Operations Management Performance Modeling 1 Operations Strategy 2

Operations Management & Performance Modeling 1 Operations Strategy 2 Process Analysis 3 Lean Operations – Class 3 b: MBPF Inc. House Manufacturing Game – Class 4 a: The Paradigm of Lean Operations: The ideal » Discuss House Game » Basic philosophy of Lean Ops » Methods for synchronization & waste reduction 4 5 6 7 OM&PM/Class 4 a Supply Chain Management Capacity Management in Services Total Quality Management Business Process Reengineering 1

Paradigm of Lean Operations: In Search for the Holy Grail = The ideal Process u Synchronization of all flows u At lowest possible cost u Waste = Gap between ideal and actual èHow do we set up a system to continually reduce waste ? OM&PM/Class 4 a 2

Toyota’s waste elimination in Operations 1. Overproduction 2. Waiting 3. Inessential handling 4. Non-value adding processing 5. Inventory in excess of immediate needs 6. Inessential motion 7. Correction necessitated by defects OM&PM/Class 4 a 3

Waste Reduction Source: Chase & Aquilano Ó Irwin 1995 OM&PM/Class 4 a 4

Reducing Waste: From Functional Layout to Cells Production Control Roof Cut FA QC OM&PM/Class 4 a Roof Cut FA QC Production Control Roof Cut FA QC Base Cut Production Control Base Cut Base Assy Roof Cut Base Cut FA Base Assy Production Control Roof Cut Base Cut FA Base Assy 5

Managing Flows: the Process View u By rethinking the IBM Austin assembly plant and introducing cells, distance traveled by a card was cut from 1. 5 miles to 200 yards. Floor space was reduced to half and production tripled with about the same number of workers. Chicago Tribune, July 1992 OM&PM/Class 4 a 6

Synchronize: Cut Batch Sizes Example Process: 0 1 2 3 4 5 C D 1 min/job Batch Mfg (Lotsize = 5) 5 Space 10 15 20 B u 5 A Time A OM&PM/Class 4 a B C u 0 1 2 3 4 5 D Flow Mfg (Lotsize = 1) Space 1 1 A 5 1 B C D 10 5 15 5 20 7

Synchronize: Just-In-Time operations JIT = have exactly what is needed, in the quantity it is needed, when it is needed, where it is needed. u “hand-to-mouth” material flow u needed by whom? OM&PM/Class 4 a 8

Synchronization with demand: customer demand pulls product PUSH: Inputs availability triggers execution Supplier inputs Process outputs Customer PULL: Outputs need triggers execution Supplier OM&PM/Class 4 a inputs Process outputs Customer 9

Reducing waste: Increase Problem Visibility Lower the Water to Expose the Rocks Inventory Missed Due Dates Late Deliveries Too much paperwork Engineering Change Orders Scrap & Rework Poor Quality OM&PM/Class 4 a Too Much Space 100% inspection Long queues Machine Downtime 10

Time plays the role of Inventory in Lean Service Operations TIME OM&PM/Class 4 a 11

Implementation: Kanban Production Control Systems Kanban Job Processing center i OM&PM/Class 4 a WIP Processing center i + 1 12

Class 4 a: Learning Objectives u Paradigm of Lean Operations: ÕStrive for the ideal by eliminating waste u Synchronize – – u Layout: Cellular operations Reduced batch sizes JIT Pull production control systems (vs. push) Improve – Increase problem visibility (river analogy) u Implementation ÕKanban OM&PM/Class 4 a 13