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TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 1

Topic Introduction to
Operations and
1 Productivity
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. define operations management;
2. understand the operations system;
3. understand the objectives of operations
management;
4. understand the strategic decisions of operations
management;
5. establish knowledge about characteristic of
services and goods;

1.0 Define Operations Management


1.1 Introduction

The word operationshad been widely used in armed forces in those days which denote carrying
out special mission in a war or battle to fight against enemy. In winning the wars the generals,
senior staff officers and war strategists would take charge to plan, organise and mobilise strategies
to defeat the enemies. They would introduce various tactical strategies and plans, requirement of
assets and military personnel to prevail in the war.

After the wars the concept of operations which had been used in military strategy has been
adapted and used extensively in process and production activities. The words operations now
bring about the meaning as a process of transforming resources into value-added goods and
services.

1.2 Operations System

Operations system in a way is a SYSTEM, where all the main functions to create goods and
services. A system is a set of interacting or interdependent components forming integrated whole.
It is an organized complex of interdependent component or subsystems designed to achieve some
common objective.

Some systems share common characteristics such as directly or indirectly or directly related to
each other and the systems has its own function or purpose. There are FOUR important
components of an operation systems such as Input,Transformations Process, Output and
Feedback. It can be illustrated as Figure 1.1
2 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

Inputs Transformation Outputs


Raw Material Process Good
Financial Support Assembling Services
Human Resources Painting
Equipment Testing or
Information Checking

Feedback
Figure 1.1 : A basic operating system

These four components as follows

1. Input
Input or resources are the basic material needed of producing goods and services
and in this context we emphasis more on services. Examples of inputs are human
resources, financial support, equipment and information
2. Transformation process
Refers to the activities related to the conversion of inputs into outputs which
involve operating startegies
3. Output
Final result obtained after the transformation process
4. Feedback
The transformation process is influenced by the environment that responds to the
organization. Therefore organizations need to be alert to the environment, in order
to control the transformation process. Feedback will acts as a control mechanism,
measuring the actual performance against the planned and expected performance.

Examples in the Table 1.1 is to explain the tangible and intangible for operations system

Organization Inputs Transformation Outputs Feedback


Process
Hospital
Patients Consulting Cured Suggestions

Doctors X-rays patients Complaints

Medical Blood tests Loyalty
equipment
Cleaning Cleaners Negotiating Cleaned area Suggestions
Services Managers Mopping Complaints
Cleaning Brushing Loyalty
equipment
Construction Staff Negotiating Building Suggestions
Company Client Construction Complaints
Sub- Payment Loyalty
contractors
Equipment
Table 1.1 : Operations system for tangible and intangible products
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 3

1.3 Operations Management Objectives

In every organization, operation management is very important and crucial because to ensure
smooth production of service or production. These objectives can be summarized in Figure 1.2

1. Achieving customers satisfaction

The ensure the customers satisfaction by providing them with what do they expect
or want from the product or service can utilise on their needs. In terms of cost and
time.

2. Using resources efficiently

Obtain maximum effect from resources. Can be expressed in terms of the


workforce needed, available time used or occupied, space utilization levels and so
on.

3. Smooth production processes

Organization enable to produce a greater amount if outputs by using lesser inputs.

4. Meeting expected demand and delivery dates

The organization is able to fulfil and deliver all customers demand on time by use
the efficiency of resources with a smooth production process. This lead to
customer satisfaction

5. Being an effective producer

Accordingly the specifications and standards by customer needs. It will


maximizing the product value. Customers receive more benefits from product that
will depicts the organization as an effective producer.

6. Adapting for future survival

With flexible production system, the organization is able to respond rapidly to


changes in a product or process design in future.
4 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

Achieving
customer
satisfaction

Adapting to Using
future resources
survival efficiently

Operations
Manageme
nt

Being an Smooth
effective production
producer process

meetingexpec
ted demand
and delivery
dates

Figure 1.2 : Objectives of operations management

SELF-CHECK 1.1

Keep in mind the meaning of operations management.


Explain the basic operating system.
Define in a simple word the objectives of operation management

1.4 Strategic Decisions of Operations Management

Operations management requires strategic decisions to propel them to high achievement. Heizer
el at., (2011) have itemised ten strategic decisions for management to assess their operations as in
Figure 1.3.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 5

Figure 1.3 : Strategic Decisions of Operations Management

i) Quality Management Strategy

Customers have a very high expectation on quality of products. Operations management should
set up quality management strategy to improve further on quality. Objectives in quality must be
set and applied in the operations.

ii) Procurement Strategy

Procurement strategy ultimate objectives call for procuring best quality components, at the
cheapest price, just on-time delivery and with best services. Operations management has to
determine and assess the most reliable suppliers that meet the highest level of achievement based
on the requirements.

iii) Product Strategy:

A product evolves within its product life cycle. From its initiation stage, a product will reach its
highest growth before coming tomaturity and declines to obsoleteness. Product strategy
emphasizes strategic analysis in development of new products and plan for successive products
for more demanding market. It requires R&D strategy, product design, global market dynamics,
consumer attributes and needs.

iv)Process Strategy

Process strategy calls for quality outputs, high variety products, mass customisation, speed, high
degree of product flexibility and economical. It emphasizes on technology, equipment, process
6 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

and resources that can give competitive advantage. Process strategy refers to the pattern of
decisions made in managing processes with the aim of achieving competitive priorities.

v) Location Strategy

The open global market and borderless economy allows operations to be carried out all over the
world. In selection of location of business a lot of criteria have to be taken into consideration. The
most importance criterion is the economic and political stability of the new location. Other criteria
that need greater analysis is the availability of skilled workers, relevant standard of education,
infrastructure, availability of raw materials, its strategic position to airport and major ports,
availability of reliable suppliers and lastly the economical advantage.

vi) Lay-out Strategy

Operations management should make efforts to have the best operations layout. The best layout
flow will give the most cost saving in operations. Layout flow should take into consideration on
the selection of most appropriate technology for the operations, selection of the right equipment,
efficient layout and positioning of equipment, effective material flow, strategic positioning of
materials/components for process, convenient position of facilities, optimum space of movement
of workers, materials and transportation, effective ventilation system, strategic provision for
expansion and finally incorporating safety and health measures in the planning of plant layout.

vii) Human Resources Strategy

Human resources management is pivotal in the success of an organisation. Engagement of the


right strategy is vital for maintaining high quality, motivated, inspired and productive employees
in unison with harmonious working environment and intriguing work culture.

viii) Reliability and Maintenance Strategy

Reliability is concerned on the stability and availability of equipment, facilities and system and
their being at optimum condition. Maintenance is concerned on activities involved in maintaining
the reliability and stability of all equipment, facilities and system at their optimum working
condition. System covers both software and hardware which includes computer system, process
system and human resources.

ix) Scheduling Strategy

Scheduling involves efficient way of planning, control and allocation of resources (materials,
equipment, human resources and capital) over time to produce goods or services. In
manufacturing scheduling includes allocations of resources, workforce scheduling and operations
scheduling.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 7
8 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

x) Inventory and JIT Strategy

Inventory means money. Excessive inventory ties up more money. No inventory means lost
money. Just in time (JIT) inventory is to optimize inventory to the lowest economical level. The
purpose of JIT inventory is to manage inventory level and control inventory costs through
collaboration between suppliers and manufacturers. Inventory costs money. Space is required to
keep the inventory. Having additional space means money. Buffer stocks between processes mean
temporary inventory before being used in the next process. Buffer stocks cost money. In JIT
organization buffer stock is non-existent.

SELF-CHECK 1.2
2
List down all the strategic decision of operation management.

1.5 Operation for Services and Goods

Operation management is consequence to the production of output. The outputs can divide into
services and goods. There are organizations that produce tangible products which are reffered to
as goods or manufactured products meanwhile other produce intangible products called services.
However many outputs are combination of goods and services which require almost the same
basic elemnts of inputs, the transformation process and outputs. Although there are similiarities in
the elements both but there also some characteristics that make these two types of output
different.

1. Characteristics of services
i. Intangible Output services are intangible meaning they cannot be seen or
touched. For example delivery services, medical services and transportation
services. Customers can only use the services
ii. Outputs Cannot Be Stored it is impossible to store or categorize them as
inventory. For example a courier company needs to perform quick delivery
services
iii. High interaction with customers services are often difficult to
standardized, thus customers needs to be present to specify what they want
from services thus they pay different prices for this uniqueness. In other
word the uniqueness in demand is what the customersare paying for. At the
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 9
same time, the services provider must be ready to provide the necessary
information pertaining to the services, and deliver as required.
iv. Labour Intensive employees play an inmportant part in services related
companies, because services delivery requires customers to interact face to
face with the service provider. For instance , a courier service company
needs many personnel to perform deliveries at various places at a given
time
v. Difficulty In Measuring Quality Services quality may vary from one
situation to another. The same services delivered to different customers
may result in different acceptance levels from them. For example a
customer who is entertained by talkative staff might enjoy the service. But
another customer who feels annoyed and harassed by the same talkative
staff may not necessarily enjoy the service.

2. Characteristics of goods
i. Tangible Products goods or manufactured products can be seen and
touched, so they are tangible. Some examples of goods include
automobiles, shirts and furniture
ii. Outputs Can Be Stored can stored and deliver until customers need them.
For instance PROTON produces cars and stores them until customers place
an order for the cars
iii. Low Interactions With Customers customers do not specify what they
want from manufactured products. They just purchase the products that suit
their needs
iv. Capital Intensive Using high technology machines during operations thus
they need to invest a huge capital to purchase the machines.
v. Ease In Measuring Quality in certain standards and specifications atht are
set by the manufacturer, in order to produce tangible products. The quality
of these products would depend on whether the manufacturer meets the
standards and specifications or not. For examples a bakery wants their
cakes to have a certain level of thickness. Quality is achieved once this
standard is met.

The summarizes if services and goods in Table 1.2

Service Good
Intangible Tangible
Produced and consumed Produced and stored
stimultaneously
Unique Siniliar
High customer interaction Low customers interaction
Quality may be hard to evaluate Quality is easier to evaluate
Inconsistent product definition Standardization of product
Often knowledge based Feasible automation
Services dispersed Fixed facility
Reselling is unusual Reselling is possible
Table 1.2 : Summarizes characteristic of services and goods

SELF-CHECK 1.3

Discuss the pro and con between characteristic goods and services
10 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

1.6 Productivity

Production is the creation of outputs; it is a form of goods and services. To produce a good
services and goods, the input must go through the transformation process that converts them into
outputs. The more efficient the process of transformation, the more productive the organization
will be.

1. What is productivity
Productivity is the ratio of outputs(goods and services) divided by the inputs (resourses,
labour and capital). Efficiency is achieved if an operations manager is able to increase this
ratio. An organization is considered productive if it is able to achieve its goal through the
conversion of inputs into outputs at lower cost.
An organizations productivity can be increased in two ways
Reducing inputs while keeping outputs constant
Increasing outputs while keeping inputs constant

2. Why productivity is important


Because of three reason
Low employment
Improved living standard
Reduced operating costs and increased revenue

1.7 Productivity Measurement

The normal interpretation of productivity is the relative comparison of the outputs against inputs.
Productivity is basically the ratio of outputs against inputs. It measures the efficiency of a process.

Inputs Transformation
Process Outputs
(Adding value)

Equation of productivity is:


Output
Productivity = Input

In normal process not all outputs will turn out to be of acceptable quality. In measuring
productivity only quality outputs are taken in the calculation. All defects and rejects will not be
considered in the calculation of productivity.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 11
Productivity is a ratio that compares output (goods and services) against input (labour, materials,
energy, machines, facilities and capital). Productivity can be differently expressed as the ratio of
output against partial input, multiple inputs and total inputs.
12 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

Output Output Output Output


Partial Productivity = = Capital = Energy = Machine
Labour

Output Output
Multiple Productivity = =
Labour +machine labour +capital +energy

Goodsservice
Total Productivity =
All inputs

In measuring total productivity of a larger unit of operation the equation of productivity will as
follow:

Total Output
Total Productivity =
Total Inputs

We have to take note that, when production increases it does not mean that there is an increase in
productivity. In certain situation you may need to add more people in order to increase the output
and achieve target schedule on time. In this situation you are creating a false output. When you
are adding more people it means you are adding more input resources. When you compute the
productivity with your output against your new inflated input you will find that the productivity
becomes lower.

Higher productivity means the production of higher output against the same expenditure of
resources. It can be illustrated by the situation when all the inputs (resources, building, materials,
machines, time and labour) remains the same, however, you still manage to produce higher
output.

Higher productivity is achieved when the output increases and the input remains the same.

Output (increases)
Higher Productivity = Input (remains the same)

Alternatively, higher productivity is achieved when the output remains the same but you manage
to do it with much less cost. For example, you are given a certain number of personnel to carry
out a job within a stipulated time. However, with the skill you have in the work you are able to
accomplish the same job with lesser number of personnel. Thus, you have achieved higher
productivity in your job.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 13

Figure 1.4: Transformation of Inputs into Outputs

Hence, higher productivity is achieved when the same output is produced with much lesser
amount of inputs (resources, building, materials, machines, time and labour).

Alternatively, higher productivity is achieved when the same output is achieved against reduced
input.

Output (remains the same)


Higher Productivity = Input( reduces)
There are two important criteria in the computation of productivity. The first criterion is related to
output. Increase in output can be done easily by just increasing the numbers. But, we have to take
into consideration the quality of the products we produce. If some of the products do not meet the
quality required, the products have to be rejected. It is no purpose of producing more output when
the quality is ignored. In fact, producing sub-standard products will add more cost to the input.
This includes cost of materials of rejected products, cost machine time lost, cost of labour used to
produce sub-standard products, cost of repair of rejected products, cost of delay in delivery, cost
of future prospect from customers, etc.

The second criterion related to input. Sometime management may decide to increase the output
urgently due to tardiness in delivery.Since there is no other alternative, the management may
decide to mobilise additional number of personnel, re-schedule more equipment for the particular
job or working overtime for the purpose of accomplishing the job. By doing this we are increasing
the cost of the input and creating false productivity.

As illustrated in Figure 1.4, the cost of the input includes labour cost, capital costs (machines,
running capital, resources, raw materials, components, energy, facilities) and management costs
(administration, staff salary, staff benefits, R&D costs, bank loans interests), returned products,
company image and market prospects. It is utmost important for all personnel in any organisation
to place productivity of work as their highest priority and main concern in carrying out their duty
and responsibility.
14 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

Productivity Improvement Methodology


There are many tools for the improvement of productivity. Single Minute Die Change (SMED)
and Just-in-Time (JIT) introduced by Toyota Corporation under its famous Toyota Production
System (TPS) are two powerful tools in productivity improvement. Following through SMED
methodology a lot of wastage of operation can be eliminated in the production process. Lean
production is another productivity improvement tool which has the same purpose as SMED but
with a different approach.

The main priority in productivity improvement is cost of the inputs. Figure 1.5 shows the list of
competitive priorities for productivity improvement. Cost is top in the list. Consciousness in costs
during the production process will greatly benefit in achieving the highest productivity. Costs of
process include costs of material, labour, energy, machines and equipment, facilities,
administration, R&D, defects, etc.

Figure 1.5: Measures of Productivity Performance

Quality is another critical criterion in productivity. Achieving higher output with poor quality
does not mean anything to productivity. Poor quality will results in defects, wastage and rework.
The worst consequence of bad quality is when the products were released to the market
undetected. The more such products get to the market the company will get into more problems. It
may cause continuous customers' complaints, bad reputation to the company and loss of market.

Flexibility in a process will allow production of different products in the same process with a
minimal adaptability or adjustment to the process. The advantage of flexibility is more different
products will be able to be produced in the same process. This adaptability will be able to fulfil
much of customers' orders. The disadvantage of flexibility is it limits the capacity of each product
when more customers' orders are required.

Delivery and response time on schedule will improve customers' satisfaction. The problem will
arise when the company accept more orders. More orders will make prioritisation of orders
becomes more complex resulting in tardiness in delivery and affecting customers' satisfaction. In
this case consistent communication with the customers is critical to keep the customers in the loop
on the progress of their orders. Continuous customers' dissatisfaction will result in loss of market.

Factors that contribute to reduced productivity are as follow:

a) Excessive variety or lack of standardization.


Each product or component has to be designed with the right specification. All products or
components produced have to follow the same specification. This is called standardisation.
Excessive variety or lack of standardization will happen when there is no standard
specification. For example, if the bolts used in fixing up the machine are not standardised
the longer bolts will take longer time to fasten.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 15
b) Incorrect quality standards.
The quality of a product must fall within a certain acceptable range or tolerance. If a
component is produced beyond the acceptable range, e.g. oversize, it has to be rejected. A
product will have many components. If incorrect quality standard is acceptable in
production we may end up producing substandard products and end up as scraps.

c) Excessive amount of material removal required.


Any component for each product must meet the standard specification. If no control is
made in the production of all the components we may end up producing oversized
products. Extra work is required to trim the products to the quality required. This will
cause waste of production time.

d) Incorrect machine (and/or hand tool) used


Incorrect machines and tools will affect the quality of the components. It will require
different operating procedure and additional processing time. It may result in unnecessary
rework. The tools and machines used have to be standardised. There are many types of
similar tools and machines in the market. Where possible the tools and machines should
come from the same source. The equipment should have the capability to produce within
the required specification of the component. Using non-standard equipment and sub-
standard materials and components will result in not meeting the specification.

e) Process not operated properly


Any process must have a proper standard operating procedure (SOP). Standard operating
procedure will ensure proper handling of components which are in easy reach that can
only be possible by having the right process layout. The workers have to follow SOP
closely. Stern action should be taken against workers who try to deviate from following
the SOP. Workers tend to take short cut method in their work. When the process is not
carried out properly it will result in sub-standard quality and be rejected to waste.

f) Non-optimal layout with wasted movements.


Good and effective layout is critical in improving the productivity.Thereare many types of
layout that can be used for different type of process. Selection the right layout is important
to ensure easy and fast movement of components. Improper and haphazard layout will
cause unsmooth and erratic flow of materials and result in waste of movement.

g) Working methods of operation causing wasted movements, time and efforts


Standard operating procedure (SOP) is a must in any process. Workers are required to
follow the standard operating procedure in carrying their task. Wasted movement will
happen when there is no SOP or workers do not follow SOP, thus resulting in wasted time
and effort.

It is possible to create the most economical manufacturing processes when the product and its
components are produced according to their specification, tolerance and standard. The machines
or equipment used in producing the products or components have to be standardised.

Elements in Productivity Improvement - The manufacturing organization must constantly strive


for higher productivity. Basically, the followings are the elements that need to be considered for
productivity improvement.
A product must fully meet design requirements and specifications.
A product must be manufactured by the most economical methods in order to minimize
costs.
16 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

Quality must be built into the product at each stage, from design to assembly, rather than
relying on quality testing after the product is made.
Production methods must be sufficiently flexible so as to respond to changing market
demands, types of products, production rates, production quantities and on-time delivery
to the customer.
Look for new developments in materials, production methods and computer integration of
technological and managerial activities in a manufacturing organization and evaluate for
their usefulness.
Look at manufacturing activities on a broader aspect as a large system not confined to
process only. Study the effect of factors such as changes in market demands, product
design, materials, production methods, product quality and cost.
Determine the optimum use of all resources used: materials, machines, energy, capital,
labour and technology, production output, machine efficiency and workers' productivity.
Analyse and form a task force to continuously improve further.

Productivity improvement can be improved by analysing the process starting from design stage to
efficient usage of resources, selection of the right process and change of working culture.

a) At design stage

i) R&D and production are totally two different entities. R&D personnel are normally
optimistic. They always claim their designs are perfect and made for easy
manufacturability. in the real situation there is always a conflict between R&D and
production. Both R&D and production have to eliminate their bigotry and work together
for greater productivity of the company.

ii) Usage of Materials


During the design stage the R&D team should the type of materials and the quantity used.
Wherever possible, optimal usage of materials should be given priority. Another vital
element is the cost of the materials. The R&D team should find out more alternative
substitutes of equivalent quality and having much lower cost.

iii) Usage of Equipment


As highlighted above R&D and production have to work together. R&D team has to ensure
that their product designs can be produced easily using the available equipment. The design
and the process have to ensure economical consumption of materials. Purchase of new
equipment should be eliminated where possible. Any purchase of new equipment has to be
adequately justified with bearing in mind that the total productivity of the whole plant will
not be affected.
iv) R&D and Production Trial
In any production trial of R&D's new design greater care has to be taken to ensure minimal
interruption to production. In most cases R&D's new design will take longer time during
production trial resulting in loss of production. Greater care should be taken to avoid any
cause of production interruption.

b) At operation stage

i) Standardised Equipment
Selection of the right equipment is essential in the manufacturing of products. Not all
equipment can produce the same product. At the same time, having a fewsimilar equipment
does not mean all have the same capability. In reality there are equipment that may differ to
another and produce more or otherwise less output as compared to others. For that very
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 17
reason all similar type of equipment has to be standardised to the best time as much as
possible. Each similar equipment should have the same accessories, the same machine and
materials layout as the others and each similar machine should have the same processing
and set-up times, By having done this we will be able to have similar equipment with very
minimal difference in their capabilities.

ii) Standard Procedure


The procedure of manufacturing of each product has to be made standardised. The operator
has to follow the standard operating procedure during the process. Failure in observing the
procedure will result in delay in production, excessive usage of materials and machine, loss
of labour time and quality of product, resulting in low output and higher costs.

iii) Training of Operators


Training of operators is critical in maintaining the consistency of production. A well trained
and skilled operator will be able to prevent loss in production and product defects. Skilled
operators will result in more efficient production and zero defect.

iv) Proper Handling and Storage of Products


Products and products-in-process would become a waste if not properly handled during
transit or storage. Proper handling and packaging is necessary as to reduce damage during
transit or in storage. Greater care should be taken in handling perishable goods. Perishable
goods are easily decayed because of changes in temperature, humidity, climate or altitude.

v) Productivity of Assets, Machines and Manpower


Productivity is viciously influenced by the cost. The main cost will be the cost of assets
which consists of land, buildings, major equipment, others that involve bigger capital
outlays and bank loans. Effective maintenance and optimum utilisation of space, major
equipment, facilities are important as to reduce the cost of wastage in excess space and
unproductive utilisation of assets. Effective utilization and maximum productivity is an
important source of cost reduction.
18 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

SELF-CHECK 1.4

Explain the productivity.


Define all the element in productivity

1.8 Main Functions of Operations Manager

Operations manager plays very important role and has high responsibility for
the success of organisation. The success and failure of an organisation is heavily
shouldered by operations manager. The function of operations manager has myriad roles from
being a good listener to goals setting champion.

Management Process
Operations managers are responsible for the four basic functions of managers: planning,
organizing, leading and controlling. Operations managers are fully in charge of
management of resources in accomplishing the organisation's objectives and goals. The
four management processes are as illustrated in Figure 1.6.

Figure 1.6 Four functions of management

Main Functions of Operations Management


In the macro scale the functions of operations managers consist of the overall
administration and management of the organisation leading to achievement of
organisation's objectives and goals.

1. Planning

Operations planning is the process of setting long term and short term strategies in
prevailing the growthand achieving the objectives of the organisation.Operations
Manager is responsible for effective workforce and resource planning and machine
utilisation optimisation. By consolidating a well organised and effective strategies
operations manager will be able to fortifythe position andgrowth of the company.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 19

2. Organising and Coordination

Organising and coordination is involved in a systematic process of integrating,


synchronising and integrating tasks, allocating resources and responsibilities,
coordinating activities of workforce and administration for effective
implementation of operations management functions.

3. Leading
Leading is more concern in building trust, respects and sense of belonging and
inspiring the enthusiasm of the workforce in achieving high performance outcomes
in orgnisation's objectives and goals.

4. Controlling

The process of measuring and monitoring work performance, comparing results to


objectives and taking corrective action as needed. The function of operations
management is to establish challenging performance benchmarks, setting
achievement scoreboards, cracking their achievement and performance level,
analyse their performances and draft corrective actions in order to uphold high
quality work outputs and organization performance.

Other functions are

1. Training and Development of Workforce


Operations managers deal directly with the workforce of different levels from shop floor
operators to area managers. They have to maintain high level of competency of all their
workforce in their respective tasks. They have to identify the strength and weakness of the
workforce, develop and upgrade their competency. They have to have a clear conscience
that having competent workforce will be a great force for the success of their operations.
They should allow his workforce to pursue higher level of competency even much better
than the Operations Managers themselves.

2. Public Relations
One of the managerial roles of operations manager include being a spokesperson of the
organisation. Operations manager must have high esteem and good leadership quality in
disseminating information to the public. He should be willing to meet customers in ironing
out their problems, complaints and dissatisfaction and take immediate action for
rectification.

3. Communication

Operations manager needs to have good communication and interpersonal skills in


convincing and pulling the members of the organisation together. His job includes
developing a positive work culture and strong teamwork. They facilitate communication
between employees and departments. Operations managers should possess professional
quality in handling any situation, dealing with problems and complaints of employees or
threats at workplace
20 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

4. Payroll, Promotion and Increment


Operations manager is the only authority who has direct contact and interaction with his
workforce. He is the right person who knows the performance of his workforce. He should
exercise his fairness in setting the salary, adjustment and promotion. As adjustment to
salary will reflect to the overhead cost operations manager has to leverage closely the
total costs with respect to operations performance.

5. Financial Management.
Operations managers play a key role in budgeting, controlling costs and keeping the
organization on track financially. Their management of the supply chain and other
resources helps minimize costs of production. They study business forecasts, sales reports
and financial statements to find ways to maximize results. They use methods such as cost-
benefit analysis to improve efficiency. Modern operations management even includes
sustainability in the financial equation.

6. Management of Resources

Operations managers play a leading role in managing both raw materials and personnel.
Oversight of inventory, purchasing and supplies is central to the job. Human resources
tasks include determining needs, hiring employees, overseeing assignment of employees
and planning staff development.

7. Goal-setting
Operations managers has to coordinate regularly, either monthly or quarterly, with
marketing, procurement and R&D counterparts in setting consolidated output targets for
short term and long term objectives. Operations manager has to take into account his
operations' capability before committing his agreement on the proposed operations' target.
Once the target has been established operations manager will be able to organise and set
his operations' goals and objectives and establish targets and expectations for various
departments in the organisation.

8. Technical skills, Entrepreneurship and BusinessAttributes


Operations manager should possess operational and technical skills in
consistent with his normal managerial functions, i.e., planning,
organising and controlling. Operations manager should be well versed
with the latest technology of his operations. He should possess other
skills which can be much helpful in his work in particular in IT/ digital,
entrepreneurship and business attributes. Refer to Figure 1.6
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 21

Figure 1.6: Technical Skill


22 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

9. People skills
People skills consist of skills in directing, motivating, coordinating, training &
development. He has to set work discipline at workplace, provide clear job functions for
each member of workforce and create rules and regulations for employees to improve their
efficiency. Refer Figure 1.7

Figure 1.7: People Skill

1.8 Challenges of Productivity and Operations Management

The main challenge of productivity is in understanding the overall strategy of the organisations
and its competitiveness and how the management effectively use its resources in achieving its
operations performance objectives. Management has limited resources, technology, expertise and
capital. Improving productivity will be a great challenge to them.

Areas that can be effective in productivity improvement are.


1. Development of effective managers;
2. Creation of high-performing workers;
3. Review corporate objectives and strategies;
4. Continuous improvement of all processes;
5. Effective communication dissemination;
6. Creating a workplace where people enjoy to work;
7. Effective time management;
8. Introduction of new technologies;
9. Strengthening the workforce through unique corporate culture.

1. Global Focus
The great challenge to do business on a global scale is to understand the type of market
and demand for the products and services. The products have to be competitive in global
pricing. Product costing has to be as low possible by improving productivity, use of
economical and low price resources, maximise process agility and flexibility and have
high degree of control in meeting global demands.

Other important requirements to do business globally is to understand the cultural factors


of a foreign location, their language, regional values, demographics, its political and
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 23
economic factors, product adaptation and insurance coverage and risk factor of the
product.

2. Just-in-time
Just-in-time (JIT) production refers to a production management system with objectives of
having products readily available to meet demand. Just in time requires precise
coordination between supply and demand to ensure on time delivery of products.

Just-in-time (JIT) production requires high level of coordination. Every aspect of JIT
process must be well synchronized. Delay in arrival of supply of components will cause
great loss to production. Delivery of raw materials or components needed for
manufacturing has to be timely. This is where high technology is required and ICT
implementation will be necessary for tracking the supply and enabling automatic
notification to suppliers for next delivery schedule.

3. Supply Chain Partnership

Operations management has to take into consideration in implementing supply chain


partnering. Supply chain partnerships are essential for continued success operations.
Operations management has to identify key relationships and tailor it to their acceptable
advantage. In order to establish genuine supply-chain partnerships it will require
considerable investments of time and resources. The higher number of partnerships will
require more control to manage the chain relationships with all suppliers and customers.

Before considering supply-chain partnerships operations management has to establish that


there is a competitive edge in the venture of partnership. In any partnership deal it has to
tailor the partnership and ensure that it will not change much to the existing operations. In
any partnership it has to be established based on mutual trust, open ness and shared risks.

4. Rapid Product Development Alliances


Developing, testing and commercialising new products can be very costly and requires
lengthy product development. New product development and market introduction has to
be aggressive for successful business operations. Employing strategic alliances will enable
operations management to gain the knowledge necessary to develop or acquire the
capabilities needed for new product development. Penetration of products to new markets
will be more possible having strategic technical and marketing alliance with established
operations in the new markets.

5. Mass Customization Standard products

Mass customisation is more of producing the products as favoured by customers. Taking


the example of tyres for car assembly plant, the tyres requested by the customers are the
same tyress old in the market. But for OEM tyres normally there are other additional
qualities required by the customers, such as, quiet or low noise level, easy maneuvering,
no squeaking when cornering, quick responsive and comfortable ride quality. Operations
24 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

manager has a duty to accommodate those requirements. This is termed mass


customisation.

There are four distinct approaches to customization, i.e., collaborative, adaptive, cosmetic
and transparent. Operations manager has to examine each of the approaches and decide
how best to serve their customers. In most cases, a single approach is able to handle the
customization problem. In other situation, operations managers will have to determine
whether they need to have a mix of some or all of the four approaches to serve the
customers. As in the case of tyres, operations manager has to understand the needs of the
customers and works together with R&D to produce similar tyres but with the additional
qualities required by the customers. In this case the operations manager is using
collaborative and adaptive methods to handle the tyre customization problems.

6. Empowered employees, teams and job specialization

A good operations manager will be more successful when he can develop a strong
teamwork with built up spirit and enthusiasm. In facing the acute challenges from
competitors, now companies are turning their attention to empower employee teams.
Operations manager will have to consider forming such empowered teams composed of
experience, most knowledgeable and skilled employees from different departments to
undertake company projects. The teams should have the authority to make final decisions
on the projects. Forming such teams will need proper training, guidance and trust.

Some of the areas of operations that can be handled by empowered teams includes in
solving complex operations problems, reducing costs projects, quality improvement,
productivity improvement which indirectly improving the overall operations efficiency.
Empowered teamwork has become the icons, in particular, in facing the challenge of
today's global business environment.

By the way, Operations management continues to be encountered with new challenges. The latest
challenges are the coming implementation of TPPA, fast depletion of fossil fuels, emphasis on
sustainable development and advancement of technology and ICT.In term of scope and techniques
of operations management, it has changed drastically the way operations is being managed.
Previously operations management is more concerned on economic order quantity (EOQ),re-order
point (ROP), materials resource planning (MRP) later we haveenterpriseresources planning (ERP)
and supply chain management (SCM).Operations management has now facing a real challenge in
transforming their operations to the technology of operations management going towards JIT
philosophy, lean production and agile manufacturing.

1. Implementation of TPPA
With the coming implementation of TPPAandnewglobalisation the world has now become
a borderless economy and free market. There will be free flow of products and services
participating countries. Such development will pose great challenge to operations
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 25
management. Competition will become greater, market pricing will become more
competitiveandfulfilment of TPPA provisions will open up more open market and trade
facilitative measures and bigger and better market access. This situation will cause greater
challenges, in particular, to low productive operations. Operations managers will have a
touch responsibility to improve their productivity,qualityand cost to compete with external
influence.

2. Depletion of Fossil Fuels


Depletion for fossil fuels is another challenge to operations management. Currently the
price of oil is already very low. During this period of time the price of oils is very volatile.
The current low price of oil may not hold long but the impact will be very great to
countries that use oils as their major source of fiscal revenue.The oil price is expected to
rise again. Irrespective of the fall of oil prices, fossil fuels reserves are continuously
running dry.Even though the price of crude oil has dropped it does not affect much on the
cost of production. The selling price of oil in the market is under the control of
government. In future prospects it is of good judgment for operations management to look
for alternative resources in view of continuous depletion of fossil fuels.

3. Sustainable Development
Another challenge to operations management is the continuous deterioration of the
environment.The world is very serious on sustainable development programme all over
the world. Among the main goals sustainable development is to reduce carbon footprint,
greenhouse gases emission and protect the planet from further degradation. It will become
a great challenge to operations management to develop new processes that ensure
sustainable production.

4. Advancement of Technology and ICT


With the present of advancement of technology and ICT, the scope of management has
changed drastically. Operations management has to move fast and be aligned with the
latest development in technology and ICT. Computerization has greatly benefited
operations. It has improved operations in their operations, productivity and profitability.
Information and Communication Technology (ICT) is applicable in all aspects of
operations. ICT application is capable in improving the processes in production. ICT will
make Enterprise Resources Planning (ERP)and Supply Chain Management (SCM) and
other soft tools more flexible, intelligent and give real-time information. ICT's great
obstacles are its astronomical cost and at the same time it poses security risks. In the event
of any malfunction of computer system it may risk a great loss to computer hardware,
software, data and machine operating system. Among computer security risks are
malwares, network crash, internet attack, hacking and system failure.

SELF-CHECK 1.5

Define the main function of operation manager.


Describe all the challenges in productivity in the future
26 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY

The word operations came about from the words operations used in the armed forces
which denote carrying out special mission in a war or battle to fight against enemy.
Operations refer day to day activity that involves economic transformation. The smallest
element of operations is process, characterised by three basic elements: input, process
and output
Functions of operations management involve all chains of production from design stage
to selection of raw materials, delivery, storage, preparation, process, finishing,
warehousing and distribution.
Operations manager has high responsibility for the success of organisation.
Operations management is the effective management of value adding transformation
processes, integrating resources and achieves specified performance measures in
products/services productivity.
Operations management continues to face new challenges such as implementation TPPA
calling for broader liberalised marketing, fast depletion of fossil fuels, greenhouse gas
effects, advanced technology and ICT.

Effectiveness - the degree to which something is R&D Researdh and Development


successful in producing a desired ROP Re-order Point
result; success. SCM Supply Chain Management
Efficiency - Efficiency is the (often measurable) SMED Single Minute Die Change
ability to avoid wasting materials, TPPA The Trans-Pacific Partnership
energy, efforts, money, and time in Agreement is a free trade agreement
doing something or in producing a currently under negotiation between NZ
desired result and 8 other countries, including the U.S
EOQ Economic Order Quantity TPS Toyota Production System
ERP Enterprise Resources Planning Productivity - the effectiveness of productive
ICT Information and Communications effort, especially in industry, as
Technology measured in terms of the rate of output
JIT Just-in-Time (JIT) introduced by per unit of input.
Toyota Japan
MRP Materials Resource Planning
OEM Original Equipment Manufacturer is a
company that makes a part or
subsystem that is used in another
company's end product.

Heizer, J., & Render, B. (2014).Operations Management-Sustainability snd Supply Chain


Management (11th ed.), New York: Pearson.
TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY 27
Lee J Krajewshi, L.J., Ritzman, L.P., &Malhotra, M.K. (2013).Operations Management-
Processes and Supply Chains (10thed.). New York: Pearson.

Rosliza Md Zani, Mohd Radzi Mohd Khir. (2015).Operations Management (1th ed.), Kuala
Lumpur : Oxford Fajar Sdn Bhd.

SELF-CHECK 1.6

SHORT QUESTIONS

A. Explain briefly elements of operations strategy.

B. Write short notes on


i. Just in Time
ii. Productivity
iii. Effectiveness
iv. Efficiency

C. Question
1) Under capacity options the company decides to vary the production output by varying
the time, workforce or outsourcing. What are the basic capacity options a company can
choose to meet demand?
2) Describe the three major business functions necessary to all organizations
3) Considering no upgrading for now, explain how you are going to increase the
productivity of your operation.
4) Two car wash employees are paid $8.00 an hour each and are capable of washing 12
cars per hour, using $1.00 of water and $2.00 of soap and other cleaning supplies,
determine the multifactor productivity of this operation.
28 TOPIC1 INTRODUCTION TO OPERATIONS AND PRODUCTIVITY