Operation Management (OM) Introduction Ing.J.Skorkovský, CSc, Department of Corporate Economy FACULTY OF ECONOMICS AND ADMINISTRATION Masaryk University Brno Czech Republic What is going on ? Use of Operations Management (OM) in external environment (main target) General knowledge of OM methods acquired at university and long-standing experience Knowledge of methods and experience from research and literature - teachers Knowledge of methods and experience from outside world – consultants, managers, … Extent of knowledge Extent of knowledge OM all around us OM is the management of all processes used to design, supply, produce, and deliver valuable goods and services to customers TQM = Total Quality Management MRP, JIT, APS, Lean Manufacturing, Little´s law ERP: Marketing, Selling, Invoicing, Payment,…. ERP: Logistics, Transportation , Some OM methods •Theory of Constraints •Balanced Scorecard •Project Management methods (Critical Chain, SCRUM,…) •Material Requirement Planning and Just-in-Time •Advanced Planning and Scheduling •Six Sigma – quality management •Boston, SWOT and Magic Quadrant Matrices •Little ´s Law (relations between WIP, Throughput and Cycle time) •Linear programming •Yield Management •Kepner-Tregoe (support of decision making) • • Some tools •ERP-Enterprise Resource Planning (MS Dynamics NAV) –Basic installation, handling and setup –Inventory – Items – Transports –Purchase –dealing with Suppliers –Selling – dealing with Customers –Payment – Bank operations –Accounting basics –CRM- Customer Relationship Management –Manufacturing – Planning and Shop Floor Control – – • • • Some basic processes controlled by ERP –I. •Logistics (Warehouse management) –Replenishment (EOQ, ROP, Safety Stock, MRP) –Inventory costing (FIFO, Specific, Average, Standard, COGS) –Stock taking –MRP –Put-away, picking, bins, zones, cross docking –Shipment –Receiving Used abbreviations : EOQ – Economic Order Quantity; ROP – Reorder Point; MRP –Material Requirement Planning; COGS – Cost of Good Sold Some basic processes controlled by ERP –II. •Finance management (accounting) –Reporting (BS, Income statement,..) –Controlling (Cost management,…) –Banking operations – – – Used abbreviations : BS– Balanced Sheet Some basic processes controlled by ERP –III. •Manufacturing –Product design (BOM, Routing) –Machines (Capacity management) –Planning –Product registration –Concepts (Lean , MRP-II, JIT,DBR,….) –QM – – Used abbreviations : MRP-II – Manufactuirn Resource Planning = MRP+Resource Planning ; JIT – Just In Time; DBR-Drum-Buffer; QM-Quality Management Some basic processes controlled by ERP –IV. •CRM –Contact management –Opportunities –Market segmentation –Getting new leads – – Used abbreviations : CRM – Customer Relationship Management Some basic processes controlled by ERP –V. •Selling –Credit limits –Price lists and discounts –Drop shipment –Substitutions –Blank orders –Quotations –Invoicing –Due date performance –ATP|CTP – – Used abbreviations : ATP|CTP– Available to Promise | Capable to Promise Controlling processes in Supply Chain Management (SCM) Supply Production Orders Operation Strategies and Innovations , R&D Forecasts, Blank Orders Long term planning Marketing Logistic operations Routing control, TQM Packaging , Transportation MRP, Replenishment MRP_II ; JIT, Capacities Cash flow Strategic Operational Tactical Operational Used abbreviations : R&D –Research and Development; TQM-Total Quality Management; JIT- Just –In-Time; MRP_II-Manufacturing and Resource Planning Used abbreviations (slide number 3 ): : ERP - Enterprise Resource Planning ; APS – Advanced Planning and Scheduling Deming cycle (based on periodicity) Plan: Define the problem to be addressed, collect relevant data, and ascertain the problem's root cause (e.g. by use of TOC) Do: Develop and implement a solution; decide upon a measurement to gauge its effectiveness. Check: Confirm the results through before-and-after data comparison. Act: Document the results, inform others about process changes, and make recommendations for the problem to be addressed in the next PDCA cycle. Used abbreviations : TOC – Theory of Constraints Project management Theory of constraints Production Critical chain Drum –Buffer-Rope MRP-MRP-II,JIT,APS Linear programming Cutting, blending Total quality management Pareto, ishikawa Product postitioning Little´s law Boston Matrix Gartner QM Workflow CONWIP Logistics EOQ Decision Making Kepner-Tregoe Hurwitz Business Intelligence Yield management Prospect Theory Another point of view ABC Pareto, Ishikawa Six Sigma Product Life Cycle LEAN Function block Logistic more in detail will be presented later in this show SCRUM Used abbreviations : QM– Quadrant Matrix; CONWIP – Constant Work in Progress; EOQ – Economic Order Quantity ; MRP - Material Requirement Planning This will be modified in following South African project show (use of Balanced Score Card) Another point of view Demand Financial needs Money Product Operations See next slide Function block Logistic-simplified Orders (dependent demand) Forecasts (independent demand) Inventory Management Inventory Costing Transportation Warehouse Management Will be part of our course regarding ERP system MS Dynamics NAV Procedures-simplified Resource (modified) : dowtsx Input Transformation Output Processing (not organised set of processes, will be presented also as a introduction to project management PWP presentation later) • Input check • Put-away • •Cross-docking • Transfer • to • Production • • Consumption registration •Production Output registration • •Inventory value •calculation • • Output check •(Quality control) • •Delivery • •Load-despatch • •Production Planning • •Sales Order • • •Component replenishment • •Purchase Order • • •Invoicing • •Payment • Finished • goods to • Inventory • • Picking from • Inventory • • •Reporting • •Statistics Resource : Skorkovský Your main task (to organize processes based on business logic) • Input check Put-away Cross-docking • Transfer • to • Production • • Consumption registration •Production Output registration Inventory value calculation • Output check • •Shipment • •Load-despatch • •Production Planning • •Sales Order (demand) • • •Component replenishment • •Purchase Order • • •Invoicing • •Payment from •Customer Finished goods to Inventory • •Picking from • Inventory • • •Reporting • •Statistics • •Inventory value •calculation • • •Inventory value •calculation • • •Payment to •Vendor Transformation Input Output Control Logistics Resource : Skorkovský Your main task (possible problems, bottlenecks, undesirable effects..) • Input check • Put-away • •Cross-docking • Transfer • to • Production • • Consumption registration •Production Output registration • •Inventory value •calculation • • Output check • •Shipment • •Load-despatch • •Production Planning • •Sales Order • • •Component replenishment • •Purchase Order • • •Invoicing • •Payment from •Customer • Finished • goods to • Inventory • • Picking from • Inventory • • •Reporting • •Statistics • •Inventory value •calculation • • •Inventory value •calculation • • •Payment to •Vendor Application of TOC ->thinking tools->Current Reality Tree – first stage Resource : Skorkovský Your main task (Search - HOW ??? Measure impacts –HOW ??? and Destroy – HOW ???) Root Problem (e.g.low profit ) Cause-Effect relations Cause-Effect relation Cause-Effect relation Cause-Effect relation Cause-Effect relation https://www.toc.tv/TV/video.php?id=701&open=excerpt#.V6xCP00kpFo Basic problem I. (one of many) momentus 33e68905-3e3e-4556-bc5b-c5e41f6527fa_Pakistan_Musharraf • •We have •a huge data •quantity 33e68905-3e3e-4556-bc5b-c5e41f6527fa_Pakistan_Musharraf • •..and at the same •time a minimum information, which could be used for decision making !!!! We cannot solve our problems with the same level of thinking that created them ! Statement by Albert Einstein) •To solve it we should use finite capacity scheduling (APS)- will be presented later improve01_01 •Op1 •Op2 •Op3 Zobrazit obrázek v plné velikosti press Zobrazit obrázek v plné velikosti •T1 •T2 • T1+T2=X • •Opt=Min(X) •Op1 •Op2 •Op3 •T1 = 0 •T2 = 0 • Basic problem III. Will be explained in Little´s law presentation •Op1 •Op2 •Op3 20 pcs A7 and 20 pcsA8 •A0 •A1 •A2 •A3 •A4 •A5 10 pcs A4 adn 10 pcs A5 (will be delivered in T1+X time ) •T1 •T0 Lead time A6 •A6 •A7 •A8 • •Op1 •Op2 •Op3 •X= slack •T1 •T1+X •APS result ->18.8.->23.8. a 27.8.->10.9 Thanks for your attention