Running head: CONCEPTS REVIEW

CONCEPTS REVIEW Phase 3: Individual Project Operations Management Principles MGM340-1203B-01 Colorado Technical University By: John Bowey

CONCEPTS REVIEW Concepts Review

INTRODUCTION
Within the last three and a half weeks, weve analyzed numerous techniques, concepts, and principles associated with operations management. Topics such as supply-chain design, which included specifics involved with facility and work design and layout implementation. In addition, concepts involved with forecasting and demand planning; such as JIT, push vs. pull, and inventory management have also been looked thoroughly into. Also, principles found within operations management regarding outsourcing, and when it would be a good time to think of doing it, was looked into. Last, but hardly the least; careful attention has been directed towards processes in operations management associated with eliminating waste, such as Lean manufacturing and Six Sigma. The following paper will look at some of these studies further, and elaborate on several specific details, as they relate to the scenario being analyzed. The following paper will address and evaluate four intentionally-formulated scenarios; in which topic-related research and an in-depth analysis will be conducted on each. The results and conclusion of these studies will follow the written description of each scenario and will consist of an explanation - stating which operations management concept seemed to be used for guiding that specific process.

SCENARIO # 1

CONCEPTS REVIEW

A closed track race-car pit crew can change tires, fill the gas tank, adjust the suspension, do minor body work, and tune the engine in 17 seconds; however, it can take up to three days for the same work to be done at a local garage or automobile dealer. The above scenario is an ideal, smaller-scale description of an operations process that was actually based around the concept that it shouldnt take more than 9 minutes to complete any setup. The operations management concept that most closely fits the profile given in the scenario is the Single Minute Exchange of Die (SMED) and Quick Changeover. Both of these processes are the practice of reducing the time it takes to change a line or machine from running one product to the next. (Vorne; 2012) The concepts of SMED and Quick Changeover were originally designed for interested manufacturers as a way of gaining a competitive advantage over others within their industry. However; because many companies spend more than 20 percent of their planned production time on changeovers, the concept rapidly became popular among a much larger base. (Vorne; 2012) Most manufacturers today have chosen, or are choosing, to collect on the rewards that are generated by utilizing such a program. The manufacturers that do invest in these processes may receive desirable benefits; such as low inventories, fast deliveries, increased efficiency, higher morale, greater numbers of satisfied customers, and an increase in productivity and profitability. The concept of SMED and Quick changeover can be evaluated and broken-down upon analyzing the performance of a race car pit crew. SMED ultimately eliminates any activities that are quite essential to the operation. The basis of this technique is frequently used among pit crews and can especially be noticed during tire replacement operations. Common procedure for a pit crew tire changeover involves taking

CONCEPTS REVIEW the old tire off the vehicle and then using one bolt, install the new tire. This is what is bare minimum necessary for the operation of the race car. (McBride, D.; 2012) Another technique used during SMED and Quick changeover processes include conducting actions associated with performing an external set-up; such as gathering tools needed to generate a successful time. General knowledge about race car pit crews is that typically the faster pit crew wins the race. Much of their proficiency and success in the pits of a race car track has to do with gaining time by having all the tools and everything they need strategically placed, ensuring fat delivery and access. Also, SMED practices require accurate measurements and comparisons in order to maintain efficiency. NASCAR pit crews perform any and all actions accordingly with requirements, guidelines, and specifications posted by NASCAR. These rules are necessary to avoid creating an unfair bias among race teams and ensure that all cars on the track are equal. In order to become successful in the NASCAR race circuit, both drivers and pit crews conduct routine timed and measured practices. David McBride; an author for Reliable Plant.com, wrote within an article about set-up time reductions; that there are several reasons that pit crews can change four tires within seconds, while it usually takes about 7 to 15 minutes for the average person to change one tire; such as, they are always prepared, they have the exact tools necessary for a successful installation easily accessible, the tires are installed with only one bolt, and the

NASCAR pit crews usually go through an extensive and continuous training program. (McBride, D.; 2012) Typically, when viewed on television, pit crews tend to make their actions seem impulsive and hurriedly. However; in actuality, operations inside the pit area are controlled and rehearsed. Prior to the race car driver even beginning their first lap around the track; their pit

CONCEPTS REVIEW crews are in full-throttle ensuring that everything is staged and all tools are placed for maximum efficiency. Another factor; which is typically not seen or experienced by spectators, is the race

team and pit crews elaborate communication set-up; which expands throughout the entire supplychain of the race team. (Fuller, J.; 2012)

SCENARIO # 2

Large passenger jets preload luggage into large aluminum containers that are put onto the plane, whereas smaller planes get loaded one bag at a time. Although it may be difficult for some to understand; however, some of the decisions made by others can appear incorrect but have under-lying reasoning affecting its placement. This scenario may happen to be one of these very instances. The standard operating procedure for this airline and their decision to use a large loading container for large aircrafts, opposed to the onebag-at-a-time approach that is used on smaller crafts; although may not seem it, does have legitimacy and logic. The main factor behind the entire process and the likely reason behind the decision is the amount of money required to operate the larger crafts. Large aircrafts; like the passenger jet described above, generate substantially more expenses to operate than the smaller planes do. Some of these obvious expenses include fuel, maintenance, pilot training, and a larger number of personnel needed to staff the jet. If the decision was to be made to load and unload luggage like the smaller plane (one at-a-time) than the airline would have a much longer window

CONCEPTS REVIEW of time where these expenses are piling-up for no reason at all. In addition, taking longer to load and unload the entire luggage from the larger jet would create a longer wait time for passengers, causing them to become irritable. Smaller airplanes however, do not generate nearly as much operating costs and making the decision to use the large container for their loading operations would not only be a waste of time, but the expenses for the labor and machine usage alone, would likely double the amount it typically costs to load by hand. Three concepts, pertaining to operations management, actually come to mind, regarding this scenario. The first concept is the Lean manufacturing concept; which is based on the principle, it is necessary to reduce and eliminate waste or non-value added activities in the total supply-chain flow. (Collier, E.; 2012) Among the seven main documented waste, three of those waste (over production, waiting, and transport) can be directly related to the airlines reasoning. In addition; the scenario above could be evaluated on the entire supply-chain management concept; paying special attention to areas like production planning. All of the activities that a company performs, from the time that raw material reaches the loading-dock, through the time that the finished product is shipped d to the customer, is considered internal aspects of the supply-chain. (Phase 3: Course Material; 2012)

By utilizing the large aluminum container for loading and unloading luggage on to larger jets; the quick changeover and set-up reduction techniques (like described in scenario #1) can also be referenced.

CONCEPTS REVIEW

SCENARIO # 3

To avoid the obsolete inventory inherent with manufacturing fashion goods, like womens sweaters; a sweater manufacturer did not add color to the sweaters produced until real orders were in hand, as compared to making them based on forecast. A carefully conducted and thorough analysis of this scenario resulted in an overwhelming amount of viable resource information; which obviously proved useful when everything was compiled to produce the following conclusion. The guiding-force behind the process described above likely came from a few operations management concept sources. The first and seemingly most obvious concept being depicted above is forecast planning and demand planning. Forecast planning has traditionally been the preferred means for scheduling and initiating the manufacturing process of goods. However; a relatively newer and increasingly more desired approach is demand planning? Demand planning, basically, refers to the customers needs defining the point in time in which production starts and resulting in demand pulling goods and services through the supply-chain. (Forrest, L. 2012) Manufacturing firms operating under forecast-driven activities are creating pre-determined schedules that result in excess inventories and decreases in productivity and profitability. Demand-driven programs refer to manufacturing operations waiting until receiving an in-the-hand request from customers, before even starting production of the order. Another Operations Management concept being utilized within the scenario is mass customization. Mass-customization has been referred to as a hybrid between mass production and customization. (Lee, S. E. & Chen, J.; 1999) Utilizing mass-customization

CONCEPTS REVIEW techniques allow businesses to serve large markets with low-cost products; while creating them through mass-production. However; the company adopting this strategy should have a flexible manufacturing program, because it is needed in order to operate effectively. According to the

scenario above, the manufacturer decided to not add the colors to the sweaters until an order was in-hand. By doing this, not only does the manufacturer avoid extensive inventory pile-up, but also provides a choice in variety for the customer. There has also been the development of a newer operations management concept Virtual-Build-To-Order; which was designed to complement mass-customization manufacturers, especially those that have lead times that exceed the time customers are willing to wait. (Brabazon, P. & McCarthy, B.; n.d.) The Virtual-BuildTo-Order (VBTO) concept gives manufacturers the ability to meet the demands of their customers at any point in the inventory, regardless if the product is finished or not. Masscustomization is concerned with catering to individual customer needs, by customizing standard products so that high customer value can be created at low costs. (Dong, S.; 2010)

SCENARIO # 4

A large insurance company, which normally takes 3 weeks to handle home casualty claims, sends an RV down to a hurricane site with a small group of people and is able to process claims in 30 minutes.

CONCEPTS REVIEW Among the various concepts learned over the last 3 and a half weeks, one specific

principle or technique can be used as a basis for explaining the process within the scenario above. After breaking the scenario down into sub-topics and reviewing subject-related resources; I feel confident that the scenario best resembles the operations management concept relating to facility design selection and layout implementation. There are four main layout programs used to efficiently configure facilities; which are product, process, cellular, and fixed-position layouts. (Collier, E.; 2012) From the information given in the scenario, the exact concept could be narrowed down to fixed-position layouts. One of the deciding factors for this claim is that the insurance company within the scenario mentions that it moved their employees, their R.V., and all their resources needed to process these claims; to the hurricane site, in order to handle their causality claims in 30 minutes, rather than the typical 3 days. A fixed-position layout consolidates the resources necessary to manufacture a good or service; such as people, material, and equipment; all to one physical location. (Collier, E.; 2012) According to the scenario above, there tends to be a cut-and-dry benefit resulting from the insurance companys decision to utilize the fixed-position layout approach and consolidate its resources in one general area. By doing this, the insurance company was able to impressively process benefit claims in 30 minutes; when usually the claims take three days to complete.

CONCEPTS REVIEW References Brabazon P. & MacCarthy B. (n.d.) Virtual-Build-to-Order as a Mass Customization Order Fulfillment Model. Concurrent Engineering: Research and Applications. Retrieved September 05, 2012 from http://eprints.nottingham.ac.uk/524/1/VBTO_forMC.pdf. Collier, E. (2012). OM. 3rd-Edition. [ETextbook Version.] Retrieved from http://www.coursesmart. Colorado Technical University. (2012). MGM340 Phase 3 Activity: [Coarse Material Text.] Retrieved from Colorado Technical University Virtual Campus. MGM340-1203B-01: https://campus.ctuonline.edu. Dong, S. (2010) The Usefulness of Modularization, Mass-Customization, Postponement, and

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Customer Order Decoupling: Poking across the Product life cycle; Retrieved September 4, 2012 from http://urn:AGN:SR:liu:Diva-57345. Forrest, L. (August 30, 2012) Phase 3 IP and Discussion Notes: Live Chat #6. [CHAT] Retrieved from Colorado Technical University, Virtual Campus, MGM340-1203B-01: Operations Management Principles. https://campus.ctuonline.edu. Fuller, J. (2012) Water World: Is NASCAR Your Supply-Chain Model? Social Media Tools. Retrieved September 3, 2012 from http://www.waterworld.com. Lee, S. E., Chen, J. (1999) Journal of Industrial Technology. Mass-Customization Methodology for an Apparel Industry with a Future. Vol. 16, Number 1. November 1999 & January 2000. Retrieved September 9, 2012 from http://www.nait.org.

CONCEPTS REVIEW References

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McBride, D. (2012) Reliable Plant: A Primer on Quick Changeover and Setup Time Reduction. Retrieved September 9, 2012 from http://www.reliableplant.com. SMED (2008) SMED Setup Reduction: Shingos Insight: Separate internal and external. Retrieved Sept. 7, 2012 from http://setupreduction-blogspot.com/2008/08/shingosinsight-seperate-internal-and-external-ond.html. Vorne (2012) Vorne: Visual Displays and Productivity Tools. SMED: Single Minute Exchange of Die. Quick Changeover. Retrieved September 4, 2012 from http://www.vorne.com/learning-unit/smed-quick-changeover.html. www.systems2win.com. (n.d.) Quick Changeover SMED Setup Reduction: Lean SMED system for changeover setup reduction. Retrieved Sept. 09, 2012 from http://www.systems2win.com/solutions/SMED.htm.