What Is Operations Management? Essay Sample
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Operations management is an area of management concerned with overseeing, designing, and controlling the process of production and redesigning business operations in the production of goods and/or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of
forms of materials, labor, and energy) into outputs (in the form of goods and/or services). What is an assembly line?
An assembly line is a manufacturing process (most of the time called a progressive assembly) in which parts (usually interchangeable parts) are added to a product in a sequential manner to create a finished product much faster than with handcrafting-type methods. The assembly line was first mechanized in the U.S. by Eli Whitney, in 1797, who also patented a type of cotton gin. Whitney began using the assembly line to manufacture muskets that had interchangeable parts. He was then contracted to supply 10,000 muskets for the U.S. government in two years. Prior to Whitney’s mechanization of the assembly line, craftsmen made muskets one at a time. Due to the handmade & custom nature of this process, each musket was unique. If a single part of the musket broke, it could not be easily replaced, but instead required a custom repair. Because parts manufactured by Whitney’s assembly line parts were interchangeable, common parts could be used to replace broken ones. This was a vast improvement in both manufacturing and maintenance of produced goods. In the early 1900s, Ford Motor Company adopted the assembly line to mass produce the Model T.
What is Economic order Quantity? (EOQ)
Economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Barabas EOQ Model or Barabas Formula. The model was developed by Ford W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for his in-depth analysis. Overview
EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, sometimes expressed as a percentage of the purchase cost of the item. We want to determine the optimal number of units to order so that we minimize the total cost associated with the purchase, delivery and storage of the product. The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, though this number can be determined from the other parameters. Underlying assumptions
1.The ordering cost is constant.
2.The rate of demand is known, and spread evenly throughout the year. 3.The lead time is fixed.
4.The purchase price of the item is constant i.e. no discount is available 5.The replenishment is made instantaneously, the whole batch is delivered at once. 6.Only one product is involved.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum. (A common misunderstanding is that the formula tries to find when these are equal.) • = Purchase Price
• = order quantity
• = optimal order quantity
• = annual demand quantity
• = fixed cost per order (not per unit, typically cost of ordering and shipping and handling. This is not the cost of goods) • = annual holding cost per unit (also known as carrying cost or storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost) The Total Cost function
The single-item EOQ formula finds the minimum point of the following cost function: Total Cost = purchase cost + ordering cost + holding cost
– Purchase cost: This is the variable cost of goods: purchase unit price ×
annual demand quantity. This is P×D – Ordering cost: This is the cost of placing orders: each order has a fixed cost S, and we need to order D/Q times per year. This is S × D/Q – Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this cost is H × Q/2 .
To determine the minimum point of the total cost curve, partially differentiate the total cost with respect to Q (assume all other variables are constant) and set to 0:
Solving for Q gives Q* (the optimal order quantity):
Q* is independent of P; it is a function of only S, D, H.
What is Lean Manufacturing?
Lean manufacturing, lean enterprise, or lean production, often simply, “Lean,” is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, “value” is defined as any action or process that a customer would be willing to pay for. Essentially, lean is centered on preserving value with less work. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as “Lean” only in the 1990s. TPS is renowned for its focus on reduction of the original Toyota seven wastes to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the world’s largest automaker, has focused attention on how it has achieved this success.
What is agile manufacturing?
Agile manufacturing is a term applied to an organization that has created the processes, tools, and training to enable it to respond quickly to customer needs and market changes while still controlling costs and quality. An enabling factor in becoming an agile manufacturer has been the development of manufacturing support technology that allows the marketers, the designers and the production personnel to share a common database of parts and products, to share data on production capacities and problems — particularly where small initial problems may have larger downstream effects.
It is a general proposition of manufacturing that the cost of correcting quality issues increases as the problem moves downstream, so that it is cheaper to correct quality problems at the earliest possible point in the process. Agile manufacturing is seen as the next step after Lean manufacturing in the evolution of production methodology. The key difference between the two is like between a thin and an athletic person, agile being the latter. One can be neither, one or both. In manufacturing theory, being both is often referred to as leagile. According to Martin Christopher, when companies have to decide what to be, they have to look at the Customer Order Cycle (the time the customers are willing to wait) and the leadtime for getting supplies. If the supplier has a short lead time, lean production is possible. If the COC is short, agile production is beneficial.
What is JIT?
Just in time (JIT) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs. To meet JIT objectives, the process relies on signals or Kanban (看板 Kanban?) between different points in the process, which tell production when to make the next part. Kanban are usually ‘tickets’ but can be simple visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT focuses on continuous improvement and can improve a manufacturing organization’s return on investment, quality, and efficiency. Quick notice that requires personnel to order new stock once existing stock is depleting is critical to the inventory reduction at the center of the JIT policy, which saves warehouse space and costs. However, JIT relies on other elements in the inventory chain as well. In recent years manufacturers have continued to try to hone forecasting methods such as applying a trailing 13-week average as a better predictor for JIT planning; however, some research demonstrates that basing JIT on the presumption of stability is inherently flawed.
What is scheduling?
Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the production time and costs, by telling a production facility when to make, with which staff, and on which equipment. Production scheduling aims to maximize the efficiency of the operation and reduce costs. Production scheduling tools greatly outperform older manual scheduling methods. These provide the production scheduler with powerful graphical interfaces which can be used to visually optimize real-time workloads in various stages of production, and pattern recognition allows the software to automatically create scheduling opportunities which might not be apparent without this view into the data.
For example, an airline might wish to minimize the number of airport gates required for its aircraft, in order to reduce costs, and scheduling software can allow the planners to see how this can be done, by analyzing time tables, aircraft usage, or the flow of passengers. Companies use backward and forward scheduling to allocate plant and machinery resources, plan human resources, plan production processes and purchase materials. Forward scheduling is planning the tasks from the date resources become available to determine the shipping date or the due date. Backward scheduling is planning the tasks from the due date or required-by date to determine the start date and/or any changes in capacity required. The benefits of production scheduling include:
•Process change-over reduction
•Inventory reduction, leveling
•Reduced scheduling effort
•Increased production efficiency
•Labor load leveling
•Accurate delivery date quotes
•Real time information
What is a supply chain?
A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains. A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver something valuable (product or service) What is warehouse management?
A warehouse management system (WMS) is a key part of the supply chain and primarily aims to control the movement and storage of materials within a warehouse and process the associated transactions, including shipping, receiving, put-away and picking. The system also directs and optimizes stock based on real-time information about the status of bin utilization. A WMS monitors the progress of products through the warehouse. It involves the physical warehouse infrastructure, tracking systems, and communication between product stations. What is reverse logistics?
Reverse logistics stands for all operations related to the reuse of products and materials. It is “the process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal. Remanufacturing and refurbishing activities also may be included in the definition of reverse logistics.” Normally, logistics deal with events that bring the product towards the customer. In the case of reverse logistics, the resource goes at least one step back in the supply chain. For instance, goods move from the customer to the distributor or to the manufacturer. Let’s look at an example; a manufacturer produces product A which moves through the supply chain network reaching the distributor or customer. Any process or management after the sale of product A involves Reverse Logistics. If product A happened to be defective the customer would return the product. The manufacturing firm would then have to organise shipping of the defective product, testing the product, dismantling, repairing, recycling or disposing the product. Product A will travel in reverse through the supply chain network in order to retain any use from the defective product. This is what reverse logistics is about.
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