Introduction to Operations Management. is the management of the direct resources required to produce the goods and services provided by an organization. Management activities performed include selecting, designing, operating, controlling and updating productive systems. Types of Decisions
is the management of the direct resources required to produce the goods and services provided by an organization.
Management activities performed include selecting, designing, operating, controlling and updating productive systems
At Strategic Level: 1. How well we make the product? 2. Where do we locate facilities? 3. How much capacity is needed? and 4. When should capacity be added?
At Tactical Level: 1. How many workers do we need? 2. When do we need them? 3. Is overtime needed or perhaps an additional shift? 4. When to deliver material? and 5. Is a finished goods inventory needed?
At Operational Level: 1. Jobs to be done today or this week? 2. To whom tasks are assigned? and 3. Which jobs have priority?
Goods & Services
Trend toward having the transformation
process work more closely with suppliers
and customers alike is often referred to as a product’s value chain.
Definition : All steps that actually add value to the product without distinguishing where they are added. This concept attempts to eliminate all non-value added steps(steps such as inspections and inventory), and results in a higher degree of dependence among the value added functions that are linked to the chain.
Service – Information Age ?
(200 years old)
Agrarian stage,Craftsmanship (Lasted 100,000 years)
Stone Age,Bronze Age (Lasted over 500,000 years)
Mode of Production
Technology of production
Vice president of
Regional manager of
Store Manager(dept store)
Branch Manager (bank)
Work methods analyst
Customer service manager
Systems and procedures analyst
A model is an approximate representation of reality.
Two Types of Models:
1. Physical Models :
a) Iconic --- looks like the real system
b) Analog --- acts like the real system.
2. Symbolic Models:
a) Verbal --- using language to model thought,
b) Mathematical --- using Math. to model reality
Math Models differ in four respects :
1 ) Purpose ----------------a) descriptive, b) optimization.
2 ) Mode -------------------a) analytic,
3 ) Randomness ------- --- a) deterministic,
4 ) Generality ------------- a) applicable to one system.
b) transferable to other
Operations Strategy & Competition
Competitiveness refers to the firm’s position in the marketplace.
Operations Strategy refers to how the operations management function contributes to the firm’s ability to achieve its competitive advantage in the marketplace. Operations Strategies are developed from the competitive priorities of an organization which include: 1. Low cost, 2. High quality, 3. Fast delivery, 4. Flexibility, and 5. Service.
Operations Strategy is thus concerned with a long-term plan in order to determine how to best utilize the major resources of the firm so that there is a high degree of compatibility between these resources and the firm’s long -term corporate strategy.
1950’s 1960’s 1970’s 1980’s 1990’s
Manufacturing based Technology info. based
Order-Qualifiers: Minimum characteristics of a firm or its products to be considered as a source of purchase.
Order-Winners: Characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase.
Categories of New Service1. Window Dressing Services: low degree of content and delivery changes. 2. Breadth-of-offering Services: highcontent change, low delivery change.3. Revolutionary Services: high content and delivery changes.4. Channel Development Services: low content change, high delivery change
Service processes are distinguished by the degree of customer contact with the service system during the rendering of the service; thus we have high contact systems such as healthcare and low contact systems such as mailing a letter to someone. See service System Design Matrix on page 73
The overall manufacturing system is the process of transforming materials and information into goods for the satisfaction of human needs.
Production engineering is the generic term which covers all activities concerned with specifying, planning and controlling manufacturing processes. The main production engineering activities are:
Process planning determines how the product or part should be manufactured by referring to component and assembly drawings and manufacturing reference data, and specifications produced at the design stage.
Production planning analyses sales forecasts and orders and decides on the manufacturing resources (capacity, materials and labor) required to meet the current and anticipated demand. Production planning involves capacity and aggregate planning, which aim to match the level of production to the level of demand.
Aggregate planning aims to ensure that capacity is available to meet demand at minimum cost.
Production control schedules production, loads the shops and monitors progress to ensure that production programs are achieved.
The approach adopted will be influences by the extend to which the company is making to order (responding to customer orders) or making to stock (anticipating future orders).
The output of the scheduling process is a master production schedule which sets out when the major operations required for each expected item of demand are to be undertaken. Master production scheduling aims to balance production possibilities with sales requirements.
Shop loading takes the master schedule and verifies labor availability, prepares detailed programs and assigns the work to a machine or an operator. Shop loading will be related to the capacity available.
Progress control monitors the progress of orders through the shops against the master production schedule and delivery requirements so that corrective action can be taken to overcome delays, shortages and bottlenecks.
Material control works from the master production schedule and, using materials requirements (MRP) and inventory control techniques, it:
Technology impacts operational performance. It makes possible for the company to compete and excel on several dimensions simultaneously. Technology in Manufacturing includes the following:
1. Automation, 2. Machining Centers, 3. Numerically Controlled Machines(NC), 4. Industrial Robots, 5. CAD/CAM, 6. FMS, 7. CIM, 8. Islands of automation, 9. Information Technology, 10. ERP, 11. SCM, 12. NPD, 13. CRM
Quality management activities aim to ensure that the high standards of product quality and service expected by customers are created and maintained. Quality management activities comprise:
Inventory control activities aim to ensure that the optimum amount of inventory or stock is held by a company so that its internal and external demand requirements are met economically. Included are:
Distribution activities are concerned with storing completed products in warehouses, depots and stores and the dispatching and delivery of products to customers. Those concerned with physical distribution management and distribution planning.
Project management activities are concerned with the planning, supervision and control of large-scale engineering or construction projects.
Manufacturingis the process of transforming materials and information into goods for the satisfaction of human needs.
Manufacturing can be subdivided into:
Manufacturing decisionsare concerned with the following four attributes:
The speed with which a manufacturing system can respond to change and how quickly a product can be produced by the system (the production rate).
The ability to meet the demands of a diversified and changing customer base in a global market. Flexibility is required in the following areas.
• Machine flexibility. The ease of making changes required to produce a given set of part types.
• Process flexibility. The ability to produce a given set of part types, possibly using different materials in different ways.
• Product flexibility. The ability to change over to produce new products economically and quickly.
• Routing flexibility. The ability to handle breakdowns and to continue producing a given set of part types.
• Volume flexibility. The ability to operate profitably at different production volumes.
• Expansion flexibility. The ability to expand the system easily and in a modular fashion.
• Operation flexibility. The ability to interchange ordering of several operations for each part type.
• Production flexibility. The universe of part types the manufacturing system can produce.
How well the production process meets the design specifications related to the different features and properties of the product.
Production planning and control systems (PPCS) use computers to determine the optimum levels of manufacturing resources required to meet demand forecasts, prepare production program, schedule production to meet those program and monitor operational activities to ensure that customer demand is satisfied while resources are used effectively.
• process planning
• demand forecasting
• master production scheduling
• monitoring and control.
• the manufacturing processes involved;
• the machine tools required to execute these processes;
• the tools and fixture required at each stage of processing;
• the number and depth of passes in a machining operation;
• the feeds and speeds appropriate to each operation;
• the type of finishing processes necessary to achieve the specified tolerances and surface quality.
Demand forecasting leads to the planning of demand for a particular product. The planning is done in terms of specific modes, styles and sizes of the product range. A variety of forecasting methods are used and the result is input into the medium-term planning stage known as aggregate planning.
Aggregate planning Is therefore largely concerned with capacity planning - deciding the capacity required in the system and developing and implementing a strategy for the use of given resources to meet demand fluctuations
Rough-cut capacity planning (RCCP) analyzethe feasibility of fulfilling a particular production program as required by the demand forecast. RCCP provides a basis for producing the master production schedule.
It is a breakdown of the aggregate plan showing when the major operations required for each expected item of demand are to be undertaken. Master production scheduling aims to balance production possibilities with sales requirements.
The detailed scheduling of work and the allocation of labour and material requirements is carried out by one or other of the following computer-based techniques:
Production monitoring can be carried out by means of computer control systems, the aim being to keep machines as fully utilized as possible.
• better planning of shop and purchase orders resulting in on-time deliveries, reduced manufacturing lead times and fewer shortages;
• improved control of shop orders resulting in shorter queues, reduced work-in-progress, less idle time and fewer bottlenecks; and
• monitoring and control of machine tools and production processes resulting in better utilization, improved quality and reduced costs.
Process analysis is conducted to identify and select the best or most efficient process, i.e. process at lowest cost possible. In order to accomplish this measurement of process performance is needed.
Types of Performance: 1. Productivity, 2. Capacity,
Capacity Utilization, 3. Quality, 4. Speed of Delivery,
5. Process Velocity, 6. Flexibility 7. Benchmarking.
These conditions occur as a result of the relationship between the various stages in a process.
Tightness: it results from a high degree of dependence between stages as is the case in assembly line production, lack of buffer inventory causes that. The more buffer the less the dependence among stages and hence less tightness in the production line.
Bottlenecks: it is caused by capacity variation in multistage operations. The stage with lowest capacity is referred to as the bottleneck in the entire operation.
Definition:It is the efficient use of resources: labor, capital, land, materials, energy, information, etc. in the production of goods and services.
It can also be defined as the relationship between results and the time it takes to accomplish them.
Restaurant……………..Customers / labor hour
Retail Store…………….Sales / square foot
Chicken Farm…………..lb. Of meat / lb of feed
Utility Plant…………….Kw / ton of coal
Paper Mill………………tons of paper / cord of wood
Capacity: is the output capability of a process in a specified period of time. Design Capacity is the output the plant is designed to achieve and Actual Capacity or Output is the actual amount the plant is producing.
Capacity Utilization: is the percent capacity used:
Quality: quality can be measured by: defective rate, number and frequency of kudos/ or complaints (customer satisfaction), or by amount of toxic waste the company is releasing into the environment.
Speed of Delivery: is measured from the time an order is placed to the time it is shipped to the customer.The shorter the time the better. Also variability of the speed of delivery is an important measure of performance.
Process Velocity: Total Throughput time
Materials requirement planning (MRPI) is a computerized production scheduling system which takes the forward schedule of final product requirements (the master production schedule) and translates it progressively into the numbers of sub-assemblies, components and raw materials required at each stage of the manufacturing cycle.
• determine for final products what should be produced at what time;
• calculate the required production of sub-assemblies;
• determine the requirement for materials based on an up-to-date bill of materials (BOM);
• calculate inventories, work-in-progress, batch sizes and manufacturing and packaging lead times; and
• generally control inventory by ordering bought-in components and raw materials in relation to the orders received or forecast rather than the more usual practice of ordering from stock-level indicators.
The benefits of MRPI are that a detailed forecast of the inventory position is produced period by period which, together with the planned order release entries, enables future production to be planned more accurately and better control to be maintained of inventory.
MRPII is a computer-based system designed to manage all the resources of a manufacturing organization. It acts as a planning and scheduling system, linking manufacturing with the sales and finance departments and providing tools for joint decision-making among all three departments.
Enterprise Resource Planning Systems : fully integrated software system that links all of the major functional areas in the organization. ERP systems are an outgrowth of Material Requirements Planning (MRP) systems.
Benefits of ERP Systems : Provide competitive advantage—the benefits can take many forms: 1. Reduction of number of errors because a common database is used, 2. Faster customer response times, and 3. Better overall communications within the organization.
Failure of ERP systems is due to: lack of top management commitment, lack of adequate resource, lack of proper training, and lack of communication.
Defined: is the continuous process of measuring the desired features of products and services, and practices against world class standards or reputable companies considered as tops in that industry. Goods & Services, Business Processes, and Performance Measures can be benchmarked.