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Automated Marine Terminals - Jun 1998
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Automated Facilities
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Introduction to automated facilities. We must start with the definitions of the various business approaches in
operations management (and their variants) and their impact on operations. If you are familiar with operations
management techniques, you may by-pass this temporary detour and go to the meat below (Table of Contents).
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Table of Contents
Reducing the Complexity of the Supply ChainWhat can we Learn?Knowing Where You Are"What If" Simulation
ApproachesSystem Architecture Supply chain modeling (and constraint identification) Evaluation of Alternative
Options Detailed Modelling of Constraint Areas Terminal Operations Operations Management Facility Capacity and
LocationPlanningMaterials Management Asking the Right Questions is CriticalThe Future
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Glossary of Production Operations
Some Management Techniques - Defined. (A briefing to determine applicability.)
Just In Time (JIT) World Class Manufacturing Total Quality Management (TQM) Business Process Re-engineering
(BPR) Kaizen BenchmarkingOptimized Production Technology (OPT) Lean ProductionMaterial Requirements Planning
(MRP and variants) Enterprise Resources Planning (ERP and variants)
Just In time: Probably the most mis-understood term ever to be introduced into the annuals of management
thinking. Often interpreted as a technique to bring about a better understanding between suppliers and
manufacturers to ensure more efficient supply of material to the point of use as required. However this is only part
of the picture. APICS defines JIT in the broad sense, an approach to achieving excellence in a manufacturing
company based upon the continuing elimination of waste (waste being considered as those things which do not add
value to the product). In fact the real driving force behind Just In Time is the inward examination of the process
issues themselves, whereby order may be brought to the manufacturing process which in itself will considerably
assist in supplier and customer relationships (2).
The broad front implementation has been advocated by many in the literature. The concept of continuous process
improvement is more in tune with the ethics of Just In Time manufacturing, hence the link with Japanese physical
methods of controlling flow such as the Kanban system and others. Such continuous improvement will have a role in
all business, there is no doubt in this, but how should you go about implementing such principles? What should be
used to focus such effort?
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World Class Manufacturing: A term which essentially carried further the Just In Time message once the initial
interest in the term JIT itself began to wane. Its aim is admirable being to assist a business provide the best service
possible to its customers at lowest cost. Unfortunately as with Just In Time itself there is no obvious focus for its
implementation which leaves many companies in difficulties with its adoption.
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Total Quality Management: A term inferring the common-sense ideas centered around the improvement in quality of
the whole business environment. Popplewell defines TQM as 'involving everyone in an organised way in the process
of improvement to achieve new standards in product and customer service and to reduce wasted effort' (3). Clearly
improving the quality of product and service, together with working life for all participants is a valuable one. But here
once again we have a great concept which lacks a focus in its application across a business. How will we guarantee
success in business terms of the investments considered? Without business productivity gains it could be argued that
the investment has been wasted.
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Business Process Re-engineering (Business Process Analysis): BPR involves the flowcharting of the processes by
which business results are achieved. In its most limited form it has much in common with Organisation and Method
study practised for many years. The latest ideas involve local managers and their staff positively responding to the
effectiveness of the business processes in their area, commencing with the need to understand what their processes
are. Often Quality Circle schemes are run as part of the initiative to consolidate and promote local participation. As a
philosophy BPR suggests a focus on the process rather than results. It can be time consuming and for this reason is
often targeted at significant 'breakthrough' issues.
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Kaizen: As a philosophy this is almost the opposite to BPR as small steps of improvement are sought with long term
effects as the goal, rather than significant breakthroughs. An entire production team or company may therefore be
more able to participate in Kaizen studies and this may embrace all aspects of running a business that one might
otherwise include in JIT or TQM studies. The ongoing improvement process does not stop when specified goals have
been achieved. Further improvements are progressively sought which may open up opportunities for further product
or customer futures.
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Benchmarking: A new term which is very much in fashion at this time. It is concerned with the ongoing monitoring of
measuring products, services and processes against known recognised industry leaders. Knowing what to measure
can be a major issue requiring much research to understand business objectives and requirements and to avoid
unnecessary wasting of time and effort. There is a tendency to focus on problem areas as the driving force behind
the exercise although this can lead to failure if this is not critical to the business.
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Optimized Production Technology: A proprietary philosophy and software product that is designed to identify, and
control the constraining influences which influence the operation of any activity based business(5). This approach is
quite different to those already identified in that although the aim is to instill a process of ongoing improvement into
a business, it is focused around the constraints or weak points of the system which fundamentally affect the whole
process. The implementation of OPT is therefore generally faster and often can be used to produce benefits quickly
from within a Just In Time , Total Quality Management or Business Process Re Engineering project. The techniques
used are also discussed in the literature under the terminology of Constraint Management or Theory of Constraints.
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Lean Production
The latest terminology being placed into the market revolves around intense work being undertaken in the
Automotive sector, which attempts to compare and contrast performance between Japanese and Western
manufacturers and to draw out a complete method of business management as its explanation and conclusion. Lean
Production has grown from a thorough analysis of the Toyota Production System and its application in Japan and
across the world. In simple terms it has been described as 'a system defined as lean because it uses less of
everything'. As a result it has been claimed that the system can offer the customer twice the number of products
that only need to be built in half the normal volume per model. A recent study has concluded that a lean production
system has the following characteristics:
* It is customer driven, not driven by manufacturing
* All activities are organised and focused on a product line basis led by a product champion with functional
departments playing a secondary servicing role.
* The whole system involves fewer actions, all of which are integrated with each other.
* A high level of information is exchanged between all the actions and real cost structure.
* The activities are co-ordinated and evaluated by the flow of work through the team or the plant in isolation.
* The discipline necessary for the system to function and expose problems is provided by JIT and TQM in the plant
and supplier and dealer performance evaluation.
* Wherever possible responsibility is devolved to the lowest possible level in the plant or its suppliers.
* The system is based upon stable production volumes but with a great deal of flexibility.
* Relations between employees, suppliers and dealers are based upon reciprocal obligations that are the result of
treating them as fixed costs.
Reducing the Complexity of the Supply Chain
It is clear that a dramatic concentration on reducing the complexity of the supply chain can provide significant
benefits, however it is also clear that many cultural and vertical industry lessons have been built into the Lean
Manufacturing experience as it has been implemented into the Automotive sector. An assembly plant by definition
must have strong links to its suppliers as it is totally dependent on their ability to supply. By involving or integrating
these suppliers into their business they can enjoy the close influence without the financial liabilities of component
manufacturer. Equally as such assembly plants are working to very stable production plans with limited change, with
aims to assemble to customer or dealer configuration then links with dealerships are essential to this stability and
must be as dynamic as possible. It is clear that assemble to order business in general may be able to move towards
this goal, however those businesses who make to stock/ forecast, engineer or make to order and those which do not
have a stable and simple product mix will find these techniques of little operational value. For these organisations
perhaps the JIT and TQM messages are the most valuable, providing their implementation is focused.
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What can we Learn?
So in looking beyond the techniques that we currently employ or have access to, what can we learn to assist
business in the future?
Clearly the ethics of Just In Time, World Class Manufacturing, Business Process Re-engineering, Total Quality
Management, Lean Production and others not necessarily discussed here are valid and they do us good if
implemented correctly. The major challenge for the consultancy community and for management boards who wish to
undertake action in this area is how best to bring the benefits of the work to reality quickly and effectively. It is
plainly not sufficient to expect each company to approach these ideas in a similar way, nor is it likely that the
techniques will apply in a particular way. In addition what is the role of Information Technology in such an
improvement philosophy and how can its development play a part in the ongoing process of improvement? The key
questions are therefore not today related to why businesses need to constantly strive for improvements in
productivity, the marketplace has seen to that. But what should I strive for and how should I get there?!
These questions and the key important answers are fundamental if any onward benefit is to be realized from
change. Furthermore these are issues which cannot be addressed by any external body. The individuals responsible
for strategic development of a business will need to clearly address such issues at the outset which will set the tone
on how to achieve success. It is clear that in order to set any direction one needs to know where one is currently
going. The presence of management information systems is a convenient mechanism for reporting on the status of
current activity and performance and it is here where most management teams will focus first. Monitoring principles
and performance targets will need to be documented and implemented with a commitment to take action against
such analysis upon its production.
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Knowing where you are is important, internally one needs to know the level of performance from the plant in
general. It is also key to understand from the market what the current customer expectation is in this area; this will
give you valuable information on the competition. Such analysis should not necessarily be restricted to one set of
measures, but those of key strategic importance should be treated with a higher focus. Knowing where you need to
go is also critical, as this will set the ground rules of the business opportunity or lack of it to follow. The need to
stand back from the business and allow its principles to be thoroughly understood is absolutely essential and this
must be supported with the right tool kit for meaningful future objectives to be set.
For example it may be important for a company to produce a greater volume of products across its range to take
advantage of an expanding market. If the range involves production of more than a couple of products across a set
of flexible multi purpose work centres, it may not be too easy to ascertain the potential consequences of say a 10%
increase in volume. Unless sufficient resource and supply considerations are taken into account at this stage, then an
entire future plan could be in jeopardy through ignorance. Many other such examples can easily be demonstrated.
This highlights a need for senior business to model the effects of such changes on their facilities prior to
implementation in order to assess the impact of change. As well as providing information on the effects of such
change the modelling toolset should be capable of pinpointing the barriers or constraints to the change being
implemented. The modelling should be capable of being targeted at any variable which impacts on the change itself,
including such items as operation cost, supply cost, lead-time impact, inventory issues, pricing concerns or margins
and others. The tool should be capable of considering such components in a finite or infinite sense giving information
back on the change consequences and possible solutions.
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"What If" Simulation Approaches
Many current ERP systems are migrating towards this "what if simulation approach" to business planning, but rarely
are such systems equipped to provide the focused detail required to provide the necessary answers. However they
often contain much of the base information that is required to support the analysis. Just as much of the recent
growth in philosophy or approach has led from earlier internal studies of aspects of the manufacturing process and
its effects on the overall business, it should be possible to take our experiences in the systems arena within
manufacturing and make a similar leap in thinking in the use of advanced internal modelling and scheduling systems.
This would lead to a generic modelling and planning system for an entire business rather than purely the
manufacturing components of it.
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System Architecture
The system architecture would need to embrace the following business aspects to assist in the ongoing change
process:
1) Supply chain modelling and constraint identification.
The entire breadth of a business should be thought of as its supply chain - i.e. all aspects of life which impact on the
ability of the business to produce a product and to supply it to the customer. The key components of the chain of
events should be documented and the critical elements identified as a potential point for process improvement.
Business systems, if they are to be effective in this area, must be able to adopt a generic stance. They must be
capable of describing the issues at hand and this will differ between companies and between different issues at the
same company.
2) "What if" evaluation of alternative options for improvement
Key target improvements should be tested out on the model to identify the actions required in the critical areas to
support the required objectives. Alternative ideologies and investments may be considered and the best
combinations of approaches selected. The aim should be to understand the nature of what the future may be like if
improvements in certain areas can be effected. This implies a simulation and planning capability, which can assess
the impact of change in the supply chain model across time. Therefore a finite scheduling heart is going to be
required to lie within the modelling and simulation shell.
3) Detailed modelling of constraint areas
The constraint areas of the model may be maximized as a key focal point for more detailed evaluation of the above.
At this point the process of analysis switches from 'a what shall we do?' to a 'how shall we do it?' study.
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Terminal Operations - mechanized automated terminals must be properly operated utilizing the appropriate
techniques with an emphasis on the learning organization continually being trained, learning, and improving. In the
absence of proper training and operating techniques, the benefit of automation improvement in productivity levels
will not materialize as expected thus causing operational expenses in excess of projected due to lesser productivity
performances.
The key to success in the "ramping up" of an automated facility is adequate and proper training thus yielding a work
force that can perform in achieving the name plate productivity capabilities of the capital-intensive systems in a
measured and shortened time frame. Training is the tool to shorten the learning curve and make it steeper. After
all, in the absence of training, the learning curve becomes very long resulting in the trade-off of training investment
vs. higher operating expenses. This does not take into consideration the additional expense of potential customer
dissatisfaction in the slow productivity and disappointing delivery of product or service resulting from shallow
learning curves anticipated without appropriate training investment.
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Operations Management - is a hierarchy of decisions regarding product life-cycle strategies and competitive priority
decisions resulting in positioning strategies. Positioning strategies may be process focused or product focused or a
mix yielding an intermediate strategy. The strategy is then reinforced by a "quality management decision"
determining the level and reliability desired or needed, and supported by a "productivity management decision"
determining expected and acceptable learning and experience curves to be applied.
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Facility Capacity and Location -Another follow-on aspect is long-term capacity planning with a focus on the
economies of scale vs. focused facilities decision. Facility location decisions regarding a single or multiple facilities
must be made followed by facility layouts that will support the positioning strategy decision of process, product or
intermediate.
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Planning - relationships to other plans in the firm following the corporate strategy should be the business plan,
aggregate production plan, master production schedule and resulting material requirements plan ending up in a
"detailed day-to-day scheduling plan.
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Materials Management - The next decision comes into play regarding the productivity management system to be
applied. Will it be Independent Demand with ROP and Periodic Review Systems? Or will it be Dependent Demand
utilizing MRP, JIT , OPT, or some other variation of the same or quite possibly some innovative new approach?
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Asking the Right Questions is Critical - Examples of Q's include "should we consider MRP, JIT or OPT?", " should we
locate our new facility to minimize labor and transportation costs?", "does it make sense to make another large
addition to our current plant?", and "how will a strategic decision to compete on cost affect our operation?"
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The Future - will be a world of global markets and competition, fundamental changes in the economies of OM
(operations management),. linking engineering/design to OM, managing the two-way flow of materials (and goods),
dealing with new different and innovative channels of distribution, and re-thinking traditional policies. DON'T MISS
THE BUS!!!
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