2022 T3 Mmm710 W08 Resource Management Ii.pptx

Presentation name or heading here Deakin University CRICOS Provider Code 00113B MMM710 Business Process and Operations Management Week 8 Resource Management Deakin University CRICOS Provider Code 0011[.]

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The Problem of the Subject

• Understand the nature of Global Value Chains

• Identify the forces that are shaping and changing GVC’s

• Imagine the ways that your industries,

•and their GVC’s

• Will evolve over the life of your career

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Week Summary

• A: THE BIG IDEAS

• Week 1 - Introduction

• Week 2, 3, 4: Innovation, Sustainability & Strategic Perspectives

• Week 5 - Mid-term Review

• B: PRAXIS – Making Choices about the Future

• Week 6, 7 - Operations Planning, Forecasting

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Week 1 - Introduction

Week 2 - Innovation Perspective on Operations Management

Week 3 - Sustainability Perspective on Operations Management

Week 4 - Strategic Perspective on Operations Management

Week 5 - Mid-term Review

Week 6 - Operations Planning

Week 7 - Forecasting

Week 8 - Resource Management

Week 9 - Quality Management (Assessment Task 1A due on 16 January 2023)

Week 10 - Operations Resilience (Assessment Task 1B due on 23 January 2023)

Week 11 - Unit Review

MMM710 Weekly Learning Schedule

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LEARNING OUTCOMES

• Describe the overall frameworks for resource planning

• in both goods-producing and service-providing organizations

• Explain options for aggregate planning

• Describe how to evaluate level production and chase demand strategies

• for aggregate planning

• Describe ways to disaggregate aggregate plans

• using master production scheduling and

• material requirements planning

• Have a basic understanding of capacity requirements planning

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The Problem: Time for Decisions

• At various points you have to make decisions

about an uncertain future

•What is going to happen? PESTEL

• If you are an International Player, the world is your unit of analysis

•How will the 3 Perspectives shift your world?

• Remember Schumpter & Kodak, the SDG’s and Your Vision

•What will be the level of demand for your Products/Services?

• Stable, Fall, Rise – Maintain or Change Patterns of the Past

• Your answers (analysis) will guide your planning

•Capacity – Materials – People (HR) – Suppliers (GVC)

Capacity Management and Risk

• 1: Understanding risks caused by demand

variability and

•inability to predict demand, inadequate service capacity, and unpredictable quality of delivery.

• 2: Use of Capacity Management Strategies to

adjust the capacity in peak and lean periods

•Eg Pricing / discounting for Airlines

• 3: Benefits achieved from the use of CMS.

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Resource Planning Framework: 3 Stages

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1: Aggregate Planning

• Develop medium-term output resource plan

– in aggregate units of measure (eg Total Units per Year)

• This provides the planning framework

•Define output levels over a planning horizon of one to two years

•Focus on product families or total capacity requirements

•Define budget allocations and associated resource requirements

• NOTE - Tesla aims to produce 50 000 cars per year

– So: how big the factory? How many resources? How many suppliers?

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3: Execution

• Bringing the Plan into Life (Making it Happen!)

•Moving work from one workstation to another

•Assigning people to tasks

•Setting priorities for jobs

•Scheduling equipment

•Controlling processes

•Note the Deep Understanding of the Business Processes Required

•Industry Knowledge and Experience

•Aptitude for the Fine Detail

•Insight and Imagination

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Supporting Technology:

Enterprise Resource Planning (ERP) Systems

• ERP Systems Integrate all aspects of a business

• into a unified information system

• Provide timely collation, analysis and reporting of

Example Aggregate Planning Variables and

Revenue/Cost Implications of Strategies

Aggregate Planning Decision Options Revenue/Cost Implications

• Higher labor costs and premiums

• Idle time/lost opportunity costs

• Overhead costs and some loss of control

Workforce

• Hiring

• Layoff

• Full- and part-time labor mix

• Acquisitions and training costs

• Lost sales (revenue) and customer loyalty costs

• Backorder costs and customer waiting costs

Facilities, Equipment, and Transportation

• Open/closed facilities and hours

• Resource utilization

• Carbon emissions

• Mode (truck, rail, ship, air)

• Capacity and resource utilization

• Variable and fixed costs

• Speed and reliability of service and delivery

• Low- to high-utilization impact on unit costs

• Inbound and outbound costs per mode

• Number of full or partial loads

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Strategies for Aggregate Planning:

Two Approaches

• Given the level of Uncertainty in demand

• There are two approaches

• Reflect your understanding of the Industry (and your relationship to risk)

• A Level production strategy

• Plans for the same production rate in each time period

• B Chase demand strategy

• Sets the production rate equal to the demand in each time period

What are key factors in your industry?

•That suggest Level Demand or Chase Strategy?

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Disaggregation Techniques in Manufacturing

• 3 Elements to the Process

• Firstly

•Master Production Scheduling – tot amount required

• Then

•Materials Requirements Planning

• What is required to achieve the MOPS

• Finally

Master Production Schedule (MPS), Part 1

Statement of quantity and the schedule of the finished items to

be produced

• Master schedule is developed for weekly time periods over a 6- to 12-month horizon

• Helps translate aggregate plans into separate plans for individual finished goods

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Master Production Schedule (MPS), Part 2

Developed for basic sub-assemblies in industries

that typically produce:

• End products using different combinations of basic subassemblies and components

• Final assembly schedule (FAS): Quantity and timing for assembling subassemblies and

component parts into a final finished good

Materials Requirements Planning (MRP), Part 1

Demand-based approach for planning the production of manufactured goods and ordering materials and components

• Minimizes unnecessary inventories and reduces costs

Gives a schedule for:

• Obtaining raw materials and purchased parts

• Manufacturing products and controlling inventories

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Materials Requirements Planning (MRP), Part 2

Gives accounting and financial functions based on production information

Based on the concepts of:

• Dependent demand

• Time phasing

• Lot sizing to gain economies of scale

Dependent Demand, Part 1

Directly related to the demand of other SKUs and does not require forecasts

•Bill of materials (BOM) of finished goods (mainly for manufacturing)

• Hierarchical relationships between all items like subassemblies, purchased parts, and manufactured parts

•Bill of labor (BOL) (mainly for labor-intensive services)

• Hierarchical record analogous to a BOM that defines labor inputs necessary to create a deliverable service

LO 13-4

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Dependent Demand, Part 2

•End items: Finished goods scheduled in the MPS or FAS that must be

forecasted

• Parent item: Manufactured from one or more components

• Components: Any item other than an end item that goes into a

higher-level parent item

• Subassembly: Composed of at least one immediate parent and at least

one immediate component

LO 13-4

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Example of a Bill of Materials and Dependent Demand

Capacity Requirements Planning (CRP), Part - I

Process of determining the amount of labor and machine resources required to accomplish the tasks of production

•Takes into account all component parts and end items in the materials plan

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Capacity Requirements Planning (CRP), Part - II

What is capacity?

Capability of a manufacturing or service resource to

accomplish its purpose over a specified time period.

Often viewed as maximum rate of output per unit of time or units of resource availability.

Short- vs Long-Term Capacity Decisions

Short-Term Capacity Decisions Long-Term Capacity Decisions

• Amount of overtime scheduled for the next

week

• Number of emergency room nurses on call

during a downtown festival weekend

• Number of call center workers to staff during

the holiday season

• Construction of a new manufacturing plant

• Expanding the size and number of beds in a hospital

• Number of branch banks to establish in a new market territory

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Demand & Capacity Matching Problem

Safety Capacity (or Capacity Cushion)

Amount of capacity reserved for unanticipated events

• Demand surges

• Materials shortages

• Equipment breakdowns

Average safety capacity (%)

= 100% − Average resource utilization (%)

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Capacity Measurement, Part 1

Capacity required depends on the set-up time and processing

time for each individual work order

Mathematically,

Capacity required (Ci) = Set-up time (Si) + [Processing time (Pi) x Order size (Qi)]

LO 10-2

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Capacity Measurement, Part 2

If we sum the capacity requirements over all work orders, we will get total capacity required using the following formula:

Total capacity required:

ΣCi = Σ[Si + (Pi x Qi)]

LO 10-2

Capacity Measurement in Services

• The formula for capacity measurement on the previous slide applies to pure type scenarios where set-up time is a one-time event allocated over all the order size units.

manufacturing-• Manufacturing work orders normally assume that one set-up is necessary for each work order, and therefore, the set-up time is spread over the single work order quantity, which makes the set-up time independent of order size.

• However, for most service scenarios, (like in the dental clinic example on the next slide), set-up time accompanies each customer (e.g., as the dentist cleans up after each patient, sterilizes equipment and sets up for the next patient)

• Therefore, such services typically require a new set-up (change-over) time for each single work order (i.e., the order size is one), and therefore, every patient surgery requires a set-up time Therefore, the capacity required formula changes to:

ΣC i = Σ[(S i x Q i ) + (P i x Q i)

= Σ[(S i + P i ) x Q i)]

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Capacity Measurement in Services

Dental procedure Appointments Set-up time (min.) Service time (min.) No of patients

Long-Term Capacity Planning

• Addresses the trade-off between the out-of-pocket cost of expanding capacity and

the opportunity cost of not having adequate capacity to meet any unexpected surge in demand.

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Short-Term Capacity Management

Approaches

• Adjusting short-term capacity levels

• Shifting and stimulating demand

Adjusting Short-Term Capacity Levels

• Add or share equipment

• Sell or lease out unused capacity

• Change labor capacity and schedules

• Change labor skill mix

• Shift work to slack periods

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Shifting and Stimulating Demand

• Vary the price of goods or services

• Provide customers with information

• Advertising and promotion

• Add peripheral goods and/or services

• Provide reservations

•Reservation: Promise to provide a good or service at some future time and place

Revenue Management System (RMS)

Consists of dynamic methods to:

• Forecast demand

• Allocate perishable assets across market segments

• Decide when to overbook and by how much

• Determine what price to charge different customer (price) classes

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Learning Curves and Capacity Requirements

• The learning curve concept is that direct labor cost decreases in a predictable manner as the experience in producing the unit increases

• As production doubles from x units to 2x units, the time per unit of the 2x th unit is 80% of the time of the x th

unit This is called a ‘80 percent learning curve’ In general, a p-percent learning curve characterizes a process

in which the time of the 2x th unit is p percent of the time of the xth unit

• Mathematically, the learning curve is represented by the function: y = ax –b

• Here, x is the no of units produced, a is the hours required to produce the first unit, y is the time to produce the xth unit and b is a constant that defines a 100p learning curve (i.e if p = 0.8, then we have an 80% learning curve)

• Learning curves can be used to estimate labor-hours for repetitive work and therefore can be useful in computing both short- and long-term capacity requirements These estimates can be used to plan staffing levels, estimate costs, price products, establish budgets and help managers negotiate terms of delivery with suppliers and customers

SUMMARY

• Resource management deals with planning, execution, and control of resources used

to produce goods or provide services

• Resource planning framework includes aggregate planning, disaggregation, and

execution

• Manufacturing firms disaggregate aggregate plans into executable operations plans

• CRP helps accomplish the tasks of production

• Capacity is the capability of a manufacturing or service system to accomplish its

purpose over a specified time period

• Long-term capacity planning involves adjusting short-term capacity levels and

shifting and stimulating demand

• Revenue Management System (RMS) constitutes of dynamic methods to forecast

and manage demand

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planning (ERP) systems

• Level production strategy

• Chase demand strategy

• Master production scheduling (MPS)

• Final assembly schedule (FAS)

• Materials requirements planning (MRP)

• Dependent demand

• Bill of labor (BOL)

• End items

• Parent item

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Global Value Chain - Presentation

• Global Value Chain Talk – Open Learning Campus

• Value Chains

• - Supported by underlying technological and economic forces, (World Bank & World

Trade Organization, 2019)”.

• GVCs - “To a large extent, they are orchestrated and operated by complex networks of

multinational enterprises (MNEs), and thus have become essential features of the international business (IB) landscape”.Reference: McWilliam, S E., Kim, J K., Mudambi, R., & Nielsen, B B (2020) Global value chain

Introduction: Connecting the dots …

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• GVC and AI

• Artificial Intelligence (AI) = “Many companies have forecast that the future of

operation and supply chain management (SCM) may change dramatically, from planning, scheduling, and optimization, to transportation, with the presence of artificial intelligence (AI)”.

Introduction: Connecting the dots …

Reference = Helo, P., & Hao, Y (2021) Artificial intelligence in operations management and supply

chain management: an exploratory case study Production Planning & Control, 1-18.

Do you agree?