Chapter 8 The Operations Function
How is it made?
So… we just think of
manufacturing?
Which ingredients/ materials?
What does it look/taste like?
Oh No, there is much more…
let’s see.
The dynamics of operations
management
• “Engine” that drives the organisation – inputs are
The operation changed to outputs; value is added
Creativity and • Create something new, can have a considerable
impact on the organisation
operations
Creative
designs • Design can determine success or failure
inherent in
operations • People want to overcome problems – search for a
Technology and solution
• Innovation – technology applied for the frst time
innovation • Technology – application of existing knowledge to
methods
• Value added – diference between the cost of inputs and the
value or price of outputs
• JIT (Just in time) systems are also known as ”lean
Value and time production”
• Total Quality Management (TQM)- holistic & integrative
approach to quality
OPERATIONS
MANAGEMEN
T
What Is The Core?
Operations
Manufacturing Service Delivery
Management
Operations is the
manufacturing process
(transformation function)
The Transformation Process
Remember, we discussed the transformation process in
chapter 1
INPUTS Transformat OUTPU
ion Systems
TS
• Transforming • Macro- • Value
Resources: processes
• People • Good &
• Creativity
• Micro- Services
• Capital
• R&D
processes • Improvem
• Technology ents
• Operations
• Transformed systems • New
resources (Assembly designs
lines,
• Energy
workshops
• Materials • Competiti
etc. )
• Customers ve
The Transformation
Process
Let’s take the example of Chocolate Éclair
toffees…
TRANSFORMA
INPUT TION PROCESS OUTPUT
(value is
added)
Toffees
Butter
Cream Kettles
Condensed milk
Powdered milk Assembly lines
Glucose & liquid
sugar
Rollers etc.
The Transformation
Process
Here is another example of a transformation process – involving you! If
you think about the type of student and person you were when you
attended your frst lecture at the UFS and who you are now. There is
certainly a diference, because you have been exposed to some type of
transformation process. Now, imagine yourself at the end of your study
years – what will the output TRANSFORM
be?
ATION OUTPUT
INPUT PROCESS * An
(value is increase in
Student added) knowledge
+ * Lectures * A tertiary
* Discussions degree in
Course BCom, BSc,
Material * Assignments
BA, BEd
* Test/ Exams
Process management is inherent to
operations management
NB!!! Transformation process doesn't
only occur in a factory.
Process Overview:
Each function adds v
alue to
the business = VAL
UE CHAIN
Have a look at the picture on
this slide.
All these processes and activities
are necessary so that a loaf of
bread are available on the shelf at
the shop. All of these are
interrelated and connected – which
means, if the one process is not
managed well, the rest of the
elements will be afected.
What would happen if the wheat
had a disease which the farmer did
not control and the wheat
production is lower?
Or, what would happen if there is a
national fuel shortage and no trucks
can deliver?
See how all of these are related and
how process management is
inherent to operations
Process management is inherent to
Operations Management
Distinguishing characteristics of processes:
Market Segment & Product Range – provides
various items that are manufactured
Process Velocity - refers to ratio of total
throughput time for a product in terms of the value-
added time
The Number of Items – economies of scale,
standardisation, repeatability of process
Visibility of Output – refers to how much of the
operation’s activities the customer is exposed to
Demand Pattern – can be highly variable,
irregular, non-routine and unpredictable
Lead Time - (queue time, processing time, setup
time, waiting time, inspection time and transport
time)
Process management is
inherent to
Operations Management
All processes have diferent lead times.
Operations management always
attempts to reduce or eliminate lead
times in a process.
What type of lead times to we get
in a process?
Let’s see on the next slide…
Process management is
inherent to Operations
Management
Process
flowcharting
You might have seen
some sort of a flow
chart in your life.
Flowcharts not only
helps people to
understand a certain
process (with all the
steps and the various
role-players involved),
but is very important for
Operations
Management in
organisations as it can
be a powerful tool to
Have a look at the process flowchart below. What do you
see? Do you think that the operations function would work
well in an organisation where people are not sure what to
do when a certain event occurs?
Operations Management Performance
Objectives
Performance Objectives:
Service/ Customer care
Quality
Speed
Cost efective
Low lead times
Reduction in stock holding
Flexibility
Low cost & afordability
OM Performance Objectives
Trade-of Theory
One aspect must be played
against another
e.g. Quality versus cost
Operations management must
ensure that one aspect does
not deteriorate while others
improve = Continuous
Improvement
OM Performance Objectives
The importance and prominence of each of
the objectives is diferent from business to
business and is dependent on the overall
business strategy.
Example: Lamborghini vs Chery QQ3.
Describe their respective business strategy
with regards to the performance objectives.
OM Performance
Objectives
Another way to think about performance
objectives of an organisation, is to think
about what consumers believe certain
organisations/brands promise to ofer or
what consumers expect.
Quality. Woolworths versus Crazy Store?
Who is most likely to have “quality” as a
performance objective?
Reliability. Toyota versus GWM. Which
brand between these has established itself
as reliable?
Productivity is central to
Operations Management
Operations as CENTRAL to productivity
MORE outputs with FEWER inputs
Increase
SAME outputs with FEWER inputs d
SAME inputs with MORE outputProducti
vity
Macr
o Micro
Macro productivity vs micro
productivity
Macro-productivity Micro-productivity
A Nation’s entire Individual business productivity
production
Focus on value, efectiveness,
efciency, utilization, impact and
Sum of the productivity quality
of individual business Productivity measurement = output
enterprises income/ input expenses
Combining
Value added productivity (remember
productivity the bread example?)
Increase/ improve productivity (refer to
GDP (Gross Domestic previous slide)
Product) is used to External component of productivity
determine this. improvement – factors beyond control
Formula: Value of total of business management (remember
diferent external environments in
output of country /
Chapter 2)
total population Internal soft components of
(inputs) productivity improvement -intangible
(difcult to change e.g. training, culture
and the organisation)
Internal hard components of
STRATEGY
& DESIGN
Operations Strategy and Design
Operation
s
Strategy
Total pattern of decisions
and actions that Design
formulate the role,
objectives and activities Choose an
APPROPRIATE design
of each part of the
operation so that they
CONTRIBUTE & SUPPORT
the organisations
BUSINESS STRATEGY.
Operations design
Lean supply vs agile supply
Products and services will demand a
specifc operations design
Which one should a business use for their
products or services?
The table will assist you in determining this.
Transformation
System
Inputs Outputs
Which types of operations design are
available?
Continuous Job/Batch Project
or repetitive
Product
Standardised Diversifed Unique
Type
According to
Product
Standardised requirements of Virtually none
Flow
particular product
Materials flow
Handling depends on
determinable, Special
Materials the product= highly
systemised equipment=
Building variable and
and often HIGH COST
expensive.
automated.
Variable
Raw
because of
Materials High turnover Low turnover
production
Inventory
time.
Work-in-
Small quantities Large quantities Single Project
progress
Fixed Cost: Fixed Cost: Fixed Cost:
Production
Relatively high Relatively low Relatively high
Cost
Variable Cost: Variable Cost: Variable Cost:
Components
Low High High
Operational Strategy and Design
Relationship between operation system and
layout type
Projects and large jobs = FIXED POSITION
LAYOUT
Building a bridge
Building a stadium
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials
Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Operational Strategy and Design
Relationship between operation system and
layout design
Jobs and batch processes = PROCESS LAYOUT
Farmers harvest grapes in the vineyard, let the grapes ferment in
barrels in cellars, bottle the grapes as wine.
4 Possible Arrangements/Grouping of
Machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials
Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Operational Strategy and Design
Relationship between operation system and
layout design
Mass processes or pure continuous repetitive
processes = PRODUCT LAYOUT
Canned goods Chocolates
Baking bread – machine approach Manufacturing body lotion – employee
approach
All elements in the process are done
by machines e.g. Employees are involved in each step of
manufacturing process e.g.
mixing dough
portioning and preparation of filling of bottles
dough putting sticker on bottle
baking packaging
packaging
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials
Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Different components are manufactured at different facilities and then
assembled with a specific line method
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials
Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• E.g. Aircraft manufacturer
Operational Strategy and Design
Have you ever been in a situation where you had to make
salad, sandwiches, cofee, whatever as a part of a group of
people in a social or work setting? Most of the times it is a
bit chaotic in the beginning as no one really takes charge
and everyone is trying to fgure out how to get things done.
Most often an “efective layout” needs to be established
before things start to really work.
Aim of
=
Effective
Layout
Streamline work flow
by minimising
handling distance and
increasing facility
Operations planning and control
Who, what,
when, how
and where?
Long-,
Medium- and
Short-term
planning
Control over the
transformation
process
Operations planning and control
Demand = Capacity
Planning for future production
capacity occurs in 3 stages, namely:
Demand Forecasting
Attuning capacity of
machines/resources/facilities
Determining strategies for the
full utilisation of capacity.
Operations planning and control
Determining the
demand for products
produced by the business with a
view to accommodate
future events
Important elements of forecasts:
Timely
Accurate
I NG? Reliable
AST Significant units
EC
FOR
Written - On Paper
Cost effective
Understandable
Casual
Methods
Determine
Time-series Multi-period
cause and pattern projections
Analysis effect
Quantitative Forecast for
relationship more than one
method future period
Data NO seasonal/
manipulated trend component
mathematically is present
Single period
Qualitative pattern projections
Techniques Categor Using historical
Based on ies of data for only
one period
Judgement. Forecas
(Most recent
GUT feeling ting demand
quantities)
Leave out…
Pages 247 - 250
8.5.3 Capacity determinants
8.5.4 Fixed-capacity planning
8.5.5 Match capacity to a change in
demand
Operations planning and control
What is Operational
Scheduling?
Determines the amount of work as well as the
sequence in which work must be performed.
Keep in mind...
Deal with diferent types of
capacity/resources simultaneously
Machines and staf will have
Operations planning and
control
The Activities of Operations Scheduling
MPS (Master Production Schedule)
Indicates the planned production per time
interval (per month)
Pushing, pulling, routing, sizing & timing
through workstations
PUSH
Does NOT consider the
consumer
PULL
Pace is determined by
the consumer
Operations planning and control
Operations scheduling comprises of 4
activities:
Operations must be TIMED and
ROUTED.
Dispatching- issuing a shop order
for operation to take place.
Control or establish the status of
the shop order.
If necessary, the order may be
EXPEDITED
Operations planning and control
The Activities of Operations Scheduling
Efective Scheduling
Planningand control difer for each product or
operation
Characterised by:
Being realistic and allowing for any essential
changes
Provide enough time for all operations
(before/during/after)
Having capacity available
Allocate responsibility to workers- in order to
Operations planning and control
Activities of operations scheduling
Forward Scheduling
Backward Scheduling
• Begin at the present
• Get the date when the time and schedule
product is needed and from then forward.
use it as a starting
point • Add all the time
needed to complete
• Subtract time needed the operation, and
from due date. inform the consumer.
Leave out…
Pages 252 - 253
8.5.6.3 Gantt charts and other
techniques
8.5.7 Project management demand
network techniques
Operations Improvement
Leadership for quality
Continuous improvement through
total quality management (TQM)
Benchmarking
Measuring quality costs
Maintenance & replacement
Safety, health and environmental
management (SHE)
Good housekeeping
Operations Improvement
Leadership for
Quality
Efective and constant
communication.
Creating the right attitude
and motivation for
employees.
Identify and develop the
skills and abilities of
employees.
Operations Improvement
Operations Improvement
Continuous improvement through Total
Quality Management.
TQM is concerned with the improvement of
ALL aspects of operations performance.
‘Smartness’
Competitiveness
Flexibility
Efectiveness- Entire organisation (including staf)
Quality is important to both internal and
external customers
Operations Improvement
Continuous improvement through Total
Quality Management.
Quality dimensions:
Services Products / Goods
Reliability Performance
Responsiveness Features
Competence Reliability
Conformance
Durability
Operations Improvement
Benchmarking
Similar
processes are
Generic Comparing
Internal
compared, Process Internal Processes and
regardless of
the industry.
es Functions
Comparing
similar Function Competi Specific
competitor
functions
between al tive comparison
industry leaders
Operations Improvement
Maintenance and
Replacement
Machinery and Equipment cannot last
forever.
Consequences of defective machinery
and equipment:
Reduced production capacity
Increased production costs
Lower quality products and services
Operations Improvement
Preventive maintenance
Training of maintenance
Teams should be properly trained that any
possible failures can be dealt with efectively
Determining / predicting the possible time of
failure
Determine scientifcally
Proper records should be kept
Implementing Japanese principles
Workers accept responsibility for preventing
Operations Improvement
Safety, Health
and
Environmental
Management
Focus on well-being of the
internal customer.
Safety, health and
environment in which
Thank you for joining! Any questions?
