Operation Management and Total Quality Management: PRELIM - 1st SEM, A.Y. 2019 - 2020

EMILIO AGUINALDO COLLEGE ISO 9001: 2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

City of Dasmariñas,Cavite
Chapter 1:
Operation Management and Total Quality

Management
[ BSAC 1-2 ] BMC1 11 -
PRELIM – 1st SEM, A.Y. 2019 - 2020
Prepared by:
Engr. John Paolo P. Severino, MBA
SBAA - Faculty / Industrial Engineer
VIRTUE EXCELLENCE SERVICE

Course Description
This course tackles the nature, scope, functions and importance of
operation management in business decision-making and basic
operational and the ways of approaching these problems.
It is also provide provides aims to enable participants to recognize

and assess quality management process in organization and to evaluate
departmental processes, 7 Quality Control Tools, dimension of quality,
approaches of quality, quality management ISO 9001 and planning
strategies.

Course Objectives
 Develop an understanding of and an appreciation for the production and
operations management function in any organization.
 To understand the importance of product and service design decision and
its impact other design decisions and operation.
 To understand the importance of an effective production and operations
strategy to an organization.
 To understand the relationship of the various planning practices of
capacity planning, aggregate planning, project planning and scheduling.
 To understand the roles of inventories and basic of managing inventories
in various demand settings.
Topics
 Operation management topics  References
include;  Production and
 Operations strategy, Operation
 Process design, Management by
 Capacity planning Steveson, Sum 2012
 Production Schedule
 Quality Assurance
 Forecasting
 Project Management
 Facilities Location

What is Operation Management?

Definitions;
 Systematic direction, control, and
evaluation of the entire range of
processes that transform inputs into
finished goods or services.
Ex. Manufacturing industry:

Production process of making cotton
clothes.
 Value-added is the term used to
describe the difference between the
cost of inputs and the value of price of
outputs.


 Customer Contact-customers
actively participate in
transformation processes,
self-service
Service Industry such as

customer service assistance,
medical services, call centers,
payment and bills etc.

What is Total Quality Management (TQM)?

 Is a people-focused management system that aims at
continual increase in customer satisfaction at continually
lower at real cost.
 It is defined as managing the entire organization so that it

excels on all dimensions of products and services that are
important to the customer.
 Passion to deliver customer value / excellence.

Quality Management & ISO 9001:2015

 ISO (International Organizational Standard) focuses on product and service
conformity for guaranteeing equity in the market place and concentrates on fixing
quality system problems and service nonconformities.
 ISO 9001 is for quality management. It is also known as QMS - Quality Management
System
 ensure that its products or services satisfy the customer's quality requirements and
 comply with any regulations applicable to those products or services. (eg. RoHS or
QA Passed)
Quality Management & ISO 9001:2015

 ISO (International Organizational Standard) focuses on product and service
conformity for guaranteeing equity in the market place and concentrates on fixing
quality system problems and service nonconformities.
 ISO 9001 is for quality management. It is also known as QMS - Quality Management
System
 ensure that its products or services satisfy the customer's quality requirements and
 comply with any regulations applicable to those products or services. (eg. RoHS or
QA Passed)

Definitions;
 The business function responsible for planning, coordinating,
and controlling the resources needed to produce products and
services for a company.
 Operations management seeks to increase the quality, efficiency,

and responsiveness of the firm.
 An organization’s core function and management function

Difference of Manufacturers and Service Organizations

SERVICES MANUFACTURERS
 Intangible product Tangible product
Product is inventoried
 Product cannot be
inventoried Low customer contact
Longer response time
 High customer contact
Capital intensive
 Short response time
 Labor intensive

The Three Basic Functions of Business Organizations

President or CEO
Marketing Operations Finance

V. P. of Marketing V. P. of Operations V. P. of Finance
Manages: Customer Manages: people, Manages: Cash flows, assets

demands technology, materials and and capital investnenst.
procedures.
Generates: Sales for goods
and services.
To produce: goods and
services.

Operation Management Concepts

• Quality: goods and services that are reliable and perform
correctly.
• Quality allows customers to receive the performance that they
expect.
• Efficiency: the amount of input to produce a given output.
• Less input required lowers cost and waste.
• Responsiveness to customers: actions taken to respond to
customer needs.
• Firm can react quickly and correctly to customer needs as they
arise.
Operation Management and Decision Making

The chief role of an Operation Manager is that of planner
and decision maker. These include the following:
1. What: What resources will be needed, and in what
amounts?
2. When: When should the work be scheduled? or when
corrective action needed?
3. Where: Where will be the work done?
4. How: How will resources be allocated?
5. Who: Who will do the work?
Job Title: Operation Manager

The Operator Manager will be responsible for;
- oversees the daily working performance of production, sales and alike.
- maintain a high quality standard of product production and delivery,
- implements schedules to ensures deadlines are met,
- implementation of organizational strategies, policies and practices.
- supervise and coach office manager on a weekly basis.
- oversee overall financial management, planning, systems and controls.
- payroll management, including tabulation of accrued employee benefits.
- development of individual program budgets.
- Play significant role in short and long term planning
*This position will also interact with the Board of Directors / Presidents or CEO.
Operation Manager Qualifications

- Candidate must posses at least a Bachelor's/College Degree, Business Studies /
Administration/ Management, Marketing, Commerce or equivalent.
- Required skill(s): computer application, customer service, multi-tasking, conflict
resolution/problem solving.
- Atleast 2 year(s) of working experience in the related field is required for this
position.
- Preferably Assistant Manager / Managers specializing in Marketing / Business
Development or equivalent.
- With strong background and work experience in Sales, Marketing and Finance.
- Excellent communication skills both verbal and written.
- With master's degree is an advantage.

Operation Strategy
2. Time-based strategies strategy that focuses on reduction of time needed to
accomplish the task.
Planning time: The time needed to react to a competitive threat, to develop

strategies and select tactics, to approved proposed changes to facilities, to adopt
new technologies.
Product/service design time: The time needed to develop and market new or
redesigned products or services.
Changeover time: The time needed to produce goods or provided services. this can
be involved scheduling, repairing equipment, methods used, inventories and alike.
Response Time for complaints: These might be customer complaints about quality,
timing of deliveries and incorrect shipments

Operation Strategy
Operation Strategy is narrower scope, dealing primarily with the operations aspect of
the organization. It relates to products, process, methods, operating resources, quality,
costs, lead times and scheduling.
Two factors of Operation Strategies

1. Quality-based strategy that focuses on quality in all phases of an organization.
Decision Area What the Decision Affect
1. Product & Service Design Costs, quality, and environmental issues
2. Capacity Cost structure, flexibility
3. Work Design Quality work of life, employees safety productivity
4. Quality Ability to meet or exceed customer expectations.
5. Process selection and layout Costs, flexibility, skill level needed, capacity.

Scope of Operation Management

Most of the activities performed by management and employees fall into the
realm of Operation Management:
1. Forecasting is a statement about the future value of a variable of interest.
It is prediction about the future.
2. Capacity planning is to achieve a match between the long-term supply
capabilities of an organization and the predicted level of long-term
demand.
2.1 Capacity the upper limit or ceiling the total that an operating unit can
handle
3. Scheduling establishing the timing of the use of equipment, facilities, and
human activities in an organization.

4. Inventories is a stock or stores of finished goods, raw materials, or
purchased parts.
5. Quality fitness for use in quality of design and quality of conformance.
It is also inversely proportional to variability. Quality always begins
with trying to satisfy the customer needs and requirements. The quality
of product highly depends on the inputs that we put into process of
making our product.
6. Motivating and Training employees in all phases of operation in
order to boost the morale of employees.
7. Locating facilities it pertains to manager's decisions on which cities to
provide for, where to locate maintenance facilities, and where to locate
major and minor hubs.

4. Motivating and Training employees in all phases of operation in
order to boost the morale of employees.


 Operations Management are the activities that transform
resources into goods and services.
 Systematic direction, control, and evaluation of the entire

range of processes that transform inputs into finished goods
or services.

Responsibilities of Operations Management

Planning Controlling
• Capacity, utilization –Inventory
–Quality
• Location –Costs
• Choosing products or services Organization
• Make or buy –Degree of standardization
–Subcontracting
• Layout –Process selection
• Projects Staffing
• Scheduling –Hiring/lay off
• Market share –Use of overtime
–Incentive plans
• Forecasting
Planning
 Capacity refers to an upper limit ceiling on the load that an operating unit can handle. It
needs include the equipment, space and employee skills or upper limit on the rate of output.
 The load might be in terms of the number of physical units produce (e.g. laptop assembled
per hour) or the number of serviced performed (e.g. computers upgraded per hour).
 The goal of strategic capacity planning is to achieve a match between the long-term supply
capabilities of an organization and the predicted level of long-term.
 Overcapacity causes operating cost that are too high, while under-capacity strained
resources and possible loss of customers.

Capacity Planning
Defining and Measuring Capacity
1. Design Capacity: The maximum output rate or service capacity an operation, process or
facility is designed for.
 It is the maximum rate of output achieved under ideal conditions.
2. Effective Capacity: Design capacity minus allowances such as personal time,

maintenance, and scraps.
 Effective capacity is usually less than design capacity owing to realities of changing
product mix, the needs for periodic maintenance of equipment, lunch breaks, coffe
breaks in scheduling and balancing operations, and similar circumstances.
Capacity Planning
Steps in the Capacity Planning Process
1. Estimates future capacity requirements

2. Evaluate existing capacity and facilities and identify gaps.
3. Identify alternatives for meeting requirements.
4. Conduct financial analysis of each alternatives.
5. Asses keys qualititative issues for each alternative.
6. Select the alternative to pursue that will be best in the long term.
7. Implement the selected alternative.
8. Monitor results.

Planning: Plant Location

Plant location decisions are closely tied to an organization's strategies. It is to
entail a long-term commitments, which makes mistakes difficult to overcome.
Plant Location Decision strategy is able to;

 low-cost producer might result in locating where labor or materials are low.
 locating near suppliers/markets.
 reduce transportation cost.
For example; 7-11, PEZA, EPZA, Provincial Location, SM-MOA &

Robinson
Planning: Make or Buy Decision

 Make or Buy Decision are typically manegerial decision requiring input form
finance, industrial engineering, marketing, process engineering, purchasing
and human resources, among others. The input to be facilities is a listing often
takes the form of a parts list or a bill of materials.(see bom/HS CIP)
 Outsource obtain a good or service from an external provider.
 The organization must decide whether to produce a good or provide a service

itself, or to outsource (buy) from another organization.


Factors of Make or Buy Decision are:
1. Availability capacity If an organization has available the equipment, necessary skills and
time, it often makes sense to produce an item or perform a service in-house.
2. Expertise If a firm lacks of expertise to do a job satisfactorily, buying might be a
reasonable alternative.
3. The nature of demand when demand for an item is high and steady, the firm is often
better off doing the work itself.
4. Quality consideration Firms that specialize can usually offer higher quality than an
organization can attain itself. Conversely, unique quality requirements of the desire to
closely monitor quality may cause an organization to perform a job itself.


Factors of Make or Buy Decision are:
5. Cost Any cost savings achieved from buying or making must be

weighted against the preceding factors.
6. Risk Outsourcing may involve certain risk. One is loss of control

over operation and another is the need to disclose proprietary
information.

Planning: Plant Layout  Facilities can be broadly defined as

 Plant Layout embraces the physical buildings where Manpower, Machine,
arrangement of industrial facilities. and Material comes together for a
This arrangement (either installed or stated purpose - typically to
planned) includes the space needed
for: make a tangible product or
1. Operating equipment and provide services.
personnel
2. Material movement
3. Storage  Objectives of Facilities Location is to
4. Indirect laborers minimize components of deliver-to-
5. Supporting activities or services customer cost that depend on location.

Scheduling in High-Volume Systems

Planning: Scheduling  A high-volume system usually require
Scheduling automated or specialized equipment
 Establishing the timing of the use of
equipment, facilities and human
for processing and handling.
activities in an organization.
 The goal is to obtain a smooth rate of
 It relates to the use of equipment,
facilities and human activities. For flow of goods or customers through
example, manufacturers must schedule the system in order to get high
production, which means developing utilization.
schedules for workers, equipments,
purchases, maintenance and so on.
For example, autos, laptops, televisions,
computers and so on.
Planning: Scheduling Scheduling in Low-Volume Systems

Scheduling in Intermediate-Volume  The characteristics of low-volume system
Systems (job shops) are considerably different from
those of high and intermediate-volume
 It refers in outputs fall between the system.
standardized type of output of the high-
olume system and made-to-order output
of job shops. Thus intermediate-volume  Product are made to order, and orders usually
work centers periodically shift from one differ considerably in terms of processing
job to another. requirements, materials needed, processing
time, sequence and set-up.
 The three basic issues in these system are

the run size of jobs, the timing of jobs,  Job-shop scheduling Scheduling for low-
and the sequence which jobs should be volume system with many variations in
processed. requirements
Planning: Scheduling
Gantt Chart is used as visual aids for loading and scheduling purposes. They derive name from Henry Gantt,
who pioneered the use of charts for industrial scheduling in the early 1900's.
 The purpose of Gantt chart is to organize and visually display the actual or intended use of resources in a time
framework. Managers may use the charts for trial-and-error schedule development to get an idea of what
different arrangement would involve.
MAY 2017 ACTIVITIES
NO. TARGET PLAN WEEK 1 WEEK 2 WEEK 3 WEEK 4 WEEK 5
1 Financial Literacy Programs
2 Dress making & Food Tech.
3 Loan Payment Management
Target Schedule
Actual Output

Planning: Forecasting Here are some of examples of uses of

Forecast is a statement about the forecast in business:
future value of a variable such as
demand or prediction about the 1. Accounting: New product/ process
future events.
cost estimates, profit projections, cash
management.
Forecast are rarely perfect; actual
results usually differ from the 2. Finance: Equipment/equipment
predicted values. It cannot predict replacement needs, timing and
precisely but it provides benchmark amount of funding / borrowing needs.
or reference value from actual
information.
Planning: Forecasting 5. Product / service design Revision of

3. Human Resource Hiring activities, current features, design of new products
including recruitment, interviewing, or services.
training, layoff planning, including
outplacement. (ex. ber months freeze
6. MIS New / revised information system,
hiring)
internet services.
4. Operations schedule capacity 7. Marketing Pricing and promotion, e-

planning, work assignments and business strategies and global competition
workloads, inventory planning, strategies.
make-or-buy decision, outsourcing
and project management.
Inventory turnover Ratio of average cost of

Controlling: Inventory good sold to average inventory investment
Inventory is a stock or store of goods.
Perpetual inventory system system that
keeps track of removals from inventory
Different kinds of inventories include the
continuously, thus monitoring current levels
following:
of each item. (e.g. fast moving items)
 Raw materials and purchased parts.
 Partially completed goods, called work- Periodic system Physical count of items in
in-process (WIP) inventory made at periodic (daily, weekly and
 Finished-goods inventories monthly)
(manufacturing firms) or merchandise
(retail stores)
Two-bin system Two containers of inventory;
 Replacement parts, tools and supplies reorder when the first is empty.
Controlling: Inventory
Just-in-Time system Improving profits and return on investment
by minimizing cost and eliminating waste through cutting
inventory on hand.
Materials Requirement Planning (MRP)

aids in managing the purchase and planning of materials required
for production. These system can be key in keeping the cost of
inventory down.

Controlling: Quality
David A. Garvin suggests that product and services have many dimensions of quality:
1. Performance: A product's primary operating characteristics. Using an autmobile as an
example, characteristic would include such things as acceleration, braking distance and
handling.
2. Features: The “bell and whistles” of a product. A car may have power options, a CD
deck, antilock brakes and and power seats. (e.g. Type J or K car)
3. Aesthetics: How a products looks, feel, sounds, tastes or smell. A car's colour instrument
panel design, and “feel of teh road” for example, may make it aesthetically pleasing.
4. Conformance: The degree to which physical and performance characteristics of a
product match pre-established standards.
5. Durability: The amount of use one gets from a product before it physically deteriorates
or until replacement is preferable. For a car it might include corrosion resistance.

For services, research shows that the five key dimensions of service quality contribute to
customer perceptions:
1. Reliability: The ability to provide what was promised, dependably and accurately.
Examples include customer service representatives responding in the promised time,
following customer instructions, providing error-free invoices and statements, and
making repairs correctly the first time.
2. Assurance: The knowledge and courtesy of employees and their ability to convey
trust and confidence. Example include having capabilities to do the necessary works
and being polite and pleasant during customer transactions. (e.g. hanling customer
complaints)
3. Tangibles: The physical facilities and equipment, and the appearance of personnel.
Tangbles include attractive facilities, appropriately dressed employees, and well-
dessigned forms that are easy to read and interpret.
For services, research shows that the five key dimensions of service quality contribute to
customer perceptions:
4. Empathy: The degree of caring and individual attention provided to customers.
Examples might be the willingness to schedule deliveries at the customer's convenience,
explaining technical jargon in a layperson's language and recognizing customers by
name. (Protocol or Free delivery of purchased item)
5. Responsiveness: The willingness to help customers and provide prompt service.

Examples including acting quickly to resolve problems, or replacing rapidly replacing
defective items or products just to maintan the good relations thru customer.

Cost Of Quality (COQ) is the sum of cost incurred by an organization in
preventing poor quality.
 Preventive Costs are investments made to keep non-conforming products
from occurring and reaching the customer.
 Appraisal cost are those associated with efforts to ensure conformance to
requirements, generally through measurement and analysis of data to
detect nonconformances. (e.g. test and inspection cost)
 Internal failure costs are incurred as a result of unsatisfactory quality
found before the delivery of a product to the customer. (e.g. scrap or
rework cost)

Organization: Subcontracting
Subcontracts Contractor must be confident they
 Subcontracting can shorten schedule can perform
and improve quality / efficiency if
subcontractor has access to superior  Reputation
technology resources (knowledge).  Labor force
 Subcontracting can also reduce
schedule flexibility because of  Job History
contractual constraint.
 Major subcontractors sometimes
 Fianancial strength
included in partnering team, working  Past work with team
with government agencies and field
coordination.  Estmating ability
 Must bind subcontractor to a cost and
schedule consistent with overall
project paramenters.
Organization: Subcontracting
Recruitment Recruitment Issues
 The process of attracting Alternative to recruitment:
individuals in sufficient  Outsourcing
numbers with the right skills  Contigent labor
and appropriate times to apply  Part-time employees
for open positions with the
organizations.  Overtime

End of Chapter 1
Thank You.

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EMILIO AGUINALDO COLLEGE ISO 9001: 2015 CERTIFIED

QUALITY MANAGEMENT SYSTEM

Operation Management and Total Quality

VIRTUE EXCELLENCE SERVICE

It is also provide provides aims to enable participants to recognize

VIRTUE EXCELLENCE SERVICE

VIRTUE EXCELLENCE SERVICE

What is Operation Management?

Ex. Manufacturing industry:

VIRTUE EXCELLENCE SERVICE

What is Operation Management?

Service Industry such as

VIRTUE EXCELLENCE SERVICE

What is Total Quality Management (TQM)?

 It is defined as managing the entire organization so that it

 Passion to deliver customer value / excellence.

Quality Management & ISO 9001:2015

Quality Management & ISO 9001:2015

What is Operation Management?

 Operations management seeks to increase the quality, efficiency,

 An organization’s core function and management function

Difference of Manufacturers and Service Organizations

VIRTUE EXCELLENCE SERVICE

The Three Basic Functions of Business Organizations

Marketing Operations Finance

Manages: Customer Manages: people, Manages: Cash flows, assets

VIRTUE EXCELLENCE SERVICE

Operation Management Concepts

Operation Management and Decision Making

Job Title: Operation Manager

Operation Manager Qualifications

VIRTUE EXCELLENCE SERVICE

Planning time: The time needed to react to a competitive threat, to develop

VIRTUE EXCELLENCE SERVICE

Two factors of Operation Strategies

VIRTUE EXCELLENCE SERVICE

Scope of Operation Management

Scope of Operation Management

Scope of Operation Management

VIRTUE EXCELLENCE SERVICE

Scope of Operation Management

 Systematic direction, control, and evaluation of the entire

VIRTUE EXCELLENCE SERVICE

Responsibilities of Operations Management

VIRTUE EXCELLENCE SERVICE

 It is the maximum rate of output achieved under ideal conditions.

2. Effective Capacity: Design capacity minus allowances such as personal time,

1. Estimates future capacity requirements

VIRTUE EXCELLENCE SERVICE

Planning: Plant Location

Plant Location Decision strategy is able to;

For example; 7-11, PEZA, EPZA, Provincial Location, SM-MOA &

Planning: Make or Buy Decision

 Outsource obtain a good or service from an external provider.

 The organization must decide whether to produce a good or provide a service

VIRTUE EXCELLENCE SERVICE

Planning: Make or Buy Decision

VIRTUE EXCELLENCE SERVICE

Planning: Make or Buy Decision

5. Cost Any cost savings achieved from buying or making must be

6. Risk Outsourcing may involve certain risk. One is loss of control

VIRTUE EXCELLENCE SERVICE

Planning: Plant Layout  Facilities can be broadly defined as