OPERATI

ON
MANAGE
MENT
(CODE NO.: 5568
Allama Iqbal
University )
Col MBA
(Executive)

Muhammad Moqeem Khan

Roll #AD593446
QUASTION NO.1
Explain:
(a) Systematic View of Operations

(a) Answer:

o Systematic View of Operation

Systems theory is the transdisciplinary study of systems in general, with the goal of
elucidating principles that can be applied to all types of systems in all fields of research.
The term does not yet have a well-established, precise meaning, but systems theory
can reasonably be considered a specialization of systems thinking and a generalization
of systems science. The term originates from Bertalanffy's General System
Theory (GST) and is used in later efforts in other fields, such as the structural
functionalist sociology of Talcott Parsons and Niklas Luhmann.

Applications of system theories

Living systems theory
Living systems theory is an offshoot of von Bertalanffy's general systems theory,
created by James Grier Miller, which was intended to formalize the concept of "life".
According to Miller's original conception as spelled out in his magnum opus Living
Systems, a "living system" must contain each of 20 "critical subsystems", which are
defined by their functions and visible in numerous systems, from simple cells to
organisms, countries, and societies. In Living Systems Miller provides a detailed look at
a number of systems in order of increasing size, and identifies his subsystems in each.

James Grier Miller (1978) wrote a 1,102 pages volume to present his living systems
theory. He constructed a general theory of living systems by focusing on concrete
systems—nonrandom accumulations of matter-energy in physical space-time organized
into interacting, interrelated subsystems or components. Slightly revising the original
model a dozen years later, he distinguished eight "nested" hierarchical levels in such
complex structures. Each level is "nested" in the sense that each higher level contains
the next lower level in a nested fashion.
Organizational theory

The systems framework is also fundamental to organizational

theory as organizations are complex dynamic goal-oriented processes. One of the early
thinkers in the field was Alexander Bogdanov, who developed his Tectology, a theory
widely considered a precursor of von Bertalanffy's GST, aiming to model and design
human organizations (see Mattessich 1978, Capra 1996). Kurt Lewin was particularly
influential in developing the systems perspective within organizational theory and coined
the term "systems of ideology", from his frustration with behavioral psychologies that
became an obstacle to sustainable work in psychology. [21] Jay Forrester with his work in
dynamics and management alongside numerous theorists including Edgar Schein that
followed in their tradition since the Civil Rights Era have also been influential.

The systems to organizations relies heavily upon achieving negative

entropy through openness and feedback. A systemic view on organizations is
transdisciplinary and integrative. In other words, it transcends the perspectives of
individual disciplines, integrating them on the basis of a common "code", or more
exactly, on the basis of the formal apparatus provided by systems theory. The systems
approach gives primacy to the interrelationships, not to the elements of the system. It is
from these dynamic interrelationships that new properties of the system emerge. In
recent years, systems thinking has been developed to provide techniques for studying
systems in holistic ways to supplement traditional reductionistic methods. In this more
recent tradition, systems theory in organizational studies is considered by some as
a humanistic extension of the natural sciences.
Software and computing
In the 1960s, systems theory was adopted by the post John Von Neumann computing
and information technology field and, in fact, formed the basis of structured
analysis and structured design (see also Larry Constantine, Tom DeMarco and Ed
Yourdon). It was also the basis for early software engineering and computer-aided
software engineering principles.

By the 1970s, General Systems Theory (GST) was the fundamental underpinning of
most commercial software design techniques, and by the 1980, W. Vaughn
Frick and Albert F. Case, Jr. had used GST to design the "missing link" transformation
from system analysis (defining what's needed in a system) to system design (what's
actually implemented) using the Yourdon/DeMarco notation. These principles were
incorporated into computer-aided software engineering tools delivered by Nastec
Corporation, Transform Logic, Inc., KnowledgeWare (seeFran Tarkenton and James
Martin), Texas Instruments, Arthur Andersen and ultimately IBM Corporation.
Sociology and Sociocybernetics
Systems theory has also been developed within sociology. An important figure in the
sociological systems perspective as developed from GST is Walter Buckley (who from
Bertalanffy's theory). Niklas Luhmann (see Luhmann 1994) is also predominant in the
literatures for sociology and systems theory. Miller's living systems theory was
particularly influential in sociology from the time of the early systems movement. Models
for dynamic equilibrium in systems analysis that contrasted classical views fromTalcott
Parsons and George Homans were influential in integrating concepts with the general
movement. With the renewed interest in systems theory on the rise since the 1990s,
Bailey (1994) notes the concept of systems in sociology dates back to Auguste
Comte in the 19th century, Herbert Spencer and Vilfredo Pareto, and that sociology was
readying into its centennial as the new systems theory was emerging following the
World Wars. To explore the current inroads of systems theory into sociology (primarily
in the form of complexity science) see sociology and complexity science.

In sociology, members of Research Committee 51 of the International Sociological

Association (which focuses on sociocybernetics), have sought to identify the
sociocybernetic feedback loops which, it is argued, primarily control the operation of
society. On the basis of research largely conducted in the area of education, Raven
(1995) has, for example, argued that it is these sociocybernetic processes which
consistently undermine well intentioned public action and are currently heading our
species, at an exponentially increasing rate, toward extinction. See sustainability. He
suggests that an understanding of these systems processes will allow us to generate
the kind of (non "common-sense") targeted interventions that are required for things to
be otherwise - i.e. to halt the destruction of the planet.

Industrial designer, and founder of The Venus Project, Jacque Fresco advocates the

utilization ofsociocybernetics for the benefits it could bring to society. A major theme of
Fresco's is the concept of a resource-based economy that replaces the need for the
current monetary economy, which is "scarcity-oriented" or "scarcity-based". Fresco
argues that the world is rich in natural resources and energy and that — with modern
technology and judicious efficiency — the needs of the global population can be met
with abundance, while at the same time removing the current limitations of what is
deemed possible due to notions of economic viability.
Systems biology
Systems biology is a term used to describe a number of trends in bioscience research,
and a movement which draws on those trends. Proponents describe systems biology as
a biology-based inter-disciplinary study field that focuses on complex interactions
in biological systems, claiming that it uses a new perspective (holism instead
of reduction). Particularly from year 2000 onwards, the term is used widely in
the biosciences, and in a variety of contexts. An often stated ambition of systems
biology is the modeling and discovery of emergent properties, properties of a system
whose theoretical description is only possible using techniques which fall under the
remit of systems biology. The term systems biology is thought to have been created
by Ludwig von Bertalanffy in 1928
System dynamics
System Dynamics was founded in the late 1950s by Jay W. Forrester of the MIT Sloan
School of Management with the establishment of the MIT System Dynamics Group. At
that time, he began applying what he had learned about systems during his work
in electrical engineeringto everyday kinds of systems. Determining the exact date of the
founding of the field of system dynamics is difficult and involves a certain degree of
arbitrariness. Jay W. Forrester joined the faculty of the Sloan School at MIT in 1956,
where he then developed what is now System Dynamics. The first published article by
Jay W. Forrester in the Harvard Business Review on "Industrial Dynamics", was
published in 1958. The members of the System Dynamics Society have chosen 1957 to
mark the occasion as it is the year in which the work leading to that article, which
described the dynamics of a manufacturing supply chain, was done.

As an aspect of systems theory, system dynamics is a method for understanding the

dynamic behavior of complex systems. The basis of the method is the recognition that
the structure of any system — the many circular, interlocking, sometimes time-delayed
relationships among its components — is often just as important in determining its
behavior as the individual components themselves. Examples arechaos
theory and social dynamics. It is also claimed that, because there are often properties-
of-the-whole which cannot be found among the properties-of-the-elements, in some
cases the behavior of the whole cannot be explained in terms of the behavior of the
parts. An example is the properties of these letters which when considered together can
give rise to meaning which does not exist in the letters by themselves. This further
explains the integration of tools, like language, as a more parsimonious process in the
human application of easiest pathadaptability through interconnected systems.

Systems engineering

Systems engineering is an interdisciplinary approach and means for enabling the

realization and deployment of successful systems. It can be viewed as the application of
engineering techniques to the engineering of systems, as well as the application of a
systems approach to engineering efforts. Systems engineering integrates other
disciplines and specialty groups into a team effort, forming a structured development
process that proceeds from concept to production to operation and disposal. Systems
engineering considers both the business and the technical needs of all customers, with
the goal of providing a quality product that meets the user needs. [24]
Systems psychology
Systems psychology is a branch of psychology that studies human
behaviour and experience in complex systems. It is inspired by systems theory
and systems thinking, and based on the theoretical work of Roger Barker, Gregory
Bateson, Humberto Maturana and others. It is an approach in psychology, in which
groups and individuals, are considered as systems in homeostasis. Systems
psychology "includes the domain of engineering psychology, but in addition is more
concerned with societal systems and with the study of motivational, affective, cognitive
and group behavior than is engineering psychology." In systems psychology
"characteristics of organizational behaviour for example individual needs,
rewards, expectations, and attributes of the people interacting with the systems are
considered in the process in order to create an effective system". [26] The Systems
psychology includes an illusion of homeostatic systems, although most of the living
systems are in a continuous disequilibrium of various degrees.
Factors of Production:

To produce goods and services requires resources. We call these the factor

inputs available in theproduction process.

Economic resources are scarce relative to the infinite needs and wants of people and
businesses operating in the economy. It is important to use these
resources efficiently in order to maximise the output that can be produced from them. 

Economists make a distinction between three types of resources - land, labour

and capital.

 LAND
 LABOUR
 CAPITAL

LAND:

Land is the natural resources available for production. Some nations are endowed with
natural resources and exploit this by specialising in the extraction and production of
these resources - for example - the development of the North Sea Oil and Gas.

Only one major resource is for the most part free - the air we breathe. The rest are
scarce, because there are not enough natural resources in the world to satisfy the
demands of consumers and producers. Air is classified as a free good since
consumption by one person does not reduce the air available for others - a free good
does not have an opportunity cost.

LABOUR

Labour is the human input into the production process.

In the UK, of about 59 million inhabitants only approximately 35 million are of working
age (16-64 years for men and 16-59 for women), and of those about 28 million have
paid jobs. The employment level for people in the Uk economy is shown in the chart
below. Over recent years there has been a sustained increase (expansion) in the
employed labour force - providing more labour resources with which to increase total
output (GDP)

Two important points need to be remembered about labour as a resource:

A housewife, a keen gardener and a DIY enthusiast all produce goods and services, but
they do not get paid for them. They are producing non-marketed output and the output
of these people is not included in Gross Domestic Product

Not all labour is of the same quality. Some workers are more productive than others
because of the education, training and experience they have received

Human capital refers to the quality of labor resources, which can be improved

through investments in education, training, and health

ENTREPRENEURS

Entrepreneurs are people who organize other productive resources to make goods and
services. Some economists regard entrepreneurs as a specialist form of labour input.
Others believe that they deserve recognition as a separate factor of production in their
own right. 
The success and/or failure of a business often depends critically on the quality of
entrepreneurship.

CAPITAL

To an economist, capital has several meanings - including the finance raised to operate

a business. But normally the term capital means investment in goods that can produce
other goods in the future.

Capital refers to the machines, roads, factories, schools and office blocks which human
beings have produced in order to produce other goods and services. A modern
industrialized economy possesses a large amount of capital, and it is continually
increasing. Increases to the capital stock of a nation are called investment. Investment
is important if the economy is to achieve economic growth in the long run.

FIXED CAPITAL: 

Fixed capital includes machinery, plant and equipment, new technology, factories and
buildings - all goods designed to increase the productive potential of the economy in
future years. 

We also include the social capital created from Government investment spending, i.e.

the building of new schools, universities, hospitals and spending on expanding the
national road network. In the summer of 2000, Chancellor Gordon Brown announced
large scale increases in government spending on education, health and transport. One
reason behind this spending boost was the desire to increase the stock of social capital
available to meet the needs of the economy in a changing world.

See also public goods and merit goods

WORKING CAPITAL: 

Working capital includes stocks of finished and semi-finished goods (components)

that will be either consumed in the near or will be made into finished consumer goods.

Example: What resources go into making a car?

 

Focus on the main factor inputs:

 Labour: Workers employed directly in the car industry; engineers, designers, paint

sprayers, testers, management staff, transport & distribution workers etc

 Land: Natural resources used in manufacturer, land for plant and equipment

 Capital: Fixed capital: machinery, technology, buildings + Working capital: i.e. stocks of
raw materials and components

 Entrepreneurship (sometimes seen as a separate factor): management, risk-taker

"If God had meant there to be more than 2 factors of production, He would have made it
easier for us to draw three-dimensional diagrams"

Environmental Concern:
Deepening concerns about climate change, local and regional impacts on air, ground
and water pollution, and perceptions of increased risk to health and safety of community
residents from industrial activities have led to a significant increase in interest in
research at the intersection of environmental management and operations. The reasons
are both economic and political. On the political side, increasing public pressure has
focused on reducing the environmental impacts of industrial operations, with many new
laws and regulations which have resulted in setting standards and penalties for non-
compliance for environmentally intensive industrial operations. Economically, the stakes
are very large in both required capital investment as well as in changes in operating
policies and management systems. The research challenges are significant and have
captured the interest of operations management scholars and practitioners around the
globe. In recognition of the significance of these problems, POM will devote two special
issues this year to the subject of environmental management and operations. The
present and first of these issues is devoted to "Manufacturing and Eco-Logisitcs." The
second special issue, to follow later this year, will focus on "Integrating Operations and
Environmental Management Systems." This introduction provides some perspectives on
the themes represented in these two issues and, more generally, on the evolution of
research and practice in environmental management and operations.
In early environmental management frameworks, operating managers were only
involved at arms length, with separate organizational units having responsibility for
ensuring environmental excellence in product development, process design and
execution. This has clearly changed. Just as in the quality revolution of the 1980s and
the supply-chain revolution of the 1990s, it has become clear that best practice calls for
the integration of environmental management with on-going operations. The research
reported in these special issues underlines this on-going integration process in product
design and development, in shop-floor control and in logistics and supply chain design.
But the integration transcends traditional company boundaries to include also
employees, community residents where facilities are located and regulators. To
understand the logic behind this and the resulting challenges for operating managers
and researchers, let us consider some of the drivers that have led to these changes.

 Productive use of resources

Every organization has number of resources. For production of goods / services. Inputs
are used to get outputs plus some wastes. Thus we can write that:

Inputs = Outputs + Wastes

Or Inputs = Outputs + Wastes

Inputs Inputs Inputs
= Productivity + Wastivity

Productivity is one of the major performance criteria for evaluating a production system.
Productivity is a function of the relationship between production, input and output.
Productivity improvement results when a given output is achieved with less input or a
given output is achieved with less input. Productivity improvement is equally useful for
service industries, in recent times productivity has improved through extensive use of
computers and sophisticated machines. Both input and output can be expressed in
terms of energy units. Material energy represents raw material and equipment, and
mental energy represents brain work. Productivity improves when waste is either
decreased or eliminated, materially or mentally so that a larger percentage of energy
input is obtained as the output.
Productivity is a summary measure of the quantity and quality of work performance with
optimal utilization of scarce resources. It identifies success or failure in producing goods
in right quantity, of good quality and with good use of resources. Productivity involves
doing a job in the best possible way all the times. Manager should be able to influence
the productivity of their subordinates. The manager should also be able to integrate
these performance contributions to achieve the high levels of productivity at the
organizational levels. Researchers are rigorously trying to study the applications of
operations management to achieve the productivity improvement in the service industry.
In order to maximize the output and minimize the input it is necessary to control the
whole production system. It results in effective utilization of human and other resources.
There are two approaches for enhancing utilization of resources viz.

Increasing Productivity
Productivity is the ratio of output to input (Productivity = Output / Input). This ratio can
be increased/improved in the following ways:
o Increasing output while keeping inputs constant.
o Decreasing inputs while keep output constant.
Increasing output in greater proportion than the increase in input.

o Social concern and different types of operation:

Operation is related with the production and we are familiar with that in 1976 Adam
smith recognized it or define it as a division of labor. And it was most widely term form
1930-1950 within this time Taylor works more widely about this and from 1950 it is
included on serves sector from that time it creates a different way for getting job.
It makes a remarkable contribution on urbanization and by this process more fields of
jobs was created and people are now getting job very easily. It is good way that the
people is getting job without any kinds of problem and making the contribution on
society.
The production system makes our world as an urban and it is a way to urbanization our
world. By urbanization various kinds of production factory are build and they need much
more employee for their production through this process our unemployed people got job
in various sector and it’s good sign for our society and also for our better world.
Another most important factor is that by the urbanization reducing pressure on
agriculture and agricultural industry, it is good sign in one side those are not related with
the agricultural business. By this process many people live their old business and
getting new one and make some contribution on the society.

Q2: Production System Model and its characteristics?

 A production system is provided in which high production efficiency can be maintained

in the entire production line even in cases in which there is a lack of uniformity in the
rates at which the articles are actually supplied from a supply unit; the weighing unit,
packaging unit, quality inspection unit, or other constituent device has stopped
operating; or other problems have occurred. In this production system, a centralized
control system controls the set capacities of devices that constitute a production line
including a weighing device, a bagging machine, and other devices disposed
downstream, so that the capacities are varied on the basis of the detection results of a
supply rate detection sensor of a supply device, that is, on the basis of the actual rates
of supply from the supply device to the weighing device.
Presently managers develop their techniques that focuses mostly on efficiency of
manufacturing, and by this, worker were gone through under microscope. And they will
be under pressure for giving their best. Normally production systems follow three steps
those are input, transformation, and output. This can be seen from the following figure.

In a production system we can input anything like human resources, capital, material
services land and energy and by the transformation process we will transform it on other
product. Like we input an unskilled labor in our production system train him in a
systematic way and he will be a skilled labor. It is normally a production system.

Production System Characteristics:

A production system holds some characteristics, those are given below:

Stratum formulation:

A production system normally consists with hierarchy of the organization. And those are
related with the size of the organization and the function of the organization. And
stratum normally related with the size, hierarchy, and the function of the organization.

Specialization of function:
If the production system expands its area of production and large number of hierarchy
and each of them start performing specialized function. Then the interrogation function
of the specialization will give the maximum output or benefit.
Increase of entropy:

We know that everything is changing in our life day by day. We need to cope with those
changes. We will change our old employee by the new ones, we will replace our
machine by new machine and we will change our technology by new technology for
stability of our production. This is called increase of entropy.

Q 3 Upcoming issues of production system?

Following are some of the concepts / issues contributing to the increased production
and efficiency in production system.

Group Technology:

Group Technology represents a major breakthrough in the economic management

through a more efficient utilization of the country's available capacity, resources, capital,
services and production facilities. The hope to achieve a higher growth rate lies in this
vital system of production particularly for the developing nations which cannot afford the
capital intensive machining centers. The paper gives a brief account of Group
Technology applications in India and highlights the potential benefits of its introduction
in a multiproduct engineering industry.

Optimized Production Technology (OPT):

Optimized production technology is proprietary scheduling system using, computer

software which was originally developed by Dr. Eliyahu Galodratt and colleagues who
recognized that one of the most complex problems facing manufacturing organizations
was that of shop floor scheduling.

The system is based on the concept that there are two fundamental manufacturing
phenomena:

  Dependent events. All processes rely upon the completion of preceding

operations.
  Statistical fluctuations. Process times fluctuate around an average.

The effect of these phenomena is that the capacity of a plant must be unbalanced and
therefore bottlenecks are inevitable.
As defined by Johnson, the OPT method of scheduling dictates that material should
only be launched on to the shop floor at the rate at which it is consumed by the
bottleneck.

Furthermore, a time buffer of work should protect the production in the bottleneck.

This means, that work scheduled for day three arrives on day one, creating a buffer of
two days as protection against disruption in operations before the bottleneck.

The aim of OPT is to schedule bottleneck capacity in an efficient way. This schedule is
the master for the demand placed on other capacities.

The main features of OPT are described by Fax as follows:

Balance flow not capacity.
The level of utilization of any part of the system, which is not a bottleneck,
idependent on other constraints in the system, not the potential of the worker.

The utilization and activation of a resource are not synonymous.

An hour lost at the bottleneck is an hour lost for the total system.

An hour saved at a non-bottleneck is just a mirage.

Bottlenecks govern both throughput and inventories.

The transfer batch may not, and many times should not be equal to the process
batch.

The process batch should be variable, not fixed.

Schedules should be established by looking at all the constraints simultaneously.

Lead times are the results of the schedule and cannot be predetermined.

OPT is operated through OPT software which has been developed to control complex
manufacturing processes. The software will model the process and produce the
schedules in the shape of material and capacity plans using the OPT bottleneck
forward-loading techniques. The shop floor control system will then monitor progress
against the schedule and initiate any action to overcome shortfalls.

The benefits claimed for OPT are that it will schedule finite resources in order to achieve
maximum factory effectiveness.

Q3 (b) PRODUCTION SYSTEM AND INFORMATION TECHNOLOGY:

Producing food, agriculture, is not as Low-Tech as it was in the previous decades. High
quality products with low cost along all the production chain is essential for a company
to survive in today's global market. Yogev Consultants have more than twenty years of
experience in horticulture and managing small and medium packing facilities for the
European market and especially for the British market.  Yogev Consultants specializes
in quality procedures, operation proceduers, teawork and management styles building
to creacte better capacity and inproving post harvest procedures in order to hvae a
longer shelf life to the packed fresh product. The fast-moving, cyclical business, the new
demands of the end users and  as well the retail procurement managers forces
businesses to control production to help them respond quickly and cost-effectively to
customer demands or vanish.

To stay competitive and become more reactive to customer demands, medium and
large farms and small and medium fresh food exporting companies, need to move
forward from its manual manufacturing control  systems and implement (BITS) Business
Information Technology System to plan capacity, compare quality demands to end
product actual quality. To forecast production capacity according to inputs from quality
control audits of raw material and packing material. Not like regular businesses,
agricultural products that come from the field, is far away from the final product that the
end user sees on the supermarket shelf. Capacity planning and production procedures
should be adapted on-line according to the intake quality control audit due to the lack of
homogeneity of the raw material versus the quality definitions of the final product. Not
planning or planning wrongly the actual capacity will cause loss of raw material
especially, when dealing with sensitive product such as figs, strawberries and table-
grapes. Using BITS in agricultural production, helps the decision makers to plan
capacity based on the rapid changing data of the raw material that comes from the field
in order to pre-allocate the right crop to the best specified customer. The supports the
capacity planning and the production according based on the production procedures
and quality procedure to achieving best shelf-life for the packed product. Right capacity
and production planning using the BITS eliminates over-handling and supports the
production with the best post harvest procedures according to the present intake of raw
material. This approach enables the farm or the company to handle various customers,
with various quality specifications by utilizing the most out of the raw material. This
approach is different  from what is common among agricultural suppliers; to over qualify
product to specified customer on one hand and under qualify to another on the other
hand. applying BITS will give the producer a low cost commercial advantage.  

When applying the concept of BITS, it is anticipated to gain improvements production

and quality by upgrading the forecast of capacity and pre-allocation and therefore the
improving the handling of the fresh product. A better post harvest treatment from
customer's orders, through harvest and packing, to distribution. Using BITS in medium
size farms and medium and large agriculture companies will improve sales, better
stockholding, reduce production costs, and provide a competitive advantage.

A cross company BITS is known as an Enterprise Resource Planning system (ERP).

Small and medium farms and companies don't really need to go that far with the BITS to
ERP. It is advised to plan to have such a system (ERP) when choosing the actual
program, but at the beginning it is advised to start with the first layer (TIS)
Transformation Information System but not more that the second layer (MIS) Managers
Information System. This will provide the users:

1. Capacity to be planned by type of packaging, across pack houses or teams within a

pack house, based on the TIS master production schedule and MIS requirements.

2. Calculating weekly orders and production capacities by; packaging, color and size, to
be used in TIS for subsequent material requirement processing MIS. These weekly
orders are consistent with the overall plan created in BRP (if exists or by manual
decision making), and provide the optimum achievement of the priorities calculated by
the TIS and MIS.

3. Calculating of which orders should be released in TIS first, based on urgency and
minimum number of packaging and qualities of raw material changes in a day for a
team, which allows TIS to control the issue of materials to the teams by calculating the
actual capacity of each production site.

4. Decision support via various management information reports in the MIS, including
the monitoring of the outstanding plan using actual production data captured by TIS.

Yogev-Consultants, is a body to facilitate the bridge between the farm's or company's

need to the Information Technology specialists (programmers). The stage of defining
the needs of the user to the programmers is crucial. The specialists most of the time
have no idea what is the nature of agriculture production and the farmers and company
owners don't know what the BITS can provide. Purchasing a "shelf-program" or a "tailor-
made program" is a very important decision. When purchasing a "shelf-program"
Yogev-Consultants can facilitate the definitions to adapt minor changes to fit the
company's needs. When purchasing a "tailor-made program" in is most crucial to define
the needs properly in order to cut expensive costs of doing things wrong at the first
time.  
Q4 Explain quality customer product and quality of design from TQM
perspective?

Total Quality Management (TQM) is an approach that seeks to improve quality and
performance which will meet or exceed customer expectations. This can be achieved by
integrating all quality-related functions and processes throughout the company. TQM
looks at the overall quality measures used by a company including managing quality
design and development, quality control and maintenance, quality improvement, and
quality assurance. TQM takes into account all quality measures taken at all levels and
involving all company employees.

Origins of TQM

Total quality management has evolved from the quality assurance methods that were
first developed around the time of the First World War. The war effort led to large scale
manufacturing efforts that often produced poor quality. To help correct this, quality
inspectors were introduced on the production line to ensure that the level of failures due
to quality was minimized.

After the First World War, quality inspection became more commonplace in
manufacturing environments and this led to the introduction of Statistical Quality Control
(SQC), a theory developed by Dr. W. Edwards Deming. This quality method provided a
statistical method of quality based on sampling. Where it was not possible to inspect
every item, a sample was tested for quality. The theory of SQC was based on the notion
that a variation in the production process leads to variation in the end product. If the
variation in the process could be removed this would lead to a higher level of quality in
the end product.

After World War Two, the industrial manufacturers in Japan produced poor quality
items. In a response to this, the Japanese Union of Scientists and Engineers invited Dr.
Deming to train engineers in quality processes. By the 1950’s quality control was an
integral part of Japanese manufacturing and was adopted by all levels of workers within
an organization.

By the 1970’s the notion of total quality was being discussed. This was seen as
company-wide quality control that involves all employees from top management to the
workers, in quality control. In the next decade more non-Japanese companies were
introducing quality management procedures that based on the results seen in Japan.
The new wave of quality control became known as Total Quality Management, which
was used to describe the many quality-focused strategies and techniques that became
the center of focus for the quality movement.

The definition of quality depends on the role of the people defining it. Most consumers
have a difficult time defining quality, but they know it when they see it. For example,
although you probably have an opinion as to which manufacturer of athletic shoes
provides the highest quality, it would probably be difficult for you to define your quality
standard in precise terms. Also, your friends may have different opinions regarding
which athletic shoes are of highest quality. The difficulty in defining quality exists
regardless of product, and this is true for both manufacturing and service organizations.
Think about how difficult it may be to define quality
for products such as airline services, child day-care facilities, college classes, or even
OM textbooks. Further complicating the issue is that the meaning of quality has
changed over time.
Today, there is no single universal definition of quality. Some people view quality as
“performance to standards.”Others view it as “meeting the customer’s needs” or
“satisfying the customer.” Let’s look at some of the more common definitions of quality.
Customer Expectations
Customer is defined as anyone who receives that which is produced by the individual
or organization that has value. Customer expectations are continuously
increasing. Brand loyalty is a thing of the past. Customers seek out products and
producers that are best able to satisfy their requirements. A product does not need to
be rated highest by customers on all dimensions, only on those they think are
important.
Customer Satisfaction
Customer satisfaction is a critical component of profitability.
Customer loyalty is a major contributor to sustainable profit growth. To achieve
success, you must make superior service second nature of your organization. A
seamless integration of all components in the service-profit chain – employee
satisfaction, value creation, customer satisfaction, customer loyalty, and profit and
growth – links all the critical dynamics of top customer service.
Customer Intimacy Works
Customer intimacy starts with a commitment to deliver the best results to each
customer. That's why it works.3 Today's customers refuse to be anonymous. They
continue to raise the level of their requirements, but their range extends beyond best
price and best product. Today's customers want exactly the right selection of products
or services that will help them get exactly the total solution they have in mind. Now,
more than ever, customers hunger for superior results from the products or services
they use. And customer intimacy gives it to them.
Kaizen & Quality Control Circles
TQC is a management tool for improving total performance. TQC means
organized Kaizen activities involving everyone in a company – managers and workers
– in a totally systemic and integrated effort toward improving performance at every
level. It is to lead to increased customer satisfaction through satisfying such corporate
cross-functional goals as quality, cost, scheduling, manpower development, and new
product development.
Q5 WHAT IS CONCEPT AND NEED OF FORECASTING IN PRODUCTION?

Process of judging how much production is required to meet estimated sales in a

particular forecasting period. Considerations include previous sales, the general state of
the economy, consumer preferences, and competitive products. Production forecasting
decisions affect budgetary and scheduling decisions.
OR
It is a process of estimation a future event by casting forward past data. The past data
are systematically combined in a predetermined way to obtain the estimate of the future.
In some situations forecast regarding single indicator is sufficient, where as in some
other situations forecast regarding several indicators is necessary. The number of
indicators and the degree of detail required in the forecast depends on the intended use
of the forecast.

Forecast (time in future)

Present Five Years and More

Forecasting time horizon

There are two basic reasons for the need of forecast in any field more so in
production/operations management.
1) Purpose:
Any action/plan is contemplated/devised in the present to take care of some
contingency accruing out of a situation/condition or set of conditions set in future.
 These future conditions offer a purpose/target to be achieved so as to take
advantage of or to minimize the impact of these future conditions.
An action/plan cannot be taken/divided in void-without any
purpose/objective/target. Any plan or action is to achieve something.
2) Time
To prepare a plan, to organize resources for its implementation, to implement
and complete the plan. All these need time as resource. Some situations need
very little time. Some other situations need several yeas of time. Therefore if
future forecast is available in advance. Appropriate actions can be planned and
implemented in time.
Q5 (b) WHAT ARE THE STEPS IN FORECASTING PROCESS?

General: The first step in planning production and inventory management activities is
forecasting future demand. The American Production and Inventory Control Society
(APICS) consider a forecast to be an objective procedure, using data collected over
time. A forecast involves an assumption that current trends will continue into the future.
The term prediction is used to describe any activity that includes subjective evaluation.
This section considers both objective and subjective procedures. However, the focus of
the section is on objective procedures.

The foundation for any production activity is either an actual order or the forecast of
future orders. In a make-to-stock environment, production activities arc based entirely
on forecasts, because orders must be filled from existing stock. In a make-to-order
environment, however, production activities are typically scheduled using Model-Option
logic.

A discussion of forecasting usually focuses on quantitative techniques to manipulate

data, neglecting how the data are obtained. We should recognize, however, that the
maxim “garbage in, garbage out” applies to forecasting as well as to other computerized
techniques. Therefore, we first discuss bow the data are obtained, verified, and
recorded. No forecasting system can afford to neglect these critical activities.

It is also important to understand that whenever there is reason to suspect that the
future will not be like the past, a prediction is preferable to a forecast, Electric utilities
experienced average annual demand growth of 7 percent to 8 percent for a quarter
century following the end of World War II. When the creation of OPEC sent oil prices
skyrocketing, the companies continued to forecast based on the past, ignoring
predictions that the rate of demand growth must fall in response to rising prices. The
oversupply of power plants (particularly nuclear power plants) that resulted is well
known. Before making a fore cast, consider whether a prediction is more appropriate.

Production planning personnel are not responsible for forecasting for the long-range
planning that is needed for planning facility construction and major equipment
purchases. Rather, they perform shorter-range forecasts used in medium-term
production planning and short-range master production scheduling. In this manual, we
limit our discussion to shorter-range forecasts that are used to schedule production and
to make short-term capacity plans.

Please notice that all of the complex detail of Forecasting is compressed in this section
to give you a sense of what’s needed for your company, instead of dumping too much
on you when it is not necessary!

Forecasting techniques are classified as qualitative, involving primarily judgment, and

quantitative, involving primarily historical data and mathematical models. Quantitative
techniques use both intrinsic data, data pertaining to the item to be forecast, and
extrinsic data, All quantitative forecasting methods involve the implicit assumption that
the near future will be similar to the recent past. To be reliable, all quantitative
forecasting techniques require accurate data. Insuring accurate data requires that the
data be monitored carefully to eliminate data input error and to adjust for one-time
occurrences, such as special promotions.

The study of a set of data describing demand over time is called time series analysis.
Three common techniques of time series analysis are moving averages, exponential
smoothing, and time series decomposition. Time series decomposition is the most
accurate of the three, but there is often too little data to permit decomposition, Winters'
three-factor model, the most complex exponential smoothing application, is a good
compromise whenever seasonal variation in demand exists but there is insufficient data
to use time series decomposition.

All forecasts are subject to error, even when the model used for the fore cast is properly
defined. Production and inventory managers require an estimate of the average forecast
error to determine appropriate levels of safety stock and other precautionary measures.
The most frequently used measure of forecast error is the mean absolute deviation
(MAD), the average of the absolute values of the forecasts minus the actual demands.

DATA

Forecasting systems extrapolate time series data. A time series is a historical record of

the past activity. A fundamental assumption for extrapolation is that the future is related
to the past in some way. This assumption does not require tomorrow to be just like
today; it only requires stable relationships. Even in today's rapidly changing
environment, fundamental relationships usually hold, at least in the short term. Some
characteristics to note are the time intervals (weeks, months, years, etc.), the
dimensions (units, dollars, kilograms, etc.), and the degree of data variability.

Time series data are of two types, intrinsic and extrinsic. Intrinsic time series data are
data concerning past sales of the product to be forecast. Extrinsic time series data are
data that are external but are related to sales of the product. For example, data
describing sales of a related product are extrinsic. Before examining formal techniques
to extrapolate time series data, let's first took at some sources of extrinsic data.
Extrinsic Data Sources

Several sources for extrinsic data exist. One source is demographic data, data related
to the characteristics of our customers. Suppose we wish to forecast sales for TRW
automotive replacement parts by region. Data clearly of interest are data related to
population trends in each region. Beyond total population data, we are interested in the
driving age population, the driving age population by specific age group, and the
population by income category. Another item of interest is the average time a car is
kept. In the early 1980s the length of time people kept their cars began increasing,
probably because of the in creasing cost of new cars. Presumably, as the average
automobile age increases, demand for replacement parts will also increase.

Demographic data are maintained in most large libraries, especially university libraries.
Most such libraries employ research librarians whose job is to know where to find these
data.

Data can also be collected within a company. Foremost among company data sources are
various types of market intelligence, such as survey information, test panel data, and sales force
feedback, Frequently, this type of data is considered of questionable value to production control,
but the fault is often in its interpretation, not in the quality of the data itself. Market
survey data are primarily obtained to aid in product promotion and new product
introduction decisions. The specific procedures to conduct a market survey will not be
covered in this text. We wish to point out that market survey data, because they are
intended primarily for marketing purposes, must be viewed carefully in making
production decisions, For example, a survey that establishes an intent to increase
purchases may be useful in planning production capacity. Also the sample may shed
light on the marketing mix (size, color, configuration) of the demand. These attributes
are important in determining manufacturing mix.

Another source of data is sales force feedback. As salespeople contact customers or

potential buyers, they accumulate information about what customers say they want and
what competitors are offering or plan to offer (or withdraw from) the market. There are
several difficulties in using these data for production decisions. Because the data are
not obtainable in an orderly and regular manner, their comparability to other information
is difficult to establish. Does the reported fact that Customer X intends to buy 15 percent
more next month represent demand over that already scheduled? Since it is quite
common to use already forecast sales to set sales force goals and hence
compensation, the incentive exists to manipulate or withhold data to influence personal
pay. The extent of deliberate bias is difficult to determine, and thus sales force feed
back is questionable, but not altogether unusable.

Modifying Intrinsic Data

At this point we will examine some sample time series data originating within a company
and discuss the need for data modification. Activities that often bias data are sales
promotion and new advertising campaigns. While it is obvious that production should be
aware of any such activities, it nevertheless happens that such activities are not
communicated adequately. Perhaps of greater con cern is that the effects of such
campaigns or promotions cannot be estimated accurately. Marketing and manufacturing
personnel must share responsibility for both the forecast and the manufacturing
schedule. Too often marketing estimates that X units will be sold; manufacturing, in the
belief that marketing's estimates are optimistic, makes X less 10 percent. When the
results are in, each blames the other for excess inventories or shortages. The only way
to eliminate this problem is to have a master schedule on which both groups agree.

Two issues that relate to forecasting when special promotions occur are forecasting
sales for the period after the promotion and adjusting the data to reflect the promotion.
Consider the following sequence of sales data:

Month  1  2  3  4  5

Sales 100 100  100 200 ?

Given this sequence, what sales prediction would you make for Month 57 Write your
answer before reading further. When this question was asked of a large audience of
experienced forecasters at a 1983 APICS conference, a majority responded that they
would forecast 0 for Month 5. Their reasoning was that in Month 4 there must have
been a promotion, causing customers to overstock. This would, in turn, result in no
orders until customers used their existing stocks.

No time series approach would reach this conclusion, logical though it is. Furthermore,
a time series analysis package will derive distorted forecasts, given these data.
Suppose a nonrecurring promotion did occur in Month 4 and sales for the first six
months were:

Month  1  2  3  4  5 6

Sales 100 100  100 200 15 85

Clearly, a more useful set of sales data to give the forecasting system is simply six months of
demand of 100 units each. This example demonstrates that modification of sales data is
sometimes justified to improve forecast accuracy.

Data modification should be limited to correction of large anomalies having known causes.
Furthermore, these causes should not recur on a regular basis. Data should not be modified
because it appears to be peculiar and no cause for the irregularity is known. It is a mistake to
alter data simply to reduce random variation. One arrives at too small an estimate of forecast
error and, worse, too little effort to protect against forecast error.

Data Quality and Accuracy

The validity and appropriateness of our data sources must be ascertained. We must also control
for errors and make appropriate modifications for non recurring events.

An important source of errors is often found in data recording. These errors may be with regard
to numeric quantity (recording 71 instead of 11) or identification (part 6A5Z instead of 6A52) or
dimensionality (seven dozen in place of seven gross). The data processing system, whether
manual or computerized, should be developed to find such errors, if possible, and to correct
them or at least point them out for further investigation as to cause.

Check Digits: Check digits provide a way to catch most recording errors regarding part
numbers. Errors in recording a part number are particularly insidious because they create errors
in the data for two parts: the part that should have been entered and the part that was entered
erroneously. Most check digits involve an algebraic manipulation of the first n - 1 digits of an n
digit number to obtain the correct value for the nth digit. The example presented here uses a
simpler scheme than is usually used, but serves to illustrate the general principle. Suppose a
company has 500 end items that it has numbered 001 to 500. The company desires to add a
check digit to the numbering system. A simple procedure is to use

X4 = (X1 + (2)X2 + (3)X3) mod 10

That is, the fourth digit is found by adding the first digit plus twice the second digit plus three
times the third digit and extracting the unit position digit from the sum. Using this procedure, the
check digit for part 134 is (1 + 2 x 3 + 3 x 4) mod 10 = (1 + 6 + 12) mod 10 19 mod 10 = 9. (The
mod operator yields the remainder after long division is performed.) The revised part number
becomes 1349. A common error in recording data is to transpose two digits. If part number 1349
is incorrectly recorded as 1439, the check digit procedure evaluates the check digit as (1 + 8 +
9) mod 10 =18 mod 10 = 8. The computer will refuse to accept this part number entry because
the final digit must be 8 not 9. Well designed check digit systems will catch more than 99
percent of all errors in recording part numbers

Demand Filters: A demand filter is created by recording a range of reason able data for each
part number. If in the past several months demand never has fallen below 100 or exceeded 200,
100 and 200 might be set as limits. The computer would automatically question any entry less
than 100 or greater than 200. To avoid too much manual intervention, we must establish
appropriate limits as a compromise between chasing down nonexistent errors and allowing
erroneous data to enter the system. In choosing a value for a demand filter, one should use a
fairly wide band for unimportant items and a narrow band for expensive and high volume items.
The reason for a variable band width is that for low dollar volume items it is cheaper to carry
safety stock to cover the effects of the error than it is to spend valuable management time
correcting the error. For high dollar volume items, the reverse is true.

Orders Versus Shipments: Many forecasting errors have been made through failure to
recognize the difference between orders and shipments. For example, orders and shipments
differ in timing. Orders precede shipments by manufacturing lead time (make-to-order
environments) or at least by order filling time (make-to-stock environments). Quantities shipped
may be less than quantities ordered for a variety of reasons. Partial shipments may be made
over a period of time to fill one order. Shipments may exceed orders because spare parts or
allowances for defects may be included. Whatever the reason, the distinction between orders
and shipments must be taken into account when using historical data to forecast.

Price Changes: Another factor to consider is that price changes may cause increased sales
dollars but not increased unit sales. Historical variations in unit prices are frequently overlooked,
and errors arise because a single conversion factor is used to translate past sales dollars into
past unit sales. For example, a price increase from $2.50 to $2.75 last July means that the first
six months' sales of $30,000 and the second half sales of $32,000 actually represent a decline
in unit sales.

Summary of Data Quality: To summarize, one must examine the source and accuracy of the
data on which forecasts will be built. No amount of ordinary photographic development
technique can transform a fuzzy negative into a clear, sharp picture. Similarly, no forecasting
technique can transform poor data into a good forecast. We must next present an overview of
the forecasting process, including data considerations.

FORECAST HORIZON AND SCOPE

The forecast horizon for a product must be at least as long as that product's total lead time. If
the forecast horizon is shorter, then the earliest production activities, such as placing purchase
orders for long lead time components, are performed with insufficient information. The forecast
horizon should be as long as possible, i.e., as long as can be forecast accurately. The
frequency of fore cast updating depends on the value of the information obtained and on the
volatility of product sales. Forecasts should be updated frequently for high dollar volume items
less frequently for low dollar volume items. For high dollar volume items, the additional accuracy
obtained by frequent updating is recovered by eliminating expensive safety stock. For items
having volatile sales, i.e., sales subject to large changes in volume, frequent forecast updating
helps to avoid expensive overproduction and underproduction. The value of the additional
information must exceed the cost of obtaining it.

In general, forecasts are made for product groups rather than for individual items. Forecasts can
then be divided by historical product mix to obtain individual item forecasts. Forecasts for
individual items are rarely needed.

Consider the case of Wellco Carpet. To plan the weaving operation, one needs a forecast of
carpet sales grouped by type of weave. We do not need to know how much of each weave will
be dyed each color to plan weaving. Similarly, to plan the dyeing operation our principle concern
is the quantity of carpet to be dyed each color, independent of weave type.

Information on both weave style and color can be obtained from the same forecast. Suppose
our forecast calls for 100,000 square yards of carpet to be sold per day on the average.
Suppose also that 23 percent of past sales was for Weave A and 13 percent was for Weave B.
Then our plan for weaving calls for 23,000 square yards of Weave A and 18,000 square yards
of Weave B. Using the same aggregate forecast of carpet sales, one can apply historical color
mixes to plan the dyeing operation.
BASIC FORECASTING TECHNIQUES

Forecasting techniques (using the term forecasting in its broadest sense) can be divided into
two categories: qualitative and quantitative. The former, which may involve numbers, uses
methodology that is not mathematical. Qualitative techniques rely on judgment, intuition, and
subjective evaluation. Among the major techniques within this category are market research
(surveys), Delphi (panel consensus), historical analogy, and management estimation (guess). In
APICS terminology, all of these techniques represent predictions rather than forecasts (in the
narrow sense). The other class of techniques, quantitative, can be divided into intrinsic and
extrinsic types.

Intrinsic techniques often are called time series analysis techniques. They involve mathematical
manipulation of the demand history for an item. These techniques are the most commonly used
in forecasting for production and inventory control. The other group of quantitative techniques,
extrinsic methods, creates a forecast by attempting to relate demand for an item .to data about
another item, a group of items, or outside factors (such as general economic conditions).

Qualitative Techniques

We mentioned some aspects of market research in discussing data sources. While these
techniques are based on good theory and can yield valuable information for marketing
decisions, they are not intended directly to support inventory decisions. Rather, they are
intended to support product development and promotion strategies. Data gathered by these
methods should be considered in some aggregate inventory or capacity planning decisions, but
should not be the sole data source for such decisions.

The Delphi, or panel consensus, method may be useful in technological forecasting, that is, in
predicting the general state of the market, economy, or technological advances five or more
years from now, based on expert opinion, (The name for this method comes from the ancient
Greek oracles of Delphi who forecast future events.) The process of creating a Delphi forecast
is a variation of the following: A panel of futurists is asked a question, such as, In the next ten
years which consumer products do you envision containing micro processors as an integral
part? Each specialist independently submits a list of such items to the panel coordinator. The
combined lists then are sent back to each panel member for evaluation and rating of likelihood
of occurrence. Panel members may see something that they hadn't thought of and rate it highly.
Also members may have second thoughts about items they themselves previously submitted.
After a sufficient number of cycles (generally two or three), the result is a list with high
consensus. The Delphi technique is not a suitable technique for short-range forecasting,
certainly not for individual products.

When attempting to forecast demand for a new item, one faces a short age of historical data. A
useful technique is to examine the demand history for an analogous product. If the related
product is very similar, quantitative techniques may be used. But if the relationship is tenuous, it
may be more appropriate to relate the products only qualitatively in order to get an impression of
demand patterns or aggregate demand. For example, the seasonal demand pattern for an
established product such as tennis balls may be used to estimate the expected demand pattern
for tennis gloves. The actual level'. and trends for the latter cannot be determined in this manner
with any precision, but the seasonal pattern may be expected to be similar.

Finally, we must not overlook management estimation (intuition) as prediction method. It is

widely practiced with regard to new products or unexpected changes in demand for established
product lines. Not everyone has estimation talent, however, Some studies have shown that a
mathematical technique, consistently followed, will lead to better results than the "expert
modification" of those forecasts. Nonetheless, many mathematical technique need significant
quantities of historical data that may not be available. When substantial data are lacking,
subjective management judgment may be the better alternative.

Quantitative Techniques

Intrinsic techniques use the time-sequenced history of activity for a particular. item as source
data to forecast future activity for that item. Such a history is commonly referred to as a time
series. The characteristics of such series can be labeled in various' ways, and the algebraic
representation of such graphs can be accomplished b' a variety of methods.

Generally, a time series can be thought of as consisting of four components or underlying

factors: (1) cyclical, (2) trend, (3) seasonal, and (4) random (or irregular). The cyclical factor
traditionally refers to the business cycle to long-range trends in the overall economy. The
cyclical factor can be very important in forecasting for long-range planning. However, it is of little
us in forecasting demand for individual products, which rarely have sufficient data to permit a
distinction between the effect of the business cycle and the effect of the product life cycle. For
that reason, the time series used for short term forecasting generally have only trend, seasonal,
and random components. The trend component generally is modeled as a line, which is
described by an intercept or base level, which we designate L, and a slope, which we designate
T. The trend line may be modified by a seasonal phenomenon (S). All data are somewhat
muddled by a random, irregular, or otherwise unpredictable variable(R).

Mathematically this process is based on a combination multiplicative and additive model of the
following sort:

D = (L + T) x S + R

where D is demand. In this version F, trend, is expressed in the same units as £, level, and T
may be positive or negative, R, random, is expressed in the same units, Its expected value is 0.
S, seasonal, is a dimensionless number having an expected value of 1. For example, we may
know that the demand for a certain Bruce Springsteen anthology is averaging 10,000 units per
month, with a trend of minus 500 per month (the pattern is to sell 500 fewer units each month).
However, the month currently being forecast is December; due to seasonal variation, December
averages 40 percent higher than the typical month, Average forecast error using this model has
been 800 units. In this example the demand forecast is

D= (10,000 - 500) x 1,4 + 0 = 13,300 units

Because the average forecast error has been 800 units, and because errors twice the average
are not uncommon occurrences, we would not be surprised if December's actual sales were
anywhere from 13,300 - 1,600 = 11,700 units to 13,300 + 1,600 = 14,900 units.
TIME SERIES ANALYSIS

This section discusses some of the most common techniques for forecasting from intrinsic time
series without explicitly looking for seasonal or trend factors. It also examines time series
decomposition.

Moving Averages: Perhaps the simplest of all time series forecasting techniques is a moving
average. To use this method, we calculate the average of, say, three periods of actual demand
and use that to forecast the next period's demand. If this three-period average is to be used as
a forecast, it would have to forecast demand in a future period, such as Period 8.

Because each average moves ahead one period each time, dropping the oldest value and
adding the most recent, this procedure is called a moving average. The number of periods to
use in computing the average may be anything from 2 to 12 or more, with 3 or 4 periods being
common. If the time series is such that there is no upward or downward trend, then the moving
average is a satisfactory technique. If, how-ever, there is any trend or any seasonal effect, then
the moving average will not work very well. Moving averages lag behind any trends.