OPMAN PRELIM - Product Packages are the combination

of goods and services; can make

company more competitive
CHAPTER 1: INTRODUCTION TO OPMAN
THE GOODS – SERVICE CONTINUUM
Operations Management- The management of
systems or processes that create goods and/or
provide services.

It affects:

- Companies’ ability to compete

- Nation’s ability to compete
internationally

PRODUCTION OF GOODS VS. DELIVERY OF SERVICE

3 BASIC FUNCTIONS:
- Production of Goods- Tangible Output
(Ahead of Time)
- Delivery of Services- An act (Happening)
Organizatio
- SERVICE JOB CATEGORIES:
n
 Government
 Wholesale/ Retail
Finance Operations Marketing  Financial Services
 Healthcare
 Personal Services
Value-Added Process- Operations function  Business Services
involves the conversion of inputs into outputs  Education

KEY DIFFERENCES:

1. Customer Contact (low goods/high service)

Value-Added and Product Packages
- Value Added elements make difference
between the cost of inputs and the
value or price of outputs
2. Uniformity of input (high goods/low service)
3. Labor content of jobs (low goods/high
service)
4. Uniformity of output (high goods/low
service)
5. Measurement of productivity (Easy
goods/Difficult service)
6. Production & Delivery (high goods/low
service)
7. Quality Assurance (high goods/low service)
8. Amount of Inventory (Much goods/Little
service)
9. Evaluation of work (Easier goods/ Difficult
service)
10. Ability to Patent Design (Usually/ Not
Usually)
*STRATEGIC – LONG TERM - HOW
 Designed/Resources allocated
*TACTICAL- SHORT TERM
- WHO
Scope of Operations Management  To do the work

 Forecasting (S) CORPORATE SOCIAL RESPONSIBILITY

 Capacity Planning (C) Phila
ntrop
 Scheduling (T) hic
(good
 Managing Inventories (S) corpo
rate
 Assuring Quality (S) citize
 Motivating & Training Employees (S) nship
Ethical
)
 Locating Facilities (S)
 Supply Chain Management (S) Legal (obey law)
 And more…

Types of Operations Economic (Profitable)

- Goods Producing
GENERAL APPROACH TO DECISION MAKING
- Storage/ Transportation
- Exchange 1. MODELS
- Entertainment - Abstraction of reality
- Communication  Physical (Mini cars)
 Schematic (Charts)
Decline in Manufacturing Jobs
 Mathematical (Formulas/ Symbols)
1. Productivity
Pros:
- increase their output using fewer workers
2. Outsourcing - Easy use; less expensive
- Some manufacturing work has been - Users to organize
outsourced to more productive companies - Increase understanding of problem
- Enable ‘what if’ questions
CHALLENGES OF MANAGING SERVICES
- Tool for evaluation and standardized format
1. Service Jobs are less structured than - Power of math
manufacturing jobs
Cons:
2. Customer contact is higher
3. Worker skill levels are lower - Quanti info may be emphasized over quali
4. Services hire many low-skills; entry level - May be incorrectly applied and results
workers misinterpreted
5. Employee turnover is higher - Does not guarantee good decisions
6. Input Variability is higher
7. Service performance can be affected by
worker’s personal factors 2. QUANTITATIVE APPROACHES
KEY DECISIONS OF OPMAN - Linear Programming
- Queuing Techniques
- WHAT *to cut line shorter*
 Resources/ amounts > Make arrival rate constant
- WHEN > Make service rate constant
 Needed/ scheduled/ ordered
- WHERE - Inventory Models
 Work to be done - Project Models
- Statistical Models - Closing Facilities
- Worker’s rights

OVERLAP OF BUSINESS FUNCTIONS

3. PERFORMANCE METRICS
- Control different aspects of operations
- Many:
 Profits
Operations
 Costs
 Quality
 Productivity
 Assets Finance Marketing
 Inventory
 Schedules
 Forecast accuracy
OPERATIONS INTERFACES
A
C
IG
N
MT
U
O
LP
E
Y
S
FRB
/H
4. ANALYSIS OF TRADE-OFFS
- Decision on the amount of inventory to
stock

Increased cost of Level of

holding inventory customer service

HISTORICAL SUMMARY OF OPMAN

5. SYSTEMS APPROACH
- Suboptimization – “The whole is greater  1770s- Industrial Revolution
than the sum of the parts”  1911- Scientific Management
1. Mass Production
2. Interchangeable parts
6. ESTABLISHING PRIORITIES 3. Division of labor
- Pareto Phenomenon – Few factors account  1920-1960- Human relations
for a high percentage of the occurrence of movement
some events.  1915, 1960-1970- Decision Models
- 80-20 Rule: 80% of problems are caused by  Influence of Japanese Manufacturers
20% of the activities

7. ETHICAL ISSUES
- Financial statements
- Worker safety
- Product safety
- Quality
- Environment
- Community MAJOR TRENDS IN BUSINESS
- Hiring/Firing Workers
 1. The Internet, Ecommerce, EBusiness It affects:
2. Management Technology
 Cost
3. Globalization
 Quality
4. Management of supply chains
 Time to market
5. Outsourcing
 Customer satisfaction
6. Agility
 Competitive Advantage
7. Ethical Behavior
*product & service design/redesign should be closely
MANAGEMENT TECHNOLOGY
tied to an organization’s strategy*
Technology- Application of scientific discoveries to
ACTIVITIES:
the development & improvement of goods and
services 1. Translate customer wants/needs into
product/service requirements
 Product &Service Technology
2. Improve existing products and services
 Process Technology
3. Develop new
 Information Technology
4. Formulate Quality goals
SIMPLE PRODUCT SUPPLY CHAIN 5. Formulate cost targets
6. Construct and test prototypes
- Supply chain- Sequence of activities &
7. Document specifications
organizations involved in producing &
(Before production, create prototype)
delivering goods/service

REASONS FOR PRODUCT OR SERVICE DESIGN

- ECONOMIC
Suppliers's Direct - SOCIAL AND DEMOGRAPHIC
Producers
Suppliers Suppliers
- POLITICAL, LIABILITY/LEGAL
Final
- COMPETITIVE
Distributer Concumer - COST/AVAILABILITY
- TECHNOLOGICAL
OTHER IMPORTANT TRENDS:
OBSERVATION OF PRODUCT AND SERVICE DESIGN
1. Operations strategy
- Main Focus
2. Working with fewer resources
 Customer Satisfaction
3. Revenue management
 Understand Customer’s wants
4. Process analysis & improvement
- Secondary Focus
5. Increased regulation & product liability
 Function of product/service
6. Lean Production
 Cost/profit
4 WAYS TO COMPETE:  Quality
 Appearance
1. Price  Ease of production/assembly
2. Quality  Ease of maintenance/service
3. Speed
4. Flexibility

CHAPTER 4: PRODUCT AND SERVICE DESIGN DESIGNING FOR OPERATIONS

 - Considering the capabilities of the
organization in designing goods & services
- Failure to take this into account can:
1. Reduce Productivity
2. Reduce Quality
3. Increase Costs
LEGAL, ETHICAL & ENVIRONMENTAL ISSUES
1. Legal
- Agrifood, product liability, uniform
commercial code
2. Ethical
- Release products w/ defects
3. Environmental
- Pollution & Toxic Materials
REGULATIONS & LEGAL CONSIDERATIONS
 Product liability – manufacturer is liable
for any injuries/damages caused by a
faulty product
 Uniform Commercial Code- products
carry implication of merchantability &
fitness
DESIGNERS ADHERE/FOLLOW TO GUIDELINES
- Produce designs which are consistent with
goals of company
- Give customers the value they expect
- Make health & safety as primary concern
- Consider potential harm to environment
OTHER ISSUES IN PRODUCT AND SERVICE DESIGN
1. Product/service life cycles
2. Degree of standardization
- Extent to which there is an absence of
variety in a product, service, or process.
- Products are immediately available to
customers
Advantage:
 Fewer parts to deal within inventory &
manufacturing
 Design costs are lower
 Reduced training costs and time
 More routine purchasing, handling &
inspection procedures
 Quality is more consistent
 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
Disadvantage:
 Designs may be frozen with many
imperfections remaining
 High cost of design changes increases
resistance to improvements
 Decreased variety results in less
consumer appeals
3. Mass Customization
 Delayed Differentiation
(Postponement)
 Modular Design (Standardization)
- Strategy of producing standardized
goods/services but incorporating some
degree of customization
4. Product/ Service Liability
 Reliability- ability of product to perform
its intended function under a
prescribed set of conditions
 Failure- Situation when it does not
perform as intended
 Normal Operating Conditions- Set of
conditions under which an item’s
reliability is specified
 IMPROVING RELIABILITY:
 - Sells an entire product that is manufactured
- Component design by a second company under its own brand
- Production/ assembly techniques
- Testing
- Rebundancy/Backup PHASES IN PRODUCT DEVELOPMENT PHASES
- Preventive maintenance procedures
- User education 1. Idea generation
- System design 2. Feasibility analysis
3. Product specifications
4. Process specifications
5. Prototype development
5. Robust Design
6. Design review
- Results in products/services that can
7. Market test
function over a broad range of conditions
8. Production introduction
 Taguchi’s Approach
9. Follow up evaluation
- Design a robust product
- Central feature in Parameter Design IDEA GENERATION
- Determines factors that are controllable
and not Supply-
- Determines their optimal levels relative to
major product advances
Chain Based

6. Degree of Newness
- Modification of an existing product/service
- Expansion of an existing product/service
- Clone of a competitor’s product/service
- New product/service
*Cultural Differences – Multinational companies
must consider cultural differences related to the
product design
7. Global Product Design
- Virtual Teams – combined efforts of team
designers working in different countries.
Provides a range of comparative advantages
over traditional teams
-
- CONCEPTS:
a. Original Equipment Manufacturer
(OEM)
- Own specifications & sells to another
company for branding and distributions.
Yours but not named by you
b. Original Design Manufacturer (ODM)
- Product according to purchaser’s
specifications
c. Original Brand Manufacturer (OBM)
Competitor
Ideas
Based
Research
Based
Reverse Engineering – dismantling or inspecting of a
competitor’s product to discover product
improvement
Research & Development (R&D) – organized efforts
to increase scientific knowledge/product innovation
 Basic Research (Advance Knowledge)
 Applied Research (Commercial
Application)
 Development (Applied research to
commercial application)
Design for Manufacturing – Achieve customer
satisfaction while making reasonable profit. Design
for operations
  Concurrent Engineer - Other benefits
- Bringing together of engineering design and  Reduced training for assemble and
manufacturing personnel early in the design installation
phase  Reduced repair time and costs
 Computer-Aided Design
- Product using computer graphics QUALITY FUNCTION DEPLOYMENT
*Increase productivity - Voice of the customer
*Creates database - House of quality
*Provides possibility

 Production Requirement
- Design for manufacturing (DFM)
- Design for assembly (DFA)
- Design for recycling (DRF)
- Design for disassembly (DFD)
- Manufacturability – ease of fabrication
and/or assembly. Important for
a. Cost
b. Productivity
c. Quality

 Recycling
- Recovering materials for future use
- Recycling reasons:
a. Cost savings
b. Environment concerns
c. Environment regulations

 Remanufacturing
- Refurbishing used products by replacing
worn out/ defective components
- Design for Disassembly (DFD) – design
products so that they can be easily taken
apart

 Value Analysis
- Examinations of parts/materials to reduce
cost and improve product performance
- Ask questions:
 Cheaper parts
 Function necessary
 Simplified part
 Specifications relaxed
 Substitutions by non-standard
parts
SERVICE DESIGN
 Component Commonality
- Multiple products that have more similarity - An act
can share components - Service delivery systems
- Automakers using internal parts  Facilities
  Processes 3. Determine performance specifications
 Skills 4. Translate performance to design
- Project Bundle – combination of goods and specifications
services 5. Translate design to delivery specifications
- Service Package- Physical resources needed
SERVICE BLUEPRINTING – method used in service
to perform the service. Involves:
design to describe and analyze a proposed service
 Physical resources
 Goods that are purchased or - Tool for conceptualizing a service delivery
consumed system
 Explicit services
 Implicit services MAJOR STEPS IN BLUEPRINTING:

PRODUCT DESIGN VS. SERVICE DESIGN 1. Establish Boundaries

2. Identify sequence of customer interactions
- Tangible – Intangible (prepare flowchart)
- Service created and delivered at the same 3. Develop estimates
time 4. Identify potential failure points
- Services cannot be inventoried
- Service is highly visible to customers CHARACTERISTICS OF WELL-DESIGNED SERVICE
- Service have low barrier to entry and exit SYSTEMS
- Location is more important to service 1. Consistent with org mission
design 2. User friendly
- Range of service systems 3. Robust
- Demand variability 4. Easy to sustain
SERVICE SYSTEMS 5. Cost effective
6. Value to customers
- Range from those with little or no customer 7. Effective linkages between back operations
contact to very high degree of customer 8. Single unifying theme
contact such as: 9. Ensure reliability & high quality
 Insulated technical core
CHALLENGES OF SERVICE DESIGN
 Production line
 Personalized service 1. Variable requirements
 Consumer participation 2. Difficult to describe
 Self-service 3. High customer contact
4. Service – customer encounter
SERVICE DEMAND VARIABILITY
GUIDELINES FOR SUCCESSFUL SERVICE DESIGN
- Demand variability creates waiting line and
idle service resources 1. Define the service package
- Perspective: 2. Focus on customer’s perspective
 Cost & efficiency perspective 3. Consider image of the service package
 Customer perspective 4. Recognize that designer’s is diff from
customer’s perspective
5. Managers should be involved
6. Define quality for tangible/intangible
7. Recruitment, training and rewards should
PHASES IN SERVICE DESIGN be consistent with service expectations
1. Conceptualize 8. Establish procedures
2. Identify service package components 9. Establish systems to monitor service
OPERATIONS STRATEGY Technology Innovation – discovery and development
of new or improved products and services for
1. Increase emphasis on component
producing/providing
commonality
2. Package products & services Kinds of Technology:
3. Employ multiple-use platforms
 Product and service technology
4. Consider tactics for mass customization
 Process technology
5. Look for continual improvement
 Information technology
6. Shorten time to market
a. Use standardized components 3 major impacts:
b. Use technology
c. Use concurrent engineering  Cost
 Productivity
 Competitiveness
CHAPTER 6: PROCESS SELECTION & FACILITY LAYOUT Technology Competitive Advantage
- Process selection – deciding on the way - Innovations in:
production of goods/services will be  Products and services
organized  Processing technology
- Major implication:
 Capacity planning Technology Acquisition
 Layout facilities
- Have benefits but risks include:
 Equipment
 Technology will and will not do
 Design of work systems
 Technical issues
 Economic issues

PROCESS SELECTION

Selection based on:

1. Variety (how much)

2. Flexibility (what degree)
3. Volume (expected output)

Process Types:

1. Job shop -small scale

Process Strategy – Key aspects of process strategy 2. Batch – moderate volume
 Capital intensive- equipment/labor 3. Repetitive/ Assembly line – high volume
 Process flexibility 4. Continuous -very high volume
 Technology PRODUCT AND SERVICE PROCESSES
 Adjust to changes
 Product design
 Volume
 Technology

Technology – Application of scientific discoveries to

the development of products/service
Product Profiling: Linking key product or service  Requires substantial investments
requirements to process capabilities of money and effort
 Involves long-term commitments
 Key dimensions
 Has significant impact on cost and
- Range of products
efficiency of short-term operations
- Expected order sizes
- Pricing strategies THE NEED FOR LAYOUT DECISIONS:
- Expected schedule changes
- Order winning requirements

Process selection can:

- Involve investment in equipment

- Influence layout of facilities

AUTOMATION: machinery that has sensing and

control devises that enable it to operate

 Fixed Automation
 Programmable Automation
 CAD/CAM
 Numerically controlled machines
 Robot
 Manufacturing cell
 Flexible manufacturing systems
 Computer integrated
manufacturing

FACILITIES LAYOUT: configurations of departments

with emphasis on movement of work through the
systems BASIC LAYOUT TYPES:
OBJECTIVES OF LAYOUT DESIGN: 1. Product layouts
1. Facilitate attainment of product or service - Standardized processing operations
quality - Repetitive/ continuous processing
2. Use workers and space efficiently - Advantage:
3. Avoid bottlenecks  High rate of output
4. Minimize unnecessary material handling  Low unit cost
costs  Labor specialization
5. Eliminate unnecessary movement of  Low material handling cost
workers or materials  High utilization of labor
6. Minimize production time or customer &equipment
service time  Established routing & scheduling
7. Design for safety  Routing accounting and purchasing
- Disadvantage:
 Creates dull, repetitive jobs
 Poorly skilled workers
 Fairly inflexible to changes
 Susceptible to shutdowns
 Needs preventive maintenance
Importance of Layout Decisions
 Incentive plans are impractical
 2. Process layouts
- Handle varied processing requirements
- Functional: Intermittent, job shop or batch
- Sequential: Repetitive or continuous
- Advantages:
 Can handle variety of processing
 No equipment failures
 Less costly
 Possible to use individual incentive
plans
- Disadvantages:
 Inventory costs high
 Challenging routing and scheduling DETERMINE THE MINIMUM NUMBER OF
 Equipment utilization rates low WORKSTATION REQUIRED
 Slow and inefficient
 Accounting and purchasing are
more involed
3. Fixed-position layout
- Remains stationary, and workers, materials
and equipment are moved as needed
 Weight
 Size
 Bulk LINE BALANCING RULES:
4. Combination layout 1. Assign tasks in order of most following tasks
2. Assign tasks in order of greatest positional
weight
CELLULAR LAYOUT
BOTTLENECK -> PARALLEL
 Cellular production: machines are
grouped into a cell that can process DESIGNING PROCESS LAYOUTS:
items that have similar processing 1. List of departments
requirements 2. Projection of work flows
 Group Technology: grouping into part 3. Distance between locations
families of items with similar design 4. Amount of money to be invested
SERVICE LAYOUT: pleasing as well as functional 5. List of special considerations
6. Location of key utilities
- Types:
 Warehouse and storage layouts
 Retail layouts
 Office layouts

Line Balancing – process of assigning tasks to

workstations with equal time requirements

Cycle Time – maximum time allowed at each

workstation to complete its set of tasks on a unit

DETERMINE MAXIMUM OUTPUT