Operations Management

Dr.M.Krishnakumar
Professor, DCSMAT
Module 4
LEAN SUPPLY CHAIN MANAGEMENT &
IT ENABLED OPERATIONS MANAGEMENT
 Lean Management
• It is a new philosophy of operations management
that provides a set of tools and techniques to
compete in an increasingly fierce marketplace.
• It is an organisational mechanism for defining value
and thereby creating value stream for customers.
• It is based on the premise that by identifying waste
in any system and removing it, it is possible to
create a value stream for the products and services
that an organisation offer to its customers.
• It enables organisations to provide better value in their
offerings by constantly improving their operations.
• A good understanding of waste and value ; and a set of
tools and techniques to eliminate waste from the system
are crucial to create a lean management.
• To understand lean management better, one has to
familiarise with the concepts of value-added (VA), non-
value (NVA) and necessary but non-value-added (NNVA)
activities
• One also able to understand the concepts of waste, value
stream and lean management
• Value-added (VA) Activity:
• The activity for which the customer is willing to pay for
that, from customer perspective.
• Carrying inventory in the company is not a value added
activity for the customers whereas for example doing a
polishing of car is a value adding activity for customers.
• Non-value (NVA) Activity:
• All those activities the customer may not want to pay
• Inspection, planning, machine repairing, rework, defect etc
• Necessary but non-value-added (NNVA) activities:
• It’s a difficult job to identify
• Example, inspection of quality is a non-value-added process
in a strictly theoretical sense.
• However if an organisation does not have a robust quality
assurance system, it is highly risk to eliminate the
inspection activity.
• Therefore in several cases it is better to classify them as
necessary but not value-adding.
• Waste
– Any process or set of activities that does not add value as
perceived by the customer is classified as ‘Waste’.
• Value Stream
– All activities that need to be performed (VA and NNVA) from the
time customer order is received to the time the order fulfilled
make up the value stream for an organisation.
• Lean Management
– A process by which the continuous efforts of all concerned parties
enable an organisation to create a channel for value stream by
eliminating waste from the system
 Lean Supply chain management concepts
• Lean supply chain management is the application of Lean
Thinking to the end to end supply chain.
• Traditionally Lean manufacturing was applied within the
four walls of a manufacturing enterprise
• Lean Supply Chain Management extends the application of
Lean upstream into the management of suppliers,
downstream in to the management of the distribution
network and upwards in to the overall integration and
management of the supply chain.
• In Lean supply chain management, the focus is on the
relentless elimination of non-value added time and
consequent reduction of lead time at every step of the
supply chain from the manufacturing of raw materials by
suppliers to the delivery of finished goods to the end user.
 Make the vendors lean
• In the traditional purchasing model, the supplier is trying to
bid just low enough to get a contract while the buyer is
looking for the lowest price.
• The buyer continually is applying pressure to the supplier,
and the supplier has no way to meet the buyer’s demands
without sacrificing something.
• Ultimately, at least one of the organizations loses.
• The lean buyer-supplier model is one of cooperation.
• The buyer and supplier are partners. If the buyer succeeds,
the supplier succeeds.
• Entering an outsourcing relationship must create value for
both the supplier and buyer.
• To accomplish this, it is important that the supplier be given
the tools and incentives to succeed.
• First of all, “open book” or transparent costing must be in
place.
• That is, the buyer should be able to know how much it
costs the supplier to produce components.
• The buyer’s goal is no longer to maximize its own profits
and minimize the profits of the supplier.
• Instead, both organizations must work toward increasing
total value.
• An outsourcing contract need not specify the pricing on
each item that the supplier will provide; it should specify
the method by which prices will be determined.
• The buyer and supplier need to gain agreement on pricing.
Initial pricing can be based on supplier cost plus a
reasonable percentage for profit.
• The buyer must challenge the supplier to decrease pricing
through productivity improvements, and some form of
gain-sharing should be specified.
• The buyer must ensure that the supplier has the tools to
accomplish such improvements. A lean organization must
help its suppliers get lean by assisting them in activities
such as:
– i) Value stream mapping training and implementation
– ii) 5-S training and implementation
– iii) Kaizen events focused on cellular manufacturing/one-piece
flow, TPM, quick changeover and other basic lean tools
– iv) Setting up Kanban systems
 Rules for lean cell design
Worksmart's 10 Point to Lean Assembly Cells

• 1. Keep it moving
• To achieve maximum
productivity with a balanced
cell, product needs to flow
one piece at a time with
minimum effort.
• Keep production balanced
with limited work in process
space.
• 2. Keep it small
• Strive to miniaturize the cell
as much as possible.
• This minimizes floor space,
WIP, transferring and
handling of product and
assists team work.
• Provide IPK when
necessary.
• 3. Keep it logical and
sequential
• What is the proper sequence for
assembly?
• Talk with your operators for input on
the sequence and division of work.
• Don’t make it more difficult than
necessary.
• cell layout? Straight line, “U”
shaped, ‘L’ shaped, or oval.
• What equipment or sub assembly
needs to be integrated?
• 4. Make it ergonomic
• Don’t fight the process.
• Design the workstation to fit
the task and operator, not
the other way around.
• Use a modular design that
makes it easy for the
operator to work their
position.

• .
• 5. Economize on movement
• Are the tools, supplies,
components, and equipment
within easy reach?
• The goal is to integrate fixturing,
product rotation, and positioning
into the process.
• Create universal fixturing for
mixed model production.
• Minimize look and reach time.
• No hyper extensions.
•
• 6. Optimize parts presentation
• Are all components at point of
use?
• If there are large or bulkie,
components are they easily
handled?
• Would customize flow racks be of
value?
• Are subassemblies being
produced and presented at point
of use?
•
• 7. Do it online, the same way
always (online – during production)
• Strive for standard work
procedures and manufacturing
uniformity.
• Provide method instructions.
• If possible, include test, QC,
inspection, and pack out, online
at each position to minimize
rework, and WIP.
• Stop the line with reoccurring
rework/quality problems
• 8. Minimize Wasteful Handling
and Exchanges
• Seems simple but any handling
that is not adding value is
wasteful.
• Eliminate lifting and movement
offline.
• As an example, a 25-pound
product lifted unnecessarily 10
times for a 50-unit production
per day is over six tons of wasted
handling.
•
• 9. Keep it open and flexible
• Keep sight lines across the cell
open to improve communication
between the team and also for
fast, real-time visual
management on the floor.
• Flexible cell design should be
scalable and encourage change
and continuous improvement.
• Use and on lights and
scoreboards for up to the minute,
visual line status.
•
• 10. Keep it simple
• There are many reasons to keep
simple:
• low/no maintenance, ease to
reconfigure, low first cost,
economical operation.
• Don’t make it more complicated
than you really need, there may
not be a pay back.
 Lean concepts
• Push & Pull system
• 5S
• Total Preventive Maintenance(TPM)
• Kanban System.
 Push & Pull system
• "Push type" means Make to Stock in which the
production is not based on actual demand.
• This means that production happens based on
demand forecast
• "Pull type" means Make To Order in which the
production is based on actual demand
• Goods are produced in the amount and time
needed.
 Push system
• Push System – No dependency on Demand nor limits on
WIP
• A company using the push system will forecast demand and
employ the Material Requirements Planning (MRP) process
to produce goods and services ahead of time.
• This is related to the Just-in-Case concept.
• This forecast may not always be accurate and will require
inventory stockpiling, but it remains a useful strategy for
products that tend to have a lot of work in progress (WIP)
or long lead times.
• The push system is particularly useful for products with low
demand uncertainty or with high importance of economies
of scale in reducing costs.
• Goods are produced under the master production schedule
with no regard to the current status.
 Pull system
• Pull System – Dependent on Demand and limitations to
WIP
• The Pull System is a lean manufacturing method that uses
the Just-in-Time strategy of not producing goods until an
order is received. Instead of forecasting demand, the pull
system produces ‘as needed’.
• This is particularly useful for companies that deal with high
demand uncertainty, low product mix, and low importance
of economies of scale.
 Hybrid Push-pull Strategy
• Most companies have some sort of a hybrid of the two, on a
spectrum between the two ends.
• The push-pull strategy is usually suggested for products with high
demand uncertainty and high importance of economies of scale.
• Example
• Dell pre-orders and stocks up on raw materials and components.
• However, from this point on, they do no produce their computers
until an order is actually placed.
• They initially “push”, but then switch to “pull’’ in the production and
assembly process
 5S Concepts
 1. Sort (Seiri)
Separate needed from unneeded items, eliminate what isn’t
needed
 2. Set in Order (Seiton)
Neatly arrange what is left after sorting – a place for everything,
everything in its place
 3. Shine (Seiko)
Clean, wash & inspect the work area
 4. Standardise (Seiketsu)
Create a standard practice for the above, this results in
cleanliness from regular performance of the first three S
 5. Sustain (Shitsuke)
This is being disciplined to continuously perform the first four S
 Total Productive Maintenance (TPM)
In a factory, sudden breakdown of the machine
results in substantial loss of production.
Before the machine actually breaks down, it
produces lots of products which are substandard in
terms of quality due to deteriorating condition of
the machine tools.
The cost of breakdown maintenance is higher than
the cost of preventive maintenance.
This is the concept of Total Productive
Maintenance.
Developed by Japan Institute of Plant Maintenance (JIPM)
TPM is a maintenance programme that involves a newly-
defined concepts for maintaining plants and equipments.
It strives to maintain optimum equipment conditions in
order to prevent unexpected breakdowns, speed losses
and quality defects arising from process activities.
Objectives, Fundamental Elements, Total Preventive
Maintenance, Components
 Objectives of TPM
 To maximise overall equipment effectiveness (OEE)
 It establishes a thorough system of planned maintenance (PM)
for the equipments entire lifespan.
 It should be implemented by cross-functional teams from
various department.
 It involves every single employee from the top management to
workers on the shop floor.
 It is based on the promotion of planned maintenance through
autonomous small group activities
 To avoid six big losses:
 i) Break down ii) Set up and adjustment iii) Reduced speed iv)
Idling and minor v) Rejects and rework vi) Start-up loss
 Overall Equipment Effectiveness (OEE)
 Overall Equipment Effectiveness or OEE is a TPM measure as to how
effectively equipment is being used. OEE is calculated using three
elements; the availability rate, the performance rate and the quality rate.
 Availability Rate (A)
 downtime losses from equipment failures and adjustments as a percentage of
scheduled time
 Performance Rate (P)
 operating speed losses; running at speeds lower than the design speeds and
any stops that last a few seconds
 Quality Rate (Q)
 losses due to scrap and rework as a percentage of total parts run
 These three elements are used to calculate OEE with the following
formula:
 OEE = A x P x Q
 8 Pillars of TPM
 1. Autonomous Maintenance (Jishu Hozen)
Developing the operators to take care of small maintenance work
 2. Focused Improvement (Kobetsu Kaizen)
To achieve and sustain zero loss with respect to minor stops, defects
and unavoidable downtimes.
 3. Planned Maintenance
Aimed to have a trouble-free machines and equipments producing
defect-free products for total customer satisfaction
 4. Quality Maintenance (Hinshitsu Hozen)
Focus on setting equipment conditions that preclude quality defects
based on the concept of maintaining perfect equipment to maintain
perfect quality
5. Education and training
To have multi-skilled revitalised employees by giving training to
upgrade their skills
6. Development management
Reduces the time taken to receive, install and set up newly
purchased equipment
7. Safety, Health and Environment
To achieve zero accidents, zero-health damage and zero-fires
8. Office TPM
Focuses upon improving the productivity and infusing efficiency
in the administrative support functions of the organisation
 Total Preventive Maintenance
Total Preventive Maintenance (TPM) is a production
management approach that places the responsibility for
routine maintenance on the workers who operate the
machinery, rather then employing separate maintenance
personnel for that function.
Used in many Japanese companies, TPM gives
employees "a sense of responsibility and awareness of
the equipment they use and [cuts] down on abuse and
misuse of the equipment,
Preventive maintenance is performed periodically in
order to reduce the incidence of equipment failure and
the costs associated with it.
 Kanban
• Kanban is a workflow management method for defining,
managing and improving services that deliver knowledge
work.
• It aims to help you visualize your work, maximize efficiency,
and improve continuously.
• From Japanese, kanban is translated as billboard or
signboard.
• Originating from manufacturing, it later became a territory
claimed by Agile software development teams
 Kanban
• Kanban was developed for workflow visualization to
improve efficiency.
• Visualization. You can visualize all of your tasks and map
every step of the process you are following on a Kanban
board.
• This way you can never forget about something that’s
waiting on you.
• This visual management board will make your life much
easier.
• •
• Establishing flow. With a Kanban board, you can see where
work is piling up.
• Organizing yourself to keep work moving through the
system in an orderly fashion improves your work and makes
you a more valuable teammate.
• Limiting WIP. A Kanban system only allows you to take on a
limited amount of work at a time.
• Limiting the work in progress reduces multi-tasking and
distractions, keeping you focused on one thing at a time
and improving your overall productivity.
 Manufacturing Information system and Operations
Management
• IT operations management (ITops) refers to the unified information
technology strategy of a company or other complex organization
including the business management teams, programming talent, and
systems administration employees required for maintaining services
24/7/365 in required operations.
• IT operations management organizes the hardware, software, and
talent resources of a business to function in support of services or
manufacturing.
• This requires desktop, mobile, web server, cloud, PaaS/SaaS, and
other resources to be purchased, configured, and maintained in use
by professional staff.
• It is concerned with the totality of computer, cloud, software,
networking, etc. resources required for the internal business
operations, productivity, and customer support of a complex
organization.
• Best practices in IT operations management revolve around building
the most cost-efficient solution for any size organization according to
the unique requirements of production, office support, software
development, cloud hosting, etc.
• Often this involves decision making on hardware purchases, software
platforms for installation, operating systems, service providers, or
third-party software services.
 DSS for Operations Management
• A decision support system (DSS) is a computerized program
used to support determinations, judgments, and courses of
action in an organization or a business.
• A DSS sifts through and analyzes massive amounts of data,
compiling comprehensive information that can be used to
solve problems and in decision-making.
• Typical information used by a DSS includes target or
projected revenue, sales figures or past ones from different
time periods, and other inventory- or operations-related
data.
 Understanding a Decision Support System
• A decision support system gathers and analyzes data,
synthesizing it to produce comprehensive information
reports.
• In this way, as an informational application, a DSS differs
from an ordinary operations application, whose function is
just to collect data.
• The DSS can either be completely computerized or
powered by humans.
• In some cases, it may combine both.
• The ideal systems analyze information and actually make
decisions for the user.
• At the very least, they allow human users to make more
informed decisions at a quicker pace.
 Using a Decision Support System
• The DSS can be employed by operations management and
other planning departments in an organization to compile
information and data and to synthesize it into actionable
intelligence.
• In fact, these systems are primarily used by mid- to upper-
level management.
• For example, a DSS may be used to project a company's
revenue over the upcoming six months based on new
assumptions about product sales.
• Due to a large number of factors that surround projected
revenue figures, this is not a straightforward calculation
that can be done manually.
• However, a DSS can integrate all the multiple variables and
generate an outcome and alternate outcomes, all based on
the company's past product sales data and current
variables.
• A DSS can be tailored for any industry, profession, or
domain including the medical field, government agencies,
agricultural concerns, and corporate operations.
 Characteristics of a Decision Support System
• The primary purpose of using a DSS is to present information to the
customer in an easy-to-understand way.
• A DSS system is beneficial because it can be programmed to generate
many types of reports, all based on user specifications.
• For example, the DSS can generate information and output its
information graphically, as in a bar chart that 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.
 Characteristics of a Decision Support System
• Certain DSS applications are also available through mobile devices.
• The flexibility of the DSS is extremely beneficial for users who travel
frequently.
• This gives them the opportunity to be well-informed at all times,
providing the ability to make the best decisions for their company
and customers on the go or even on the spot.
• Certain DSS applications are also available through mobile devices.
• The flexibility of the DSS is extremely beneficial for users who travel
frequently.
• This gives them the opportunity to be well-informed at all times,
providing the ability to make the best decisions for their company
and customers on the go or even on the spot.
 Decision Support System Categories
• 1. Model-driven DSS
• A model-driven DSS was based on simple quantitative models.
• It used limited data and emphasized manipulation of financial
models.
• A model-drive DSS was used in production planning, scheduling and
management.
• It provided the most elementary functionality to manufacturing
concerns.
• 2. Data-driven DSS
• Data-driven DSS emphasized the access and manipulation of data
tailored to specific tasks using general tools.
• While it also provided elementary functionality to businesses, it
relied heavily on time-series data.
• It was able to support decision making in a range of situations.
• 3. Communication-driven DSS
• It uses communication and network technologies to facilitate decision
making.
• It made use of a variety of tools including computer-based bulletin
boards, audio and video conferencing.
• 4. Document-driven DSS
• It uses large document databases that stores documents, images,
sounds, videos and hypertext docs.
• It has a primary search engine tool associated for searching the data
when required.
• The information stored can be facts and figures, historical data,
minutes of meetings, catalogs, business correspondences, product
specifications, etc.
• 5. Knowledge-driven DSS
• Knowledge-based DSS are human-computer systems that come with
a problem-solving expertise.
• These combine artificial intelligence with human cognitive capacities
and can suggest actions to users.
• The notable point is that these systems have expertise in a particular
domain.
• 6. Web-based DSS
• Web-based DSS is considered most sophisticated decision support
system that extends its capabilities by making use of worldwide web
and internet.
• The evolution continues with advancement in internet technology.