UPSTREAM VOLATILITY IN THE SUPPLY CHAIN: THE MACHINE TOOL INDUSTRY AS A CASE STUDY

Cyclicality is a well‐known and accepted fact of life in market‐driven economies. Less well known or understood, however, is the phenomenon of amplification as one looks “upstream” in the industrial supply chain. We examine the amplification phenomenon and its implications through the lens of one upstream industry that is notorious for the intensity of the business cycles it faces: the machine tool industry. Amplification of demand volatility in capital equipment supply chains, e. g., machine tools, is particularly large relative to that seen in distribution and component parts supply chains. We present a system dynamics simulation model to capture demand volatility amplification in capital supply chains. We explore the lead‐time, inventory, production, productivity, and staffing implications of these dynamic forces. Several results stand out. First, volatility hurts productivity and lowers average worker experience. Second, even though machine tool builders can do little to reduce the volatility in their order streams through choice of forecast rule, a smoother forecasting policy will lead companies to retain more of their skilled work force. This retention of skilled employees is often cited as one of the advantages that European and Japanese companies have had relative to their U. S. competitors. Our results suggest some insights for supply chain design and management: downstream customers can do a great deal to reduce the volatility for upstream suppliers through their choice of order forecast rule. In particular, companies that use smoother forecasting policies tend to impose less of their own volatility upon their supply base and may consequently enjoy system‐wide cost reduction.     

THE USE OF INDUSTRIAL SOFTWARE TO CREATE EXPERIENTIAL LEARNING ACTIVITIES IN OPERATIONS MANAGEMENT COURSES

Computer-based manufacturing planning and control (MPC) systems are widely used in industry to gain competitive advantage through integration and coordination of managerial activities. In collegiate business schools, important operations management activities are taught and studied, often by sequential examination of discrete topics such as aggregate production planning, master production scheduling, capacity planning, material planning, and production activity control. This paper explores the potential use of industrial MPC software in the classroom to create experiential learning activities that address the dynamic and integrative nature of operations management. Experiences with this pedagogical approach over the past decade are reported.     

QUANTIFYING THE IMPACT OF INVENTORY HOLDING COST AND REACTIVE CAPACITY ON AN APPAREL MANUFACTURER'S PROFITABILITY

This paper was motivated by the operational problems faced by Northco, a school uniform manufacturer in the Northeastern United States. Northco was facing high working capital costs while also incurring high stockout and markdown costs. This paper models the impact of inventory holding cost and reactive capacity on Northco's targeted understocking and overstocking cost and offers a solution methodology for such problems. We quantify the impact of varying inventory carrying costs (and hence, high working capital costs) on stockout costs and the value of additional capacity. Our results illustrate that apparel manufacturers with high working capital costs, and hence high inventory carrying costs, should target higher stockout costs and achieve lower capacity utilization. The results presented have application beyond Northco because high working capital cost is endemic to many supply chains.     

The Primary Risk

In the Tavistock tradition, we understand anorganization by first identifying its primary task. Weask, what is this organization set up to do, how is itorganized to accomplish this objective, and what unconscious dynamics limit or distort itsmembers' ability to do their work? This approach whilepowerful, does not help us understand organizations thatlive at strategic junctures in their life cycles. In these situations, the task is to choose atask. We need a conceptual framework to help usunderstand the psychodynamics of organizing and decidingin these situations. The following article develops the concept of the “primary risk”to explain how organizations behave in these situations.It links the primary risk to the psychoanalytic idea ofambivalence and the gestalt idea of the figure/ground relationship. It draws on case material toilluminate its concepts.     

A REVIEW OF FLOWSHOP SCHEDULING RESEARCH WITH SETUP TIMES

Flowshop scheduling problems with setup times arise naturally in many practical situations. This paper provides a review of static and deterministic flowshop scheduling research involving machine setup times. The literature is classified into four broad categories, namely sequence independent job setup times, sequence dependent job setup times, sequence independent family setup times, and sequence dependent family setup times. Using the suggested classification scheme, this paper organizes the flowshop scheduling literature involving setup and/or removal times and summarizes the existing research for different flowshop problem types. This review reveals that, while a considerable body of literature on this subject has been created, there still exist several potential areas worthy of further research.     

PRODUCTION SCHEDULING OF CONTINUOUS FLOW LINES: MULTIPLE PRODUCTS WITH SETUP TIMES AND COSTS

The problem of production planning and setup scheduling of multiple products on a single facility is studied in this paper. The facility can only produce one product at a time. A setup is required when the production switches from one type of product to another. Both setup times and setup costs are considered. The objective is to determine the setup schedule and production rate for each product that minimize the average total costs, which include the inventory, backlog, and setup costs. Under the assumption of a constant production rate, we obtain the optimal cyclic rotation schedule for the multiple products system. Besides the decision variables studied in the classical economic lot scheduling problem (ELSP), the production rate is also a decision variable in our model. We prove that our solutions improve the results of the classical ELSP.     

MANAGING ENGINEERING CHANGE: MARKET OPPORTUNITIES AND MANUFACTURING COSTS

Engineering changes in the design of a product, while attractive from a marketing viewpoint (in terms of increased sales opportunities, matching competitors innovations, etc.) cause disruptions in the manufacturing function of a firm. These disruptions include delays or backorders in the delivery of both committed-orders and forecast-demands of existing products, increased capacity requirements that could result in greater use of subcontracts, higher component inventories, and obsolescence of certain components. In this paper, we establish how the marketing opportunities and manufacturing costs associated with engineering changes can be managed so as to enhance the firm's profits over a planning horizon. Using an optimization model, we show that an enhanced product with increased marketing opportunities may not immediately replace the existing product; it may be phased in over a period of time. We further illustrate how the firm's overall profit, and the mechanics of phasing out the old product and phasing in the new product, are affected by factors such as the manufacturing lead time of the new product, its market attractiveness as compared to the old product, capacity availability, subcontracting premiums, and backorder costs. We develop several insights that allow managers to quickly establish whether an engineering change would be desirable and discuss a multitude of options that may be used to further enhance their desirability. Finally, we show that if the phase out period of the old product is set arbitrarily, rather than optimally, the result may be a substantial reduction in overall profits.     

A GENERAL APPROACH FOR COORDINATING PRODUCTION IN MULTIPLE-CELL MANUFACTURING SYSTEMS

We introduce a general approach to the coordination and control of material and information flow in multiple cell manufacturing systems. This approach uses production authorization cards (called PAC system) and generalizes such well-known approaches as MRP (material requirements planning), KANBAN (japanese card system), OPT (optimized production technology), BSS (base. stock system), IC (integral control), CONWIP (constant work-in-process), and others. It provides a framework for developing coordination and control mechanisms that combine the desirable features of more than one of these traditional approaches. The coordination is achieved by the rules that determine when and how material and information flow through the system and by the appropriate choice of the parameters of these rules. We also discuss various models of the PAC system that can be used to gain insight into the impact of the choices of the parameters. Directions for future research in this area is also outlined.     

PLANNING AND SCHEDULING THE REPAIR SHOPS OF THE DEUTSCHE LUFTHANSA AG: A HIERARCHICAL APPROACH

To plan and schedule the repair shops for recoverable parts at Deutsche Lufthansa AC, we designed a hierarchical model consisting of two levels. The top level calculates the optimal number of parts in the system to guarantee a certain service level while minimizing the capital tied up in parts. Given this provision, the lower level schedules the repair of parts so that the service level is actually maintained. Using queuing theory, the solution gives special attention to the different hierarchical dependencies. Lufthansa has implemented the model for its repair shops of electronic parts. Their experience with the model is discussed briefly.     

AN EXPLORATORY STUDY OF PATTERNS OF PRIORITIES AND TRADE-OFFS AMONG OPERATIONS MANAGERS

A survey of 15 firms showed that agreement among operations managers on competitive priorities is related to agreement on long-run strategic trade-off decisions and not to agreement on shortrun trade-offs. Furthermore, intended short-run actions were often in conflict with stated competitive priorities. Use of management-by-objectives linked to performance appraisal was related to agreement on competitive priorities.