Lecture 8:

Operations management theories and approaches

 Outline
I. Evolution of Operations Management
• Time, concept, tool and originators
• Today OM environment
II. Queuing theory
• What is queuing theory?
• Queuing system
• Application of queuing model
III. Lean production
• What is lean production
• Systematic elimination of 6 waste types
• Effective lean production requirements
IV. Just-in-time production
• Definition
• How does JIT work
• Key principles
• Benefits and drawbacks
• Examples
I. Evolution of Operations
Management
 I. Evolution of OM
(cont)
 I. Evolution of OM
(cont)
 I. Evolution of OM
(cont)
 Today OM environment
• Customers demand better quality, greater
speed, and lower costs
• Companies implementing lean system concepts
– a total systems approach to efficient
operations
• Recognized need to better manage information
using ERP and CRM systems
• Increased cross-functional decision making
 II. Queuing theory:

Queuing in Thailand
(Source: Amusing Fun Website, 2016)
1. What is Queuing Theory?
• A queue is a waiting line (like customers
waiting at a supermarket checkout counter)
• Queuing theory
• is the mathematical theory of waiting lines
• It is concerned with the mathematical
modeling and analysis of systems that
provide service to random demands (i.e.
business decisions providing a service)
• Queuing problems arise because:
There is too much demand on the
facilities
(Much waiting time or inadequate
number of service facilities)
There is too less demand
(Much idle facility time or too
many facilities)

Customers waiting to buy famous moon cakes Staffs waiting for customers
(Source: Kenh14, 2016) (Source: Collinson, 2015)
The problem is to either schedule arrivals or provide extra facilities or both so as to obtain an optimum
balance between costs associated with waiting time and idle time.
2. Queuing system
a. Basic elements:
• Entries or customers
• Queue (waiting lines)
• Service channels or service facility

Source: Jalhotra, 2014

2. Queuing system
b. Basic structure:

Source: Jalhotra, 2014

2. Queuing system
b. Characteristics:
• Maximum number of
• Arrival distribution customers allowed in
• Service (departure) the system
distribution • Calling source or
• Service channels population
• Service discipline • Service facility
• Calling source or behavior
population • Customer’s behavior
Service channel

Source: Jalhotra, 2014

Service discipline
• FCFS (First Come, Fisrt Served)
• LCFS (Last Come, First Served)
• Service in random order
• Priority service
System capacity
• Maximum number of customers that can be accommodated
in the queue.
• Assume to be of infinite capacity (instead of finite capacity)
Customer’s behavior
• Balking – when a customer leaves the queue because it is too long,
has no time to wait, no space to stand, etc.
• Reneging – when a customer leaves the queue because of his
impatience.
• Jockeying – when a customer shifts from one queue to another.
Service facility behavior
• Failure – a server may fail while serving a customer, thereby interrupting service
until a repair can be made.
• Changing service rate – a server may speed up or slow down, depending on the
number of customers in the queue.
• Batch processing – a server may service several customers simultaneously.

Source: Daily Mail, 2015

 Waiting and idle time costs
• Cost of waiting customers
✔ Indirect cost of business loss
• Cost of idle service facility
✔ Payment to be made to the servers (engaged at the facilities)
for the period for which they remain idle.
✔ Direct cost of idle equipment.

Source: Harbin, 2012

🡪 The optimum balance of costs can be made by scheduling the flow

of units or providing proper number of service facilities.
3. Applications of Queuing Model
• We can use the results of the queuing models when making
decisions on design and/or operations.
• Some decisions that we can address:
– Number of servers
– Efficiency of the servers
– Number of queues
– Amount of waiting space in the queue
– Queuing discipline
Some examples of businesses which apply QM:
• Telecommunications
• Traffic control
• Determine the sequence of computer operations
• Predicting computer performance
• Health services (e.g. control of hospital bed assignments)
• Airport traffic, airline ticket sales
• Layout of manufacturing systems
III. Lean production
1. What is lean production?
– “An approach to management that focuses on cutting out waste,
whilst ensuring quality. This approach can be applied to all
aspects of a business – from design, through production to
distribution”.
– Underlying principle:
“less is more productive”
i.e. in order to stay competitive, organizations are required to
deliver better quality products and services using fewer resources.
Mechanism of lean production

Source: Beri, 2014

– Lean production in a nutshell
• Doing the simple things well
• Doing things better
• Involving employees in the continuous process of improvement
• … and as a result, avoiding waste
– Why cut out waste???
WASTE = COST
2. Systematic elimination of 6 types of waste
Eliminating wastes in production:

Source: Livingston & Haven, 2016

3. Effective lean production requires…
• Good relationship with suppliers
• Committed, skilled and motivated employees
• A culture of quality assurance; continuous improvement and
willingness to embrace change
• Trust between management and employees
 IV. Just-in-time production

1. Definition
Just-in-time (“JIT”) aims to ensure that inputs into the
production process only arrive when they are needed.
2. How does JIT work?
• Based on a ‘pull’ system of production – customer orders
determine what is produced
• Requirements complex production scheduling –
achieved by using specialist software to connect
production department with suppliers
• Suppliers delivered to production line only when needed
• Requires close cooperation with high quality suppliers
2. How does JIT work? (cont)

If a manufacturer can squeeze time and waste out of any one of

these areas, it can process a job – and get paid – more quickly.
Source: Farrell & Brown, 2015
3. Key principles of JIT
• A method of production control
• No demand – no production
• Anticipated/planned consumer demand triggers production
• Finished goods assembled just in time to be sold to customer

• Component parts assembled just in time to become finished

goods Source: Sercore, 2016
• Materials purchased just in time to make component parts
5. Examples of companies adopting JIT
The application of JIT at
• Dell’s approach to JIT is different in that they leverage their suppliers to achieve the
JIT goal. They are also unique in that Dell is able to provide exceptionally short lead
times to their customers, by forcing their suppliers to carry inventory instead of
carrying it themselves and then demanding (and receiving) short lead times on
components so that products can be simply assembled by Dell quickly and then
shipped to the customer.
• Important Factors to Dell’s Success:
– Dependable suppliers with the ability to meet Dell’s demanding lead time
requirements.
– A seamless system that allows Dell to transmit its component requirements so
that they will arrive at Dell in time to fulfill its lead times.
– A willingness of suppliers to keep inventory on hand allowing Dell to be free of
this responsibility.