Operations Management

Session1
Kristen Cookie Case
• Product Design Vs Production Design
 Kristen’s Cookie Company

6 mins 2 mins 1 min 9 min 5 min 2 mins 1 min

Dough
Oven
Mixer Load Tray, Baking Colling Packing Payment
Setting
How do you study Operations

By analysing and understanding processes?

How do you analyse processes

First by mapping them

 Process
INPUTS PROCESS OUTPUTS
Raw vegetables Cleaning Clean vegetables
Metal sheets Cutting/Rolling/Welding Cans

Resources are employed for executing processes

An example
• Customer order processing
• Generation of a work order
• Purchasing of materials from suppliers
• Generation of detailed production schedules
• Actual production and assembly
• Pack and ship
Customer order processing
( sub processes)

• Customer request for information

• Customer places order
• Review and enter order
• Finalize order
• Create drawings and specifications
• Check drawing and specifications
• Sign off & release drawings/specifications
Process Mapping
• Graphical
• System approach
• Top down approach
• Processes & Sub processes
• Process Identification
• Trigger Events
• Process owner
• Process Parameters
• Capacity, time taken, setup time etc
Flowchart Symbols
Purpose and Examples
Tasks or operations Examples: Giving an
admission ticket to a
customer, installing a engine
in a car, etc.

Decision Points Examples: How much change

should be given to a customer,
which wrench should be used,
etc.
Flowchart Symbols
Purpose and Examples
Storage areas or Examples: Sheds, lines of
queues people waiting for a service,
etc.

Flows of materials or Examples: Customers moving

customers to a seat, mechanic getting a
tool, etc.
Example: Flowchart of Student Going to
School

Yes
Process Deliver
Accept the Order Product
order?

No

Send
Communication
with explanation
Types of Processes

Single-stage Process

Stage 1

Multi-stage Process

Stage 1 Stage 2 Stage 3

Types of Processes (Continued)
A buffer refers to a storage area between
stages where the output of a stage is
placed prior to being used in a downstream
stage
Multi-stage Process with Buffer
Buffer

Stage 1 Stage 2
Process Types
Performance Measure
What is Operations Management About
Even in Services
What do Operations Managers Do
Evolution of OM

Further Refinement
of
SCM Capabilities

SCM Formation/
Extensions

JIT, TQM, BPR,

Alliances

Inventory Management/Cost
Optimization

Traditional Mass Manufacturing

1950s 1960s 1970s 1980s 1990s 2000s Beyond

Evolving Further
Challenges
• Productivity
• Quality
• Risk
• Sustainability
The How Question

Vs
What is Operations management about?

• Transformation processes
• The design, operation, and improvement of the systems that create and deliver
the firm’s primary products and services
Different Transformation Processes

Process Examples

Physical Farming, construction, manufacturing

Storage/transportation Warehousing, trucking, mail, taxis,

buses, hotels
Exchange Trade, retailing, wholesaling, renting,
leasing, loans
Entertainment Radio, movies, TV, concerts, recording
Do all processes add value?
 What do you mean by adding value?

The difference between the cost of inputs

and the (market or fair) value or price of outputs
Are there choices in transformation process?

Is it not fixed given the product?

Identify companies in the same business but with distinctly different
transformation process
What are the decisions that affect Transformation Process?
Operations Management Decisions

•Strategic: •Tactical:
• Product/Service Design • Quality Control
• Capacity Planning • Demand Forecasting
• Facility Location • Supply Chain Management
• Facility Layout • Production Planning
• Job Design • Inventory Control
• Scheduling

31
Can OM create advantage over competitors?

• Walmart
• Toyota
• Southwest
• NH
Comparison Case

Performance Parameter Toyota - Japan GM - USA

Production of Vehicles ( millions) 4 8

Number of Employees 37,000 8,50,000

Parts on which detailed engineering 30 81

is done (%)
Number of employees in 337 6000
purchasing

Number of suppliers for upholstery 1 25

Design to customer delivery time 1.7 3

( million hours)
Design to customer delivery time 46 60
( months)
Career In Operations

Source: Reid and Sanders, 2005.

Types of Processes

A buffer refers to a storage area between

stages where the output of a stage is
placed prior to being used in a downstream
stage

Multi-stage Process with Buffer

Buffer

Stage 1 Stage 2
Other Process Terminology
• Blocking
• Occurs when the activities in a stage must
stop because there is no place to deposit the
item just completed
• If there is no room for an employee to place
a unit of work down, the employee will hold
on to it and not able to continue working on
the next unit
• Starving
• Occurs when the activities in a stage must
stop because there is no work
• If an employee is waiting at a work station
and no work is coming to the employee to
process, the employee will remain idle until
the next unit of work comes
Other Process Terminology

• Bottleneck
• Occurs when the limited capacity of a process
causes work to pile up or become unevenly
distributed in the flow of a process
• If an employee works too slow in a multi-stage
process, work will begin to pile up in front of that
employee. In this case, the employee represents
the limited capacity causing the bottleneck.
• Pacing
• Refers to the fixed timing of the movement of
items through the process
Other Types of Processes

• Make-to-order
• Only activated in response to an actual order
• Both work-in-process and finished goods inventory
kept to a minimum
• Make-to-stock
• Process activated to meet expected or forecast
demand
• Customer orders are served from target stocking
level
Measuring Process Performance
• Operation Time - setup time + Run time
• Throughput time – Average time for a unit to move through the
system
• Cycle time – Average time between completion of units
• Throughput rate – 1/ cycle time
• Efficiency – Actual output / Standard output
• Utilization – Time activated / Time available
• Productivity – output/ input
• Efficiency – output / std output
Cycle Time Example

Suppose you had to produce 600 units in 80 hours

to meet the demand requirements of a product.
What is the cycle time to meet this demand
requirement?
Cycle Time Example

Suppose you had to produce 600 units in 80 hours

to meet the demand requirements of a product.
What is the cycle time to meet this demand
requirement?

Answer: There are 4,800 minutes (60 minutes/hour x

80 hours) in 80 hours. So the average time
between completions would have to be: Cycle
time = 4,800/600 units = 8 minutes.
Process Throughput Time Reduction

• Perform activities in parallel

• Change the sequence of activities

• Reduce interruptions
Measuring Productivity

• Productivity is a measure of how efficiently inputs

are converted to outputs
Productivity = output/input

• Total Productivity Measure:

Total Productivity = (total output)/(total of all inputs)

• Partial Productivity Measure:

Partial Productivity = (total output)/(single input)

• Multifactor Productivity Measure:

Multi-factor Productivity = (total output)/(several inputs)

© Wiley 2010 43
Kristen Cookie Case - Questions
• How much time will it take for a rush order
( Is it throughput time)
• How many orders can you fill in a night
• How many cookies can you produce if all orders are to be a minimum
of two dozen
• Will you give discount for a two or three dozen order
• If your roommate is not available for a day, will it reduce your
capacity ( Bottleneck is not always the operation with the longest
cycle time)
• Is it worthy to improve the cooling or packing operation
• What are the other ways to improve the system
Gantt Chart – Two Dozen Order
Gantt Chart – One Dozen Orders
OBJECTIVES
• Process Analysis

• Process Flowcharting

• Types of Processes

• Process Performance Metrics

Process Analysis Terms

• Process: Is any part of an organization that

takes inputs and transforms them into outputs
• Cycle Time: Is the average successive time
between completions of successive units
• Utilization: Is the ratio of the time that a
resource is actually activated relative to the
time that it is available for use
Other Process Terminology
• Blocking
• Occurs when the activities in a stage must stop because there
is no place to deposit the item just completed
• If there is no room for an employee to place a unit of work
down, the employee will hold on to it and not able to
continue working on the next unit
• Starving
• Occurs when the activities in a stage must stop because there
is no work
• If an employee is waiting at a work station and no work is
coming to the employee to process, the employee will remain
idle until the next unit of work comes
Other Process Terminology (Continued)
• Bottleneck
• Occurs when the limited capacity of a process
causes work to pile up or become unevenly
distributed in the flow of a process
• If an employee works too slow in a multi-stage
process, work will begin to pile up in front of that
employee. In this case, the employee represents
the limited capacity causing the bottleneck.
• Pacing
• Refers to the fixed timing of the movement of items
through the process
Other Types of Processes

• Make-to-order
• Only activated in response to an actual order
• Both work-in-process and finished goods inventory
kept to a minimum
• Make-to-stock
• Process activated to meet expected or forecast
demand
• Customer orders are served from target stocking level
Process Performance Metrics
• Operation time = Setup time + Run time

• Throughput time = Average time for a unit to

move through the system

• Velocity = Throughput time

Value-added time
Process Performance Metrics (Continued)
• Cycle time = Average time between
completion of units

• Throughput rate = 1 .
Cycle time
• Efficiency = Actual output
Standard Output
Process Performance Metrics (Continued)

• Productivity = Output
Input

• Utilization = Time Activated

Time Available
Little’s Law

• Throughput Time = Average WIP

Throughput Rate
 Example

Find total number of batteries in the plant

How many days of supply are held in raw material inventory