MODULE #1 (Operations Management (TQM))

INTRODUCTION

Production and Operations managers carry on their work in a social and economic environment. We
typically use the term production to denote the process of converting or transforming resources
materials, machines, employees, time-into goods or services. The term operations broadly describe the
set of all activities associated with the production of goods a service.

 Production
is the intentional act of creating something useful according to quantity demanded, quality
specifications, and delivery schedule.
It is the process of converting or transforming resources into products. Operations are a set of all
activities associated with the production of a product.

 A system
provides an efficient and effective framework of activities unnecessary to attain an objective.
It is a dynamic arrangement of elements; each designed to interact harmoniously with the others.
The elements of production system consist of a physical network of men, materials, machines and
processes, and an information network so planned and built as to interact harmoniously.

TWO SUB-SYSTEMS WITHIN THE PRODUCTION SYSTEM ARE EASILY IDENTIFIED:

 The physical system, which acts in the transformation of inputs to product outputs and the
information system which coordinates and controls the action of the physical system.
 The production system is characterized by:

1. A material transformation process

2. A degree of repetitiveness
3. An information system superimposed on the physical system
4. A material process flow

 The transformation process consists of inputs, activities and outputs.

 The information system includes the organizational structure, directives, reports, and a network
of mechanized or electronic servo-systems. The material process flow is dependent on the
nature of the product or service rendered by the firm.

Managing the resources needed to produce goods and service s is called Production/Operations
Management (P/OM), or simply Operations Management.

 Frederick Taylor, often called the "father of scientific management" said that
management is knowing exactly what you want men to do and then seeing to it that
they do it in the best and cheapest way.

This reflects Taylor's dominant interest in efficiency.

A more contemporary definition of management is the accomplishment of desired objectives by

establishing an environment favorable to performance by people operating in organized groups.

 Management is often described as consisting of:

1. Planning and establishing goals or objectives. It is the process of establishing guidelines and actions
should be pursued and when they should be completed in order to meet the goals of the organization.

2. Organizing input resources and staffing. It is the process of bringing together all the resources
necessary to complete a task.

3. Directing or motivating people to perform to attain those goals. It is the process of turning plans into
realities by assigning specific responsibilities to employees.

4. Controlling the performance or comparing actual progress with planned performance. It is the
process of monitoring and evaluating performances and correcting any problems as necessary.

 SCOPE OF PRODUCTION/OPERATIONS MANAGEMENT

  Production and operations management activities are not confined to the
manufacturing of products.

It is true that the production activities carried on in manufacturing companies form the backbone of our
customer society through the production of a broad array of products. But people also perform
production activities in organizations, which provide services.

The production managers aim is to create the end product in the market in the right quantity, of the
right quality, at the right time, economically.
To achieve this objective, he must involve himself in product planning, process planning, production
planning and control and quality control.
To meet the economic objective, the manager is concerned with such things as methods improvement
and work measurement, physical facilities management, materials management, and personnel
management.
 Product Planning
It is often a top management work involving all sectors of the firm, that is, the finance, marketing,
production and technical department Production performs a stellar role in the development of the
product.

 Process Planning

This naturally comes after product design. It involves determining required machines, tools, men, and
methods. The determination of the general flow of work, materials, and specific work content and
methods are essential to process planning.

 Physical Facilities Management

The production manager must consider the heavy investment on manufacturing facilities. Aside from
the fact that the cost of plant facilities can considerably deplete the firm's financial reserves, the
arrangement of these facilities in a manner that will result in the most efficient handling of materials
directly affects the final cost of the product. Plant location, engineering economics, plant layout, plant
engineering, and materials handling comprise this area of activity.

 Production Planning and Control

Production planning involves forecasting the demand for the company's product and converting the
forecast in terms of the need for the various factors of production. Sometimes this process is referred to
as loading or routing. Schedules of the factors of production are adjusted to eliminate wide fluctuations
and permit manufacturing and purchasing in economic batches.

The aspect of the production manager's work referred to as Production Control includes:

1. Scheduling the required work.

2. Giving the go signal to start and providing the necessary instructions to the different manufacturing
sectors (dispatching).
3. Checking on the progress and initiating corrective measures to ensure the effective and efficient use
of the various factors of production and the delivery of the product on the stipulated date.

 Quality Control

Quality Control is responsible for the provision of the correct product quality to the consumer,
consistent with the minimum resources used. This includes the determination and specification of
quality standards as well as maintenance.

 Methods Improvement

There are ten ways of skinning a cat, so the saying goes. There are many ways of producing a product,
but not all of these are equally attractive as and economical. Scientific management has been in
constant pursuit of a best way of doing a job. Consequently, analysts must develop alternative the
methods and choose the most efficient one. This is a never-ending search new materials, new machines,
and new knowledge evolving in explosive proportions keep the manager awake and sensitive to change.

 Work Measurement
Labor is one of the most important resources that the production manager employs. It is one of the
costs associated with the production activity. To control labor cost, one must know how much he can
expect from a worker. To answer the question, he must employ work measurement, which is the
application of techniques designed to establish the time for a qualified worker to carry out a specified
job at a defined level of performance. It is a way of establishing labor time standards.

 Materials Management

Inventories serve to decouple successive operations in the process of making a product and getting it to
the consumer. They make successive operations in the it unnecessary to gear production directly to
consumption. Too much inventory on hand or too little of it can both have a crippling effect on. Too
much the company's operation. The essential question then is: What is the level of inventory, which will
be most economical? The production manager is expected to schedule production activities so that
manufacturing can be done in economical lot sizes and so that the goods will be on hand when
needed. He is also expected to purchase raw materials and parts in economic order quantities and make
them available in time when they are needed.

 Personnel Management

This is the application of different management functions to the personnel engaged by the enterprise to
optimize their contribution toward the realization of corporate activities.

The functions related to personnel management are:

1. Manpower planning
2. Manpower procurement
3. Manpower development
4. Wage administration
5. Personal relations
6. Maintaining personnel safety, health and benefits

 Interrelationship

Production and operations managers have a great variety of activities. In order to do this, they assemble
appropriate resources and direct the use of these resources be they people, machines, or processes in
transforming materials and labor into products or services. They direct the inputs so that they produce
outputs. Successful organizations also have reporting systems, which provide current feedback
information so that the managers can see whether or not they are meeting customer demands.
Managers also have to respond to forces from the external environment, such as government
regulations, labor union demands, and local, regional, national, and world economic conditions. Keeping
in tune with current conditions is a continuous and dynamic process.

 WHY STUDY ABOUT P/OM

Questions occasionally asked by students with little business experience are; "Why do I need to know
about production and operations management, since I am an accounting (or finance or marketing or
personnel or information systems) major?" "Wouldn't my time be better spent studying more about my
specialization?" These are good questions and deserve a good response, as education is expensive and
time-consuming.

1. P/OM deals with the supply side of organizations.

All organizations exist to meet demand through their production functions. With a basic understanding
of what it takes to build and operate production system:

a. Marketing managers can better serve their markets and manage their sales forces if they
understand the capabilities and limitations of their demand-supply system.

b. Financial managers can better plan for capacity expansion and will better be able
understand the purposes of inventories before they demand their wholesale reduction.
Financial managers also can utilize modem requirements planning systems both in
determining future capital requirements through capacity planning activities, and forecasting
cash requirements to pay for new machines, labor, materials, energy, and overhead—just as
though cash were another raw material.
 c. Accountants and controllers need to learn about the capabilities of modem computer-based
production and inventory control systems. These systems can provide accounting
information, capacity utilization ratios, inventory valuation, cost of goods sold and other
information for internal control, auditing, and financial reporting.

d. Personnel managers can also gain an appreciation for the complexities of job design.

e. Computer and information system specialist will be charged with developing,

implementing, or operating such P/OM-related systems as inventory control job scheduling
and order control, customer order entry, automated bills of materials, and labor cost
reporting.

2. Understanding of P/OM and strategic business decision making is necessary since the product
and the service strategies have a large impact on the design of the production process. There
are six basic strategies which have to be addressed to for the manufacturing company to
determine it is in the right track.

a. Positioning of the production system. The production system must be flexible in such a
way that it can adapt to changing customer's demands, tastes' facts.

b. Capacity and location factors.

Capacity factors:
 Product demand forecasts over a period of time
 Cost of money (lower cost enable designs for long period) Vs penalties for
expansion, penalties for shutdowns, prices
Types of expansion:
 grassroot- building a new plant
 debottlenecking- identifying bottlenecks and relieving these bottlenecks.
Location Factors:
 Transportation costs
 Labor availability, costs trainability
 City ordinances, taxes
 Power supply and costs
 Weather conditions
 Peace and order
 Government incentives
 Real estate value
 Political stability
 Infrastructures- roads, bridges, communication systems
 Social environment
 Economic
 Technical requirement - Ex. Refineries need to be built in deep
 water to allow VLCCs
c. Product and process technology. The technology should be based on applicability,
appropriateness, produce ability and low cost.

d. Work force and job design

 Prepare detailed inventory of all process equipment which will be operated

 Determine depart mentation of operations, maintenance, engineering and
administration
 Determine manning
 Write a job description (qualifications, skills)
 Perform job evaluation (levels)
 Establish salary scales
 Recruit required personnel
e. Strategic implications of operating decisions to reduce Costs and Control Quality.

5S's

 Seiri sort proper arrangement

 Seiton systematize orderliness
 Seiso sweep cleanliness
  Seiketsu sanitize clean-up
 Shitsuke self-discipline discipline
KISS - Keep It Simple Stupid

Don't use Pl,000 approach to a P10 program

Distinguish between the forests and woods.

f. Strategies regarding supplies reduction/minimization of inventory costs.

 Avoid being at the supplier’s mercy by being flexible in sourcing your materials.

 Vertical integration backward expands operations to include source/supply

activity forward supplier expands operations to manufacturing.

3. P/OM and Social Responsibility

 High level production and operations managers are in a dual position. They try to serve
their employers, who are a company’s stockholders or legislative bodies. At the same
time, they operate in a social system and have certain obligations to society . Many of
these obligations to society are written into laws, but others in the production area, such
as trying to maintain stable employment to pay fair wages, produce quality and sate
products, to serve customers well and to maintain or increase productivity, are less
formal.

 Social obligations are rarely stable and are often quite dynamic. Recent years have seen
a shift, and the emergence of a strong consumer consciousness, particularly as it
concerns the design of products and services so that they are safe for customers to use
and so that working conditions will be safe for customers to use and so that working
conditions will be safe for employees. Besides this, environmental considerations have
also become very important.

4. P/OM and our "Productivity Crisis" Productivity is a measure of the effectiveness with which an
organization uses its resources in transforming inputs to outputs; in other words, the ratio of the
output of a production system to the input.

Major factors affecting productivity:

1. Government policy
 Integrated planning and infrastructure
 Price stability
 Tax base
 Licensing
 Small scale industries promotion
 import substitution

2. Resource endowment
 Natural resources
 Human resources
 Financial resources

3. Cultural/social values and institutions

 Attitudes of people
 Local social values

 PRODUCT SAFETY AND CONSUMER PROTECTION

 The majority of organizations provide us with goods and services which

performs as expected, are of good value and safe in use. However, there are
always some goods and services which are unsatisfactory and possibly unsafe in
certain applications.
Scenario:

People don't get their brakes fixed and then have accident from faulty brakes; they drive their cars too
fast or after drinking too much alcohol; they smoke in bed; they leave open bottles of aspirin around
children; they go away and leave electric iron turned on; people ski in unsafe ways; people misuse a
product, or use it purpose for which it was never intended, and then if it fails or injures them, they blame
the manufacturer or the server.

None of these acts of carelessness, however, excuse organizations from providing the safest product or
service that they can. In some cases, this means that cheaply made products will have to be discontinued
even if they are in demand since such products are likely to be dangerous in use.

Thus, manufacturers need to do their best to be sure that their products are safe to use, just as service
people must try to render good service.

 OPERATIONS IN THE SERVICE SECTOR

Manufactures produce a tangible product, whereas service products are often intangible. We will
define services as including repair and maintenance, government, food and lodging, transportation,
insurance, trade, financial, real estate, education, legal, medical, entertainment, and other professional
occupations.

Differences between Goods and Services:

1. Services are usually intangible (for example, your purchase of a ride in an empty airline
seat between two cities) as opposed to a tangible good.

2. Services are often produced and consumed simultaneously, there is no stored

inventory. For instance, the beauty salon produces a haircut that is "consumed"
simultaneously, or the doctor produces an operation that is "consumed" as it is
produced. We have not figured out how to inventory haircuts and appendectomies.

3. Services are often unique. Your mix of financial coverage, such as investments and
insurance policies, may not be the same as anyone else's just as the medical procedure
or a haircut produced by you is not exactly like anyone else's.

4. Services have high customer interaction. Services are often difficult to standardize,
automate, and make as efficient as we would like because customer interaction
demands uniqueness. In fact, in many cases this uniqueness is what customer is paying
for; therefore, the operations manager must ensure that the product is designed (i.e.
customized) so that it can be delivered in the required unique manner.

5. Services inconsistent product definition. Product definition may be rigorous. Services

are often knowledge-based, as in the case of educational, medical, and legal services,
and therefore hard to automate.

6. Services are frequently dispersed. Dispersion occurs because services are frequently
brought to the client/customer via a local office, a retail outlet, or even a house call.

Attributes of Goods (tangible product)

 Product can be resold.

 Product can be inventoried.
 Some aspects of quality are measurable.
 Selling is distinct from production.
 Product is transportable.
 Site of facility is important for cost.
 Often easy to automate.
 Revenue is generated primarily from the tangible product

Attributes of Services (intangible product)

  Reselling a service is unusual.
 Many services cannot be inventoried.
 Any aspects of quality are difficult to measure.
 Selling is often a part of the service.
 Provider, not product, is often transportable.
 Site of facility is important for customer contact.
 Service is often difficult to automate.
 Revenue is generated primarily from the intangible services

MODULE #2 (Operations Management (TQM))

 INTRODUCTION

There are many reasons why a domestic business operation will decide to change to some form
of international operation. These can be viewed as a continuum ranging from tangible reasons to
intangible reasons.

 REASONS TO GLOBALIZE

 TANGIBLE REASONS
 Reduce costs (labor, taxes, tariffs, etc.)
 Improve supply chain
 Provide better goods and services
 Understand market
 INTANGIBLE REASONS

 Learn to improve operations

 Attract and retain global talent
 Cultural and ethical issues
 TANGIBLE REASONS

REDUCE COSTS. Many international operations seek to take advantage of the tangible opportunities to
reduce their costs. Foreign locations with lower wages can help lower both direct and indirect costs (less
stringent government regulations on a wide variety of operation practices such as environment control,
health and safety). Opportunities to cut cost of taxes and tariffs also encourage foreign operations.

Shifting low-skilled jobs to another country has several advantages.

 The firm may reduce costs.
 Moving the lower skilled jobs to a lower cost location trees higher cost workers for more
valuable tasks.
 Reducing wage costs allows the savings to be invested in improved products and facilities at the
home location.
Availing different trade agreements.
 World Trade Organization (WTO) promotes world trade by lowering barriers to the free flow of
goods across borders.
 North American Free Trade Agreement (NAFTA) seeks to phase out all trade and tariff barriers
among Canada, USA and Mexico
 European Union (EU) reduces trade barriers among participating European nations through
standardization and a common currency, the Euro.

IMPROVE THE SUPPLY CHAIN. Locating facilities in countries where unique resources are available.
These resources may be expertise, labor, or raw material.
PROVIDE BETTER GOODS AND SERVICES. Although the characteristics of goods and services can be
objective and measurable (e.g., number of on-time deliveries), they can also be subjective and less
measurable (e.g., sensitivity to culture). We need an even better understanding of differences in culture
and the way business was handled in different countries. Improved understanding as the result of a
local presence permits firms to customize products and services to meet unique cultural needs in foreign
markets.

UNDERSTAND MARKET. Because international operations require interaction with foreign customers,
suppliers, and other competitive businesses, international firms inevitably learn about opportunities for
new products and services. Europe led the way with cell phone innovations and now the Japanese lead
with the latest cell phone fads. Knowledge of these markets not only helps firms understand where the
market is going but also helps firms diversify their customer base, add production flexibility, and
smooth the business cycle.

Another reason to go into foreign markets is the opportunity to expand the product life cycle (i.e. stages
a product goes through: Market Development; Market Growth; Market Maturity; and Market Decline) of
an existing product.

 INTANGIBLE REASONS

LEARN TO IMPROVE OPERATIONS. Learning does not take place in isolation. Firms serve themselves
and their customers well when they remain open to the free flow of ideas.

ATTRACT AND RETAIN GLOBAL TALENT. Global organizations can attract and retain better employees
offering more employment opportunities. They need people in all functional areas and areas of
expertise worldwide. Global firms can recruit and retain good employees because they provide both
greater growth opportunities and insulation against unemployment during times of economic downturn.

 DEVELOPING MISSIONS AND STRATEGIES

Managers of all companies must address and have timely answers to three central questions:

 What is the company's present situation? This pushes managers to evaluate

industry conditions and competitive pressures, the company's current performance
and market standing, its resource strengths and capabilities and its competitive
weaknesses.

 Where does the company need to go from here? This forces management to think
strategically about the direction the company should be headed in order to grow the
business and strengthen the company's market standing and financial performance.

 How should it get there? This challenges managers to craft and execute a strategy to
move the company down the chosen strategic path and achieve the targeted
outcomes.

A company's strategy is management's game plan for growing the business, staking out a market
position, attracting and pleasing customers, competing successfully, conducting operations, and
achieving targeted objectives.

 Firms achieve missions in three conceptual ways:

 Differentiation
 Cost leadership
 Response
 This means operations managers are called to deliver goods and services that are: 、

 Better, or at least different

 Cheaper
 More responsive
Operations Managers translate these strategic concepts into tangible tasks to be accomplished.

 STRATEGY MAKING, STRATEGY-EXECUTING PROCESS

DEVELOPING A STRATEGIC VISION. Top management’s views and conclusions about the company
direction and future product-customer-market-technology focus constitute a strategic vision for the
company. The core concept: A strategic vision describes the route a company intends to take in
developing and strengthening its business. It paints a picture of a company's destination and provides a
rationale for going there.

A strategic vision is different from a mission statement.

The chief concern of a strategic vision is "where are we going and why”.

A company mission statement usually deals with a company's present business scope and purpose
“who we are, what we do, and why we are here”.

Companies couch their mission in terms of making a profit. This is misguided. Profit is more correctly an
objective and a result of what a company does.

SETTING OBJECTIVES. These convert the strategic vision into specific performance targets—results and
outcomes the company's management want to achieve—and then use these objectives as yardsticks for
tracking the company's progress and performance. Well stated objectives are specific, measurable,
attainable, realistic and time bound.

Ideally, managers ought to use the objective-setting exercise as a tool for stretching an organization to
reach its full potential.

Two very distinct types of performance yardsticks are required:

 Financial performance (outcomes relating to profitably, creditworthiness, and

shareholder well-being).

 Strategic performance (outcomes that indicate a company is strengthening its

marketing standing, competitive vitality, and future business prospects).

CRAFTING A STRATEGY

This entails addressing a series of how’s:

 How to grow the business?

 How to please customers?
 How to outcompete rivals?
 How to respond to changing market conditions?
 How to manage each functional piece of the business and develop needed
organizational capabilities?
 How to achieve strategic and financial objectives?
The faster a company’s business environment in changing, the more critical the need for its managers
to be good entrepreneurs in diagnosing the direction and force of the changes under the way and in
responding with timely adjustments in strategy.

 OPTIONS IN CRAFTING A STRATEGY

 Basic competitive strategy options. (A company's first strategic option)

 OVERALL LOW-COST PROVIDER STRIVES to achieve lower overall costs than
rivals and appealing to a broad spectrum of customers usually by underpricing
rivals.

 BROAD DIFFERENTIATION seeks to differentiate the company’s products offering

from rivals in ways that will appeal to a broad spectrum of buyers. Companies
attempt to offer something unique in the industry with respect to
product/services.

 BEST-COST PROVIDER gives customers more value for the money by

incorporating good-to excellent product attributes at a lower cost than rivals;
the target is to have the lowest (best) costs and prices compared to rivals
offering products with comparable attributes.

 FOCUSED (OR MARKET NICHE) STRATEGY based on differentiation concentrates

on a narrow buyer segment and outcompeting rivals by offering niche members
customized attributes that meet their tastes and requirements better than rivals'
products.
Niche strategy focus exclusively on a highly specialized segments of the market and try to achieve a
dominant position in the Niches comes from Latin nidus, nest. It rhymes with hitch.

 Complementary strategic options (A company's second set of strategic choices)

 STRATEGIC ALLIANCES AND PARTNERSHIP these are collaborative arrangement
where two or more companies join forces to achieve mutually beneficial
strategic outcomes.

 MERGER AND ACQUISITION STRATEGIES combining the operations of two

companies via merger or acquisition, is an attractive strategy option for
achieving operating economies, strengthening the resulting company's
competences and competitiveness, and opening up avenues of new market
opportunity.

 VERTICAL INTEGRATION STRATEGIES operating across more stages of the

industry value chain. The vertical integration strategy has appeal if it significantly
strengthens a firm's competitive position.

 OUTSOURCING STRATEGIES. Outsourcing involves farming out certain value

chain activities to outside vendors. Outstanding the performance of more value
chain activities to outside suppliers and vendors has become increasingly
popular. The two big drivers behind outstanding are:

 Outsiders can often perform certain activities better or cheaper.

 Outsourcing allows a firm to focus its entire energies on those

activities that are at the center of its expertise (its core competencies)
and that are the most critical to its competitive and financial success.

 OFFENSIVE STRATEGIES. It takes successful offensive strategies to build

competitive advantage—good defensive strategies can help protect
competitive advantage but rarely are the basis for creating it.

Several types of strategic offensives:

 Offering an equally good or better product at a lower price.

 Leap frogging competitors by being the first adopter of new generation

technologies or being first to market with next generation products.

 Adopting and improving on the good ideas of other companies (rivals

or otherwise).

 Deliberately attacking those market segments where a key rival makes

a big profit.

 Attacking the competitive weakness of rivals.

 Maneuvering around competitors and concentrating on capturing

unoccupied or less contested market territory.

 Using hit-and-run tactics to grab sales and market share from

complacent or distracted rivals.

As a rule, challenging rivals on competitive grounds where they are strong is an uphill struggle. Strategic
offensives should, as a rule, be grounded in a company's competitive assets and strong points—its core
competencies, competitive capabilities, and such resource strengths as a well-known brand name, a cost
advantage in manufacturing or distribution, and a new or much-improved product.

 DEFENSIVE STRATEGIES - protecting market position and competitive advantage.

It is just as important to discern when to fortify a company's present market
position with defensive actions as it is to seize the initiative and launch strategic
offensives. Either goal can be achieved by letting challenges know the battle will
cost more than it is worth. Would be challenges can be signaled by:

 Publicly announcing management’s commitment to maintain the firm's

present market share.
  Publicly committing the company to a policy of matching competitor's
terms or prices.

 Making an occasional strong counter response to the moves of weak

competitors to enhance the firms as a tough defender.

 Choosing functional-area strategies. (A company's third set strategic choices).

A company's strategy is not complete until company managers have made strategic choices about how
the various functional parts of the business—R&D, Production, Human Resources, Sales and Marketing,
Finance, Accounting, and so on-will be managed in support of its basic competitive approach and the
other important moves being taken. In many respects, the nature of functional strategies is dictated by
the choice of competitive strategy.

 Timing a company's strategic moves in the marketplace (A company's fourth set of

strategic choices). When to make a strategic move is often critical as what move to
make.

FIRST-MOVER & FAST LEARNER. Strong R&D capabilities and new product development; to keep pace.
Being first to initiate a strategic move can have a high payoff when:

FAST-FOLLOWER. Chance to win disenchanted buyers away from first-movers if products do not live up
to buyers' expectations.

LATE-MOVER. Avoid mistakes of first-movers. Counting on all first-movers to stumble or otherwise be

easily overtaken is usually a bad bet that put a late-mover's competitive position at risk.

 IMPLEMENTING AND EXECUTING THE STRATEGY EFFICIENCY AND EFFECTIVELY

EFFICIENCY means doing things right. It entails balancing the number of resources used to achieve an
objective against what was actually accomplished. Managers must not waste scarce and costly resources.

EFFECTIVENESS means doing the right things. It entails promptly achieving a stated organizational
objective. Managers are held responsible for attaining the objectives.

Good strategy execution requires creating strong fits between strategy and organizational capabilities,
between strategy and the organization’s work climate and culture, between strategy and the reward
structure, and between strategy and internal operating systems. The stronger the fits—that is, the more
that the company’s capabilities, culture, reward structure, and internal operating systems facilities and
promote proficient strategy execution—the better the execution and the higher the company’s odds of
achieving its performance targets.

 ACHIEVING COMPETITIVE ADVANTAGE

DIFFERENTIATION. To distinguish the offerings of the organization in any way that the customer
perceives as adding value. Through experience differentiation, it engages the customer with the product
through imaginative use of the five senses so the customer "experiences" the product. Differentiation is
concerned with providing uniqueness.

 Competing the cost. Achieving maximum value as perceived by the customer.

 Competing on response. This refers to the set of values related to rapid, flexible
and reliable performance.

 Flexible response. The ability to match changes in a marketplace where

design innovations and volumes fluctuate substantially.

 Reliability of scheduling. This manifests in meaningful schedules

communicated to customers such that the customer can, in turn, rely on
them. Consequently, the competitive advantage generated through reliable
response has value to the end customer.

 Quickness. To compete based on speed in design, production and delivery.

 ISSUES IN OPERATIONS STRATEGY

 RESEARCH. It tells about effective operations management strategy.

  High product quality (relative to the competition)
 High-capacity utilization.
 High operating efficiency (the ratio of expected to actual employee productivity).
 Low investment intensity (the amount of capital required to produce a sale).
 Low direct cost per unit (relative to the competition)
 PRECONDITIONS.

Identify factors to develop effective OM strategy

 Strength and weaknesses of competitors as well as new entrants into the market,
substitute products, and commitment of suppliers and distributors.
 Current and prospective environmental, technological, legal, and economic issues.
 Product life cycle, which may dictate the limitations of operations strategy.
 Resources available within the firm and within the OM function.
 Integration of the OM strategy with the company’s strategy and other functional
areas.
 DYNAMICS
 Strategy is dynamic because it changes within the organization. All areas of the firm
are subject to change. Strategy is also dynamic because of changes in the
environment.
Self-check and Reflect Questions:

1. What are the reasons to globalize? Explain at least two (2).

2. What are the options in crafting a strategy?

3. Explain efficiency and effectiveness. Which should go first?

4. How can a firm achieve its competitive edge among competitors?

MODULE #3 (Operations Management (TQM))

 INTRODUCTION
In a going concern, products and services are developed to meet customers' needs and only if there
appears to be a market, either now or in the future, can a product or service be justifiably produced.
Good product design satisfies customers, communicates the purpose of the product or service to its
market and brings financial rewards to the business. The objective of good design, whether of products
or services, is to satisfy customers by meeting their actual and anticipated needs and expectations.

This, in turn, enhances the competitiveness of the organization. Product and service design, therefore'
can be seen as the starting and ending with the customer.

 GOODS AND SERVICES SELECTION

 PRODUCT STRATEGY OPTIONS SUPPORT COMPETITIVE ADVANTAGE

A world of options exists in the selection, definition, and design of products again based on
differentiation by offering a distinctly unique and high-quality product/services; low-cost strategy, by
designing a product/service that can be produces with a minimum cost; and rapid response, executing
the fastest and shortest time to get a product/service to market before customer tastes change and to
do so with the latest technology and innovations.

Product decisions are fundamental to an organization’s strategy and have major implications
throughout the operations functions.

 PRODUCT LIFE CYCLE AND STRATEGY

Products are born. They live and die. They are cast aside by changing society. A product life is divided
into four phases.

 Introductory phase or market development. When a new product is first brought to

market. This is work out the kinks. Because products in the introductory phase are
still being “fined-tuned” for market, as are their production techniques, they may
warrant unusual expenditures for:

 Research.

 Product development.

 Process modification and enhancement.

 Supplier development.

 Growth phase. Demand begins to accelerate and the size of the total market
expands rapidly. This is called the take off stage adjust to volume. Product design
has begun to stabilize, and effective forecasting of capacity requirements is
necessary.

 Maturity phase or market maturity. Demand levels off and grows, for the most part,
only at the replacement and new family formation rate. Turn the crank. The product
is mature, dependable in performance, reasonable priced and does not change
much from year to year.

 Decline phase or market decline. Product begins to lose customer appeal and sales
drift downward. Juggling act. Management may need to be ruthless with those
products whose life cycle is at an end.

 PRODUCT-BY-VALUE ANALYSIS

 It allows management to evaluate possible strategies for each product.

 These may include increasing cash flow (for example, increasing contribution by
raising selling price or lowering cost), increasing market penetration (improving
quality and/or reducing cost or price), or reducing costs (improving the production
process).

 The report may also tell management which product offerings should be eliminated
and which fail to justify further investment in research and development or capital
equipment.
  GENERATING NEW PRODUCT

One technique to generate new products ideas is brainstorming, technique in which a diverse group of
people share, without criticism, ideas on a particular topic. The goal is to generate an open discussion
that will yield creative ideas about possible products and product improvements.

 Understanding the customer is the premier issue in new-product development.

 Economic change brings increasing levels of affluence (prosperity) in the long run but
economic cycles and price changes in the short run.

 Sociological and demographic change may appear in such factors as decreasing family
size. This trend alters the size preference for homes, apartments, and automobiles.

 Technological change makes possible everything from hand-held computers to cellular

phones to artificial heart.

 Political/legal change brings about new trade agreements, tariffs, and government
contract requirements.

 Other changes may be brought about through market practice, professional standards,
suppliers, and distributors.

IMPORTANCE OF NEW PRODUCTS. Despite constant efforts to introduce viable new products, many
new products do not succeed. Product selection, definition, and design occur frequently—perhaps
hundreds of times for each financially successful product.

Operations managers and their organizations must be able to accept risk and tolerate failure. They
must accommodate a high volume of new product ideas while maintaining the activities to which they
are already committed.

PRODUCT DEVELOPMENT SYSTEM. An effective product strategy links product decision with cash
flows, market dynamics, product life cycle, and the organization's activities.

Sources of ideas:

 Marketing people see the need for something their customers want.

 Production people see opportunities to improve methods and processes.

 Everyone in an organization is a potential source of ideas. Quality circles—to

stimulate ideas

 Outside the company, as from its customers, or the public, or from sources
within the firing not directly responsible for new product ideas like its
employees.

STAGES IN DEVELOPING A MARKETABLE PRODUCT

1. Initiation of an idea.

2. Gathering of necessary data on the marketability of the product

3. Screening of the gathered data by the preliminary product review committee

consisting of specialist from the sales, administration, production, and design
departments.

4. Determination of immediate and ultimate marketing objectives of the product after

thorough scrutiny.
 5. Development of the product with the combined efforts of the market research,
product development, product design, and manufacturing departments.

6. Checking of the product development results and pre-testing for marketability.

7. Organizing the manufacture of the first product, prototype, or pilot project.

8. Field test of the product on its marketability.

9. Review of the design based on test results and from the point of view of economic
manufacture. This work has to be done by the product design and development
departments in complete collaboration with the production department and
manufacturing shops.

10. Standardization of the product criteria and the method of manufacturing.

VALUE ENGINEERING

 Value engineering (usually done by design engineers)

 Value analysis (usually done by the purchasing department)

Value engineering answers:

 Would another lower-cost design work as well?

 Could another less costly item fills the need?

 Would less expensive material do the job?

 On purchased items, are the vendors' prices as low as they could be for the level of
quality and delivery dated required?

Value Engineering can be divided into five phases:

1. An information phase - getting all the available facts concerning the item
being studied and answering them:

 What is it?

 What is its function or special purpose?

 Where it is used?

 What environmental conditions will it be subjected to?

 What it its frequency of use?

 What cost estimates are available?

2. Creative phase - checklist are:

 Can the design be simplified for manufacturing without impairing function

or reliability?

 Would a substitute, lower-cost material be suitable?

 Could the part be produced as a precision casting, forging, extrusion or

similar form to reduce machining costs.

 Are there any finish requirements that could be eliminated or changed?

 Would a relaxation of any tolerances result in lower manufacturing costs?

 Could lower-cost components be obtained from vendors?

 Are there any tests, qualifications, or other requirements that appear to be

unnecessary or that could be relaxed?

 Can a standard, off-the-shelf item be adapted to serve the purpose?

 3. Evaluation phase - ideas are refined.

4. Program planning - with a certain approach selected, the next step is to

develop the more promising ideas.

5. Reporting phase - when value engineers have fully developed their

recommendations, they are ready to report the results to managements, to
design and manufacturing engineers, and to others directly concerned.

 ISSUES FOR PRODUCT DESIGN

ROBUST DESIGN. This means that the product is designed so that small variations in production or
assembly do not adversely affect the product.

MODULAR DESIGN. Products designed in easily segmented components are known a modular design.
Modular designs offer flexibility to both production and marketing. The production department typically
finds modularity helpful because it makes product development, production, and subsequent changes
easier.

COMPUTER-AIDED DESIGN (CAD) Use and variety of CAD software is extensive, most of it is still used
for drafting and three- dimensional drawings. CAD software allows designers to save time and money by
shortening development cycles for virtually all products. The speed and ease with which sophisticated
designs can be manipulated, analyzes, and modified with CAD makes review of numerous options
possible before final commitments are made. The payoff is particularly significant because most
product costs are determined at the design stage.

COMPUTER-AIDED MANUFACTURING (CAM). CAM refers to the use of a specialized computer

programs to direct and control manufacturing equipment. When CAD information is translated into
instructions for CAM, the result of these two techniques is CAD/CAM.

Benefits are:

 Product quality. CAD permits the designer to investigate more alternatives,

potential problems, and dangers.

 Shorter design time A shorter design phase lowers cost and allows a more rapid
response to the market.

 Production cost reductions Reduced inventory, more efficient use of personnel

through improved scheduling, and faster implementation of design changes
lower costs.

 Database availability. Provides information for other manufacturing software

and accurate product data so everyone is operating from the same information,
resulting in dramatic cost reductions.

 New range of capabilities. CAD/CAM removes substantial detail work, allowing

designers to concentrate on the conceptual and imaginative aspects of their
tasks.

VIRTUAL REALITY. A visual form of communication in which images substitute for reality and typically
allow the user to respond interactively.
VALUE ANALYSIS. This is a review of successful products that takes place during the production
process. It is taking place while the product is being produced. Value engineering covers activities during
the design.

It is generally focuses on function, not on form. value analysis asks more fundamental questions like:

 What does it do?

 What does it cost?

 What else does the same thing?

 What does the alternative cost?

 Which is less costly?

ETHICS AND ENVIRONMENTALLY FRIENDLY DESIGNS

Goals for ethical and environmentally friendly design;

 Developing safe and more environmentally sound products.

 Minimizing waste of raw materials and energy.

 Reducing environmental liabilities.

 Increasing cost-effectiveness of complying with environmental regulations.

 Being recognized as a good corporate citizen.

Green manufacturing means sensitivity to environmental issues in product design, manufacture, and
disposal.

LEGAL AND INDUSTRY STANDARDS. Laws and industry standards can help operations managers make
ethical and socially responsible decisions to guide them in product design, manufacture/assembly, and
disassembly/disposal.

 TIME-BASED COMPETITION

This is competition based on time; rapidly developing products and moving them to market. Much of
the current competitive battlefield is focused around the speed of product to market.

JOINT VENTURES. They are combined ownership, usually between two firms, to form a new entity.

ALLIANCES. Cooperative agreements that allow firms to remain independent, but that pursue strategies
consistent with their individual missions

 DEFINING THE PRODUCT

Once new goods or services are selected for introduction, they must be defined in terms of its
functions-that is, what does it do. The product is then designed, and the firm determines how the
functions are to be achieved.

Most manufactured items as well as their components are defined by an engineering drawing that shows
the dimensions, tolerances, materials and finishes of a component. The engineering drawing will be an
item on a bill of material, a listing of the components, their description, and the quantity of each
required to make one unit of a product.

 DOCUMENTS FOR PRODUCTION

Documents:

 Assembly drawing. This is an exploded view of the product, usually via a three-
dimensional or isometric drawing. It shows in schematic form how a product is
assembled.

 Route sheet. This is a listing of the operations necessary to produce the

component with the specified in the bill of material. When route sheets include
specific methods of operations and labor standards, they are often known as
process sheets.

 Work order. This is an instruction to make a given quantity of a particular item,

usually to a given schedule.

 Engineering change notices. This is a correction or modification of an

engineering drawing or bill of material.

 Configuration management. A system by which a product planned and changing

components are accurately identified and for which control and accountability of
change are maintained.

 PRODUCT LIFE-CYCLE MANAGEMENT (PLM) This is a suite or umbrella of software programs

that attempts or ties together phases of a product design and manufacture.

 SERVICE DESIGN

 It is challenging because they often have unique characteristics.

 The customer may participate in the design process of the service, so the supplier may
have a menu of services from which the customer’s selected options.

Number of techniques can both reduce costs and enhance the product.

Design Criteria

A. Feasibility. This is the ability of an operation to produce a process, product or service. The
feasibility of the design option—can we do it?

 Do we have the skills (quality of resources)?

 Do we have the organizational capacity (quantity of resources)?

 Do we have the financial resources to cope with the option?

B. Acceptability. The attractiveness to the operation of a process, product or service. The

acceptability of the design option---do we want to do it?

 Does the option satisfy the performance criteria which the design is trying to achieve?
(These will differ or different designs.)

 Will our customers want it?

  Does the option give a satisfactory financial return?

C. Vulnerability. The risks taken by the operation in adopting a process, product or service—Do we
want to take the risks? That is,

 Do we understand the full consequences of adopting the option?

 Being pessimistic, what could go wrong if we adopt the option? What would be the
consequences of everything going wrong? (This is called the "downside risks, of an option.)

Self-check and Review Questions:

1. Explain the product life cycle.

2. What are the stages in developing a marketable product?

3. Explain Value Engineering.

4. How do Computer Aided Manufacturing help manufacturers/producers?

MODULE #4 (Operations Management (TQM))

Topic : Production Process/Automated Machine Systems

Learning Target : To identify the process of automating machine systems;

: To familiarize the different production process;

: To classify the different production processes and systems.

References (Author, Title, Pages) : Montoya, Rome Sheriff (2017), Strategic Production and
Operations Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render,
Barry (2007), An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson
Higher Education.; Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian
Perspective Evans, William and Lindsay, William (2013) Total Quality Management Ramasamy (2012)
Total Quality Management

 INTRODUCTION

Once products and services are designed, their specifications must be translated into specific
processing systems which create the product or provide the service.

For example: Manufacturing a keyboard for a new microcomputer, it is necessary to determine what
processing methods to use for making its component parts. Some may be stamped from sheet steel;
others may be die-cast from aluminum or they can be plastic parts formed by plastic injection molding.

Decisions must be made about the kinds of machines to use to perform these operations.

A process is a specific combination of machines, operators, work methods, materials, tools, and
environments factors what together convert inputs to outputs.

The choice of technology affects a firm’s ability to manufacture products that meet the
customers’ requirements and the firm’s strategic goals of quality, flexibility, dependability, and cost.

The process selected will have a long-term effect on efficiency and flexibility of production, as
well as on cost and quality of the goods produced. Therefore, much of a firm's strategy is determined at
the time of this process decision.

 FOUR PROCESS STRATEGIES

PROCESS FOCUS. This is devoted to making low-volume, high variety products in places called
“job shops". Consequently, they are also called intermittent processes.

A job shop is a small company or business that makes specific products for one customer at a time. The
unit makes each product according to customer specifications, i.e., it makes bespoke products.

REPETITIVE FOCUS. This uses modules. Modules are parts or components previously prepared, often in
a continuous process. The repetitive process is the classic assembly line.

Fast-food firms are an example of repetitive process using modules.

PRODUCT FOCUS. High volume, low-variety processes are product focus. The facilities are
organized around products. They are also called continuous processes because they have very long,
continuous production runs. A product-focused facility produces high volume and low variety.

Products such as light bulbs, rolls of paper, beer, and bolts are examples of product
process.

MASS CUSTOMIZATION FOCUS. Mass is a rapid, low-cost production of goods and services that fulfil
increasingly unique customer desires. This process is not only about variety; it is about making precisely
what the customer wants when the customer wants it economically. Achieving mass customization is a
challenge that requires sophisticated operational capabilities.

 PROCESS TECHNOLOGY

The methods and equipment used to manufacture a product or deliver a service.

HARD TECHNOLOGY involves the application of computers, sensors, robots, and other mechanical and
electronic aids.
SOFT TECHNOLOGY refers to the application of computer software and other techniques that support
manufacturing and service organizations.

 CLASSIFICATION OF PRODUCTION SYSTEMS AND PROCESSES

Firms produce either in response to customer orders or in anticipation of them. Thus, production
systems can usually be classified into one of the general categories: make-to-order and make-to-stock.
Since manufacturers of jet engines produce only in response to orders from aircraft builders, their
production systems would be classified as make-to-order. Manufacturers of radios and other small
appliances, however, build inventories for future sale, so their systems are make-to-stock. Restaurants
and self-service cafeterias also exemplify make-to-order and make-to-stock systems, respectively.

The two systems differ with respect to the variety and quantity of products made. Make-to-order
production made. Make-to-order production systems typically produce a larger variety of products in
smaller quantities than do make-to-stock production systems.

TYPES OF PROCESS MANUFACTURING SERVICE

1. CONTINUOUS FLOW Chemicals, paper, electricity generation, bottling, oil refinery, license
plate renewal

2. MASS OR ASSEMBLY LINE Automobile, package sorting and appliance distribution, dry cleaning

3. BATCH, OR INTERMITTENT Books, clothing, fast foods, course packet duplication service

4. JOB SHOP Machine tools, legal services, printing, hotel and restaurants

5. PROJECT Cruise ships, architectural plans, aircraft, tax-return preparations

Types of productions process based on the volume-variety continuum are:

Production systems maybe classified:

a. Analytical. Production by splitting raw materials into its basic components to

produce various products, usually from original material. Ex: Petroleum
refinery

b. Synthetic. Different materials of divergent characteristics are combined/mixed

to produce a product which is very different from any of the original
ingredients. Ex: Cement industry; Fertilizer industry

c. Assembly. Raw materials and various parts in different stages of completion;

all parts are quite easily distinguishable from the finished product. Ex:
Automobile industry

 PROCESS TYPES

The position of a process on the volume-variety continuum shapes its overall design and the general
approach to managing its activities.

4V’s are:

 Volume

 Variety

 Variation in Demand

 Visibility

A firm has the option of three types of process technology:

  Manual technology uses no machinery to perform manufacturing or assembly tasks.

 Mechanized technology utilizes machines that are under human control

 Automated technology uses computers to control the process.

 CHARACTERISTICS OF PRODUCTION PROCESSES

How to plan a production line?

 Product design—materials, size, shape, dimensions

 Tooling/Equipment—capacity and speed should be compatible.

 Layout/shape—will depend on time machine is used; building space

 Manning — how many work stations and people required

 Production rate—product volume per unit of time

 Balance—equal times and production rates

 Materials handling—the shorter or less distance the better; use of conveyors, by hand,
forklifts

 LINE PRODUCTION-TYPE OF MANUFACTURING PROCESS PRODUCTION

 LINE-PHYSICAL ARRANGEMENTS OF MACHINES

PROCESS ANALYSIS AND DESIGN

When analyzing and designing processes to transform resources into goods and services, we ask
question such as the following:

 Is the process designed to achieve competitive advantage in terms of differentiation,

response, or low cost?

 Does the process eliminate steps that do not add value?

 Does the process maximize customer value as perceived by the customer?

 Will the process win orders?

Tools that help us understand the complexities of process design and redesign.

 Flow diagrams. This is a schematic drawing used to analyze movement of people or

material.

 Time function mapping or process mapping. This is a flow diagram but with time
added on the horizontal axis.
 

Value-stream mapping. This helps managers understand how to add value of the flow
material and information through the production process including the supply chain.

 Process charts. They use symbols, time, and distance to provide an

objective and structured way to analyze and record the activities that
make up a process. They allow us to focus on value-added activities.

 Service blueprinting. This is a process analysis technique that lends

itself to a focus on the customer and the provider’s interaction with
customer.

SERVICE PROCESS DESIGN

Interaction with the customer often affects process performance adversely. But a service, by its very
nature, implies that some interaction and automation is needed. Recognizing that the customer’s unique
desires tend to play havoc with a process, the more the manager designs the process to accommodate
these physical requirements, the more effective and efficient the process will be.
Techniques for improving service productivity

 Separation. Structuring services so customers must go where the service is offered.

Ex. Bank customer go to a manager to open a new account; to loan officers for loans

 Self-service. Self-service so customers examine, compare, and evaluate at their own

pace

Ex. super markets and department stores; internet ordering

 Postponement. Customizing at delivery.

Ex. Customizing vans at delivery rather than production.

 Focus. Restricting the offering.

Ex. Limited menu restaurant.

 Modules. Modular selection of service.

Ex. Investment and Insurance selection

Ex pre-packaged food modules in restaurants.

 Automation. Separating services that may lead themselves to some type of

automation.

Ex. Automatic teller machines.

 Scheduling. Precise personnel scheduling.

Ex. Scheduling ticket counter personnel at 15-minute interval at airlines.

 Training. Clarifying the service options.

Ex. Investment counselor, funeral directors.

Explaining how to avoid problems.

Ex. After-Sale service/maintenance personnel.

 SELECTION OF EQUIPMENT AND TECHNOLOGY

An important attribute to look for in new equipment and process selection is flexible equipment.

 Flexibility is the ability to respond with little penalty in time, cost, or customer value.
This may mean modular, movable, even cheap equipment.

PRODUCTION TECHNOLOGY

 Machine Technology - Use of machineries.

 Automatic Identification Systems (AIS) - a system for transforming data into electronic
form. Ex. Bar codes.

 Process Control - the use of information technology to control a physical process.

 Vision Systems - using video cameras and computer technology in inspection roles.
Often used in inspection.

 Robots - a robot is a flexible machine with the ability to hold, move, or grab items. It
functions through electronic impulses that activate motors and switches.

 Automated Storage and Retrieval System (ASRS) -it is a computer-controlled

warehouses that provide for the automatic placement of parts into and from designated
places within the warehouses.

 Automated Guided Vehicle (AGV) - this is an electronically guided and controlled cart
used to move materials.
  Flexible Manufacturing System (FMS) - This is a system using an automated work cell
controlled by electronic signals from a common centralized computer facility.

 Computer-Integrated Manufacturing (CIM) – It is a manufacturing system in which CAD,

FMS, inventory control, warehousing, and shipping are integrated.

PRODUCTION LINE APPROACH TO SERVICE

Distinction between service (traditionally) and manufacturing in terms of approach to work:

 Service Manufacturing

1. Performs by people for the people/Machines tended by people.

2. Thinks humanly/Thinks technocratic (technical)

3. Field Factory

4. Intensive people/Capital intensive

5. Non-standard products/Standard products

6. Primitive and inefficient/Forward-looking and efficient

7. Free-style manner of tasks/Centralized, controlled and highly structured

8. Accomplished by people and serendipity/Technology and systems (tsamba)

9. Results in failures/Results in successes

 Computer-Integrated Manufacturing Systems (CIMS)

CIMS are being used for high-volume, highly standardized production where mass-production
technology has traditionally been employed.

Companies with CIMS experience have been able to:

a. Decrease engineering design costs by up 30%;

b. Increase productivity by 40 to 70%;

c. Increase equipment utilization by a factor of 2 to 3,

d. Reduce work-in-process and lead times by 30 to 60%; and

e. Improve quality by a factor of 3 to 4.

 ROBOTICS

ROBOT. It is a programmable machine designed to handle materials or tools in the performance of a

variety of tasks. It can be "taught" a large number of sequences of motions and operations and even to
make certain logical decisions. It can be reprogrammed and transported from one application to
another, leading to reduced labor requirements, improvements in quality, increased capacity, and more
flexibility of low-volume production equipment.

The movement is essentially either:

 Point to point

 It has instructions to stop at predetermined points, do their work, and move on

to the next point.

 Continuous-path
  The movement is where the robot arm or tool moves continuously along a
programmed path.

Robots are generally classified into four kinds:

 Manual manipulators which simply do a fixed sequence of operations.

 Programmable units which can be “taught” to repeat a fixed set of varying

sequences.

 NC robots that respond to numerical instructions from a pre-programmed disk or

computer.

 Intelligent units which can recognize objects and have some minor capability to
think for themselves.

INDUSTRIAL ROBOTS

Were first introduced in 1954; in 1969 General Motors installed the first robot for the spot-welding
automobiles.

Two (2) major components:

 Manipulator

 Wrist

 HUMAN vs. MACHINE CAPABILITIES

HUMAN：

Advantages:

 Recognize and use information creatively

 Improvise and adapt to new situations

 Reason by induction (experience from a part to the whole, from

particulars to generals)

 Make subjective (substantial) decisions

Disadvantages:

 Relatively poor short-term memories

 Cannot perform many tasks simultaneously

 Slow in response

 Difficulty in maintaining consistency in performance

MACHINES:

Advantages:

 Precise, accurate, and fast response

 Highly reliable for routine tasks

 Can perform tasks beyond human capabilities

 Fast deductive reasoning. Conclusions follow from the premises

  Store and process large amounts of information

Disadvantages:

 No creative capability

 Decision making limited by programmed instructions

 Cannot adapt to unexpected situations

 Limited perpetual capability.

Self-check and Reflect Review Questions:

1. What are the four process strategies? Explain each.

2. Differentiate human and machine capabilities

MODULE #5 (Operations Management (TQM))

Topic : Human Resources and Job Design

Learning Target : To discuss the advantage of the human resource strategy; and

: To explain the five ingredients in job design that is consistent with job enlargement, job enrichment,
and job empowerment.

References (Author, Title, Pages): Montoya, Rome Sheriff (2017), Strategic Production and Operations
Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render, Barry (2007),
An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson Higher Education.;
Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian Perspective Evans, William
and Lindsay, William (2013) Total Quality Management Ramasamy (2012) Total Quality Management

 HUMAN RESOURCE STRATEGY FOR COMPETITIVE ADVANTAGE

Objective is to manage labor and design jobs so people are effectively and efficiently utilized. We want to
ensure that people:

 Are sufficiently utilized within the constraints of other operations management

decisions.

 Have a reasonable quality of work life in an atmosphere of mutual commitment and

trust. By reasonable quality of work, we mean a job that is not only reasonably safe and
for which the pay is equitable but also achieves an appropriate level of both physical and
psychological requirements.

The three district decision areas of human resource strategy are:

1. Labor planning.

2. Job design.

3. Labor standards

LABOR PLANNING. This is a means of determining staffing policies dealing with employment work
stability and work schedule.

 Employment-stability policies

1. Follow demand exactly. Following demand exactly keeps direct labor costs tied to
production but incurs other costs.
 a. hiring and termination costs

b. unemployment insurance

c. premium wages to entice personnel to accept unstable employment.

2. Hold employment constant. Holding employment levels constant maintains a

trained work-force and keeps hiring, termination, and unemployment costs to a
minimum.

 Work schedules

 A currently popular variation from a standard work schedule (five 8-hour days) is
flextime.

 This allows employees within limits, to determine their own schedules.

 Another option is the flexible workweek. This plan often calls for fewer but
longer days, such as four 10-hr days or as in the case of light assembly plants,
12-hour shifts.

 Another option is shorter days rather than longer days. This plan often moves
employees to part-time status. Such an option is particularly attractive in service
industries, where staffing for peak loads in necessary. Banks and restaurants
often hire part-time workers.

 Job classifications and work rules

Many organizations have strict job classifications and work rules that specify who can do what, when
they can do it, and under what conditions they can do it, often as a result of union pressure. These job
classifications and work rules restrict employee flexibility on the job, which in turn reduces the flexibility
of the operations function. Yet part of an operations manager’s task is to manage the unexpected.
Therefore, the more flexibility a firm has when staffing and establishing work schedules, the more
efficient and responsive it can be.

JOB DESIGN. This specifies the tasks that constitute a job for an individual or a group. We examine seven
(7) components.

1. LABOR SPECIALIZATION OR JOB SPECIALIZATION. This is the division

of labor into unique tasks. This is accomplished by: 、

a. Development of dexterity and faster learning by the employee because of repetition.

b. Less loss of time because the employee would not be changing jobs or tools.

c. Development of specialized too is and the reduction of investment because each

employee has only a few tools needed for a particular job.

d. Paying exactly the wage needed for the particular skill.

2. JOB EXPANSION. Driving this effort is the theory that variety makes
the job "better” and that the employee therefore enjoys a higher
quality if work life.

a. Job enlargement. This is the grouping of a variety of tasks about the same skill level;
horizontal expansion.

b. Job rotation. It is a system in which an employee is moved from one specialized job to
another.

c. Job enrichment. It’s a method of giving an employee more responsibility that includes
some of the planning and control necessary for job accomplishment. This can be thought
of as vertical expansion as opposed to job enlargement, which is horizontal.
 3. SELF-DIRECTED LEARNS. This is a group of empowered individuals
working together to reach a common goal . Teams are effective
primarily because they can easily provide employee empowerment,
ensure core job characteristics, and easily satisfy many of the
psychological needs of individual team members.

4. MOTIVATION AND INCENTIVE SYSTEMS.

 Bonus. A monetary award usually in cash or stock options given to management.

 Profit sharing. A system providing some portion of any profit for distribution to the
employees.

 Gain sharing. A variation of profit-sharing which rewards employees for improvement

made an organization’s performance.

 Incentive system. An employee award system based on individual or group productivity.

Production incentives often require employees or crews to produce at or above a
predetermined standard.

 Knowledge-based pay systems. A portion of the employee’s pay depends on

demonstrated knowledge or skills of the employee; knowledge-based pay systems are
designed to reward employees for the enlarged scope of their jobs.

5. ERGONOMICS AND WORK METHODS

 Ergonomics means the study of work. (Ergon is the Greek word for work). Male and
female adults come in different configurations. Therefore, the design of tools and the
workplace depends on the study of people to determine what they can and cannot do.
The design of the workplace can make the job easier or impossible. Additionally, we
now have the ability, through the use of computer modeling to analyze human
motions and efforts.

 Operator input to machine. Operator response to machine, hand tools, pedals, levers,
or buttons, needs to be evaluated.

 Feedback to operators is provided by sight, sound, or feel; it should not be left to

chance.

 The work environment. The physical environment in which employees work affects
their performance, safety, and quality of work life.

 Method Analysis focuses on how a task is accomplished. Using knowledge from

ergonomics and methods analysis, methods engineers are charged with ensuring that
quality and quant its standards are achieved efficiently and safely. Methods analysis
and related techniques are useful in office environments as well as in its factory.

6. THE VISUAL WORKPLACE. This uses low-cost visual devices to share

information quickly and accurately. It uses a variety of visual
communication techniques to rapidly communicate information to
stakeholders. Visual signals are:

 Present the big picture helping employees understand the link between their
day-to-day activities and the organization's overall performance.

 Performance. Details of quality, accidents, service levels, delivery performance

costs and such traditional variables as attendance and tardiness can all be
presented, often in the form of statistical process control (SPC) charts. Kanban.

 Housekeeping. Use of shadow boards and foot printing, labeling and color-
coded signs and lights.

Example is the use of andon, call light that signals problems.

Andon is a system that quickly alerts operators about a problem on the line.

7. ETHICS AND THE WORK ENVIRONMENT.

Management’s role is to educate the employees, even when employees think it is "macho" not to wear
safety equipment. Management’s role is to define the necessary equipment, work rules and work
environment and to enforce those requirements.

 LABOR STANDARDS

These are the amount of time required to perform a job or part of a job. Only when accurate labor
standards exist can management know want its labor requirements are, what its costs should be and
what constitutes a fair day's work.

Self-check and Review Questions:

1. Why are people issues so important in operations managements?

2. How do operations managers contribute to human resource strategy?

3. What is the role of recruitment and development?

MODULE #6 (Operations Management (TQM))

Topic : Managing Quality

Learning Target : To state how to specify and manage quality and reliability;

: To distinguish testing and inspection in quality management;

: To analyze the practical stages in manufacturing.

: To understand Total Quality Management and its relationship with continuous improvement.

References (Author, Title, Pages): Montoya, Rome Sheriff (2017), Strategic Production and Operations
Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render, Barry (2007),
An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson Higher Education.;
Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian Perspective Evans, William
and Lindsay, William (2013) Total Quality Management Ramasamy (2012) Total Quality Management

 SPECIFYING QUALITY

 "Quality" to most people, seems to mean "high quality.”

 The more quality the better.

But do people really want the highest possible quality of everything? The answer has to be NO, because
COSTS are always a part of the picture.

 "Quality" is a hard concept to pin down. Yet a factory has to make products of
specified quality.

Why not always try to make the best?

  People don’t all want the very best of these things-at least not to the extent of being
willing to pay the cost of high quality. What most of us usually want is the best
quality we can get for the money we are willing to spend.

As a rule, the higher the quality, the higher the cost. Worse, even, cost usually go up faster than
quality. A little more quality usually costs a good bit more money.

 A product's or a service's quality is embodied in its characteristics. The

organization's managers decide these characteristics and then they have their
designers try to develop products and services which incorporate these
characteristics.

 QUALITY CONTROL AND RELIABILITY

QUALITY CONTROL. In production involves not only the finished product but also the whole production
process. Quality control is a method of checking manufacturing operations to determine how well
these operations adhere to blueprint specifications on dimensions, tolerances, surface finish and the
life, as well as processing, testing, and manufacturing.

RELIABILITY. The probability that a product will perform without failure when operated under
reasonable conditions through its normal life. Refers to the development of the correct part for the
conditions to which that part will be subjected.

Sticking to a blueprint specification does not guarantee reliability.

The reliability program is divided into four phases:

1. DESIGN. Should take into account the intended function of the part, the
environmental conditions, the stresses to which the product will be
subjected, and the financial capabilities of the customer.

2. TESTING. It is performed on parts and assemblies in laboratories and

workshops to defects or failures. Additional testing is also performed on
normal parts produced according to improve designs.

3. PRODUCTION

4. SERVICES. It takes place if the customer spots weaknesses hissed in design

and testing. For this reason, it is extremely important that a manufacturer
establish fast and efficient feedback on field failures so that corrective
possible time.

 INSPECTION

 It is the primary quality control implementation activity on a day-to-day basis.

 Inspecting products while they are being made also avoids further work on already
defective units.

 The primary objective of inspection should be prevention—not remedy. The object

is to stop making defective items (or stop inferior service).

 TESTING AND INSPECTION

 Testing is a specific kind of inspection. Inspection, a broader term than testing,

includes all activities, among them is testing, to see if the products are up to
standards.
If to inspect an item, a person has to do more than just look at it or measure it, it is usually called testing
rather than inspecting. Tests maybe be performance or operating tests.

 METHODS OF CHECKING PRODUCT QUALITY IN MANUFACTURING

INSPECTION

 Visual

 Judgmental

 Broad Ex. Garments

 Tasting Ex. Foods

 Deals with properties termed as attributes…inherent characteristics (visual). When an

inspector looks at a product a say “It passes” or “It is a reject “ ， he is dealing with
"attributes."

TESTING

 Specific

 Quantified

 Involves physical and chemical properties (min and max ranges/limits).

TYPES OF MATERIALS CHECKED FOR QUALITY IN MANUFACTURING

 Raw or purchased materials.

 Work-in-process

 Finished products

INSPECTING PURCHASED ITEMS

 As a rule, all purchased items should be inspected to see that they are of the right kind
and quantity and so that damaged or unsatisfactory items can be returned to the
supplier and new ones obtained quickly.

 As a rule, everything purchased should be inspected, but this rule can be relaxed for
materials coming from vendors whose final inspection has proved to be reliable. A
company can usually bypass incoming inspection where materials have already passed a
rigid inspection in the vendor's plant.

INSPECTING WORK IN PROCESS

 Final inspection, unlike most in process inspection, often includes a performance test.
  HOW MANY SAMPLES TO CHECK

 Will depend on the economic balance between costs or testing vs. risks involved in
taking less samples than necessary.

Ex. There are items which need to be 100% tested like electric wires.

 Probability analysis is important because in most cases inspection can and should be
done only by sampling. One hundred percent inspection— looking at every item—is
often too costly. 100% inspection can't be used in tests which destroy the items tested.

Bulk materials must also be inspected by sampling. Because of inspection costs, samples are usually used
for many items which otherwise could be 100% inspected.

 WHERE TO INSPECT

Inspection can take place either at the job or in a central inspection crib.

FLOOR INSPECTION / AT THE JOB. Sometimes called “patrolling," “roving,” or “first piece" inspection
where inspectors move from machine to machine to approve setups before production starts and to
catch defective work before a large quantity has been produced.

Floor inspection saves extra handling of materials to move faster through the plant by eliminating their
need to be hauled to and from central inspection.

One disadvantage floor inspection is that workers and machines have to wait for the inspector before
they can continue.

CENTRAL INSPECTION. Materials are trucked to a central inspection crib, where they are left to be
inspected.

 This inspection saves inspector’s time because they never have to wait
or jobs to inspect.

 The work can be done by less costly inspectors who work under close
supervision and are away from the pressure of the people whose work
they inspect.

 Special equipment can be used to good advantage at the central

inspection.

 Materials handling and transportation costs are higher because all the
trip that materials make to central inspection cribs. And there are more
delays, so materials move more slowly through the plant which
increases work in progress (WIP) and its associated holding costs.

 INSPECTION SHORTCOMINGS

 The inspector must decide whether the item passes or not, and the decision is
important because they are the ones that enforce standards if they pass products which
should be rejected or reject products which should pass.

 They are really making a new and unofficial set of quality specification standards for
the company. Care should be taken to be sure that inspectors do not substitute their
own standards for those set by engineering.

 Inspectors are human beings; all of them make errors once in a while. In central
inspection, the work is often repetitious and monotonous. Fatigue may cause the
inspector to miss some of the bad products.
 REDUCING INSPECTION ACTIVITY

 Repetitive manual jobs, including inspection, can often be mechanized.

 Sometimes it is necessary to know a part’s exact size but only that it is

between two limits and not beyond. This lets inspection time be reduced by
using go/no-go gauges which incorporate the two dimensions but show no
measurements.

 Improve the machine or set them properly so that it does not get out of
adjustment. All that is necessary is to inspect the first few pieces, and then
another piece occasionally to assure that the machine is still in adjustment.

 Install a sense of pride of workmanship in each worker and, within reason, let
them be responsible for checking their own work and reporting problems as
they occur.

 PROCESS CONTROL

 The inspection of the work turned out by these machines now is usually done by
microcomputers which analyses hundreds of performances check every minute and then
adjust the machines if it needs it.

 SELECTIVE INSPECTION

 This is sorting inspected parts by size so that over- and undersize parts can be
matched. This is important where parts have to fit together and work as mating
parts. Instead of rejecting or reworking parts just over or just under the
tolerance limits, they are put into piles by size for use with mating parts having
offsetting discrepancies in size.

 THREE REASONS WHY THE EMPHASIS ON QUALITY

 More satisfied customers — customers are happy.

 Promotes repeat and increased business—customers buy again

 Contributes to firm's profitability which translate to job security and makes firm
profitable (more volumes and less wastage)

 BASIC QUALITY PROCESSES

 Quality planning

 Control

 Improvement

 QUALITY CIRCLE

 It is a small group of workers from the same working unit or work area who meet
regularly to voluntarily identify and solve problems within their areas of responsibility.

 SMALL GROUP. A circle of 5 is most preferred to ensure active participation of

all members in all activities. However, circles may have 3 to 7 members.
  SAME WORKING UNIT OR WORK AREA. If circle members work in the same unit
or area, they are expected to encounter problems common to them all.

 VOLUNTARILY IDENTIFY AND SOLVE PROBLEMS. It is the circle members

themselves who will select and solve the problem they have chosen at their own
pace.

 AREAS OF RESPONSIBILITY. Problems selected must be within their areas of

responsibility to avoid conflicts with employees from other units and to ensure
improvements are first done in "their backyard.”

HISTORY OF QUALITY CIRCLES. Many years ago, Japanese-made products were always the cheapest and
the flimsiest of all. This is because of scarcity of natural resources. Raw materials are usually imported
from other countries and therefore costly. Now their reputation in such areas as cameras is very high.
One of the reasons for this change is the development in Japan of the "QC circle’, concept.

Dr. Kaoru Ishikawa-Originated the fishbone diagram. It is a cause-and-effect diagram which is a simple
graphical tool for organizing a collection of ideas.

 ISO 9000

 This refers to a series of quality management and assurance standards which define
the elements needed to achieve a quality system.

 It tries to define sound quality management system so that products are within
acceptable quality standards.

WHAT PROMPTED ISO 9000. Suppliers had a hard time to justify and explain how products were
manufactured to convince buyers. This is time consuming experience.

BENEFITS OF ISO 9000

 Saves money.
  Psychological effect on customers that firm and its product are of acceptable
quality.

 Efforts towards work simplification and efficiency makes worker more satisfied.
Workers know that they are doing their job satisfactorily.

 QUALITY SYSTEMS ON SERVICES

Read this!

In the October 5, 2002 issue of the Manila Bulletin, there was an interesting article, "New
Methodologies, Systems Key to Improve RP Education". Quality education in the country remains to be
an elusive dream. The list of woes that continue to plague Philippine education is both long and all-too-
familiar: (a) lack of classrooms, (b) lack of facilities, (c) luck of teachers, (d) lack of a faculty development
program, (e) inadequate pay for teacher and other education personnel, and (f) a host of other
inadequacies.

There is a keen and heightening call for renewal within the education community. According to Henry
Tenedero, President of Center for Learning and Teaching Styles Philippines (CLTS), the poor quality of
education in the country goes beyond these shortcomings. Improving it lies heavily on constructing new
educational methodologies, tools and systems that can lead to a holistic learning (balanced, whole,
organic and functional) What is more significant is for the educators to take time and extra effort to lead
students through the rest of the learning process that ensures more lasting knowledge. Many students
are lost because teachers do not understand how students learn. The way teachers teach is not
compatible with the learning style of those they are teaching.

Learning style banks on the fad that each person has a unique learning style that students learn at
different paces, some faster and some slower than others.

 TOTAL QUALITY MANAGEMENT (TQM)

 This refers to a quality emphasis that encompasses the entire organization,

from supplier to customer.

 TQM stresses a commitment by management to have a continuing

companywide drive toward excellence in all aspects of products and services
that are important to customer.

Quality expert W. Edwards Deming’s Fourteen (14) Points for Implementing Quality Improvements

1. Create consistency of purpose.

2. Lead to promote change.

3. Build quality into the product, top depending on inspections to catch

problems.

4. Build long-term relationships based on performance instead awarding

business on the basis of price.

5. Continuously improve product, quality, and service.

6. Start training.

7. Emphasize leadership.

8. Drive out fear.

9. Break down barriers between departments.

10. Stop haranguing (lecturing) workers.

11. Support, help, and improve.

12. Remove barriers to pride in work.

 13. Institute a vigorous program of education and self-improvement.

14. Put everybody in the company to work on the transformation.

 SEVEN CONCEPTS FOR AN EFFECTIVE TQM

1. CONTINUOUS IMPROVEMENT. Plan-Do-Check-Act (PDCA) Process, Walter Shewhart

developed this as his version of continuous improvement. The Japanese used the
word Kaizen to describe the ongoing process of unending improvement-the setting
and achieving of ever-higher goals.

2. SIX SIGMA. This popularized by Motorola (developed in the 1980’s in response to

customer complaints about its products and to stiff competition).

Six Sigma is a comprehensive system-a strategy, a discipline, and a set of tools-for achieving-and
sustaining business success.

It is a strategy because it focuses on total customer satisfaction.

It is a discipline because it follows the formal Six Sigma Improvement Model known as DMAIC five-step
process.

Defines critical outputs and identifies gaps for improvement.

Measures the work and collects data for processes that can help close the gaps.

Analyzes the data.

Improves by modifying or redesigning existing procedures.

Controls the new process to make sure performance levels are maintained.

3. EMPLOYEE EMPOWERMENT. Enlarging employee jobs so that the added

responsibility is moved to the lowest level possible in the organization.

4. BENCHMARKING. This involves selecting a demonstrated standard of products,

services, cost, or products that represent the very best performance for processes or
activities very similar to your own. The idea is to develop a target at which to shoot
and then to develop a standard or benchmark against them to compare your
performance.

The steps are:

 Determine what to benchmark.

 Form a benchmark team.

 Identify benchmarking partners.

 Collect and analyze benchmarking information.

 Take action to match or exceed the benchmark.

5. JUST-IN-TIME (JIT). This system is designed to produce or deliver goods just as are
they needed.

6. TAGUCHI CONCEPTS. Geniche Taguchi has provided three concepts aimed at

improving both product and process quality.

a. Quality robustness. Taguchi's idea is to remove the effects of adverse

conditions instead of removing the causes. He suggests that removing
 effects is often cheaper than removing the causes and more effective in
producing a robust product.

b. Quality loss function. This identifies all cost connected with poor quality and
shows how these cost increase as product moves away from being exactly
what the customer wants. These costs include not only customer
dissatisfaction but also warranty and service costs, internal inspection,
repair, a scrap costs; and costs that can best be described as costs to society.

c. Target-oriented quality. A philosophy of continuous improvements to bring

the product exactly on target. It strives to keep the product at desired
specification, producing more (and better) units near the target.

 PHILOSOPHY/CONTRIBUTION OF TQM LEADERS

 W. EDWARDS DEMING

 He insisted
management accept
responsibility for
building good systems.

 The employee cannot

produce products that
on average exceed the
quality of what the
process is
capable of producing.

 JOSEPH M JURAN

 A pioneer in teaching the Japanese how to

improve quality.

 Believes strongly in top-management

commitment, support, and involvement in the
quality effort.

 He is also a believer in teams that

continually seek to raise quality standards.
  ARMAND FEIGENBAUM.

 His 1961 book, Total Quality Control, laid out 40 steps to quality
improvement process.

 He viewed quality not as a set of tools but as a total field that

integrated the process of a company. His work in how
people learn from each other’s successes led to the
field of cross-functional teamwork.

 PHILIP B. CROSBY.

 “Quality is free” was Crosby’s attention-getting

book published in 1979.

 He believed that the traditional trade-off

between the cost of improving quality and
the cost of poor quality, the cost of poor
quality is understated.

 Crosby coined the term zero defects and

stated,

"There is absolutely no reason for having errors or defects in any product or

service".

Case Analysis： Use the Case Analysis Format

Being cheap is our specialty

Hon Hai Precision Industry is sometimes called the biggest company you have never heard of. Yet it is
one of the world's largest contract electronics manufacturers who produce many of the world's
computer, consumer electronics and communications products for customers such as Apple, Dell, Nokia
and Sony. Since it was founded in 1974, the company's growth has been phenomenal. It is now the
world's biggest contract manufacturer for the electronics industry. Why? Because it can make these
products cheaper than its rivals. In fact, the company is known for having an obsession with cutting its
costs. Unlike some of its rivals, it has no imposing headquarters. The company is run from a five-storey
concrete factory in a grimy suburb of Taipei and its annual meeting is held in the staff canteen. ‘Doing
anything else would be spending your money. Cheap is our specialty’, says chairman Terry Gown, and he
is regarded as having made Hon Hai the most effective company in his industry at controlling costs. The
extra business this has brought has enabled the company to achieve economies of scale above those of
its competitors. It has also expanded into making more of the components that go into its products than
its competitors. Perhaps most significantly, Hon Hai has moved much of its manufacturing into China and
other low-cost areas with plants in South-East Asia, Eastern Europe and Latin America. In China alone, it
employs 100,000 people, and with wages rates as low as one-fifth of those in Taiwan many of Hon Hai’s
competitors have also shifted their production into China.

Self-check and Review Questions:

1. Quality is a term that means different things to different people. Expound.

2. Choose 3 from seven concepts for an effective TQM. Discuss your choices.

3. What are the practical stages in manufacturing at which it is best to check quality?

MODULE #7 (Operations Management (TQM))

Topic : Layout Strategies

Learning Target : To understand the importance of Layout Strategies;

: To identify the different types of Layout Strategies and distinguish its Advantages and Disadvantages

References (Author, Title, Pages) : Montoya, Rome Sheriff (2017), Strategic Production and
Operations Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render,
Barry (2007), An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson
Higher Education.; Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian
Perspective Evans, William and Lindsay, William (2013) Total Quality Management Ramasamy (2012)
Total Quality Management

 IMPORTANCE OF LAYOUT

 Layout is one of the key decisions that determines the long-run efficiency or operations.

 It establishes an organization’s competitive priorities in regard to capacity, process,

flexibility, and costs, as well as quality of work life, customer contact, and image.

 An effective layout can help the organization achieve a strategy that supports
differentiation, low cost, or response.

Layout design must consider how to achieve the following:

 Higher utilization of space, equipment and people.

 Improved flow of information, materials, or people.

 Improved employee morale and safer working conditions.

 Improved customer/client interaction.

 Flexibility - whatever the layout is now, it will need to change.

 TYPES OF LAYOUTS

OFFICE LAYOUT. It positions workers, their

equipment, and spaces/offices to provide for
comfort, safety, and movement of information.

Desk crammed together in dusters are called islands.

Islands are arranged in long rows; managers, sit at
the ends of the rows with subordinates in full view.

RETAIL LAYOUT. It allocates shelf space and

response to customer behavior services
capes. The physical surroundings in which a
service takes place, and how they affect
customers and employees.

Three elements to be considered are：

 a. Ambient conditions, which are background characteristics such as lighting, sound, smell, and
temperature.

b. Spatial layout and functionality, which involve customer direction, angle, and shelf spacing, and
product grouping.

c. Signs, symbols, and

artifacts, which are
characteristics of building
design that carry social
significance (such as
carpeted areas of a
department store that
encourage shoppers to
slow down and browse).

WAREHOUSE LAYOUT. It addresses trade-offs between space and material handling. The objective is to
find the optimum trade-off between handling cost and costs associated with warehouse space.
Consequently, management’s task is to maximize utilization of the total “cube” of the warehouse—that
utilize its full volume while maintaining low material handling costs.

Cross-docking. This means to avoid placing materials or supplies in storage by processing them as they
are received.

Random Stocking. This is used in warehousing to locate stock wherever there is an open space.
Computerized random stocking systems often include the following tasks:

a. Maintaining a list of "open" locations.

b. Maintaining accurate records of existing inventory and its locations.

 c. Sequencing items on orders to minimize the travel time required to “pick”
orders.

d. Combining orders to reduce picking time.

e. Assigning certain items or classes of items, such as high-usage items, to

particular warehouse areas so that the total distance traveled within the
warehouse is minimized.

Customizing. This uses warehousing to add value to the product through component modification,
repair, labeling, and packaging.

FIXED-POSITION LAYOUT. It addresses the layout requirements of large, bulky projects such as ships
and buildings. The project remains in one place and workers and equipment come to that one work
area. Examples of this type of project are a ship, a highway, a bridge, a house, and an operating table in
an operating room of a hospital.

PROCESS-ORIENTED LAYOUT. It can simultaneously handle a wide variety of products or services. This
is the traditional way to support differentiation strategy. A big advantage is its flexibility in or
equipment and labor assignments. The disadvantages come from the general-purpose use of
equipment.

Orders take more time to move through the system because of difficult scheduling, changing setups, and
unique material handling.

WORK-CELL LAYOUT. This arranges

machinery and equipment to focus on
production (also called "job shop," or
intermittent production). This reorganizes
people and machines that would
ordinarily be dispersed in various departments into a group so that they can focus in making single
product or group of related products.

REPETITIVE AND PRODUCT-ORIENTED LAYOUT. This seeks the best personnel and machine utilization in
repetitive continuous production. Layouts are organized around products or families of similar high-
volume, low-variety of products.

Case Analysis： Use the Case Study format

Giordano

With a vision that explicitly states its ambition to be 'the best and the biggest world brand in apparel
retailing’ Giordano is setting its sights high. Yet it is me company that changed the rules of clothes
retailing in the fast- growing market around Hong Kong, China, Malaysia and Singapore, so industry
experts take its ambitions seriously. Before Giordano, up-market shops sold high -quality products and
gave good service. Cheaper clothes were piled high and sold by sales assistants more concerned with
taking the cash than smiling at customers. Jimmy Lai, founder and Chief Executive of Giordano Holdings,
changed all that. He saw that unpredictable quality and low levels of service offered an opportunity in
the casual clothes market. Why could not value and service, together with low prices, generate better
profits? His methods were radical. Overnight he raised the wages of his salespeople by between 30 and
40 per cent, all employees were told they would receive at least 60 hours of training a year and new staff
would be allocated a 'big brother’ or 'big sister’ from among experienced staff to help them develop
their service quality skills. Even more startling by the standards of his competitors, Mr. Lai brought in a
'no-questions-asked' exchange policy irrespective of how long ago the garment had been purchased.
Staff were trained to talk to customers and seek their opinion on products and the type of service they
would like. This information would be immediately fed back to the company's designers for
incorporation into their new products. How Giordano achieved the highest sales per square metre of
almost any retailer in the region and its founding operations principles are summarized in its 'QKISS' list.

 Quality - do things right.

 Knowledge - update experience and share knowledge

 Innovation - think 'outside the box'.

 Simplicity - less is more.

 Service - exceed customers' expectations.

Self-check and Review Questions:

1. What is layout?

2. What are the basic layout types used in operations?

3. What type of layout should an operation choose?

4. What is layout design trying to achieve?

5. How should each basic layout type be designed in detail?

MODULE #8 (Operations Management (TQM))

Topic : The Location Strategy

Learning Target: To know the importance of Location Strategies;

: To identify the different types of Location Strategies;

: To distinguish the different methods of Locating Strategies

References (Author, Title, Pages) : Montoya, Rome Sheriff (2017), Strategic Production and
Operations Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render,
Barry (2007), An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson
Higher Education.; Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian
Perspective Evans, William and Lindsay, William (2013) Total Quality Management Ramasamy (2012)
Total Quality Management

 THE STRATEGIC IMPORTANCE OF LOCATION

 Location has a major impact on the overall risk and profit of the company. Companies
make location decisions relatively infrequently, usually because demand has outgrown
the current plant's capacity or because of changes in labor productivity, exchange rates,
costs, or local attitudes.

 Companies may also relocate their manufacturing or service facilities because of shifts in
demographics and customer demands.

Location options include:

 Expanding an existing facility instead of moving.

 Maintaining current sites while adding another facility elsewhere, or

 Closing the existing facility and moving to another location.

The location decision often depends on the type of business. For industrial location decisions, the
strategy is usually minimizing costs, although innovation and creative may also be critical.

LOCATION AND COSTS. Location is such a significant cost driver. Location often has the power to make
(or break) a company’s strategy. Location decisions based on a low-cost strategy require careful
consideration.

LOCATION AND INNOVATION. When creativity, innovation, and research and development investments
are critical to the operations strategy the location criteria may change from a focus on a cost.

When innovation is the focus, four attributes seem to affect overall competitiveness as well as
innovation:
 1. The presence of high-quality and specialized inputs such as scientific and
technical talent.

2. An environment that encourages investment and intense local rivalry.

3. Pressure and insight gained from a sophisticated local market.

4. Local presence of related and supporting industries.

 FACTORS THAT AFFECT LOCATION DECISIONS

One approach to selecting a country is to identify what the parent organization believes are Critical
Success Factors (CSFs) needed to achieve competitive advantage (globalization).

SITE DECISION

 Site size and cost

 Air, rail, highway, waterways systems

 Zoning restrictions

 Proximity of services/supplies needed

 Environmental impact issues

REGION/COMMUNITY DECISION

 Corporate desires

 Attractiveness of region (culture, taxes, climate, etc.)

 Labor availability, costs, attitudes toward unions

 Cost and availability of utilities

 Government incentives and fiscal policies

 Proximity to raw materials and customers

 Environmental regulations of state and town

 Land/construction costs

COUNTRY DECISION

 Political risks, government rules, attitudes, incentives

 Cultural and economic issues

 Location of markets

 Labor talent, attitudes, productivity, costs

 Availability of supplies, communications, energy

 Exchange rates and currency risks

Besides globalization, a number of other factors affects the location decision.

LABOR COST/ PRODUCTIVITY (₱ COST/ UNIT). Labor cost per unit is sometimes called the labor content
of the product.

EXCHANGE RATES AND CURRENCY RISK. Unfavorable exchange rates may negate any savings.

COSTS
  TANGIBLE COSTS. costs that are readily identifiable and precisely measured.
Includes utilities, labor, material, taxes, depreciation, and other costs that the
accounting department and management can identify.

Such costs as transportation of raw materials, transportation of finished goods, and site construction are
all factored into the overall cost of a location.

 INTANGIBLE COSTS. Are less easily quantified and include quality of education,
public transportation facilities, community attitudes toward the industry and the
company, and the quality and attitude of prospective employees.

They also include of quality-of-life variables, such as climate and sports teams that may influence
personnel recruiting.

ETHICAL ISSUES. To what extent do companies owe long-term allegiance to a particular country or state
or town if they are losing money—or if the firm can make greater profits elsewhere? Is it ethical for
developed countries to locate plants in underdeveloped countries where sweatshops (small
manufacturing establishment employing workers under unfair and unsanitary conditions) and child labor
are commonly used? Where low wages and poor working conditions are the norm?

ATTITUDES. Attitudes of national, state, and local governments toward private and intellectual property,
zoning, pollution, and employment stability may be in a flux.

Government attitudes at the time a decision is made may not be lasting ones. Moreover, management
may find that these attitudes can be influenced by their own leadership.

Worker attitudes may also differ from country to country, region to region, and small town to city.

PROXIMITY TO MARKETS. Manufacturing firms find it useful to be close to customers since when
transporting finished goods is expensive and difficult (perhaps because they are bulky, heavy, or fragile).
In addition, with the trend toward just-in-time production, suppliers want to relocate near users to
speed deliveries.

Firms locate near their raw materials und suppliers because of:

 Perishability

 Transportation costs

 Bulk

PROXIMITY TO COMPETITORS (CLUSTERING). Clustering is the location of competing companies near

each other, often because of a critical mass of information, talent, venture capital, or natural resources.

Examples: Fast-food chains’ sites (McDo, KFC, Jollibee, Pizza Hut are situated within 1 mile or less of one
another because they stimulate food sales and high traffic flows. Theme Parks (Disney World, Universal
Studios and Sea World) are located in Orlando because the place is a hot spot for entertainment, warm
weather, tourists, and inexpensive labor.

 METHODS OF EVALUATING LOCATION ALTERNATIVES

THE FACTOR-RATING METHOD. This instills objectivity into the process of identifying hard-to-evaluate
costs.

Steps are:

1. Develop a list of relevant factors called critical success factors (CSF).

2. Assign a weight to each factor called critical success factors (CSF).

3. Develop a scale for each factor (for example, 1 to 10 or 1 to 100 points).

4. Have management score by weights for each factor, using the scale in step 3.

5. Multiply the score by the weights for each factor and total the score for each location.

6. Make a recommendation based on the maximum point score the results of quantitative
approaches as well.

LOCATIONAL BREAK-EVEN ANALYSIS. It is the use of cost-volume analysis to make an economic

comparison of location alternatives. By identifying fixed and variable costs and graphing them for each
location, we can determine which one provides the lowest costs.

Steps are:

1. Determine the fixed and variable cost for each location.

2. Plot the costs for each location, with costs on the vertical axis of the
graph and annual volume on the horizontal axis.

3. Select the location that has the lowest total cost for the expected

production volume.

Let us assume that the expected sales volume as estimated by a market research team is 95 Tracktors.
CENTER-OF-GRAVITY METHOD. This is a mathematical technique used for finding location of a
distribution center that will minimize distribution casts. This method takes into account the location of
markets, the volume of goods shipped to these markets, and the shipping costs in finding the best
location for a distribution center.

Operations Management for Competitive

Advantage
Chase – Aquilano – Jacobs / chap009tn.ppt (live.com)
TRANSPORTATION MODEL. The
objective is to determine the best pattern of shipments from several points of supply (sources) to several
points of demand (destinations) so as to minimize total production and transportation costs.

 Linear Programming (LP) technique can be used to solve this type of problem, more
benefit special-purpose algorithms have been developed for the transportation
application. The transportation model finds an initial solution and then makes a step-by-
step improvement until an optimal solution is reached.
(250 * 3) + (50 * 1) + (300 * 6) + (100 * 5) + (300 * 3) + (200 * 2) = 4400

According to North West Corner method, (O1, D1) has to be the starting point i.e., the north-west corner
of the table. Each and every value in the cell is considered as the cost per transportation.

 SERVICE LOCATION STRATEGY

 While the focus in industrial-sector location analysis is on minimizing costs, the focus
in the service sector is on maximizing revenues. This is because manufacturing firms
find that costs tend to vary substantially among locations, while service firms find their
location often has more impact on revenue than costs. Therefore, for the service firm, a
specific location often influences revenue more than it does cost. This mean that the
location focus for service forms should be on determining the volume of business and
revenue.

There are eight major components of volume and revenue for the service firm:

1. Purchasing power of the customer-drawing area.

2. Service and image compatibility with demographics of the customer-

drawing area.

3. Competition in the area.

4. Quality of the competition.

5. Uniqueness of the firm's and competitors' locations.

6. Physical qualities of the facilities and neighboring businesses.

7. Operating policies of the firm.

8. Quality of management.

Location may determine up to 10% of the total cost of an industrial firm. Location is also a critical
element in determining revenue for the service, retail, or professional firm.

For service, retail, and professional organizations, analysis is typically made of a variety of variables
including purchasing power of a drawing area, competition, advertising and promotion, physical qualities
of the location, and operating policies of the organization.

Case Analysis: Use the Case Analysis Format

Improvement at Heineken

The improvement approach of Heineken's Zoeterwoude facility was described in Chapter 18. Although
this description emphasized issues such as target setting and use of techniques, of equal or more
importance in making a success of the initiative was the way improvement teams were empowered,
organized and motivated. In fact, before this improvement initiative, the company had started a 'cultural
change’ programme. ‘Its aim', according to Wilbert Raaijmakers, the Brewery Director, 'was to move
away a command-and- control situation and evolve towards a more team-oriented organization.’
Fundamental to this was a programme to improve the skills and knowledge of individual operators
through special training programmes. Nevertheless, the improvement initiative exposed a number of
challenges. For example, the improvement team discovered that it was easier to motivate people to
work on improvements when the demand on the plant clearly exceeded its capacity. What was more
difficult was to keep them focused when the pressures of keeping up production levels were lower, such
as during the winter season.
In an attempt to overcome this, communication was improved so that staff were kept fully informed of
future production levels and the upcoming schedule of training and maintenance activities that were
planned during slumps in demand. The lesson that the improvement team learnt was that it is difficult to
convince people of the necessity for change if they are not aware of the underlying reason for it.
Notwithstanding these efforts it soon became evident that some groups were more ready to make
changes than others. Some staff much preferred to stick with their traditional methods rather than
explore how these could be improved. Similarly, some team leaders were more skilled at encouraging
change than others. Many staff needed coaching and reassurance as well as more formal training on how
to take ownership of problems and focus on achieving results in line with targets. Also, it was found that
setting improvement targets in a step-by-step series of milestones could help to maintain the
momentum of motivation.

During the improvement initiative, Heineken staff worked closely with a group of consultants (Celerant
Consulting). Towards the end of the initiative, as is common in such improvement projects, the
consultants gradually reduced their involvement to allow Heineken staff to take over control of the
initiative. At this point there was a dip in the momentum of the improvement project. It needed the
appointment of a special coordinator within the company to ‘monitor, secure and audit’ the various
activities included in the project before it regained its momentum. Yet it did regain its momentum and,
looking back over the experience, Heineken see one of the most significant outcomes from the initiative
as its success in bringing home to every person in the company the realization that improvement is an
ongoing process.

Self-Review and Reflect Questions

1. While the focus in industrial-sector location analysis is on minimizing costs,

the focus in the service sector is on maximizing revenues. Support the
statement by doing research.
MODULE #9 (Operations Management (TQM))

Topic : Aggregate Planning

Learning Target: To identify and differentiate Aggregate Planning and Aggregate Scheduling;

: To point out the different methods of Aggregate Planning and Yield Management.

References (Author, Title, Pages): Montoya, Rome Sheriff (2017), Strategic Production and Operations
Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render, Barry (2007),
An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson Higher Education.;
Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian Perspective Evans, William
and Lindsay, William (2013) Total Quality Management Ramasamy (2012) Total Quality Management

 AGGREGATE PLANNING OR AGGREGATE SCHEDULING

 It is concerned with determining the quantity and timing of production for the
intermediate future, often from 3 to 18 months ahead.

 Operations managers try to determine the best way to meet forecasted demand by
adjusting production rates, labor levels, inventory levels, overtime work, subcontracting
rates, and other controllable variables.

 Usually, the objective of aggregate planning is to minimize cost over the planning
period. However, other strategic issues may be more important than low cost. These
strategies may be to smoothen employment level, to drive down inventory levels, or to
meet a high level of service.

 For manufacturers, the aggregate schedule ties the firm's strategic goals to production
plans, but for service organizations, the aggregate schedule ties strategic goals to
workforce schedules.

 THE PLANNING PROCESS

OPERATIONS MANAGERS, SUPERVISORS, FOREMEN

Short-range plans (up to 3 months)

 Job assignments

 Ordering

 Job scheduling

 Dispatching
  Overtime

 Part-time help

OPERATIONS MANAGERS

Intermediate-range plans (3 to 8 months)

 Sales planning

 Production planning and budgeting

 Setting employment, inventory, subcontracting levels

 Analyzing operating plans

TOP EXECUTIVES

Long-range plans (over one year)

 Research & Development

 New product plans

 Capital investments

 Facility location/expansion

 AGGREGATE PLANNING STRATEGIES

When generating an aggregate plan, the operations manager must answer several questions:

 Should inventories be used to absorb changes in demand during the planning period?

 Should changes be accommodated by varying the size of the workforce?

 Should part-timers be used, or should overtime and idle time absorb fluctuations?

 Should subcontractors be used on fluctuating orders so a stable workforce can be

maintained?

 Should prices of other factors be changed to influence demand?

CAPACITY OPTIONS

 Changing inventory levels. This applies mainly to production, not service, operations.

Advantage: Changes in human resources are gradual or no abrupt production changes.

 Disadvantage: Inventory holding costs may increase. Shortages may result in lost sales.

 Varying workforce size by hiring or layoffs. This is used where size of labor pool is large.

Advantage: Avoids the costs of other alternatives.

 Disadvantage: Hiring, layoff, and training costs may be significant.

  Varying production rates through overtime or idle time. This allows flexibility within the
aggregate plan.

Advantage: Matches seasonal fluctuations without hiring/training costs.

 Disadvantage: Overtime premium; tired workers; may not meet demand.

 Subcontracting. This applies mainly in production settings.

Advantage: Permits flexibility and smoothing of the firm's output.

 Disadvantage: Loss of quality control; reduced profits; loss of future business. It risks opening
the client's door to a competitor. It is often hard to find the perfect subcontract supplier, one who always
delivers the quality product on time.

 Using part-time workers. This is good for unskilled jobs in areas with large temporary labor
pools. This practice is common in restaurants, retail stores, and supermarkets.

Advantage: Is less costly and more flexible than full-time workers.

 Disadvantage: High mover/training costs; quality suffers; scheduling becomes difficult.

DEMAND OPTIONS

 Influencing demand. This creates marketing ideas. Overbooking used in some businesses.
When demand is low, a company can try to increase demand through advertising,
promotion, personal selling, and price cuts. However even special advertising, promotions,
selling, and pricing are not always able to balance demand with production capacity.

Advantage: Tries to use excess capacity. Discounts draw new customers.

 Disadvantage: Uncertainty in demand. Hard to match demand to supply exactly.

 Back ordering during high-demand periods. Many companies back order. Back orders are
orders for goods or services that a firm accepts but is unable (either on purpose or by
chance) to fill at the moment. If customers are willing to wait without loss of their goodwill
or order, back ordering is a possible strategy. Many firms back order, but the approach often
results in lost sales.

Advantage: May avoid overtime. Keeps capacity constant.

 Disadvantage: Custom must be willing to wait, but goodwill is lost.

 Counter seasonal product and service mixing. Risky finding products or services with
opposite demand patterns. Examples include companies that make both furnaces and air
conditioners or lawn mowers and snow blowers.

Advantage: Fully utilizes resources; allows stable workforce.

 Disadvantage: May require skills or equipment outside firm's areas of expertise.

MIXING OPTIONS TO DEVELOP A PLAN

 Chase strategy. It sets production equal of forecasted demand . The operations manager can
vary workforce levels by hiring or laying off. Can vary production by means of overtime, idle
time, part-time employees, or subcontracting.
This is a lean production strategy, saving on costs until the demand – the order – is placed. Inventory
costs are low, and the cost of goods for products sold is kept to a minimum and for a shorter length of
time.

Many service organizations favor the chase strategy because the inventory option is difficult, or
impossible to adopt industries that have moved toward a chase strategy include education, hospitality
and construction.

 Level strategy. This is an aggregate plan in which daily production is uniform from period to
period. It maintains a constant output rate, production rate, or workforce level over the
planning horizon. Let the finished-goods inventory go up or down to buffer the difference
between production and demand. Find alternative work for employees.

Their philosophy is that stable workforce leads to a better-quality product, less turnover and
absenteeism, and more employee commitment to corporate goals. Other hidden savings include
employees who are more experienced, easier scheduling and supervision, and fewer dramatic start-ups,
and shutdowns. Level scheduling works well when demand is reasonably stable.

 AGGREGATE PLANNING SERVICES

 Close scheduling of labor-hours to assure quick response to customer demand.

 Some form of on-call labor resource that can be added or deleted to meet unexpected
demand.

 Flexibility of individual worker skills that permits reallocation of available labor.

 Individual worker flexibility in rate of output or hours of work to meet expanded

demand.

These options may deem demanding, but they are not unusual in-service industries, in which labor is
the primary aggregate planning vehicle.

For instance:

 Excess capacity is used to provide study and planning time by real estate and auto
salespersons.

 Police and fire departments have provisions for calling off-duty Personnel for major
emergencies. Where the emergency is extended, police or fire personnel may work
longer hours and extra shifts.

 When business is unexpectedly light, restaurants and retail stores send personnel home
early.

 Supermarket stock clerk/work cash registers when checkout lines become too lengthy.

 Experienced waitresses increase their pace and efficiency of service as crowds of

customers arrive.

 YIELD MANAGEMENT (REVENUE)

This is the aggregate planning process of allocating resources to customers at prices that maximize
yield or revenue. Organizations that have perishable inventory, such as airlines, hotels, car rental
agencies, cruise lines, even electrical utilities, have the following shared characteristics that make yield
management of interest:

 Service or product can be sold in advance of consumption.

  Demand fluctuates.

 Capacity is relatively fixed.

 Demand can be segmented.

 Variable costs are low and fixed costs are high.

Yield management involves strategic control of inventory to sell the right product to the right customer
at the right time for the right price.

To make yield management work, the company needs to manage three issues:

 Multiple pricing structures must be feasible and appear logical (and preferably fare) to the
customers. Such justification may take various forms, for example, first-class scam on an
airline or the preferred starling time at a golf club.

 Forecasts of the use and duration of the use. How many economy seats should be
available? How much will customers pay for a room with an ocean view?

 Changes in demand. This means managing the increased use as more capacity is sold. It
also means dealing with issues chat occur because the pricing structure may not seem
logical and fair to all customers. Finally, it means managing new issues, such as overbooking
because the forecast is not perfect.

Aggregate planning provides companies with a necessary weapon to help capture market shares in the
global economy.

The aggregate plan provides both manufacturing and service firms the ability to respond to changing
customer demands while still producing at low-cost and high-quality levels.

Self-check and Review Questions:

1. Why aggregate planning is necessary?

2. How aggregate planning process works in production?

3. How do you choose the best aggregate plan strategy?

MODULE #10 (Operations Management (TQM))

Topic : Material Requirement Planning (MRP)

Enterprise Resource Planning (ERP)

Just-in-Time and Lean Production Systems

Essentials of Project Management Maintenance/Reliability

Learning Target : To understand the basic components of MRP and ERP;

: To discover the strategic importance of Scheduling Strategy; Sequencing Rules and constraint’s theory.

: To identify the basics of Just-in-Time and Lean Production Systems and Project Management

References (Author, Title, Pages) : Montoya, Rome Sheriff (2017), Strategic Production and
Operations Management. Unlimited Books Library Services & Publishing Inc.; Heizer, Jay and Render,
Barry (2007), An Introduction to Operations Management, 8th Edition. (Philippine Edition). Pearson
Higher Education.; Chuong, S. C. and Stevenson, W. (2010) Operations Management: An Asian
Perspective Evans, William and Lindsay, William (2013) Total Quality Management Ramasamy (2012)
Total Quality Management

 ENTERPRISE RESOURCE PLANNING (ERP)

 Enterprise Resource Planning is a term originally derived from Manufacturing Resource

Planning (MRP ll) that followed Material Requirements Planning (MRP). MRP evolved
into ERP when "routings” became a major part of the software architecture and a
company's capacity planning activity also became a part of the standard software
activity.

 ERP software can aid in the control of many business activities, including sales,
marketing, delivery, billing production, inventory management, quality management,
and human resource management.

 ERP systems saw a large boost in sales in the 1990s as companies faced the Y2K problem
in their legacy systems. Many companies took this opportunity to replace their legacy
information systems with ERP systems. This rapid growth in sales was followed by a
 slump in 1999, at which time most companies had already implemented their Y2K
solution.

 ERPs are cross-functional and enterprise wide. All functional departments that are
involved in operations or production are integrated in one system. In addition to
manufacturing, warehousing, logistics, and information technology, this would include
accounting, human resources, marketing and strategic management.

 ERP II, a term coined in the early 2000s, is often used to describe what would be the
next generation of ERP software. This new generation of software is web-based, and
allowed both internal employees, and external resources such as suppliers and
customers' real-time access to the data stored within the system. ERP II is also different
in that the software can be made to fit the business, instead of the business being made
to fit the ERP software.

 THE STRATEGIC IMPORTANCE OF SHORT-TERM SCHEDULING

 Effective scheduling means faster movement of goods and services through great facility.
This means greater use of assets and hence greater capacity per dollar invested, which,
in turn, lower cost.

 Added capacity, faster throughput, and the related flexibility mean better customer
service through faster delivery.

 Good scheduling also contributes to realistic commitments and hence dependable

delivery.

 SCHEDULING ISSUES

 Scheduling deals with the timing of operations.

 A schedule decision begins with capacity planning, which involves total facility and
equipment resources available.

 Capacity plans are usually annual or quarterly as new equipment and facilities are
purchased or discarded. Aggregate planning makes decisions regarding the use of
Facilities, inventory； people, and outside contractors.

 Aggregate plans are typically monthly, and the resources are allocated in terms of an
aggregate measure such as total units, tons, or shop hours.

 The master schedule breaks down the aggregate plan and develops a schedule for
specific products or product lines for each week.

Short-term schedules then translate capacity decisions, aggregate (intermediate) planning, and master
scheduling into job sequences and specific assignments of personnel, materials, and machinery. We
describe the narrow issue of scheduling goods and services in the short run (that is, matching daily or
hourly requirements to specific personnel and equipment).

Two significant factors in achieving this allocation and prioritizing are:

1. The type of scheduling, forward or backward

2. The criteria for priorities

FORWARD AND BACKWARD SCHEDULING

FORWARD SCHEDULING. It starts the schedule as soon as the job requirements are known. It is usually
designed to produce a schedule that can be accomplished even if it means not meeting the due date. In
many instances, it causes a build-up of work-in-process inventory.

BACKWARD SCHEDULING. It begins with the due date, scheduling the final operation first. Steps in the
job are then scheduled, one at a time, in reverse order. It is used in many manufacturing environment,
as well as service environments such as catering a banquet or scheduling surgery. In practice, a
combination of forward and backward scheduling is often used to find a reasonable tradeoff between
what can be achieve and customer due dates.

SCHEDULING CRITERIA

 Minimize completion time. This criterion is evaluated by determining the

average completion time per job.

 Maximize utilization. This is evaluated by determining the percent of the time

the facility is utilized.

 Minimize the work-in-process (WiP) inventory. This is evaluated by determining

the average number jobs in the system. The relationship between the number of
jobs in the system and WIP inventory will be high. Therefore, the fewer the
number of jobs that are in the system, the lower the inventory.

 Minimize customer waiting time. This is evaluated by determining the average

number of late days.

Given these considerations the objective of scheduling is to optimize the use of resources so that
production objectives are met.

 SCHEDULING PROCESS-FOCUSED FACILITIES

 These are also known as intermittent or job-shop facilities.

 These are high-variety, low-volume systems commonly found in manufacturing and

service organizations these are production systems in which products are made to
order.

 Items made under this system usually differ considerably in terms of materials used,
order of processing, processing of requirements, time of processing, and setup
requirements. Because of these differences, scheduling can be complex.

 LOADING JOBS

 Loading means the assignment of jobs to work or processing centers. Operations

managers assign jobs to work centers so that costs, idle time, or completion times are
kept to a minimum.

ORIENTED TO CAPACITY via a technique known as input-output control. This is a system that allows
operations personnel to manage facility work flows by tracking work added to a work center and its work
completed. If the work is arriving faster than it is being processed, the facility is overloaded, and a
backlog develops.
Overloading causes crowding in the facility, leading to inefficiencies and quality problems. It the work is
arriving at a slower rate than jobs are being performed, the facility results in idle capacity and wasted
resources.

Two approaches used for loading:

GANTT CHARTS. These are visual aids that are useful in loading and scheduling. The name is derived
from Henry Gantt who developed them in the late 1800s.

The Gantt load chart has a major limitation: It does not account for production variability such as
unexpected breakdowns or human errors that require reworking a job. Consequently, the chart must
also be updated regularly to account for new jobs and revised time estimates.

A Gantt schedule chart used to monitor jobs in progress. It indicates which jobs are on schedule and
which are ahead of or behind schedule.

ASSIGNMENT METHOD (HUNGARIAN METHOD). This involves assigning tasks or jobs to resources. This
is a special class of linear programming models.

 SEQUENCING JOBS

 This determines the order in which jobs should be done at each work center.

 Scheduling provides a basis for assigning jobs to work centers.

 Loading is a capacity-control technique that highlights overloads and underloads.

 Sequencing (also referred to as dispatching) specifies the order in which jobs should be
done at each center.

 Priority rules tor dispatching jobs are:

 FCFS: First Come, First Served. The first job to arrive at a work center is
processed first.

 SPT: Shortest Processing Time. The shortest jobs are handled first and
completed.

 EDD: Earliest Due Date. The job with the earliest due date is selected first.

 LPT: Longest Processing Time. The longer, bigger jobs are often very important
and are selected first.

 SEQUENCING RULES

CRITICAL RATIO. This is a sequencing rule that is an index number computed by dividing the time
remaining until due date by the work time remaining.

CR = Time raining / Workdays remaining

= (Due date – Today’s date) / Work (lead) time remaining

SEQUENCING N JOBS ON TWO MACHINES: JOHNSON’S RULE. This is an approach that minimize
processing time for sequencing a group of jobs through two work centers while minimizing total idle
time in the work centers.
Steps:

1. All jobs are to be listed, and the time that each requires on a machine is to be
shown.

2. Select the job with the shortest activity time. If the shortest time lies with the
first machine, the job is scheduled first. If the shortest time lies with the second
machine, schedule the job last. Ties in activity times can be broken arbitrarily.

3. Once a job is scheduled, eliminate it.

4. Apply steps 2 and 3 to the remaining jobs, working toward the center of the
sequence.

Limitations of Rule-Based Dispatching Systems

 Scheduling is dynamic; therefore, rules need to be revised to adjust to changes

in orders, process, equipment, product mix, and so forth

 Rules do not look upstream or downstream, idle resources and bottleneck

resources in other departments may not be recognized.

 Rules do not look beyond due dates. For instance, two orders may have the
same due date. One order involves restocking a distributor and the other is a
custom order that will shut down the customer's factory if not completed. Both
have many the same due date, but clearly the custom order is more important.

 FINITE CAPACITY SCHEDULING (FCS)

 This is a computerized short-term scheduling that overcomes the disadvantages of

rule-based systems by providing the user with graphical interactive computing.

 FCS allows the scheduler to make schedule changes based on up-to-the-minute

information.

FCS allows delivery needs to be balanced against efficiency, and according to some predefined rules and
based on today's orders.

 THEORY OF CONSTRAINTS

 That body of knowledge that deals with anything that limits an organization's ability to
achieve its goals.

Recognizing and managing through a five-step process is the basis of the theory of constraints.

1. Identify the constraints.

2. Develop a plan for overcoming the identified constraints.

3. Focus resources on accomplishing step B.

4. Reduce the effects of the constraints by off-loading work or by expanding capacity. Make
sure that the constraints are recognized by all those who can have impact on them.

5. Once one set of constraint is overcome, go back to step A and identify new constraints.

BOTTLENECK work are constraints that limit the output of production. Several techniques for dealing
with the bottleneck are:
  Increasing capacity of constraint. This may require a capital investment or more people
and may take a while to implement.

 Ensuring that well-trained and cross-trained employees are available to ensure full
operation and maintenance of the work center causing the constraint.

 Developing alternative routings, processing procedures, or subcontractors.

 Moving inspections and tests to a position just before the bottleneck. This approach has
the advantage of rejecting any potential defects before they enter the bottleneck.

 Scheduling throughput to match the capacity of the bottleneck. This may mean
scheduling less work at the work centers supplying the bottleneck.

Throughput is the number of units that pass through a process during a period of time.

DRUM, BUFFER, ROPE

This is another idea from the theory of constraints.

 Drum is the beat of the system. It provides the schedule-the pace of production.

 Buffer is the resource, usually inventory, and necessary to keep the constraints operating
at capacity.

 Rope provides the synchronization necessary to pull the units through the system. The
rope can be thought of as Kanban signals. Kanban is the Japanese word for card that has
come to mean "signal". A Kanban system moves parts through production via a “pull”
from a signal. The card is the authorization for the next container of material to be
produced. Typically, a Kanban signal exists for each container of items to be obtained. An
order for the container is then initiated by each Kanban and "pulled" from the producing
department or supplier. A sequence of Kanban’s “pulls” the material through the plant.

 SCHEDULING SERVICES

Scheduling service systems differ from scheduling manufacturing systems in several ways:

 In manufacturing, the scheduling emphasis is on machines and materials; in services, it is

on staffing levels. Inventories can help smooth demand in manufacturers, but many service
systems do not maintain inventories.

 Services are labor-intensive, and the demand for this labor can be highly variable.

 Legal consideration, such as wage and hour laws and union contracts that limit hours
worked per shift, week, or month, constrain scheduling decisions.

 Because services usually schedule people rather than material, behavioral, social, seniority,
and status issues are more important and can complicate scheduling.

SCHEDULING SERVICE EMPLOYEES WITH CYCLICAL SCHEDULING

A number of techniques and algorithms exist for scheduling service-sector employees. Managers, trying
to set timely and efficient schedule that keeps personnel happy, can spend substantial time each month.
One approach that is both workable yet simple is cyclical scheduling. Here the objective focuses on
developing a schedule with the minimum number of workers. In these cases, each employee is assigned
to a shift and has time-off.
  JUST IN TIME AND LEAN PRODUCTON SYSTEMS

TOYOTA PRODUCTION SYSTEM (TPS)

The Toyota Production System is built on two main principles:

"Just-In-Time” production and “Jidoka”

Underlying this management philosophy and the entire Toyota production process is the concept that
“Good Thinking Means Good Product."

The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota that
comprises its management philosophy and practices. The TPS organizes manufacturing and logistics for
the automobile manufacturer including interaction with suppliers and customers.

The system is a major precursor of the more generic “Lean manufacturing”. Taiichi Ohno, Shigeo Shingo
and Eiji Toyoda developed the system between 1948 and 1975.

Originally called “Just in Time Production”, it builds on the approach created by the founder of Toyota,
Sakichi Toyoda, his son Kiichiro Toyoda, and the engineer Taiichi Ohno. The founders of Toyota drew
heavily on the work of W. Edwards Deming and the writings of Henry Ford. When these men came to the
United States to observe the assembly line and mass production that had made Ford rich, they were
unimpressed. While shopping in a supermarket they observed the simple idea of an automatic drink re
supplier; when the customer wants a drink, he takes one, and another replaces it. The principles
underlying the TPS are embodied in The Toyota Way.

JUST-IN-TIME. It refers to the manufacturing and conveyance of only what is needed, when it is needed,
and in the amount needed."

It is built upon three basic principles:

1. The Pull System

2. Continuous Flow Processing

3. Take time

PULL PRODUCTION. To reduce inventory holding costs and lead times, Toyota developed the pull
production method wherein the quantity of work performed at each stage of the process is dictated
solely by demand for materials from the immediate next stage. The Kanban scheme coordinates the flow
of small containers of materials between stages. This is where the term Just-In-Time (JIT) originated.

CONTINUOUS FLOW PROCESSING: Input operations, output and rate of flow are fairly uniform. Use of
highly, specialized tools, equipment and materials-handling equipment.

Examples are oil refineries, mining, toys and appliance manufacturing

TAKE TIME: "Take-Time" is the time which should be taken to produce a component on one vehicle. This
timing mechanism is based on the monthly production schedule. Daily total operating time is figured on
the basis of all machinery operating at 100% efficiency during regular working hours. The take time
allows us to produce many parts of many different types for use in vehicles on the production
schedule and to supply those parts to each process on the assembly line at the proper time. This keeps
production on schedule and permits flexible response to change in sales.

Straight Time Work lime (Seconds)

Take Time = ---------------------------------------------------------------------------------------

Required Number of Production Based on Demand

 THE FOCUS OF TOYOTA PRODUCTION SYSTEM

TPS in Toyota is primarily concerned with making a profit, and satisfying the customer with the highest
possible quality at the lowest cost in the shortest lead-time, while developing the talents and skills of its
workforce through rigorous improvement routines and problem-solving disciplines.

This stated aim is mixed in with the twin production principles of Just in Time (make and deliver the
right part, right amount, at the right time), and Jidoka (build in quality at the process), as well as the
notion of continuous improvement by standardization and elimination of waste in all operations to
improve quality, cost, productivity, lead-time, safety, morale and other metrics as needed.

Jidoka (Humanizing the interface between operator and machine)

Jidoka helps prevent the passing of defects, helps identify and correct problem areas using localization
and isolation, and makes it possible to “build” quality at the production process.

The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to
eliminate waste (muda).

The most significant effects on process value delivery are achieved by designing a process capable of
delivering the required results smoothly; by designing out "mura” (inconsistency). It is also crucial to
ensure that the process is as flexible as necessary without stress or "muri" (overburden) since this
generates "muda" (waste). Finally, the tactical improvements of waste reduction or the elimination of
"muda" (waste) are very valuable.

There are seven kinds of “mud” (waste) that are addressed in the TPS

1. Over-production

2. Motion (of operator or machine)

3. Waiting (of operator or machine)

4. Conveyance

5. Processing itself

6. Inventory (raw material)

7. Correction (rework and scrap)

The 5s refer to the five dimensions of workplace optimization.

 1. Seiri - Sort Proper arrangement

2. Seiton - Systematize/Set in order Orderliness

3. Seiso - Sweep/Shine Cleanliness

4. Seiketsu - Sanitize/Standardize Clean up

5. Shitsuke - Self-discipline/Sustain Discipline

Self-check and Review Questions:

1. What is ERP?

2. Why are short-term scheduling strategic?

3. What are the main principles of Toyota Production System? Discuss.