CHAPTER 6:

OPERATIONS AND
MANUFACTURING
 LEARNING OUTCOMES

After completing this chapter, you should be able to

• define the concept of operations management and manufacturing
• describe the concept of operations management
• understand why operations management is important in all types of
organisations
• describe key operations management performance measures
• analyse and provide examples (real or hypothetical) of how an integrated
and aligned operations strategy may lead to a sustainable competitive
advantage.
INTRODUCTION
Figure 6.1 Chapter outline
DEFINING OPERATIONS AND
MANUFACTURING
Figure 6.2 Operations
management as a
transformation process
Source: Adapted from Slack et al.
(2013)
 IMPORTANCE OF OPERATIONS
MANAGEMENT

The core function of any organisation

See Table 6.1 Examples of operations management in goods and service industries (page 133)
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Financial implications of operations

management
• Over production – energy cost and reduction of life span of equipment
• Queues and motion – time wasting, rise in labour cost
• Transportation –fuel, driver and maintenance cost
• Inventory – absolete, holding and handling cost
• Over-processing –time and labour cost
• Defective products –recalls and rework cost
See Table 6.2 Options for increasing profit contribution (page 134)
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Improved operations and manufacturing

management
Figure 6.3 The reduction in valuable operating time
Source: Adapted from Slack, Chambers & Johnston (2010)
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Improved operations and manufacturing

management
• Process strategy – process focus, mass customization,
• Forecasting – assist in supply and demand
• Short terms scheduling –assist with managing of operations
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Operations management as a performance

measure
Productivity measures
𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂𝑂
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 =
𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼
Table 6.3 Single-factor productivity measure examples
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Operations management as a performance measure continued

Capacity measures
𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜
𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 =
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐

𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑜𝑜𝑜𝑜 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢

𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢𝑢 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚𝑚 ℎ𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎

𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 =
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Operations management as a performance measure continued

Quality, speed of delivery and flexibility measures

Process velocity
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣𝑣 =
𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡
 IMPORTANCE OF OPERATIONS MANAGEMENT continued

Operations management as a performance measure continued

Operations management as a source of sustainable

competitive advantage
Figure 6.4
The relationship between
corporate, supply chain
and manufacturing strategy
DEVELOPING AN OPERATIONS AND
MANUFACTURING STRATEGY
Figure 6.5 Stages in the development of an operations and
manufacturing strategy for a fast-moving consumer goods
manufacturer
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Stages in developing the strategy

• Stage 1: Define corporate objectives
• Stage 2: Determine marketing strategies in support of corporate
objectives
• Stage 3: Assess how different products and/or services qualify in their
respective markets and win orders against competitors
• Stage 4: Make strategic sourcing decisions
• Stage 5: Implement the appropriate logistics concepts
• Stage 6: Establish the appropriate manufacturing process
• Stage 7: Design the manufacturing infrastructure to facilitate production
streaming
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Corporate objectives

• Satisfy market needs

Market analysis

• Introduction stage
• Growth stage
• Maturity stage
• Decline stage

Product and/or service profiling

• Improve fit between orders and manufacturing fulfilling of the orders

• Adapt to changes in the market

 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Strategic sourcing
Figure 6.6
Typical strategic sourcing
decision framework
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

Logistics concepts
MAKE AND SHIP TO FORECAST
Figure 6.7 Make and ship to forecast
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

MAKE TO FORECAST
Figure 6.8 Make to forecast
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

ASSEMBLE OR CONFIGURE TO ORDER

Figure 6.9 Assemble to order
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

MAKE TO ORDER
Figure 6.10 Make to order
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

PURCHASE AND MAKE TO ORDER

Figure 6.11 Purchase and make to order
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

ENGINEER TO ORDER
Figure 6.12 Engineer to order
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Logistics concepts continued

ENGINEER TO ORDER continued

Table 6.4 A comparison of logistics concepts and sensitiveness

 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Manufacturing process alternatives

Figure 6.13 Depiction of five manufacturing process alternatives
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Manufacturing process alternatives continued

Project-shop production system

• Products and markets
• Manufacturing
• Investment and cost
• Infrastructure
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Manufacturing process alternatives continued

Batch-flow production system

• Products and markets
• Manufacturing
• Investment and cost
• Infrastructure
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Manufacturing process alternatives continued

Mass production or line-flow production system

• Products and markets
• Manufacturing
• Investment and cost
• Infrastructure
• Products and markets
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Manufacturing process alternatives continued

Continuous process flow production system

• Markets and products
• Manufacturing
• Investment and cost
• Infrastructure
• Products and markets
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Production streaming
• Process review
• Identifying manufacturing order winners and qualifiers
• Process rearrangement
• Infrastructure rearrangement
 DEVELOPING AN OPERATIONS AND MANUFACTURING STRATEGY continued

Conclusion
• Operations management if the core function of a business to transform
inputs into outputs, with major financial implications. Understanding
operations will assist companies to improve their competitive advantage.