Running head: LITERATURE REVIEW 1

CONTENTS

The Industrial Revolution.................................................................................................................2

Scientific Management.....................................................................................................................2
ABC Classification.............................................................................................................................3
Demand Forecasting.........................................................................................................................4
Forecasting Based on Time-Series....................................................................................................4
Moving Average...............................................................................................................................4
Exponential Smoothing....................................................................................................................5
Inventory..........................................................................................................................................5
WIP...................................................................................................................................................5
PERT.................................................................................................................................................6
CPM..................................................................................................................................................6
BOM.................................................................................................................................................7
WBS..................................................................................................................................................7
Quality Tools....................................................................................................................................8
Lean Manufacturing.........................................................................................................................9
Important concepts and processes lean relies on.............................................................................9
JIT...................................................................................................................................................10
Value Stream Mapping...................................................................................................................11
Safety Stock....................................................................................................................................11
Location..........................................................................................................................................12
LITERATURE REVIEW 2

History of Operation Management

In the seventeenth century, operations management was initially conceived as factory

management. The economist Adam Smith understood that labour specialization might be

very beneficial to the economy of any organization.

The Industrial Revolution

Beginning in England in the 1770s, the Industrial Revolution spread throughout the rest of

Europe and the US in the 19th century. In the past, little shops were the places where artisans

and their apprentices produced goods. In such method, the manufacture of a product, such as

a horse-drawn wagon or a piece of furniture, was often overseen by a single individual.

Simple tools were the only ones available; contemporary machinery was only in its infancy.

Then, a series of inventions in the 18th century replaced human labor with machine labor,

forever altering the nature of production. Despite the major changes that were taking place,

management theory and practice had not progressed much from early days. What was needed

was an enlightened and more systematic approach to Management

Scientific Management

The era of scientific management saw significant adjustments to factory management.

Frederick Winslow Taylor, known as the pioneer of scientific management and an efficiency

engineer, was the movement's driving force. Taylor held that the "science of management"

was based on observation, evaluation, analysis, and improvement of working practices, as

well as financial incentives. To choose the optimum approach for each task, he thoroughly

researched work approaches. Automobiles were just starting to become popular in the US

during the beginning of the 20th century. The Model T was so popular that Ford had a hard

time keeping up with demand for the vehicles. Ford utilized Frederick Winslow Taylor's

scientific management philosophies in an effort to increase operational efficiency.

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Additionally, he developed the moving assembly line, which had a significant influence on

production techniques across numerous industries.

Quality management systems are popular in today's operations management. Quality

management is a system for mapping, improving and monitoring operations processes. A

variety of quality management systems are in use among top firms, the most notable systems

being the ISO systems and Six Sigma. These systems aim to increase the efficiency of

business processes. Although operations management has typically dealt with the

manufacturing process, the growth of the service industry has created a field of service

operations management.

ABC Classification

ABC analysis in cost accounting, or activity-based costing, is loosely related but different

from ABC analysis for inventory management. Accountants use activity-based costing in

manufacturing to assign indirect or overhead costs like utilities or salaries to products and

services. The ABC classification process is an analysis of a range of items, such as finished

products or customers into three categories: A - outstandingly important; B - of average

importance; C - relatively unimportant as a basis for a control scheme. Each category can and

sometimes should be handled in a different way, with more attention being devoted to

category A, less to B, and less to C.

Inventory managers are always looking for ways to improve pricing and quality or to achieve

greater efficiencies. In light of that goal, they may use the ABC technique, sometimes called

the “always better control” method. They can use the analysis to focus their time and effort

primarily on Class A inventory and less on B and C class products. For example, inventory

managers will use ABC analysis to check the purchase orders of the highest value (Class A

items) products first, since these generate the most revenue.

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Demand Forecasting

One of the biggest mistakes an operations manager may do is to plan manufacturing

operations without considering how much you could sell or how many resources would be

available at all times. A lack of items or a build-up of inventory can be caused by an incorrect

forecast of demand or the availability of labour, both of which can be harmful to any

company's expansion goals. Therefore, forecasting is a crucial ability that operations

managers should develop since they are in charge of determining a company's output quantity

and schedule. Although difficult, operations management forecasting supports predictive data

analytics-based planning and decision-making.

Forecasting Based on Time-Series

A time series is a regularly spaced-out, time-ordered collection of observations (e.g.. hourly,

daily, weekly, monthly, quarterly, annually). Measurements of demand, earnings, profits,

shipping, mishaps, production, precipitation, productivity, or the consumer price index may

be included in the data. On the premise that future values of the series can be inferred from

past values, forecasting techniques based on time-series data are used. These techniques are

widely utilized, frequently producing pretty excellent results, despite the fact that no attempt

is made to identify the variables that affect the series.

Moving Average

The forecast of the naive technique only traces the actual data with a lag of one period and

does not smooth at all, which is one of its weaknesses. However, this issue can be resolved by

increasing the amount of past data a projection is based on. A moving average forecast

creates a prediction using some of the most recent real data values. A moving average

forecast has the advantages of being simple to calculate and comprehend. The average's equal

weighting of all numbers could be a drawback. The advantages of a moving average forecast
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are that it is easy to compute and easy to understand. A possible disadvantage is that all

values in the average are weighted equally. For instance, in a 10-period moving average, each

value has a weight of 1/10. Hence, the oldest value has the same weight as the most recent

value. If a change occurs in the series, a moving average forecast can be slow to react,

especially if there are a large number of values in the average. Decreasing the number of

values in the average increases the weight of more recent values, but it does so at the expense

of losing potential information from less recent values.

Exponential Smoothing

A sophisticated weighted averaging technique that is nonetheless comparatively simple to

apply and comprehend is exponential smoothing. A percentage of the difference between the

previous forecast and the series' actual base value at that time is added to each successive

forecast. last estimation of the level. It is essential to understand that there is no definitive

mathematical definition of the level. Instead, it is up to our model to estimate it.

Inventory

Both the raw materials used in production and the finished commodities that are offered for

sale are included in the definition of inventory. One of a company's most valuable assets is its

inventory because it is one of the main sources of revenue generation and, consequently, a

source of profits for the company's shareholders. There are three different categories of

inventory: finished commodities, work-in-progress, and raw materials. On the balance sheet

of a company, it is listed as a current asset.

WIP

Work-in-progress (WIP) is a production and supply-chain management word used to describe

products that are partially done but need to be finished. Raw materials, labor, and overhead

expenses expended on goods that are in various phases of manufacturing are referred to as
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WIP. WIP is a part of the balance sheet's inventory asset account. Following that, these

expenses are charged to the finished goods account and ultimately to the cost of sales. One

element of a company's balance sheet is WIPs. Only the value of those products in various

intermediate production stages is reflected in the WIP figure. The cost of raw ingredients that

haven't yet been used to create a product for sale is not included. Since the combs are only

partially completed, all costs are posted to WIP. When the combs are completed, the costs are

moved from WIP to finished goods, with both accounts being part of the inventory account.

Costs are moved from inventory to cost of goods sold (COGS) when the combs are

eventually sold.

PERT

A graphical representation of a project's timetable, known as a program evaluation review

technique (PERT) chart, lists each individual activity required to complete the project.

Because it shows job dependencies, the PERT chart is frequently preferred to the Gantt chart

as a project management tool. A PERT chart, however, might be more challenging to

understand. A PERT chart is made by a project manager to examine all of the project's tasks

and determine how long it will take to accomplish each one. The project manager can

calculate the least amount of time needed to finish the entire project using this information.

The manager can use this data to create a project budget and identify the resources required to

complete the project.

CPM

The critical path method (CPM) is a method for determining schedule flexibility and

identifying tasks required for project completion. The longest series of tasks that must be

completed on schedule for the project to be concluded is known as a critical path in project

management. The rest of the project will be delayed if important activities are delayed.
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Finding the most crucial activities in the project timetable, determining task dependencies,

and computing task durations are the core tenets of CPM. CPM was developed in the late

1950s as a method to resolve the issue of increased costs due to inefficient scheduling. Since

then, CPM has become popular for planning projects and prioritizing tasks. It helps you break

down complex projects into individual tasks and gain a better understanding of the project’s

flexibility.

BOM

A detailed description of the raw materials, parts, and instructions needed to build, produce,

or repair a good or service is known as a bill of materials (BOM). A bill of materials typically

takes the shape of a hierarchical structure, with the finished product displayed at the top and

various materials and components listed below. There are many bills of materials that are

particular to engineering and are used in the design phase, as well as bills of materials that are

special to manufacturing and are used in the assembly process. A centralized source of data

used to build a product is a bill of materials (BOM). It is a list of the materials required to

make a product, together with directions on how to put the thing together. In order to ensure

that parts are available when needed and that the assembly process is as efficient as possible,

it is essential to create an accurate bill of materials (BOM). If the BOM is incorrect,

production may stop while missing parts are found, a new production order is started, or the

proper method of assembly is determined, which raises operational expenses. The various bill

of materials (BOM) formats relies on the project's nature and the demands of the company.

Engineering, design, operations, manufacturing, and other fields frequently use BOMs.

Designing enterprise resource planning (ERP) systems and materials requirement planning

(MRP) require a manufacturing BOM

WBS
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Work can be made more manageable and approachable by using a common productivity

strategy called task breaking. The Work Breakdown Structure (WBS), one of the most

significant project management papers, is the tool that applies this technique to projects. It

does it on its own, integrating scope, cost, and schedule baselines to guarantee project plans

are in sync. The Work Breakdown Structure is a "deliverable-oriented hierarchical

decomposition of the work to be completed by the project team," according to the PMI

Project Management Book of Knowledge (PMBOK). WBS can be divided into two

categories: deliverable-based and phase-based. The deliverable-based strategy is the most

popular and preferred method. The main difference between the two approaches are the

Elements identified in the first Level of the WBS.

Quality Tools

Flowcharts: A flowchart is a visual representation of a process. As a problem-solving tool, a

flowchart can help investigators in identifying possible points in a process where problems

occur. The diamond shapes in the flowchart represent decision points in the process, and the

rectangular shapes represent procedures. The arrows show the direction of “flow” of the steps

in the process.

Check Sheets; A check sheet is a simple tool frequently used for problem identification.

Check sheets provide a format that enables users to record and organize data in a way that

facilitates collection and analysis. Check sheets are designed on the basis of what the users

are attempting to learn by collecting data. Many different formats can be used for a check

sheet and there are many different types of sheets. One frequently used form of check sheet

deals with type of defect, another with location of defects.

Histograms: A histogram can be useful in getting a sense of the distribution of observed

values.
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Pareto Analysis. Pareto analysis is a technique for focusing attention on the most important

problem areas. The Pareto concept, named after the 19th-century Italian economist Vilfredo

Pareto. The idea is to classify the cases according to degree of importance and focus on

resolving the most important, leaving the less important. Often referred to as the 80–20 rule,

the Pareto concept states that approximately 80 percent of the problems come from 20

percent of the items.

Scatter Diagrams: A scatter diagram can be useful in deciding if there is a correlation

between the values of two variables. A correlation may point to a cause of a problem.

Control Charts: A control chart can be used to monitor a process to see if the process output

is random. It can help detect the presence of correctable causes of variation.

Cause-and-Effect Diagrams: A cause-and-effect diagram offers a structured approach to the

search for the possible cause(s) of a problem. It is also known as a fishbone diagram because

of its shape, or an Ishikawa diagram, after the Japanese professor who developed the

approach to aid workers overwhelmed by the number of possible sources of problems when

problem solving. This tool helps to organize problem-solving efforts by identifying categories

of factors that might be causing problems.

Lean Manufacturing

Lean manufacturing is a methodology that focuses on minimizing waste within

manufacturing systems while simultaneously maximizing productivity. Waste is seen as

anything that customers do not believe adds value and are not willing to pay for. Some of the

benefits of lean manufacturing can include reduced lead times, reduced operating costs and

improved product quality.

Important concepts and processes lean relies on

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JIT

Just-in-time, or JIT, is an inventory management method in which goods are received from

suppliers only as they are needed. The main objective of this method is to reduce inventory

holding costs and increase inventory turnover. Just in time requires carefully planning the

entire supply chain and usage of superior software in order to carry out the entire process till

delivery, which increases efficiency and eliminates the scope for error as each process is

monitored. One example of a JIT inventory system is a car manufacturer that operates with

low inventory levels but heavily relies on its supply chain to deliver the parts it requires to

build cars on an as-needed basis. Consequently, the manufacturer orders the parts required to

assemble the vehicles only after an order is received.

5S: Lean manufacturing involves the use of many tools such as 5S, kaizen, kanban, jidoka,

heijunka, and poka-yoke, i.e Sort, Straighten, Shine, Standardize, and Sustain. 5S is

considered a foundational part of the Toyota Production System because until the workplace

is in a clean, organized state, achieving consistently good results is difficult. A messy,

cluttered space can lead to mistakes, slowdowns in production, and even accidents, all of

which interrupt operations and negatively impact a company. A set of practices for

organizing workspaces to create efficient, effective and safe areas for workers and which

prevent wasted effort and time. 5S emphasizes organization and cleanliness.

Heijunka: production levelling or smoothing that seeks to produce a continuous flow of

production, releasing work to the plant at the required rate and avoiding interruptions.

Kanban: Kanban is a visual method for controlling production as part of Just in Time (JIT)

and Lean Manufacturing. As part of a pull system, it controls what is produced, in what

quantity, and when. Its purpose is to ensure that you only produce what the customer is
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asking for and nothing more. It is a system of signals that is used through the value stream to

pull product from customer demand back to raw materials.

Jidoka: A method that defines an outline for detecting an abnormality, stopping work until it

can be corrected, solving the problem, then investigating the root cause. The concept of

jidoka originated in the early 1900s when Sakichi Toyoda, founder of the Toyota Group,

invented a textile loom that stopped automatically when any thread broke. Previously, if a

thread broke the loom would churn out mounds of defective fabric, so each machine needed

to be watched by an operator.

Value Stream Mapping

This is the point where you literally need to map the workflow of your company. It has to

include all actions and people involved in delivering the end product to the customer. By

doing so, you will be able to identify what parts of the process bring no value. Applying the

Lean principle of value stream mapping will show you where value is being generated and in

what proportion different parts of the process do or do not produce value. When you have

your value stream mapped, it will be much easier for you to see which processes are owned

by what teams and who is responsible for measuring, evaluating, and improving that process.

This big-picture will enable you to detect the steps that don’t bring value and eliminate them.

Safety Stock

Logisticians refer to a degree of excess stock as "safety stock" to reduce the danger of

stockouts (a shortage of raw materials or packaging) brought on by erratic supply and

demand. When demand, supply, or production yield are unpredictable, safety stock levels

must be sufficient to allow for business operations to go as planned. Safety stock acts as a

safeguard against stockouts. A safety stock is an extra quantity of a product kept in the
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inventory to lower the possibility that it will run out. It serves as a buffer stock in the event

that sales are higher than anticipated or the supplier is unable to supply the extra units on

time. The less accurate the forecast, the more safety stock is required to ensure a given level

of service. With an MRP worksheet, a company can judge how much it must produce to meet

its forecasted sales demand without relying on safety stock. However, a common strategy is

to try to reduce the level of safety stock to help keep inventory costs low once the product

demand becomes more predictable.

Location

Deciding where to locate a business has always been important. Location plays a huge role in

attracting and retaining the best employees, many of whom keep a close eye on where they’re

based in order to optimize work-life balance. Good location decisions can significantly boost

a company’s long-term performance. Poor ones can cost millions in lost talent, productivity

and capital. Location holds great significance in smooth operational activities of an

organization. In business, organizations need to identify a country, region, community and;

site as location.

Location planning allows you to future-proof your operations based on current trends, but this

isn’t the end of the story; new ways of working and rapidly evolving technology is putting

pressure on all companies—including you and I—to review their real estate spend.

The facilities location problem is one of major importance in all types of business. It is

important to notice the different problems that may arise whilst trying to choose a suitable

location. Normally, the decision on siting proceeds in two stages: in the first, the general area

is chosen; and then a detailed survey of that area is carried out to find suitable sites where the

plant or facility could be located. However, the final decision as to where to locate a facility

is made by taking into consideration more detailed requirements.

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Identifying a country

Locating a manufacturing facility depends on talent, labor costs & energy costs. Many

countries have outsourced their facilities to foreign suppliers to take advantage of many

relatively low wage rates. As with foreign based subsidiaries, manufacturing companies can

ship their products to overseas & pay low tariffs. Though higher transportation costs,

lower productivity need to be in consideration.

Identifying a region

The regional factors that are need to be in consideration involve raw materials, market and

labor considerations. A location which is near main suppliers will help to reduce cost and

allow staff to meet suppliers easily to discuss quality, technical or delivery problems,

amongst others. It is also important that certain supplies which are expensive or difficult to

procure by transport should be readily available in the locality.

Identifying a community

Especially for the workers & managers should include facilities like education,

transportation, religious worship, recreation, entertainment and many more. community size

can be particularly important of a firm is a major employer in the community. Also, the cost

and availability of utilities, environmental regulations, taxes from local governments are also

in consideration. Opting for a community where suppliers prefer JIT techniques for reducing

lead time and increasing efficiency.

Identifying a site

The considerations related to sites are land, transportation and zoning or other restrictions.

The cost of the site is a very important factor; however, it is necessary to prevent immediate

benefit from jeopardizing the long-term plans of an organisation.