OPERATIONS MANAGEMENT

http://cours.hec.be/operation_mgt

"Entreprises et Qualité" at HEC Monday October 28th at 7:30 pm.

ROOM 30Film of 45 min. + discussion

CURSUS CONTENTSCURSUS CONTENTS1) Introduction2) Human resources functions3) A new factory4) Products4) Products5) Services management6) The processes7) Planning the production8) Mass production9) Project management

• Different types of production systems

• Planning of the system and planning horizons

Forecasts

Chapter 7 Planning the production

• One time project

• Produce to order = Make to order (MtO)

• Final assembly to order =Assembly to order (AtO)

• Mass production = unique product or similar products(= Make to stock)

• Continuous process

• Diversified production (limited series)

Different types of production systems

One time project

Produce to order

Final assembly to order

Make to stock

Continuous process

Flows management by anticipationMtS, AtS,

Flows management by orderMtO, AtO, EtO

R&D Supplying Producing Delivering

Time - length

A Time delivery A

B Time delivery B

D Time delivery D

E Time delivery E = 0

New

CTime delivery C

Different types of production systems

Planning of the system and planning horizons

Forecasts

Chapter 7 Planning the production

Load versus capacity analysisCapacity

Load: orders + probable orders

Planning:

long range

medium range

short range

Planning the system and planning horizons

Forecasts

Demand estimation

Orders

Agregate Production Planning

Master Production Schedule

Operation Scheduling

Situation in the workshop

Inventory adjustmentsLongterm

Day

Mediumterm

P0 P1 P2 P3 P4 P5 P6 P7

Forecasts 17 26 11 25 31 34 38

Orders 21 12 27 13 7 4 0

Stock (end of P) 120 82 44 70 32 -6 44 6

Production 64 88

Master Production Schedule

C3

C4

C5C2

C1

Demand

Production level

Time

Example: Product A. Forecast of production requirements

• Time required for the production of 1 item 25hours• 20 days/month x 8hours/day x 200 employees• 1000 units on hand at the beginning of the period• Cost of holding 1 item in stock 5 €/month• Cost of 1 item = 1000 €• Cost of hiring a new employee = 1000 €• Cost of laying off an employee = 2000 €• Cost of a normal working hour = 25 €• overtime: : 50 % higher• Subcontracting : 30 % higher• Interim : 20 % higher• Backorder cost : 50 €/item

Try to find out two feasible strategies and to compare their costs.

Month J F M A M J J A S O N D

Quantity 1200 1400 1500 1400 1600 1700 1800 1900 1600 1500 1400 1000

From bill of material + times (of production, to get raw materials…)+ MPS Operation Scheduling

Operation Scheduling

Objectives: optimize

• Respect lead time and quantities

• Resources : saturation

• Stocks : minimize

Different types of production systems

Planning of the system and planning horizons

Forecasts

Chapter 7 Planning the production

Input forecastinghistorical data projection in the future

external constraints(ad campaign, new product, regulations…)

necessary but to use with judgement

Planning the system : forecasting

Forecast techniques Moving average (3 periods) = January + February + March

3

248

(256+255+248)/3 = 253

Month Sales Forecasts (3 periods) Forecasts (4 periods)

Jan 246

Feb 256

Mar 255

Apr (246+256+255)/3 = 252.3

May (246+256+255+248)/4 = 251.25

Forecast techniquesExponential smoothing

Period Sales Forecasts Difference Absolute difference

Squared difference

1 D1 F1=D1 e1 = D1-F1 |e1| (e1)2

2 D2 F2 = F1+ α e1 e2 = D2-F2 |e2| ...

3 D3 F3 = F2+ α e2 e3 = D3-F3 |e3| ...

... ... ... ... ... ...

Forecast techniquesExponential smoothing (example α = 0.2)

Period Sales Forecasts Difference Absolute difference

Squared difference

Jan 246

Feb 256

Mar 255

Apr

F1= 246

F2= 246+0=246

D1= 0

F3= 246+0.2x10=248

D2= 10

D2= 7

F4= 248+0.2x7=249.4

Sales and forecasts

230235240245250255260265

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Forecast techniquesExponential smoothing

Forecast techniques

Linear regression (least-squares)

Linear Regression

-10

0

10

20

30

40

50

0 200 400 600 800

salesPr

ofit yi

y'iei

Seasonal components

-5000

0

5000

10000

15000

20000

0 10 20 30 40

Time (quarters)

Num

ber o

f pas

seng

ers

ObservationsSeason.Comp. Trenderror

Forecast techniquesSeasonal components

CURSUS CONTENTSCURSUS CONTENTS1) Introduction2) Human ressources functions3) A new factory4) Products4) Products5) Services management6) The processes7) Planning the production8) Mass production

IntroductionLine Balancing

9) Project management

Introduction- line

- a single product or family of product

PRODUCT LAYOUT (chap 3)

- design

- balancing load/capacity

Chapter 8 Mass Production

Example :The chemical firm "Hareng" refines a product "x" for which the sales forecasts are :

Jan Feb March Apr May June1 800 T 1 500 T 1 100 T 900 T 1 100 T 1 700 T

The beginning inventory is 400 T.Manufacturing cost : 100 €/T.Stocking expenses : 1,5 €/T a month.Safety stock : 400 T.The product goes through the 3 workshops A, B, C that respectively have the following capacities : 70, 50, 120 T/Day. ( 2 shift/Day, 30 days/month)

0

500

1000

1500

2000

Jan Fev Mars Avr Mai Juin

Solution 1: Production = Need

(Average to produce: 1350 T)

Sometimes 3 shifts (Jan, June)Sometimes 1 shift (Mar, Apr, May)

flexible working timecosts in overtime and layoffs

Capacity: 1500 T/month (2 shifts)

Jan Feb March Apr May June1 800 T 1 500 T 1 100 T 900 T 1 100 T 1 700 T

Solution 2: Contant production level In Jan use security stockIn March, Apr, May : make stocks

Stocking costs

Capacity: 1500 T/month (2 shifts)

Jan Feb March Apr May June1 800 T 1 500 T 1 100 T 900 T 1 100 T 1 700 T

Other solutions

Introduction

Line balancing

Chapter 8 Mass Production

- operation

- station (gathers several operations)

- cycle: time between the exit of 2 items

from the last station

Min number of stations, min total idle time

Operation Length Immediate predecessors1 6 -

2 2 1

3 5 1

4 7 1

5 1 1

6 2 2

7 3 3, 4, 5

8 6 6

9 5 7

10 5 8

11 4 9, 10

Example: matrix with time lengths and orders of operations

1

2

3

4

5

6

7

8

9

10

11

Op L pre1 6 -

2 2 1

3 5 1

4 7 1

5 1 1

6 2 2

7 3 3, 4, 5

8 6 6

9 5 7

10 5 8

11 4 9, 10Cycle time = 10Total time = 46

At least 5 stations

1

2

3

4

5

6

7

8

9

10

11

t = 6

t = 5

t = 7

t = 1

t = 2

t = 2

t = 3

t = 6

t = 5

t = 5

t = 4

Solution (trial)

Cycle time = 10

Station Operations Length Idle1 1, 2, 5 9 12 3, 6 7 33 4, 7 104 8 6 45 9, 10 106 11 4 6

Op1, 2, 5

Op3, 6

Op8

Op9, 10

Op11

Op4, 7

Station1 Station2 Station3 Station4 Station5 Station6

Activ. t = 9Idle time =1

Act. t = 7Idle = 3

Act. t = 10Idle = 0

Act. t = 6Idle = 4

Act. t = 10Idle = 0

Act. t = 4Idle = 6

Total idle time = 14

Station Oper. Length Idle1 1, 2, 6 102 4, 5 8 23 3, 7 8 24 8 6 45 9, 10 106 11 4 6

Op1, 2, 6

Op4,5

Op8

Op9, 10

Op3, 7

Station1 Station2 Station3 Station4 Station5

Activ. t = 10Idle time =0

Act. t = 8Idle = 2

Act. t = 8Idle = 2

Act. t = 6Idle = 4

Act. t = 10Idle = 0

Station6Op11

Act. t = 4Idle = 6

Total idle time = 14

Other solution

Cycle time = 10

Cycle time = 10

Station Oper. Length Idle1 1, 2, 6 102 5, 8 7 33 3, 10 104 4, 7 105 9, 11 9 1

Op1, 2, 6

Op5, 8

Op4, 7

Op9, 11

Op3, 10

Station1 Station2 Station3 Station4 Station5

Activ. t = 10Idle time =0

Act. t = 7Idle = 3

Act. t = 10Idle = 0

Act. t = 10Idle = 0

Act. t = 9Idle = 1

Total idle time = 4

Other solution(optimal)

– Optimal technique: Linear Programming

– Heuristic method

(not detailed here)

Be careful: not to be mistaken with chap 9!

Line balancing: methods

Example : We want to organize a line. We have a monthly production rate of records, each one requiring the operations described below. Let us say that we want to produce one record per hour (cycle = 1 hour). How many stations will we need ?

Operation Length Precedence

1 0,22 0,6 13 0,4 14 0,7 25 0,3 36 0,5 37 0,6 48 0,1 5,69 0,4 7,8

Station Oper. Length Idle1 1 0.2 0.82 2, 3 1 -3 4, 5 1 -4 6, 8 0.6 0.45 7, 9 1 -

Remark: split up the operation n°3 in two (3a and 3b) : 0,2 each

Station Oper. Length Idle1 1, 2, 3a 1 -2 3b, 4 0.9 0.13 5, 6, 8 0.9 0.14 7, 9 1 -

Solution: