Operations & Innovations Management Presented by Renaldo de Jager 11-1
Vendor Selection 11-2
VENDOR SELECTION A firm that decides to buy components rather than make them, must select suitable vendors. Vendor selection considers numerous factors, such as: Inventory and transportation costs Availability of supply Delivery performance Quality and reputation of suppliers Financial strength of the supplier Manufacturing range Technical assistance After-sales service Labour/trade relations Packaging Warranties and guarantees 11-3
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Vendor Selection Vendor evaluation Critical decision Find potential vendors Determine the likelihood of them becoming good suppliers Vendor Development Training Engineering and production help Establish policies and procedures 2011 Pearson Education, Inc. publishing as Prentice Hall 11-6
Inventory 11-7
FUNCTIONS OF INVENTORY There are six basic functions of inventory: (i) To provide a stock of goods to meet expected customer demand. (ii) To de-couple components from the production-distribution system. (iii) To take advantage of quantity discounts as purchases in larger quantities may reduce the costs of goods or delivery. (iv) To strike a balance against inflation and upward price changes. (v) To protect against delivery variation due to weather, supplier shortages, quality problems or improper deliveries. 11-8
EFFECTIVE INVENTORY MANAGEMENT REQUIREMENTS Management has two basic functions with respect to inventory. One is to establish a system of accounting for items in inventory, and the other is to make decisions on how much to order and when to order. To be effective, companies should have the following: (i) A system to keep track of inventory on hand and on order. (ii) A reliable forecast of demand that includes the forecast error. (iii) Knowledge of lead times and lead-time variability. (iv) Reasonable estimates of inventory holding costs, shortage costs and order costs. (v) A classification system for inventory items 11-9
JIT 11-10
JIT/Lean Production Just-in-time (JIT): A highly coordinated processing system in which goods move through the system, and services are performed, just as they are needed, JIT lean production JIT pull (demand) system JIT operates with very little fat 11-11
Goal of JIT The ultimate goal of JIT is a balanced system. Achieves a smooth, rapid flow of materials through the system 11-12
Benefits of Small Lot Sizes Reduces inventory Less rework Less storage space Problems are more apparent Increases product flexibility Easier to balance operations 11-13
Transitioning to a JIT System Get top management commitment Decide which parts need most effort Obtain support of workers Start by trying to reduce setup times Gradually convert operations Convert suppliers to JIT Prepare for obstacles 11-14
Quality 11-15
Key success factors for managing quality 1. A good plan 2. Appropriate communication 3. Manage stakeholders 4. Good measurement 5. Constant review 6. Act early 16 11-16
Quality concepts Zero defects The customer is the Next Person in the Process Do the Right Thing the First Time (DTRTFT) Continuous Improvement Process (CIP)- Kaizen 17 11-17
Quality management 1. Quality assurance (QA) 2. Quality control (QC) 3. Quality plan-a blueprint which provides specific quality practices,resources,and sequence of activities relevant to a project (ISO-8402) 4. Quality policy 5. Quality planning-identifying the quality standards relevant to a project. 6. TQM 18 11-18
Quality planning This is the process of identifying which quality standards are relevant to the project and determining how to satisfy them. Four elements underpinning the quality management plan: Quality policy Who is in charge? Where are we going? How are we going to get there? 19 11-19
Topics in a quality management plan The mission and quality policy of the organisation. Roles and responsibilities Quality system description Personnel qualifications, training and improvement of work processes Corrective actions procedures Standard operating procedures Quality improvement description Procurement of items and services Documentation and records Computer hardware and software 20 11-20
Quality assurance Quality assurance is evaluating the overall project performance on a regular basis to provide a confidence that the project will satisfy the relevant quality standards. Quality assurance can be INTERNAL or EXTERNAL. 21 11-21
Quality Audits These are structured reviews of the quality management activities that help identity lessons learned that can improve the performance on current or future project activities. The PDCA Cycle This is the popular tool used to determine quality assurance is the Shewhart Cycle. This cycle for quality assurance consists of four steps: Plan Do Check Act 22 11-22
A summary of project quality assurance Quality assurance is the application of planned, systematic quality activities to ensure that the project will employ all processes needed to meet requirements identified during quality planning. Quality assurance addresses the programme Defining quality assurance activities is the fourth step in a sevenstep quality journey that provides a general framework for quality management. Quality assurance activities are based on specifications and operational definitions. Metrics are the means of measurement that link requirements,specifications,assurance activities and the metrics themselves. The quality assurance plan lists all assurance activities in one place to assist in managing project quality. Preparing a quality assurance plan is the fifth step in the quality assurance journey Quality audits are structured reviews of the quality system. 23 11-23
Quality control This involves monitoring specific project results to determine if they comply with relevant standards and identifying ways to eliminate causes of unsatisfactory results. The manager should be aware of : Prevention (keeping team should be aware of the process) Inspection (keeping errors out of the customers hand) Attribute sampling (for conformity of results) Variable sampling (where the results are rated on a continuous scale that measures the degree of conformity or non conformity Special cause (unusual events) Random causes (normal process variations) Tolerances (where results should fall with in a defined tolerance range) Control limits (the process is in control if it falls within these 24 defined limits) 11-24
Quality management tools Five categories of tools that may be applied to managing project quality: Collect data Understanding data Understanding processes Analysing processes Solving problems 25 11-25
INNOVATION MANAGEMENT 11-26
Definition of innovation - 1 Technological innovations are defined as new products and processes and major technological modifications to products and processes. An innovation is considered performed if it is introduced to the market (product innovation) or implemented in the production process (process innovation). Innovation includes many research, technological, organizational, financial and commercial activities. 11-27
Definition of innovation - 2 R&D represents only one of these activities and can take place during various stages of the innovation process. It can play not only the role of the original source of the innovation ideas but also the role of problem solution framework, which can be turned to at any stage of the implementation. 11-28
CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 1 Systematic collection of all impulses that could lead to innovation Creativity of employees Ability to evaluate the possibility of the innovation idea Good team work Project-based approach and ability to manage projects 11-29
CHARACTERISTICS OF SUCCESSFUL INNOVATING COMPANIES - 2 Cooperation with external experts (universities, research laboratories ) Proper rate of risk-taking Employees motivation (the employees are willing to improve the product and the operation of the whole company) Continued education of employees 11-30
DEGREE OF NOVELTY Incremental innovations Radical innovations Systemic innovations 11-31
Classification of innovations SYSTEM New series of cars, planes, computers, TV New generation (MP3 and download as substitution of CD) Steam engine, ICT, biotechnology, nanotechnology COMPONENT Improvement of components New components for existing systems Advanced materials improving component properties INCREMENTAL RADICAL do better what we already do new for the company new for the world 11-32
INNOVATION PROCESS Research and development (R&D) Production Marketing Innovation is an opportunity for something new, different. It is always based on change. Innovators do not view any change as a threat but as an opportunity 11-33
FOCUS Use the limited resources in the most effective manner; focus on one of the following: Operational output Top-quality products Perfect knowledge of customers 11-34
RECOMMENDATIONS Solve the correct problem correctly be effective and efficient Manage innovation as a project Analyze risks Use models, scenarios, computer simulation Study examples of succesful and unsuccesful innovation projects 11-35
WHAT TO DO 1. Start with analysis and study of opportunities. 2. Go among people, ask questions, listen 3. Effective innovations are surprisingly simple. They must be focused on specific needs and on specific final products. 4. Effective innovation start on a small scale. 5. A successful innovation always tries to win a leading position, otherwise you 11-36
WHAT TO AVOID 1. Don t try to be too clever. All that is too sophisticated will almost certainly go wrong. 2. Don t try to do too many things at once. Focus on the core of the problem. 3. Don t try to make innovations for the future but for today. An innovation can have a long-term impact but there must be an 11-37
Three conditions for innovations 1. Innovation means work, hard, concentrated and thorough work. If these qualities are lacking then there is no use for the big talent, cleverness or knowledge. 2. Successful innovations must build on your strong points. The innovation must be important to the innovator. 3. Innovation must focus on a market, must be controlled by the market (marketpull). 11-38
New concept development model (NCD) Technology push Market pull 11-39
NCD components Engine: represents management support Engine powers the five elements of the NCD model The engine and the five elements are placed on top of the influencing factors. 11-40
PERT 11-41
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PERT and CPM were developed at around the same time, and most of their characteristics are the same. The major difference is that PERT incorporates uncertainty in task times by employing three time estimates for each activity (optimistic, pessimistic, and most likely). With PERT, project managers can estimate probabilities of completing the project within certain time frames. 11-43
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