Lecture 1 Slides ISyE 6201: Manufacturing Systems

Transcription

1 Lecture 1 Slides ISyE 6201: Manufacturing Systems Georgia Institute of Technology Atlanta, GA August 20, 2002 Lecture by Dr. Julie L. Swann. Material courtesy of Dr. Paul Griffin and Dr. Pinar Keskinocak, ISyE, Ga Tech.

2 The Enterprise Environment PRODUCT SERVICES Firm WASTE MATERIAL

3 Enterprise Components Environment PRODUCT SERVICES Firm WASTE MATERIAL Structure or content (resources) Activities or behavior (operations)

4 Resources Capital plant, equipment Financial cash, stock, borrowing capacity Human people Goods product & material inventories Information data, contacts, recipes Intellectual patents, trademarks Infrastructure dist n channels, corporate culture Privileges franchise, mineral rights

5 Operations Transform the portfolio of resources E.g., assemble parts into a product E.g., use people and equipment to develop a new product concept E.g., transact with a customer to exchange products for money

6 The Manufacturing Enterprise a portfolio of resources deployed through a network of activities to create value for a customer by producing and delivering a product in order to create economic profit for its owners

7 What Is A Supply Chain? The network of manufacturing and distribution sites that interact in order to procure and transform raw materials for producing finished goods to customers.

8 Supply Chain Raw Material Manufacturers Warehouses Customers Assemblers Stages Procurement Production Distribution

9 Supply Chain for Beverage Provider Suppliers Concentrate Plant Bottling Plants Distribution Centers Customers

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11 Supply Chain Management Supply Chain Management (SCM) is the management of material and information flows in and between the different parts of the Supply Chain. The goal in Supply Chain Management: Deliver the right product to the right place at the right time for the right price, while minimizing system-wide costs and satisfying service requirements.

12 Key Supply Chain Processes Consumers Customers Distribution Manufacturing Company / Concentrate Plants Suppliers Consumer and customer service systems - strategy Consumer and customer service systems - planning Demand management and operations planning Warehousing and transportation Manufacturing Infrastructure planning and development Individual and organizational development (Source: Steve Buffington)

13 Supply Chain Decisions Strategic Level Long Term Corporate Objectives Capacity Facilities Location Resources Tactical Medium Term Aggregate Planning Resource Allocation Capacity Allocation Distribution Operational Near Term MPS Raw Material Scheduling

14 What is Manufacturing? Manus (hand) Factus (make) Process Value Added Starting Material Material in Processing Processed Material

15 Manufacturing is the realization of product

16 Customer Value Drivers COST QUALITY SPEED INNOVATION Cost, Quality, Speed, and Innovation are the core manufacturing competencies essential to success. They are the essential ways to creating value for customers and the basis for competition.

17 The Manufacturing Function Raw Material Planning Production Planning Distribution Resource Planning Delivery Schedule Production Schedule Line Scheduling Performance to Standard Performance to Standard Status Inventory Management Transport Scheduling Shipment Schedule Orders Forecasts Forecasting History BASIS Productivity Reporting System Sales Transactions Promotions Purchasing Production Warehouse Distribution Sales

18 Supports for Materials Management Information Control Buffers Capacity Inventory Leadtime Pricing

19 Cost of Capacity A new semiconductor fab may cost US$4-6 billion The finance cost can be $600 million per year An engine line for GM can cost as much as $150 million--and there is at least one line for every different engine model Idle capacity is a CEO s nightmare Where is your capacity? What does it cost?

20 Cost of Inventory KO revenues in 1998 were $23.55 billion The cost of goods sold was 36% of revenue Suppose inventory turns once per month The prime rate today is 8.25% The cost to KO to finance inventory is roughly $70 million per year. Actual inventory costs are considerably higher due to insurance, facilities, taxes, etc.

21 Customers Want Speed Jiffy Lube Domino s 30 Minute Guarantee 1 Hour Film Development Products usually have substitutes. As such, if the product isn t delivered when the customer wants it in the quantities desired, customers will switch brands.

22 Why need operations management? PRESSURES FROM TODAY S COMPETITIVE ENVIRONMENT Rapidly changing demand and market conditions Diversity of customer requirements in global markets Demands for mass customization/product variety Short product life cycles

23 Why need operations management? Compaq computer estimates it lost $500 million to $1 billion in sales in 1995 because its laptops and desktops were not available when and where customers were ready to buy them. In 1993, IBM lost a major fraction of its potential sales of desktop computers because it could not purchase enough chips that control the computer displays. Boeing Aircraft, one of America s leading capital goods producers, was forced to announce write-downs of $2.6 billion in October The reason? Raw material shortages, internal and supplier parts shortages. (Wall Street Journal, Oct. 23, 1997)

24 Why need operations management? PRESSURES FROM TODAY S COMPETITIVE ENVIRONMENT Rapidly changing market and demand conditions Need flexibility and shorter time-to-market Short Innovation/Product Development Cycles Inventory becomes a major risk

25 Why need operations management? During the decade from the mid-'80s to the mid-'90s, IBM and Digital lost $80 billion in market value while new, specialized business designs (by Intel, Microsoft, and others) gained $80 billion, (from the bookvalue Migration by Slywotzk) Dell Computers predicts a loss; stock plunges. Dell acknowledged that the company was sharply off in its forecast of demand, resulting in inventory write-downs. (WSJ, August 1993) Liz Claiborne said its unexpected earnings decline is the consequence of higher than anticipated excess inventories. (WSJ, August 1993) When Palm formally reported its quarterly numbers in June, the damage was gruesome. Its loss totaled $392 million, a big chunk of which was attributable to writing down excess inventory - piles of unsold devices. (The Industry Standard, June 16, 2001)

26 Why need operations management? Nortel posts $19.2 billion loss for the second quarter. Inventory write-downs of $15.2 billion. Lays off 20,000 employees. Nortel CEO John Roth: "It was only in October that customers stopped beating me up for not shipping fast enough, and now they say, 'Ship what? I don't need it.' " (June 2001, The Industry Standard)

27 Why need operations management? Apple Computer has reported a record $740 million second quarter loss in 1997 huge write-downs of inventories, which climbed nearly $2 million increased outsourcing of various operational functions liquidation of certain assets reductions in total headcount; 2,800 jobs over the next 12 months "Almost every single smart e-tailer is moving to stock more and more." Julie Wainwright, CEO of pet-supplies site Pets.com (11/1999). In November 2000, Pets.com announced it was closing Amazon.com ~100 million items in stock, $2.76 billion in sales in 2000 Inventory turnover rate: 17 or 18 times a year; compared to 6 to 8 times in a bricks-and-mortar store

28 Issues in production Flexibility Ability to produce different products simultaneously and efficiently Ability to produce new products efficiently Efficiency Low cost Short lead time Reliability On-time delivery Quality

29 Dell performance

30 Dell model Suppliers maintain nearby ship points; delivery time 15 minutes To 1 hour Suppliers own inventory until used in production Demand forecasting is critical changes are shared immediately within Dell and with supply base Customers frequently steered to recommended configurations with high availability to balance supply and demand Demand pull throughout value chain information for inventory substitution Focused on strategic partnerships: suppliers down from 200 to 47 External logistics supplier used to manage inbound supply chain

31 Course Components (i.e. where we go from here!) Planning Component Forecast resources control Customer Inputs Production Process Finished Goods