1 Monday

Introduction operation management

Project management: as the set of the collection of the activities responsible, designing,
production, etc.
Why is it important to learn about operation management:
1. Just like basic critical function of department in any manufacturing as well as service
company.
2. We need to look how the product is design and produce by the company,
3. We would like to know about what the operation manager do,
4. Operation management is very critical because it’s responsible for the making of
product.
What operations managers do:
a. Basic Function:
 Planning
 Organizing
 Staffing
 Leading
 Controlling
10 strategic decisions:
1. Design of goods and services
2. Managing quality
3. Process and capacity strategy
4. Layout decision
5. Location decision
6. Human resource and job design
7. Supply chainmanagement
8. Inventory management
9. Scheduling
10. Maintenance
Current challenge in operation management:
 Globalization: this is the biggest challage because in this section explain how the
company manufacturing is going to design of activities in global standard. Such as
selection of supplier, selection of facilites and location of their market.
 Supply chain partnering: it’s about which partner, which vendor (domestic or foreign
country) to established corporation with them.
 Sustainability: how the company will be acting, and responsibly.
  Rapid product development: how the company will be able to design, to develop,
making, and evolving the product to thei various target market segment.
 Mass customization,
 Lean operation: how the company will be able to operate effectively and efficiently.
Operation activities:
 Manufacturing company: usually they will produce product.
 Service company: usually they will design and deliver the services.
Major differences between good and services:
1. Mature of the product: product is tangible. The quality can be evaluated easily, but
service is more tangible that manufacturing’s product.
2. Product of goods can be inventoried. Product of the manufacturing’s company can be
put in the warehouse by them. But for services, the deliveries must be go hand by hand.
It can’t be inventoried in the warehouse.
3. In the production of goods, hopefully we will have like a similliar product. But in
services we have higher variety, even it’s a similliar services aspect. It can be different.
4. Service sector now is gaining more and more important in terms of employment. Such
as education, medical, transportation, finance, insurance, real estate, hotel, etc. but in
developing countries its a problem because number of labor become bigger and bigger
than those who work for manufacturing sector.
Types of productivity measure: (rumus)
1. Parsial (single productivity measure): total output / input
2. Multifactor pruductivity measure: total outpout / (direct material + direct labour)
3. Total factor pruductivity measure: total output / total input
Measurement problems:
 Quality may change while the quantity of inputs and outputs remains constant.
 External elements: may cause an increase or decrease in productivity.
 Precise units of measure may be lacking.
STRATEGY AND PRODUCTIVITY
Strategy: as a plan or creating a value, how the firm is going to design, develop producvt or
services to it’s customer. It’s also can be define as pattern of decision.
Hirarchy of strategy:
1. Corporate level strategy: Mission. Mission usually included in the corporaye level
strategy. Such as mission, vision, values, goals/objectives)
2. Business streategy: how the company is going to compete with the competitors. Such as
competitive strategy)
3. Functional Strategy: included marketing, HR, Finance, IT, Operations.
Mission: the most importante of strategy. Define as about where the firm will going in the
future. Mission usually included in the corporaye level strategy. Such as mission, vision, values,
goals/objectives). However mission can also be developed for functional level, such as operation,
Marketing, finance, etc. Mission can also be adopted for each OM decision. 10 decisions:
1. Design of goods and services
2. Managing quality
3. Process and capacity strategy
4. Layout decision
5. Location decision
6. Human resource and job design
7. Supply chainmanagement
8. Inventory management
9. Scheduling
10. Maintenance
Strategy: tell us about how we get there. How we achive or complete the mission.
Strategy development process: usually company can begain strategy development by analizin
the environment. They usually using SWOT. By using that the company can use competitive
advantage for facing the competitor. competitive advantage such as lower cost, the highest
quality, the most innovative product, etc.
Operations strategy: can be defined as a patterns of operations decisions to create competitive
advantage. Competitive advantage such as lower cost, the highest quality, the most innovative
product, etc. operations strategy must be refer to the busines strategy or business competitive
strategy.
2 kind of generic busines strategy:
 Cost leadership: because our production processes are able to deliver, to produce the
product at its lower cost. So we can be able to sell or to offer the product at the lowest
price. How? Low overhead (indirect) cost, best capacity utilization, best inventory
management practices.
 Differentiation: how our product or services will be design and then produce so it will
be different from our competitor. Its not just to be different but to be better or the best
product in the market. How? Innovative design, broad product lines, after-sales services.
Quick response:
 Flexibility: able to produce a variety of products or services.
 Realibility: from good and consistent quality
 Quickness: speedy responses.
 1 Wednesday
Product and Service Design
Product life cycle:

Stage 1 introduction: product decision is critical and need to be develop that meet the
demands to gain competitive advantage. The characteristics is: Cost is very high, slow
sales on the start, sales revenue becoming growth but the rates of growth is very slow.
Stage 2 growth: sales and profit increased very rapid.
Stage 3 maturity: high marketing cost, falling prices, lower profit.
Stage 4 decline: sales volume and profits are declined.
Stage 5 abandon: finally the product will be abandon, but the company will introduce
the new product and repeat the product life cycle.
Product and service design steps:

Week 2 Monday
Project Management
Life cycle activity stage:
1. Inicial concept: project manager need to identified the need for the project.
2. Visibility study: project manager evaluated cost, and benefit of the project.
3. The planning of project: project manager analyzed the work to be done, and develop
time estimate for the completion each of the activity.
4. Execution of the plan: project manager carries out the activity may up the project.
5. The termination of the project: project manager will end the project.
Program Evolution and Review Technic (PERT): is a planning network technic that use for
determine project plan, completion date and identified the project critical path.
Critical ptah: is a planning network technic that use for determine project plan, completion date
and identified the project critical path.
Network planning technique:
How to computing slack time:
 Week 2 WEDNESDAY
Capacity and Forecasting
STRATEGIC CAPACITY
3 things that are considered in operations management:
1. Capacity: the capability of an object wheter it’s a machine, work center or operator to
produce output for specific time periode which is can be 1 hour or 1 day. Example:
number of passangers on train, number of patients that can accepted in the hospital or
number of car that can be produced in a week by a factory.
How to measuring capacity? Using input, output and combination of the two.
Example for input measuring:

Example for Output measuring:

Process Output Capacity
Textile manufactur Textile produce in a day or a week
Hotel Room booking In a day
The output measuring capacity is best use when there are low variety in product or
limited costumization.
How to measuring capacity:
 Basic capacity strategy:
o Lead Capacity Strategy. Company often use this strategy as it allow a
company to increase production when the demand of the manufactur plan
art low. Company love this strategy because it minimize risk. The negative
side of this strategy is the product that can not sell it will become
unwanted inventory and increase company’s expenditure.
o Lag Capacity Strategy. In this strategy the company only increase the
capacity only after the demand has acquired. The positive side of this
strategy is it will reduce company risk and have more stable expenditure.
o Match Capacity Strategy. A company try to increase the capacity in
small increment. The benfit of this strategy is to minimize over capacity of
the strategy.
 Defining capacity:
o Design Capacity: is an ideal condition of what the process capable
producing perfect condition. In some case it can interpreted as maximun
capacity.
o Effective Capacity: contain unplanned loss. this consider how the
operations it will be stop or it will be maintain.
o Actual capacity: contain unplanned loss and planned loss.
 Theory of constraint:

 Capacity Constraint:

 Difference between bottleneck and constraint:

 How to identify the constraint or bottleneck:

 How to deal with bottlenecks in operations management:

 o Monitoring everyting. Such as see what went wrong at labor side, what happen
during production, etc. this usually can identified the number of problem.
o Quality oriented results. Try to fixing one problem on bottleneck issue at one
time.
o Inspect each process.
2. Demand: the amount of product or services that customer wanted.
3. Forecasting:

 Importance of Forecasting:
o Human Resource. Human resource manager forcecast the demand in the future
to find out how many man power he need. This imply: Hiring, training, laying off
workers.
o Capacity. Business development manager need demand forcast and economic
forecast to determain phisicaly capacity to have. This is related to the future target
market share and customer satisfaction. This imply: loss of customers and loss
market share.
o Supply chain mansgement. Good supplier and price advantages.
 Time horizon:
o Medium (1 year - 3years) and long range (more than 3 years). Forecast deal
with more comprehensive issues and support management decision regarding
planning and products, plants and process. Such as market share,
technologydevelopment , business environment.
o Short term (less than 1 year). Forecasting usually employs quantitative method
and deal with daily operational decisions.
 Types of forecasting:
o Economic forecast: that addres business cycle such as inflation rate, money
supply, etc.
o Technological forecast: predict the rate of technological progress that has deep
implication to the development to the new product.
o Demand forecast: predict the sales of existing product and services.
 Qualitative forecasting:

 Use of qualitative forecasting:

o It’s suspected that future results will depart martkedly from results in rpior
periods, and which therefore cannot be predicted by wuantitative meas. Example:
the company want to develop new category of product.
o The assimilation of large amount of narrowly-focused local data to discern trends
that a more quantitative analysis might not find. Example: when the company
want to expand the busines to the new area. Previous data can be use for
quantitiave analysis.
 o Management modifies historically-derived trends base on expert opinions. In this
case quantitative methods are use to create a preliminary forecast, which is then
adjusted a qualitative revirew.

 Delphi method:
o Iterative group process, continues until consensus is reached.
o 3 types of participants: decision maker, stakeholder, customers.
o commonly use by education insititute to determain future curriculum.
 Market survey:
o Ask customers about purchasing plans.
o What cosumer lsay, and what they do often different
o Sometimes difficult to answer.
o During this suervey the company realize that what the customer say is different
with the company did.
 Quantitative approach:

 Quantitative approach usually use to predict future performance the existing product
with the current technology.
 Components of the time series is random variation, trend, and seasonal.

 Times series commonly known as black box method. But the assosiative method
commonly known as glass box method.
 Asociative:

WEEK 3 MONDAY
Process Design and analyisis
 Process Strategy:
 o The main focus of Process focus category is many inputs - many outputs.
o Repetitive process category usuallu run in mode speed compare to the process
focus. In this category a company take raw materian and modul input, then
creating output.
o Product focus category is taking few input and produce high variety of product.
o Mass customization category is represent the demand. It’s a rapid low cost good
and services that fulfill increasingly unique costomer desire. This usually have
high variety volume. They have many parts and component inputs and then
turning it into many output version.
 The comparison:
o Process focus have low cost but high variable cost
o Product focus have high cost but low variable cost
o Repetitive product jus like between two above.
 Terminology:
 Lead time vs process time:

Lead time longer than process time and process time there are in middle of work in idle.
 Process representation:
 Process stage:

 Process type:

 Value stream mapping:

This map especially usefull in designing lean system that have main purpose to reduce
any kind of waste including time.
 Terminology:

o Buffer side effect is increase inventory level. So the process designer have to
make a process so the process can continue flow and minimum inventory in
buffer.
 Process performance rumus:
 Example process performance:

 little law:
 Service process degree customization and degree of labor:

 The thing that we need to remember in process design:

WEEK 3 WEDNESDAY
QUALITY MANAGEMENT
 Quality: define as fitnes for use. This contain 2 aspect: design quality and conformance
quality.
 o Quality of design: refers to the inheren value of the product in the market place.
For example we can difference laptop for business and gaming. So the quality of
design is based on their design.
o Conformance quality: refers to the degree to which the product or the services
design specification are made. For example laptop for busines people must be
light as possible.
 5 determinant for service quality:
o Realibility: is the ability to perform promiss services accurately
o Assurance: is the knowlage of the coutesy of employees and the ability to
contarint trust.
o Tangibles: appearance of the phycically facilities, equipment, and
communication material.
o Empathy: individually attend to customer
o Responsiveness: : the willingness to help customer
 Quality dimensions by prof garfin 1987:
o Performance
o Features
o Ralibility
o Conformance
o Durability
o Servicabilitty
o Aesthethics
o Perceived quality
 Six sigma: same as taguchi see the quality is inversely proportional to variability.
Variability is our enemy to produce the product however its not measure by loss function
by measure by how many defect projected in long term with the variation of the process.
The ultimate goal of six sigma is: to reduce defect of the product until 3.4 defect per
million oppurtinities.
 Cost of quality:
 3 criteria calue added analysis:
o Customer is willing to pay for it. Will the customer pay for waiting for the
services?
o There has to be physically changed. does inspection change the items
inspected?
o Done right at the first time. Correcting measn we failed doing right at the
first time.
 Quality can be a strategy for company to win the competion since the quality of the
pproduct increasing the profit. Because happier customer will increase sales and at the
same time reduces cost.
 Quality management system
o The QMS was coined by ken croucher in 1991
o A collection of business process focused on consistenly meeting customer
requirement and enhanching their satisfatction.
 TQM
o As management approach to long term success through customer satisfaction
o Keybords:
 customer satisfaction is the he ultimate goal, becase no matter how good
the the company do for the quality, the customer will determain the quality
level.
 management approach, total.