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Operations & Innovations Management

Presented by Renaldo de Jager

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Vendor Selection

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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

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11 - 6 © 2011 Pearson Education, Inc. publishing as Prentice Hall

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

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Inventory

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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.

(vi) To permit operations to continue easily.

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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

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JIT

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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”

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Goal of JIT

The ultimate goal of JIT is a balanced system.

Achieves a smooth, rapid flow of materials through the system

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Benefits of Small Lot Sizes

Reduces inventory

Less storage space

Less rework

Problems are more apparent

Increases product flexibility

Easier to balance operations

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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

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Quality

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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

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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

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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

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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?

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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

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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.

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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

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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 seven-step 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.

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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 defined limits)

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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

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INNOVATION MANAGEMENT

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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.

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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.„

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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

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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

Ability to finance the innovation

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DEGREE OF NOVELTY

Incremental innovations

Radical innovations

Systemic innovations

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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

„do better what

we already do“

„new for the

company“

RADICAL

„new for the

world“

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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

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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

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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

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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 create opportunities for your

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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 immediate need for it.

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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 (market-pull).

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New concept development model

(NCD) Technology push

Market pull

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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.

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PERT

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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.

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