Tech n Ops Flashcards
4 v’s of operations
variability, variety, volume, visibility
Primary performance parameters
Cost, quality, flexibility, speed, reliability (ethics and environment)
- Strategy: choose balance of these so competitive advantage
Green impacts
Lubin and Etsy (2010): sustainability not as a second-thought but original design e.g. 3D printing - additive manufacturing - cake to homes.
Hervani et al (2005): green supply chain management - keiretsu style of relationship
packaging, supply chain compliance, revised distribution networks
Societal pressures and repetitional risk defining minimum ethical standards.
- ethical vs financial frontier -> push it out
Sustainability examples
Unilever: Sustainable living plan -> Marmite by-product to be eaten & produce methane to generate power
HP recycling facility
Product-process matrix
Hayes & Wheelwright 1979: project, jobbing, batch, line, continuous
- volume vs variety
Focused factory
Skinner 1974
- “Simplicity and repetition breed competence”
- need congruous tasks - competitive priorities
- cannot achieve high performance in all competitive dimensions simultaneously
Sandcone model
Ferrous & Meyer 1990
- cumulative capabilities to avoid tradeoffs
- quality, dependability, speed, cost
Queuing points
- Identify the bottleneck
- Baulk - don’t join
- Renege - leave
- Deal with seasonality - find products with counter-seasonal demand
- Kingsman formula: cost:service trade-off
- variability, inventory, capacity utilisation
- E.g. IKEA ‘ designing out the bottlenecks’ : design car parks, marked short-cuts, express checkouts
EOQ assumptions
The Q of items that supposedly minimise the total cost of inventory mgmt
Stable demand linear holding costs order costs known and fixed (FX impacting this - OECD 2000 - 95% are SME) no supplier delays / batch limitations unlimited capacity to store ignores stockout costs
Little (92): humans desire simple models that can be applied broadly
Points against EOQ
Taichi Ohno: always challenge the current EOQ - don’t take costs as given - SMED
Williams and Westbrook 1994: mass customisation - EOQ taking last gasps
Inventory costs
Calloni et al (2005):
- Physical - insurance / storage
- Working capital costs (opportunity cost)
- Devaluation costs (quality defects)
- Obsolescence costs
Porter et al (1999): 75% UK use MRP, useful for storage costs etc but not obsolescence as hard to measure
Typical estimate is 20-30% - probably conservative as excludes quality, depreciation and opportunity cost
Challenges with inventory
Contestability: hard to predict demand
Seasonality
Kopczak and Johnson (2003): want to get earlier demand info or impact the demand pattern to match supply and demand. Don’t take as given and try match supply.
Inventory examples
HP: computer’s quickly change specification - in 1995 cost of inventory same as overall profit margin
Ford - owned mines for iron - raw material to cash to 33hrs from 728 - Model T obsolete in 1920s.
Airbus - A320neo not available - 3 year wait time post Boeing crash - Boeing keep producing before outcome?
UPS: late packages $5-30 rev - ‘hot status board’ where haven pilots & planes to ‘rescue volume’ - saves $20m rev.
National Health Service Blood & Transport: shelf life of 5 days
Bullwhip effect
Small disturbances downstream cause increasingly large disturbances, errors and volatility as work upstream
Sterman 1989: Beer game
- ‘misperceptions of feedback’: attribute dynamics to external effects not acknoweledge were internally generated.
- amplification 700%
- now have more decision aids e.g. data on demand
Fisher’s inventory costs and solution
Fisher et al 1994:
- stockout costs:
- markdown costs
- Risk-based production sequencing: use off-peak capacity to produce predictable, free up peak for unpredictable when demand materialises
Adv inventory
- exploitation price reduction
- avoid stockout costs
- Economies of scale: decrease cost of ordering
- buffer/insurance against uncertainty
- increase in value (wine)
- Smooth production
- pipeline inventory (allow for lead times)
- Little Law’s implies minimum needed to run factory: no. in system = arrival rate x wait time
Disadvantage inventory
- obsolescence / perishability
- depreciation, storage, capital costs
- Hids problems: used to maintain delivery despite unreliable production. Can’t see operating inefficiencies (TPS)
TPS Japanese words
Keiretsu - exclusive relationships - light-touch contracts Kanban - pull-scheduling Kaizen - continuous improvement Jidoka - total employee involvement Pokayoke - preventing errors e.g. sim card or USB port - built into design. Muda - waste Andon - line stop authority Heijunka - level scheduling
Author opinions of lean / TPS
Hayes and Pisano: reduces trade-off as pushes out ppf
Krafik (1988): pure Fordism with added glue of teamwork
Bohan (1998): how do you implement a philosophy
Takeuchi et al (2008): studied Toyota 6 years. Practices necessary but not sufficient for the success. They’ve mastered ‘soft innovation’ that relates to corporate culture. Emulating Toyota is about creating culture (not cyst copy practices)
Staats et al (2011): implementation is hard. Non-manufacturing - lack of repetition.
Quality definition and TQM founders
Consistent conformance to customer’s expectations.
- cost of prevention vs that of failure
Deming, Ishikawa, Turing
TQM characteristics
continuous improvement meeting customer requirements reducing rework increased employee involvement process redesign competitive benchmarking management responsibility team-based problem solving constant measurement closer relationships with suppliers
Author opinions of TQM
Benson (1993): in 10 short years became pervasive part of business thinking as quarterly results
Slack (1995): must implement all
Powell (1995): findings suggest features generally associated with TQM..don’t produce competitive adv but certain tacit, behavioural, imperfectly imitable features such as culture, employee empowerment produce adv
Osigweh (1989): concept stretching - ambiguity and empirical vagueness as stretch to new contexts
Hackman & Wakeman (1995): what counts as success, many influence, short vs long term
Issues with hospitals
Professional rivalries
Ethic concerns e.g. care.data
Knowledge-doing gap
Pfeffer and Sutton 1999
Adler et al (2003) solution:
- ‘Performance Improvement Capability’ 5 components
- skills supported by systems, embedded structures, need strategic guidelines that fit with culture
Cultural blindspots
Weick and Sutcliffe (2003):
- culture enables sustained collective action
- blind the collective to vital issues to factors outwits the bounds of the organisational perception
- tenacious justification
- e.g. Bristol Royal Infirmary - paediatric cardiac surgery - blamed severity not themselves
- bring into TQM
Types of service variability
Frei (2006):
- arrival
- preference
- request
- effort
- capacity
Service profit chain
Heskett et al (1997):
- internal quality service-> employee satisfaction & productivity -> external service value -> customer satisfaction -> customer loyalty -> rev & profit
- frontline workers & customers at centre of strategy - profit is the outcome not the focus
- Southwest Airlines CEO Kelleher found on tarmacs/terminals interacting
- tech more important than employee interaction?
Production line approach to services
Levitt (1972): technocratic vs humanistic terms
Service blue-printing
Bitter et al (2008)
- services are fluid, dynamic and coproduced by consumers, employees and technology
- can’t over simplify
Self-service technologies
Meuter et al (2000):
- Adv: less c2c interactions, £, speed, avoid hiring/firing
- Disadvantage: tech savvy, complaints proliferate via reviews, prone to customer driven failure, lack human contact impact loyalty
- e.g. ATM, mobile banking, pay-at-pump terminals, file for divorce, vending machines, tax preparation software, blood pressure machines
Customer defections
Frederick and Sasser (1990):
- scrap heap for services: customers that don’t come back
- accounting systems don’t capture the value of a loyal customer
- big impact on the bottom line
- 10% reduction in unit costs is financially equivalent to a 2% decrease in defection rate
- Loyalty: price premium, reduce costs e.g. credit check, referrals, increase in purchases
- E.g. credit card spends $51 to recruit new customer
Supply chain examples
Levi Global sourcing andoperating guidelines: used to select business partners in 60 countries that are consistent with company values
Rana Plaza Bangladesh collapse 2013: Primark
Kobe Steel: falsifying data on quality of products. GM, Boeing, Toyota sub-standard materials.
VW: “S-ratings” zero-emissions vehicles to be built in factories relying on renewable energy.
- entire ecosystem
- batteries operating at slim margins
North Face Bluesign: meet rigorous standards
Air Canada: warning financial performance hit by grounding of Boeing 737
7 eleven Japan: HQ aggregate data for supply chain
Changing the supply chain
Disintermediation: easier with internet
Outsourcing: harder to trace problems, delays, wider capabilities
No. of suppliers:
Co-opetition: clusters - industrial commons (Pisano and Shih 2009) - collective capabilities / knowledge when geographically rooted)
