Process design Push-pull boundary 35C03000 Process Analysis and Management Max Finne, Assistant Professor of Information and Service management

Transcription

1 Process design Push-pull boundary 35C03000 Process Analysis and Management Max Finne, Assistant Professor of Information and Service management

2 Arrangements for lectures 9 and 10 In class Studying outside class The task Horse Trading case & Manufacturing game in class Study using Sport Obermeyer case & Fisher et al. (1994) article, supplemented by course textbooks Lecture 9 Groups 5 9 Groups 1, 3, 4, 10, 12 Lecture 10 1, 3, 4, 10, (8, 9 will give feedback for presenters at 13:15-14:00)

3 Group work Presentation order Lecture Case Presenting groups Groups giving feedback 2 ARAPU 5, ZARA 1, 3 5, 7 5 Lego (A) 6 1, 3 9 Horse trading 8, Horse trading 10, 12 8, 9 11 Sport Obermeyer 4 10, 12 Note: The bar for presentation quality is likely to go up as the course progresses, because the students presenting later weeks will have been able to learn from earlier presenters

4 Case presentations in class Every group should give a 10-minute presentation of one of the five following cases in class Lecture 2: ARAPU Lecture 3: ZARA: The world's largest fashion retailer Lecture 5: Lego: Consolidating distribution (A) Lectures 9 and 10: Horse trading: Food sourcing in the twenty-first century Lecture 11: Sport Obermeyer

5 10% Presentation of a case solution in class Category Understanding of course material on the topic Application of course material in the context Penalties: every full 60sec. overtime -1% Presentation quality Quality Clarity Enjoyment factor Grade / 2 / 4 / 2 Feedback given to other group Constructive Developmental Accurate / usable / 2 In total /

6 Presentations Some advice Presenters Study the case using relevant course materials Course textbooks a great source for this + any relevant contents covered during previous lectures Creative problem solving is key Be innovative, but don t forge the case to retro-fit it to your analysis A good chance to practice presentation and communication skills Practice the presentation and time it 10min is the maximum duration Those giving feedback Be constructive, respectful and polite Offer your insights on what worked, why, what could be improved and how The audience Pay careful attention to the presentations, as the exam may include questions on those Participate into the discussion during feedback; in a constructive manner

7 Zara discussion

8 Zara vs. Benetton and H&M 1. Can you identify some key challenges of being a global retailer in the fashion industry? 2. How does Zara cope with these challenges? 3. How would you class Zara, Benetton and H&M in terms of the markets they serve? 4. How do they differ in terms of their approach to the a) design stage of the supply chain? b) production stage? c) distribution stage? d) retail / on-line stage?

9 Market positioning of Zara, Benetton and H&M High priced Benetton High fashion Conservative fashion Zara H & M Low priced

10 Zara s value stream Characteristics Design Production Distribution Retail / On-line Consumers Design stage Production stage Distribution stage Retail / online stage

11 Agenda for push vs. pull

12 Ford River Rouge, 1928 Raw materials in Model Ts out

13 Standard Oil, Cleveland, Ohio, 1897

14 Smart car: Smartville, 1998

15 Agenda for push vs. pull Discuss why there is a need to integrate supply chains Understand what choices supply chain integration involves Identify what is a push strategy, a pull strategy and a pushpull strategy Describe a framework that matches products / industries with push or pull strategies

16 Vertical integration

17 Vertical integration Direction Upstream? Downstream? Span 1st Tier? 2nd Tier? Balance Under supply? Over supply?

18 Vertical integration - direction Upstream vertical integration raw materials supplier component maker assembly operation wholesaler retailer Downstream vertical integration raw materials supplier component maker assembly operation wholesaler retailer stages owned by the organization

19 Vertical integration - span Narrow process span raw materials supplier component maker assembly operation wholesaler retailer Wide process span raw materials supplier component maker assembly operation wholesaler retailer stages owned by the organization

20 Vertical integration in fashion industry Benetton Design Suppliers Manufacture Distribution Retail H & M Zara Total ownership (no outsourcing) No ownership (total outsourcing)

21 Vertical integration in fashion industry Benetton Design Suppliers Manufacture Distribution Retail H & M Design Suppliers Manufacture Distribution Retail Zara Design Suppliers Manufacture Distribution Retail Total ownership (no outsourcing) No ownership (total outsourcing)

22 Vertical integration - balance Balanced Network - Vertically integrated stages deal only with each other raw materials supplier component maker assembly operation wholesaler retailer Less than full balance - Vertically integrated stages also sell to, or buy from, other companies raw materials supplier component maker assembly operation wholesaler retailer

23 Push-me-pull-you

24 Push vs. pull systems Push planning and control Forecast Operations planning and control cell Work centre Work centre Work centre Work centre Demand Request Request Request Request Work centre Work centre Work centre Work centre Demand Pull planning and control Deliver Deliver Deliver Deliver

25 Push planning and control Operations planning and control cell Forecast Work centre Work centre Work centre Work centre Demand Characteristics of MRP (materials requirements planning) Anticipates future demand Copes with product and process complexity OK even for infrequent, low-volume parts

26 Push strategies Production decisions based on long-term forecasts Ordering decisions based on inventory & forecasts Problems with push strategies Inability to meet changing demand patterns Obsolescence The bullwhip effect: Excessive inventory Excessive production variability Poor service levels

27 Pull planning and control Request Request Request Request Work centre Work centre Work centre Work centre Demand Deliver Deliver Deliver Deliver Characteristics of JIT (just-in-time) Reacts to demand Best for simple products and routings Requires level scheduling

28 Pull strategies Production demand driven Production and distribution coordinated with true customer demand Firms respond to specific orders Pull Strategies result in Decreased inventory levels at retailers and manufacturers Decreased system variability Reduced production lead times Better responsiveness to changing markets But Harder to leverage economies of scale Doesn t work in all cases, especially when lead times are long

29 Choosing between push / pull

30 Supply pipeline performance P time > D time

31 Uncertainty framework Demand uncertainty Low High Functional products Innovative products Low Groceries, basic apparel, food, oil, gas Fashion apparel, computing, pop music Supply uncertainty High Hydro-electric power, some food produce High-end computers, semi conductors Lee, H.L. (2002) Aligning supply chain strategies with product uncertainties. California Management Review. 44 (3),

32 Uncertainty framework Demand uncertainty Low High Functional products Innovative products Low Efficient Responsive Supply uncertainty High Risk hedging Agile Lee, H.L. (2002) Aligning supply chain strategies with product uncertainties. California Management Review. 44 (3),

33 Decoupling point The push-pull boundary Push Strategic Inventory Pull Low uncertainty Forecast at generic level Economic batch quantities Maximise efficiencies High uncertainty Demand driven Localised configuration Maximise responsiveness Christopher, M. (2005) Logistics and Supply Chain Management. FT Prentice Hall.

34 Locating the push/pull boundary The push section Uncertainty relatively low Economies of scale important Long lead times Complex supply chain structures Management based on forecasts appropriate Focus on cost minimisation Achieved through effective resource utilisation supply chain optimisation The pull section High uncertainty Short lead times Simple supply chain structure Reacting to realised demand important Focus on service level Flexible and responsive approaches

35 Push versus Pull Systems Push systems Schedule work releases based on demand No limit for system WIP Inherently due-date driven Performance measurement control release rate observe WIP level Pull systems Authorize work releases based on system status Deliberately establish a limit on system WIP Inherently rate driven Performance measurement control WIP level observe throughput Hopp and Spearman 2000,

36 Decoupling point The push-pull boundary Driven By Forecast Driven By Demand Plants Distribution Warehouses Depots Centres

37 Theory of Constraints

38 Planning, capacity, & utilization example: Heathrow expansion Heathrow is the world's busiest airport based on the number of international passengers However, the airport is currently running at 99% capacity So what is wrong with 99% capacity (if anything)?

39 Theory of Constraints 1. Identify the bottleneck (=constraint) 2. Exploit the system bottleneck 3. Subordinate everything else to the bottleneck 4. Elevate the bottleneck 5. Go back and find new bottlenecks, repeating the process

40 1. Identify the bottleneck Which part of the process is constraining the production flow? This is, by definition, the bottleneck Identify/calculate the capacities of each activity Calculate the loads on capacity Determine the capacity constrained resource (CCR = bottleneck) Where does the WIP accumulate in the process? Usually, in front of the bottleneck Where do you see full capacity utilization all (or most of) the time? This is the bottleneck

41 2. Exploit bottleneck Anything that stops the bottleneck working to its maximum potential must be removed Determine how much of each product should be produced Calculate the throughput of each product Calculate the throughput per unit of production of the bottleneck (bang-for-the-buck calculation)

42 3. Subordinate everything to the bottleneck Schedules should be based on the maximum utilization of the bottleneck Ignore local inefficiencies that do not consider the system as a whole Focus on process flow not activity flow

43 4. Elevate the bottleneck Increase flow through the bottleneck, e.g. Increase number of resources two machines, not one? Work longer hours? Stand-by resources No longer a bottleneck

44 5. Repeat the process The old bottleneck is no longer a bottleneck Where is the new bottleneck? Go back to step 1of the process improvement

45 TOC Principles Balance the flows not the capacity Throughput matters Bottleneck governs both throughput and inventory An hour saved at the bottleneck an extra hour The level of utilization of a non-bottleneck resource is not determined by its potential Some other constraint in the system determines it An hour saved at a non-bottleneck mirage and more idle time Schedules should be established by looking at all of the constraints simultaneously Lead times are the result of a schedule and cannot be predetermined Goldratt

46 Drum-Buffer-Rope Scheduling Advantages of the system Practical and effective method for achieving synchronous flows Can be applied to complex and dynamic manufacturing environments Elements Drum (constraint = bottleneck) - Sets the beat that establishes the production rate - Approach to develop MPS consistent with system constraints Buffer (inventory) - Prevents the constraint from running out of material to work on - Protects the plant performance from disruptions Rope (scheduling) - Pulls necessary raw material in the system by controlling strategic locations - Reduces communication (problems) to non-bottleneck activities R1 R2 R3 bottleneck R4 Shipping e.g. Umble & Srikanth

47 Comparison of the Philosophies Criteria MRP TOC JIT History 60s 70s 50s System Push Push & Pull Pull Focus on Demand assumed Capacity scheduling Objective of planning Reaction on changes Role of IT Inventory status Coordination Problems Lead times and customer service - Infinite Raw mat.availability & lead time control Very sensitive Important (Planned) safety stocks Data-based planning Inflexibility, long lead times, inventories Bottlenecks Stable Finite (balancing) Control bottlenecks & maximize profit Sensitive Eases If no bottlenecks, no inventory Knowledge & incentives Defining profit and bottlenecks Quality Stable - Minimum inventories & high quality Quick Not necessary Zero Routine-based Reaction to demand variation, incentives 100

48 Push vs. Pull simulation

49 Push vs. Pull simulation Every group should use one laptop to access the simulation Access the coursepack 35C03000 Process Analysis and Management : Select the simulation Operations Management Simulation: Push vs. Pull Production Get familiar with the simulation through reading the instructions Please wait until all groups are ready to begin playing the simulation Take notes of your decisions during the simulation and screenshots from the simulation screen You will need the notes for discussion in class, improving your performance and possible exam questions on the simulations

50 Playing Push vs. Pull simulation Use the 10 Quiz Questions to navigate through the simulation and insert your answers based on simulation results You can open up the Quiz Questions in a separate window from your simulation There are 6 scenarios within the simulation After answering the questions in each scenario, you can try out the impacts of different parameters Note: Increase the speed, to get faster progress You can also select Run to End to get the results almost immediately

51 Correct answers for the questions 1. I C 4. A A A 10. C