Opman Soft

UNIVERSITY OF CALOOCAN CITY
C O L L E G E O F B U S I N E S S A N D A C C O U N T A N C Y
Table of Contents
MODULE 1 – Introduction An Overview Of Operations Management………...…2

Operations management: Introduction and overview………………………….……....3
Operations Management Strategy Framework……………………..……….……….....5
Understanding Similarities And Differences Among Products,
Goods & Services……………………………………...……………………………….7
Historical Evolution Of Operations Management:
Changes And Challenges…………………………………..…………………..….…...9
MODULE 2 – Product Development: Operations Strategy……………………..13
Product Strategy and Integrated Product Development...............................................14

Process Strategy.............................................................................................................18
Capacity Planning Decision...........................................................................................23
Facility Location Strategy..............................................................................................25
MODULE 3 – System Design ………………………………………………........…28
Facility Layout and Material Handling……………………………………….............29
Group Technology Flexible Manufacturing System………………..………………...36
Line of Balance (LOB)………………………………………..……………………....40
MODULE 4 – Productivity and Quality Tools …………………………...........…..42

Productivity Concepts: Quality Circles, Kaizen and other SGA………………….......43
Value Analysis and Value Engineering ……………………………………………....45
Total Quality Management…………………………………………………................47
Maintenance Planning and Control ( Reliability, Availability, Maintainability)……..53
Work Study-Method Study and Work Measurement....................................................56
MODULE 5 – Planning and Managing Operations……………………….............60

Demand Forecasting, Value Chain and Supply Chain Management……..………....61
Purchasing, Vendor Selection, Material Management……………………...............66
Inventory Management and Just- in -Time System.....................................................70
Material Requirement Planning, MRPII and ERP………………………...................72
Aggregate Operation Planning……………………………………………................75
Scheduling, Sequencing and Dispatching 1……………………..……………...…...77
MODULE 6 - Advance Operations Management.................................................83

Service Operations Management...............................................................................84
Lean Systems...............................................................................................................87
Constraint Management……………………………………………...……………...90
Computer Integrated Manufacturing.........................................................................94
DSS for Operations Management 2...........................................................................9
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OPERATIONS MANAGEMENT’S TRANSFORMATION ROLE

 To add value
 Increase product value at each stage
 Value added is the net increase between output product value and input
material value
 Provide an efficient transformation
 Efficiency – means performing activities well for least possible cost
WHAT OPERATIONS MANAGERS DO
 Operations managers are responsible for managing activities that are part of the production
of goods and services. Their direct responsibilities include managing the operations process,
embracing design, planning, control, performance improvement, and operations strategy.
Their indirect responsibilities include interacting with those managers in other functional
areas within the organisation whose roles have an impact on operations.
OPERATIONS MANAGEMENT ACROSS THE ORGANIZATION
 Most businesses are supported by the functions of operations, marketing, and

finance
 The major functional areas
must interact to achieve the organization goals
TYPICAL ORGANIZATION CHART
OPERATIONS MANAGEMENT DECISIONS

 Following decisions focus on specifics - Tactical decision
 Tactical decisions: focus on specific day-to-day issues like resource needs, schedules, &
quantities to produce are frequent
 Strategic decisions less frequent
 Tactical and Strategic decisions must align
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TODAY’S OPERATIONS MANAGEMENT ENVIRONMENT
 Customers demand better quality, greater speed, and lower costs

 Companies implementing lean system concepts – a total systems approach to efficient
operations
 Increased cross-functional decision making
OPERATIONS MANAGEMENT IN PRACTICE
 OM has the most diverse organizational function

 Manages the transformation process.
 All business functions need information from OM in order to perform their tasks
OPERATIONS MANAGEMENT STRATEGY FRAMEWORK
STRATEGY
The direction and scope of an organization over a long term: ideally, which matches its resources
to its changing environment, and in particular its markets, customers or clients so as to meet
stakeholder expectations.
CORPORATE LEVEL STRATEGY

 At the highest or corporate level
 the strategy provides long-range guidance for the whole organization
BUSINESS LEVEL STRATEGY

Here the concern is with the products and services that should be offer in the market defined at
the corporate level
FUNCTIONAL LEVEL STRATEGY

This is where the function of them make long-range plans that support the competitive advantage
being pursue by the business strategies
OPERATION STRATEGY
It is the total pattern of decision which shape the long-term capabilities of any type of operation
and their contribution to overall strategy, through the reconciliation of market requirements with
operating resources
ASSESSMENT OF THE OPERATIONS DECISIONS REGARDING:

 Structural Decisions
 Infrastructural Decisions
OPERATIONS STRATEGY FORMULATION
3.1 HILL (2005) FRAMEWORK FOR OPERATIONS STRATEGY

FORMULATION
 Provides an iterative framework that links together the corporate objectives, the
marketing and operation strategy.
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THE FRAMEWORK CONSISTS OF FIVE STEPS:
1. Define corporate objectives.

2. Determine marketing strategies to meet these objectives.
3. Assess how different products win against competitors.
4. Establish the most appropriate mode to deliver these set of products.
5. Provide the infrastructure required to support operations.
STEP 1: CORPORATE OBECTIVES
STEP 2: MARKETING STRATEGY
 Involves identifying target markets and how to compete in these markets.

 How to develop a marketing strategy, step-by-step
 Research
 Market analysis: the size of your market, how quickly it is growing, your customers and
their spending and lifestyle habits.
 Competitor analysis: monitor both direct and indirect competition and how they compare
with you on every aspect of sales and marketing (their customers, their brand, price,
convenience of location, sales channels, and so on).
 Company analysis: your overall business objectives, how you are going to achieve them,
your strengths and weaknesses and those of your products or services.
 Customers
Segment them: split your existing and target customers into groups, according to what
they need from your business - which will differ. Some will want cost-effectiveness,
some quality, some great customer service, and so on.
Positioning: how you compare to your competitors for each of your customer segments
- are you the fastest, do you have the best customer service, are you the third most
popular, and so on.
Product
 Examine your product or service with the aim of working out how you're going to
market it and outdo competitors
 Communication. How you are now going to communicate the benefits of buying your
product or service or using your business to your target customers (again, this may well vary
between your various customer segments).
STEP 3: HOW DO PRODUCTS WIN ORDERS ON THE MARKET PLACE?
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ORDER WINNERS AND QUALIFIERS
 Order winners
-Performance objectives which directly and significantly contribute to winning
businesses from customers
-Considered by customers as key reasons for purchasing products or services
Qualifiers
-important but are not major determinants
-Must be some “threshold” level to be considered by customer
-Further improvement beyond “threshold level” unlikely to result in competitive
benefit
STEP 4: DELIVERY SYSTEM CHOICE (STRUCTURAL DESIGN)
STEP 5: INFRASTRUCTURE CHOICE (INFRASTRUCTURAL DECISIONS)
UNDERSTANDING SIMILARITIES AND DIFFERENCES AMONG
PRODUCTS, GOODS & SERVICES
GOODS
 Goods are the things that can be offered to a market for attention, acquisition, use or
consumption that might satisfy a want or need of a customer
 Goods are the tangible expendable products, articles, and commodities offered by
companies in exchange for cash. Goods have physical characteristics, for instance, shape,
appearance, size, weight, and other visible characters. Goods satisfy human wants thereby
providing utility.
 Goods have a time gap between production, distribution, and consumption. The ownership
of goods is transferable meaning once a person buys, the ownership moves from the seller
to the buyer.
SERVICES
 refer to the intangible economic products offered to a consumer by a producer, on demand.
Services are perishable, they do not have a physical identity and the ownership of Services is
not transferable.
 they cannot be seen, touched, gripped, smelled at, tasted, etc.
 Examples of services are financial services like bank insurance and Transportation services
like train travel, bus travel, etc. hotel services, etc..
SIMILARITIES BETWEEN GOODS AND SERVICES
Position Choice of Goods and Services

The manufacturers of goods and services are the determinants of the position and location
of the company or service provider. The consumer cannot determine the location in any way.
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Design Layouts and Production Facilities

For both goods and services, manufacturers are the decision makers on production. They
determine the outlook for the output and come up with production facilities to make products and
services.
Process Existence
In every production, there must involve a process of producing either goods or services.
There is a process where the input comes into the process and output brought out of the
processing. For a production of goods and services to go through, you must involve inputs.
Use of Technology
Both goods and services need the use of some technology in production, one way or the
other. Without technology, production cannot happen.
Concern for Quality

Quality is the aptitude of the goods and services to fit for its purpose. Whether goods or
services, quality is vital. Failure to consider quality in production can lead to huge losses.
Productivity
Businesses make both goods and services with the aim of helping the customers’
productivity by meeting their daily needs and wants.
Customer Satisfaction
Both goods and services aim at fulfilling customers need and in return generate customer
satisfaction
Capacity Choice
The producers of both goods and services choose the production capacity. Consumers
cannot influence the capacity choice of the producer.
In conclusion, goods and services are two different things but have so many similarities.
Goods are tangible and expandable objects. On the other hand, services are an intangible
economic product offered by a person to another.
In the production of both goods and services, the producer decides on the location and the
production facilities. They both require technology. The main aim of both goods and services is
to create productivity amongst the users. In addition, both goods and services aim at fulfilling
human needs. Human beings cannot live without either goods or services and therefore they are
both crucial. In both goods and services, customers cannot influence the capacity choice.
Both Goods and Services are necessary for economy to flourish in any country. In 21st
century, service industry is growing rapidly and manufacturing industry has seen lot of
innovation in manufacturing techniques and process because of the technology. Service industry
continues growing dominating the manufacturing industry in both developing and developed
countries.
HISTORICAL EVOLUTION OF OPERATIONS MANAGEMENT:

CHANGES AND CHALLENGES
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INTRODUCTION
Operations Management is the management of systems or processes that create goods or
provide services.
HISTORICAL EVOLUTION
INDUSTRIAL REVOLUTION
 Began in the 1770s in England and spread to the rest of Europe and to the United
States during the 19th century.
 Substituted machine power for human power.
 The most significant machine was a steam engine.
WHAT DID TAKE PLACE

 Production became fast and low one
 Economies of sale
 Development of standard gauging system
 Factories grew rapidly
 Provided countless jobs
SCIENTIFIC MANAGEMENT
 Widely changed the management of factories.
 Developed by Frederick Winslow Taylor, the father of scientific management.
 Based on observation, measurement, analysis and improvement of work methods and
economic incentives.
 Studied to identify the best method for doing each job.
 Henry Ford practically adopted the scientific management principles for Taylor.
 Introduced the moving assembly line, which affected too many industries.
 Introduced mass production to the automotive industry.
 The concept of “Interchangeable Parts” was applied by Eli Whitney, an American
Inventor.
 The basis for interchangeable parts was to standardize parts.
 Any part in a batch of parts would fit any automobile coming down the assembly line.
 The result was a high decrease in assembly time and cost.
 Concept of division of labor, which Adam Smith wrote about in the wealth of Nations
(1776) was used by Ford.
 An operation is divided up in to a series of many small tasks, individual workers are
assigned to one of those tasks.
PIONEERS WHO CONTRIBUTED
 Frank Gilbreth
He was an industrial engineer who is often referred to as the father of
motion study. He developed principles of motion economy that could be applied
to incredibly small portions of a task.
 Henry Gantt
He recognized the value of nonmonetary rewards to motivate workers,
and developed a widely used system for scheduling, called Gantt charts.
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 Harrington Emerson
He applied Taylor’s ideas to organization structure and encouraged the
use of experts to improve organizational efficiency. He testified in a
congressional hearing that railroads could save a million dollars a day by
applying principles of scientific management.
 Henry Ford
The great industrialist, employed scientific management techniques in his
factories.
DECISION MODELS AND MANAGEMENT SCIENCE
Accompanied by the development of several quantitative techniques
 F.W. Harris developed a mathematical model for inventory order size in 1915.
 H.F. Dodge, H.g. Romig, and W. Shewhart developed statistical procedures for
sampling and quality control in 1930.
 L.H.C. Tippet conducted studies that provided the groundwork for statistical
sampling theory in 1935.
Those qualitative models were widely used in World War II. These decisions
models were also used for forecasting, inventory management, project management and
other areas of operations management.
THE INFLUENCE OF JAPANESE MANUFACTURERS
 Japanese manufactures developed management practices that increased the

productivity and quality.
 Companies which were outside Japan was interested in their approaches.
 The influence of Japanese companies is continuing for the foreseeable future.
OPERATIONS TODAY
 Advances in information technology and global composition have had a major

influence.
 E-business is receiving increased attention from business owners and managers

in developing strategies, planning and decision making.
 Technology refers to the application of scientific discoveries to the development

and improvement of goods and services.
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 Operations management is concerned with product and service technology and

information technology.
HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT
 Industrial Revolution Late 1700s

 Scientific Management Early 1900s
 Human Relations Movement 1930s to 1960s
 Management Science Mid-1900s
 Computer Age 1970s
 Just-In-Time Systems (JIT) 1980s
 Total Quality Management (TQM) 1980s
 Reengineering 1990s
 Flexibility 1990s
 Time-Best Competition 1990s
 Supply Chain Management 1990s
 Global Competition 1990s
 Environmental Issues 1990s
 Electronic Commerce Late 1990s
CHAPTER 2:
PRODUCT DEVELOPMENT:
OPERATIONS STRATEGY
CHAPTER 2:
PRODUCT DEVELOPMENT: OPERATIONS STRATEGY
Product Strategy and Integrated Product Development
PRODUCT
It is the sum of the physical and psychological satisfactions the buyer

receives when he makes a purchase. It is thus a tangible and/or intangible attribute
that is offered to the market for sales.
STRATEGY
 Is the plan for how you’re going to win

 Informed by competitive analysis
 Looking at long term vs. short term
 Big picture: big rocks vs. sands
PRODUCT STRATEGY
is often called the roadmap of a product and outlines the end-to-end vision of the product
and what the product will become.
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Product development strategy is the process of bringing a new innovation to consumers from
concept to testing through distribution.
PRODUCT MARKET FIT PYRAMID
8 Steps Involved in New Product Development
1. Idea generation -It is the act of getting as many ideas as possible.
2. Idea screening - Process of screening the ideas generated in order to do away with
those ideas that are not consistent with the company’s objectives and resources.
3. Concept development and testing - The ideas that pass through the screening stage
are then developed into concept on paper stating clearly the marketing and engineering details of
the product.
4. Business analysis - This stage is geared toward evaluating the overall cost, sales
revenue, and profit potentials of the contemplated product idea.
5. Marketing strategy development - The most viable ideas that scaled through the
previous stages can be used as good candidates for marketing strategy development.
6. Product development - It is at this stage that the actual or physical prototype of the
successful idea will be produced.
7. Test marketing - Testing of product (and its packaging) in typical usage situations
8. Commercialization - This is the final stage of the development process in which the
new product will be launched or born.
The Three Elements of an Effective Strategy
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Examples of Product Development Strategy
• The Nissan Leaf - is a compact five-door hatchback electric car manufactured by Nissan,
introduced in Japan and the United States in December 2010, and now in its second
generation.
• Tecnica and Blizzard - The Group covers the sport fields of Alpine Ski, Lifestyle,
Outdoor Sports, and gliding Sports.
• Wilson Custom Racket Shop - allows players to select a frame that suits their playing
style, and then customize the look of it to match their personal style.
INTEGRATED PRODUCT DEVELOPMENT
Integrated Product Development (IPD) is based on the integrated design of products and
manufacturing and support processes. It is not a matter of assessing the producibility, testability,
supportability and quality of the product after it has been designed nor of focusing on related data
item deliverables nor of extensive testing to improve quality or reliability.
1. Understand customer needs and manage requirements
2. Plan and manage product development
3. Use product development teams
4. Integrate process design
5. Manage costs from the start
6. Involve suppliers and subcontractors early
7. Develop robust designs
8. Integrate case, cad, cam & case tools
9. Simulate product performance and manufacturing processes electronically
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10. Create an efficient development approach
11. Improve the design process continuously
PLANNINGS
A Product Development Assessment (PDA) is a thorough review of the development

process based on 250 best practices that have been identified from studying companies’ product
development activities around the world.
QUALITY FUNCTION DEPLOYMENT
Quality function deployment (QFD) matrices can be used to translate these high priority
improvement categories into specific actions, priorities, and implementation prerequisites to take
with respect to strategy, organization, process, methods, and technology. and establishing
implementation priorities. Given the many elements of IPD, the role of executive management in
defining a vision and establishing implementation priorities is crucial.
There are two types of implementation planning that must be addressed. The first one that
has been described is the implementation plan for the enterprise activities. It covers all the
activities to create the IPD environment for a particular development project – the activities that
cannot cost effectively be done by an individual development project.
The second plan, the project deployment plan, the IPD actions that will be taken to
support an individual product development project. This plan would be developed with the
participation of the member of management responsible for the development effort, e.g.,
engineering manager, program manager, product line manager, etc.
PROCESS STRATEGY
 A process (or transformation) strategy is an organization’s approach to transforming

resources into goods and services.
 How to produce a product or provide a service
How to produce a product or provide a service that
- Meets or exceeds customer requirements
- Meets cost and managerial goals
Has long term effects on:
- Efficiency and production flexibility
- Costs and quality
MAJOR PROCESS DECISION
PROCESS STRUCTURE DETERMINES how processes are designed relative to the kinds of
resources needed, how resources are partitioned between them, and their key characteristics.
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CUSTOMER INVOLVEMENT refers to the ways in which customers become part of the
process and the extent of their participation.
RESOURCE FLEXIBILITY is the ease with which employees and equipment can handle a
wide variety of products, output levels, duties, and functions.
CAPITAL INTENSITY is the mix of equipment and human skills in a process
FOUR BASIC PROCESS STRATEGIES
- Process focus
- Repetitive focus
- Product focus
- Mass customization
PROCESS FOCUS
 Similar processes or equipment grouped together.

(Example: All drill presses are together.)
 Low volume, high variety products.
 75% of all global products.
 Products follow many different paths.
Other names: Intermittent process. Job shop
 EXAMPLES. HOSPITALS, REPAIR SHOP, BANKS
REPETITIVE FOCUS
 Facilities often organized by assembly lines.

 Characterized by MODULES .
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 Parts & assemblies made previously.

 combined for many output options.
Other names: Assembly line, Production line
 EXAMPLES: FAST FOOD CHAINS, HARLEY DAVIDSONS, APPLIANCE CENTER
PRODUCT FOCUS
 High volume, low variety products

 Long, continuous production runs.
 Discrete unit manufacturing.
 Continuous process manufacturing.
Other names: Line flow production. Continuous production.
 EXAMPLES: CHIPS FACTORIES, BASIC COMMODITIES FACTORY
(soap,sardines,shampoo etc.)
MASS CUSTOMIZATION
 The rapid, low-cost production of goods and service to satisfy increasingly unique
customer desires
 Combines the flexibility of a process focus with the efficiency of a product focus
 EXAMPLES: DELL COMPUTERS, ADIDAS
WHICH PROCESS TO USE?
 How do we choose which process strategy to used?

 What type of data would help us?
CHANGING PROCESSES
 Difficult and expensive

 May mean starting over
 Process strategy determines transformation strategy for an extended period
 Important to get it right
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PROCESS ANALYSIS AND DESIGN
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FLOW DIAGRAMS- Shows the movement of materials

TIME-FUNCTION MAPPING- Shows flows and time frame
VALUE STREAM MAPPING -Shows flows and time and value added beyond the immediate
organization
PROCESS CHARTS -Uses symbols to show key activities

SERVICE BLUEPRINTING- focuses on customer/provider interaction
PROCESS REDESIGN
The fundamental rethinking of business processes to bring about dramatic improvements in

performance
 Relies on reevaluating the purpose of the process and questioning both the purpose and
the underlying assumptions
 Requires reexamination of the basic process and its objectives
 Focuses on activities that cross functional lines
 Any process is a candidate for redesign
Ethics and Environmentally Friendly Processes
 Reduce the negative impact on the environment

 Encourage recycling
 Efficient use of resources
 Reduction of waste by-products
 Use less harmful ingredients
 Use less energy
CAPACITY PLANNING DECISIONS
CAPACITY
is the maximum output rate of a facility.
CAPACITY PLANNING
is the process of determining the production capacity needed by an organization to meet
changing demands for its product.
OBJECTIVES OF CAPACITY PLANNING
 To identify and solve capacity problem in timely manner to meet consumer needs.
 To maintain a balance between required capacity and available capacity.
 To minimize the discrepancy.
THE NEED FOR CAPACITY PLANNING
 Capacity planning is done in order to estimate whether the demand is higher than
capacity or lower than capacity.
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 It helps an organization to identify and plan the actions necessary to meet customer's
present and future demand.
CAPACITY PLANNING DECISION
 Assessing existing capacity.

 Forecasting capacity needs.
 Identifying alternative ways to modify capacity.
 Evaluating financial, economical, and technological capacity alternatives.
 Selecting a capacity alternative most suited to achieving strategic mission.
MAKING CAPACITY PLANNING DECISIONS
Step 1. Identify Capacity Requirements

Identify the levels of capacity needed by the company now, as well as in the future.
Step 2 Develop Capacity Alternatives
The company needs to develop a set of alternatives that would enable it to meet future
capacity needs.
Step 3 Evaluate Capacity Alternative

Evaluate the capacity alternatives and select the one alternative that will best meet the
company's requirements.
ESTIMATING FUTURE CAPACITY NEEDS
Short Term Planning
A reactive time scale and can be as immediate as adjusting capacity on the same day or
on in time scale of up to around 3 months.
 Overtime of existing staff

 Multi-skilled staff
Medium- term planning
This time scale is beyond the immediate managing of the operation and has the horizon
of around 3-18 months.
 Hiring and firing contract staff

 Leasing in Facilities
Long-term planning
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A time scale beyond 12-18 months. Here the investment decisions tend to be more
significant and will link to the strategy of the operation.
 New trained full time staff or fire existing staff

 New processes that may be faster
 New machinery on a manufacturing line
 New information systems or technology can be applied to increase efficiency and
capacity.
 Additional facilities
FACILITIES LOCATION STRATEGY
LOCATION STRATEGY
A location strategy is a plan for obtaining the optimal location for a company by
identifying company needs and objectives, and searching for locations with offerings that are
compatible with these needs and objectives. Generally, this means the firm will attempt to
maximize opportunity while minimizing costs and risks.
Factors Formulating a Location Strategy
1. Facilities. Facilities planning involves determining what kind of space a company will
need given its short-term and long-term goals.
2. Feasibility. Feasibility analysis is an assessment of the different operating costs and other
factors associated with different locations.
3. Logistics. Logistics evaluation is the appraisal of the transportation options and costs for
the prospective manufacturing and warehousing facilities.
4. Labor. Labor analysis determines whether prospective locations can meet a company's
labor needs given its short-term and long-term goals.
5. Community and site. Community and site evaluation involves examining whether a
company and a prospective community and site will be compatible in the long-term.
6. Trade zones. Companies may want to consider the benefits offered by free-trade zones,
which are closed facilities monitored by customs services where goods can be brought
without the usual customs requirements.
7. Political risk. Companies considering expanding into other countries must take political
risk into consideration when developing a location strategy. Since some countries have
unstable political environments, companies must be prepared for upheaval and turmoil if
they plan long-term operations in such countries
8. Governmental regulation. Companies also may face government barriers and heavy
restrictions and regulation if they intend to expand into other countries.
9. Environmental regulation. Companies should consider the various environmental
regulations that might affect their operations in different locations. Environmental
regulation also may have an impact on the relationship between a company and the
community around a prospective location.
10. Incentives. Incentive negotiation is the process by which a company and a community
negotiate property and any benefits the company will receive, such as tax breaks.
Incentives may place a significant role in a company's selection of a site.
COMPANY REQUIREMENTS
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The initial part of developing a location strategy is determining what a company will require
of its locations. These needs then serve as some of the primary criteria a company uses to
evaluate different options. Some of the basic requirements a company must consider are:
Size. A company must determine what size property or facility it needs.
Traffic. If it is in the service business, a company must obtain statistics on the amount of
traffic or the number of pedestrians that pass by a prospective location each day.
Population. Whether a service or manufacturing operation, a company must examine the

population of prospective locations to ensure that there is a sufficient number of potential
customers (if a service business) or a sufficient number of skilled or trainable workers.
Total costs. Companies must determine the maximum total costs they are willing to pay for a
new location. Total costs include distribution, land, taxes, utilities, and construction costs.
Labor. Companies must establish their labor criteria and determine what kind of labor pool
they will need, including the desired education and skilled levels.
Suppliers. Companies must consider the kinds of suppliers they will need near their locations.
In addition, having suppliers nearby can help companies reduce their production costs.
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CHAPTER 3:
SYSTEM DESIGN
MODULE 3: SYSTEM DESIGN
FACILITY LAYOUT AND MATERIAL HANDLING
 FACILITY LAYOUT
 The basic meaning of facility is the space in which a business's activities take
place.
 Facility layout and design is an important component of a business's overall
operations
 The basic objective of layout is to ensure a smooth flow of work, material, and
information through a system.
 The layout and design of that space greatly impact how the work is done.
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FACTORS IN DETERMINING LAYOUT AND DESIGN
1. Facilities should be designed so that they can be easily expanded or adjusted to meet
changing production needs.
2. The facility design should reflect recognition of the importance of smooth process flow.
3. Small business owners should make certain that the facility layout makes it possible to
handle materials in an orderly, efficient and preferably simple manner.
4. The facility should be laid out in a way that is conducive to helping the business meet its
production needs.
TWO DISTINCT TYPES OF LAYOUT
1. Process Layout
 It s also called the functional layout; it is oriented around the processes that are used
to make the products.
 In other words, all lathes will be at one place, all milling machines at another and so
on, that is machines have been arranged according to their functions. This type of
layout is generally employed for industries engaged in job order production and non-
repetitive kind of maintenance or manufacturing activities.
2. Product Layout
 It is synonymous with assembly line and is oriented toward the products that are
being made.
 It implies that various operations on raw material are performed in a sequence and
the machines are placed along the product flow line, i.e., machines are arranged in
the sequence in which the raw material will be operated upon.
 This type of layout is preferred for continuous production, i.e., involving a
continuous flow of in-process material towards the finished product stage.
 Fixed Position Layout
o In other types of layouts discussed earlier, the product moves past stationary
production equipment, whereas in this case the reverse applies; men and equipment
are moved to the material, which remains at one place and the product is completed
at that place where the material lies.
o Layout by fixed position of the product is inherent in ship building, aircraft
manufacture and big pressure vessels fabrication.
 Combination Type Of Layout
o A combination of process and product layouts combines the advantages of the both
types of layouts. Moreover, these days’ pure product or process layouts are rare.
o Most of the manufacturing sections are arranged in process layout with
manufacturing lines occurring here and there (scattered) wherever the conditions
permit. A combination layout is possible where an item is being made in different
types and sizes.
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o A combination layout is also useful when a number of items are produced in same
sequence but none of the items are to be produced in bulk and thus no item justifies
for an individual and independent production line.
FLOW PATTERN OF MATERIALS: MEANING AND TYPES
 FLOW PATTERN
 The system to be adopted, for the movement of raw materials, from the
beginning and up to the end of manufacturing.
 The overall-objective is to plan for the economical movement of the raw
materials throughout the plant.
 The layout of a line can make quite a difference in the performance of line.
TYPES OF FLOW PATTERN
1. Straight Line Pattern
 The simplest line.

 This is common for very short lines or for automated lines. It is also used for processes
that cannot have bends in the line for technical reasons (e.g., the float glass process for
producing flat glass, where the 100-meter-long piece of glass naturally can’t go around
corners until you cut it into smaller pieces, or rolling mills or paper plants where the sheet
metal or paper strips also cannot go around corners very easily).
2. U-Shaped Pattern
 It is used mostly for manual manufacturing lines.

 The main benefit exists if multiple operators are within the “U” of the line. All the
operators are within the “U,” while the material is supplied from outside of the “U.”
 In this line, the operator loads the machines and starts the process before moving to the
next machine(s). The machine works independently and ejects the part afterward before
the worker loops back to the machine.
3. S-Shaped Pattern
 It is often used for particularly long lines, as for example automotive assembly lines.
 An S-shaped line can fit much easier in a manufacturing plant, and the logistics are also
much easier to handle.
4. L-Shaped Pattern
 The L-line is usually not part of a grand design.

 Most L-lines are forced to be L-shaped by the available space in the plant. They may also
be useful if the inbound and outbound warehouse is at a right angle to each other and the
L suddenly makes sense.
 They have similar advantages and disadvantages to the I-line, except they have an
additional corner to go around. They are hence not that common.
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MODULE III: SYSTEM DESIGN
MATERIAL HANDLING
“Material handling is the movement, protection, storage and control of materials and products
throughout manufacturing, warehousing, distribution, consumption, and disposal. As a process,
material handling incorporates a wide range of manual, semi-automated and
automated equipment and systems that support logistics and make the supply chain work. ”
 Material handling deals with the moving, packing and storing of substance in any form,
and includes the preparation, placing and positioning the material to facilitate their
movement.
 Material handling systems consist of discrete or continuous resources to move entities
from one location to another.
 Materials handling also occur during preparation for shipment, transportation may be by
sea, air or land, and moving material in and out of carriers.
 Material handling is common in manufacturing systems compared to service systems.
In early systems of handling materials, goods were handled as single units in a

discontinuous manner. This primitive method requires discrete steps, and materials were moved
in individual rather than bulk units.
Modern materials-handling systems, by contrast, emphasize the integrated flow of goods

from the source of raw materials to final user. This can be achieved by transporting goods in large
quantities and in standardized units by using material handling equipment.
Objectives of Material Handling
 Efficient and safe movement of materials to the desired place.

 Timely movement of the materials when needed.
 Supply of materials at the desired rate.
 Storing of materials utilizing minimum space.
 Lowest cost solution to the material handling activities.
Importance of Material Handling
The foremost importance of materials handling is that it helps productivity and thereby
increases profitability of an industry. Many enterprises go out of business because of inefficient
materials handling practices. In many instances it is seen that competing industries are using same
or similar production equipment, and one who uses improved materials handling system stays
ahead of their competitors.
Material Handling Equipment
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1. Conveyors
These are gravity or powered equipment commonly used for moving bulk or unit
load continuously or intermittently, directionally from one point to another over fixed
path, where the primary function is conveying of the material by the help of movement of
some parts/components of the equipment. The equipment as a whole does not move.
2. Cranes and Hoist Equipment

These equipment are generally utilized to lift and lower and move unit and
varying loads intermittently, between points within an area known as the reach of the
equipment, where the primary function is transferring.
3. Containers
These are either ‘dead’ containers (e.g. Cartons, barrels, skids, pallets) which
hold the material to be transported but do not move themselves, or ‘live’ containers (e.g.
wagons, wheelbarrows)
4. Robots
Robots are programmable devices that resemble the human arm. They are also
capable of moving like the human arm and can perform functions such as weld, pick and
place, load and unload.
5. Industrial Trucks
Industrial trucks are more flexible in use than conveyors since they can move
between various points and are not permanently fixed in one place.
Principles of Material Handling
1. Planning principle. All handling activities should be planned.

2. Systems principle. Plan a system integrating as many handling activities as possible and
coordinating the full scope of operations (receiving, storage, production, inspection,
packing, warehousing, supply and transportation).
3. Space utilization principle. Make optimum use of cubic space.
4. Material flow principle. Plan an operation sequence and equipment arrangement to
optimize material flow.
5. Simplification principle. Reduce combine or eliminate unnecessary movement and/or
equipment
6. Safety principle. Provide for safe handling methods and equipment.
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7. Standardization principle. Standardize method, types, size of material handling

equipment.
8. Flexibility principle. Use methods and equipment that can perform a variety of task and
applications.
9. Motion principle. Equipment designed to transport material should be kept in motion.
10. Maintenance principle. Plan for preventive maintenance or scheduled repair of all
handling equipment.
These principles help with the planning and processes of all material handling and are just as
relevant whether the equipment is manual, semi-automated or fully automated.
While material handling of a product does not add any direct value to the customer, how efficient
or inefficient a process is, can directly affect the consumers outlook on the company, product and
possibly industry.
GROUP TECHNOLOGY
1. WHAT WILL BE COVERED?

 an introduction to group technology.
 group technology coding structures.
 how group technology will help improve quality.
 the benefits and obstacles for managers using group technology.
2. INTRODUCTION
 group technology was introduced by frederick taylor in 1919 as a way
to improve productivity.
 one of long term benefits of group technology is it helps implement a
manufacturing strategy aimed at greater automation.
3. BODY
WHAT IS GROUP TECHNOLOGY?
 group technology (gt) is a manufacturing philosophy that seeks to
improve productivity by grouping parts and products with similar
characteristics into families and forming production cells with a group
of dissimilar machines and processes.
4. BACKGROUND
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 the introduction of gt techniques in:

*general electric
*lockheed missiles and space co.
*boeing
 group technology is viewed as:
*an essential step in the move toward factory automation.
*a necessary step in maintaining a high quality level and profitable
production.
5. MANAGERIAL BENEFITS
 REDUCED PURCHASING COST THROUGH VOLUME
PURCHASING
-can purchase fewer different items at higher volumes
 FASTER LEAD TIME
-can quickly identify the materials or materials needed
 BETTER NEGOTIATION LEVERAGE
-value analysis
 ACCURATE COST ESTIMATION
-estimate the future price range with a standard cost database
 QUICKER REACTION TO DESIGN CHANGES
-quickly identify newer material or parts that conform to newer
designs and specifications
 BETTER COMMUNICATION BETWEEN THE BUYER AND THE
SUPPLIER
-eliminate the human errors with gt classification
6. POTENTIAL OBSTACLES
 MANAGEMENT RESISTANCE TO CHANGE
-unwilling to devote the time and energy
 EXTENSIVE DATA REQUIREMENTS
-the proper identification needs detailed item descriptions 
extensive purchase records/data
 HIGH START-UP COST
-item characteristics are not available without the aid of automated
information storage and retrieval systems which usually incur high
expenses until gt is in place
FLEXIBLE MANUFACTURING SYSTEM
FLEXIBLE MANUFACTURING SYSTEM
WHAT IS A MANUFACTURING SYSTEM?
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• production method that is design to easily adapt to changes in the type and quantity of the
product being manufactured.
• machines and computerized systems can be configured to manufacture a variety of parts
and handle changing levels of production.
WHAT IS A MANUFACTURING SYSTEM?
• refer to the costs incurred by a business from manufacturing a product or providing a

service.
make-to-order
• is a business production strategy that allows consumers to purchase products that are
customized to their specification. known as mass customization.
JEROME H. LEMELSON (1923-1997)
• developed the concept of flexible manufacturing.

• an american industrial engineer.
• an inventor who filed a number of related patents in the early 1950s.
• robot-based system.
HOW FLEXIBLE MANUFACTURING SYSTEMS WORK?
• a system which have a configuration of interconnected processing workstations with

computer terminals that process the end-to-end creation of a product.
• from loading-unloading functions to machining and assembly to storing quality
testing to data procesing.
PROS AND CONS OF A FLEXIBLE MANUFACTURING SYSTEM
ADVANTAGES
• enhancement of production efficiency.

• downtime is reduced because the production line does not have to be shut down to set up
for a different product.
DISADVANTAGES
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• it includes a higher upfront costs.

• greater time required to design the system.
• increase in automation results in a net reduction of labor costs.
KEY TAKEAWAYS:
• A flexible manufacturing system (fms) is designed up front to be readily adapted to

changes in the type of goods being produced.
• Production is largely automated, reducing overall labor costs.
• An fms system is, however, more expensive to design and put in place and required
skilled technicians to keep it running.
PRODUCTION LINE BALANCING
Line-balancing strategy is to make production lines flexible enough to absorb external and
internal irregularities. There are two types of line balancing, which we have explained as –
 Static Balance – Refers to long-term differences in capacity over a period of several

hours or longer. Static imbalance results in underutilization of workstations, machines
and people.
 Dynamic Balance – Refers to short-term differences in capacity, like, over a period of
minutes, hours at most. Dynamic imbalance arises from product mix changes and
variations in work time unrelated to product mix.
Assembly line balancing is a production strategy that sets an intended rate of production
to produce a particular product within a particular time frame. Also, the assembly line needs to be
designed effectively and tasks needs to be distributed among workers, machines and work
stations ensuring that every line segments in the production process can be met within the time
frame and available production capacity. Assembly line balancing can also be defined as
assigning proper number of workers or machines for each operations of an assembly line so as to
meet required production rate with minimum or zero ideal time.
The very purpose of line balancing is to assign workloads to each assigned work station in a
manner that the every works stations has approximately same amount of work to be done.
 Improved process efficiency

 Increased production rate
 Reduced total processing time
 Minimum or Zero Ideal Time
 Potential increase in profits and decrease in costs
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CHAPTER 4:
PRODUCTIVITY AND QUALITY TOOLS
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MODULE 4:
PRODUCTIVITY AND QUALITY TOOLS
PRODUCTIVITY CONCEPTS: QUALITY CIRCLE KAIZEN OTHER SGA
PRODUCTIVITY
Is a tool of measurement that determines the efficiency of the organization in terms of the ratio
of output produced with respect to inputs used.
EMPLOYEES
One factor of the company's productivity is through their employees and workers.
Why does the company needs productivity concepts through employees?
It encourages employees to come up with ideas and managers to act on them to improve
processes and helps in overall functioning of the organization.
QUALITY CIRCLE
A group of employees that meets regularly to consider ways of resolving problems and
improving production in their organization.
Also a participatory management technique that enlists the help of employees in solving
problems related to their own jobs.
Thus, implemented correctly, quality circles can help a small business reduce costs, increase
productivity, and improve employee morale.
The emphasis of Japanese quality circles was on preventing defects from occurring rather than
inspecting products for defects following a manufacturing process
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ADVANTAGE OF QUALITY CIRCLE
 Improved Communication
 Enhanced Decision Making Skills
 Improved Motivation
 Management Awareness Of Employee Job-related Concerns
 Increased Individual Power
 Personal Growth And Development
 Opportunities For Recognition Of Individual Improvement.
KAIZEN
Kaizen is a compound of two Japanese words that together translate as "good change" or
"improvement," but Kaizen has come to mean "continuous improvement" through its association
with lean methodology.
How kaizen works?
Kaizen is based on the belief that everything can be improved and nothing is status quo. It also
rests on a Respect for People principle.
Kaizen involves identifying issues and opportunities, creating solutions and rolling them out --
and then cycling through the process again for other issues or problems that were inadequately
addressed.
There are seven steps to create a cycle for continuous improvement and give a systematic
method for executing this process.
KAIZEN CYCLE FOR CONTINUOUS IMPROVEMENT:
 Get employees involved.

 Find problems.
 Create a solution.
 Test the solution.
 Analyze the results.
 Standardize.
 Repeat.
SMALL GROUP ACTIVITY
Is a method for problem solving in teams by structurally searching for the root causes and
eliminating them.
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VALUE ANALYSIS AND VALUE ENGINEERING
What is Value?
The minimum money which has to be expended in purchasing or manufacturing a

product to create the appropriate use of esteem factors
VALUE ANALYSIS
It is one of the newer scientific aids to managerial decision-making. It comprises a group

of techniques aimed at the systematic identification of unnecessary costs in a product or service
and efficiently eliminating them without impairing its quality and efficiency
Value analysis (VA)
is a systematic interdisciplinary examination of factors affecting the cost of a product or

service in order to devise means of achieving the specified purpose most economically at the
required standard of quality and reliability (British Standards Institution, 1992).
DIVISION OF VALUE
Use Value
These are certain characteristics of a product which make it useful for certain purposes. It
measures the quality of performance of a product.
It may be:
 Primary use value  Auxiliary use value

 Secondary use value
Esteem Value
Certain properties of a product do not increase its utility or performance but they make it
esteemable which would induce customers to purchase the product
Cost Value
This value is measured in terms of cost involved. In case of a manufacturing concern it

refers to the cost of production of the product produced and if some part of the product is
purchased from outside, it means cost of purchase of that part.
Exchange Value
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Certain characteristics of a product facilitate its exchange for something else and what we
get is the exchange value of that product
Implementation of Value Analysis
 Identifying the function

 Evaluation of the function by comparison
 Develop alternatives
Why Value Analysis is important?
Value analysis seeks to provide the different values required in a product or service at the
least cost without impairing its quality, efficiency and attractiveness.
It leads to improvements in product design so that, most appropriate products are

produced
Maintains high quality , cost savings provide a measure for judging managerial
effectiveness , new ideas are generated and incorporated , areas requiring attention and
improvement are pin pointed
VALUE ENGINEERING
is a systematic and organized approach to providing the necessary functions in a project

at the lowest cost.
promotes the substitution of materials and methods with less expensive alternatives,
without sacrificing functionality.
focused solely on the functions of various components and materials, rather than their
physical attributes.
VALUE = FUNCTION/COST
Value
Worth of the product to the customer
Function
Properties and qualities of the product
Cost
Money value of materials used, labour, and indirect costs
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TOTAL QUALITY MANAGEMENT
Meaning of TQM:
 Total Quality Management means that the organization’s culture is defined by and
supports the constant attainment of customer satisfaction through an integrated system of
tools, techniques, and training.
 This involves the continuous improvement of organizational processes, resulting in high

quality products and services.
Total – made up of the whole.
Quality – degree of excellence a product or service provides.
Management – act, art or manner of planning, controlling, directing etc.
Therefore, TQM is the art of managing the whole to achieve excellence.
Basic Tenets of TQM:
 The customer makes the ultimate determination of quality.

 Top management must provide leadership and support for all quality initiatives.
 Preventing variability is the key to producing high quality.
 Quality goals are a moving target, thereby requiring a commitment toward continuous
improvement.
 Improving quality requires the establishment of effective metrics. We must speak with
data and facts not just opinions.
The Three Aspects of TQM:
Counting – Tools, Techniques, and Training in their use for analyzing, understanding,
and solving quality problems.
Customers – Quality for the customer as a driving force and central concern.
Culture – Shared values and beliefs, expressed by leaders, that define and support
quality.
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Elements of TQM:
Customer Focus
It is important to focus on the customer, both internal and external i.e., the employers
and the user of the end product – The students. In TQM parlance, the next process and not just a
person who pays for the productor service.
Employee Involvement
People at all levels make up an organization and their full involvement enables their
abilities to be used for an institution's benefit.
Continuous Improvement
There is a beginning to the process of TQM, but there is no end. Checking, rechecking,
valuation, re-evaluation, engineering, and re-engineering are essential to ensure continuous
improvement.
Universal Responsibility
A TQM leader has to learn that inspection is not a means to achieve quality. One
eliminates the need for inspection by building quality into the product in the first place. TQM
helps us to recognize the fact that it is we ourselves who are responsible for quality work.
A Sustained Management Commitment to Quality
An organization's performances and culture will ultimately reflect its senior

managements values. If an organization is serious about implementing TQM, the commitment to
do so has to start at the top, and the organization's senior management has to be unwavering in its
commitment to quality.
Addressing Deficiencies
TQM is a management philosophy that seeks to prevent poor quality in products and
services, rather than simply to detect and sort out defects. "An ounce of prevention is worth a
pound of cure".
Objectives of TQM:
 To develop a conceptual understanding of the basic principles and methods associated

with TQM.
 To an understanding of how these methods and principle have been put into effect in a
variety of organizations.
 To develop an understanding of the relationship between TQM develop principles and
theories and models studied in traditional management.
 To do the right things, right the time every time.
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Principles of TQM:
TQM can be defined as the management of initiatives and procedures that are aimed at
achieving the delivery of quality products and services. A number of key principles can be
identified in defining TQM including:
 Executive Management - Top management should act as the main driver for TQM and
create an environment that ensures its success.
 Training - Employees should receive regular training on the methods and concepts of
quality Customer Focus - Improvements in quality should improve customer
satisfaction.
 Decision Making - Quality decisions should be made based on measurements.
 Methodology and Tools - Use of appropriate methodology and tools ensures that non-
conformances are identified, measured and responded to consistently.
ADVANTAGES & DISADVANTAGES OF TQM:
Advantages of using TQM
1. Improves Reputation - problems are spotted and sorted quicker so there are zero defects.
2. Higher employee morale- workers motivates by extra responsibility, team work and
involvement in decisions of TQM, requires effort on everyone's part.
3. Lower Costs - Decrease waste as fewer defective products and no need for separate.
4. Quality Control Inspectors
Disadvantages of using TQM
1. Initial introduction costs - training workers and disrupting current production whilst being
implemented.
2. Benefits may not be seen for several years.
3. Workers may be resistant to change may feel less secure job.
4. Inhibits the developer’s creativity because they have to work out the inefficiencies.
EVOLUTION OF TOTAL QUALITY MANAGEMENT
TQM TIMELINE:
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1920s: Some of the first seeds of quality management were planted as the principles of scientific
management swept through U.S. industry.
1930s: Walter Shewhart developed the methods for statistical analysis and control of quality.
Dr. Walter Andrew Shewhart
“Grand Father of Quality Control”
Shewhart’s Cycle:
Plan – Do – Study – Act (PDSA)
Plan – Do – Check – Act (PDCA)
1950s:Dr. William Edwards Deming taught methods for statistical analysis and control of
quality to Japanese Engineers and Executives.
Deming’s 14 Point Methodology
1) Create Constancy of Purpose 9) Breakdown Barriers

2) Adopt New Philosophy 10) Eliminate Exhortation
3) Cease Dependence on Inspection 11) Eliminate Arbitrary Numerical
4) End Lowest Tender Contracts Targets
5) Improve every process 12) Permit Pride of Workmanship
6) Use training on the Job 13) Encourage Education
7) Implement Leadership 14) Top Management’s Commitment
8) Eliminate Fear
Dr. Joseph Moses Juran taught the concepts of controlling quality and managerial
breakthrough.
Dr. Joseph Moses Juran
 He believes that most quality problems are due to management not employees.
 Constant Problems requires the Principle of Breakthrough
 Irregular Problems requires the Principle of Control
Breakthrough Act or Quality Improvement include:
 Breakthrough in Attitude  Formation of a investigate arm

 Discovery of the Vital Few Projects  Diagnosis
 Organizing for breakthrough in  Breakthrough in Cultural Pattern
knowledge  Breakthrough in Performance
 Formation of a steering arm  Transition to the new level
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Dr. Armand Feigenbaum’s book Total Quality Control was published.
1968: Kaoru Ishikawa’s synthesis of the Philosophy contributed to Japan’s ascendancy
as a quality leader.
Prof. Kaoru Ishikawa
Development, Design, Production and Service of a product that is most efficient, most helpful
and constantly acceptable to the consumer.
7 Basic Tools were “Indispensable for Quality Control”
1. Process Flow Chart 6. Scatter Diagram

2. Check Sheet 7. Control Chart
3. Histogram
4. Pareto Chart
5. Cause-Effect Diagram (Ishikawa’s Diagram)
MAINTENANCE PLANNING AND CONTROL
MAINTENANCE
Defined as the combination of activities by which equipment or a system is kept or
restored to a state in which it can perform its designated function it is an important factor in
product quality control and can be used as a strategy for successful competition.
MAINTENANCE PLANNING
Identifying and addressing any possible issues ahead of time enables the production or
management to complete work quickly and correctly.
CONTENT OF MAINTENANCE PLAN
WHAT: Machine or Equipment that must be maintained

HOW: The type of maintenance tasks
WHEN: The intervals at which each machine or equipment is to be maintained
WHO: The skill levels required for each maintenance
MAINTENANCE CONTROL
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Refers to the set of activities tools and procedures utilize to coordinate and allocate
maintenance resources to achieve the objective of the maintenance system
RAM
Reliability, Availability and Maintainability
RELIABILITY
Concerned with the probability of a failure occurring over a specified time interval.
MTBF
Mean time between Failure
For example a pump, out of the expected runtime of ten hours, it ran for nine hours and failed for
one hour spread over three occasions.
So, MTBF = 9 hours / 3 = 3 hours.
MAINTAINABILITY- Is the parameter concerned with how system in use can be restored
after a failure. It is also known as MTTR or Mean time to Repair
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Imagine a pump that fails three times over the span of a workday. The time spent repairing each
of those breakdowns totals one hour. In that case
MTTR would be 1 hour / 3 = 20 minutes.
AVAILABILITY- Is a measure of something being in a state ready to be tasked.

By continuing with the above example of the pump, its availability is
The
result is 90% availability
WORK STUDY, METHOD STUDY

AND
WORK MEASUREMENT
Productivity
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•the rate at which goods are produced or work is completed

•has now become an everyday watch.
High Productivity
•it refers to doing the work in a shortest possible time.
Organizations Most Important Jobs:
 Finding the customers and retaining them.

 Improving overall productivity and minimizing the overall costs as much as below the
price as possible and thus maximizing profits.
Work Study
 means of enhancing the production efficiency of the firm by elimination of waste and
unnecessary operations.
 generic term for techniques, particularly method study and work measurement.
Objectives
 Increased efficiency.
 Better product quality.
 To choose the fastest method to do a job.
 To improve the working process.
 Less fatigue to operators and workers.
TWO MAJOR BRANCHES OF WORK STUDY
Method Study
 It is the systematic recording and critical examination of existing and proposed ways of
doing work, as a means of developing and applying easier and more effective methods
and reducing costs.
Objectives
 Improvement in use of all inputs.

 Economy in human effort and reduction of unnecessary fatigues.
 Layout improvements.
 Improvement in design of plant and equipment.
 Improvement in safety standards and procedure.
 Development of better working environment.
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Considerations for Selection of Method Study

•Economic Aspect
•Technical Aspect
•Human Considerations
Work Measurement
 Application of techniques designed to establish the time for a qualified worker to carry
out a task at defined rate of working or at a defined level of performance.
 It measures the time taken in performance of an operation wherein it can separate out
ineffective time from effective time.
Fair Day's Work

It is the amount of work that can be produced by a qualified worker or employee when
working at a normal place.
CONCEPTUAL FRAMEWORK FOR CARRYING OUT WORK MEASUREMENT
1. Qualified Worker
one who is accepted having the necessary physical attributes, who possess the required
intelligence and education.
2. Standard Rating
rating is the assessment of the worker's rate of working relative to the observer's concept of the
rate corresponding to the standard pace.
3. Standard Performance
it is the rate of output which a qualified worker will naturally achieve without over-exertion as
an average over the working day of shift provided that he is motivated to apply himself to his
work.
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Techniques in Production Management
Repetitive Work
 type of work in which the main operation or group of operations repeat continuously
during the time spent at the job.
Non-Repetitive Work
 includes some type of maintenance of construction work, where the work cycleitself is
hardly even repeated identically.
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CHAPTER 5:
PLANNING AND MANAGING OPERATIONS
MODULE 5: Planning and Managing Operations
DEMAND FORECASTING, VALUE CHAIN AND SUPPLY CHAIN MANAGEMENT
Demand Forecasting is the process in which historical sales data is used to develop an estimate of
an expected forecast of customer demand.
Demand Forecasting provides an estimate of the amount of goods and services that its customers
will purchase in the foreseeable future.
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TYPES OF DEMAND FORECASTING
A. Passive Demand Forecasting
Passive Demand Forecasting is carried out for stable businesses with very conservative
growth plans. Simple extrapolations of historical data is carried out with minimal
assumptions.
B. Active Demand Forecasting
Active Demand Forecasting is carried out for scaling and diversifying businesses with
aggressive growth plans in terms of marketing activities, product portfolio expansion and
consideration of competitor activities and external economic environment.
C. Short-term Demand Forecasting
Short-term Demand Forecasting is carried out for a shorter term period of 3 months to 12
months. In the short term, the seasonal pattern of demand and the effect of tactical decisions
on the customer demand are taken into consideration.
D. Medium to long-term Demand Forecasting
Medium to long-term Demand Forecasting is typically carried out for more than 12
months to 24 months in advance. Long-term Forecasting drives the business strategy
planning, sales and marketing planning, financial planning, capacity planning, capital
expenditure, etc.
E. External macro level Demand Forecasting
This type of Forecasting deals with the broader market movements which depend on the
macroeconomic environment. External Forecasting is carried out for evaluating the strategic
objectives of a business like product portfolio expansion, entering new customer segments,
technological disruptions, a paradigm shift in consumer behavior and risk mitigation
strategies.
F. Internal business level Demand Forecasting
This type of Forecasting deals with internal operations of the business such as product
category, sales division, financial division, and manufacturing group. This includes annual
sales forecast, estimation of COGS, net profit margin, cash flow, etc.
IMPORTANCE OF DEMAND FORECASTING
1. Demand Forecasting is the pivotal business process around which strategic and operational plans
of a company are devised.
2. Strategic and long-range plans of a business are formulated.
3. Facilitates important management activities
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DEMAND FORECASTING METHODS
I. QUALITATIVE METHODS
a. The Delphi Technique -A panel of experts are appointed to produce a Demand Forecast.
b. Sales Force Opinion -The Sales Manager asks for inputs of expected demand from each
Salesperson in their team.
c. Market Research -Customer-specific surveys are deployed to generate potential demand.
II. QUANTITATIVE METHODS
a. Trend projection method -Historical data generates a “time series” which represents the
past sales and projected demand for a specific product category under normal conditions by
a graphical plotting method or the least square method.
b. Barometric technique -Forecasters deploy statistical analysis like Leading series,

Concurrent series or Lagging series to generate the Demand Forecast.
c. Econometric forecasting technique -Econometric forecasting utilizes autoregressive

integrated moving-average and complex mathematical equations, to establish relationships
between demand and factors that influence the demand.
WHAT IS VALUE CHAIN?
 A business model that describes the full range of activities needed to create a product or service.
For companies that produce goods, a value chain comprises the steps that involve bringing a
product from conception to distribution, and everything in between.
IMPORTANCE
1. A company conducts a value-chain analysis by evaluating the detailed procedures involved in

each step of its business.
2. The purpose of value-chain analyses is to increase production efficiency so that a company may
deliver maximum value for the least possible cost.
COMPONENTS OF VALUE CHAIN
PRIMARY activities consist of five components, and all are essential for adding value and
creating a competitive advantage
a. Inbound logistics
Functions like receiving, warehousing, and managing inventory.
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b. Operations
Procedures for converting raw materials into finished product.
c. Outbound logistics
Activities to distribute a final product to a consumer.
d. Marketing and sales
Strategies to enhance visibility and target appropriate customers
e. Service
Programs to maintain products and enhance consumer experience
The role of SUPPORT activities is to help make the primary activities more
efficient. When you increase the efficiency of any of the four support activities, it benefits at
least one of the five primary activities. These support activities are generally denoted as
overhead costs on a company's income statement.
 Procurement-How a company obtains raw materials.

 Technological development- Used at a firm's research and development (R&D)
 Human resources (HR) management-Hiring and retaining employees who will
fulfill business strategy; and help design, market, and sell the product.
 Infrastructure-Company systems; and composition of its management team.
SUPPLY CHAIN MANAGEMENT
 Management of the flow of goods and services and includes all processes that transform raw
materials into final products.
 It involves the active streamlining of a business's supply-side activities to maximize customer
value and gain a competitive advantage in the marketplace.
HOW SCM WORKS
 By managing the supply chain, companies are able to cut excess costs and deliver
products to the consumer faster.
 This is done by keeping tighter control of internal inventories, internal
production, distribution, sales, and the inventories of company vendors.
 Aspects of the Supply Chain
 The plan or strategy
 The source
 Manufacturing
 Delivery and logistics
 The return system
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PURCHASING, VENDOR SELECTION AND MATERIAL MANAGEMENT
PURCHASING is the act of buying the goods and services that a company needs to operate
and/or manufacture products. Purchasing is now seen as more of a strategic function that can be
used to control bottom-line costs. Companies are also seeking to improve purchasing processes as
a means of improving customer satisfaction
THE TRADITIONAL PURCHASING PROCESS
The traditional purchasing process involved several steps—requisition, soliciting bids, purchase
order, shipping advice, invoice, and payment-unacceptably slow, expensive, and labor intensive.
It was focused on getting the right quantity and quality of goods to the right place at the right time
at a decent cost.
Total cost of ownership (TCO)
Instead of buying the good or service that has the lowest price, the buyer instead weighs a
series of additional factors when determining what the true cost of the good or service is to his or
her company.
TCO calls for closer attention to what else should be counted in addition to
price.Categories include freight, warranty requirements, financing costs, tooling requirements,
storage/inventory costs, disposal costs
STRATEGIC SOURCING
Strategic sourcing is one of the key methods that purchasing departments are using to
lower costs and improve quality. Strategic sourcing involves analyzing what products the
company buys in the highest volume, reviewing the marketplace for those products,
understanding the economics and usage of the supplier of those products, developing a
procurement strategy, and establishing working relationships with the suppliers that are much
more integrated than such relationships were in the past.
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EMPOWERING TEAMS
One is creating cross-functional teams that involve purchasing personnel in every stage of
the product design process.These teams have broken down barriers and helped abolish the old
manufacturing method that was known as the "over the wall" method of productions—each
business unit would work on a project until its portion of the job was completed.
It would then "throw the product over the wall" to the next functional team that was
waiting to perform its part of the manufacturing process.The new cross-functional teams often
include personnel from purchasing, manufacturing, engineering, and sales and marketing.
JUST-IN-TIME PURCHASING
Traditional purchasing meant building a supplier list over time by constantly adding new
suppliers, spreading purchases around, and maintaining higher inventory levels in case demand
for a product soared or quality from a supplier dipped suddenly. JIT purchasing demands that
buyers narrow their supplier list to a chosen few who can deliver high-quality products on-
demand and in a timely fashion.
PURCHASING CARDS
One popular method is recent years is to supply selected employees with purchasing or
corporate procurement cards. The cards are similar to credit cards; in fact the big three credit card
companies—VISA, MasterCard, and American Express—are among the leaders in purchasing
cards. In most cases, the cards are used to purchase small business items. The most important
advantage is that the vendor receives payment much more quickly than in the past
VENDOR SELECTION is a subsidiary process that allows clearly stating, defining and
approving those vendors which meet requirements of the procurement process.Hiring a vendor
has several advantages. It can reduce operational costs, enhance working conditions, improve
responsiveness, and save significant money.While outsourcing to a vendor may be necessary,
there are also times when it is not wise to do so.
Five phase of Vendor selection process
Phase 1 – Pre-solicitation Planning
During this process, you will determine whether products or services will be produced
within the organization or outsourced to a vendor. This is the time to use the market research that
you have conducted.Once you have determined that you are going to hire a vendor, a Request for
Proposal (RFP) will be drafted. The purpose of a RFP is to detail the buyer’s requirements, to
ask or solicit proposals, and to detail how the procurement team will evaluate and negotiate a
future contract.
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Phase 2 – Vendor Selection
Once you have responses to your RFP, it is time to go through each submission and select
a vendor. Some key areas to examine are the financial stability of the organization, the length of
time in business, recommendations from similar organizations, and the trustworthiness of the
organization.
Phase 3 – Award Contract
Once you have determined which vendor you would like to use, it’s time to award the
contract. The first thing to do when speaking with your vendor is to make sure you have clearly
detailed your expectations
Phase 4 – Contract Management
Before the vendor gets started on the project, create a statement of work. Both the
internal and external project managers should have a current project plan. This will allow for
better monitoring and control. It also helps each manager to assist in moving the project forward
Benchmarks can be used to compare the present project
Phase 5 – Contract Closure
Contract closeout can only take place after both the vendor and the buyer have fulfilled
the contract
Contract closeout should involve the following steps:
 Verify the contract has been fulfilled: Look for documentation that gives evidence
contract requirements have been delivered
 Collect documentation and evaluation reports:In most cases these reports have already
been established by the organization as part of the monitoring and controlling process.
You want to make sure all of those evaluation reports indicate a completion of the
contract.
 Verify all contract requirements have been fulfilled: It is very important to make sure that
the vendor has not intentionally or unintentionally left something out.
 Make final payment to vendor: You are accountable to make sure the vendor has received
the proper payment.
 Prepare contracts closure document: This document is used to review the contents of the
contract to give a summary of what has taken place in the fulfillment by the vendor of
this contract.
MATERIAL MANAGEMENT is an approach for planning, organizing, and controlling all

those activities principally concerned with the flow of materials into an organization.It is a
business function for planning, purchasing, moving, storing material in a optimum way which
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help organisation to minimise the various costs like inventory, purchasing, material handling and
distribution costs.
The fundamental objectives of the Materials Management function , often called the
famous 5Rs of Materials Management, are acquisition of materials and services :
1. of the right quality 4. from the right source
2. in the right quantity 5. at the right price
3. at the right time
The key objectives of MM are :
 To buy at the lowest price , consistent with desired quality and service
 To maintain a high inventory turnover
 To maintain continuity of supply
 To maintain the specified material quality level and a consistency of quality this permits
efficient and effective operation
 To develop reliable alternate sources of supply to promote a competitive atmosphere in

performance and pricing
 To minimize the overall cost of acquisition by improving the efficiency of operations and
procedures
 To hire, develop, motivate and train personnel and to provide a reservoir of talent
 To develop and maintain good supplier relationships
 To achieve a high degree of cooperation and coordination with user departments
 To maintain good records and controls that provides an audit trail and ensures efficiency
and honesty
 To participate in Make or Buy decisions MM must partner with Production, Accounting

and IT and take the lead role in presenting key
MM data that shows waste in the following areas: inventory, overproduction, defective material,
material wait/queue time, over processing, under/over utilized assets and unnecessary movement.MM
can no longer just "process" the tasks involving material flow, but lead others to "see" the wastes in
these tasks so they can be improved.
INVENTORY MANAGEMENT AND JUST-IN-TIME SYSTEM
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What is inventory management?
 refers to the handling and controlling of a company's non-capitalised assets

 For most retailers, this involves the overseeing and controlling of finished items that are
ready to be sold.
 fundamental goal is to keep inventory levels balanced at all times without ever having
too much or too little product in stock
 So staying on top of ordering, forecasting and storage are key parts of good quality
inventory management
Importance:
 Holding this inventory ties up a lot of cash and resources. Being able to manage it

effectively and efficiently is therefore vitally important to cash flow and a great way
to save money.
Save on storage costs
Warehousing costs tend to fluctuate based on how much product is being stored and for how
long. The longer an item sits on a shelf without being sold, the more it costs a business.
Avoid spoiled or dead stock
It’s not just storage costs where a retailer is potentially losing money from poor inventory
management. Perishable items will be entirely wasted should too much be ordered at one time or
it isn’t stored sufficiently.
Too much stock that becomes ‘dead’ due to going out of season or style is similarly wasteful.
Better managing of inventory helps avoid wasting money on too much spoiled or dead stock.
Improve cash flow
Any inventory is likely to have been paid for upfront. But until this stock is sold, it’s just a hole in
the bank balance and a dip in cash flow.
Managing inventory properly means cash isn’t drained on buying too much stock at any one time.
This leaves more money in the bank to spend on growth instead of inventory.
Calculating inventory value

Knowing what items are actually in stock and being stored as inventory in the warehouse is, of
course, vital. On top of this, it’s also key to know the value of this inventory.
Inventory value is a legal accounting requirement, but is also a piece of data that gives a crucial
insight when making certain business decisions. For example, whether you can afford to purchase
new stock.
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Just in Time (JIT)
The Just in Time method is where a business would maintain a very low level of inventory and
order goods in as and when they are needed. This represents a move away from the traditional
philosophy of piling stock high to meet any sudden rises in demand.
The severely reduced amount of inventory being held at any one time means a business can save
massively on storage costs and decrease waste.
However, it requires finely tuned and accurate forecasting that accounts for seasonal fluctuations
in demand. Any mistakes here can result in not being able to fulfil orders and a nosedive in
customer satisfaction.
MATERIAL REQUIREMENTS PLANNING, MRP II AND ERP
Material Requirements Planning (MRP)
What is MRP I?
• It is a system for calculating the materials and components needed to manufacture a

product.
• It consists of 3 Primary Steps: 1) taking inventory of the materials and components on

hand, 2) identifying which additional ones are needed and 3) scheduling their production
or purchase.
• It is one of the most widely used system for harnessing computer power to automate the
manufacturing process.
• It uses information from the bill of materials, inventory data and the master production
schedule.
• It is both useful in discrete manufacturing and process manufacturing.
 MRP in Manufacturing
A critical input for material requirements planning is a bill of materials (BOM)—an
extensive list of raw materials, components, and assemblies required to construct,
manufacture or repair a product or service. BOM specifies the relationship between
the end product (independent demand) and the components (dependent demand).
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Independent demand originates outside the plant or production system, and dependent
demand refers to components.
Companies need to manage the types and quantities of materials they purchase
strategically; plan which products to manufacture and in what quantities; and ensure that
they are able to meet current and future customer demand—all at the lowest possible
cost. MRP helps companies maintain low inventory levels. Making a bad decision in any
area of the production cycle will cause the company to lose money. By maintaining
appropriate levels of inventory, manufacturers can better align their production with
rising and falling demand.
Joseph Orlicky
• He is an IBM engineer who developed MRP in 1964 after he studied the Toyota
Production System which was the model for lean production system.
• MRP can help with lean production, because MRP serves as the "push" system while lean
production serves as the "pull" system.
• He died in 1986.
Manufacturing Resource Planning (MRP II)
What is MRP II?
• It is an integrated information system used by the businesses.
• Evolvement from early MRP I.
• It is designed to centralize, integrate and process infos for effective decision making in
scheduling, design engineering, inventory management and cost control in
manufacturing.
• It is able to account for variables that MRP I can't -- including machine and personnel
capacity.
• MRP II systems are still in wide use by manufacturing companies and can either be
found as stand-alone solutions.
Examples of MRP II as of 2019: (SOFTWARES)
• Fishbowl • S2k enterprise
• Epicor • Factory Edge
ANOTHER INFO ABOUT MRP II
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Most of the MRP II systems deliver all the fuctionality of the MRP I system. But
in addition, to offering master production scheduling, bills of materials or (BOM) and
inventory tracking, MRP II provides fuctionality within logistics, marketing and general
finance.
Enterprise Resource Planning (ERP)
What is ERP?
• It is a process used by companies to manage and integrate the important parts of their
businesses.
• It can also integrate planning, purchasing inventory, sales, marketing, finance, human
resources and more.
• Its system allows the different departments to communicate and share information more
easily with the rest of the company.
• It can help the corporation become more self-aware by linking information about the
production, finance, distribution and human resources together. Its offerings have
evolved over the years, and many are now typically web-based applications that users can
access remotely.
• ERP systems does'nt always eliminate inefficiencies within the business.
• ERP systems usually fail to achieve the objectives that influenced their installation
because of a company's reluctance to abandon all working process that are incompatible
with the software.
MRP vs. ERP
• An extension of MRP, developed by management expert Oliver Wight in 1983 and called
manufacturing resource planning (MRP I), broadened the planning process to include other
resources in the company, such as financials and added processes for product design,
capacity planning, cost management, shop-floor control and sales and operations planning,
among many others.
• In 1990, the analyst firm Gartner coined the term enterprise resource planning (ERP) to
denote a still more expanded and generalized type of MRP II that took into account other
major functions of a business, such as accounting, human resources and supply chain
management, all of it managed in a centralized database. Both MRP and MRP are
considered direct predecessors of ERP.
MRP I vs. MRP II
• For all intents and purposes, MRP II has effectively replaced MRP I software.
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• For pexample, MRP II is able to account for variables that MRP is not including
machine and personnel capacity providing a more realistic and holistic representation of a
company's operating capabilities.
• Many MRP II solutions also offer simulation features that allow operators to enter
variables and see the downstream effect. Because of its ability to provide feedback on a
given operation, MRP II is sometimes referred to as a closed-loop system.
MRP I included the following three major functionalities:
o master production scheduling

o bill of materials
o inventory tracking
MRP II includes those three, plus the following:
• machine capacity scheduling • quality assurance
• demand forecasting • general accounting
MRP II systems are still in wide use by manufacturing companies today and can either be
found as stand-alone solutions, or as part of an enterprise resource planning (ERP) system.
Enterprise Resources Planning (ERP) software systems are regarded as the successors to
MRP II software.
* ERP suites include applications that are well outside the scope of manufacturing. These
can include everything from human resources and customer relationship management to
enterprise asset management.
MRP vs ERP
• ERP quickly expanded to other industries, including services, banking and retail, that did
not need an MRP component However, MRP is still an important part of the ERP software
used by manufacturers.
AGGREGATE OPERATIONS PLANNING
Aggregate planning is the process of developing, analyzing, and maintaining a preliminary,

approximate schedule of the overall operations of an organization.
 Capacity - is expressed as total number of units per time period that can be
produced.
 Demand - is expressed as total number of units needed.
AGGREGATE PLANNING OBJECTIVES:
o Match Supply and Demand (Effectiveness) o Minimize cost ( Efficiency )
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o Minimize changes in production rates o Minimize changes in work force levels
Options which can be used to increase demand to match current capacity includes:
 Pricing - varying pricing to increase demand in periods when demand is less than
peak.
 Promotion - advertising, direct marketing and other forms of promotion are used to
shift demand.
 Back Ordering - orders are taken in one period and deliveries promised for a later
period.
 New demand creation - a new but complementary demand is created for a product or
service.
Options which can be used to increase or decrease capacity to match current demand
includes:
1. Hire/lay off - by hiring additional workers as needed or by laying off workers not
currently required to meet demand, firms can maintain a balance between capacity and
demand.
2. Overtime - by asking or requiring workers to work extra hours a day or an extra day per
week, firms can create a temporary increase in capacity without the added expense of hiring
additional workers.
3. Part-time or casual labor - By utilizing temporary workers or casual labor (workers who
are considered permanent but only work when needed, on an on-call basis, and typically
without the benefits given to full-time workers).
4. Inventory - Finished-goods inventory can be built up in periods of slack demand and then
used to fill demand during periods of high demand. In this way no new workers have to be
hired, no temporary or casual labor is needed, and no overtime is incurred.
5. Subcontracting - Frequently firms choose to allow another manufacturer or service

provider to provide the product or service to the subcontracting firm's customers. By
subcontracting work to an alternative source, additional capacity is temporarily obtained.
• 6. Cross-training - Cross-trained employees may be able to perform tasks in several

operations, creating some flexibility when scheduling capacity.
• AGGREGATE PLANNING STRATEGIES
• There are two pure planning strategies available to the aggregate planner: a level strategy
and a chase strategy. Firms may choose to utilize one of the pure strategies in isolation, or
they may opt for a strategy that combines the two.
• 2 TYPES OF AGGREGATE PLANNING STRATEGIES
LEVEL STRATEGY
• A level strategy seeks to produce an aggregate plan that maintains a steady production
rate and/or a steady employment level. In order to satisfy changes in customer demand, the
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firm must raise or lower inventory levels in anticipation of increased or decreased levels of
forecast demand.
CHASE STRATEGY
• A chase strategy implies matching demand and capacity period by period. This could
result in a considerable amount of hiring, firing or laying off of employees; insecure and
unhappy employees; increased inventory carrying costs; problems with labor unions; and
erratic utilization of plant and equipment.
SCHEDULING, SEQUENCING AND DISPATCHING
SCHEDULING can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.”
It is also defined as “establishing of times at which to begin and complete each event or
operation comprising a procedure”.
TYPES OF SCHEDULING
Forward scheduling
 Classified on the basis of the time
 Activities are scheduled from the date of the planned order release.
 First task of the job is scheduled.
Advantages of Forwarding Scheduling
1.High Labor Utilization rate

2. Minimize slack time by redistributing resources during unexpected workloads.
Disadvantages of Forward Scheduling

1. The material is consumed in advance.
2. Meeting deadlines in time decreases.
Backward scheduling
 Classified on the basis of the time.
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 Activities are scheduled from the date or the planned receipt date.
 The last activity sceduled first.
Advantages of Backward Scheduling
1. It leads to lower material cost as the materials are used only when required.
2. The Production System is less prone to risk in case of any schedule change by the cuatomers.
Disadvantages of Backward Scheduling

1. No Buffer time
-last minute rush means last minute problem
2. Fulfilling orders
- It can be difficult to fulfill orders if an unusual or unexpected influx of oreders come in.
SEQUENCING refers to the order in which activities occur in the operation process. The
production sequence helps to avoid bottleneck situations while maximizing the use of available
resources.
 PRIORITY SEQUENCING RULES

1. FCFS = First Come First Serve
Jobs processed in the order in which they arrive at a machine or work center.
2. SPT = Shortest Processing Time
Jobs with the shortest processing time are scheduled first.
3. DDATE = Earliest Due Date
jobs are sequenced according to their due dates.
4. CR = Critical Ratio
Jobs are processed according to smalleat ratio of time remaining until due
date to processing time remaining.
PERFORMANCE MEASURING FORMULA
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NOTES:
DISPATCHING is the routine of setting productive activities in motion through the release of
orders and necessary instructions according to preplanned time and sequence of operations
embodied in route sheets and loading schedules.
A dispatcher is familiar with the productive capacity of each equipment. He always keeps an
eye over the progress of orders which move at different speeds on different routes.
Two Different kinds of Dispatching
 CENTRALIZED DISPATCHING
The organization of the dispatching function into one central location.
 DECENTRALIZED DISPATCHING
The organization of dispatching function into individual departmental dispatchers.
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CHAPTER 6:
ADVANCE OPERATIONS MANAGEMENT
Module VI : Advanced Operations Management
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Service Operations Management
What is service operations management?
The word service means many different things to different people, and even
within the Service Operations community there is no commonly agreed definition. This is
due in no small way to the many different industries that perceive themselves as
providers of services in one form or other. However, in the context of this chapter it is
important to have a framework around which we can work with the term ‘service
operations management’.
Factors shaping service industries:
 Technology Developments
 Demographic changes
 Globalization
 Changing consumer behavior
 Virtual Organizations
Types of Service Industries.
The growth in service industries is dependent on providing services to many different

sector specific industries. Therefore, those service organizations will vary in how they support
their aligned market sector. Johnston and Clark (2008) have identified five broad sectors within
the service economy; a variation of these is listed as follows:
 Business-to-business services (External)

Services provided to business customers. These can include consultancy,
training, security, technical support, and sanitation services.
 Business-to-business services (Internal)

Within a virtual organization these services may be provided across departments,
or business units. Examples of this type of service would be process development,
training, ICT help desk support, centralized procurement, and HR support. These
services may also be provided by external service businesses should the organization
wish to outsource these business functions to a third party service provider.
 Business-to-consumer services
These are services targeted directly at individual consumers. These may include
personal banking, travel agents, sports centres, hotels, and retail.
 Public services
These are services provided by central or local government agencies. These
cover a wide range of services to support both individual and commercial customers.
These services are seen as vital to maintaining the fabric of society and usually provide
the end user with little or no choice in how the service is delivered, or paid for. These
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services include school services, hospitals, police, fire services, waste management, park
services, and national security.
 Not-for-profit services
These are services provided by nongovernment organizations such as charities.
These services are seen as providing support for a wide range of issues that may fall
outside the sphere of influence of the local or national government. In many instances
government support is not sought, as this would restrict the manner in which the services
are delivered. Examples of these services include hospice care centres, support services
such as the Samaritans, religious organizations, educational establishments, and aid
agencies.
Managing Service Innovation.
Service innovation is a growing area of interest to academics, industry,

government, and not-for-profit organizations alike. The growth in the service sector has
seen the service industry expand to a point where it has become the dominant industry in
many countries (Paton & McLaughlin, 2008). We have also seen the service industry
mature to a point where its influence, and services reach into all aspects of industry and
private life. As service organizations compete for business within a global market place
the need for innovation becomes a key component in remaining competitive.
Types of innovations.
Innovation can be broken down into four basic types. These are
sometimes referred to as the 4P’s of innovation (Francis & Bessant, 2005). The
four types are as follows:
 Product innovation – Changes to products or services that are

provided by an organization.
 Process innovation – Changes to the manner in which the products or

services are delivered to the customer.
 Position innovation – Changes in the context in which the products or

services are introduced
.
 Paradigm innovation – Changes to the mental models used by the
organization in developing the business.
LEAN SYSTEM
 A Lean system describes a business or business unit that holistically applies Lean
principles to the way it plans, prioritizes, manages, and measures work. The goal for any
Lean system is to maximize customer value. While Lean thinking can greatly improve the
productivity and function of a team or department, Lean implementations that spread
across the entire organization have the greatest impact on the customer.
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 Lean systems use a Lean approach to identify and eliminate waste. They systematically
discover and act upon opportunities to improve. These are two of the fundamental
concepts of Lean: Eliminate anything that does not add value to the customer, and work
systematically and continuously to create more value for the customer.
7 Guiding Principles of a Lean System
Although transforming into a Lean system involves a great deal of effort, Lean’s
lightweight, flexible nature makes it easy to scale than more structured, regimented
methodologies. Practicing Lean thinking begins with a thorough understanding of these 7 Lean
principles:
1. Optimize the whole

 Visualize, optimize, and manage the entire organizational value stream
as one value-generating system. Make decisions that optimize the entire
organization’s ability to deliver value to the customer -- not just one team
or department.
2. Create knowledge
 A Lean system is a learning system -- it grows and develops through
analyzing the results of small, incremental experiments. In order to retain
the insight and knowledge gained from constant experimentation, Lean
systems must provide the infrastructure necessary to properly document
and retain value learnings.
3. Eliminate waste
 Lean systems use this definition of waste: If your customer wouldn’t pay
for it, it’s waste. Waste can be anything from context switching, to too
much work in process, to time spent manually completing a task that
could be automated. Lean thinkers are relentless about eliminating any
process, activity, or practice that does not result in more value for the
customer.
4. Build quality in
 Lean organizations set themselves up for sustainable growth by building
quality into processes and documentation. They automate and
standardize any tedious, repeatable process or any process prone to
human error, which allows them to error-proof significant portions of
their value streams.
5. Deliver fast
 In Lean, flow refers to the manner by which work moves through your
organizational system. Good flow describes a Lean system with a steady,
consistent flow of value delivery, while bad flow describes a system with
unpredictable delivery and unsustainable habits.
6. Defer commitment
 This Lean principle says that Lean systems should function as just-in-
time systems, waiting until the last responsible moment to make
decisions and deliver work. This is based on the idea that the longer we
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wait, the greater the chance that our decisions will be well-informed,
based on data that reflects the reality of the market.
7. Respect people
 At its core, all successful Lean systems are rooted in one thing: Respect
for people. Lean systems are designed to maximize customer value while
minimizing waste, out of respect for the customer. Out of respect for
employees, Lean systems encourage environments that allow everyone to
do their best work. In Lean systems, team members continuously strive
to optimize processes to allow everyone to deliver the most value they
can provide.
Benefits of a Lean System
When an organization holistically applies these Lean principles, it is able to function in a

healthier, smarter, more sustainable way. This directly results in business value: 92% of Lean
practitioners surveyed reported moderate to significant improvements in project success since
becoming Lean.
When the organization wins, the people within it win too -- members of Lean systems are
not only more productive, but often more fulfilled and less stressed too. Here are the top ten
benefits Lean practitioners reported:
1. Manage team/process complexity

2. More efficient business processes
3. Better management of changing priorities
4. Better project visibility at the team level
5. Increased team productivity
6. Reduced lead time
7. Increased team morale
8. Improved visibility to stakeholders
9. Reduced costs
10. Predictable delivery of customer value
CONSTRAINTS MANAGEMENT
What Is a Constraint?
 To identify and rectify a constraint, it is crucial to understand what a constraint is. A

constraint is anything that stops you from achieving your goal, and a constraint can show
itself in various ways. However, the theory of constraints maintains that there are not an
endless number of constraints, but at least one and at most only a few.
Constraint Management
 Constraint management is a tool used by supervisors and other management personnel to

help employees maintain task focus.
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 Constraint management exhibits the theoretical foundation that Deming considered so

important to effective management action (Deming, 1986). Theories can be either
descriptive or prescriptive.
Types of Constraints
o Market o Financial
o Resource o Knowledge / competence
o Material o Policy
o Supplier/vendor
What Is the Theory of Constraints?
 Developed by Eliyahu Goldratt in the mid 1980’s with his business novel The Goal.
 Has a close relationship with other modern techniques (more about this later):
 Just-in-Time
 Manufacturing Resource Planning
 Quality Management, Six-Sigma

 Activity-Based Management.
Goldratt’s Biography
› Born in Israel in the late 1940’s.

› Bachelor’s degree in Physics.
› Masters and Doctorate degrees in Philosophy.
› Founder of a production scheduling software company.
› Has helped many companies such as: GM, RCA, Kodak, Westinghouse, Philips, etc.
› Wrote several books:
• The Goal.
• The Race.
• What is this thing called TOC?
• Critical Chain.
What is the “Theory of Constraints” all about?
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 Looks at the entire supply chain and synchronizes the chain to achieve ultimate
performance.
 Based on two assumptions:
o Every organization has a set of processes working together to achieve a common
goal.
o Every process has a [single] constraint that limits it from higher performance.
 Typical constraints: Time, Capacity, Materials, Human Resources, Capital Resources,
Financial Resources
 Basically, the theory of constraints says that a small number of constraints prevents any
management system from achieving more of its goals. There is always at least one
constraint, and the theory of constraints uses what is called a focusing process to identify
that constraint, and then restructures to address it
Eliyahu Goldratt’s “The Goal”
Brief overview:
 Midsize company having difficulty shipping products on time.

 Managed by a plant manager desperate to turn things around.
 With the help of a Physicist, the plant manager is able to locate the bottleneck and find a
solution.
Symptoms noted in the book:
 Obsolete inventory.
 Low inventory turnover and high amount of inventory in storage.
 Idle workers or machines.
 Machine breakdown.
 A large amount of scrap pieces.
 A large amount of retooling and rework needed.
Implementation of the Theory of Constraints
Step 1: Identify the bottleneck(s)/constraint(s).
• Look at your production plan as a whole and determine which resource is preventing you
from achieving better performance.
• Look at the cause (old machine, untrained employee, long setup times, machine
breakdown).
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• According to Goldratt, an entire plant’s throughput (productivity) is limited to the

bottleneck’s productivity.
Step 2: Exploit the bottleneck(s).
• All process efforts should be focused primarily on the constraint to maximize throughput.
Step 3: Subordinate everything else to the bottleneck(s).
• According to the theory, other activities must be subordinated to the actions taken to fix
the bottleneck in hand.
Step 4: Elevate the bottleneck(s).
• At this point, management has to decide whether to purchase additional capacity (new
machine, better trained employee)
Step 5: Evaluate whether solving the current bottleneck(s) created other bottlenecks. Do
not allow inertia.
• The production plant has to be monitored carefully as to whether other constraints now
exist and to monitor the progress of the old constraint.
Common Terms in Theory of Constraints
• Throughput: processing another unit of output

 Emphasis on Increasing Sales, Productivity, and Market Demand
• Throughput contribution: Sales-(Material and any other directly variable Costs).
• Bottlenecks: limited resource that prevent the supply chain from achieving
ultimate performance
Benefits of implementing TOC
o Reduction in inventory.
o More productive machines.
o Ability to meet shorter lead times.
o More flexible.
o Better customer service.
o Better product mix.
o Better customer relationship.
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COMPUTER-INTEGRATED MANUFACTURING
What is Computer-Integrated Manufacturing?
It is the manufacturing approach of using computers to control entire production process. This
integration allows individual processes to exchange information with each other and initiate
actions.
The goal of CIM is to remove all the barriers between all the functions within an operation, to
encourage marketing, order entry, accounting, design, manufacturing, quality control, shipping
and all the other departments to work closely together throughout the process.
Computers may be used to assist the human operators of the manufacturing facility, but there
must always be a competent engineer on hand to handle circumstances which could not be
foreseen by the designers of the control software.
Functional Areas:
In a CIM system functional areas such as design, analysis, planning, purchasing, cost accounting,
inventory control, and distribution are linked through the computer with factory floor functions
such as materials handling and management, providing direct control and monitoring of all the
operations.
 The term computer-integrated manufacturing was coined by Dr. Joseph Harrington in his
1974 book bearing that name.
 CIM implies that there are at least two computers exchanging information.
(e.g. the controller of an arm robot and micro-controller)
 CIM is an example of information and communication technologies (ICT’s) in
manufacturing.
 CIM is most useful where a high level of ICT is used in the company or facility, such as
CAD/CAM systems, the availability of process planning and its data
The major components of CIM are as follows:
 Data storage, retrieval, manipulation and presentation mechanisms

 Real-time sensors of sensing the current state and for modifying processes
 Data processing algorithms
Benefits of CIM systems are:
o Cost Reduction. Information handling is the way to reduce manufacturing time.

o Quality Improvements. Supports customer satisfaction.
o Greater Production Control. Company’s efficiency increases through work
simplification and automation.
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o Faster Responsiveness to the Market. Lead CIM users to a rapid response to the market
place.
o Reduced Inventory. Reduced investment in production inventories.
o Small Lot Manufacturing. CIM Is based on small lot sizes.
o
Devices and Equipment Required:
 Computer numerical controlled machine tools

 Direct numerical control machine tools
 Programmable logic controllers
 Robotics
 Computers
 Software
 Controllers
 Networks Interfacing
 Monitoring Equipment
CONCLUSION
Thus computer integrated manufacturing technique is a modern technique adopted by the most
large scale industries in the market.
DECISION SUPPORT SYSTEM (DSS)

Danielle Rome L. Mangao (BSAIS-2A)
 Developed in the early 1970s. Primarily used by mid- to upper-level management.

 A decision support system may present information graphically and may include an expert
system or artificial intelligence (AI).
 A decision support system (DSS) is a computerized program used to support determinations,
judgments, and courses of action in an organization or a business.
 It examines and analyzes massive amounts of data, compiling comprehensive information
that can be used to solve problems and in decision-making.
Typically, business planners will build a DSS system according to their needs and use it to
evaluate specific operations, including:
 Large stock of inventory
 Sales process
 Sales Optimization and Sales Projections
 Other specialized processes related to a field or industry.
Tools for Model Driven DSS
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 Linear Programming
› Lindo
› Gindo
 Spreadsheet Software
› Excel
› Lotus 1-2-3
› Quattro Pro
Data Driven DSS

› Many current and the newest DSS
› Data-driven DSS with On-line Analytical Processing (OLAP) provide the highest
level of functionality and decision support that is linked to analysis of large collections of
historical data.
THREE FUNDAMENTAL COMPONENTS OF A DSS

1. Model Management Component - consists of both the DSS models and the model
management system.
2. Data Management Component - stores and maintains the information that you want
your DSS to use.
3. User Interface Management Component - allows you to communicate with the DSS.
TYPES OF DECISION SUPPORT SYSTEM (DSS)

 Communication-Driven DSS - targeted at internal teams, including partners. Its purpose
are to help conduct a meeting, or for users to collaborate.
 Data-Driven DSS - targeted at managers, staff and also product/service suppliers. It is
used to query a database or data warehouse to seek specific answers for specific purposes
 Document-Driven DSS - targeted at a broad base of user groups. The purpose of such a
DSS is to search web pages and find documents on a specific set of keywords or search
terms.
 Knowledge-Driven DSS - a catch-all category covering a broad range of systems
covering users within the organization setting it up, but may also include others
interacting with the organization.
 Model-Driven DSS - These are used by managers and staff members of a business, or
people who interact with the organization, for a number of purposes depending on how
the model is set up - scheduling, decision analyses etc.
BENEFITS OF A DSS OUTLINED BY PETER G. KEEN

 Increase in the number of alternatives examined
 Fast response to unexpected situations
 Ability to make one-of-a-kind decisions
 New insights and learning
 Improved communication and control over operations
 Cost savings from making better decisions and analyze several scenarios in a short period
 Better decisions
 Effective teamwork
 Time savings
 Better use of data resources
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UNIVERSITY OF CALOOCAN CITY

MODULE 1 – Introduction An Overview Of Operations Management………...…2

MODULE 2 – Product Development: Operations Strategy……………………..13

Product Strategy and Integrated Product Development...............................................14

MODULE 4 – Productivity and Quality Tools …………………………...........…..42

MODULE 5 – Planning and Managing Operations……………………….............60

MODULE 6 - Advance Operations Management.................................................83

OPERATIONS MANAGEMENT’S TRANSFORMATION ROLE

WHAT OPERATIONS MANAGERS DO

OPERATIONS MANAGEMENT ACROSS THE ORGANIZATION

 Most businesses are supported by the functions of operations, marketing, and

TYPICAL ORGANIZATION CHART

OPERATIONS MANAGEMENT DECISIONS

TODAY’S OPERATIONS MANAGEMENT ENVIRONMENT

 Customers demand better quality, greater speed, and lower costs

OPERATIONS MANAGEMENT IN PRACTICE

 OM has the most diverse organizational function

OPERATIONS MANAGEMENT STRATEGY FRAMEWORK

CORPORATE LEVEL STRATEGY

BUSINESS LEVEL STRATEGY

FUNCTIONAL LEVEL STRATEGY

ASSESSMENT OF THE OPERATIONS DECISIONS REGARDING:

OPERATIONS STRATEGY FORMULATION

3.1 HILL (2005) FRAMEWORK FOR OPERATIONS STRATEGY

THE FRAMEWORK CONSISTS OF FIVE STEPS:

1. Define corporate objectives.

STEP 1: CORPORATE OBECTIVES

STEP 2: MARKETING STRATEGY

 Involves identifying target markets and how to compete in these markets.

STEP 3: HOW DO PRODUCTS WIN ORDERS ON THE MARKET PLACE?

ORDER WINNERS AND QUALIFIERS

STEP 4: DELIVERY SYSTEM CHOICE (STRUCTURAL DESIGN)

STEP 5: INFRASTRUCTURE CHOICE (INFRASTRUCTURAL DECISIONS)

UNDERSTANDING SIMILARITIES AND DIFFERENCES AMONG

PRODUCTS, GOODS & SERVICES

SIMILARITIES BETWEEN GOODS AND SERVICES

Position Choice of Goods and Services

Design Layouts and Production Facilities

Concern for Quality

HISTORICAL EVOLUTION OF OPERATIONS MANAGEMENT:

WHAT DID TAKE PLACE

PIONEERS WHO CONTRIBUTED

DECISION MODELS AND MANAGEMENT SCIENCE

Accompanied by the development of several quantitative techniques

THE INFLUENCE OF JAPANESE MANUFACTURERS

 Japanese manufactures developed management practices that increased the

 Companies which were outside Japan was interested in their approaches.

 The influence of Japanese companies is continuing for the foreseeable future.

 Advances in information technology and global composition have had a major

 E-business is receiving increased attention from business owners and managers

 Technology refers to the application of scientific discoveries to the development

 Operations management is concerned with product and service technology and

HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT

 Industrial Revolution Late 1700s

PRODUCT DEVELOPMENT: OPERATIONS STRATEGY

Product Strategy and Integrated Product Development

It is the sum of the physical and psychological satisfactions the buyer

 Is the plan for how you’re going to win

PRODUCT MARKET FIT PYRAMID

8 Steps Involved in New Product Development

1. Idea generation -It is the act of getting as many ideas as possible.

The Three Elements of an Effective Strategy