Operations Management

Kiran J Mathew
Asst Professor
SCMS Cochin School of Business
Lean Management
• CONTEXT
• Value-added (VA) Activities
• An activity is classified as value-added as long as the customer is willing to pay for that activity. In a manufacturing system, carrying
inventory is not value-added as it does not concern the customer if the organization carries inventory or not. On the other hand,
activities pertaining to the core manufacturing process are considered as value-added. Similarly, having an inspection department
check the incoming or outgoing quality level is a non-value-added activity from a customer’s perspective.
• Non-value-added (NVA) Activities
• All those activities for which the customer may not want to pay are classified as non-value-added activities. These include having a
poor plant layout resulting in large distances to be travelled by the production items; increasing the WIP inventory; having an army
of progress chasers, production planning, and control personnel; having a large number of indirect labour; expensive follow up of
suppliers; frequent breakdowns of machines; defects; and rework. All these activities invariably add cost and time to the products
and services offered, but no value.
• Necessary but Non-value-added (NNVA) Activities
• Several activities are non-value-added but appear to be value-adding on account of the quality of management practices in an
organization. For eg, inspection of quality is a non-value-added process in a strictly theoretical sense. However, if an organization
does not have a robust quality assurance system, it is highly risky to eliminate the inspection activity. Therefore, in several such
cases, it is better to classify them as necessary but not value-adding. The motivation for making an NNVA classification is that it
highlights a set of activities that are to be eventually eliminated as and when better systems are developed in an organization.
• Waste: Any process or set of activities that does not add value as perceived
by the customer is classified as waste. It consists of both NVA and NNVA.
From a short-term perspective, NVA is avoidable waste whereas NNVA is an
unavoidable waste.
• Value stream: All activities that need to be performed (VA and NNVA) from
the time the customer order is received to the time the order is fulfilled
make up the value stream for an organization. Depending on the nature of
the business, it may span activities from concept to launch, order to
delivery, or raw material to finished product.
• Lean management: Lean management is a process by which the
continuous efforts of all concerned parties enable an organization to create
a channel for the value stream by eliminating waste from the system.
Common Source of Waste
The lean management process
Lean Supply Chain Management
Making your vendor lean
• 1. Identify value • 4. Establish flow and rhythm
• The first step of lean management is to define what value • You should establish flow and rhythm with your vendors,
means for your customers and your business. Value is such as standardizing processes, reducing batch sizes,
anything that satisfies a customer need or solves a problem. synchronizing schedules, or implementing kanban systems.
• 2. Map the value stream • 5. Implement continuous improvement
• The second step of lean management is to map the value • You should implement continuous improvement with your
stream, which is the sequence of activities and processes that vendors, such as setting and tracking key performance
deliver value to your customers. You should map the value indicators (KPIs), conducting regular audits and reviews, or
stream of each vendor, and identify the sources of waste, applying the Plan-Do-Check-Act (PDCA) cycle.
inefficiency, or variability.
• 6. Empower your team
• 3. Implement pull systems
• You should empower your team to manage your vendor
• Pull systems help you reduce inventory levels, avoid relationships, such as involving them in vendor selection,
overproduction or underproduction, and increase flexibility evaluation, and communication, providing them with training
and responsiveness. You should implement pull systems with and feedback, or rewarding them for their achievements.
your vendors, such as just-in-time (JIT) ordering, vendor-
managed inventory (VMI), or consignment inventory.
Rules for lean cell design
• [Link]
• [Link]
Lean concepts: Push & Pull Systems
Lean Concepts: 5S
• 5S is defined as a methodology that results in a workplace that is
clean, uncluttered, safe, and well organized to help reduce waste and
optimize productivity.
Japanese Translated English Definition
Seiri organize sort Eliminate whatever is not needed by separating
needed tools, parts, and instructions from unneeded
materials.

Seiton orderliness set in order Organize whatever remains by neatly arranging and
identifying parts and tools for ease of use.

Seiso cleanliness shine Clean the work area by conducting a cleanup

Shitsuke discipline sustain Make 5S a way of life by forming the habit of always
following the first four S’s.
TPM (TOTAL PRODUCTIVE MAINTENANCE)
• TPM (Total Productive Maintenance) is a
holistic approach to equipment maintenance
that strives to achieve perfect production:
• No Breakdowns
• No Small Stops or Slow Running
• No Defects
• In addition it values a safe working
environment:
• No Accidents
• TPM emphasizes proactive and preventative
maintenance to maximize the operational
efficiency of equipment. It blurs the
distinction between the roles of production
and maintenance by placing a strong
emphasis on empowering operators to help
maintain their equipment.
Pillar What Is It? How Does It Help?
Autonomous Places responsibility for routine maintenance, •Gives operators greater “ownership” of their equipment.
Maintenance such as cleaning, lubricating, and inspection, in •Increases operators’ knowledge of their equipment.
the hands of operators. •Ensures equipment is well-cleaned and lubricated.
•Identifies emergent issues before they become failures.
•Frees maintenance personnel for higher-level tasks.
Planned Maintenance Schedules maintenance tasks based on •Significantly reduces instances of unplanned stop time.
predicted and/or measured failure rates. •Enables most maintenance to be planned for times when equipment is not scheduled for production.
•Reduces inventory through better control of wear-prone and failure-prone parts.

Quality Maintenance Design error detection and prevention into •Specifically targets quality issues with improvement projects focused on removing root sources of
production processes. Apply Root Cause defects.
•Reduces number of defects.
Analysis to eliminate recurring sources of quality
defects. •Reduces cost by catching defects early (it is expensive and unreliable to find defects through
inspection).
Focused Improvement Have small groups of employees work together •Recurring problems are identified and resolved by cross-functional teams.
proactively to achieve regular, incremental •Combines the collective talents of a company to create an engine for continuous improvement.
improvements in equipment operation.

Early Equipment Directs practical knowledge and understanding •New equipment reaches planned performance levels much faster due to fewer startup issues.
Management of manufacturing equipment gained through •Maintenance is simpler and more robust due to practical review and employee involvement prior to
TPM towards improving the design of new installation.
equipment.

Training and Education Fill in knowledge gaps necessary to achieve •Operators develop skills to routinely maintain equipment and identify emerging problems.
TPM goals. Applies to operators, maintenance •Maintenance personnel learn techniques for proactive and preventative maintenance.
personnel and managers. •Managers are trained on TPM principles as well as on employee coaching and development.

Safety, Health, Maintain a safe and healthy working •Eliminates potential health and safety risks, resulting in a safer workplace.
Environment environment. •Specifically targets the goal of an accident-free workplace.
TPM in Administration Apply TPM techniques to administrative •Extends TPM benefits beyond the plant floor by addressing waste in administrative functions.
functions. •Supports production through improved administrative operations (e.g., order processing, procurement,
and scheduling).
• OEE (Overall Equipment Effectiveness)
is a metric that identifies the
percentage of planned production
time that is truly productive. It was
developed to support TPM initiatives
by accurately tracking progress
towards achieving “perfect
production”.
• An OEE score of 100% is perfect
production.
• An OEE score of 85% is world class for
discrete manufacturers.
• An OEE score of 60% is fairly typical for
discrete manufacturers.
• An OEE score of 40% is not uncommon
for manufacturers without TPM and/or
lean programs.
Kanban Systems
• Kanban is a Japanese word that directly translates to "visual • The Kanban system can be thought of as a signal and
card“ response system. When an item is running low at an
operational station, there will be a visual cue specifying how
• Kanban (Japanese for sign) is an inventory control system much to order from the supply. The person using the parts
used in just-in-time (JIT) manufacturing to track production makes the order for the quantity indicated by the Kanban and
and order new shipments of parts and materials. the supplier provides the exact amount requested.
• Kanban was developed by Taiichi Ohno, an industrial • For example, if a worker is bagging product on a conveyor
engineer at Toyota, and uses visual indications to prompt the belt, a Kanban may be placed in the stack above the last 10
action needed to keep a process flowing. bags. When the worker gets to the card, he gives the floor
• One of the main goals of Kanban is to limit the buildup of runner the card to bring more bags. A station further from
excess inventory at any point on the production line. the supply room might have the Kanban placed at 15 bags
and a closer one at five. The flow of bags and the placement
• Kanban also strives to limit bottlenecks by promoting of cards are adjusted to make sure no station is left bagless
communication and information sharing between individuals while the belt is running.
and departments. • The kanban system can be used easily within a factory, but it
• Successful implementation of Kanban may lead to reduced can also be applied to purchasing inventory from external
expenses, greater customer satisfaction, more efficient suppliers. The Kanban system creates extraordinary visibility
processes, and minimized risk due to unforeseen problems. for both suppliers and buyers.
Kanban Core Practices
• Visualize Workflows • Clearly Define Policies
• At the heart of Kanban, the process must be visually • As part of visually depicting workflows, processes are often
depicted. Whether by physical, tangible cards or leveraging clearly defined. Departments can often easily understand the
technology and software, the process must be shown step by expectations placed on their teams, and Kanban cards
step using visual cues that make each task clearly identifiable. assigned to specific individuals clearly identify responsibilities
for each task.
• Limit WIP
• Implement Feedback Loops
• As Kanban is rooted in efficiency, the goal of Kanban is to
minimize the amount of work in progress. Teams are • When using the Kanban method, companies often gather
encouraged to complete prior tasks before moving on to a information, analyze how the process is flowing, and
new one. implement changes to further improve the process. This
feedback loop allows employees to continuously improve and
• Manage Workflows make incremental, small improvements that are easier to
• A critical part of Kanban is to observe and adapt to. The feedback may be positive feedback or negative
eliminate bottlenecks prior to them occurring. This includes feedback.
forecasting production and resource utilization. As a process • Improve Collaboration
becomes more predictable, a company will find it easier to
make commitments to customers or make processes even • Because tasks are broken down into very small Kanban cards,
more efficient individuals must often rely upon each other when using the
Kanban method. Individuals, often on different teams, must
collaborate and discuss transitions between swim lanes,
while other individuals must group to identify and resolve
issues quickly.
DSS for Operations Management
• A decision support system (DSS) is a • For example, a DSS may be used to
computerized program used to support project a company's revenue over the
determinations, judgments, and courses upcoming six months based on new
of action in an organization or a business. assumptions about product sales. Due to
A DSS sifts through and analyzes massive a large number of factors that surround
amounts of data, compiling projected revenue figures, this is not a
comprehensive information that can be straightforward calculation that can be
used to solve problems and in decision- done manually. However, a DSS can
making. integrate all the multiple variables and
• The DSS can be employed by operations generate an outcome and alternate
management and other planning outcomes, all based on the company's
departments in an organization to past product sales data and current
compile information and data and variables.
synthesize it into actionable intelligence.
In fact, these systems are primarily used
by mid- to upper-level management.
• Characteristics of a DSS • In organizations, a decision support system
• The primary purpose of using a DSS is to (DSS) analyzes and synthesizes vast amounts
present information to the customer in an of data to assist in decision-making. With this
easy-to-understand way. A DSS system is information, it produces reports that may
beneficial because it can be programmed to project revenue, sales, or manage inventory.
generate many types of reports, all based on Through the integration of multiple variables,
user specifications. For example, the DSS can a DSS can produce a number of different
generate information and output its outcomes based on the company’s previous
information graphically, as in a bar chart that data and current inputs.
represents projected revenue or as a written
report.
• As technology continues to advance, data
analysis is no longer limited to large, bulky
mainframe computers. Since a DSS is
essentially an application, it can be loaded on
most computer systems, whether on desktops
or laptops. Certain DSS applications are also
available through mobile devices.
Decision support system examples
• Organizations use decision support systems in several different contexts, including the following:
• GPS routing. GPS route planning is an example of a typical DSS. It compares different routes,
taking into account factors such as distance, driving time and cost. The GPS navigating system also
enables users to choose alternative routes, displaying them on a map and providing step-by-step
instructions.
• ERP dashboards. ERP (enterprise resource planning) dashboards can use a decision support
system to visualize changes in production and business processes, monitor current business
performance against set goals and identify areas for improvement. ERP dashboards let business
owners see a snapshot of their company's most important numbers and metrics.
• Clinical decision support system. A clinical decision support system (CDSS) is a software program
that uses advanced decision-making algorithms to help physicians make the best medical
decisions. Healthcare professionals often use these to interpret patient records and test results,
and to calculate the best treatment plan. CDSS in healthcare can help providers identify
abnormalities during specific tests, as well as monitor patients after certain procedures to
determine if they are having any adverse reactions.