Operations

Management Basics
For PGP1 Students

Process

A sequence of interdependent and linked procedures which, at every stage,

consume one or more resources to convert inputs (data, material, parts, etc.)
into outputs. These outputs then serve as inputs for the next stage until a
known goal or end result is reached.

Input

Process

Output

"Process" may refer to the complete production process, such as doing a load of
laundry or making bread from start to finish, or to a segment of the complete
process, such as the wash cycle or the baking process

For any process:

Inputs: labour, material, utilities & capital

Outputs: goods & services

Activities: equipment

Flows: material & information

Storage: RM(Raw Material), WIP(Work-in-process), FG(Finished Goods)

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Types of Process
Single Stage Process

Input

Stage 1

Output

Multi-Stage Process
Input

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Stage 1

Stage 2

Stage 3

Process Flow Diagram

Breaking a process into its discrete components and diagramming
it as a series of small rectangles (processes), arrows (information
and material flows), and inverted triangles (storage of goods) as a
means to map the process and better understand it.

Symbols used in
a PFD

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Process Concepts
Capacity

Cycle Time (CT)

Bottleneck
Idle Time
Manufacturing Lead Time (MLT)
Work-in-Process (WIP)
Buffers
Batch Size
Utilization
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Process Concepts

Capacity: The maximum rate of output of a process, measured in units of output

per unit of time. The unit of time may be of any length, a day, a shift, or a minute.

Cycle Time (CT): Average time between completion of successive units. It is

directly related to the output rate. A process with an output rate of 4 units per hour
has a cycle time of 15 minutes.
Consider an example of laundry operation:

Cycle time for a single washer for one load of clothes is 30 min
for a single load.

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Then, for a large laundry operation with 10 washers, cycle time would be??

Process Concepts
Bottleneck: The production resource that limits the capacity of the overall
process. This is usually the production equipment at the step with the lowest
overall capacity, i.e., the longest cycle time. In some situations, the
bottleneck resources may be labour available at a particular step or steps.

Consider the following example:

In the example above, washing can start only when load has been put in, drier
can start operation only after the load has been washed, and clothes can be
folded only after drying. In the figure above, once our 'line' is full, which
operation will decide (i.e., limit) the speed at which we can do our laundry? The
dryer will, because it will still be drying the first load when the washer finishes its
cycle on the second load. Generally, the step with the longest cycle time will be
the bottleneck.
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Process Concepts

Idle Time: The time when useful work is not being performed. For an example,
Sometimes you only need to do one load of laundry, but because the steps in the
process are dependent, two machines (including you the folder) will be idle part of
the time.

In the diagram shown, for the first 30 minutes,

the drier and folding activity cannot be performed.
For the next 45 min, washer is idle(only 1 load)

and folding cannot be done.

For the last 30 minutes, washer and drier are idle.

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Process Concepts

Work-in-Process: Number of units in the process at any point in time. If the process
includes buffer inventories between steps, they the work-in-process is the total
number of units being worked upon as well as waiting in the inventory between steps.
The units in inventory are usually referred to as Work-in-process inventory, to
distinguish them from raw materials inventory or finished goods inventory.

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In the laundry example, once the 'line' is full,

we would always have a load either in the
washer or waiting to be put into the dryer and
another load in the dryer. We would also
have a load that is being folded, but since
that load doesn't have to wait for anything,
that step will be empty some of the time.
Ignoring the possibility that folding is delayed
by our loading and unloading the machines,
we would expect to have a load of laundry inprocess at the folding step for thirty minutes
(folding time) out of every forty-five (cycle
time of the laundry operation). We would
therefore say that there is two thirds of a load
in that step in describing the WIP of the
operation, or 2 2/3 loads of WIP in total.

Process Concepts

Buffer: Interim storage where Work-in-process can be stored between steps in a

process.
There can be a large number of reasons for having a buffer. In the laundry
example, suppose we don't want the washer to run in the afternoon. We might want
to run it non-stop in the morning to get as many loads finished as possible, but we
would need space to put them in while they waited for the dryer to catch up. In
larger operations, a buffer may be important in order to make sure that the
bottleneck is never starved for inputs. Since the bottleneck sets the pace, loss
of production there may imply lost production for the entire operation.

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Process Concepts

Manufacturing Lead Time (MLT): The amount of time each unit spends in the
manufacturing process (sometimes called Throughput Time). This includes time
spent actively being worked upon at each step of the process as well as any time
spend waiting between steps. The concept of a lead time applies to the total time
spent in any process in which the start and finish are well-defined events. We can
talk about lead times, for example, in service operations, or in the entire order-todelivery process.

In the example shown, the load would spend one cycle (45 minutes) in the washer,
including idle time, another cycle in the dryer (90 minutes total), and then two-thirds
of a cycle being folded (120 minutes). From laundry bag to clean and folded will
take an average of two hours. Note that because folding took place after our
bottleneck (drying), the load didn't have to stay there for a full cycle.

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Process Concepts

There is a simple formula, known as Little's Law, which can help estimate the
Manufacturing Lead Time. Little's Law states that:
Manufacturing Lead Time = Cycle Time * Work-in-Process
This simple rule makes sense if you imagine the path a new set of inputs (like a
load of laundry) must follow in order to pass through the operation. As each unit
of WIP moves forward, the new set of inputs takes its place. Each move occurs
once per cycle, so multiplying cycle time times WIP will give us our total leadtime.
In our laundry example, we had 2 2/3 loads of WIP. Multiplying 2 2/3 times our
cycle time of 45 minutes gives us 120 minutes.

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Other process concepts

Lot Size (also called Batch Size): Number of units of a particular product type that are
produced before beginning production of another product type.

Utilization: Ratio of the input actually used over the amount of the input available. Labour
utilization is the ratio of the actual labour time spent processing to the total amount of labour
time available. Differences between the two can be due to inefficiencies in the process that lead
to lost working time, as well as to imbalances in the cycle times at each step of the process that
lead to idle time of workers at some steps while those at others are working. Capacity utilization
is the ratio of the capacity actually used (i.e., the output of the process) to the total capacity
available.

Blocking: It occurs when the activities in a stage must stop because there is no place to
deposit the item just completed. If there is no room for the load to be kept after washing stage,
the load has to wait before it can move to the drying stage thereby blocking the operation.

Starving: Occurs when the activities in a stage must stop because there is no work. If the
washer is free and there is no new load for it to wash it will have no load to work upon.

Pacing: Refers to the fixed timing of the movement of items through the process.

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Process Performance Metrics

Operation time = Setup time + Run time
Throughput time = Average time for a unit to move through
the system. Also called Lead time

Productivity = Output
Input

Utilization =

Time Activated
Time Available

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Process Performance Metrics

Operation time = Setup time + Run time

Throughput time = Average time for a unit to move through the system. Also called Lead time

Productivity = Output
Input

Utilization =

Time Activated
Time Available

Cycle time = Average time between completion of units

Throughput rate =

1
.
Cycle time

Efficiency =

Actual output

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Standard Output

Scheduling

Scheduling is an important tool for manufacturing and engineering, where it can

have a major impact on the productivity of a process. In manufacturing, the
purpose of scheduling is to minimize the production time and costs, by telling a
production facility when to make, with which staff, and on which equipment.
Production scheduling aims to maximize the efficiency of the operation and reduce
costs. As such, in the decision-making hierarchy, scheduling is usually the final step
in the transformation process before the actual output (e.g., finished goods) is
produced. Consequently, scheduling decisions are made within the constraints
established by these longer-term decisions. Generally, scheduling objectives deals
with tradeoffs among conflicting goals for efficient utilization of labor and
equipment, lead time, inventory levels, and processing times.

Various techniques are applied for scheduling, like FCFS (First come first serve),
Johnsons Rule, Shortest processing time.

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Planning
Setting goals & objectives
Meet demand within the limits
of available resources at the least cost
Determining steps to achieve goals
Hire more workers
Setting start & completion dates

Begin hiring in Jan and finish by Mar.

Assigning responsibility

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Types of Plans
Management Level
High

Operations
Managers
Short-Range
Low Dispatching
Today
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Long-Range
Facility location

Top
Executives

Intermediate-Range
Aggregate plans

3 months

Supervisors
1 year

18 months

5 years

Aggregate Planning
Production quantity & timing of production for
intermediate future
Usually 3 to 18 months into future

Combines (aggregates) production

Expressed in common units
Example: Hours, dollars, equivalents
(e.g., FTE students)
Time to make average product

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Forecast to scheduling
Forecast &
Firm Orders

Material
Requirements
Planning

Aggregate
Production
Planning

Resource
Availability
Work force
Inventory
Subcontractors

Master
Production
Scheduling

No, modify CRP, MRP, or MPS

Capacity
Requirements
Planning
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Realistic?
Yes

Shop
Floor
Schedules

Aggregate to Master
Production Schedule
Aggregate Schedule:
Month
Jan Feb
No. of Chips 600 650

Mar
620

Apr
630

May
640

Master Production Schedule:

Month
Jan Feb
P4 1.5 ghz
300 200
P4 1.7 ghz
300 450

Mar
310
310

Apr
300
330

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May
340
300

Aggregate Scheduling Strategies

Level scheduling strategy
Produce same amount every day
Keep work force level constant
Vary non-work force capacity or demand
Often results in lowest production costs
Month vs. cum. Production

60
50
40
30
20
10
0
0

2
demand

4
Production

Chase strategy
Hire / Fire workers to make production capacity
meet necessary
60
production
50
40
Month vs. cum. Production
30
20
10
0

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2
demand

4
Production

Supply Chain
All facilities, functions, activities, associated with flow and transformation of goods and
services from raw materials to customer, as well as the associated information flows

An integrated group of processes to source, make, and deliver products

Information
Procurement
Source

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Production
Make

Distribution
Deliver

Supply Chain Illustration

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Bullwhip effect
Phenomenon of variability magnification as we move from the
customer to producer ion the supply chain

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Supply chain strategies

Efficient
Supply Chain

High cost efficiency, Non-value added activities

eliminated, economies of scale and
optimization with best capacity utilization

Risk-hedging
supply chain

Pooling and sharing of resources to share risk

in supply disruptions

Responsive
supply chain

Flexible to changing and diverse needs of

customer

Agile Supply
chain

Responsive and flexible to customer needs

while risk of disruptions are hedged by pooling
of inventory and other capacity resources

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Capacity Planning
Horizons of capacity Planning

Long Range >1 year

Intermediate RangeMonthly Plans for 6-18

months

Short Range-Less than

1 month (weekly/ daily
plans)

Buildings, equipment
and facilities

Hiring, layoffs new

tools, minor equipment
,sub contracting

Adjustments to
eliminate variances
between planned and
actual output

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Lean Production
High volume production using minimum inventory of raw materials, WIP and
FG
Nothing will be produced until it is needed. Production need is created by
actual demand for the product

Attacks waste(time ,inventory and scrap)

Exposes problems and bottlenecks . Achieves streamlined production

It assumes stable environment

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Lean concepts
JIT(Just in Time ): Producing or procuring what is needed when
needed and no more. Anything over the minimum amount necessary is
viewed as waste as effort and resource expended on it cannot be
utilized now

Quality at source: Do it right the first time and when something goes
wrong stop the process eg. Andon card

Heijunka- Uniform plant loading: Smoothing the production flow to

dampen the reaction waves that occur as a result of schedule variations

Kanban: Means sign or instruction card. Signaling system to regulate

JIT flows
Number of kanban card,k =

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