CBAC101–Operations Management and Total Quality Management

MAE LOU FRIA B. ABARIENTOS

BG11
 EQUIPMENT SELECTION AND FACILITY LAYOUT

Operations management is the strategic administration of production processes and

personnel to maximize output, minimize errors and continually enhance product quality while
increasing its demand to the market. Under operations management, there are many methods to
consider, one of these methods is the “Equipment Selection and Facility Layout”. Equipment
selection involves strategically choosing which types of equipment and what kind of work
processes to include in the production of a product. On the other hand, facility layout basically
refers to the space in which a business’s activities takes place. Equipment selection and facility
layout are both important elements of operations management and it does play a crucial in
achieving the management goal.

Selecting equipment to be used in production may vary according to what the industry is
producing. It is necessary to conduct a research about the equipment you are going to buy and
use, since it involves lot money. In order to succeed in proper selecting of equipment we must
consider these three essential factors to consider before buying equipment. First, the
equipment’s quality, it doesn’t matter whether its price cost too much as long as you have the
assurance of having a good quality equipment because good quality equipment results to good
production. Having good quality equipment can save maintenance and repair costs, and at the
same time it can prevent hazardous events during production. Second, technology, embrace
technology because it is an ally you want on your side. If you have heavy equipment that has the
latest technology, it will surely impact and enhance the overall performance of your business.
These machines will get more work done in less time and less work force, the work would be
smoother, helping them complete the projects faster and on time. Lastly, knowledge of using the
equipment, efficient and reliable lifting equipment will do you no good if you do not have the
skill or dexterity to use it. Working with heavy machinery is quite challenging and poses a
workplace safety hazard if not handled carefully. Ensure that only trained and specialized
machine operators are in-charge of running such equipment/machines to keep the workplace safe
and eliminate accidents. The proper selection of equipment is the company’s biggest assets, so it
is necessary to invest wisely in it to secure the future.

Facility layout is an important element of a business’s overall operations, both in terms of

maximizing the effectiveness of the production process and meeting the needs of employees. The
basic objective of facility layout is to ensure a smooth flow of work, material, and information
through a system. However, facility layout must be considered very carefully because the
company do not want to constantly redesign the facility, it will cost too much time, effort and
money. Weiss and Gershon summarize that some of the goals in designing the facility are to
ensure a minimum amount of materials handling, to avoid bottlenecks, to minimize machine
interference, to ensure employee high morale and safety, and to ensure flexibility. The key to
good facility layout is the integration of the needs of people (personal, employees and customer),
materials (raw, in process, and finished), and machinery in such a way that they create a single,
well-functioning system. Good facility layout is also important from the perspective of attracting
investments, long-term commitments and its considerable bearing on the efficiency/cost ratio for
short-term application.

Equipment selection and facility layout both play a crucial role in the operations
management, these two are interrelated to each other that when there is problem in equipment
selection it can also affect the its facility layout. These two elements must be done accordingly in
order to achieve success and to continue its progress. Choosing the right equipment and laying
out process in the most efficient manner can increase production output, decrease operational
costs and errors, and enhance product quality. The ultimate goals of operations managers
continually re-evaluate their production place and setups to look for opportunities to save money
or boost production effectiveness.
LINE BALANCING- The process of assigning tasks to workstations in such a way that the
workstations have approximately equal time requirements.

PROBLEM: (p.277- OPM 11th ed)

1. An assembly line with 17 tasks is to be balanced. The longest task is 2.4 minutes, and the total
time for all tasks is 18 minutes. The line will operate for 450 minutes per day.

a. What are the minimum and maximum cycle times?

b. What range of output is theoretically possible for the line?

c. What is the minimum number of workstations needed if the maximum output rate is to be
sought?

d. What cycle time will provide an output rate of 125 units per day?

e. What output potential will result if the cycle time is (1) 9 minutes? (2) 15 minutes?

SOLUTIONS:
a. OT= 450 MINUTES
minimum cycle time= 2.4 minutes (length of the longest tasks)
maximum cycle time= 18 minutes (task times)

b. Range of ouput:
2.4 min: 450/2.4 = 187.5units
18min: 450/18 = 25 units

c. N = 187.5(18)/450 = 7.5 or 8

d. CT = 450/125 = 3.6 minutes per cycle

e. 1. CT = 9 minutes: 450/9 = 50 units

2. CT = 15 minutes: 450/1 = 30 units
 LOCATION DECISION

Why that location decision is important to a business? What is its role in order to achieve
success? Is it okay to disregard location decision? How is the business going to conduct a
decision regarding to location? In this paper, we are able to understand location decision and
ponder important details regarding location decision.

Location decision simply means choosing a business location for business. It is not so
very important decision for the business. Location decision is important for both small and large
organization. It is very important in all types of business units in such way that it affects the cost,
selling price, and demand of the product. For businesses in some sectors, location really is
important. For others, it is relatively minor decision. Its main aim is to find out the best
alternative from different choices. The key is to consider the main issues faced by a business
choosing a business location and to address the most appropriate way of making a choice. It is a
non-recurring heavy expenditure. Large companies take the help of different professionals like
lawyers, accountants, environmentalist, and many others for selecting the proper location of
plant.

There is a need or importance of location decision and planning because it aids in (1)
expansion, if the company wants expansion and wants to diversify its activities, it will have to
search for a new location for setting up its new business. (2) Cost advantages, if an existing
plant is not near in a market place, it will increase the transport cost and this will increase the
cost of the product. To avoid this thing to happen the best thing to do is find a place near the
market where customers can easily reach and the demand is still there. (3) Discovery of raw
material, if a business is going to decide for location, it must be near to where the raw materials
are located and available. (4) Additional facilities, more facility means more production, more
production means more demand and more demand means more profit. New facilities may be
necessary to meet rising demand and it is good to the business. (5) Mergers, joint ventures may
lead to start a new unit at a new-location. It may even require closure of an existing plant unit. In
mergers, production is mostly started at a new place as per the new-agreement. (6) Increasing
product demand, demand for the company’s product may increase at other places and it is good
to start negotiating to other people outside the country for more opportunity. These are some
importance of location decision that may result to an overall success.

Location decision is very crucial and important it is not productive to disregard it. Once
the location decision is made, it is difficult and costly to undo. The costs of moving an operation
are often significant and run the risk of inconveniencing the customers and staff. It is always best
to get the location decision right first time. Running a business is difficult, and planning and
making decision for location are too risky but there is no such thing as the perfect business
location. Every choice made involves having to balance the supply (cost) and demand (revenue)
factors. The more it is getting hard the more chance of being more successful, and I think the
most important thing here in location decision is you are willing to take the risk, and that risk
you have taken will be your foundation and strength to continue.

A good location is one that delivers benefits to the company, such as competitive unit
costs through a combination of a productive and efficiency labor supply, acceptable location
overheads and cost-effective access to inputs. It also brings optimal revenue opportunities,
acceptable rate of return on investments, sufficient production capacity, and access to a labor
force.
EVALUATING LEARNING ALTERNATIVES: Center of Gravity Method

Center of gravity method- is a method to determine the location of a facility that will minimize
shipping costs or travel time to various destinations.

PROBLEMS: (p361- OPM 11th ed)

1. A clothing manufacturer produces women’s clothes at four locations in Mexico. Relative

locations have been determined, as shown in the table below. The location of a center shipping
point for bolts of clothes must now be determined. Weekly quantities to be shipped to each
location are also shown in the table. Determine the coordinates of the location that will minimize
distribution cost.

LOCATION (X,Y) WEEKLY QUANTITY

A 5,7 15

B 6,9 20

C 3,9 25

D 9,4 30

90

SOLUTIONS:

ẋ = 5(15) + 6(20) + 3(25) + 9(30) = 540 = 6.0

90 90
ȳ = 7(15) + 9(20) + 9(25) + 4(30) = 630 = 7.0
90 90
Hence, the center of gravity has the coordinate x= 6.0, and y= 7.0.
 TOTAL QUALITY MANAGEMENT
A primary role of management is to lead an organization in its daily operation and to
maintain it as a viable entity into the future. (OPM 11th edition p.390)
As mentioned in the book of Stevenson William, Operations Management 11 th edition
total quality management is a philosophy that involves everyone in an organization in a continual
effort to improve quality and achieve customer satisfaction. Quality has become an important
factor in both of these objectives. It refers to a quest for quality in an organization. There are
three key philosophies mentioned in the book. One is never-ending push to improve, which is
referred to as continuous improvement; the second is the involvement of everyone in the
organization; and the third is a goal of customer satisfaction, which meeting or exceeding
customer expectations. Total quality management systems are intended to prevent poor quality
from occurring. (OPM 11th edition p.391)
As I go further in this topic regarding Operations Management, I am able to understand
that above all elements there is total quality management. It is like a management system having
its productive elements wherein a company attains organizational advancement through a
commitment to customer requirements. A company meets those requirements and empowers the
entire employee in each department to maintain high quality standards and strive for a
continuous improvement. Total quality management is the predecessor of many quality
management systems.
To achieve quality product we have to achieve the quality management in the entire
company. Nevertheless, what is quality management first? Quality management is a measure of
the level of acceptability of a product or service. According to ASQ quality glossary, quality
management defines as the “application of a quality management system in managing a process
to achieve maximum customer satisfaction at the lowest overall cost to the organization while
continuing to improve the process”. In order to attain quality management you must have first
the quality product or service. In management, it is very necessary to prioritize the need of the
customer, their demand for the product or service and the quality of it that you are going sell or
render. Without the quality of the product or service, the business will no longer reach tits peak
of success. Quality management has four parts: quality planning, quality assurance (defect
prevention), quality control (which includes product inspection and other elements), and quality
improvement. With the help of these four parts of quality management, it is possible to succeed.
There are always challenges and problems in a company, despite these challenges it is
possible to take note of these eight principles related to total quality management. First, the
customer satisfaction, these are the main reason why we put up a business, to satisfy our
customers needs and even their wants. Without customers, there is no business. Second,
employee commitment, it creates empowerment through training and some suggestions
mechanism. Employee must stay committed and loyal to their job. Third, fact-based decision-
making, those data and process must be from reliable information and sources to ensure that
work meet specifications. Fourth, good communication, though there are managers it doesn’t
mean that employees don’t have the right to know the plans, strategies, and methods that will be
used to achieve common goals of an organization. Having good and proper communication will
lessen the risk of failure and problems in the organization. Fifth, process approach, there are
many ways and process an organization may adhere. Finding the best process approach is critical
in quality management. Processes ensure that the proper steps are taken at the right time to
ensure consistency and speed up production. Sixth, integrated system, an organization has many
different departments, and each department have their specific function and purpose. These
departments and functions should be interconnected with the goals. Seventh, strategic and
systematic approach, these approaches is one of the important key in achieving success and
coping with organizational problem. It also contributes to the organization’s effectiveness and
efficiency in achieving its objectives. Lastly, continuous improvement, an organization must
always seek for growth and improvement. Improvement doesn’t end by achieving one goal,
every day you must think of another achievement and never stop on making your goals happen.
EVALUATING LEARNING ALTERNATIVES: Center of Gravity Method

Center of gravity method- is a method to determine the location of a facility that will minimize
shipping costs or travel time to various destinations.

PROBLEM: (p360-361 OPM 11th ed)

A toy manufacturer produces toys in five locations throughout the country. Raw materials
(primarily barrels of powdered plastics) will be shipped from a new, centralized warehouse
whose location is to be determined. The monthly quantities to be shipped to each location are the
same. A coordinate system has been established, and the coordinates of each location have been
determined as shown. Determine the central gravity.

LOCATION (X,Y) MONTHLY QUANTITY

A 3,7 15

B 8,2 20

C 4,6 25

D 4,1 30

E 6,4 35

125

SOLUTION:

ẋ = 3(15) + 8(20) + 4(25) + 4(30) + 6(35) = 635 = 5.08

125 125
ȳ = 7(15) + 2(20) + 6(25) + 1(30) + 4(35) = 465 = 3.72
125 125
Hence, the center of gravity has the coordinate x= 5.08, and y= 3.72.
 CAPACITY PLANNING

Capacity refers to an upper limit or ceiling on the load that an operating unit can handle.
It is defined as the ability to achieve store or produce; capacity would be the ability of a given
system to produce output within the specific time period. Planning is a management process,
concerned with defining goals for a company’s future direction and determining the missions and
resources to achieve those targets. Combined together, the ultimate goal of capacity planning is
to achieve a match between the long-term supply capabilities of an organization and the
predicted level of long-term demand.
Organizations become involved in capacity planning for various reasons. Among these
reasons are changes in demand, changes in technology, changes in environment, and perceived
threats or opportunities. A gap between current and desired capacity will result in capacity that is
out of balance. Overcapacity causes operating costs that are too high, while under capacity
causes strained resources and possible loss of customers. Along this paper are the important
questions we need to consider in order to deepen our understanding in capacity planning. Those
questions are “what kind of capacity is needed?” “How much is needed to match the demand?”
and “when it is needed?”
The kind of capacity needed depends on the products and services that management
intends to produce or provide. The management should identify first their capability of making
their target amount and number of production. It will always start on the materials needed, the
employees/workers and the equipment that will be used in production. Every step an
organization to will going to take must be planned first to prevent failures and errors in the
organization. Capacity planning depends on the forecast on how much capacity is needed and
when it is needed. Forecasting is a technique that uses historical data as inputs to make informed
estimates that are predictive in determining the direction of future trends. Organizations and
businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated
expenses for an upcoming period. Because of uncertainties, some organizations prefer to delay
capacity investment until demand materializes, and that’s the time you should finally know when
it is needed. Capacity planning is essential in determining optimum utilization of resources and
plays an important role decision-making process.
A technique used to identify and measure overall capacity of production is referred to as
strategic capacity planning. Strategic capacity planning is utilized for capital-intensive resource
like plant machinery, labor etc. Strategic capacity planning is essential as it helps the
organization in meeting the future requirements of the organization. Planning ensures that
operating cost is maintained at a minimum possible level without affecting the quality. It ensures
the organization remain competitive and can achieve the long-term growth and development
plan. Capacity planning is classified into three main categories long range, medium range and
short range. Long-range capacity of an organization is dependent on various other capacities
like design capacity, production capacity, sustainable capacity and effective capacity. Design
capacity is the maximum output possible as indicated by equipment manufacturer under ideal
working condition. Production capacity is the maximum output possible from equipment under
normal working condition or day. Sustainable capacity is the maximum product level achievable
in realistic work condition and considering normal machine breakdown, maintenance and others.
Medium range capacity planning undertaken by organization for 2 to 3 years of a time frame is
referred to as medium term capacity planning. Short range strategic planning undertaken by
organization for a daily weekly or quarterly time frame is referred to as short term capacity
planning.
The ultimate goal of capacity planning is to meet the current and future level of the
requirement at a minimal wastage. The three types of capacity planning based on goal are lead
capacity planning, lag strategy planning and match strategy planning. This ultimate goal will
lead the organization into success. Even though organization set up goal and objectives there are
some factors affecting capacity planning. Effective capacity planning is dependent upon factors
like production facility (layout, design, and location), product line or matrix, production
technology, human capital (job design and compensation), operational structure (scheduling,
quality assurance) an external structure (policy and safety regulations).

The above paragraph used general definition of capacity. Although it is functional, it can
be refined into two useful definition of capacity. First term is design capacity, it is the maximum
output rate or service capacity an operation, process, or facility is designed for. Second term is
effective capacity; it is simply design capacity minus allowances such as personal time, and
maintenance. Design capacity is the maximum rate of output achieve under ideal condition.
While effective capacity is always less than design capacity owing to realities of changing
product mix, the need for periodic maintenance of equipment, lunch break coffee breaks,
problems in scheduling and balancing operations, and similar circumstances.

There are different measures of capacity are useful in defining two measures of system
effectiveness: efficiency and utilization. Efficiency is the ratio of actual output to effective
capacity. Capacity utilization is the ratio of actual output to design capacity. Both measures are
expressed as percentages. It is not unusual for managers to focus exclusively on efficiency, but in
many instances, this emphasis can be misleading. This happens when effective capacity is low
compared to design capacity. In those cases, high efficiency would seem to indicate effective use
of resources when it does not. The necessary formulas for these measures are; efficiency equals
to actual output over effective capacity multiplied by 100%, and the utilization equals to actual
output over design capacity multiplied by 100%.

Many decisions about system design have an impact on capacity. The same is true for
many operating decisions. The main factors relate to facilities, products or services, processes,
human considerations, operational factors, the supply chain, and external forces. In facilities, the
design of facilities, including size and provision for expansion, is the key. Locational factors,
such as transportation costs, distance to market, labor supply, energy sources, and room for
expansion, are also important. Product or service design can have a tremendous influence on
capacity. The more uniform the output, the more opportunities there are for standardization of
methods and materials, which leads to greater capacity. The quantity capability of a process is an
obvious determinant of capacity. A more subtle determinant is the influence of output quality. In
human factors the tasks that make up a job, the variety of activities involved, and the training,
skill, and experience required to perform a job all have an impact on the potential and actual
output. Management policy factor can affect capacity by allowing or not allowing capacity
options such as overtime or second or third shifts. Scheduling problems may occur when an
organization has differences in equipment capabilities among alternative pieces of equipment or
differences in job requirements. Supply chain factors must be taken into account in capacity
planning if substantial capacity changes are involved. In externals factor, product standards,
especially minimum quality and performance standards, can restrict management’s options for
increasing and using capacity. Thus, pollution standards on products and equipment often reduce
effective capacity, as does paperwork required by government regulatory agencies by engaging
employees in nonproductive activities.

To succeed and develop capacity strategies the organization must require a delicate
balance between real-time employee availability, available budget, and the demand for work
from customers, partners, or other stakeholders. Establishing a proper capacity planning process
is important for businesses to manage work force and product manufacturing. Therefore, the
capacity planning process should involve carefully thought-out steps to ensure businesses have
the right amount of resources at the right time. Without capacity plan, organizations are either
grossly under-prepared or over-prepared as it helps to determine the production capacity needed
by an organization to meet changing demands for its products.
PROBLEMS: (p209 OPM 11th ed)

1. A computer repair service has a design capacity of 80 repairs per day. Its effective capacity,
however, is 64 repairs per day, and its actual output is 62 repairs per day. The manager would
like to increase the number of repairs per day. Which of the following factors would you
recommend that the manager investigate quality problems, absenteeism, or scheduling and
balancing? Explain your reasoning.

Explanation:

The computer repair shop must improve its effective capacity that is the maximum
capacity that the shop can repair given its product mix, scheduling difficulties, and other possible
situations. There is wide gap between the design capacity (80) and effective capacity (64).
Design capacity that is the maximum attainable output is 80. The company could have produce
more if scheduling and balancing have been improved. Absenteeism may also be investigated
because considering the company’s resources, it should have repaired 64 computers but the
actual output was only 62. This may mean that some of the company’s resources may not have
been fully utilized.

2. In a job shop, effective capacity is only 50 percent of design capacity, and actual output is 80
percent of effective output. What design capacity would be needed to achieve an actual output of
eight jobs per week?

Solution:
Given:
Effective capacity = 50% (design capacity)
Actual output = 80% (effective capacity)
Actual output desired = 8 jobs per week

Substitution:
Actual output = (.80) x [(.50)(design capacity)]
Actual output = (.40) (design capacity)

Design capacity = Actual output = 8 = 20jobs

.40 .40