Operations Management

Additional Learning
Aggregate Planning
 The term "aggregate" is used because planning at this level
includes all resources "in the aggregate," Eg: A product line or
family
 Aggregate planning is an operational activity which does an
aggregate plan for the production process, in advance of 3 to
18 months.
 Provides an idea to management as to what quantity of
materials and other resources are to be procured and when
 Objective is to keep the total cost of operations of the
organisation to the minimum, over that period.
Objectives of Aggregate Planning
• Minimize total cost over the planning horizon
• Maximize customer service
• Minimize inventory investment
• Minimize changes in workforce levels
• Minimize changes in production rates
• Maximize utilization of plant and equipment
Options to regulate the Capacity vs
Demand
1. Hire / Layoff: Hiring or firing the People as required
2. Overtime: Extra Hours / Day or Extra Days per week
3. Part time or Casual Labour: Utilizing CLs when required
4. Inventory: FG inventory can be built during slack and supplied
when demand increases
5. Subcontracting: Seeking services from sub-contractors when
demand rises
6. Cross training / Multi tasking: Training employees in multi
tasking, so that non-utilized employees can be used where
required
7. Other methods: Using employees’ intellectual source and skills
to develop new products, processes, training activities etc.
Pre-required inputs for Aggregate
Planning
 Information about the resources and the facilities available.
 Demand forecast for the period for which the planning has to
be done.
 Cost of various alternatives and resources.
 Organisational policies regarding the usage of above
alternatives.
Aggregate Planning Strategies
1. Chase Strategy
 Matching demand and capacity period by period.
 Capacities (Workforce levels, production schedules, output
rates, etc.) are adjusted to match demand requirements over
the planning horizon
 Advantages:
 Anticipation inventory is not required, and investment in
inventory is low
 Labour utilization is kept high
 Disadvantages:
 Expense of adjusting output rates and/or workforce levels
 Alienation of Workforce
Aggregate Planning Strategies
2. Level Strategy
 Seeks to produce an aggregate plan that maintains a steady
production rate and / or a steady employment level
 Firm maintains a level workforce and a steady rate of output when
demand is somewhat low
 The inventory surplus absorbs when demand increases

 Advantages
 Stable output rates
 Stable workforce levels
 Disadvantages
 Greater inventory investment is required
 Increased overtime and idle time
 Resource utilizations vary over time
Aggregate Planning in Services
 Service capacity is very difficult to measure
 Services are labour intensive than manufacturing
 Aggregate Planning can be applied in select services like
 Hotels & Restaurants - Seasonal demand
 Hospitals - Campaigns, Health Check-ups, Canteen
Requirements
 Miscellaneous Services - Seasonal Sale
 Airline Industry - Seasonal demand, Discounts
Job Design
 The way in which we structure the content and
environment of individual staff member’s jobs within
the workplace and the interface with the technology
or facilities that they use
Factors for Job Design
 What are the environmental conditions of the
workplace?
 What technology is available and how will it be used?
 What tasks are to be allocated to each person in the
operation?
 What is the best method of performing each job?
 How long will it take and how many people will be
needed?
 How do we maintain commitment?
 Is the Workplace Ergonomically designed?
Work Study for better Job Design
 Work study is a generic term for those techniques, method
study and work measurement which are used in the
examination of human work in all its contexts. And which lead
systematically to the investigation of all the factors which affect
the efficiency and economy of the situation being reviewed, in
order to effect improvement.”
Advantages of Work Study
1. Helps to achieve the smooth production flow with
minimum interruptions
2. Helps to reduce the cost of the product by
eliminating waste and unnecessary operations
3. Better worker-management relations
4. Meets the delivery commitment
5. Reduction in rejections and scrap and higher
utilisation of resources of the organization
Advantages of Work Study
6. Helps to achieve better working conditions.
7. Better workplace layout.
8. Improves upon the existing process or methods and helps in
standardisation and simplification.
9. Helps to establish the standard time for an operation or job
which has got application in manpower planning, production
planning.
Work Study and its branches - Recap

Let’s
discuss
about this
first
Method Study
 Method study enables the industrial engineer to subject each
operation to systematic analysis.
 The main purpose of method study is to eliminate the
unnecessary operations and to achieve the best method of
performing the operation.
 Method study involves the breakdown of an operation or
procedure into its component elements and their systematic
analysis
 Method study scope lies in improving work methods through
process and operation analysis – Men, Material, Operation
Sequence, Facilities, Layout, Working Environment
Steps involved in Method Study
Recording Techniques for Method Study
Flow Process Chart - Example
Process Flow Diagram - Example
String Diagram - Example
Work Study and its branches - Recap

Till now
we were
talking Now, let’s
about this talk about
this
Work Measurement
 Work measurement is also called by the name ‘time study’
 Work measurement is absolutely essential for both the
planning and control of operations
 Without measurement data, we cannot determine the capacity
of facilities or it is not possible to quote delivery dates or
costs
 Work Measurement can be done for
 Repetitive Work – Regular Job
 Non-Repetitive Work – Construction, one time
Objectives of Work Measurement
1. Comparing alternative methods
2. Assessing the correct initial manning (manpower
requirement planning)
3. Planning and control
4. Realistic costing
5. Financial incentive schemes
6. Delivery date of goods
7. Cost reduction and cost control
8. Identifying substandard workers
9. Training new employees
Various techniques of work measurement
1. Time study (stop watch technique) – Recording to determining
the actual time
2. Synthesis – Recording the time in comparison with pre
determined levels
3. Work sampling – Determining with large number of
observations
4. Predetermined motion and time study - times established for
basic human motions
5. Analytical estimating – time required to carry out elements of
a job at a defined level of performance is estimated partly from
knowledge and practical experience of the elements
concerned and partly from synthetic data
Steps for Time Study
Computation of Standard Time
Standard time may be defined as the, amount of time required
to complete a unit of work:
(a) under existing working conditions
(b) using the specified method and machinery
(c) by an operator, able to the work in a proper manner
(d) at a standard pace
Computation of Standard Time
The Standard Time is the product of following factors:
1.Observed time: The time measured to complete the task
2.Performance rating factor: The pace the person is
working at
 90% is working slower than normal
 100% is normal
 110% is working faster than normal
This factor is calculated by an experienced worker who is
trained to observe and determine the rating
3. Normal time: Observed time x Perfom Rating ÷ 100
4. Allowance
Computation of Standard Time
The Formulas
Computation of Standard Time – An
Illustration
 Assume that the total observed time for an operation of
assembling an electric switch is 1.00 min.
1. If the rating is 120%, find normal time and Allowance
time.
2. If an allowance of 10% is allowed for the operation,
determine the standard time.
Computation of Standard Time – An
Illustration
1. If the rating is 120%, find normal time and Allowance time.
Constituents:
Observed time = 1.00 Min
Rating = 120%
Allowance = 10%
Computation of Standard Time – An
Illustration
2. Determine the Standard time.
Constituents:
Normal time = 1.20 Min
Allowances = 0.12 min

Standard time = Normal time + Allowances

= 1.20 Min + 0.12 Min
= 1.32 Min
Total Quality Management (TQM)
 A management approach to long–term
TQM uses strategy, data, and
success through customer satisfaction.
effective communications to
 In a TQM effort, all members of an integrate the quality discipline
organization participate in improving into the culture and activities
processes, products, services, and the of the organization
culture in which they work.
 The methods for implementing this
approach come from the teachings of such
quality leaders like
• Philip B. Crosby,
• W. Edwards Deming,
• Armand V. Feigenbaum,
• Kaoru Ishikawa,
• Joseph M. Juran
Primary Elements of TQM
Customer
Focused

Commun Total
Employee
ications Involvement

Fact
based
decision
making
TQM Process
Centered

Continual
Improveme
Integrated
nt System
Strategic
and
Systematic
Approach
Implementing a TQM System
1. Top management learns about and decides to commit to
TQM. TQM is identified as one of the organization’s
strategies.
2. The organization assesses current culture, customer
satisfaction, and quality management systems.
3. Top management identifies core values and principles to be
used, and communicates them.
4. A TQM master plan is developed on the basis of steps 1, 2,
and 3.
5. The organization identifies and prioritizes customer demands
and aligns products and services to meet those demands.
6. Management maps the critical processes through which the
organization meets its customers’ needs.
Implementing a TQM System
7. Management oversees the formation of teams for process
improvement efforts.
8. The momentum of the TQM effort is managed by the
steering committee.
9. Managers contribute individually to the effort through
planning, training, coaching, or other methods.
10. Daily process management and standardization take place.
11. Progress is evaluated and the plan is revised as needed.
12. Constant employee awareness and feedback on status are
provided and a reward/recognition process is established.
Five Strategies to develop TQM Process
1. TQM Element approach: takes key business processes and/or
organizational units and uses the tools of TQM to foster
improvements
2. Guru approach: uses the teachings of leading quality thinkers as
a guide against which to determine where the organization has
deficiencies
3. Organization Model Approach: Modeling on Successful
Organizations
4. Japanese Total Quality Approach: examine the detailed
implementation techniques and strategies employed by Deming
Prize–winning companies
5. Award Criteria Approach: uses the criteria of a quality award,
like Deming Prize, the European Quality Award, or the Malcolm
Baldrige National Quality Award
Benchmarking
 Benchmarking is a way to go backstage and watch another
company’s performance from the wings, where all stage tricks and
hurried realignments are visible
 Evolved in early 1950s, when W. Edward Deming taught the Japanese
the idea of quality control

Benefits of
Benchmarking
1. Cultural Change
2. Performance
Improvement
3. Effective Human
Resources
Levels of Bench Marking
1. Internal benchmarking (within the company)
2. Competitive or strategic benchmarking (Industry and
competitors)
3. Benchmarking outside the industry
The Process of Benchmarking
Business Process Reengineering (BPR)
 According to Hummer and Champy, Business Process
Reengineering (BPR) is the fundamental rethinking and radical
redesign of business process to achieve dramatic
improvements in critical and contemporary measures of
performance, such as cost, quality, services and speed.
 There are four key components:
1. Fundamental rethinking
2. Radical redesign
3. Dramatic improvement
4. Critical and contemporary measures of performance
BPR Business Models
 Business process improvement
 Basic. Equivalent to re-decorating a house
 The starting and finishing points of the process are usually within
a single department
 Business process reengineering
 Companies being re-modelled
 Projects can be expensive in scope.
 Cross Functional where Start and end could be different
 Business process architecture
 Complex. Comparable to getting an old building or constructing
a new one
 Experts are needed, the investment and the risk are substantial
BPR Methodology
1. Talwar method: Entails three stages
 Initiation: Defining strategic scope, scale and planning
the change
 Implementation: Business redesign, integration and
testing
 Exploitation: Continuing the improvement process
BPR Methodology
2. COBRA method: C- Constraints, O – Opportunities, B –
Business, R – Restructuring, A – Analysis
 A six stage of BPR methodology designed to be
implemented by a technocratic approach with due regard
to people issues.
1. Establishing an organisation’s approach to BPR
2. Identifying the opportunity
3. Analysis of an existing process
4. Process re-design
5. Implementation of the change
6. Performance monitoring
Benefits of BPR
1. Can save a company which is running at a loss
2. By changing the present process through BPR a losing
business can make profits
3. Can find new business dimensions
4. BPR will open up new dimension into the existing business
5. Continuous improvements will enhance the business
performance
6. Over all change could enhance the performance of the
business
7. Improves quality
8. Improves the quality of service delivery and customer
satisfaction Speedier
Drawbacks of BPR
1. Could be a costly process
2. Need to invest huge sum of money to introduce such a
system
3. Time consuming process
4. It takes lot of time to design such a system and some time
take years to plan properly
5. Extensive planning required
6. Need experts to implement and monitor
7. Lack of experts
8. It is bit difficult to find real experts on BPR, since you are
going to invest a huge sum of money you need to have such
experts to run the show
Quality Management Systems
 A QMS can be defined as:
“A set of co-ordinated activities to direct and control an
organisation in order to continually improve the effectiveness
and efficiency of its performance.”
 The main thrust of a QMS is in
 defining the processes, which will result in the production of
quality products and services rather than in detecting
defective products or services after they have been
produced
 A fully documented QMS will ensure that two important
requirements are met
 Customer Requirements
 Organization Requirements
Quality Management Systems
ISO Standards
 ISO (International Organization for Standardization) is the
world’s largest developer of voluntary International Standards.
 Gives specifications for products, services and good practice,
helping to make industry more efficient and effective.
 Developed through global consensus, they help to break down
barriers to international trade.
 Has developed over 19500 Standards
ISO Popular Standards
 ISO 9000 - Quality management : Make sure your products and
services meet customers' needs with this family of standards. The
Current version is ISO 9001:2008.
 ISO 14000 - Environmental management : Improve your
environmental performance with this family of standards.
 ISO 22000 - Food safety management : Inspire confidence in
your food products with this family of standards.
 ISO 27001 - Information security : Ensure your organization's
information is secure with this family of standards.
 ISO 50001 - Energy management : Make energy savings and
help make your organization more efficient with this standard.
 ISO 31000 - Risk management : Manage risks that could be
negative for your company’s performance with this standard.
ISO Popular Standards
 ISO/TS 16949: Applicable to any organisation within the
automotive supply chain that manufactures
 AS9100: Widely adopted and standardized quality
management system for the aerospace industry.
ISO Clauses
 Section 1: Scope
 Section 2: Normative Reference
 Section 3: Terms and definitions (specific to ISO 9001, not
specified in ISO 9000)
 Section 4: Quality Management System
 Section 5: Management Responsibility
 Section 6: Resource Management
 Section 7: Product Realization
 Section 8: Measurement, analysis and improvement