Download Simulation Techniques for Operations Management

Erasmus Intensive Programme
“SINTROME 2012”
Simulation Techniques for Operations
Management – An Introduction
Dr. Vasiliki Kazantzi
Assistant Professor, Dept. of Project Management
16-29 September 2012
TEI of Larissa, Greece
Responsible for the Academic Part
of SINTROME:

Dr. Vasiliki Kazantzi
– Educational Background:
» B.Sc. in Chemical Engineering, Aristotle University of Thessaloniki,
» M.Eng. and PhD in Chemical Engineering, Texas A&M University, USA
– Academic Experience:
» Assistant Professor, Department of Project Management, Technological Education
Institute of Larissa, Greece
» Lecturer, Texas A&M University, USA
– Professional Experience:
» Environmental Project Consultant, Project Manager (EU funded R&D projects)
– Tel. +30-2410-684545 Mobile: 6940617693
– e-mail: [email protected]
– Web: http://dde.teilar.gr/main.aspx?category=338&UICulture=el-GR
Simulation Techniques for Operations Management
Outline

Motivation for Studying OM

What is Operations Management (OM) and What Do
Operations Managers Do?

OM activities and challenges

Heritage of OM

OM through Simulation Techniques

What is Simulation?

Advantages and Disadvantages of Simulation
Techniques

Monte Carlo Simulation Technique
Simulation Techniques for Operations Management
The Operations Management is of
High Demand!
The consultancy service market
Financial
6
Marketing/sales
2
Organizational design
11
Operations and process
management
31
Benefits/Actuarial
16
IT strategy
17
Corporate strategy
17
(source: The Economist, 2005)
Simulation Techniques for Operations Management
OM is Management

Management is the process of
•
•
•
•
•
achieving organisational objectives
within a changing environment,
by balancing efficiency, effectiveness and equity,
obtaining the most from limited resources,
and working with and through people
Simulation Techniques for Operations Management
Operations Management
Management
Operations
Principles
Management
which are in fact highly “symbiotic”:
Management
Operations
Principles
Management
Simulation Techniques for Operations Management
Four Common Attributes: 1. ‘Important’

‘Management Principles’:
•
intellectual foundation of management thought and
innovation for more than 100 years

‘Operations’:



design & creation of products and services upon which
we all depend
the only rationale for an organisation existence
(business objectives: reduce costs, increase revenue,
reduce amount of investment, provide innovation)
‘operations function’ is the area where most of the
organisations financial resources are spent
Simulation Techniques for Operations Management
Four Common Attributes: 2. ‘Exciting’

‘Management Principles’:


provides the “Vision”
‘Operations’:

is at the very centre of changes affecting the Business
world
Simulation Techniques for Operations Management
Four Common Attributes: 3. ‘Challenging’

‘Operations’:


creativity is the prime task of Operations Managers: they (have to)
respond to global competition, environmental challenges,
customer pressure etc.
‘Management Principles’:

the essential intellectual underpinning for balancing the ‘3 Es’:
Simulation Techniques for Operations Management
Four Common Attributes: 4. ‘Ubiquitous ’
Oxford Illustrated Dictionary (1962) defines
ubiquity as “omnipresence, being everywhere or
in many places at the same time”

‘Operations’:


Operations processes can be found everywhere
‘Management Principles’:

cover developments in HR management, chaos theory,
game theory, business strategy, change management,
‘ethics’ and so on
Simulation Techniques for Operations Management
What is Operations Management?



Operation function: arrangement of organization
resources to produce products and services
Operations management: set of activities,
decisions and responsibilities that creates value in
the form of goods and services by transforming
inputs into outputs
Operations managers task:
– managing (both effectively and efficiently) resources
comprising operations function
– managing processes transforming “inputs” into “outputs”
» design processes, products and services
» monitor processes
» seeking ways of improvement
Simulation Techniques for Operations Management
All operations are
transformation processes
TRANSFORMED
RESOURCES
ENVIRONMENT
MATERIALS
INFORMATION
CUSTOMERS
INPUT
TRANSFORMATION
PROCESS
GOODS
OUTPUT
AND
SERVICES
FACILITIES
STAFF
TRANSFORMING
RESOURCES
ENVIRONMENT
Simulation Techniques for Operations Management
Look Around You …

Everything you can see around you has been
processed by an operation

Every service you receive (radio station, bus
service, lecture, library etc.) has also been
produced by an operation

Operations Managers are responsible to
manage the creation process of everything you
buy, sit on, wear, eat, throw at people, and
throw away
Simulation Techniques for Operations Management
Back office
operation in
a bank
Kitchen unit
manufacturing
operation
They are all
operations
Retail
operation
Take-out /
restaurant
operation
Simulation Techniques for Operations Management
An Operations Manager could be
called…

“fleet manager”, in a distribution company

“administrative manager”, in a hospital

“store manager”, in a supermarket

and so on .....

.....
Simulation Techniques for Operations Management
The Mind Map of OM
Competitive
global
context
Targets
Measure
Regulate
Control
Plant
Operations
manager’s
decisions
Capacity
Processes
Costs
Models
OM concepts
Theory
Timing
Projects
Scheduling
Information
Inventories
Queues
Distribution
Simulation Techniques for Operations Management
Operations Provide Advantages to
Business




reduce costs of producing products/services by
being efficient
increase revenue by increasing customer
satisfaction through good quality & service
reduce amount of investment by increasing effective
capacity
provide basis for innovation
Simulation Techniques for Operations Management
Why Study OM?




OM is one of three major functions (marketing,
finance, and operations) of any organization
We want (and need) to know how goods and
services are produced
We want to understand what operations
managers do
OM is such a costly part of an organization
Simulation Techniques for Operations Management
Critical Decisions in OM
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Service, product design
Quality management
Process, capacity design
Location
Layout design
Human resources, job design
Supply-chain management
Inventory management
Scheduling
Maintenance
Simulation Techniques for Operations Management
Operations Activities as Feedback Loops
 Design activities set the basic configuration
 Planning & control activities guide short/medium term changes
 Improvement activities guide longer term changes
Design
Planning & Control
Improvement
Simulation Techniques for Operations Management
Broader Scope of OM Activities

How do OM cope with Globalization?

Environmental Protection

Social Responsibility

Technology Awareness
etc.
Simulation Techniques for Operations Management
Where are the OM Jobs ?
Simulation Techniques for Operations Management
The Heritage of OM - 1
Division of labor (Adam Smith 1776 and Charles Babbage 1852)
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/Sorenson/Avery 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian Gilbreth 1922)
Quality control (Shewhart 1924; Deming 1950)
Computer (Atanasoff 1938)
CPM/PERT (DuPont 1957)
23
Simulation Techniques for Operations Management
The Heritage of OM - 2
Material requirements planning (Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization(1992)
Internet (1995)
24
Simulation Techniques for Operations Management
New Challenges in OM
From





Local or national focus
Batch shipments
Lengthy product
development
Standard products
Job specialization
To



Global focus
Just-in-time (pull
systems)
Supply chain partnering

Rapid product
development, alliances

Mass customization
Empowered employees,
teams

Simulation Techniques for Operations Management
Operations Management through
Simulation




Simulation is a considerably powerful, yet simple, tool for
an experiential understanding of any operational system’s
behaviour
Presents complex abstract models of reality in
experientially rich and concrete forms
Simulation training: a ‘learning by doing’ educational
approach
Simulation games: facilitate a better understanding of the
implementation of organizational changes and new
processes, as well as the benefits, difficulties, people
management and information system needs
Simulation Techniques for Operations Management
Simulation


Numerical technique of experimentation
Attempts to duplicate a system
– Features
– Behavior


Requires description of system
Many application areas
– Operations management
– Finance & economics
Simulation Techniques for Operations Management
Simulation

Imitate a real world situation

Study its properties and operating
characteristics

Draw conclusions and make action decisions
Simulation Techniques for Operations Management
The Process of Simulation
Define the
Problem
Introduce
important
variables
Construct
simulation
model
Specify values
of variables to
be tested
Conduct the
simulation
Examine the
results
Select best
course of
action
Simulation Techniques for Operations Management
Some Applications of Simulation
Ambulance location and dispatching
Bus scheduling
Assembly-line balancing
Design of library operations
Parking lot and harbor design
Taxi, truck, and railroad
dispatching
Distribution system design
Production facility scheduling
Scheduling aircraft
Plant layout
Labor-hiring decisions
Capital investments
Personnel scheduling
Production scheduling
Traffic-light timing
Sales forecasting
Voting pattern prediction
Inventory planning and control
Simulation Techniques for Operations Management
Advantages of Simulation







flexible, straightforward
can analyze large, complex real-world
problems for which no closed-form
analytical solutions exists
can include real-world complications
which most other techniques cannot
enables “time compression”
allows “what if” type questions
does not interfere with the real-world
system
allows study of relationships
Simulation Techniques for Operations Management
Disadvantages of Simulation




Can be expensive
and time consuming
Does not yield optimal
solution
Requires good
managerial input
Results not generalizable
to other situations
Simulation Techniques for Operations Management
The Monte Carlo
Simulation Technique
The MC Simulation technique applies in systems
which contain elements that are probabilistic in nature
MC Simulation steps:
 Setup probability distribution for important variables
 Build cumulative distribution for each variable
 Establish interval of random numbers for each
variable
 Generate random numbers
 Simulate a series of trials
Simulation Techniques for Operations Management
Real World Variables Which Are
Probabilistic in Nature

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Inventory demand
Lead time for orders to arrive
Time between machine breakdowns
Times between arrivals at a service facility
Service times
Times to complete project activities
Number of employees absent from work each
day
Simulation Techniques for Operations Management
Simulation and Inventory Analysis
- the Basic Model
demand >
begin inv?
Begin
end inv =
begin-demand
Order
arrived?
Increase
current inv
by qty order
End inv < reorder
point?
random #
for today's
demand
# of
lost sales
End inv = 0
Order placed
& not arrived?
Enough Days
in simulation?
Place
order
Generate
Random lead
time
Compute
averages
Simulation Techniques for Operations Management