SHANTO-MARIAM UNIVERSITY OF

CREATIVE TECHNOLOGY

Department of Apparel Manufacturing Management &

Technology
Program: MBA in PFM

4th SEMESTER
Module Title: Production & Operation Management
Module Code: MBA 6204

MODULE LEADER: LABLU MIAH

MODULE TEACHER: LABLU MIAH

Updated on: 18.10.2020

Module Specifications
Department: Apparel Manufacturing Management & Technology

• Module Title : Production & Operation Management

 • Module Code : MBA-6204
• Year of Study : 2nd (Semester: 4th)
• Pre-Requisite : NA
• Contact Hours : 2.0 Hours per week , Total Week: 18
• Total Contact Hours : 36 Hours
• Credits : 3
• Assessment Way :Quiz, Class Test, Viva, Assignment, Presentation,
Mid-Term and Final Examination

Aim:

This course provides a general introduction to operations management (OM), or

the production and delivery of goods and services. Students will learn to observe
and analyze an organization from a systems or process-perspective. From this
lens, students will learn to design, operate, and improve the systems that deliver
goods and services through OM tools such as process flow diagrams, lean
management, and decision trees. Ultimately, this course aims to familiarize
students with the major operational issues that confront managers, and provide
them with the basic language, concepts, insights, and analytical tools to deal with
these issues

Objectives:

By the end of the module, Students will be able to:

• To understand the importance of an effective production and operations
strategy to an organization.
• To understand the various production and operations design decisions and
how they relate to the overall strategies of organizations.
• To understand the importance of product and service design decisions and
its impact other design decisions and operations.
• Develop an understanding of and an appreciation for the production and
operations management function in any organization.
• To understand the importance of productivity and competitiveness to both
organizations and nations.
• Obtain an understanding of quality management practice in organizations
and how total quality management and six-sigma facilitate organizational
effectiveness.
 • To understand the relationship of the various planning practices of capacity
planning, aggregate planning, project planning and scheduling. • To
understand the roles of inventories and basics of managing inventories in
various demand settings.

Class Contact and Teaching Pattern:

Lectures : 18

Total Hours : 36 Hours

Learning Outcomes:
After completion the module, students should be able to:
• To understand contemporary operations and manufacturing organizational
approaches and the supply-chain management activities and the renewed
importance of this aspect of organizational strategy.
• Explain the key role that the operations function plays in creating the
competitive strength of the firm.
• Develop comprehensive, clear written and mathematical analyses that make
sense and that foster the decision-making process.
• Effectively assess a well-managed and well executed operations strategy. •
Effectively identify effective soft management skills applicable to operations
management
Text Books:

• Operations Management by Jay Heizer, Barry Render

• Operations Management 13th Edition by William J Stevenson
Mark Distribution

Mid-Term Exam Final Exam

1. Attendance: 05 2. Quiz: 10 3. Class Test: 05 4. 1. Attendance: 05 2. Submission: 05 3.

Mid-Term Exam: 20 Assignment: 10 4. Final Exam: 40

Total Marks: 40 Total Marks: 60

Grand Total: 100

Module Continuous Assessment Timetable

Course: MBA in PFM

 • Module Title : Production & Operation management
• Module Code : MBA 6204
• Year of Study : 2nd (Semester: 4th)
• Assessment Way : Class Test, Quiz, Viva, Assignment, Presentation, Mid-Term
Assessme 1 2 3 4 5 6 7 8 9 Mid-Term 10 11 12 13 14 15 16 17 18 Final
nt Examination Examination
Descriptio
n
Weeks

Quiz test 10% 20%

Written
Examination

Class Test 5%

Assignment

Presentati 5% 10%
on &
Submission

All the above quiz, Class Tests must be carried out in

NB: 5% is in Class Attendance in Mid-Term
class. Submission & Presentation will be present in
Examination and 5% is in Final Examination.
Class.

Module Leader: Lablu Miah Module Teacher: Lablu Miah Date: 19.10.20
At a Glance: Lectures Delivery Plan
 Module Code: MBA 6204
Module: Production & Operation Management Contact Hours / Week: 3

Week Lecture Topic (Lecture Title) Assessment

1 1 Introduction to Operations
Management

2 2 Operation system

3 3 Operation system

4 4 Operation forecasting

5 5 Forecasting of production
(Moving average approach)

6 6 Forecasting of production
(Regression analysis)

7 7 Forecasting of production Quiz /class test

(Regression analysis) 15%

8 8 Product and Service design

9 9 Product and Service design

Mid-Term Examination

10 10 Managing Quality

11 11 Managing Quality

12 12 Areas of Operation
Management Decisions

13 13 Operations Strategies

14 14 Operations Strategies

15 15 LeanOperations
 16 16 Business Process
Reengineering (BPR)

17 17 Agile Operations

18 18 Review class, Presentation

Final Examination

SHANTO –MARIAM UNIVERSITY OF CREATIVE

TECHNOLOGY
Program : MBA in Product & Fashion Merchandising Course
Title : Production & Operation Management Course Code :
MBA 6204
Year of Study : 2nd (Semester: 4th)
Lecture : 01
Week : 01

Topic: Introduction to Operations Management

Operations management focuses on carefully managing the processes to produce

and distribute products and services. A great deal of focus is on efficiency and
effectiveness of processes. Therefore, operations management often includes
substantial measurement and analysis of internal processes.

Operations management refers to the administration of best business practices in

order to achieve the maximum levels of effectiveness and efficiency in terms of
the use of company resources. This includes the proper management of materials,
machinery, technology and labor to produce high-quality goods and services that
will benefit the company.

• "Operations management is chiefly concerned with planning, organizing

and supervising in the contexts of production, manufacturing or the
provision of services." -- TOPMBA
Goods and Services:
Basically, a product is a tangible offering to a customer, whereas a service is an
intangible offering. The former is usually a one-time exchange for value. In
contrast, a service usually involves a longer period of time.
The value of a product is inherent in the tangible offering itself, for example, in
the can of paint or pair of pants. In contrast, the value of a service often comes
from the eventual benefit that the customer perceives from the time while using
the service

In addition, the customer often judges the value of a service based on the quality
of the relationship between the provider and the customer while using the service.

Features of a product
• The major key feature of a product is that it is physical and it is also
tangible. This implies that a product can be held, it can be seen, felt or
smelled. However, it should also be noted that a product can be returned
to the seller for replacement or refund in the event that it is wrong or
damaged. When the customer is not satisfied with the product, he can
return it to the seller in exchange of the right type of product desired.
• The value of the product is often created and derived from the product by
the user. In other words, the user knows what exactly he or she truly
desires from a product hence the decision to buy it. It is the same
customer who can derive value from purchasing a product unlike the
value of the service that is created by the service provider.
• The other important aspect about a product pertains to ownership. A product
can be owned by the purchaser since ownership is transferred the moment
a transaction has been performed. The fact that a product is tangible
makes ownership transferrable unlike a service that can only be felt. Once
a product has been bought, it can then be easily separated from the
provider since the customer can take it home for personal use. Ownership
of a service can therefore not be transferred to its user.
• The customer care perspective of a product is limited compared to that of a
service. In a service, it is customer care that attracts the buyers of that
particular service while in a product, elements such as branding and other
product features that differentiate it from similar products that attract the
customers.
Features of a Service
A service is work done by another person for another individual. For instance, a
person will visit a restaurant to have the desired services performed by other
people while they relax on their tables. Legal advice is another good example of a
service rendered to another person by professional lawyers. In most cases, people
are usually attracted by the quality of service they get from a particular
organization instead of the product itself. Quality service is satisfactory and
people who are satisfied will continue doing business with the company.

• The billing process of a service is continuous unlike that of a product. For

instance, a service can be in the form of monthly subscriptions where a
service is rendered upon receipt of the subscription. The other notable
aspect about a service is that it cannot be returned to the provider since it
is intangible. A service is something that can only be felt therefore cannot
be returned.
• The other issue about a service is about their variability. Services vary
according to who provide them, where, when and how. Usually, the
quality of the service is mainly determined by the service provider while
the customer determines the value of the product upon its purchase. The
quality of the service depends on the service provider. The marketers of a
service should therefore have knowledge about what the customers really
desire such that they can tailor their services to meet those needs. The
marketers need to understand the features to sell to the customers.

Key Differences between Services and Products

Products are tangible – they are physical in nature such that they can be
touched, smelled, felt and even seen. Services are intangible and they can only be
felt not seen.

Need vs. Relationship– a product is specifically designed to satisfy the needs and
wants of the customers and can be carried away. However, with a service,
satisfaction is obtained but nothing is carried away. Essentially, marketing of a
service is primarily concerned with creation of customer relationship.
Quantity- products can be numerically quantified and they come in different
forms, shapes and sizes. However, services cannot be numerically quantified.
Whilst you can choose different service providers, the concept remains the same.

Inseparability- services cannot be separated from their providers since they can
be consumed at the same time they are offered. On the other hand, a product can
be separated from the owner once the purchase has been completed.
Quality- quality of products can be compared since these are physical features
that can be held. However, it may be difficult to compare the quality of the
services rendered by different service providers.

Returnability- it is easier to return a product to the seller if the customer is not

satisfied about it. In turn, the customer will get a replacement of the returned
product. However, a service cannot be returned to the service provider since it is
something that is intangible.

Value perspective- the value of a service is offered by the service provider while
the value of the product is derived from using it by the customer. Value of a
service cannot be separated from the provider while the value of a product can be
taken or created by the final user of the product offered on the market.

Shelf line- a service has a shorter shelf line compared to a product. A product can
be sold at a later date if it fails to sell on a given period. This is different with
regard to a service that has a short shelve line and should be sold earlier.

Principles of Operations Management:

Reality

Operations managers must focus on problems, not techniques, because there are
no tools that provide universal solutions.

Organization

Processes in manufacturing are interconnected. All elements must be predictable

and consistent, in order to achieve the same outcome in profits.

Humility
No one wants to work with an aggressive know-it-all. Thus, it’s important for
operations managers to position themselves as ordinary people who don’t know
everything and can also make mistakes.

Success

Managers have to be able to clearly define what they consider successful, so that
everyone in the company will have the parameters to work with in the process of
achieving targets.

Fundamentals
Operations managers must know how to comply with all basic fundamentals,
because this is the key to production success. It is important to ensure the
accuracy of inventory data, BOMs, and other general tasks to achieve the desired
results.

Accountability

Managers are expected to set rules and metrics, determine the responsibilities of
their subordinates, and regularly check if objectives are achieved.

Variance

Variance of processes has to be encouraged, because if managed properly,

differences can be a source of creativity.

Causality

Sometimes, problems will still arise even when the best efforts have been made.
Managers need to find the root cause of the problem so that they won’t get
worse.

Managed Passion

Employee morale can be a major driver of company growth. Managers must be

able to inspire their subordinates to be passionate at work.
Lecture : 02 & 03
Week : 02 & 03

Topic: Operation system

System:
A system is an organized collection of parts that are highly integrated to
accomplish an overall goal. The system has various inputs, which go through
certain processes to produce certain outputs, which together, accomplish the
overall desired goal for the system.

For example, a garment is a system. Its inputs are fabric, sewing thread, trims and
accessories, energy. The system's processes are when they work together to get
the garment as an output.

Operations System:
The primary activities in operations management are a system -- they are all
integrated and aligned with each other. The operations manager's job is to ensure
they are all effectively and efficiently working together in order to produce the
desired goal of useful goods and services for customers. The various inputs that
are processed to produce certain outputs and outcomes (desired goals).
An operations system includes, for example:
• Inputs -- such as expertise, best practices, funding, equipment, facilities
and technologies, as well as the customer's feedback and the overall
organization's strategic priorities
• Processes -- such as planning (capacity, product and service design,
production, facilities, jobs, inventory, quality control, etc.) and managing
productivity to produce high-quality products and services
• Outputs -- high-quality products and services
• Outcomes -- very satisfied customers
Feedback from customers should be continually collected and considered as an
input to the processes of the planning the development and production of goods
and services.

Planning Operations Systems

Product/Service Planning

• The planning of products and services (the outputs from the system)
includes market research to:
• Clarify the needs and wants of potential groups (market niches) of
customers, as well as how those needs and wants might be met with
certain products and services.
• Clarify how the new products and services should best be provided to
 those target markets.
• Identify competitors, as well as potential collaborators.
• Suggest the best terms in pricing for the products and services. • Suggest
how best to advertise and promote to those groups of customers.

Capacity Planning
Capacity planning includes specifying how many of the outcomes (products or
how much service) will be produced and how often. That includes predicting, or
forecasting, the demand for those outcomes. The previous market research will be
very useful here.

A useful planning technique to ensure consideration of many possible influences

is scenario planning, including to consider various external driving forces that
could have a strong influence.

Facilities and Layout Planning

This is one of the most critical activities in operations management, not just
because they underlie and facilitate the activities to very effectively and
efficiently produce products and services, but also because facilities and their
maintenance are one of the most expensive, as well. Fortunately, there is a variety
of helpful articles about how to do this acclivity in operations management.

Job and Work Design

An arrangement in the workplace that has the objective of overcoming employee

alienation and job dissatisfaction that comes about from mechanical and repetitive
tasks in the workplace. Work design is used by organizations to boost
productivity by offering employees non- monetary rewards such as satisfaction
from a greater sense of personal achievement. It is also called job design."
Lecture : 04
Week : 04

Topic: Operation forecasting

Forecasting is the process of predicting a future event. Forecasting is a process of
predicting or estimating the future based on past and present data. Forecasting
provides information about the potential future events and their consequences for
the organization. It may not reduce the complications and uncertainty of the
future. However, it increases the confidence of the management to make
important decisions. Forecasting is the basis of premising. Forecasting uses many
statistical techniques. Therefore, it is also called as statistical analysis.

Importance of Forecasting
🗹 Forecasting provides relevant and reliable information about the past and
present events and the likely future events. This is necessary for sound
planning.
🗹 It gives confidence to the managers for making important decisions.
🗹 It is the basis for making planning premises.
🗹 It keeps managers active and alert to face the challenges of future events
and the changes in the environment.

Forecasting time horizon

🗹 Short-range forecast

🗹 Up to 1 year, generally less than 3 months

🗹 Purchasing, job scheduling, workforce levels, job assignments,

production levels
🗹 Medium-range forecast

🗹 3 months to 3 years

🗹 Sales and production planning, budgeting

🗹 Long-range forecast

🗹 3+years
 🗹 New product planning, facility location, research and development

Steps in Forecasting

🗹 Analyzing and understanding the problem: The manager must first identify
the real problem for which the forecast is to be made. This will help the
manager to fix the scope of forecasting.
🗹 Developing sound foundation: The management can develop a sound
foundation, for the future after considering available information,
experience, type of business, and the rate of development.
🗹 Collecting and analyzing data: Data collection is time consuming. Only
relevant data must be kept. Many statistical tools can be used to analyze
the data.
🗹 Estimating future events: The future events are estimated by using trend
analysis. Trend analysis makes provision for some errors.
🗹 Comparing results: The actual results are compared with the estimated
results. If the actual results tally with the estimated results, there is
nothing to worry. In case of any major difference between the actual and
the estimates, it is necessary to find out the reasons for poor performance.
🗹 Follow up action: The forecasting process can be continuously improved
and refined on the basis of past experience. Areas of weaknesses can be
improved for the future forecasting. There must be regular feedback on
past forecasting.
Approaches of forecasting

There are two predominant approaches to forecasting: qualitative approach and

quantitative analysis. A qualitative approach uses factors such as experience,
instinct and emotion while the quantitative analysis relies heavily on
mathematics, historical data and casual variables.

Qualitative methods

1. Jury of executive opinion. This is based on the inputs and decisions of high
level experts or management.

2. Delphi method. Decision makers, staff, and respondents all meet to develop
the forecast. Every shareholder in the process provides input.

3. Sales force composite. Each sales person provides an individual estimate

which is reviewed for realism by management, and then combined for a big
picture view.

4. Consumer market survey. This is surveying the prospective customer base to

determine demand for existing products and can also be used for new products.

Quantitative methods
Quantitative methods are in two categories. Time-series models predict by
assuming the future is a function of the past. Associative models uses similar
historical data inputs and then includes other external variables such as
advertising budget, housing, competitor's prices and more.

Time Series Models Associative Model

Naïve method Linear regression Moving averages

Exponential smoothing

Trend projection

Calculation of forecasting (Linear regression):

 Company of C & M has the following data in respect of order:
Year Sales Year Sales

2015 100 2018 140

2016 120 2019 180

2017 110

Find out the forecasting sales for 2020.

Solution:

According to Least Square Method:

Year Serial Sales (Y) X Y Deviation Deviation �� y ��2
(X)
�� =(X- y =(Y-Y
X )
)

2015 1 100 X= Y= -2 -30 60 4

2016 2 120 ∑�� ∑�� -1 -10 10 1

�� ��

2017 3 110 =650 0 -20 0 0

2018 4 140 5 = 1 10 10 1
=155 = 3 130
2019 5 180 2 50 100 4

∑�� ∑�� = ∑�� = 0 ∑�� = 0 ∑�

= 650 ��
15, N=5 �
= 180

Now, for the forecasting sales of 2020 we have calculated the below

equation, Yf = a + b X -------------------------- (1)

b= ∑����
∑��2= 180/10 =18

a = Y - b X =130- 18*3 = 76

(1)…… Yf = a + b X = 76 + 18*9 [ here, X = 9]

= 76+ 162

= 238

Limitations of Forecasting

🗹 The collection and analysis of data about the past, present and future
involves a lot of time and money. Therefore, managers have to balance the
cost of forecasting with its benefits.
🗹 Forecasting requires proper judgment and skills on the part of managers.
Forecasts may go wrong due to bad judgment and skills on the part of some
of the managers. Therefore, forecasts are subject to human error.
🗹 Forecasting can only estimate the future events. It cannot guarantee that
these events will take place in the future. Long-term forecasts will be less
accurate as compared to short-term forecast.
🗹 Forecasting is based on certain assumptions. If these assumptions are
wrong, the forecasting will be wrong. Forecasting is based on past events.
However, history may not repeat itself at all times.
🗹 Forecasting requires proper judgment and skills on the part of managers.
Forecasts may go wrong due to bad judgment and skills on the part of some
of the managers. Therefore, forecasts are subject to human error.
Lecture : 05 & 06
Week : 05 & 06

Topic: Forecasting of production (Moving average

 approach)
A moving average is a technique that calculates the overall trend in a data set. In
operations management, the data set is sales volume from historical data of the
company. This technique is very useful for forecasting short-term trends. It is
simply the average of a select set of time periods.
A moving average is a technique to get an overall idea of the trends in a data set;
it is an average of any subset of numbers. The moving average is extremely
useful for forecasting short-term trends. It can be calculated for any period of
time.
Example
Calculate a five-year moving average from the following data set:
Year Sales ($M)

2003 4

2004 6

2005 5

2006 8

2007 9

2008 5

2009 4

2010 3

2011 7
 2012 8

The mean (average) sale for the first five years (2003-2007) is calculated by
finding the mean from the first five years (i.e. adding the five sales totals and
dividing by 5). This gives you the moving average for 2005 (the center year) =
6.4M:

Year Sales ($M)

2003 4

2004 6

2005 5

2006 8

2007 9

(4M + 6M + 5M + 8M + 9M) / 5 = 6.4M

The average sales for the second subset of five years (2004 – 2008), centered
around 2006, is 6.6M: (6M + 5M + 8M + 9M + 5M) / 5 = 6.6M
The average sales for the third subset of five years (2005 – 2009), centered
around 2007, is 6.6M: (5M + 8M + 9M + 5M + 4M) / 5 = 6.2M

Calculating each five-year average, until it reaches the end of the set (2009-2013).
This gives a series of points (averages) that you can use to plot a chart of moving
averages. The following Excel table shows you the moving averages calculated
for 2003-2012 along with a scatter plot of the data:
Excel 2013: Steps
Step 1: Click the “Data” tab and then click “Data Analysis.”
Step 2: Click “Moving average” and then click “OK.”
Step 3: Click the “Input Range” box and then select your data. If you include
column headers, make sure you check the Labels in first row box.
Step 4: Type an interval into the box. An interval is how many prior points
you want Excel to use to calculate the moving average. For example, “5”
would use the previous 5 data points to calculate the average for each
subsequent point. The lower the interval, the closer your moving average is to
your original data set.
Step 5: Click in the “Output Range” box and select an area on the worksheet
where you want the result to appear. Or, click the “New worksheet” radio
button.
Step 6: Check the “Chart Output” box if you want to see a chart of your data
set (if you forget to do this, you can always go back and add it or choose a
chart from the “Insert” tab.”
 Step 7: Press “OK.” Excel will return the results in the area you specified in
Step 6.
Lecture : 07
Week : 07

Topic: Forecasting of production (Regression analysis)

Regression analysis is used to find equations that fit for the data. Once we have
the regression equation, we can use the model to make predictions. When
a correlation coefficient shows that data is likely to be able to predict future
outcomes and a scatter plot of the data appears to form a straight line, we can
use simple linear regression to find a predictive function. The equation for a line
is y’ = a + bx.

Calculation Linear Regression Equation: Steps

Step 1: Make a chart of your data,

SUBJECT AGE X NO OF GARMENTS USE XY X2 Y2

1 43 99 4257 1849 9801

2 21 65 1365 441 4225

3 25 79 1975 625 6241

4 42 75 3150 1764 5625

5 57 87 4959 3249 7569

6 59 81 4779 3481 6561

Σ 247 486 20485 11409 40022

From the above table, Σx = 247, Σy = 486, Σxy = 20485, Σx2 = 11409, Σy2 =
40022. n is the sample size.

Step 2: Use the following equations to find a and b.

a = 65.1416
b = .385225
Find a:
((486 × 11,409) – ((247 × 20,485)) / 6 (11,409) – 2472)
484979 / 7445
=65.14
Find b:
(6(20,485) – (247 × 486)) / (6 (11409) – 2472)
(122,910 – 120,042) / 68,454 – 2472
2,868 / 7,445
= .385225
Step 3: Insert the values into the equation.
y’ = a + bx
y’ = 65.14 + .385225x
Linear Regression Equation Microsoft Excel: Steps
Step 1: Install the Data Analysis Toolpak, if it isn’t already installed. For
instructions on how to load the Data Analysis Toolpak, click here.

Step 2: Type your data into two columns in Excel. For example, type your “x”
data into column A and your “y” data into column b. Do not leave any blank
cells between your entries.

Step 3: Click the “Data Analysis” tab on the Excel toolbar. Step 4:
 Click “regression” in the pop up window and then click “OK.”

Step 5: Select your input Y range. It can be done in these two ways: either
selects the data in the worksheet or type the location of your data into the
“Input Y Range box.” For example, if your Y data is in A2 through A10 then
type “A2:A10” into the Input Y Range box.

Step 6: Select your input X range by selecting the data in the worksheet or
typing the location of your data into the “Input X Range box.”

Step 7: Select the location where you want your output range to go by
selecting a blank area in the worksheet or typing the location of where you
want your data to go in the “Output Range” box.

Step 8: Click “OK”. Excel will calculate the linear regression and populate
your worksheet with the results.
Lecture : 08 & 09
Week : 08 & 09

Topic: Product and Service design

A product is the item offered for sale. A product can be a service or an item. It
can be physical or in virtual or cyber form. Every product is made at a cost and
each is sold at a price. The price that can be charged depends on the market, the
quality, the marketing and the segment that is targeted. The nature of product
design can affect costs in a wide variety of cost categories, going far beyond the
direct labor and material costs involved. A list of categories affected by product
design include:

• Raw material
• Equipment

• Direct Labor
• Indirect labor
• Tooling

• Engineering

• Sales and administration

Classes of Customer Needs or Wants
1. Dissatisfies – expected but not present
2. Satisfiers – expected or asked and present
3. Exciters/delighters – not expected but present

Product Life Cycle

Introduction – Growth – Maturity – Decline
Introduction
• Best period to increase market share

• R&D engineering is critical

Growth

• Practical to change price or quality image •

Strengthen niche
Maturity

• Poor time to change image, price, or quality •

Competitive costs become critical
• Defend market position
Decline

• Cost control critical

Operation Management Strategy

• Product design and development critical •

Frequent product and process design changes •
Short production runs
• High production costs
• Limited models
• Attention to quality
Growth

• Forecasting critical
• Product and process reliability
• Competitive product improvements and options
• Increase capacity

• Shift toward product focus

• Enhance distribution

Maturity

• Standardization

• Less rapid product changes – more minor changes •

Optimum capacity
• Increasing stability of process
• Long production runs
• Product improvement and cost cutting

Decline

• Little product differentiation

• Cost minimization
• Overcapacity in the industry
• Prune line to eliminate items not returning good margin •
Reduce capacity

Major factors in design strategy

• Cost

• Quality

• Time-to-market
 • Customer Satisfaction
• Competitive Advantage
Product and service design – or redesign – should be closely tied to an
organization’s strategy

Product or Service Design Activity

• Translate customer wants and needs into product and service requirements •
Refine existing products and services
• Develop new products and services
• Formulate quality goals
• Formulate cost targets
• Construct and test prototypes
• Document specifications

Objectives of Product and Service Design

Main Focus

• Customersatisfaction
Secondary Focus

• Function of product / service

• Cost / profit
• Quality

• Appearance

• Ease of productivity / assembly

• Ease of maintenance / service

Regulations & Legal Considerations

Product Liability – A manufacturer is liable for any injuries or damages caused
by a faulty product.
Uniform Commercial Code – products carry an implication of merchantability
and fitness.

Designers Adhere to Guidelines

• Produce designs that are consistent with the goals of the company •
Give customers the value they expect
• Make health and safety a primary concern
• Consider potential harm to the environment

Other Issues in Product and Service Design

• Product / service life cycles

• How much standardization
• Product / service reliability
• Range of operating conditions

Standardization

• Standardization – Extent to which there is an absence of variety in a

product, service or process.
• Standardized products are immediately available to customers

Advantages of Standardization

• Fewer parts to deal with in inventory & manufacturing

• Design costs are generally lower
• Reduced training costs and time

• More routine purchasing, handling and inspection procedures •

 Orders fillable from inventory
• Opportunities for long production runs and automation
• Need for fewer parts justifies increased expenditures on perfecting designs
and improving quality control procedures.

Disadvantages of Standardization

• Designs may be frozen with too many imperfections remaining. •

High cost of design changes increases resistance to improvements. •
Decreased variety results in less consumer appeal.

Mass Customization

•A strategy of producing standardized goods or services, but incorporating

some degree of customization
• Delayed differentiation
• Modular design

Delayed Differentiation
Delayed differentiation is a postponement tactic

• Producing but not quite completing a product or service until customer

preferences or specifications are known.

Modular Design
Modular design is a form of standardization in which component parts are
subdivided into modules that are easily replaced or interchanges. It
allows:

• Easier diagnosis and remedy of failures

 • Easier repair and replacement
• Simplification of manufacturing and assembly

Reliablity
Reliability – The ability of a product, part, or system to perform its intended
function under prescribed set of conditions.
Failure – Situation in which a product, part, or system does not perform as
intended.
Normal Operating Condition – The set of conditions under which an item’s
reliability is specified

Generation of New Product Opportunities

• Economic change
• Sociological and demographic change
• Technological change
• Political / Legal change
• Changes in:
– Market Practices
– Professional Standards
– Suppliers and distributors

The product development process

The product development process is a series of activities by which a product
idea is transformed into a final product. .
 The Product Development Process
Evaluate Opportunities and Select the Best Product Idea
Starting the first business, you might have only one product idea. But existing
organizations often have several ideas for new products, as well as improvements
to existing ones. Typically, various ideas are reviewed and evaluated by a team of
individuals, who identify the most promising ideas for development. They may
rely on a variety of criteria: Does the proposed product fill an unmet need of our
customers? Will enough people buy our product to make it commercially
successful? Do we have the resources and expertise to make it?
Get Feedback to Refine the Product Concept
From the selected product idea, the team generates an initial product concept that
describes what the product might look like and how it might work. Members talk
both with other people in the organization and with potential buyers to identify
customer needs and the benefits that consumers will get from the product. They
study the industry in which the product will be sold and investigate competing
products. They brainstorm various product designs—that is, the specifications for
how the product is to be made, what it’s to look like, and what performance
standards it’s to meet.
Based on information gathered through this process, the team will revise the
product concept, probably pinpointing several alternative models. Then they’ll go
back to potential customers and get their feedback on both the basic concept and
the various alternatives. Based on this feedback, the team will decide what the
product will look like, how it will work, and what features it will have.

Make Sure the Product Performs and Appeals to Consumers The team then
decides how the product will be made, what components it will require, and how
it will be assembled. It will decide whether the product should
be made in-house or outsourced to other companies. For products to be made in
house, the team determines where parts will be obtained. During this phase, team
members are involved in design work to ensure that the product will be
appealing, safe, and easy to use and maintain.

Design with Manufacturing in Mind

As a rule, there’s more than one way to make any product, and some methods are
more expensive than others. During the next phase, therefore, the team focuses its
attention on making a high-quality product at the lowest possible cost, working to
minimize the number of parts and simplify the components. The goal is to build
both quality and efficiency into the manufacturing process.
Build and Test Prototypes
A prototype in the next phase, prototypes are produced and tested to make sure
that the product meets the customer needs that it’s supposed to. The team usually
begins with a preliminary prototype from which, based on feedback from
potential customers, a more sophisticated model will then be developed. The
process of building and testing prototypes will continue until the team feels
comfortable that it has fashioned the best possible product. The final prototype
will be extensively tested by customers to identify any changes that need to be
made before the finished product is introduced.

Ramp Up Production and Run Market Tests

During the production ramp-up stage, employees are qualified in manufacturing
and assembly processes. Products turned out during this phase are carefully
inspected for residual flaws. Samples are often demonstrated or given to potential
customers for testing and feedback.
Launch the Product
This is the concluding stage; the firm starts ongoing production and makes the
product available for widespread supply.
Lecture : 10 & 11
Week : 10 & 11

Topic: Managing Quality

Quality Management

Quality is about much more than describing a product or service as “good.”

Quality Management professionals see Quality as the following:

1. Designing features that are free from deficiencies and errors. Products or
services that are deficient and don’t work as they should require rework
or, if they make it to the marketplace, lead to costly recalls and customer
 dissatisfaction, all of which costs an organization money, time, and brand
integrity. Defects found at later stages of product development are far
more costly than if they had been found earlier.
2. Providing products or service features that customer’s need. These features
lead to customer satisfaction and exceeding customer expectations, which,
in turn, lead to increased revenue for the producer. Ensuring Quality by
adding features that customers want while ensuring consistency and
reliability with every iteration has a cost, but the cost of not embracing
Quality is much higher, including lost market share, missed opportunities,
brand damage, and recalls due to design and manufacturing flaws.
3. Ensuring ongoing continuous improvement (CI) to address the root causes
of defects that are inherent in processes, tools, and designs and that have a
significant impact. By addressing the root causes through CI rather than
the symptoms, organizations can reduce the Cost of Quality, increase
efficiency, sustain a Culture of Quality, minimize rework activities on the
shop floor and in the back office, reduce scrap, and ultimately have fewer
recall events. Revenue and overall market share then increase as a result
of improved product quality, higher levels of customer satisfaction, and
increased market share. According to the Center for Economic and
Business Research, every $1 invested in Quality produces $16 in cost
reduction and a $3 increase in profit.

Cost of Quality

Cost of Quality (COQ) is a way of measuring the costs associated with ensuring
that a Culture of Quality thrives in an organization, as well as the costs associated
with Quality failures. There are four types of Quality-related costs:

1. Prevention costs. These planned costs are the result of designing and
implementing a QMS and preventing Quality problems from arising.
These costs include Quality planning, training, and Quality assurance.
 2. Appraisal costs. These costs are the result of measuring the effectiveness of
a Quality Management System and apply to both manufacturers and the
supply chain. These costs include verification, Quality audits, and supplier
assessment.
3. Internal failure costs. These costs arise when the manufacturer discovers
Quality failures before products or services are delivered to customers.
They include waste from poor processes, excessive scrap, and rework to
correct errors, and the activity required to diagnose the cause of Quality
failures.
4. External failure costs. These are the most expensive costs and are usually
apparent only after the products or services have reached the customer.
These costs include repairs, warranty claims, returns, and dealing with
customer complaints.
The Cost of Poor Quality (COPQ) and its consequences can be difficult for
organizations to measure, and it can be a struggle to convince executive
stakeholders that Quality improvement projects to mitigate COPQ have real value
and are not simply cost centers. The primary consequences of COPQ are the most
obvious. Costs associated with process failures inside the organization include:

• Excess scrap and waste material created by inefficient manufacturing

processes,
• Rework on defective or damaged products before they ship to market, and,
• Retesting and analyzing processes and procedures to determine point of
failure. If poor Quality is not caught before products or services make
their way to end customers, the external costs can include those associated
with:
• Lawsuits,

• Recalls,

• Warranties,

• Complaints,
 • Returns,

• Repairs, and,
• Field support.

The traditional Cost of Poor Quality has usually been assumed to be between 4
percent and 5 percent of an organization’s annual revenue. In other words, a
business with $100 million in annual revenue is throwing away between $4
million and $5 million by failing to mitigate the impact of preventable process
failures.

• Decreased employee engagement,

• Higher employee turnover and attrition,

• Employees addressing Quality failures instead of focusing on Quality

improvement through innovation,
• Overtime costs,
• Machine downtime,
• Long-term customer dissatisfaction,
• Brand damage,
• Poor inventory turnover, and,
• Decreased customer lifetime value.

Quality Management in Organizations

• "Quality management is the act of overseeing all activities and tasks needed
to maintain a desired level of excellence. This includes the determination
of a quality policy, creating and implementing quality planning and
assurance, and quality control and quality improvement."
• “Quality management” ensures superior quality products and services.
Quality of a product can be measured in terms of performance, reliability
and durability. Quality is a crucial parameter which differentiates an
organization from its competitors. Quality management tools ensure
 changes in the systems and processes which eventually result in superior
quality products and services."
• "Quality management is the act of overseeing different activities and tasks
within an organization to ensure that products and services offered, as
well as the means used to achieve them, are consistent. It helps to achieve
and maintain a desired level of quality within the organization."
Terms in Quality Management

There are a several quality-related terms, most of which sound similar to each
other, but that are somewhat different. These include:

Quality Assurance and Quality Control

The American Society for Quality distinguishes the difference. Quality assurance
is "focused on providing confidence that quality requirements will be fulfilled."
Quality control is "more the inspection aspect of quality management" or "the
operational techniques and activities used to fulfill requirements for quality."

Quality Planning

"Identifying which quality standards are relevant to the project and determining
how to satisfy them". So essentially it is the process that specifies the measurable
requirements and milestones and for when they are to be achieved.

Quality Improvement

"Quality improvement (QI) consists of systematic and continuous actions that

lead to measurable improvement in health care services and the health status of
targeted patient groups."

APPROACHES TO QUALITY MANAGEMENT

Continuous Improvement (Process Improvement)

Continuous improvement focuses on improving quality and customer satisfaction

through continuous and incremental improvements to various internal processes,
including by removing unnecessary activities and variations. The benefits of
implementing continuous improvement are similar to those of other methods of
quality management. Benefits can include increased quality, productivity and
sales, as well as employee satisfaction. It can decrease waste, costs and employee
turnover.
Balanced Scorecard

The Balanced Scorecard is a performance management approach that focuses on

various overall performance indicators, often including customer perspective,
internal-business processes, and learning and growth and financials, in order to
monitor progress toward organization's strategic goals. Each major unit
throughout the organization often establishes its own scorecard which, in turn, is
integrated with the scorecards of other units to achieve the scorecard of the
overall organization.

Overall, the Balanced Scorecard can be used to accomplish stronger alignment

between all of the major operations in an organization, as well as more effective
and efficient accomplishment of strategic goals. It can also result in increased
efficiencies and productivity, which, in turn, can reduce costs and increase
profits. A major benefit of the Balanced Scorecard is that it can provide a set of
dashboards, or key indicators, which can be used very effectively to monitor the
performance of various internal functions, as well as the overall organization.

Benchmarking

Benchmarking is the use of certain measurements to compare the quality and

performance of an organization, major activity or general process to another
similar one in order to make conclusions about the quality and performance.
Thus, benchmarking can be used in a wide variety of different approaches to
quality where measurements are involved. Benchmarks can be used, for example,
to compare the quality of two similar types of cars made by different
manufacturers or to compare the quality of a certain product or service to an
industry standard.

There are different types of benchmarks, for example, internal benchmarks to

compare different internal processes, such as the quality of technical support in
the sales versus the engineering departments. There is also competitive
benchmarking to make comparisons between competitors, such as the quality of
their products or services. There is also functional benchmarking to compare the
quality of a function, such as strategic planning, to a set of best practices for that
function.
Business Process Reengineering (BPR)

This approach aims to increase organizational performance by radically re

designing the organization's structures and processes, including by starting over
from the ground up. It includes extensive analysis of the various processes across
the organization, and analyzing them for effectiveness and efficiencies.

Although the activities of BPR can be quite detailed, complex and challenging,
the benefits can be many. Similar to the Balanced Scorecard, BPR can also be
used to accomplish stronger alignment between all of the major operations in an
organization, as well as more effective and efficient accomplishment of strategic
goals. It also can be used for increased efficiencies and productivity, which, in
turn, can reduce costs and increase profits. Also, for nonprofits, it can be used to
increase impact in the community. (BPR is a form of transformational
organizational change.)

Failure and Effects Analysis

Failure Mode and Effects Analysis can improve quality and reliability, especially
by focusing on ways in which the use of a particular product can fail. For each
likely or detected failure, its effects are identified, especially in terms of how they
might affect the customers, for example, injury, poor performance, noise or odors.
Likely causes are identified, as well. A comprehensive FMEA process will
associate a probability of each failure actually occurring, and will clarify
recommended actions regarding how each failure can be avoided, along with who
has responsibility for enacting those actions and when.

FMEA is usually applied early in the development phases of the product so that
later stages of development can be used to solve any problems that were
discovered. FMEA is applied particularly with complex designs, such as
mechanical and electrical systems. There are different types of FMEA, depending
on the focus of where quality and reliability need to be improved. Types include:
system, design, process, service and software. Effective use of FMEA can result
in increased quality, reliability and safety, and can reduce the likelihood of
recurring changes to design.

ISO9000
ISO 9000 is a set of internationally recognized standards in quality management.
ISO9001 is a well-known standard within that set and over one million
organizations use it. ISO9000 builds on the continuous improvement approach to
quality. The ISO quality standards are so comprehensive and well-known that
they are often the foundation in a quality management system upon which other
quality management methods are placed.

A big advantage is that the set of standards can be customized and applied to any
type of organization, including service organizations. It focuses especially on the
integration of the various functions ranging from developing products and
services to ensuing strong satisfaction among those who use them. Organizations
can apply to be audited to earn ISO 9000 certification.

The standard is based on sever highly integrated principles of quality

management, including: customer focus, leadership, engagement of people,
process approach, improvement, evidence-based decision making and
relationship management.

Kaizen

Kaizen is a continuous improvement program. Kaizen in Japanese means "change

for the better." This is a powerful definition of Kaizen: "KAIZEN™ means
improvement. Moreover, it means continuing improvement in personal life, home
life, social life, and working life. When applied to the workplace KAIZEN™
means continuing improvement involving everyone – managers and workers
alike." Masaaki Imai, Founder of Kaizen Institute

Kaizen is often described as a philosophy rather than an approach to quality

management. It is a practice of continuously seeking opportunities to improve
work processes and making small, continuous changes instead of radical and
transformational ones. In an organization implementing Kaizen, everyone in the
organization is trained on Kaizen and implements the practices. So Kaizen is not
an expensive set of practices, as much as a long-term set of continuous practices
made by everyone in the organization, resulting in large and lost-lasting change.

Lean Management

Lean management is a continuous improvement approach to quality management

process that focuses on maximizing customer value while reducing waste. The
approach focuses first on clarifying what customer’s value, and then eliminating
waste toward producing products and services that are proven to provide that
value. Any activity or process that consumes resources, adds cost or time without
creating value becomes the target for elimination. Each step in the business
process is mapped and analyzed for waste. Waste could include, for example,
unused or unneeded materials, transportation or other activities, as well as
unnecessary delays and defective parts. Lean management also focuses on
continuously improving especially all of the people, materials and activities,
especially those that directly contribute to producing products and services to
customers. A hallmark of lean management is that it encourages shared
responsibility and shared leadership, as well as respecting people and continuous
improvement.

Six Sigma
Six Sigma uses a problem-solving framework commonly referred to as DMAIC:
Define Measure, Analyze, Improve and Control. Six Sigma is sometime
combined with the Lean management approach to quality management, and is
focused on not only detecting and solving problems, but on avoiding them in the
first place. Six Sigma also puts strong focus on well-designed planning and
implementation, including careful specification of roles (or "belts") in the
planning and implementation team. Six Sigma is beginning to be adopted world
wide as more organizations realize that it can be used in more applications than
highly technical, mass production. Like TQM and other quality initiatives, Six
Sigma includes tools used to drive down defects, improve quality and profits, and
thus, morale and profitability.
Total Quality Management

Total Quality Improvement (TQM) is a set of management practices throughout

the organization, and is geared to ensure the organization consistently meets or
exceeds customer requirements. TQM builds on the continuous improvement
approach to quality. Like Lean management and Six Sigma, the TQM approach
focuses not only on manufacturing, but on the processes across departments that
are geared to meeting or exceeding customers' expectations.

“Quality management", as a result of TQM's focus on the entire process to meet

customers' needs, there has been various related phrases, such as Total
Involvement of Employees and Total Customer Focus
Quality Circles

A quality circle is a small group of employees who meet regularly with their
manager to analyze problems in their activities and to make recommendations to
improve them. Ideally, the employees implement the recommendations
themselves. Ideally, the employees reflect and learn about how to avoid those
types of problems in the future.

Another benefit is that the circles can help employees to think about their
activities, especially from the perspectives of their customers. The circles also can
cultivate strong team building among those who work together to develop and
deliver products and services to their customers, whether customers are internal
or external to the organization. Another major benefit of quality circles is that
they can be much less expensive than other approaches to quality management
because they usually require much less initial consultation and training to
implement.

Useful Tools in Quality Management

There are a variety of tools that are useful across many of the different
approaches to quality management in organizations, including;
• Bar Charts
• Brainstorming
• Cause and Effect
Diagrams • Check Sheets
• Control Charts
• DMAIC
• Dot Plot Charts
• Histograms
• Matrix Analysis
• Pareto Charts
• PDCA
• Process Mapping
• Scatter Diagrams
• Statistical Process Control
Lecture : 12
Week : 12
 Topic: Areas of Operation Management Decisions
1. Process and Capacity Design: Design strategies which support all production
goals including technology and resources. A value stream map can help
determine what processes are necessary and how to keep them running
efficiently.

2. Goods and services: This includes looking for ways to implement consistency in
costs, quality, and resources across all business divisions.

3. Quality Management: Be clear on the customer’s demands and then meet those
expectations. Use market research to determine customer needs and batch quality
assurance testing on products and services in production.

4. Location: In developing a location strategy consider supply chain and how the
location will receive supplies, the movement of goods and services internally and
to customers, and the role of marketing and public relations in the location
choice.

5. Layout Design and Strategy: Consider the placement of desks, workstations, and
how materials are delivered and used.

6. Human Resources and Job Design: Implement continuous improvement

programs with regular reviews, provide continuous training for employees, and
institute employee satisfaction programs to achieve success in this area.

7. Supply Chain Management: Determine the best strategies to streamline, be cost

effective, and to develop trusted partners.

8. Scheduling: Consider both production and people. Ask questions such as how
much product is required to be produced for the customer in the required time?
How many people and how many machines are required to do the job effectively
and efficiently? This differs among industries and business departments. For
example, emergency rooms need to maintain different schedules than a hospital’s
corporate office.

9. Maintenance: This includes maintaining people and machines, as well as,

process. What do you need to do to maintain quality and keep resources reliable
 and stable?

10. Inventory: Different markets mean different challenges when it comes to

inventory but all need to strategize and plan their inventory control. Weather,
supply shortages, and labor all influence how an organization maintains its
inventory.
Lecture : 13 & 14
Week : 13 & 14

Topic: Operations Strategies

Operations strategies drive a company’s operations, the part of the business that
produces and distributes goods and services. Operations strategy underlies overall
business strategy, and both are critical for a company to compete in an ever
changing market. With an effective ops strategy, operations management
professionals can optimize the use of resources, people, processes, and
technology.

The seven main functions of operations are:

• Product management
• Supply chain
• Inventory
• Forecasting
• Scheduling
• Quality
• Facilities planning and management

Purpose of Operations Strategy

“An operations strategy should guide the structural decisions and the evolution of
operational capabilities needed to achieve the desired competitive position of the
company as a whole,” says Tim Laseter in his article "An Essential Step for
Corporate Strategy.”

Operations strategy is only one part of overall business or corporate strategy, but
it’s crucial for competitiveness and success. Without a strong operations strategy,
companies fail to keep up with changing markets and lose out to more strategic
competitors. Many companies, big and small, have struggled with operations
strategy, often lacking in comparison with technologically savvy competitors. For
example, Amazon, while constantly advancing technology such as drones for
delivery, has pushed aside myriad brick-and-mortar retailers.

To be effective and competitive, all parts of a company must work together. All
departments should contribute to the company mission and have strategies
underlying the overall corporate/business strategy. In addition to having an
operations strategy, they should also have functional area strategies in finance, IT,
sales, marketing, human resources, and possibly other departments, depending on
the type of business.

The operations function is reactive and

• Stage 1, Internally Neutral:
viewed as a necessary evil.

• Stage 2, Externally Neutral:The operations function adopts best practices

and tries to match the competition.

• Stage 3, InternallySupportive: The operations function tries to provide

support for the overall business strategy.

• Stage 4, Externally Supportive:The operations function provides

competitive advantage for the company, and sets the industry
standard.

Core Operational Strategy Areas

Different sources use different terms to describe strategy areas. Here’s one way to
categorize core strategies:

• Corporate: Overall company strategy, driving the company mission and

interconnected departments

• Customer-Driven:Operational strategies to meet the needs of a targeted

customer segment

• Core Competencies: Strategies to develop the company’s key strengths

and resources
 • Competitive Priorities: Strategies that differentiate the company in the
market to better provide a desired product or service

• Product or Service Development: Strategies in product design, value, and

innovation

Another way to frame strategic areas is by these “distinctive” competencies:

• Price
• Quality, such as performance, features, aesthetics, and durability •
Service
• Flexibility
• Tradeoffs, or competing on one or two distinctive competencies at the
necessary expense of others

Operations Strategies and Tactics

• Take a Global View: See how others worldwide are providing better goods
and services. Learn from them, and see how you might compete and innovate
in a core competency. Also, improve your supply chain by looking globally,
and employ global talent if remote work is an option.

• Have a Strong Mission Statement: Focus your efforts with a mission

statement that truly defines your goals and guides your business approach.
Tie your overall business strategy and operations strategy into it.

• Gain Competitive Advantage with Differentiation: Develop a point of

differentiation and a unique value proposition, and consistently innovate
and build strategies around them. Don’t just use best practices. Exceed
them, and leapfrog the competition.

• Gain Insights from a SWOT Analysis: Analyze your company’s strengths,

weaknesses, opportunities, and threats as a catalyst to strategy.
• Track Progress: Develop strong analytics and KPI dashboards to measure
and optimize your operational efforts.
Examples 0f Operations Strategy

• Amazon: Once known for books, Amazon is now known as the go-to
platform for online shoppers of any product. Its distribution network is
widely touted and even includes experiments with drone delivery.

• Apple Computers: Apple is long recognized in operations circles for its

operational excellence and supply chain management.

• Walmart: This retailing giant managed to undercut many competitors on

the price and variety of a wide range of products.

• FedEx: FedEx made speed of delivery its calling card, achieving it with
excellent operations.

• IKEA: The
world’s largest furniture retailer undercut many home goods
competitors on price and variety with its warehouse concept.

Steps to Write a Strategic Operations Plan

1. Choose the Right People: Select those with the right knowledge to
compile the operations strategy plan, sometimes just called an operations
plan. Some businesses provide more strategy than others in their ops
strategy plan.

2. Study the Overall Business Strategy Plan: Sometimes the operations

strategy plan is included as a section of the overall business plan. In any
case, the ops strategy plan should align with the business plan.

3. Develop Measurable Operations Goals: These should match up with the

business plan. Don’t do KPIs in a vacuum. Ensure that stakeholders have
a say and agree to the numbers.
4. Gather Key People to Brainstorm Strategies: Work on strategies
(approaches to reach goals) and underlying tactics (specific steps and
tasks to implement the strategy).

5. Outline Your Major Points to Maintain Your Plan’s Focus: Use headings,
subheadings, and bulleted lists for clear organization. These will carry
over to your fully written plan, providing clear structure and easy
scanning. Your plan might have elements of a SWOT analysis: strengths,
 weaknesses, opportunities, and threats.

6. Keep Your Audience in Mind: Write so that they will understand it. The
plan is all about communication.

7. Include an Index: Use this for easy scanning of the plan and its sections.

8. Use an Appendix: Use this for supplementary material or for items too
detailed for the whole audience.

9. Include the Operations Budget: Include it, or cross-reference or cross link

it in your operations strategy plan. Show the rationale for key budget
items, especially large expenses.

10. Include a “Stage of Development” Section: Give an overview of the

current state of operations and what you’re trying to accomplish and
improve. Provide a high-level view of how you make your product, your
supply chain, and quality control. Identify risks and how you’ll monitor
them.

11. Include a Production Process Section: This goes into detail on the daily
production process, and demonstrates that you’ve worked out the
necessary specifics. For manufacturing, you would list plant details,
equipment, assets, materials, special requirements, inventory, and quality
control steps. For a startup, you might include prototype and testing
details.

12. If Necessary, Divide Other Sections by Product Family: You can also
divide them by product, service, or different areas of operations. You
might include overall strategies and tactics and/or consider them by
section.

13. Use Flowcharts: Use these images and other graphics to make it more
easily understandable.

14. Build in Flexibility: Explain how you might adjust operations based on a
changing market.

15. Regularly Monitor Your Goals: Do this to see how your strategies and
tactics are working. Adjust as necessary to keep ahead of the curve. A
 strong operations strategy plan is key to success.

Operations Strategy Consultants Services

Consultants offer a wide range of services in functional strategy areas like

operations as well as overall corporate/business strategy. Among other things,
they can help a business do the following:

• Map and assess their operations

• Improve alignment with the overall business and with other departments •
Create strategic plans
• Perform a SWOT analysis (strengths, weaknesses, opportunities, and
threats)
• Advise on better technology
• Develop benchmarking, KPIs, and goals
• Streamline operations for efficiency and cost reduction
• Implement strategic plans and new ways of doing things
Lecture : 15
Week : 15

Topic: Lean Operations

The term Lean was first used by John Krafcik in his article “Triumph of the
Lean Production System” which appeared in 1988. This paper found that
productivity and quality levels in car assembly plants were not determined by
an assembly plant’s location. However plants that operated with a “lean”
production policy were able to manufacture a wide range of models, yet
maintain high levels of quality and productivity. The message was further
disseminated by the book “The Machine That Changed the World” (1991) by
Womack & Roos. The term ‘lean’ approach aims to meet demand instantly,
deliver perfect quality and eliminate waste in all its forms.

Three key elements of Lean Operations are eliminate waste, involve everyone
and continuous improvement.

EliminateWaste
Waste is considered as any activity which does not add value to the operation.
Ohno (1988) classified 7 wastes; the priority should be to avoid these wastes,
only then to cut:

- Overproduction – making too much too early

- Waiting – Need to keep a flow of material/customers

- Unnecessary Motions – ergonomics and layout

- Transporting – unnecessary movements/handling

- Processing– Too much capacity in one machine instead of a number of

smaller ones

- Inventory – Raw material, work in progress and finished goods - Defects

– costs of defects tend to escalate the longer they remain

undetected

The 7 service customer wastes can be the basis for an improvement programme
(Bicheno, 2008):

- Delayon the part of customers waiting for service, for delivery, in

queues, for response, not arriving as promised.

- Duplication.Having to re-enter data, repeat details on forms and

answering queries from several sources within the same
organisation.

- Unnecessary movements. Queuing several times, poor ergonomics in the

service encounter.

- Unclear communication and the wastes of seeking clarification.

- Incorrectinventory. Out-of-stock, unable to get exactly what is required,

substitute products or services.

- Opportunity lost to retain or win customers, failure to establish

rapport, ignoring customers, unfriendliness, and rudeness.

- Errors
in the service transaction, product defects in the product-service
bundle, lost or damaged goods.
Involvement ofEveryone

Some organizations view the lean approach as consisting almost exclusively of

waste elimination. However effective waste elimination is best achieved through
changesin staff behavior. Lean aimsto create a new culture in which all
employees are encouraged to contribute to improvement efforts through
generating ideas. In order to undertake this level of involvement the organization
will provide training to staff in a wide range of areas, including techniques such
as statistical
process control (SPC) and more general problem solving techniques.

Continuous Improvement(CI)

Continuous Improvement or Kaizen, the Japanese term, is a philosophy which

believes that it is possible to get to the ideals of Lean by a continuous stream of
improvements over time. Continuous Improvement is needed because customer’s
views are continually changing and standards are rising. Kaizen is about moving
tacit knowledge to explicit knowledge

- Tacit– ‘Know-How’ based on years of experience but may not be

written down
- Explicit – Written down in principles and procedures

Improvement efforts include:

- Createa mind-set for improvement. Do not accept that the present way of
doing things is necessarily the best.

- Tryand try again. Don’t seek immediate perfection but move to your
goal by small improvements, checking for mistakes as you progress.

- THINK. Get to the real cause of the problem - ask why? five times.

- Work in Teams. Use the ideas from a number of people to brainstorm

new ways.

- Recognise that improvement knows no limits. Get in the habit of

always looking for better ways of doing things.
 Visual control is used to facilitate continuous improvement work. Visibility is
achieved through what is called the five S’s (seiri, seiton, seiso, seiketsu,
shitsuke) which roughly translate as organisation, tidiness, cleanliness,
maintenance and discipline. To achieve these factors visibility measures include
Andon signs (coloured lights), control systems such as the Kanban and
performance charts such as Statistical Process Control (SPC) charts.

Implementing Lean
As stated earlier the ‘lean’ approach aims to meet demand instantly, deliver
perfect quality and eliminate waste in all its forms. One of the ways it does this
is through replacing the traditional push production system with a pull
production system sometimes called ‘lean synchronisation’. Other techniques
include setup reduction and total preventative maintenance

Push ProductionSystems
In a push production system a schedule pushes work on to machines which is
then passed through to the next work centre. At each production stage a buffer
stock is kept to ensure that if any production stage fails then the subsequent
production stage will not be starved of material. The higher the buffer stocks
kept at each stage of the line, the more disruption can occur without the
production line being halted by lack of material.

Advantages

- Buffers insulate stages

against disruption

Disadvantages

- Because buffers insulate system from problems the problems are not
visible so no one takes responsibility for fixing them.

- Buffer stock leads to high inventory and slower lead times

- Production is not connected to demand

In a pull system the process starts by an order for the finished product (e.g. car)
at the end of the production line. This then triggers an order for components of
that item which in turn triggers an order for further sub-components. The
 process repeats until the initial stage of production and the material flows
through the system as in the ‘push’ approach.
Advantages

- No buffers so problems visible (whole line stops) so people take

responsibility for fixing them.

- No or low buffer stock leads to low inventory and faster lead times -

Production is connected (pulled) to demand Disadvantages - No

protection against unforeseen disruptions to supply chain

One system for implementing a pullsystem is called a kanban (Japanese for

‘card’ or ‘sign’) production system. Each kanban provides information on the
part identification, quantity per container that the part is transported in and the
preceding and next work station. Kanbans in themselves do not provide the
schedule for production but without them production cannot take place as they
authorise the production and movement of material through the pull system.
Kanbans need not be a card, but something that can be used as a signal for
production such as a marker, or coloured square area

Setup Reduction

In order to operate with the small batch sizes required by lean it is necessary to
reduce setup time (the time taken to adjust equipment to work on a different
component) drastically because of the increased number of setups needed with
small batches. Originally some operations such as stamping car door panels with
a press die were done in very large batch sizes, and the output stored in
inventory, because the setup time for the press could be measured in hours or
even days. Shigeo Shingo developed a system for setup reduction which became
known as the Single Minute Exchange of Dies(SMED)

Total Preventative Maintenance(TPM)

This anticipates equipment failures through a programme of routine

maintenance which will not only help to reduce breakdowns, but also to reduce
downtime and lengthen the life of the equipment.
TPM includes the following activities:
- Regular Maintenance activities such as lubricating, painting,
cleaning and inspection. These activities are normally carried out
by the operator in order to prevent equipment deterioration.
- Periodic Inspection to assess the condition of equipment in order to
avoid breakdowns. These inspections are normally carried out at
regular time intervals by either operator or maintenance personnel.
- Preventative Repairs, due to deterioration, but before a breakdown
has occurred. Normally carried out by maintenance personnel but
ideally by the operators.
Lecture : 16
Week : 16
Topic: Business Process Reengineering (BPR)

Defined by Hammer and Champy (1993) as: ‘the fundamental rethinking and
radical redesign of business processes to achieve dramatic improvements in
critical, contemporary measures of performance, such as cost, quality, service
and speed’

The definition means,

- Fundamental rethinking – reengineering usually refers to the changing

of significant business processes

- Radicalredesign – involves a complete rethink about the way the

business operates

- Dramatic improvements – tens or hundreds of percent improvement

- Critical contemporary measures of performance – process

measures based on competitive factors of cost, quality, service
and speed.

Hammer and Champy stress the use of information technology as a catalyst for
these major changes. Examples given include decision support systems,
teleconferencing and shared databases. BPR organises work around customer
processes rather than functional hierarchies
 Advantages of functional structures:

- Creates
a pool of expertise which can service a number of areas -
Helps develop careers in a particular field

Disadvantages of functional structures:

- Focus of work can be on functional boss rather than end customer -
No one takes overall responsibility for overall process
- Tasks may be undertaken for internal functional reasons rather than
overall business strategy

ImplementingBusiness Process Redesign

The task of designing processes should be undertaken in a structured manner
and the steps involved can be described as:

1. Identifying and documenting the process activities

2. Identifying processes for improvement
3. Evaluating process design alternatives

Identifying and documenting the process activities

The identification of activities in a current process design is a data collection
exercise using methods such as examination of current documentation,
interviews, and observation. In order to provide a framework for the design and
improvement of service processes the techniques of process mapping and
service blueprinting can be utilized.

Identifying processes forimprovement

The identification of the relevant business processes for improvement can be
undertaken using a scoring system in which prioritisation is governed by
importance to customers and performance against competitors. Other
measurement systems can be used such as a process marking guide covering the
amount of impact and extent of innovation required of a process to meet
performance across a number of critical success factors.

Evaluating Process DesignAlternatives

 There are many ways in which a process can be designed to meet particular
objectives and so it is necessary to generate a range of innovative solutions for
evaluation. Three approaches which can be used to generate new ideas are:

- Generating new designs through brainstorming

This approach offers the greatest scope for radical improvements to
the process design but represents a risk in the implementation of a
totally new approach.

- Modifying Existing Designs

This approach is less risky than a blue skies approach but may
mean the opportunity for a radical improvement in process
design is missed

- Using an established ‘benchmark’ design

This approach applies the idea of identifying the best-in-class
performer for the particular process in question and adopting that
design.

Business Process Simulation (BPS) is used due its ability to incorporate the
dynamic (i.e. time-dependent) behaviour of operations systems when
evaluating alternative process designs. There are two aspects of dynamic
systems which need to be addressed:

- Variability
Most business systems contain variability in both the demand on the
system (e.g. customer arrivals) and the durations (e.g. customer service
times) of activities within the system.

- Interdependence
Most systems contain a number of decision points that affect the overall
performance of the system.
Lecture : 17
Week : 17
 Topic: AgileOperations

Agile Operations aim to respond quickly to market demand in order to retain

current markets and gain new market share. As a strategy agile operations can
be seen to embrace uncertainty in markets and achieve competitive advantage
by the flexibility and speed of their response to them. The focus of agility has
moved from an individual organisation to supply chains in which several
companies work together. A supply chain is a series of activities that moves
materials from suppliers, through operations to customers.

The traditional way to deal with uncertainty of demand is to improve forecast

quality. However difficult to do in volatile markets, so emphasis is on reducing
3 critical lead times:

1. Time-to-market –how long does it take to recognize a market

opportunity and bring products/services to market

2. Time-to-serve –how long does it take to capture a customer’s order and to

deliver the product

3. Time-to-react – how long does it take to adjust the output of the business
in response to volatile demand

Companies are slow to recognize changes in demand in the marketplace

because of a lack of visibility. Supply chains are driven by orders which are in
turn driven by independent forecasts and inventory replenishment decisions by
organisations along the supply chain from retailers to wholesalers to
manufacturers. Thus upstream parties are unable to anticipate changes in the
needs of customers
- Lead Time Gap = Logistics Pipeline – Customers Order Cycle Time

- LogisticsPipeline = Time to source materials, convert them

into products and move them to the marketplace

- Customers Order Cycle Time = How long

customer is prepared
 Agile SupplyChains

Agile supply chains aim to be shorter and demand driven in order to overcome
lead time gap. Agile supply chains should offer the following benefits:

- Visibility

Supply chain participants should have full visibility of customer

demand, supply sources, inventory levels, promotion plans etc. This
visibility should help companies increase the speed of the flow of
materials, information and customers through their organization and
thus speed up response times.

- Flexibility

Key areas are product development, sourcing, manufacturing and

logistics flexibility.

- Speed

The end-to-end cycle time from manufacture to distribution. The

smaller the cycle time the quicker responses can be implemented

- Predictability

The response of the supply chain to changes should be predictable to all

supply chain participants

- Scalability

The ability to respond to demand changes

Lean SupplyChains

An alternative model to agile supply chain is the concept of the lean supply
chain. Lean supply chains adopt the concept of lean operations across the supply
chain. Lean supply chains emphasize efficiency.

Efficiency is achieved by policies such as minimizing inventory across the supply

chain and continuous improvement across the supply chain.

Leagility – CombiningLean and Agile

It is suggested that there are three ways of bringing lean and agile together
 (Christopher and Towill, 2001)

Pareto Rule (80/20 rule)

- 80% of volume generated from 20% of product line
- Use lean for 20% of predictable high volume product lines. Seek
economies of scale and make to forecast.
- Use agile for 80% of less predictable product lines. Aim for quick
response and make to order.

Postponement
- Thisinvolves the use of a decoupling point which holds ‘strategic’
inventory in modular form until precise customer requirements are
known.
- Companies can use lean methods up to the decoupling point and then
agile methods beyond it.
- The concept can also be used with an information decoupling point.
This represents the furthest point upstream at which ‘real’ demand
information flows (i.e. information not distorted by policies such
as re- order points).

Base and Surge

- Base demand can be forecast on the basis of history and so can be met
using lean to maximise efficiency
- Surge demand is met by more flexible (agile) processes.

- One strategy is to source base demand in low cost countries and meet
surge demand in local markets (albeit at higher cost but more
effective overall).

Mass Customisation

Mass customisation can be seen as an example of the agile approach. Mass

customisation describes the ability to produce and distribute what are perceived
to be customised goods and services within a high volume or mass market
(Davis, 1987). Mass customisation is based on the assumption that market
requirements are becoming increasingly fragmented, while operations resources
are allowing a greater degree of flexibility and responsiveness. Therefore it is
possible to ‘mass produce’ a basic family of products or services which can still
 be customized to the needs of individual customers.

Vonderembse and White (2004) describe 3 levels of customization:

- Customer-contact

This is where a product or service is tailored to individual needs. E.g.

haircut

- Adaptive

A standard product is customized to individual needs through the use of

options. e.g. car

- Presentation

Standard products are presented differently to different customers. e.g.

packaging

Quick Response Manufacturing(QRM)

A company-wide strategy for reducing lead times throughout the enterprise.

External lead times are reduced by rapidly designing and manufacturing
products to customer’s needs. Internal lead times are reduced in order to
improve quality, lower cost and provide quicker response to the customer

QRM is based on 4 core concepts (Suri, 2010):

The power of time

- The reduction of lead time should drive all decisions
- Lead time is defined as the typical amount of calendar time from when
a customer creates an order, through the critical path until the first
piece of that order is delivered to the customer.
- Reduced lead time = quick response

Organization structure
- Move from functional departments to flexible cells
- Move from top-down control to team ownership
 - Move from specialised, narrowly focused workers to a cross-trained
workforce
- Move from efficiency/utilisation goals to lead time reduction
System Dynamics
- Thislooks at how interaction between machines, people, and products
impact lead times.
- Do not have too high utilization of resources as this can increase lead
times considerably
- Reduce variability in flow time (arrival time + process time) to reduce
lead time
- Choose a batch size that minimizes lead time

Enterprise-wide application
- Apply the principle of minimizing lead time across all departments -
Apply the principle of minimizing lead time to suppliers
- Apply the principle of QRM to rapid new product development
Lecture : 18
Week : 18

Review class, Presentation