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Operations Management

Operations Management

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Published by VIVEK JAISWAL
Some aspects about Operations Management
Some aspects about Operations Management

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Published by: VIVEK JAISWAL on Jun 13, 2013
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  • Primary Topics
  • Evolution
  • The System Approach
  • OM System Definition
  • Operations Strategy at Wal-Mart
  • Criteria of Performance
  • Key Success Factors
  • Strategic Perspectives
  • Strategy Participants
  • Product Design – Mfg
  • Product Design
  • Concurrent Engineering
  • Strategic Process
  • What is a Process?
  • Process Flow Structure
  • Comparison & characteristics
  • Examples
  • Key benefits of job production
  • Continuous Flow Process
  • Continuous Process
  • Continuous Flow
  • Types of Process Flow
  • Types of Process
  • Break-even Analysis
  • Process Chain
  • Process Performance Measure
  • Little’s Law
  • The Process Bottleneck
  • Starvation and Blocking
  • Strategic Service Vision
  • Service Integration
  • Service Designs
  • Waiting Line Management
  • Poisson Distribution
  • Waiting Line Factors
  • Waiting Line Models
  • Basic Approach
  • Culture Change
  • Dimensions of Quality
  • Costs of Quality
  • Gurus of TQM
  • MBNQ Award
  • ISO 9000
  • ISO 9001 Model
  • Quality Control Methods
  • The Zero Error Mind-Set
  • Quality Tools
  • Statistical Quality Control
  • The Inspection Alternatives
  • Quality Control Circles
  • Acceptance Sampling
  • Capacity Management
  • Need for Capacity Planning
  • Type
  • Ways of Enhancing Effective Capacity
  • System Performance Measures
  • Forecasting role in CP
  • Optimal capacity Determination
  • Capacity Planning Concepts
  • Aggregate Planning
  • Aggregate Production Planning
  • Just In Time Logic
  • Production Waste
  • Waste Elimination
  • The What’s of JIT
  • JIT in Service
  • Facilities
  • Facility Planning
  • Plant Location Methods
  • Location Factor Rating System
  • Transportation Model
  • Layout Types
  • Process Layout
  • A Process Layout in Service
  • Fixed Position Layouts
  • Classroom Assignment
  • Job Design Decisions
  • Work Measurement Techniques
  • Managing Supply Chain
  • The Supply Chain
  • Supply Chain Uncertainty
  • Information in the Supply Chain
  • Suppliers
  • Distribution
  • ERP’S Central Database
  • Inventory Control Systems
  • ABC Classification System
  • EOQ Model
  • Basic EOQ Model
  • Production Planning and Scheduling
  • Scheduling
  • Objectives in Scheduling
  • Types of Scheduling
  • Gantt Load Chart
  • Gantt Scheduling Chart
  • Assignment Method
  • Production Control Activities
  • Johnson’s Rule
  • Monitoring
  • Forecast Methods

Operations Management

Primary Topics
• • • • • • • • • Operation Strategy Products and Service Process and Technology Facilities Project Management Managing the Supply Chain Forecasting Demand Production planning and scheduling Ensuring quality

• Industrial Revolution – steam engine, Division of labor, Interchangeable parts • Scientific Management – Time & motion studies • Human Relations- Motivational Theories • Operations Research- LP, Digital computer Simulation, Waiting Line Theory, PERT/CPM • Quality Revolution – JIT, TQM, Strategy • Globalization – BPR, WTO • Internet Revolution – WWW, ERP, SCM, Ecommerce

OM in Changing Business Scenario
• Consumerism is on a steep rise • People all over the world are demanding more and better products • Developments in technology, particularly in the areas of telecommunication, internet, mass media, and transport have made it possible for products and ideas to travel across the globe with minimal efforts.

.OM in Changing Business Scenario • It is obvious that a lot is being demanded of the production and operations mgmt. function • Functions have to assure that required products are of high quality with an acceptable price delivered at customer place • Quality. productivity and delivery are the basic minimum to stay in competition.

OM in Changing Business Scenario
• New products or variants have to be continuously designed, manufactured and delivered – all profitably. • Manufacturing has to be very actively support the marketing functions. • Materials and logistics people have to react swiftly to the needs of the manufacturing system.

OM in Changing Business Scenario
• The HR department has to ensure that employees not only have the needed skills but also the essential attitudes. • It’s not that the quality of all these aspects was not the concern earlier but the intensity of application has increased. • Services are no longer “frills”. No manufacturing company is purely into manufacturing.

OM in Changing Business Scenario
• Shift
Product- centric People-centric

Operations Management
• Operations management is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It is also the management of resources, the distribution of goods and services to customers, and the analysis of queue systems.

Fundamentally. these value-adding creative activities should be aligned with market opportunity for optimal enterprise performance . the set of valueadded activities that transform inputs into many outputs.Operations Management • Operations also refers to the production of goods and services.

Operations Management Planning Criteria • Control by creating and maintaining a positive flow of work by utilizing what resources and facilities are available • Lead by developing and cascading the organizations strategy/mission statement to all staff • Organize resources such as facilities and employees so as to ensure effective production of goods and services .

Operations Management Planning Criteria • Plan by prioritizing customer. Knowledge-Skill-Attitude (KSA). expectations and motivation to fulfill organizational requirements • Performance Measures for the measurement of performance and consideration of efficiency versus effectiveness . employee and organizational requirements • Maintaining and monitoring staffing. levels.

.The System Approach • The functional approach – minimum reference to other parts of the business • The system approach – integrates OM decisions with those of all other business functions. System approach produces better solutions. Think of sports team or an orchestra team. challenge is to make the firm perform as team.

inventory levels. analyzing. on the plan. Thus OM system is every thing that affects process planning. quality standards.OM System Definition • Elements that have impact on the problems. • Planning. or its solution. or the decision. capacity decisions. and production schedules. and improving processes is the essence of OM .

.Operations Strategy • Operation strategy is concerned with setting broad policies and plans for using the resources of the firm to best support the firm’s long term competitive strategy. • An operation strategy involves decisions that relate to the design of a process and the infrastructure needed to support the process. • It must be integrated to corporate strategy.

Operations Strategy • Process design involves: – – – – Selection of appropriate technology Sizing the process over time Role of inventory Locating the process • Infrastructure decisions involve: – Planning and control systems – Quality assurance and control – Work payment structure and orgn. ops function .

prices.Operations Strategy at Wal-Mart Mission Provide Providevalue valuefor forour our customer customer Low Lowprices.everyday everyday Competitive Priorities Operations Strategy Operations Structure Low Lowinventory inventorylevels levels Linked Linkedcommunication communication Between Betweenstores stores Short flow times Fast Fasttransportation transportation system system Enabling Process and Technologies EDI/Satellites EDI/Satellites Cross-docking Cross-docking Focused Focused locations locations .

Operations Priorities • Improved Responsiveness in terms of: – Minimizing time to respond/ timely response – Global sourcing – Flexible processes • Reduced prices through: – Overall improvements in production-delivery value chain – Better designs of products/services .

Operations Priorities • Improved quality through: – – – – Better skills/knowledge/attitudes Improved technology Reduced complexity and confusions Reduced problem-generators • • • • Lean or light production Make-to-order Make-to-stock Assemble-to-order .

Criteria of Performance • Customer satisfaction • Effectiveness – doing right things • Efficiency – doing things right .

Key Success Factors • • • • Product performance Technology leadership New product introduction Access to key decision-makers or key influencers • Delivery service .

Strategic Planning Mission Missionand and Vision Vision Voice Voiceof ofthe the Business Business Corporate Corporate Strategy Strategy Voice Voiceof ofthe the Customer Customer Marketing Marketing Strategy Strategy Operation Operation Strategy Strategy Financial Financial Strategy Strategy .

Strategic Vision Customer Needs New Products Current Products New Product Development Performance Priorities & Requirements dependability Order Fulfillment After sales service Quality Price Speed Flexibility Ops capabilities Supplier capabilities people TQM & D CIM JIT Distribution ology n h c e T System R .

Strategic Perspectives • Strategic thinking (planning) to realize objectives involves teamwork. • Strategy is the comprehensive and overall planning for the organization’s future. . • It has to be product-oriented and marketing aware in order to take the customer and the competition into account.

Strategy Participants Operations Operations Management Management Finance Finance Marketing Marketing Accounting Accounting Strategic Planning Engineering Engineering Distribution Distribution Research Research& & Development Development HR HR Management Management .

Skills Flexibility. Relations Equipment age Employee age Population characteristics Interest/Exchange rates Improved communications Threats New products/markets Opportunities .Strengths Quality Motivation Cost structure Technology. Capacity New competitors Competitors’ plans Weaknesses Mgmt systems Indl.

Operations Management Planning Criteria • • • • • Product design and Process design Process flow structure Process analysis Linear programming Project Management – Work breakdown structure – Gantt chart / CPM / PERT .

product development. • How manufactured product are designed and how the process to produce them is selected? • Three major functions are involved – marketing. mfg. .Product Design – Mfg. • Designing new products and getting them to market quickly is the challenge that manufacturing industry is facing.

Market System Product Development New Product Ideas Advanced Research Technical Concept Manufacturing Needs Marketing Customer market system promotion Product Design Process Plnng. Customer Market System call Production Customer Order Sales .

suppliers Marketing R&D Customers Competitors Product or Service Concept Design Process Idea Generation Feasibility Study Performance Specification Form Design Functional Design Design Specification Pilot run & Final Tests New Product or Service Launch Production Design Mfg. Specifications Final Design/Specifications .

The Service Design Process Service Concept Desired Service Level Target Customers Service Package Benefits Performance Specs Customer Requirements Expectations Service Provider Customer Design Specs Delivery Specs Schedules Locations Deliverables Service .

Product Design • Concurrent Engineering (CE) CE Approach BUYER Product Design MKTG Serial Approach TOOL ROOM PRODN R&D ENGG .

• Teams – program mgmt.Concurrent Engineering • To speed up the development process CE approach is used. team. and many design-build teams . technical team. • This approach emphasizes the cross functional integration and concurrent development of product and its essential processes.

House of Quality 5 Trade off Matrix 3 Design Characteristics 1 Customer Requirements Importance to Customer 4 Relationship Matrix 2 Competitive Assessment 6 Target Values .

House of Quality Door sealers Force on ground Energy to open Energy to close Imp char Tech a cus ortanc cteris Cus tome e to tics t re r Acoustic q Easy to close Stays open on hill Easy to open Doesn’t leak In rain No road noise Importance weighing 7 5 3 3 3 2 10 6 6 9 2 3 Target values Water res Competitive evaluation .

Final Engineering Release Production / Process Engineering Process Market Intro Pilot Production Pilot Production Ramp up Ramp Up .Time Schedule Phase Concept Development Product Planning Concept Program Approval First Full Prototype Design Planning Production Engg.

Strategic Process • Strategic Process Mapping wth o r G g ic e t a Str ss e c Pro Function / sites Time Scale Process Planning Enterprise Planning .

and facilitate the business growth. reinforce product decision. .Process Strategy • An organization’s over all approach for physically producing goods and services. • Process decision (type of process) should reflect how the firm has chosen to compete in the market place.

What is a Process? • A process is a series of activities or steps that add value and are goal-oriented. • The operations or stages within the manufacturing or servicing cycle required to transform components into intermediates or finished products/services .

Process Strategy • • • • Capital intensity Process flexibility Vertical integration Customer involvement .

Process Strategy From Function to Process Manufacturing Purchasing Accounting Product Development Sales Order Fulfillment Supply Chain Management Customer Service process Function .

• The process architecture may be an important component in the firm’s strategy for building a competitive advantage. technology decisions and work methods. .Process Flow Structure • The flow structure of the process used to make or deliver a product or service impacts facility layout. resources.

The Product-Process Matrix High Le Cu ss st lab om o ize r in d ten siv e Le ss Continuous Flow Volume Mass Production Batch Production Projects Low Standardization High .

The Service-Process Matrix High Le ss Le Cu ss st lab om o ize r in d ten siv Service Factory Volume e Mass Service Service Shop Professional Service Low Standardization High .

Comparison & characteristics project Flow Flexibility # Products Capital Investment Variable Cost Labor Content Labor Skill Volume None High High Low High High High Low Job shop Batch process Assy. Line Continuous Flow Cont Low Low High Low Low Low High .

Process Flow Structure • Process classification Job Shop Uses general Purpose resources And highly flexible Flow Shop Uses specialized Resources and Work follows fixed path Process Flow Structure .

very high Labor Content and Skill – very high Volume – one .no flow Flexibility .very High Products .Project • • • • • • • Flow .very low Variable Cost .unique Capital Investment .

• Inputs are brought to the project location as they are needed; there is no flow in the process. Technically a project is not a process flow structure since there is no flow of product – the quantity produced usually is equal to one. It is worthwhile, however, to treat it as a process structure here since it represents one extreme of the spectrum.

Job Shop
• • • • • • • Flow - jumbled flow Flexibility - High Products - many Capital Investment - low Variable Cost - high Labor Content and Skill – high Volume – low

Job Shop
• A job shop is a flexible operation that has several activities through which work can pass, it is not necessary for all activities to be performed on all products and their sequence may be different for different products e.g. machine shop. • A job shop uses general purpose equipment and relies on knowledge of workers to produce a wide variety of products. A job shop often sells its capabilities, not products.

• Designing and implementing an advertising campaign • Auditing the accounts of a large public limited company • Building a new factory • Installing machinery in a factory

especially when compared to mass production • workers can be easily motivated due to the skilled nature of the work they are performing • Disadvantages include: • higher cost of production • requires the use of specialist labour (compare with the repetitive. low-skilled jobs in mass production) • slow compared to other methods (batch production and mass production) .Key benefits of job production • work is generally of a high quality • a high level of customization is possible to meet the customer's exact requirements • significant flexibility is possible.

several • Capital Investment . with some dominant flow • Flexibility .Batch Process • Flow – disconnected.moderate • Variable Cost .moderate • Labor Content and Skill – moderate • Volume – moderate .moderate • Products .

Products are produced in batches for example.Batch Process • A batch process is similar to job shop. are disconnected from one other. • The disadvantage is the set up time required to change from one product to the other. The activities though in line. to fulfill a specific customer orders. except that the sequence of activities tends to be in a line and less flexible. dominant flows can be identified. • Different production runs for different products. In a batch process. .

connected line Flexibility .Assembly Line Process • • • • • • • Flow .low Products – a few Capital Investment .high Variable Cost .low Labor Content and Skill – low Volume – high .

E.g. an assembly line process work in fixed sequence. automobile plant. for example. with a conveyor belt. . However the assembly line connects the activities and paces them.Assembly Line Process • Like a batch process.

Continuous Flow Process • • • • • • Flow .low Products .continuous Flexibility .one Capital Investment – very high Variable Cost – very low Labor Content and Skill – low but with overseers • Volume – very high .

Since most of the operations performed involve the assembling of components. . this arrangement is known as an assembly line.Continuous Process • The high volume of mass production system allows the production system to be arranged in a line according to the processing requirements of a product.

the product is processed in a continuous flow. . Low skilled workers but with highly skilled supervision.Continuous Flow • Like the assembly line. a continuous process has a fixed pace and fixed sequence of activities. its quantity tends to be measured in weight or volume. Rather than being processed in discrete steps.

Types of Process Flow • Synthetic processes – a process in which a variety of components come together. ultimately to form a single product Part A Part B Part C Part D Part E Part F Part H An Assembly Flow Chart (many to one) Paint XY Assy Z Paint Z Assy Clean Inspect Assy Y Assy XY Assy X Sequence of operations .

It is the reverse of synthetic process as it breaks up one thing into many things. .Types of Process • Analytic Processes – an analytic process is characterized by progressive disassembly.

Everyone in the company looks to OM at this time.Productivity Measurement • Productivity = Outputs Inputs Or Goods and services produced All resources used When a company is competing on price. it means that it will lose sales if a competitor offers a lower price that it can match. .

Productivity Measurement • Sales perceives productivity as: Productivity = effectiveness efficiency = high customer sales volume low producer expenses Productivity is a system measure .

.Process Selection • The choice of process may depend on the firm’s marketing plans and business strategy for developing a competitive advantage. Early in a product’s life cycle. • The process choice may depend on PLC. a job shop may be most appropriate structure to rapidly fill the early demand and adjust to changes in demand.

New product or service Share of market Maturity Decay Termination of distribution Introduction maintenance Restaging Withdrawal of Marketing support Time .

• A break-even chart relates costs to levels of demand in various processes and the selection is made based on anticipated demand. • BE-analysis examines the cost trade offs associated with demand volume.Process Selection • A break-even analysis may be performed to assist in process selection. .

Process Selection • Break Analysis – quantitative technique • Components: – Volume – number of units made and sold – Cost – fixed and variable – Revenue – price time volume – Profit .

Break-even Analysis Value Total cost To t al re ve nu e Units Break-even point .

energy. equipment Output Transformation Physical product or Service .Process Analysis • Process improvement Input Material. labor.

I/P Stage 1 Stage 2 Stage 3 Stage 4 Stage n O/P . and the relevant metrics.Process Chain • The first step to improving a process is to analyze it in order to understand the activities. their relationship.

Process Analysis • The process analysis involves: – Define the boundaries that mark the entry points of process input and exit points of the output – Construct a process flow diagram that illustrates the various process activities and their interrelationship. calculate other measures if interest. – Determine the capacity of each step in the process. .

the step having the lowest capacity. • Use the analysis to make operating decisions and to improve the decision. . that is.Process Analysis • Identify the bottleneck. • Evaluate further limitations in order to quantify the impact of the bottleneck.

Process Flow Design • Seven points to be considered: 1. Customers prefer to chose products that maximizes value . Product cost and productivity 5. ergo to process features 3. Product quality is a direct function of process flow design 4. Customers are usually very sensitive to delivery lead times. Alternative process flow designs 2.

7. Customer satisfaction through process based quality and reduced costs. . Achieving best in class value includes satisfactory delivery and service excellence.Process Flow Design 6.

Direct labor content. Direct labor utilization. quality. Flow time. and speed. Set-up time.Process Performance Measure • Operations managers are interested in process aspects such as cost. . process time. Capacity utilization. Throughput rate. Some of the process performance that communicate these aspects are: • Process capacity. Cycle time. flexibility. Idle time. Work in process.

Inventory = Throughput rate x Flow rate Since the throughput is rate 1 per cycle time above can be written as Flow Time = W.P. Inventory x Cycle Time .P.I.I.Little’s Law • The inventory is related to throughput rate and through time by the following equation: W.

The Process Bottleneck • The process capacity is determined by slowest series task in the process i. but also provides the opportunity to increase the capacity. having the slowest throughput rate or longer cycle time.e. . • Identification of bottleneck is critical aspect of process analysis since it not only determines the process capacity.

Starvation and Blocking .

quality.I. and speed are commonly sought. The following processes can be improved: – Reduce W.Process Improvement • Improvements in cost.P. inventory – reduce lead time – Additional resource – Improve the efficiency of the bottleneck activity – increase capacity – Move work away from bottleneck area – Increase availability of bottleneck resources . flexibility.

.Process Improvement – Minimizing non-value adding activities – Redesign the product for better manufacturability – Outsourcing A cost-benefit analysis must be done to determine if a process change is worth the investment.

Services • The nature of services – Everyone is an expert on services – Services are idiosyncratic – Quality of work is not quality service – Most services contain mix of tangibles and intangible attributes that constitute a service pack. – High-contact services are experienced whereas goods are consumed .Product Design and Process Selection .

– Facilities-based – car service station – Field-based – cleaning and home repair services • Internal services – support functions within the organization . consultancy etc. airlines.Service Business and Internal Services • Service business . hospitals. law firms.Banks.

A Contemporary view of Service Management The Service Triangle The Service strategy The Customer The systems The people .

& facility by which the service is created .Strategic Service Vision • Designing a service organization involves four elements: – Target customer – Who? – Service concept – How do we differentiate our service in the market? – Service strategy – what is our service package and the operating focus of our service? – Service delivery system – actual processes. staff.

Service Integration • Integrating marketing and operations to achieve competitive advantage Service Marketing Promise Marketing Operations Service Delivery Sys Execution Of Promise Monitor & Control Customer Experience Recovery plan Customer Expectation customer perception Service Oblivion Service Advantage Service measurement & recovery process .

Service-System Design Matrix Degree of customer/server contact Buffered Core Permeable (some) Reactive System (much) (None) High Sales Opportunity Low Face to face Customization Face to face Loose specs Phone Contact Face to Face Production Efficiency Mail contact Low On-line Tech l High .

customer takes a greater role in the production of service • The personal attention approach – hotel.Service Designs • The production line approach – the bhailpuri or chat • The self service approach . departmental store • Service guarantees – design drivers .

.Waiting Line Management • Understanding waiting lines or queues and learning how to manage them is one of the most important areas in operation management.

Service Capacity versus Waiting Line Trade-off Aggressive Cost Minimum Cost of Service Capacity Waiting line cost Optimal Capacity Service Facility Capacity Cost .

Queuing System • Three major components: – The source population and the way objects arrive at the system – The servicing system – The condition of the object at the exiting the system (back to the source population or not) .

Queuing System Servicing System servers Waiting Line exit .

Customer Arrival • Finite population – a finite population refers to the limited-size customer pool that will use the service and. from a line. . • Infinite population – is one large enough in relation to the service system so that the population size caused by subtractions or additions to the population does not significantly affect the system probability. at times.

we need to define the manner in which customers or the waiting units are arranged for the service. • Arrival rate – Constant arrival distribution – Variable (random) distribution .Customer Arrival • Distribution of arrivals – when describing a waiting system.

a plot of the inter-arrival times yields an exponential distribution. f (t) t .Exponential Distribution • When arrivals at a service facility occur in a purely random fashion.

An exponential distribution arises naturally when modeling the time between independent events that happen at a constant average rate. .Exponential Distribution • In probability theory and statistics. the exponential distributions are a class of continuous probability distribution.

Poisson Distribution • When one is interested in the number of arrivals during some time period T the distribution is referred as Poisson distribution • The Poisson process is a continuous-time process which is used for modeling random events in time that occur to a large extent independently of one another. .

infinite potential • Number of lines – single.Waiting Line Factors • Length – limited capacity. SCMP. MCMP • Exit – low probability of re-service. etc. emergency first. multiple • Queue discipline – FCFS. return to source population . reservation first. • Service time distribution – service rate • Line structures – SCSP. Shortest processes time. MCSP.

Waiting Line Models • • • • Customers in line Equipment selection Determining the number of servers Finite population source .

Total Quality Management .

Total Quality Management • Everyone in the company contributes to the quality of the product and service. • It applies to every aspect of manufacturing and service • Quality goals are determined by the voice of the customer • Quality leverages sustained competitive advantage .

Total Quality Management
• TQM is “managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.” • TQM integrates fundamental management techniques, existing improvements efforts, and technical tools under a disciplined approach.

Basic Approach
• A committed and involved management • Focus on internal and external customers • Effective involvement and utilization of entire work force • Continuous improvement • Treating suppliers as partners • Establish performance measures

Culture Change
• New and Old Culture Product oriented Short term Detection Operations Quality control Managers Price Plan, assign Control & enforce customer oriented long term prevention systems everyone teams life cycle costs, partnership Delegate, coach, facilitate, and mentor

Dimensions of Quality
• • • • • • • • Performance Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality

Costs of Quality • The cost of prevention • The cost of appraisal (inspection) • The cost of failure – Life time value (LTV) of a customer – Product callbacks Total cost costs Cost of failure Cost of inspection % defective produced Cost of prevention .

Gurus of TQM • • • • • • Shewhart Deming Juran Ishikawa Crosby Taguchi .

Deming Philosophy • Create and publish the aims and purposes of the organization • Learn the new philosophy • Understand the purpose of inspection • Stop awarding business based on price alone • Improve constantly and forever the system • Institute training • Teach and institute leadership .

Deming Philosophy • Drive out fear. create trust. groups • Eliminate exhortations for the work force • Eliminate numerical quotas for the W/F • Eliminate management by objectives • Remove barriers that rob people of pride • Encourage education and self-improvement • Take actions to accomplish the transformation . and create a climate for innovation • Optimize the efforts of teams.

MBNQ Award A System Perspective Organizational Profile Strategic Planning Leadership Customer & Market Focus HR Focus Business Results Process Management Measurement Analysis and Knowledge Mgmt .

Continuous improvement is a key focus.ISO 9000 • The organization. provides certification of conformance to quality standards. • Why is ISO 9001 important to customers? – Customer satisfaction is the primary objective of the ISO 9001 quality system. . ISO.

ISO 9001 Model Management Review Resource Mgmt Measurements customer Product Realization input ISO 9001:2000 output Customer QMS .

Quality Control Methods • The Deming Quality Cycle P A D C .

The Zero Error Mind-Set • The most important goals for process analysis are higher quality. . and lower costs. improved productivity. • All this can be done only when we have a clear concept of Zero Defect approach • Do it right the first time is the motto of the approach • Go for “no defect” policy and when it fails switch to “learn from mistakes” policy.

Quality Tools • • • • • • • Data check sheets Bar charts Histograms Pareto analysis Cause and effect charts Statistical quality control (SQC) charts Run charts .

Statistical Quality Control • Quality is classified into two classes: – Classification by Attributes – Classification by Variables • Control charts for attributes – the number of Defects per Part • Control chart for variables – X Bar Charts – R Bar Chart .

• Many organizations now champion the practice of “inspect your own work”. • Sampling inspection is a logical alternative in destructive testing. .e.The Inspection Alternatives • 100% inspection or sampling? • An economic reason to shun 100% inspection is that it is often labor intensive i. Costs of inspection may be higher than the sampling the output.

Quality Control Circles Problem Identification Review & Follow-up Implement-ation Problem Selection Problem Analysis Generate Alternatives Present Solution Prepare plan Of Action Select best Solution .

Acceptance number (c). items defective (k) .Acceptance Sampling • Acceptance sampling is the process of using samples at both the inputs and outputs of the traditional input-output model • It has to be done in conjunction with statistical quality control • Basic elements in acceptance sampling: – Lot size (N). sample size (n).



• Capacity planning is a long-term decision. . • Ratio of actual standard hours to maximum standard hour can be calculated on daily basis to know the capacity trend.Capacity Management • Operations managers need to look at both resource input and product output in terms of planning and execution. • Capacity planning itself has different meaning to individuals at different levels within the operation management hierarchy.

provisioning of organizational resources and services by matching them to business demands. 06/13/13 operations Management .Capacity Planning • Capacity planning is an important part of infrastructure and deployment planning A capacity plan supports the goal of optimum. It helps identify and reduce inefficiencies associated with either under-utilized resources or unmet customer demand and to provide satisfactory service levels in a cost-efficient manner. and cost effective.

that components will perform as efficiently as possible. 06/13/13 operations Management .Capacity Planning • The plan helps ensure that all infrastructure components are capable of performing all required functions. and accommodate reasonable growth without being overly wasteful.

Need for Capacity Planning Optimal capacity of the facility Satisfy the future needs Need for Capacity Planning Initial investment low Investment can not be reversed .

Type • Designed capacity – Represents maximum rate of output that can be achieved ideal condition • Effective capacity – Represents max rate of output which can be achieved under the process constraints • Actual capacity – Represents max rate of output under operational constraints 06/13/13 operations Management .

less employees turnover . and internal working environment • Uniform and standardizing products • Good coordination across internal and external entities • Good training. high motivation. location.Ways of Enhancing Effective Capacity • Better quality controls leading to low wastage • Proper facility. layout.

System Performance Measures • Efficiency – Actual output / Effective capacity • Capacity Utilization – Actual output/Design capacity .

Forecasting role in CP • General trends in demand forecast: – Growth – Decline – Cyclic – Stable .

Optimal capacity Determination Average cost per unit Output rate Optimal output rate .

06/13/13 operations Management .

Capacity Management .

Capacity Planning Concepts • Best operating level – capacity for which the process was designed and thus is the volume of output at which average unit cost is minimum • Capacity utilization rate • Economies of scale • The experience curve .

Determining Capacity Requirements • Steps followed: – Forecast techniques – Calculate equipment and labor requirements – Project labor and equipment availabilities – Capacity cushion • Planning service capacity – Time – Location .

MD>MSC UNDERCAPACITY Time period . back ordered.Supply and Demand Relationships with Capacity Market demand and units made MD<MSC Extra Capacity Max Supply Capacity Out of stock.

Aggregate Planning .

Aggregate Production Planning • Objectives: – To establish a company wide game plan for allocating resources and – To develop an economic strategy for meeting demand .

Aggregate Production Planning outputs Inputs Size of Workforce Demand Forecast Capacity Constraint Strategic Objectives Company Policies Financial Constraints Aggregate Production Planning Production per Month Inventory Levels Job Outsourced Backordered or Lost .

work in process. • Logic – nothing will be produced until it is needed. and finished goods.Just In Time Logic • An integrated set of activities designed to achieve high volume production using minimal inventories of raw materials. .

Production Waste • Seven prominent types of waste: – Waste from overproduction – Waste of waiting time – Transportation waste – Inventory waste – Processing waste – Waste of motion – Waste from product defects .

Waste Elimination • • • • • • • Focused factory networks Group technology Quality at source – do it right the first time JIT production Uniform plant loading Kanban production control system Minimized set up time .

The What’s of JIT What it is Management Philosophy “Pull” System through the plant What it does Attacks waste (time. inventory. scrap) Exposes problems and Bottlenecks Achieves streamlined production JIT What it requires Employee participation Industrial engineering Continuing improvement Total Quality Control Small lot size What it assumes Stable environment .

How to Accomplish JIT Production Design Flow Process Improve Product Design TQC Reduce Inventory Concurrently solve Problems •Root cause •Solve permanently •Team approach •Measure performance Stabilize Schedule Work with Vendors Kanban pull .

Relationship Between JIT & Quality Heightened awareness Of defect causation Fast feedback on defects Less internal wastage Fast feedback on defects Scrap/quality control Smoother output rates Reduced buffer inventories Less material and labor inputs for the same or higher output= higher productivity .

JIT in Service • • • • • • • • Organize problem solving groups Upgrade housekeeping Upgrade process capabilities Clarify process flows Revise equipment and process technologies Level the facility load Eliminate unnecessary activities Develop supplier networks .

Facilities .

Facility Planning • Main components: – Location of facility – where geographically? To rent it or buy it? – Structure and specific site selection – kind of facility? – Equipment choice – kind of process technology? – Layout of the facility – machines and people to be placed? .

Facility Location • Issues in facility location – Proximity to customers – Business climate – Total costs – Infrastructure – Quality of labor – Suppliers – Other facilities .

Facility Location • Issues: – Free trade zones – Political risk – Government barriers – Trading blocs – Environment regulation – Host community – Competitive advantage .

Plant Location Methods • • • • Factor-Rating System Linear programming Center-of-gravity technique Transportation model .

Location Factor Rating System • In this system. factors that are important in the location decision are identified. . • Each factor is weighted from 1 to 100 to prioritize the factor and reflect its importance.

shipping costs Factory to customers – shipping costs Obtaining total transport costs Optimal (minimum cost) solution .Transportation Model • • • • Suppliers to factory .

. cycle time. workstations. • Effective layouts minimize material costs.Facility Layout • Facility layout is the arrangement of areas within a facility • It refers to the arrangements of machines. and common areas within an existing or proposed facility. aisles. visual control. departments. efficient space utilization. mfg. eliminate bottlenecks. storage areas.

Facility Layout • Layout decisions entail determining the placement of departments. workstations. machines. • The objectives is to arrange these elements in a way that ensures a smooth work flow. . and stock-holding points within a production facility. workgroups within the departments.

Layout Types • • • • • Job shop process layout Product-oriented layout Cellular layout Group technology layout Combination of product and process orientation .

. all drills would be in one place.Process Layout • Also known as functional layouts • Group similar activities together according to the process they perform e.g. lathes in another place etc. machine shop.

A Process Layout in Service Women’s Lingerie Women’s Dresses Women’s Sportswear shoes House wares Cosmetics and Jewelry Entry and Display area Children’s Department Men’s Department .

D D D D D D P P A A A D D G G G G Receiving & Shipping Equipment in a process layout is general purpose.A Process Layout in Manufacturing Lathe Deptt. Advantage of this layout is flexibility. M M M M Drilling Deptt. L L L L L L L L L L G G Milling Deptt. and the workers are skilled at operating the equipment in their particular department. .

Product Layout • Product layouts arrange activities in a line according to the sequence of operations for a particular product or service. • Also known as “Assembly lines” • Each product has its own “line” specifically designed to meet the requirements. . • The flow of work is orderly and efficient moving from one workstation to another till a finished product comes off at the end.

Product Layout IN OUT A major concern in a product layout is balancing the assembly line so that no one work station becomes a bottleneck and holds up the flow of work. .

Product Layout 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Description Type of process Product Demand Volume Equipment Workers Inventory Storage space Material handling Aisle Scheduling Lay out decision Advantage Sequential arrangement of activities Continuous. production. job shop. high finished goods Small Fixed path Narrow Part of balancing Line balancing Efficiency Process Layout Functional grouping of activities Intermittent. mainly fabrication Varied. made to stock Stable High Special purpose Limited skills Low in-process. batch production. low finished goods Large Variable path Wide Dynamic Machine Location Flexibility . mass. main assembly Standardized. made to order fluctuating Low General purpose Varied Skill High in-process.

Ships.g. and other resources are brought to the production site. and aircraft. or heavy to move. . materials. • In this layout product remains stationary for the entire manufacturing cycle.Fixed Position Layouts • Fixed position layouts are typical of projects in which the product produced is too fragile. E. houses. bulky. workers. • Equipment.

• Estimates of product or service in demand • Processing requirements in terms of number of operations and amount of flow between the elements in the layout. • Space requirements for the elements Cont…… .Inputs to the Layout Decisions • The amount of space required. and the distance must be traveled between elements in the layout.

and those that do not interact should be located farther away.Inputs to the Layout Decisions • The department that incur the interdependent movement should be located close to each other. • Techniques used are: – Block diagramming – Relationship diagramming .

How do their layouts differ? Which appears to be most efficient? Why? . and Domino to observe their facility layout. Which layout characteristics help the learning process and which ones hinder it? How does layout affect the manner in which the class is taught? • Visit a local McDonald’s.Classroom Assignment • Look around your classroom. Pizza Hut.

as well as to set reasonable standards for performing it. • Work measurement methods are used to determine the most efficient means of performing a given task. .Job Design and Work Management • The operations manager uses job techniques to structure the work so that it will be conducive to both the physical and behavioral needs of the human worker.

Job Design Decisions • It is a function of specifying the work activities of an individual or group in an organizational setting. • Its objective is to develop job structure that meet the requirements of the organization and its technology and that satisfy the jobholder’s personal and individual requirements. .

& Morale of worker Who Mental & physical Characteristics Of the work How Method of Performance and Motivation Ultimate Job Structure . Location of Work areas When Time of day. Time of occurrence In the work flow Why Organizational Rationale for job.Job Design Decisions What Tasks (s) to be performed Where Geographical Locale of Orgn. Objectives.

Employee Involvement & Team approach Information & Computing Networking Extensive use of temporary workers Cross training To perform Multi-skilled jobs Decision Influential Automation of Heavy manual work QC as part of Worker’s job Organizational Commitment to Environment & culture .

Behavioral Considerations in Job Design • Degree of labor specialization • Job Enrichment – horizontal & vertical • Socio technical systems – focus on interaction with technology and work group .

Physical Considerations in Job Design • Work physiology – rest period • Ergonomics – work space • Work methods – work charts – A production process – Worker at a fixed workplace – Worker interacting with equipment – Workers interacting with other workers • Work measurement and standards .

Work Measurement Techniques • Time study • Videography .


cooperation. .Managing Supply Chain • Supply Chain Management (SCM) focuses on managing the flow of goods and services and information through the supply chain in order to attain the level of synchronization that will make it more responsive to customer needs while lowering total costs. & communication plus timing among chain members in order to be effective. • Synchronization requires close coordination.

delivery.The Supply Chain Information Suppliers Producers Distributors Customers Total Materials Products Finished Products Package Products Satisfaction Parts services Products & services And Delivery services With quality. services And service Cash . Subassemblies services Price.

Supply Chain Uncertainty • • • • • • • Demand forecasting Lead times Parts Batch ordering Price fluctuation Inflated orders Distorted communication – Bullwhip effect .

Information in the Supply Chain • Information links all aspects of the supply chain • It plays the role of “enablers” • E-business • Electronic Data Interchange • Bar codes • The internet .

• On-demand • Continuous replenishment • Sourcing .Suppliers • Supply chain begins with supply at the farthest upstream point in the supply chain inevitably from raw materials.

what it accomplishes. is referred as order fulfillment • Distribution centers and warehousing • Warehouse management systems • VMI • Collaborative Distribution .Distribution • The downstream portion of supply chain normally referred as logistics • The focus of distribution.

a software that organize and manages a company’s business by sharing information across functional areas. and assemble-to-order environment. . • ERP Modules • MRP – Inventory control and production planning system. job shop production.Supply Chain Management Software • ERP. Useful for dependent and discrete demand items. complex products.

ERP’S Central Database FI SALES & MARKETING ERP Data Repository Production & MM Human Resourcing .

Material Requirement Planning Master Production Schedule Product Structure file Material Requirement Planning Item Master File Planned Order releases Work Orders Purchase Orders Rescheduling Notices .

Capacity Requiring Planning MRP planned Order release Routing File Capacity Requirement Planning Open orders file Load profile For each Process .

• The high cost of inventory has motivated companies to focus on efficient supply chain management and quality management.Inventory Management • Inventory is a stock of items kept to meet demand • The objective of inventory management has been to keep enough inventory to meet customer demand and also be cost effective. .

in process products. machinery.Inventory Management • Inventory can be significantly reduced by reducing uncertainty. • Thus inventory is an insurance against uncertainty. working capital . labor. tools. and equipment. Purchased parts and supplies. components. • Inventory includes: Raw Materials.

Inventory  Inventory Built Up Additional Stock Buffer Stock Safety Stock Emergency Stock Required Stock Hedge against a stockout .

. • Inventory exists to meet customer demand • Demand can be either dependent of independent • Dependent demand items are typically component parts or materials used in the process of producing a final product.Inventory • The starting point for the management of inventory is customer demand.

Inventory • Inventory costs – Carrying costs – cost of holding items in inventory – Ordering costs – cost of replenishing inventory – Shortage costs – stock out costs .

Bank cheque book Inventory Control System Periodic Inventory System At the end of a Defined period Results into over stocking .Inventory Control Systems • A continuous (or fixed-order-quantity) system – same constant amount • Periodic (or fixed-time-period) system – variable amount after specific intervals Continuous or Perpetual system ROL ROQ EOQ Continuous monitoring e.g.

ABC Classification System • An ABC system is an inventory classification system in which a small percentage of items account for most of the inventory value. • In ABC analysis each class of inventory requires different levels of inventory control – higher the value of the inventory tighter the control .

• The basic model is a formula for determining the optimal order size that minimizes the sum of carrying costs and ordering costs. • Qopt = √2CoxD÷ Cc • TC = (CcxD÷Qopt )+CcxQopt÷2 .EOQ Model • The purpose of the EOQ model is to determine the optimal order size that minimizes total inventory costs.

d an m De Q Inventory Level R Order Lead time Order receipt Paced te Ra ROL Time .Basic EOQ Model Order Qty.

The EOQ Cost Model Total Cost Minimum Cost Minimum Total Cost Carrying Cost Ordering cost Optimal Order Order Quantity .

Production Planning and Scheduling .

• Scheduling drives the workflow which results into cash flow. .Scheduling • Scheduling specifies when labor. • This function differs considerably based on the type of operation. equipment and facilities are needed to produce a product or provide a service. • It is the last stage of planning before production takes place.

Objectives in Scheduling • Possible objectives in creating a schedule: – Meeting customer due dates – Minimizing job delays – Minimizing response time – Minimizing completion time – Minimizing time in the system – Minimizing overtime – Maximizing machine or labor utilization – Minimizing idle time .

Strategic Implications of Short Term Scheduling • By using scheduling. which. in turn. lowers cost • This added capacity and related flexibility provides faster delivery and therefore better customer service • Good scheduling is a competitive advantage leading to dependable delivery . companies use assets more effectively and create greater capacity per Re invested.

Types of Scheduling • Forward Scheduling Backward Scheduling B E B E Today Due Date Due Date .

Gantt Load Chart Work Center Sheet Metal Mechanical Electrical Painting Job B Job E Job E Mon Job A Job D Tue Wed Job F Job D Job G Job F Thu Job F Fri Job F Job G .

Gantt Scheduling Chart Day Job Mon Tue Wed Thu Fri Job A Job B Job C Sat repair .

time etc. – Constraints • One job per resource (machine) • One resource per job .Assignment Method • Assigns tasks or jobs to resources • Type of linear programming model – Objectives • Minimize total cost.

Production Control Activities • Loading – checking the availability of material. • Monitoring – maintaining progress reports on each job until it is completed. • Sequencing – releasing work orders to the shop and issuing dispatch lists for individual machines. machines. . and labor.

. • CRP generates a load profile for each machine center. • Each worker is assigned with the task that he or she can perform the best and each job to the machine that can process it most efficiently.Loading • Loading is the process of assigning work to limited resources.

Loading • The routing file used by CRP lists the machine that can perform the job most efficiently. assignment method of Linear Programming is used. . • In order to resolve the overload constraints. • Linear programming develops an “opportunity cost matrix” for assigning particular jobs to particular machine. if any.

the operator would probably process the job that arrived first. • If jobs are stacked on arrival to a machine. • If no particular order is specified. first served (FCFS). it might be easier to process the job that arrived last and is now on top of the stack (LCFS) .Sequencing • Sequencing prioritizes jobs that have been assigned to a source. This default sequence is called first-come.

(SETUP) sequencing • Minimum slack (SLACK) • Smallest critical ratio (CR) . (DDATE) and (CUSTPR) sequencing.Sequencing • Another common approach is to process the job that has the highest customer priority. • Take the job that is being similar to the one in process as of then.

.Sequencing • Sequencing jobs through one process • Sequencing jobs through two serial processes – Johnson’s Rule • Sequencing jobs through any number of processes in any order – jobs follow routes through a facility that consists of many different machine centers or departments.

– Apply above two steps to the remaining jobs. the job is scheduled first. – Once a job is scheduled.Johnson’s Rule • Scheduling n jobs on two machines: – All jobs are to be listed. If the shortest time lies with the first machine. if with the second machine. and the time each requires on a machine shown – Select the job with the shortest activity time. the job is scheduled last. eliminate it. .

– Gantt charts and – Input/output control .Monitoring • Through – job card.

• Planning decisions such as scheduling. production. • A forecast of product demand is the basis for most important planning decisions. distribution. facility layout and design. inventory. • Companies attempt to predict how much of their product will be sold in the future.Forecasting • A forecasting is a prediction of what will occur in future. workforce. purchasing .

Forecasting • Forecasting is an uncertain process. • Customers are more demanding and have larger product choice • Product diversity and designer products makes it more difficult. • Market changes are much more rapid as of now. .

opinions. past experience.Forecast Methods • Qualitative forecast – based on judgements. • Quantitative forecasting – based on mathematical formulas. or best guesses. .

Forecast Components • Time frame – Short-to mid-range forecast – Long range forecast • Demand behavior – Trend – Random variations – Cycle – up and down – Seasonal pattern .

Forecast Components • Forecasting methods – Time series – statistical techniques – Regression – Qualitative • Forecasting process.steps .

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