Bernoud A.J. Jonker MBA


Operations Management Basics


• Objectives of this lecture are to introduce Operations Management its place and connections within organisation and some important concepts:
– – – – – – Efficiency Batch production Quality Customer Order Decouple Point Process layout Production Planning


Operations Management Basics


1 BAJJonker OPERATIONS MANAGEMENT BASICS Operations Management Basics 3 .

OPERATIONS MANAGEMENT Introduction • What is Operations? • How does the role of Operations relate to other functional areas? • What Operations Management concepts do you know? BAJJonker Operations Management Basics 4 .

materials. goods.OPERATIONS MANAGEMENT What is Operations? • Operations can be defined as a transformation process where e. services INPUT •Material •Machines •Labour •Energy •Management •Capital OPERATIONS 1 2 3 4 OUTPUT 5 •Goods •Services Feedback Requirements Feedback Source: Russel & Taylor. g.g. 2009 BAJJonker Operations Management Basics 5 . labour is transformed into e.

OPERATIONS MANAGEMENT Transformation processes Transformation can be: • Physical • Locational • Exchange • Physiological • Psychological • Informational Example: Manufacturing operations Transportation/warehousing Retail Health care Entertainment Communication BAJJonker Operations Management Basics 6 .

OPERATIONS MANAGEMENT Strategic planning hierarchy Mission and Vision Voice of the Business Corporate Strategy Voice of the Customer Marketing Strategy Operations Strategy Financial Strategy Source: Russell & Taylor. 4th Edition. 2003 BAJJonker Operations Management Basics 7 .

OPERATIONS MANAGEMENT Supply Chain perspective Supply Chain Supply side Demand side Transformation process Tier 3 suppliers Tier 2 suppliers Tier 1 suppliers Warehouses/ Wholesale Retail Customers Source: David Barnes. 2008 BAJJonker Operations Management Basics 8 .

and inventory data Job design Employee evaluation Hiring/firing Training Source: Own compilation BAJJonker Operations Management Basics 9 .OPERATIONS MANAGEMENT Operations within organisation General General management management Marketing Marketing Operations Operations Finance Finance Human Human Resources Resources Availability Lead time Sales forecast Customer orders Budgets Cost analysis Production.

BAJJonker Operations Management Basics 10 .= ----------------input Labour • Competitiveness = degree to which an countries can produce goods and services that meet the test of international markets.OPERATIONS MANAGEMENT Productivity and Competitiveness • Productivity = ratio of output to input Output Output Productivity = ------------.

Machine shops. electricity. Production of automobiles. fast food. furniture making. . education. foodstuffs.OPERATIONS MANAGEMENT Production process selection High Continuous production Volume Mass production Batch production Projects Low Low Standardisation High Source: Russel & Taylor. bakeries. rock concert. development new product. paper. 2009 BAJJonker Operations Management Basics 11 Examples Production of oil. steel. Building ship. personal computers. televisions.

an international perspective 12 .THE OPERATING SYSTEM Customer-order-decoupling-point The logistic chain make-to-stock assemble-to-order Customer BAJJonker Supplier make-to-order design-to-order Source: Own compilation Operations Management.

OPERATIONS MANAGEMENT Customer-order-decouple-point Examples from manufacturing industry Make-to-order Assemble-to-order Make-to-stock Ship building industry BAJJonker Car building industry Operations Management Basics Many industries 13 .

2009 BAJJonker Operations Management Basics 14 .OPERATIONS MANAGEMENT Different layout types Process layout Product layout Fixed position layout Hybrid layout Adopted from: Russel & Taylor.

4. 4} = 4 Idle time = 0 Balance delay = 0 • • • • Flow time = 3 + 4 + 3 = 10 Cycle time = max{3. 4. 3} = 4 Idle time = 1 Balance delay = 2 15 BAJJonker Operations Management Basics .OPERATIONS MANAGEMENT Line balancing 1 4 minutes 2 4 minutes 3 4 minutes 1 3 minutes 2 4 minutes 3 3 minutes • • • • Flow time = 4 + 4 + 4 = 12 Cycle time = max{ 4.

OPERATIONS MANAGEMENT The supply chain Supplier Manufacturer Wholesale Retail Customer Purchasing Production Physical distribution Retailing Supply chain Reverse logistics Source: Own compilation BAJJonker Operations Management Basics 16 .

OPERATIONS MANAGEMENT Information in the supply chain Supplier Manufacturer Retail Customer EDI EDI EDI BAJJonker Operations Management Basics 17 .

OPERATIONS MANAGEMENT Planning hierarchy • Operations planning hierarchy: Forecasting Planning Scheduling Input from sales/marketing in combination with historic data Input from forecasting in combination with rough capacity calculations Input from planning in combination with machine capacity calculations Source: own compilation BAJJonker Operations Management Basics 18 .

p. 2009.OPERATIONS MANAGEMENT Levels of scheduling Make-to-stock Assemble-to-order Make-to-order Master schedule finished products Master schedule major subassemblies or modules Master schedule components or materials Source: Russell & Taylor. 652 BAJJonker Operations Management Basics 19 .

reduce by increasing speed Operations Management Basics 20 BAJJonker . reduce by shorter distances Set-up time. reduce by smart set-up Processing time. reduce or eliminate Moving time.LEAN MANUFACTURING Reduction of lead time • Lead time is typically made up of four components: Storage Transportation Set-up machine Production Storage – – – – Waiting time.

or other work stoppages.OPERATIONS MANAGEMENT Inventory management elements Raw material Production step 1 In-process buffer Production step 2 Finished product • Raw material buffers: to cover for variations in suppliers deliveries. • Finished goods inventories: to cover for fluctuations in demand and work stoppage. • buffer inventories: so that production can run smoothly in case of temporary machine breakdowns. BAJJonker Operations Management Basics 21 .

PLANNING AND SCHEDULING Economic order quantity models Inventory level The Inventory Order Cycle Order quantity. R Order placed Lead time Order received Order placed Lead time Time Order received Source: Russell & Taylor. 2009 BAJJonker Operations Management Basics 22 . Q Demand rate Reorder point.

2009. 670 23 BAJJonker Operations Management Basics .OPERATIONS MANAGEMENT ERP modules Customer order Order status Customers Sales & marketing Forecast & Sales orders Cost & Estimates Hiring & Training Job description Human Resources Payroll data Hiring info Sales data Sales analysis Cost analysis Production data & Inventory Purchase order Delivery Confirmation Suppliers Production & Material Management Finance & Accounting Source: Russell & Taylor. p.

OPERATIONS MANAGEMENT Evolution of quality management Total Quality Management Quality Assurance Quality Control Quality inspection BAJJonker Operations Management Basics 24 .

OPERATIONS MANAGEMENT Integrated overview General Management •Integrating all functional areas Marketing •Availability •Lead time •Sales forecast •Customer orders Operations •Budgets •Cost analysis •Production.and inventory data •Job design •Employee evaluation •Hiring/firing •Training Finance BAJJonker Human Resource Management Operations Management Basics 25 .

sourcing.OPERATIONS MANAGEMENT Issues and trends in Operations • • • • • • • • • • BAJJonker Globalisation of markets. operations Virtual companies Greater choice more individualism Emphasis on service Speed and flexibility Supply chains C(ollaborative)-commerce Technological advances Knowledge Environmental and social responsibilities Operations Management Basics 26 .