Strategy Execution for Engineers
Table of Contents
Introduction
Decisions have trade-offs, which can limit a firm's performance. One example is efficiency (labour productivity) against responsiveness. The trade-off is bounded by an efficiency frontier, and a firm on the frontier is best in class, where increasing one attribute necessarily decreases another. A firm within the frontier can increase an attribute without affecting another. Within the frontier, a firm can be worse than another on all attributes, whereas on the frontier the firm will always be better on at least attribute.
Operations management deals with the design, management and continuous improvement of the transformation process for creating goods and services that are valued by customers and society. This involves maximising both efficiency (doing things right) and effectiveness (doing the right things).
A firm's mission is why it exists. Its vision is where it wants to be in the future. Its values are the guiding principles, describing what it believes and how it will behave. Its strategy is the roadmap for achieving the goals.
There can arise conflicts between areas of necessary cooperation but potential goal conflict, such as between manufacturing and marketing. These tensions can arise from:
- Different objectives which may be conflicting
- Lack of communication causing goal arguments
- There may be a lack of understanding of technical capabilities
- There may not be a reasonable expectation of what is capable
The solutions to these problems can include:
- Having multifunctional meetings
- Need to have goal congruency
- Rotate staff across departments
Removing boundaries and creating a boundaryless organisation can help with communication and avoid such tensions. Some boundaries are:
- Horizontal
- Functions, e.g. engineering, marketing, finance, operations
- Vertical
- Organisational hierarchies
- Geographical
- Spacing around the world hindering communication
- Organisational
- Supply chain management
A organisation has a set of inputs it requires, a set of transforming processes and a set of outptus. For example, air transport inputs airports, aircrafts, staff, etc, transforrm with schedules, reservations, meals, baggage and outputs customers on flights transported to their destinations.
Process analysis
A process is a collection of tasks connected by a flow of goods and information that transforms inputs into more valuable outputs. A Process Flow Diagram is a pictoral representation of the process. Process analysis consists of:
- Choose the process boundaries and flow unit
- Understand how the physical process works and draw a process flow diagram. Show process steps, including inventory holding points, and arrows depicting flow of the product
- Determine the capacity of each step in the process expressed as the number of flow units of product that can be processed per unit time
- Identify the bottleneck, being the step with least capacity
- Once the bottleneck is identified, think about how the bottleneck influences other process steps. Calculate different performance measures such as the process capacity, flow time, work in process inventory and labour utilisation
- Consider changes to improve system performance
Three measures of process performance are:
- Cycle time
- Average time between completion of successive units
- Flow time
- Amount of time it takes for a unit to get through the process
- Inventory or Work In Process
- Number of units in the process at any point in time
If the demand is greater than the capacity at the bottleneck, the situation is capacity constrained and the flowrate is constrained to the capacity at the bottleneck. If the deamnd is smaller than the capacity at the bottleneck, the situation is deman constrained.
Delayed differentiation
Delayed differentiation is the practice of differentiating the product as late in the supply chain as possible. This allows for a generic product to be made such that the same supply path can be used for multiple different products. An example of this is printers having different power cables, yet the printer is the same.
There is a trade off between made to order and made to stock.
| Made to order | Made to stock |
|---|---|
| Customised | Generic |
| Long lead time | Walk out with product |
| More expensive | Economies of scale |
Delayed differentiation allows for limited customisation, which the consumer values, but also benefits from the economies of scale.
Little's law
The average inventory in a system is given by the average flow rate and average flow time. \[I=R*T\] The inventory turn is the number of times in a period that the full inventory is replaced in a given timespan. Inventory turn is the inverse of the flow time, where the larger the flow time, the smaller the inventory turn. A larger flow time would suggest the firm is managing its inventory poorer, as the products are spending more time in inventory rather than being sold to customers.
Utilisation
Utilisation of a resource is defined as: \[\text{Utilisation}=\frac{\text{Flow rate}}{\text{Capacity}}\] The flow rate is defined as: \[\text{Flow Rate}=\min\{\text{demand},\text{capacity at bottleneck}\}\] If the flow rate is the demand, the situation is demand constrained. If the demand is greater than the capacity at the bottleneck, the flow rate is the capacity at the bottleneck and the situation is supply constrained.
Implied utilisation is: \[\text{Implied utilisation}=\frac{\text{Demand}}{\text{Capacity at the resource}}\] If the implied utilisation is less than 100% for all resources, the situation is demand constrained. If greater than 100% for a resource, then the situation is supply constrained. The resource with the highest implied utilisation will be the bottleneck resource.
Assembly lines
Two types of lines:
- Worker paced
- Work moves as soon as job is finished
- Machine paced
- Belt moves as slow as the slowest task
Worker paced lines require inventory stages between steps to accommodate for the inventory build-up, as the throughput is dependent on the bottleneck. A machine paced line has a longer lead time, as every stage takes the same time as the bottleneck stage. In both, the throughput is the same, as all successive units will take the same amount of time, being the time taken at the bottleneck.
The time a worker takes when waiting for the next unit to be worked on is idle time. Idle time is unproductive time that has costs, reducing worker utilisation and efficiency. Shifting the tasks between workers can reduce the amount of idle time, by having the same utilisation of each worker, ideally being 100%.
Yerkes-Dodson's Law states that the relationship between satisfaction and variety follows a bell curve, with low satisfaction at low variety and at high variety. Peak satisfaction is reached with an intermediate level of variety. Worker satisfaction can improve their throughput and reduce staff turnover.
Batch processes
Batch processes are created when a process requires setup. As a result, trying to put as many units in a batch helps to reduce the cost per unit of the setup. The capacity logarithmically approaches the capacity without setup as the batch size increases. As a result, the bottleneck can change as the output changes, moving between different stages due to the decreasing cycle time of the batch process.
The batch size should be chosen such that the batch process capacity is equal to the next lowest capacity process. This way, decreasing batch size reduces the system capacity and increasing does not increase the capacity so the gains from increasing are cancelled out.