INTRODUCTION TO OPERATIONS Control – the comparison of feedback against

MANAGEMENT previously established standards to determine

if corrective action is needed.
Operations

• The part of a business organization

that is responsible for producing Factors affecting the design and
goods or services. management of operations system:

• Degree of involvement of customers

in the process.
Operations Management
• Degree to which technology is used to
• The management of systems or produce and deliver a product or
processes that create goods and/or service.
provide services.
Scope of Operations Management

Goods vs. Service • Forecasting

• Capacity planning
Goods are physical items that include raw
• Facilities and layout
materials, parts, subassemblies, and final
• Scheduling
products. (Automobile, Computer, Oven)
• Managing inventories
Services are activities that provide some • Assuring quality
combination of time, location, form or • Motivating employees
psychological value. (Education, Haircut) • Deciding where to locate facilities

Supply Chain Other Areas that are part of the Operations

Functions:
• a sequence of activities and
organizations involved in producing • Purchasing – procurement of
and delivering a good or service. materials, supplies and equipment.
• Industrial Engineering – scheduling,
performance standards, work
methods, quality control, and
inspecting the purchased goods.
The Transformation Process • Distribution – shipping of goods to
warehouses, retail outlets or final
customers.
• Maintenance – responsible for
general up-keep and repair of
equipment, buildings and grounds,
heating and air-conditioning;
removing toxic wastes; parking and
perhaps security.
Feedback – measurements taken at various
points in the transformation process.
Role of the Operations Manager Quantitative Approaches

A primary function of the operations manager • These approaches and problem

is to guide the system by decision making. solving often embody an attempt to
obtain mathematically optimal
• System Design Decisions
solutions to managerial problems.
• System Operation Decisions
Linear Programming – used for optimum
allocation of scarce resources.
Decision Making
Queuing Techniques – are useful for analyzing
• Most operations decisions involve situations in which waiting line forms.
many alternatives that can have quite Inventory Models – Widely used to control
different impacts on costs or profits inventories.
• Typical operations decisions include:
What: What resources are needed, Project Models (PERT / CPM) – are useful for
and in what amounts? planning, coordinating, and controlling large-
When: When will each resource be scale projects.
needed? When should the work be
Forecasting Techniques – widely used for
scheduled? When should materials
planning and scheduling.
and other supplies be ordered?
Where: Where will the work be Statistical Models – are currently used in
done? many areas of decision-making.
How: How will he product or service
be designed? How will the work be
done? How will resources be Productivity
allocated?
Who: Who will do the work? • measures the efficiency of production
• Formula: Productivity = Output /
Input
Models
Inputs - labor hours, raw materials, energy,
• are abstraction of reality, a simplified technology.
representation of something.
Outputs - number of units produced, revenue,
Different types of Models: customer satisfaction.
• Physical Models – look like their real Types of Productivity Metrics
counterparts.
Labor Productivity: Output / Labor Hours
• Schematic models – are more
abstract than their physical Capital Productivity: Output / Capital
counterpart (graphs, charts, Invested
blueprints, pictures, drawings)
• Mathematical Model –most abstract; Multi-Factor Productivity: Output / Combined
they do not look like their physical Inputs
counterparts.
INDUSTRY ANALYSIS TOOLS Potential factors:

Porter’s Five Forces • Sustainable competitive advantage

through innovation
Porter’s five forces analysis is a framework
• Competition between online and
that attempts to analyze the level of
offline companies
competition within an industry and business
• Level of advertising expense
strategy development.
• Powerful competitive strategy
Components of Poter’s Five Forces Model • Firm concentration ratio
• Degree of transparency
1. Threat of new entrants

The market is full of competition. Not only the

existing firms pose threat to the business, but SWOT Analysis
the arrival of new entrants is also a challenge.
The market is always open for entry and exits. Strengths: Internal attributes or resources
that provide a competitive advantage.
2. Threat of substitutes
Weaknesses: Internal factors that hinder
The substitutes can be defined as the progress or create vulnerabilities.
products of other industries that have the
ability to satisfy similar needs. Opportunities: External conditions or trends
that can be leveraged.
Example: Coffee can be a substitute for tea.
Threats: External challenges or risks that
3. Bargaining power of buyers could cause harm.
When there many producers and there is a
single customer in the market, then that
situation is called as 'monopsony'. In these PEST/PESTEL Analysis
markets, the position of the buyer is very Political: Government policies, political
strong and he sets the price. stability, trade regulations, tax policies, etc.
The bargaining power of the buyers compels Economic: Inflation, interest rates, economic
the firms to reduce the prices and may also growth, unemployment, exchange rates, etc.
demand a product or service of higher quality
at low price. Social: Demographics, cultural trends, lifestyle
changes, consumer behavior, etc.
4. Bargaining power of suppliers
Technological: Innovation, R&D, technology
Since the company needs raw material for adoption, automation, digital transformation,
producing, therefore the producers have to etc.
build a relationship with its suppliers. When
suppliers have the power in their hands, they Legal: Laws, regulations, labor laws, consumer
can exert influence on the producing firms by rights, health and safety standards, etc.
selling them raw materials at higher prices. Environmental: Climate change,
Example: Wal-Mart as an organization sustainability, environmental regulations,
natural resources, etc.
5. Rivalry inside the industry

For most industries the intensity of

competitive rivalry is the major determinant
of the competitiveness of the industry.
PROJECT MANAGEMENT Work Breakdown Structure (WBS)

Project • A hierarchical listing of what must be

done during a project.
• Unique, one-time operations
designed to accomplish a specific set • Establishes a logical framework for
of objectives in a limited time frame. identifying the required activities for
• Example: Producing a movie. the project.

1. Identify the major elements of

the project.
Key Decisions in Project Management 2. Identify the major supporting
• Deciding which projects to activities for each of the major
implement. elements.
• Selecting the project manager. 3. Break down each major
• Selecting the project team. supporting activity into a list of
• Planning and designing the project. the activities that will be needed
• Managing and controlling project to accomplish it.
resources. Deciding if and when a
project should be terminated. Gantt Chart
Project manager - is responsible for the • enables a manager to initially
following: schedule project activities and then to
monitor progress over time by
• Work
comparing planned progress to actual
• Human Resources
progress.
• Communication
• Quality
• Time
PERT and CPM
• Cost
• PERT (program evaluation and review
Project Champion - a person who promotes
technique) and CPM (critical path
and supports a project.
method) are two techniques used to
Project Life Cycle manage large-scale projects.

• By using PERT or CPM Managers can

obtain:

1. A graphical display of project

activities.
2. An estimate of how long the
project will take.
3. An indication of which activities
are most critical to timely
project completion.
Risk Management 4. An indication of how long any
• The probability of occurrence of risk activity can be delayed without
events is highest near the beginning delaying the project.
of a project and the lowest near the
end.
Network diagram Slack and the Critical Path

Diagram of project activities that shows Slack can be computed one of two ways:
sequential relationships by use of arrows and
• Slack = LS – ES
nodes
• Slack = LF – EF
Activity on arrow (AOA)
The critical path is indicated by the activities
• network diagram convention in which with zero slack
arrows designate activities.

Activity on node (AON)

Probabilistic Time Estimates
• network convention in which nodes
The beta distribution is generally used to
designate activities/.
describe the inherent variability in time
Deterministic Time Estimates estimates.

Deterministic - time estimates that are fairly The probabilistic approach involves three-
certain. time estimates:

Probabilistic - time estimates that allow for Optimistic time (to)

variation.
• The length of time required under
optimal conditions.

Early Start, Early Finish Pessimistic time (tp)

Finding ES and EF involves a forward pass • The length of time required under
through the network diagram. the worst conditions.

Early start (ES) Most likely time (tm)

• The earliest time an activity can start. • The most probable length of time
required.
Early finish (EF)
FORMULA
• The earliest time an activity can finish. Expected
Time
Expected
Late Start, Late Finish duration
Finding LS and LF involves a backward pass of a path
through the network diagram. Standard
Deviation
Late Start (LS)
Variance
• The latest time the activity can start
and not delay the project.

Late Finish (LF)

• The latest time the activity can finish

and not delay the project.
HUMAN RESOURCES, JOB DESIGN, AND Work Schedules
WORK MEASUREMENT
Standard work Five eight-hour days
Human Resource Strategy schedule

The objective of a human resource strategy is Flextime Allows employees,

to manage labor and design jobs so people within limits, to
are effectively and efficiently utilized determine their own
scedules
Ensure that people: Flexible work week Fewer but longer days
1. Are effectively utilized within the Part-time Fewer, possibly
constraints of other operations irregular, hours
management decisions.
2. Have a reasonable quality of work
Job Classification and Work Rules
life in an atmosphere of mutual
commitment and trust. • Specify who can do what
• Specify when they can do it
• Specify under what conditions they
Constraint on Human Resource Strategy
can do it
• Often result of union contracts
• Restricts flexibility in assignments and
consequently efficiency of production

Job Design

Specifying the tasks that constitute a job for

an individual or a group.

1. Job specialization
2. Job expansion
Labor Planning 3. Psychological components
4. Self-directed teams
Employment-Stability Policies 5. Motivation and incentive systems
1. Follow demand exactly
• Matches direct labor costs to Labor Specialization
production
• Incurs costs in hiring and The division of labor into unique tasks.
termination, unemployment
1. Development of dexterity
insurance, and premium wages
2. Less loss of time
• Labor is treated as a variable cost
3. Development of specialized tools
4. Wages exactly fit the required skill
2. Hold employment constant
required
• Maintains trained workforce
• Minimizes hiring, layoff, and
unemployment costs
• Employees may be underutilized
during slack periods
• Labor is treated as a fixed cost
Job Expansion 1. Skill variety
2. Job identity
Adding more variety to jobs.
3. Job significance
Intended to reduce boredom associated with 4. Autonomy
labor specialization. 5. Feedback

• Job enlargement
• Job rotation
Self-Directed Teams
• Job enrichment
• Employee empowerment • Group of empowered individuals
working together to reach a common
goal
Job Enlargement • May be organized for long-term or
short-term objectives

Benefits of Teams and Expanded Job Designs

• Improved quality of work life

• Improved job satisfaction
• Increased motivation
• Allows employees to accept more
responsibility
• Improved productivity and quality
• Reduced turnover and absenteeism
Psychological Components of Job Design

Human resource strategy requires

Limitations of Job Expansion
consideration of the psychological
components of job design. • Higher capital cost
• Individuals may prefer simple jobs
Hawthorne Studies
• Higher wage rates for greater skills
• They studied light levels, but • Smaller labor pool
discovered productivity improvement • Higher training costs
was independent from lighting levels
• Introduced psychology into the
Motivation and Incentive Systems
workplace
• The workplace social system and Bonuses - cash or stock options.
distinct roles played by individuals
may be more important than physical Profit-sharing - profits for distribution to
factors employees.
• Individual differences may be Gain sharing - rewards for improvements.
dominant in job expectation and
contribution Incentive plans - typically based on
production rates.

Core Job Characteristics Knowledge-based systems - reward for

knowledge or skills.
Jobs should include the following
characteristics:
Ergonomics and the Work Environment Historical Experience

Ergonomics is the study of the interface • How the task was performed last
between man and machine. Often called time.
human factors. • Data available from production
records or time cards.

Methods Analysis
Time Studies
• Focuses on how task is performed
• Involves timing a sample of a worker’s
• Used to analyze:
performance and using it to set a
1. Movement of individuals or
standard.
material
• Requires trained and experienced
2. Activities of human and machine
observers.
and crew activity
3. Activities of human and machine
and crew activity Rest Allowances

Personal time 4% - 7% of total time for use

The Visual Workplace allowance of restroom, water fountain,
etc.
• Use low-cost visual devices to share
information quickly and accurately. Delay allowance Based upon actual delays that
• Displays and graphs replace printouts occur.
and paperwork. Fatigue allowance Based on our knowledge of
human energy expenditure
• Able to provide timely information in
a dynamic environment.

Visual signals can take many forms and serve

many functions:

• Present the big picture PRODUCT AND SERVICE DESIGN

• Performance
• Housekeeping What does product and service design do?

• Translate customer wants and needs

Labor Standards into product and service requirement
(marketing);
• Labor standards are the amount of • Refine existing products and services
time required to perform a job or part (marketing);
of a job. • Develop new products and/or service
• Accurate labor standards help (marketing, operation);
determine labor requirements, costs, • Formulate quality goals (quality
and fair work. assurance, operations);
May be set in four ways: • Formulate cost target (accounting);
• Construct and test prototypes
1. Historical experience (marketing, operations);
2. Time studies
• Document specifications
3. Predetermined time standards
4. Work sampling
Reasons for Product or Service • Serviceability - the capability of
Design or Redesign an organization to provide a
service at an acceptable cost or
NEW DESIGN REDESIGN
profit
Be competitive by Customer complaints
offering new products 3. What level of quality is appropriate?
or services. Accidents or injuries
• Customer expectations
To make business Excessive warranty • Competitor quality
grow and increase claims • Fit with current offering
profits.
Low Demand 4. Does it make sense from an
An alternative to economic standpoint?
downsizing.
• Liability issues, ethical
considerations, sustainability
issues, costs and profits
Objective of Product or Service
Design or Redesign

Overall objective: satisfy the customer while Idea Generation

make a reasonable profit. Internal sources – employees: those who
Measure of design effectiveness: deliver services, salespeople, purchasing
agents.
• Development time and cost
Other sources:
• Product or service cost
• Resulting quality of product/service 1. Supply-chain based
2. Competitor based
3. Research based (Basic & Applied)
Strategic Product and Service Design

The essence of an organization is the goods

and services it offers. Design Considerations
➢ Every aspect of the organization is • Legal considerations
structured around them • Ethical considerations
Product and service design – or redesign – • Human factors
should be closely tied to an organization’s • Cultural factors
strategy. • Global product and service design
• Environmental factors
Key Questions to be considered:

1. Is there a demand for it?

Standardization
• Market size
• Demand profile • Extent to which there is absence of
variety in a product, service, or
2. Can we do it? process.
• Manufacturability - the capability
of an organization to produce an
item at an acceptable profit
Mass Customization factors, either in manufacturing or
in use, than to control the
• A strategy of producing standardized
environmental factors.
goods and services but incorporating
some degree of customization in the
final product or services.
Sustainability
• Tactics:
➢ Delayed differentiation • Using resources in ways that do not
➢ Modular Design harm ecological systems that support
human existence
Delayed Differentiation Key aspects of designing for sustainability:
• A postponement tactic: the process of • Cradle-to-grave assessment (Life-
producing, but not quite completing, Cycle assessment)
a product or service, postponing • End-of-life programs
completion until customer • The 3-Rs
preferences or specifications are ➢ Reduce: Cost and Materials
known. ➢ Re-Use: Remanufacturing
➢ Recycling
Modular Design
Phases in Design & Development
• A form of standardization in which
component parts are grouped into 1. Feasibility analysis
modules that are easily replaced or 2. Product specifications
interchanged. 3. Process specifications
4. Prototype development
5. Design review
Reliability
6. Market test
Reliability - The ability of a product, part, or 7. Product introduction
system to perform its intended function under 8. Follow-up evaluation
a prescribed set of conditions.

Failure - Situation in which a product, part, or

Service Design Definitions
system does not perform as intended
Service - something that is done to, or for, a
Normal Operating Conditions - The set of
customer.
conditions under which an item's reliability is
specified. Service delivery system - the facilities,
processes, and skills needed to provide a
service.
Robust Design
Product bundle - the combination of goods
• Design that results in products or and services provided to a customer.
services that can function over a
Service package - the physical resources
broad range of conditions.
needed to perform the service, accompanying
• Taguchi's Approach
goods, and the explicit (core features) and
➢ His premise is that it is often
implicit (ancillary features) services included.
easier to design a product that is
insensitive to environmental
Service Design Quality of conformance - the degree to which
goods or services conform to the intent of the
• Begins with a choice of service
designers.
strategy, which determines the nature
and focus of the service, and the Ease-of-Use and user instructions - increase
target market. the likelihood that a product will be used for
• Key issues in service design: its intended purpose and in such a way that it
➢ Degree of variation in service will continue to function properly and safely.
requirements
After-the-sale service - taking care of issues
➢ Degree of customer contact and
and problems that arise after the sale.
involvement

Operations Strategy Costs of Quality

Effective product and service design can help Appraisal Costs

the organization achieve competitive
• Costs of activities designed to ensure
advantage:
quality or uncover defects.
• Packaging products and ancillary
Prevention Costs
services to increase sales
• Using multiple-use platforms • All TQ training, TQ planning, customer
• Implementing tactics that will achieve assessment, process control, and
the benefits of high volume while quality improvement costs to prevent
satisfying customer needs for variety defects from occurring.
• Continually monitoring products and
Failure Costs
services for small improvement
opportunities • Costs incurred by defective
• Reducing the time, it takes to get a parts/products or faulty services.
new or redesigned product or service
Internal Failure Costs - costs incurred to fix
to the market
problems that are detected before the
product/service is delivered to the customer.

External Failure Costs - all costs incurred to fix

problems that are detected after the
MANAGEMENT OF QUALITY
product/service is delivered to the customer.
Quality

• The ability of a product or service to

Quality Contributors
consistently meet or exceed customer
expectations.

Determinants of Quality

Quality of design - Intention of designers to

include or exclude features in a product or
service.
Total Quality Management Study

• A philosophy that involves everyone • Evaluate the data collection during

in an organization in a continual effort the do phase
to improve quality and achieve • Check results against goals
customer satisfaction. formulated during the plan phase

TQM Approach: Act

1. Find out what the customer wants • If the results are successful,
2. Design a product or service that standardize the new method and
meets or exceeds customer wants communicate it to the relevant
3. Design processes that facilitate doing personnel
the job right the first time • Implement training for the new
4. Keep track of results method
5. Extend these concepts throughout the • If unsuccessful, revise the plan and
supply chain repeat the process

TQM Elements:

1. Continuous improvement Basic Quality Tools

2. Competitive benchmarking
3. Employee empowerment
4. Team approach
5. Decision based on fact, not opinion
6. Knowledge of tools
7. Supplier quality
8. Champion
9. Quality at the source
10. Suppliers are partners in the process

Plan-Do-Study-Act (PDSA) Cycle

Plan

• Begin by studying and documenting

the current process.
• Collect data on the process or
problem
• Analyze the data and develop a plan
for improvement
• Specify measures for evaluating the
plan

Do Quality Circle

• Implement the plan, document any • Groups of workers who meet to

changes made, collect data for discuss ways of improving products or
analysis. processes.
Operations Strategy

• Quality is a strategic imperative for

organizations
• Quality is a never-ending journey
• Customer satisfaction ≠ customer
loyalty
• Quality needs to be incorporated
throughout the entire supply chain,
not just the organization
Capital Intensity
_____________________________________
• the mix of equipment and labor that
Reliability will be used by the organization.
• The ability of a product, part, or
system to perform its intended Process Flexibility
function under a prescribed set of
conditions. • the degree to which the system can
• Reliability is expressed as a be adjusted to changes in processing
probability: requirements due to such factors as
➢ The probability that the product changes in product or service design,
or system will function when changes in volume processed, and
activated. changes in technology.
➢ The probability that the product
or system will function for a given
length of time. Types of Processing

Availability

• The fraction of time a piece of

equipment is expected to be available
for operation.

_____________________________________

PROCESS SELECTION AND FACILITY LAYOUT

Process selection

• Refers to deciding on the way

production of goods or services will
be organized
• It has major implications for: Technology
➢ Capacity planning
Technological Innovation
➢ Layout of facilities
➢ Equipment • The discovery and development of
➢ Design of work systems new or improved products, services,
 or processes for producing or Repetitive Processing: Product Layouts
providing them.

Technology

• The application of scientific

discoveries to the development and
improvement of products and
services and/or the processes that
produce or provide them.
Non-repetitive Processing: Process Layouts

Automation Process layouts

• Machinery that has sensing and • Layouts that can handle varied
control devices that enable it to processing requirements.
operate automatically.

Process Strategy

• Flexibility is important but it does not

always offer the best choice in
process decisions.
• Flexible systems and equipment are Fixed Position layout
often more expensive and not as • Layout in which the product or project
efficient as less flexible alternatives. remains stationary, and workers,
• Flexibility should be adopted with materials, and equipment are moved
great care; its applications should be as needed.
matched with situations in which a
need for flexibility clearly exists.
• In practice, decision makers choose Combination Layouts
flexible systems for either of two
Some operational environments use a
reasons:
combination of the three basic layout types:
➢ Demand variety; and
➢ Uncertainty exists about • Hospitals
demand • Supermarket
• Shipyards

Some organizations are moving away from

Facilities Layout
process layouts in an effort to capture the
Layout is the configuration of departments, benefits of product layouts
work centers, and equipment, with particular
• Cellular manufacturing
emphasis on movement of work (customers
• Flexible manufacturing systems
or materials) through the system.

Facilities layout decisions arise when:

Service Layout
• Designing new facilities
• Re-designing existing facilities Service layouts can be categorized as:
product, process, or fixed position
Service layout requirements are somewhat Information Requirements
different due to such factors as:
In designing process layouts, the following
• Degree of customer contact information is required:
• Degree of customization
1. A list of departments to be arranged
Common service layouts: and their dimensions
2. A projection of future work flows
• Warehouse and storage layouts
between the pairs of work centers
• Retail layouts
3. The distance between locations and
• Office layouts
the cost per unit of distance to move
loads between them
4. The amount of money to be invested
Line balancing in the layout
• The process of assigning tasks to 5. A list of any special considerations
workstations in such a way that the 6. The location of key utilities, access
workstations have approximately and exit points, etc.
equal time requirements.
• Goal: obtain task grouping that
represent approximately equal time
requirements since this minimizes idle
time along the line and results in a
high utilization of equipment and
labor.

Designing Process Layouts

The main issue in designing process layouts

concerns the relative placement of the
departments

Measuring effectiveness:

• A major objective in designing process

layouts is to minimize transportation
cost, distance, or time