18 . Operations / Manufacturing

COURSE POINTS

• Operating a company is far different than building a product
• Operations is critical to the day to day existence of the company
• Processes play a vital role in a proper operations organization
• The day is won or lost on logistics no matter how great your products are
• Ideally, manufacturing wants to make one and only one thing.
• The more consistent and standard you make your product, the better manufacturing can build it.
• Continuous Improvement, Lean Manufacturing and 6 sigma all strive to measure and improve a manufacturing line

DISCUSSION

For most of you creative types, operations and manufacturing are just those guys overseas that make the stuff you invent. This is partly true. Depending on what you make, your operations and manufacturing organization can be flung far and wide. Coordinating this logistical nightmare usually rests on either the VP of Operations or the Chief Operating Officer (COO). These folks are part general, part cheerleader and part magician.

A TYPICAL OPERATIONS GROUP

When you think of operations, think of the daily tasks that keep the company afloat. This can range from making sure the bathrooms are clean to figuring out how much to pay for raw materials. Operations and manufacturing probably have the most diverse set of people in your organization. Their skills can range from the basics of a line worker to the Ph D. statistician looking at product yields. In a sense, these groups cut across more of humanity than any other group. That’s a great strength and a bear to manage.

If you look at a typical operations organization, the following functions can be found:

• Manufacturing: Anything the company makes will be done in manufacturing. Even software that is bundled in packages, which nowadays is kind of silly, needs to be manufactured.
• Configuration Management: Most companies have a vast array of products. Keeping track of all those options falls under configuration management. This is important to get right because this information feeds into what to manufacture and purchase.
• Purchasing: Anything the company buys usually goes through purchasing. The job of purchasing is to get the company the best deal they can on the materials they need to design and build products. This is usually why they like to deal with big companies and standards configurations.
• Inventory: If a company physically makes something, then it will have some sort of inventory. Inventory is the finished goods that are ready to be sold. They can be already sold and just waiting to ship or the the company can build up inventory to meet customer demand. In a lean operation, the goal would be to have zero inventory, which is next to impossible.
• Service and Support: Once the product is done and at the customers site, there needs to be a support team that services (if required) and takes support calls. All products have problems, so the support staff needs to be able to rapidly fix any issues customers have.
• Quality: Critical to a properly functioning manufacturing line is the compliance to quality standards. A poor quality product will get more support calls and make customers angry. The overall goal of the quality group is to catch all those defective products before they leave the factory.
• Logistics and Transportation: Logistics is responsible for moving all those products, raw materials and people to where they need to go. Without a detailed knowledge of where your raw materials, people and products are, you can miss deadlines, ship things to the wrong place and run out of inventory.
• Facilities The physical location of where the company does it’s businesses is important to maintain and keep compliant to local laws and codes. The facilities group is in charge of making that happen. This includes routine maintenance (like cleaning the bathrooms) all the way to selecting and building a new factory.
• Distribution Channels: Companies can have many distribution channels for their products. Distribution channels are just places where your companies products are sold. Think of it like this. You can go to a store to buy an ink cartridge or you can by it on-line. Each is a distribution channel (actually, more like a sales channel). Another example would be buying direct from the manufacture or via a third party.

As you can see, an operations group has a lot going on. A well run operations group is an invaluable asset to a company. Many a company has folded because their operations were sloppy and they could not get their innovative products to market.

WHAT’S NOT MEASURED, DOES NOT IMPROVE

One aspect of operations that warrants some additional discussion is manufacturing. A companies manufacturing line is what creates, in volume, the companies products. Without a properly functioning manufacturing line, a company will struggle to produce products. For the manufacturing group, the single more important thing is to produce high quality products at the lowest possible price. To achieve this, they will constantly look at ways to improve efficiency while still maintaining a high level of quality. The tools they use to achieve this include:

• Statistical Process Control (SPC): This method uses statistics to measure and monitor critical process steps so that actions can be taken. The output of SPC is usually a control chart that shows how a particular process step is trending and whether or not it’s “in control.”
• Lean Manufacturing: Deals with eliminating as much waste (be it time or materials) as possible so that an optimum cycle time through the manufacturing process is achieved. It tends to focus on simplify process steps and reducing the need for inventory at each step.
• Continuous Improvement: Probably the most well know continuous improvement is the Japanese KAIZEN, which means improvement. It’s basically a method to maintain and improve a production process by always looking for ways to do tasks better. All levels of the organization work together to make that happen.
• 6 Sigma: Refers to a process and level of quality that a company wishes to strive for. Six sigma refers to the overall outgoing quality of a product and when achieved means that only 3.4 defects per million opportunities are seen by the customer.

Operations and manufacturing are intensely data driven because they are always looking for ways to improve both costs and quality. That’s why most people who work in those areas adhere to the mantra, what is measured, improves. Remember that the next time you wonder what they do over in operations and manufacturing.

THINGS TO DO

1. Ask your VP or Operations or COO how many facilities they manage and where they are. Ask them what’t it like to manage all those sites.
2. Look up a manufacturing procedure. How complex is it? What are the components that it contains? Write two paragraphs on what you learned.
3. Interview one of your companies purchasing professional. Ask them what criteria they use to make decisions. What makes a good vendor as opposed to a bad vendor? Write a paragraph on what you find.
4. Visit your companies manufacturing line. Ask the supervisor to give you a tour of the line and have them explain what they make and how much. Write two paragraphs on what you learned.