There is a 8 question part for manufacturing and a case study regarding manufacturing.
Michelle_Michy
20201018211522topic_3___technology_modified21.pptUnit 305
Operations Management
• Topic 3: Technology
Management of Technology & Processes
The ability to manage technology strategically is crucial to
achievement of the operational objectives of an organisation.
This topic will discusses the importance of the
strategic application of technology to both manufacturing and
services.
We will then discuss issues associated with process
management and one means of analysing costs for new
products, processes and services …. “break-even analysis”.
Assignment - Question 3
What Information Systems are used in your organization to support the value chain internal functions and the supply chain? How does technology contribute to achieve competitive advantage?
The Importance of Technology
“Technology is the engine that drives the economies of nations.
Technological capabilities constitute the cutting edge of business
strategies of enterprises that excel in the intensely competitive
global marketplace”, (Rastogi 1995, p9).
“Across a wide and expanding spectrum of products and
production capabilities …. technology has become the single
most important factor driving global industrial competition”, (ibid
p13)
Technology Strategy
One way to define technology strategy is by seeing it as the
link between the products and services an organisation
brings to market and the underpinning technologies of these
products and services.
Managers throughout an organisation have an obligation to
ensure that technology is used most effectively.
Cost Reduction Benefits from Adopting New
Technologies
• Labor costs
• Material costs
• Inventory costs
• Transportation or distribution costs
• Quality costs
• Other costs
5
Other Benefits….
• Increased product variety
• Improved product features and
quality
• Shorter cycle times
6
Acquiring Technology
By Purchasing a Firm
Speeds development
Issues concern the fit between the acquired organization and
product and the host
Through Joint Ventures
Both organizations learn
Risks are shared
Through Alliances
Cooperative agreements between independent organizations
7
Hardware Systems
• Numerically controlled (NC) machines
• Machining centers
• Industrial robots
• Automated material handling (AMH) systems
- Automated Storage and Retrieval Systems (AS/AR)
- Automate Guided Vehicle (AGV)
• Flexible manufacturing systems (FMS)
8
Software Systems
• Computer-aided-design (CAD)
- Computer-aided engineering (CAE)
- Computer-aided process planning (CAPP)
• Automated manufacturing planning and
control systems (MP & CS)
9
Computer Integrated Manufacturing
(CIM)
• Product and process design
• Planning and control
• The manufacturing process
10
Components of
e-Manufacturing
11
Outsourcing vs Insourcing
The question of whether to develop technology in house or to
“outsource” the technology is one for senior managers to
eventually make.
However, if everyone has access to the same technology (e.g.
an ERP system) where is the competitive advantage gained?
Innovation, on the other hand, continues to play its
traditionally important role in sustaining competitiveness,
(Jewels, Al-Rawshdi, Abusharekh, & Shamisi ,2011).
ERP Systems
ERP systems have become the de facto standard for large and
medium organisations to run their major functional and process
operations, and have even been described by Kumar and Van
Hillegersberg, (2000) as merely the price of entry for running a
business.
They have been described by Stewart, Milford, Jewels, Hunter
and Hunter, (2000, p967) as technology diffusions through
social systems.
Technology in Services
Technology has profound effects on how services are managed
and expected by customers.
Services in the following sectors have been transformed by
technology …
• Medicine
• Telecommunications
• Retail
• Education
• Banking
• Airlines
Internet and E-business
E-business has the potential to restructure processes and
functions to allow greater and more efficient utilisation of
assets and reduced operating costs.
“Burn the ships” …. a term first used by Tariq bin Ziyad when
reaching Andalucia …. (the sea is behind us … the enemy in
front … we can only go one way). Does any Middle Eastern
student here not remember those lines? It is appropriate to use
in traditional and virtual marketplaces.
Relevant Publications
Jewels, T. (2003). The Dag-Brücken ASRS Case Study. Journal of Information
Systems Education: Special Issue on IS Teaching Cases, 14(3), 247-257.
Jewels, T., Ghanem, A., Mongeal, A., Nuaimi, E., Aljaaidi, A., Al-Kaf, A., &
Nuaimi, A. (2009, August 6-9th). E-Business Use in the United Arab
Emirates: Lessons for Evolving Markets. Paper presented at the 15th
Americas Conference on Information Systems, San Francisco, CA.
Developing New Products
New product development is a crucial part of business.
Product Life Cycle (PLC)
Product Life Cycles
Cost of development and production
Sales revenue
Net revenue (profit)
Cash
flow
Negative
cash flow
Loss
Introduction
Growth
Maturity
Decline
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New Products
New products serve to provide growth opportunities and a
competitive advantage for the organisation.
Increasingly there is a challenge to introduce new products
more quickly without sacrificing quality. PC’s now have a very
short PLC of less than 1 year. Car makers can now introduce a
new model in half the time it used to take.
CAD/CAM technology and/or concurrent engineering are some
of the methods used.
THE DESIGN PROCESS
• An effective design process:
- Matches product or service characteristics with
customer requirements,
- Ensures that customer requirements are met in
the simplest and least costly manner,
- Reduces the time required to design a new
product or service.
- Minimizes the revisions necessary to make a
design workable
20
Product Development Stages
Idea generation
Feasibility analysis
Customer Requirements
Functional Specification
Product Specifications
Process Specifications
Prototype Development
Design Review
Test Market
Scope of design for
manufacturability
and value
engineering teams
Product Introduction to Market
Evaluation
The Product Design Process
22
Concurrent Design-
Breaking Down Barriers
Effective designs break down the series of walls between functional areas and involve
persons from different backgrounds and areas of expertise early in the design process. This
process of jointly and iteratively developing a design is called concurrent design.
23
Concurrent Design
Defined
Concurrent design can be defined as the
simultaneous development of project design
functions, with open and interactive
communication existing among all team
members for the purposes of reducing time to
market, decreasing cost, and improving
quality and reliability.
Simultaneous (Concurrent) Engineering
Product/
Service Ideas
Economic and Technical
Feasibility Studies
Continuous
Interaction
Product/Service Design
Production Process Design
Produce and Market
New Product/Service
Design Simplification
26
DESIGN QUALITY REVIEWS
• Before finalizing a design, formal procedures
for analyzing possible failures and rigorously
assessing the value of every part and
component should be followed.
• Three such techniques are failure mode and
effects analysis, fault tree analysis, and value
analysis.
27
Failure Mode and Effects Analysis for
Potato Chips
28
DESIGN FOR ENVIRONMENT
• Eco-labeling, such as
Germany's Blue Angel
designation or the
United States’ Energy
Star rating, gives the
seal of approval to
environmentally safe
products and
encourages informed
consumer purchase.
29
Jugaad - Design for the Times
• India has a Hindi slang word that describes their mode of
innovation, jugaad. Roughly translated, it means “invention
on the fly,” an improvisational style of innovation based on
the immediate and affordable needs of customers.
• It works well in environments of scarce resources where
workable options that are inexpensive and quick to
implement are valued.
• Tata, Infosys, and other Indian corporations have used
jugaad for years.
• Now Best Buy, Cisco Systems, and Oracle, among others,
are following suit.
• Low-priced, no frills products are right for the times, and
they are changing the design process.
30
Few Successes
Number
2000 Ideas
1750
1500
1000
500
Market
requirement
1000
Functional
specifications
500
Design review,
Testing, Introduction
Product
specification
100 25
0
Development Stage
One
success!
New Services
A service can be seen as a process - a method of doing things.
Technology can be used to change the way that processes are
carried out.
Computerisation of manual processes are just one example …
using a computer to automate a manual process, (example of
Castrol Australia).
CHARACTERISTICS OF SERVICES
• Services are intangible
• Service output is variable
• Services have higher customer contact
• Services are perishable
• The service and the service delivery are
inseparable
• Services tend to be decentralized and
geographically dispersed
• Services are consumed more often than products
• Services can be easily emulated
33
The Service Design Process
34
The Service Process Matrix
35
The Service
Process
Matrix
36
SERVICE BLUEPRINTING
37
FRONT OFFICE AND BACK-OFFICE
ACTIVITIES
• In manufacturing firms, the focus of activities is on the back office (i.e., producing
products efficiently).
• Whereas, in service firms, the focus is on the front office, interacting with the
customer.
• Every firm needs both a front and back office, but firms may structure these in
different ways.
• In the front office, the customer interface can be an individual, the service
provider, or a self-service kiosk or machine. The interactions in the front office
influence the customer’s perception of the service and thus are critical to a
successful design.
• Typical front office goals are courtesy, transparency, responsiveness, usability, and
fun.
• The back office processes material or information to support the front office
needs.
• Typical goals of the back office are efficiency, productivity, standardization, and
scalability.
38
SERVICESCAPES
• It is precisely because services are so intangible that
physical cues to service quality are needed.
• Servicescapes design
1.
the space and function where the service takes places;
2.
the ambient conditions, such as music, temperature, décor,
and noise; and
3. signs, symbols, and artifacts.
• It is important that the servicescape be consistent with the
service concept, and that all the elements be consistent
with each other.
• Servicescapes have proved to be extremely important to
customer perception of service quality and to their
satisfaction with the service.
39
WAITING LINE ANALYSIS FOR SERVICE
IMPROVEMENT
• Companies are able to reduce waiting time and provide
faster service by increasing their service capacity, which
usually means adding more servers—that is, more tellers,
more mechanics, or more checkout clerks.
• However, increasing service capacity has a monetary cost,
and therein lies the basis of waiting line, analysis; the
trade-off between the cost of improved service and the
cost of making customers wait.
• Waiting lines are analyzed with a set of mathematical
formulas which comprise a field of study called queuing
theory.
• Different queuing models and mathematical formulas exist
to deal with different types of waiting line systems.
40
Process Management
A process is a series of events or activities intended to produce
a certain result for a customer (internal or external), such as a
physical product (hamburger), service (dental work) or
information (advice on a course).
The issue of whether we should perform the processes at all
lies at the heart of whether to outsource or insource … it might
be determined by whether the process is “core” or “non-core”.
Process Strategy
•
A process is a group of related tasks with specific inputs and outputs.
•
Processes exist to create value for the customer, the shareholder, or society.
•
Process design defines what tasks need to be done and how they are to be coordinated
among functions, people, and organizations.
•
Planning, analyzing, and improving processes is the essence of operations management.
•
Processes are planned, analyzed, and redesigned as required by changes in strategy and
emerging technology.
• Process strategy is an organization’s overall approach for physically producing goods and
providing services.
• Process decisions should reflect how the firm has chosen to compete in the marketplace,
reinforce product decisions, and facilitate the achievement of corporate goals.
• A firm’s process strategy defines its:
- Vertical integration: The extent to which the firm will produce the inputs and control the outputs of
each stage of the production process.
- Capital intensity: The mix of capital (i.e., equipment, automation) and labor resources used in the
production process.
- Process flexibility: The ease with which resources can be adjusted in response to changes in demand,
technology, products or services, and resource availability.
- Customer involvement: The role of the customer in the production process.
42
OUTSOURCING
• A firm that sells the product, assembles the
product, makes all the parts, and extracts the raw
material is completely vertically integrated.
• But most companies cannot or will not make all
of the parts that go into a product.
• A major strategic decision, then, is how much of
the work should be done outside the firm.
• The decision involves questions of dependence,
competency-building, and proprietary
knowledge, as well as cost.
43
PROCESS SELECTION
• Production processes can be classified into projects, batch production, mass
production, and continuous production.
• Projects take a long time to complete, involve a large investment of funds and
resources, and produce one item at a time to consumer order. Examples include
construction projects, shipbuilding, new-product development, and aircraft
manufacturing.
• Batch production processes many different jobs through the production system at
the same time in groups or batches. Products are typically made to customer
order, volume (in terms of customer order size) is low, and demand fluctuates.
Examples of batch production include printers, bakeries, machine shops, education
and furniture making.
• Mass production produces large volumes of a standard product for a mass market.
Product demand is stable, and product volume is high. Goods that are mass
produced include automobiles, televisions, personal computers, fast food, and
most consumer goods.
• Continuous production is used for very high-volume commodity products that are
very standardized. The system is highly automated and is typically in operation
continuously 24 hours a day. Refined oil, treated water, paints, chemicals, and
foodstuffs are produced by continuous production.
44
The Product Process Matrix
45
The Product
Process
Matrix
46
Core & Non-Core
Core processes are those primary activities that
have a high potential for competitive advantage.
Non-core processes have low potential for
competitive advantage and are therefore strong
candidates for outsourcing.
PROCESS ANALYSIS
• Process analysis is the systematic examination
of all aspects of a process to improve its
operation—to make it faster, more efficient,
less costly, or more responsive to the
customer.
• The basic tools of process analysis are process
flowcharts, diagrams, and maps.
48
A Process Map
or Swimlane
Chart of
Restaurant
Service
49
Lean Manufacturing
After WW2 the US system of mass production was the envy of
the world as materials were produced in large batches leading
to efficiencies of scale.
In the 1960’s Japan determined that they could not duplicate
the US system because of shortages of raw materials so they
developed systems that would allow them to produce in
smaller batches. This gave rise to such things as Toyota
Production System (TPS) and Just-In-Time (JIT) processes.
The Nissan Example
When Nissan entered the UK production market they provided
a good example of lean production:
Flexibility - a broadening of everybody’d responsibilities so that
full use could be made of plant and equipment.
Quality - total commitment to ‘getting it right the first time’.
Teamwork - all pulling together.
Business Process Reengineering
At the heart of reengineering is the notion of discontinuous
thinking.
An example shown by Edward de Bono ….
Rather than simply add to (revise) existing processes the idea is
to think of it as a blank sheet of paper.
Business Process Reengineering
• Processes are planned in response to new facilities,
new products, new technologies, new markets, or new
customer expectations.
• Processes should be analyzed for improvement on a
continuous basis.
• When continual improvement efforts have been
exhausted and performance expectations still cannot
be reached with an existing process, it is time to
completely redesign or innovate the process.
• Process innovation is also known as business process
reengineering (BPR), process redesign, restructuring,
and many other company-specific terms.
53
The Value of Linking Technology with Process
Although introducing a new ERP system was once seen as the
technological innovation in itself, the more modern view is
that the technology is merely a catalyst that permits
organisations to change their processes.
The changing of processes provides the real competitive
advantages and true benefits to the organisation.
PROCESS SELECTION WITH
BREAKEVEN ANALYSIS
• Several quantitative techniques are available for selecting a process.
• One that bases its decision on the cost tradeoffs associated with demand
volume is breakeven analysis.
• The components of breakeven analysis are volume, cost, revenue, and
profit.
• Volume is the level of production, usually expressed as the number of
units produced and sold. We assume that the number of units produced
can be sold.
• Cost is divided into two categories: fixed and variable.
• Fixed costs remain constant regardless of the number of units produced,
such as plant and equipment and other elements of overhead.
• Variable costs vary with the volume of units produced, such as labor and
material.
• The total cost of a process is the sum of its fixed cost and its total variable
cost (defined as volume times per unit variable cost).
55
Break-Even Analysis
The most important break-even analysis formulas are those for
calculating total cost (TC) and quantity of units produced and
sold (Q).
Total costs (TC) = fixed costs (FC) + vQ
where v = variable cost per unit and Q = number of units
produced
Q = (P+FC)/(p-v)
Where P = profit (when calculating a break-even point P = 0) and
p = selling price/unit
Economic Analysis
Cost Functions of Processing
Alternatives
Fixed Costs
Annual cost when production volume is zero
Initial cost of buildings, equipment, and other fixed assets
Variable Costs
Costs that vary with production volumes
Labor, material, and variable overhead
Cost Functions of Processing
Alternatives
Annual Cost of Production (000)
2,000
Automated
1,500
1,000
500
Job
Shop
Preferred
Cellular
Manufacturing
Preferred
Assembly Line
Preferred
Units
Produced
Per Year
100,000
250,000
Cost Functions of Processing
Alternatives
Example
Three production processes (A, B, and
C) have the following cost structure:
Fixed Cost Variable Cost
Process Per Year
Per Year
A
$120,000
$3.00
B
90,000
4.00
C
80,000
4.50
What is the most economical process for a
volume of 8,000 units per year?
Cost Functions of Processing
Alternatives
Example
TC = FC + v(Q)
A: TC = 120,000 + 3.00(8,000) = $144,000 per year
B: TC =
90,000 + 4.00(8,000) = $122,000 per year
C: TC =
80,000 + 4.50(8,000) = $116,000 per year
The most economical process at 8,000 units is Process C, with the
lowest annual cost.
Break-Even Analysis
Example
Break-Even Points of Processes A, B, and C, assuming a $6.95
selling price per unit
Q = FC / (p-v)
A: Q = 120,000 / (6.95 - 3.00) = 30,380 units
B: Q =
90,000 / (6.95 - 4.00) = 30,509 units
C: Q =
80,000 / (6.95 - 4.50) = 32,654 units
Process A has the lowest break-even point.
The Use of Technology
Although these calculations can be performed manually it is
more efficient due to ever changing circumstances for you to use
a computer to calculate answers. An excel spreadsheet might be
all that is required for many examples of this type.
Assessment Item 1
Calculate the following …
1. The total cost of 1000 widgets with a variable cost per unit of
20 dirhams and fixed costs of 10,000 dirhams.
2. If each widget is sold for 25 dirhams what is the minimum
amount of widgets that must be produced to reach a break-
even point i.e. P = 0?
3. If the fixed costs increase to 20000 dirhams and the variable
cost per unit increases to 22 dirhams, what is the new break-
even point?
References
Hammer, M., & Champy, J. (1994). Reengineering the Corporation. New
York, NY: Harper Business.
Jewels, T., Ghanem, A., Mongeal, A., Nuaimi, E., Aljaaidi, A., Al-Kaf, A., et al.
(2009, August 6-9th). E-Business Use in the United Arab Emirates: Lessons
for Evolving Markets. Paper presented at the 15th Americas Conference on
Information Systems, San Francisco, CA.Jewels, T., Al-Rawshdi, A.,
Abusharekh, R. N., & Shamisi, A. S. (2011). Organisational Culture and its
Effects on Innovation within ERP Systems. In C. de Pablos Heredero (Ed.),
Open Innovation at Firms and Public Administrations: Technologies for
Value Creation. Hershey PA: IGI.
Kumar, K., & Van Hillegersberg, J. (2000). ERP experiences and evolution.
Communications of the ACM, 43, 23-26.
Rastogi, P. N. (1995). Management of Technology and Innovation:
competing through technological excellence. Delhi: Sage.
Stewart, G., Milford, M., Jewels, T., Hunter, T., & Hunter, B. (2000, Aug 10-
13). Organisational Readiness for ERP Implementation. Paper presented at
the AMCIS 2000, Long Beach CA.
