Production Management lecture 1
Slides & H1 book | Article Fisher
Important aspects of a (production) company:
• ‘Silo thinking’, focusing on own department is not what you want. Work together in
multifunctional teams, communicate, and improve processes.
• Motivate your employees. Incentive alignment. When you change systems, also change the
incentives (remuneration). Find the right system that motivates the people and gives the
best results for everyone.
• Combine expertise and collaborate in order to create great ideas
Effectiveness through strategic relations with the environment:
Equipment is built on technology; what is possible
within the existing technological boundaries?
Strategy is based on the market; needs, requirements,
lifestyle, wealth.
Personnel relies heavily on labour; skills and availability
of workforce
Company structure is dependent on the institutional
environment of the company; legislation, import/export
rules, constraints
Customized product vs mass products:
The greater the product specificity, the greater
the costs per unit (usually) and the other way
around. Craft (handmade) production vs mass
(machine) production. Goal of mass
production: find ways to produce as cheap and
fast as possible.
The greater the specificity, the greater the
influence of the customer in the design (one of
a kind)
The less specific the product is, the more the
supplier(s) dominate the design.
,Manufacturing Planning and Control (MPC)
MPC: Concerned with planning and controlling all operational aspects of manufacturing or service
(e.g. material management, machine and people scheduling, coordination of customers and
suppliers). It is a model for responding to changes in the competitive environment, based on
production strategy. Designing an MPC system is a continuous effort (adaptation & responsiveness).
The development of an effective MPC system is the key to success of any goods producing
companies. A very effective MPC system can even coordinate supply chains.
Four managerial concerns; important
• What are the typical tasks performed by the MPC system and how do they affect company
operations? – MPC systems defined
• What are the key MPC system components and how do they respond to company needs? –
MPC system framework
• How do supply chain, product, and process issues affect the MPC system design? –
matching MPC system with company needs
• What (competitive/environmental) forces drive changes in the MPC system and how do
companies respond to these forces? – MPC system evolution
Framework:
ß Front end – set of activities for
overall direction setting
_____
ß Engine – set of activities for capacity
and material planning
____
ß Back end – MPC execution
The total MPC system is embedded and supported by an ERP system. All activities and sub-processes
are integrated and it provides timely and accurate information.
Demand management: coordinates all activities of the business that place demands on
manufacturing capacity.
Sales/operations planning: balances sales/marketing plans with available production resources.
Detailed material planning: calculating requirements for all parts needed for production. Based on
the demand management and sales/operations planning, as well as (order) lead times and BOMs.
MRP: determines the time-phased plans for all components and raw materials required to produce
all the products in the MPC. Very detailed.
Shop-floor systems: how do we produce our products? Equipment, factory layout, processes, work
centers, scheduling, allocation. The shop-floor system is connected with material planning through
inventory status.
,Vendor systems: provide detailed information to the suppliers. Can be done by purchase orders
(arm’s length) or VMI/CPFR and everything in between.
Product design/engineering not involved in MPC! Why? This is only delivered once, and once
delivered it is continuously produced by the MPC. However, engineers from the shop-floor can be
involved in product design. Why? Operator knows how the production process and machines work.
Making sure the design can actually be produced.
Goals of MPC:
• Respond to customer requirements
• Optimal utilization of resources (people, equipment, materials etc.)
• Efficient management of material flow
Achieved by utilizing….
• Suppliers’ capacity
• Own facilities
• Suppliers’ and customers’ facilities
• Demand management
Ancillary (ondersteunende) activities: gather and analyze supply information for decision making.
MPC system can be enhanced by ICT systems. However, ICT costs money and is often not well used.
Automation of production process
Japanese style: first get the process and quality right, then bring the robots
Tesla: automate everything from the first moment. Expensive lesson learned.
Key influences on MPC:
• Breadth and depth of globalization
o Fast growing economies (e.g. BRIC)
o International agreements (WTO)
o General trends
• Focus on core competences; crucial role for SCM director
o focal company does only design and marketing, supported by a network of
manufacturers (nike, dell, apple)
o subcontract/outsource certain activities
• collaboration between companies; supply chain, supply networks.
• Plug-in compatibility; give component specification and everyone can produce it. ‘easy’ to
move elsewhere
More demanding role for customers/consumers:
• Customer integration and responsiveness; reduce time-to-market, mass-customization.
• Product and process flexibility
• More complex networks requiring operational compatibility (verenigbaarheid); identify
changes in demand and respond quickly
Production management philosophies:
• Mass Production/Taylorism (Ford) – US, 1900
• Socio-technology - Europe, 1950
• Lean production - Japan, TPS, 1950
• Agile production - US, 1990
, Mass production (Taylorism)
• Henry Ford: line production
• Standardization; of all activities, products and processes (you can have any color you want….)
• Vertical Integration; do every sub-process in-house
• Frederick Taylor; Scientific Management
o Time and motion study; scientific approach
o Optimization; cycle time and batch size
o Conveyor belt
o Piece-rate system; payment by results. Money=motivation
o Mechanization
o Scientific selection of workforce
Resulted also in dehumanization and silo thinking
Socio-Technology management philosophy
• Volvo
• Complex tasks in production structure
o Parallelization: production lines serving a certain product/market combination
o Segmentation: split up the line in ‘independent’ parts
o Make teams per independent process; plan/do/check/act
• Simple administrative (overhead) structure
o Delayered organization
Social results; quality of working life
• Better working conditions; ergonomics
• Job content; long work cycles, job rotation, work enrichment
• Group/team autonomy
Economic results
• Increased productivity
• Reduced capital expenditure
• Higher volume flexibility
• In general, higher costs
Mass Customization
The company has to understand the market requirements. This is changing continuously and rapidly.
Slides & H1 book | Article Fisher
Important aspects of a (production) company:
• ‘Silo thinking’, focusing on own department is not what you want. Work together in
multifunctional teams, communicate, and improve processes.
• Motivate your employees. Incentive alignment. When you change systems, also change the
incentives (remuneration). Find the right system that motivates the people and gives the
best results for everyone.
• Combine expertise and collaborate in order to create great ideas
Effectiveness through strategic relations with the environment:
Equipment is built on technology; what is possible
within the existing technological boundaries?
Strategy is based on the market; needs, requirements,
lifestyle, wealth.
Personnel relies heavily on labour; skills and availability
of workforce
Company structure is dependent on the institutional
environment of the company; legislation, import/export
rules, constraints
Customized product vs mass products:
The greater the product specificity, the greater
the costs per unit (usually) and the other way
around. Craft (handmade) production vs mass
(machine) production. Goal of mass
production: find ways to produce as cheap and
fast as possible.
The greater the specificity, the greater the
influence of the customer in the design (one of
a kind)
The less specific the product is, the more the
supplier(s) dominate the design.
,Manufacturing Planning and Control (MPC)
MPC: Concerned with planning and controlling all operational aspects of manufacturing or service
(e.g. material management, machine and people scheduling, coordination of customers and
suppliers). It is a model for responding to changes in the competitive environment, based on
production strategy. Designing an MPC system is a continuous effort (adaptation & responsiveness).
The development of an effective MPC system is the key to success of any goods producing
companies. A very effective MPC system can even coordinate supply chains.
Four managerial concerns; important
• What are the typical tasks performed by the MPC system and how do they affect company
operations? – MPC systems defined
• What are the key MPC system components and how do they respond to company needs? –
MPC system framework
• How do supply chain, product, and process issues affect the MPC system design? –
matching MPC system with company needs
• What (competitive/environmental) forces drive changes in the MPC system and how do
companies respond to these forces? – MPC system evolution
Framework:
ß Front end – set of activities for
overall direction setting
_____
ß Engine – set of activities for capacity
and material planning
____
ß Back end – MPC execution
The total MPC system is embedded and supported by an ERP system. All activities and sub-processes
are integrated and it provides timely and accurate information.
Demand management: coordinates all activities of the business that place demands on
manufacturing capacity.
Sales/operations planning: balances sales/marketing plans with available production resources.
Detailed material planning: calculating requirements for all parts needed for production. Based on
the demand management and sales/operations planning, as well as (order) lead times and BOMs.
MRP: determines the time-phased plans for all components and raw materials required to produce
all the products in the MPC. Very detailed.
Shop-floor systems: how do we produce our products? Equipment, factory layout, processes, work
centers, scheduling, allocation. The shop-floor system is connected with material planning through
inventory status.
,Vendor systems: provide detailed information to the suppliers. Can be done by purchase orders
(arm’s length) or VMI/CPFR and everything in between.
Product design/engineering not involved in MPC! Why? This is only delivered once, and once
delivered it is continuously produced by the MPC. However, engineers from the shop-floor can be
involved in product design. Why? Operator knows how the production process and machines work.
Making sure the design can actually be produced.
Goals of MPC:
• Respond to customer requirements
• Optimal utilization of resources (people, equipment, materials etc.)
• Efficient management of material flow
Achieved by utilizing….
• Suppliers’ capacity
• Own facilities
• Suppliers’ and customers’ facilities
• Demand management
Ancillary (ondersteunende) activities: gather and analyze supply information for decision making.
MPC system can be enhanced by ICT systems. However, ICT costs money and is often not well used.
Automation of production process
Japanese style: first get the process and quality right, then bring the robots
Tesla: automate everything from the first moment. Expensive lesson learned.
Key influences on MPC:
• Breadth and depth of globalization
o Fast growing economies (e.g. BRIC)
o International agreements (WTO)
o General trends
• Focus on core competences; crucial role for SCM director
o focal company does only design and marketing, supported by a network of
manufacturers (nike, dell, apple)
o subcontract/outsource certain activities
• collaboration between companies; supply chain, supply networks.
• Plug-in compatibility; give component specification and everyone can produce it. ‘easy’ to
move elsewhere
More demanding role for customers/consumers:
• Customer integration and responsiveness; reduce time-to-market, mass-customization.
• Product and process flexibility
• More complex networks requiring operational compatibility (verenigbaarheid); identify
changes in demand and respond quickly
Production management philosophies:
• Mass Production/Taylorism (Ford) – US, 1900
• Socio-technology - Europe, 1950
• Lean production - Japan, TPS, 1950
• Agile production - US, 1990
, Mass production (Taylorism)
• Henry Ford: line production
• Standardization; of all activities, products and processes (you can have any color you want….)
• Vertical Integration; do every sub-process in-house
• Frederick Taylor; Scientific Management
o Time and motion study; scientific approach
o Optimization; cycle time and batch size
o Conveyor belt
o Piece-rate system; payment by results. Money=motivation
o Mechanization
o Scientific selection of workforce
Resulted also in dehumanization and silo thinking
Socio-Technology management philosophy
• Volvo
• Complex tasks in production structure
o Parallelization: production lines serving a certain product/market combination
o Segmentation: split up the line in ‘independent’ parts
o Make teams per independent process; plan/do/check/act
• Simple administrative (overhead) structure
o Delayered organization
Social results; quality of working life
• Better working conditions; ergonomics
• Job content; long work cycles, job rotation, work enrichment
• Group/team autonomy
Economic results
• Increased productivity
• Reduced capital expenditure
• Higher volume flexibility
• In general, higher costs
Mass Customization
The company has to understand the market requirements. This is changing continuously and rapidly.
