =
(Actual cost of product)
--------------------------------------- X 100
(Estimated cost of product)
14
Example 5
Manpower utilisation (%) =
(Number of hours employee is gainfully employed)
----------------------------------------------- -------------------- X 100
(Number of working hours )
15
Example 6
Machine utilisation (%) =
(Number of hours a machine is working)
----------------------------------------------- --------- X 100
(Hours a machine is available )
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Example 7
Floor utilisation(%) =
(Total equipment area)
-------------------------------------- X 100
(Total floor area )
17
Example 8
Deliveries on Time (%) =
(Number of deliveries on time)
---------------------------------------------- X 100
(Total number of deliveries )
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Exercise 3
Define Supply Chain Management.
Discuss about internal and external integration in Supply Chain.
Supply Chain
Supply Chain: Definition
• Supply chain is a network of interconnected organizations or organizational entities developed with
the goal of getting the right product to the right place at the right time.
(Chopra, 2004)
Supply chain management is the design and management of seamless, value-added processes
across organizational boundaries to meet the real needs of the end customer.
(Institute for Supply Management)
Supply chain management is a set of approaches utilized to efficiently integrate suppliers,
manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the
right quantities, to the right locations, and at the right time, in order to minimize system wide costs
while satisfying service level requirements. (Simchi-Levi)
Supply Chain Management- At a glance
- A supply chain consists of
Supplier Manufacturer Distributor Retailer Customer
Upstream
Downstream
- aims to Match Supply and Demand,
profitably for products and services
SUPPLY SIDE DEMAND SIDE
- achieves
The right
Product
+ + + + +
The right
Price
The right
Store
The right
Quantity
The right
Customer
The right
Time
= Higher
Profits
Supply chain planning and control
Supply chain planning and control -Activities
Second tier First tier First tier Second tier End
supplier supplier customer customer customer
Supply side Demand
side
Purchasing and Physical distribution
Information supply management
flow management
Physical Materials management
flow
Logistics
Supply chain management
Integration
• Integration is the central theme in SCM
• Building synergy by integrating business functions, departments and
companies
Internal Value Chain: Local Focus
Executive
R&D
Management
Information
Operations
Technology
Supply
Logistics
Management
Finance Marketing
Human
Accounting Resource
Management
Internal Value Chain: Company Focus
Executive
R&D
Management
Information
Operations
Technology
Upstream Downstream
Supply
Suppliers Management
Logistics Customers
Finance Marketing
Human
Accounting Resource
Management
SCM: Linked Value Chains
Executive
R&D
Management
Information
Operations
Technology
Executive Executive Executive
R&D R&D R&D
Management Management Management
Executive
Information Information Information R&D
Operations Operations Management
Operations
Technology Technology Technology
Information
Operations
Technology
Supply Supply Supply Supply
Management Management
Logistics Logistics
Management Logistics Logistics
Management
Supply
Logistics
Management
Finance Finance Marketing Marketing Finance Marketing
Human Human Human Finance Marketing
Accounting Resource Accounting Resource Accounting Resource
Management Management Management
Human
Finance Marketing Accounting Resource
Management
Supplier’s Supplier Accounting
Focal Human
Resource
Customer Customer’s
Supplier Firm Management Customer
Supply Chain Integration
• Internal Process Integration: increase collaboration among the
company’s functional groups.
• Backward Process Integration: collaboration with 1st-tier and 2nd-
tier (leading companies) suppliers.
• Forward Process Integration: collaboration with 1st-tier customers.
• Complete Integration: collaboration from the “suppliers’ supplier
to the customers’ customer.”
Exercise 4
Critically compare different aspects of Outsourcing within your
organisation.
Strategic design decision in SC
• In-house or Outsourcing/Make-or-Buy
decision
Outsourcing
Outsourcing is the process of moving an aspect of
production, service, or business function from within an
organization to an outside supplier.
or outsource is purchasing from an outside source a product
or service that had been previously provided internally.
Examples of outsourcing
• Warehousing and Logistics: 3PL
• Catering/cleaning
• IT Management
• Call centres
• Manufacturing
• Product Design
Example - Outsourcing Decisions at Toyota
• About 30% of components in-sourced
• Engines:
– Company has knowledge and capacity
– 100% of engines are produced internally
• Transmissions
– Company has the knowledge
– Designs all the components
– Depends on its suppliers’ capacities
– 70 % of the components outsourced
• Vehicle electronic systems
– Designed and produced by Toyota’s suppliers.
– Company has dependency on both capacity and knowledge
Benefits of Outsourcing
• By outsourcing non-strategic processes, an organization can
focus its attention on those things it does best to satisfy the
customer.
(Ex:- Nike focuses on innovation, marketing, distribution,
and sales, not on manufacturing)
• Other benefits include:
– Reduce capital investment (Capital investment transferred
to suppliers)
– Access to low-cost labor and/or resources
– Performance improvement
– Benefit from outside expertise
Outsourcing Risks
• Loss of competitive knowledge
– Outsourcing may open up opportunities for competitors (IBM PC)
– Outsourcing may prevent the development of new skills, insights, innovations and
solutions
• Conflicting Issues with suppliers
– Quality issues
– Lead time issues
– Demand/supply matching issues
– Ethical/CSR issues etc
• Cultural distance, administrative distance, geographical distance and
economic distance