Pom Study Guide

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Service Processes – Session 1

The Lean Enterprise

Clear focus in operating decisions leads to superior performance But, limits to flexibility, risk of (market or technical) obsolescence, or the routine

Operations Strategy is about deciding what solution to offer (product or service), to who, and how to deliver it.

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Manufacturing Process – Session 2

Distinct business processes are appropriate to create distinct value propositions

• Jumbled flow (job shop) for low volume and highly customized solutions • Disconnected line flow (batch) for multiple products in moderate volumes • Connected line flow (Assembly line) for high volume of major products • Continuous flow for commodity products

Important sources of cost differentials

• Operations strategy
• Operational efficiency

The dynamics of the product-process matrix

• Positioning in the P-P matrix is not only driven by operations strategy but also by the product lifeline • Moving in the P-P matrix requires changing the entire mindset/culture of the organization

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Part II – Business Process Analysis and Improvement

Customer Response Performance in Services – Session 3

From parameters to performance

If s = 1 server
[pic]or use lookup table if s > 1

Parameters

sNumber of Servers
λFrequency of arrivals -> x/day / x/hr / x/minute
τAverage service time -> days / hrs / minutes
μ=1/ τService rate
ρUtilization; ρ = λτ/s
CVCoefficient of variation; CV = σ/μ (stddev/mean)
CVSVariation of service time = στ/μτ, = 1 if Exponential, 0 if constant. CVAVariation of arrival rate = σλ/μλ, = 1 if Poisson.

Average performance measures

WqWaiting time
WTotal throughput time
LqNumber of customers in the queue
LNumber of customers in the system
Wq + τCustomer response time

Single Server

What are the parameters? λ,τ, CVA, CVS
1. Find ρ = λτ
2. Find Wq from the formula above
3. Lq = λWq
W = Wq + τ
L = λW

Multiple Server

1. What are the parameters? λ,τ, s
2. Find ρ = λτ/s
3. Find Lq from table using s and ρ; Assumes CVA = 1 and CVS = 1. 4. Wq = Lq/λ
W = Wq + τ
L = λW

Assembly lineJob Shop
CVS0> 1
CVA
Utilization (target)~90%~60%

If multiple production machines, equalize Lq across the production lines

Waiting is “inevitable”, even with less than 100% utilization

• Scale effects, τ
• Utilization effects, ρ/(1- ρ)
• Variability effects, (CVA2 + CVS2)/2

Little’s Law: Inventory = rate x wait (on average)

In general, for stable systems (ρ < 1), the average inventory in system = average arrival rate x average time in system. Can also be used to calculate the average time in system. L = λW

Managing waits/customer response time

• Remove non-value added steps to reduce processing time (τ↓, ρ↓) • Reduce variability in demand (CVA↓) and process (CVS↓) • Pool resources to more effectively use existing capacity (s↑)

Lessons for Life: Keep slack

What is the Goal of the Enterprise? – Session 4

Definitions

ThroughputThe rate at which the system generates revenues
Production is not revenue
Capacity utilization is not the goal, only a possible means to achieve it InventoryThe level of capital invested in the system
“It takes money to make money”
… just don’t take too much
Money costs money; Opportunity cost of equity, interest charged on debt.

Managing with bottlenecks

1. Find the bottleneck
2. Maximize throughput by exploiting the bottleneck
o Avoid starving the bottleneck (create buffer for some inventory in front of it). o Lost capacity at bottleneck is lost forever
o Schedule to keep it busy. Reduce number of setups at the bottleneck (big batches) 3. Elevate: Increase capacity at bottleneck
o Reduce length of setup time at the bottleneck...
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