UNIT 1

Operations management
Operations management is an area of business concerned with the production of goods and
services, and involves the responsibility of ensuring that business operations are efficient in
terms of using as little resource as needed, and effective in terms of meeting customer
requirements. It is concerned with managing the process that converts inputs (in the forms
of materials, labour and energy) into outputs (in the form of goods and services).

Pre-industrial revolution
According to Smith, if workers divided their tasks, then they could produce their products
more efficiently than if the same number of workers each built products from start to finish.
This concept would later be used by Henry Ford with the introduction of the assembly line.
post-industrial revolution
Despite this growth, there was considerable inefficiency in production. Taylor developed a
scientific approach for operations management, collecting data about production, analysing
this data and using it to make improvements to operations. Ford increased efficiency in
production by introducing assembly line production and improved the supply chain through
just-in-time delivery.
post-world war ii
Technological developments during the second world war created new possibilities for
managers looking to improve their operations. The abilities of computers have continued to
increase exponentially, allowing for a high degree of data analysis and communication.
Modern producers are now able to track their inventory from raw materials, through
production and delivery.
modern day
Quality management systems are popular in today's operations management. A variety of
quality management systems are in use among top firms, the most notable systems being
the ISO systems and Six Sigma. Although operations management has typically dealt with
the manufacturing process, the growth of the service industry has created a field of service
operations management.

The evolution of operation management (OM) in terms of changes in approaches for

manufacturing and operations, can be summarized as
Focus on efficiency
As international Trade grew the emphasis on operations efficiency the cost reduction
increased. Many companies moved their factories to low-wage countries. Technology was
viewed primarily as a method of reducing costs and distracted from the importance of
improving quality.
Quality revolution
US consultants told that continual improvement of quality would open world markets, free
up capacity and improve the economy. They embarked on a massive effort to train the
workforce, using statistical tools to identify causes of quality problems and fix them; so that
the made steady progress in reducing defects and paid attention to consumer needs.
Customization and design
As the goals of low cost and high quality became given , companies began to emphasize
innovative designs and product features to gain a competitive edge. Quality meant much
more than simply defect reduction; quality meant offering consumer new and innovative
products , not only meeting their needs but surprising and delighting them .
Time–based competition
Companies have to respond quickly to changing customer needs to win competitive
advantage. That task includes developing products faster than competitors, speeding
ordering and delivering process, rapidly responding to changes in customers’ needs and
improving the flow of paperwork. As information technology matured, time became an
important source of competitive advantage.

Service revolution
While the goods-producing industries were getting all the attention in the business
community, the popular press and in business school curricula, service industry were quietly
growing and creating many jobs.

Processes in Operations Management

Operations management is a field of business that involves managing the operations of a
business to ensure efficiency in the execution of projects. It means that the individual in
charge of the department will be required to perform various strategic functions. Some of
the functions include:
1. Product Design
Product design involves creating a product that will be sold to the end consumer. It involves
generating new ideas or expanding on current ideas in a process that will lead to the
production of new products. The operations manager’s responsibility is to ensure that the
products sold to consumers meet their needs, as well as match current market trends.
Consumers are more interested in the quality of the product more than the quantity, and
the organization should create systems that ensure the products produced meet the needs
of the consumer.
2. Forecasting
Forecasting involving making predictions of events that will occur in the future based on
past data. One of the events that the operations manager is required to predict is the
consumer demand for the company’s products.
The manager relies on past and present data on the uptake of the company’s products to
determine future trends in consumption. The forecasts help the company know the volume
of products needed to meet the market demand.
3. Supply Chain Management
Supply chain management involves managing the production process from raw materials to
the finished product. It controls everything from production, shipping, distribution, to
delivery of products.
The operations manager manages the supply chain process by maintaining control of
inventory management, the production process, distribution, sales, and sourcing of
suppliers to supply required goods at reasonable prices. A properly managed supply chain
process will result in an efficient production process, low overhead costs, and timely
delivery of products to consumers.
4. Delivery Management
The operations manager is in charge of delivery management. The manager ensures that the
goods are delivered to the consumer in a timely manner. They must follow up with
consumers to ensure that the goods delivered are what the consumers ordered and that
they meet their functionality needs.
If the customer is unsatisfied with the product or is complaining about certain features of
the product, the operations manager receives the feedback and forwards it to the relevant
departments.

Definition of Operations management

Operations management is the administration of business operations within an enterprise
to achieve the best quality products and services. It is, therefore, involved with the most
effective conversion of materials and labour into products and services to maximise an
organization's profitability. Operations management teams aim to make the maximum net
operational profit viable by balancing the expenses and income.

Facility Location
There are many factors that can determine where an organization will locate its facilities.
For any given situation, some factors become more important than others in how facility
location affects an organization’s performance. For example, when a company needs to
open a new manufacturing facility, there are several factors that determine which location
reduces the company’s operating costs while providing a great level of responsiveness to
the market.
Key Factors in Facility Location Decision-Making
Proximity to sources of supply:
Firms that process bulk raw materials usually locate close to the source of supply to reduce
transportation costs. Paper mills locate close to forests, canneries are built close to farming
areas, and fish processing plants are located close to the harbors where the fishing vessels
dock.
Proximity to customers:
There are several reasons why an organization would locate close to end customers. Service
firms need to be close to customers to be convenient, as is the case for grocery stores, gas
stations, fast food restaurants, and hospitals. Transportation costs can also require
proximity to customers, as in the case of concrete manufacturing. Perishable products often
require that they be produced close to the final market, as is the case for bakeries and fresh
flowers.
Community factors:
Communities may offer a number of incentives to entice companies, including waiving or
reducing taxes, and providing access roads, water and sewer connections, and utilities.
Community attitudes can also play a role in an organization’s location decision. Some
communities may actively discourage companies that might bring more pollution, noise, and
traffic to the area. Some communities may not want a prison to be located in their
community. Other communities may welcome such firms because of the jobs, tax revenues,
and economic diversity they promise.
Labor factors:
Research shows that the majority of location decisions are largely based on labor factors,
since labor is a critical variable for many firms. Labor factors include the prevailing wage rate
in a community for similar jobs, the supply of qualified workers, and the average education
level of the local population (percentage of high school graduates, etc.). Other labor factors
can include the degree of union organizing and the general work ethic of a community, as
well as other measures of absenteeism, and worker longevity in a job can play a strong role
when a firm makes a location decision.
.

Five Types of Manufacturing Processes

As mentioned in the definitions of manufacturing operations, two key phrases are
emphasized: (1) manufacturing processes; and (2) production performance. There are 5
types of manufacturing processes that manufacturers use depending on the kind of goods
they are producing. They are:
Repetitive Manufacturing (REM)—this is a type of manufacturing process wherein same (or
similar) goods are produced in a rapid succession following a repetitive or ongoing sequence
over a lengthy period of time; this often means that goods are manufactured with an
automated assembly line process.
Examples: REM is often used in the automotive and electronics manufacturing industries
and by businesses utilizing a make-to-stock production strategy.
Discrete manufacturing—this is a type of manufacturing process wherein goods are also
produced in an assembly line; but unlike repetitive manufacturing, this allows for
modifications, additional set-up, or removal in a product that may take longer production
time.
Examples: Discrete manufacturing involves parts and systems like nuts and bolts, brackets,
wires, assemblies and individual products.
Job shop manufacturing—this is a type of manufacturing process wherein production is
done in multiple designated workstations or workshops instead of a single assembly line.
This process is also used in cases wherein the manufacturing of products needs to be done
by highly-trained workers, such as in the manufacturing of items used in the aerospace and
defense industries which require intensive quality control or high-quality build.
Examples: Manufacturing custom cabinets—wherein workers do their task in their
workstations; one group may be in charge with the sawing of lumber, another workstation
for putting hinges and pulls, and another one for finishing or polishing with varnish or
lacquer, until the final phase is reached.
Continuous process manufacturing—this is a type of manufacturing process that is quite
similar to repetitive manufacturing, with the only difference being that this process is used
for raw materials that are commonly gases, liquids, and powders.
Examples: Continuous process manufacturing is mostly being used by oil refineries or by the
manufacturers of food products such as tomato sauce, juice, and peanut butter.
Batch process manufacturing—this is a type of manufacturing wherein products are
produced in batches.
Examples:
Food production
Newspaper printing
Bookbinding
Depending on your manufacturing business and the type of product you are seeking to
produce, the manufacturing process you choose will be different from that of other
businesses and the manufacturing of other products. In some situations, a combination of
multiple manufacturing processes may even be beneficial.
Facility Layout. https://courses.lumenlearning.com/wm-introductiontobusiness/chapter/
facility-location-and-layout/
After the site location decision has been made, the next focus in production planning is the
facility’s layout. The goal is to determine the most efficient and effective design for the
particular production process. A manufacturer might opt for a U-shaped production line, for
example, rather than a long, straight one, to allow products and workers to move more
quickly from one area to another.
There are four main types of facility layouts: process, product, fixed-position, and cellular.

The process layout arranges workflow around the production process. All workers
performing similar tasks are grouped together. Products pass from one workstation to
another (but not necessarily to every workstation). For example, all grinding would be done
in one area, all assembling in another, and all inspection in yet another. The process layout
is best for firms that produce small numbers of a wide variety of products, typically using
general-purpose machines that can be changed rapidly to new operations for different
product designs. For example, a manufacturer of custom machinery would use a process
layout.
Products that require a continuous or repetitive production process use the product (or
assembly-line) layout. When large quantities of a product must be processed on an ongoing
basis, the workstations or departments are arranged in a line with products moving along
the line. Automobile and appliance manufacturers, as well as food-processing plants, usually
use a product layout. Service companies may also use a product layout for routine
processing operations.

Product, or assembly line, layout. Assembly of flat screen televisions.

Some products cannot be put on an assembly line or moved about in a plant. A fixed-
position layout lets the product stay in one place while workers and machinery move to it
as needed. Products that are impossible to move—ships, airplanes, and construction
projects—are typically produced using a fixed-position layout. Limited space at the project
site often means that parts of the product must be assembled at other sites, transported to
the fixed site, and then assembled. The fixed-position layout is also common for on-site
services such as housecleaning services, pest control, and landscaping.

UNIT 2
Characteristic aspects within service operation are as under:
1. Perishability:
Service is highly perishable and time element has great significance in service marketing.
Service if not used in time is lost forever. Service cannot stored.
2. Fluctuating Demand:
Service demand has high degree of fluctuations. The changes in demand can be seasonal or
by weeks, days or even hours. Most of the services have peak demand in peak hours,
normal demand and low demand on off-period time.
3. Intangibility:
Unlike product, service cannot be touched or sensed, tested or felt before they are availed.
A service is an abstract phenomenon.
4. Inseparability:
Personal service cannot be separated from the individual and some personalised services
are created and consumed simultaneously.
For example hair cut is not possible without the presence of an individual. A doctor can only
treat when his patient is present.
5. Heterogeneity:
The features of service by a provider cannot be uniform or standardised. A Doctor can
charge much higher fee to a rich client and take much low from a poor patient.
6. Pricing of Services:
Pricing decision about services are influenced by perishability, fluctuation in demand and
inseparability. Quality of a service cannot be carefully standardised. Pricing of services is
dependent on demand and competition where variable pricing may be used.
7. Service quality is not statistically measurable:
It is defined in form of reliability, responsiveness, empathy and assurance all of which are in
control of employee’s direction interacting with customers. For service, customers
satisfaction and delight are very important. Employees directly interacting with customers
are to be very special and important. People include internal marketing, external marketing
and interactive marketing.

Customer contact in services

customer contact refers to the physical presence of the customer in the system, and
creation of the service refers to the work process that is entailed in providing the service
itself. Extent of contact here may be roughly defined as the percentage of time the
customer must be in the system relative to the total time it takes to serve him. Obviously,
the greater the percentage of contact time between the service system and the customer,
the greater the degree of interaction between the two during the production process.

What Is Quality Management?

Quality management is the act of overseeing all activities and tasks that must be
accomplished to maintain a desired level of excellence. This includes the determination of a
quality policy, creating and implementing quality planning and assurance, and quality
control and quality improvement. It is also referred to as total quality management (TQM).

Terminology
Competence: The competence requirements of a job are the required employee skills
needed to adequately perform the job. The competence of the employee is the ability of
their known skills and experience to satisfy the requirements of the job. Conformity /
Nonconformity / Defect: Conformity is the ability of a process output to satisfy the
requirements it is desired to meet. Conformity is when the output meets the requirements,
and inversely, nonconformity is when the output fails to meet one or more requirements.
Correction: When a nonconformity occurs, there are steps taken to correct the immediate
problem. If a document is incorrect, an update is done on the document. If a drawing is
wrong, the drawing is corrected. This addresses the immediate problem so that work can
continue.
Corrective Action: When a nonconformity occurs that is systemic in nature, it is important
to correct not only the immediate problem, but to find what the root cause of the problem
is and correct it. The actions taken to correct the root cause of a problem are called a
corrective action
Customer Satisfaction: Customer satisfaction is how much your customer perceives that
your product or service has met their requirements. This deals more with the way that a
customer has interpreted the outcome of your product or service delivery than it does with
how much you feel that your product or service has met every requirement stated.
Design Verification / Design Validation: Design verification is the act of taking the design
outputs (drawing, specification, plans, documents, etc.) and comparing them to the design
inputs (requirements for the design) to make sure that all requirements are met.
Effectiveness: A comparison of the actual results and the planned activities. The
effectiveness is how well the activities met the plan.
Efficiency: A comparison of the results achieved and the resources needed to achieve the
results. A process can be effective, but if it takes too many resources to achieve the results,
the process may not be considered efficient.
Infrastructure: The physical surroundings required for a business such as buildings, utilities,
process equipment, transportation services and IT systems.
PDCA Cycle: Plan-Do-Check-Act (also called PDCA) is a cycle that was originated by Walter
Shewhart and made popular by Edward Deming – two of the fathers of modern quality
control. This concept is a cycle for implementing change which, when followed and
repeated, would lead to repeated improvements in the process .
Preventive Action: A preventive action takes the same steps as a corrective action in
correcting the root cause of a problem. However, it does so when the problem has not yet
occurred as a nonconformity and is still a potential problem.
Procedure / Documented Procedure: The way that is specified to perform an activity or
process. A procedure is a list of steps to take to make a process work properly, but need not
be documented unless required. For a greater understanding of what needs to be
documented, take a look at Mandatory Documentation Required by ISO 9001:2008.
Process Approach: Looking at an overall system as smaller, interrelated processes to focus
efforts toward more consistent and predictable results on the individual processes of the
system. Controlling and improving the individual processes can be a much easier and more
effective way to control and improve the entire system.
Quality Management System: A Quality Management System, often called a QMS, is a set
of internal rules that are defined by a collection of policies, processes, documented
procedures and records. This system defines how a company will achieve the creation and
delivery of the product or service they provide to their customers. For more details, see
What is a Quality Management System.
Quality Manual: The Quality Manual is a document that defines the scope of the
organization’s quality management system (including exclusions from the ISO 9001
requirements), lists or includes the documented procedures that are established for the
QMS, and provides a description of how the processes of the QMS interact.
Quality Policy/Quality Objectives: The Quality Policy comprises the overall goals, intentions
and direction that the management of an organization has identified for quality. Quality
objectives are specific goals designed to support the overall Quality Policy and are specified
for relevant employees and departments throughout the organization.
Regrade: A decision taken on nonconformity products or services to use them for another
purpose than that intended. A good example of this is when a store offers “seconds,” or
their products that contain a defect and are reduced in price.
Rework / Repair: Actions taken on a nonconforming product or service that will make it
usable. A rework will cause the resulting product or service to fully meet requirements,
while a repaired product or service will be usable, but will still fail to meet some
requirements.
Risk: The result of uncertainty, or the chance that an event will occur. Assessing what to do
with a risk involves predicting the resulting outcome of the potential event and deciding
what to do about it should it occur. For more ideas on how this works, see The role of Risk
Assessment in the QMS.
Scrap: A decision to dispose of nonconforming material that is unusable in any form. This
may include salvage of some parts.
Traceability: The ability to track the history of a part or service. Depending on requirements,
this can include being able to identify each sub-component and material batch that is used
within a larger product.
Work Environment: The conditions within the company infrastructure that are needed to
achieve conforming products or services. This is determined by the company and can
include temperature, humidity, lighting, weather protection and noise.

Quality Management System Implementation Parameters

Create Strategies with Goals in Mind
A proper quality management system, in its most primitive form, is an organizational
strategy. Just like every other organizational strategy, a quality management system will
also need goals and objectives to function effectively. You should list the ultimate goal for
the project, which could be ensuring the quality of products. However, short-term goals
should also be considered to arrive at actionable. Quality management functions efficiently
when company leadership has a long-term vision for the whole process. With that vision as
a guiding light, developing a world-class quality management system won’t be an issue.
Well-drafted Staff Training
A quality management process is dependent on how you train your team to perform. Most
small businesses won’t have experienced staff, and this lack of experience will show itself in
the process. Companies should take the effort to spend resources on training staff. Training
need not be unnecessarily expensive. There are various affordable tools, including online
manuals that can help your staff with training. Simplify your business with ISO 9001 to
standardize the process. Expect the staff training process to be something that continues for
years, and that is in constant need of improvement.
Focus on Customer Needs
Quality assurance is carried out to make sure your customers are satisfied, in addition to
adhering to regulations as well. Therefore, the strategy you have to follow from the
beginning should have a strong customer focus. Your company should determine, based on
available data, who exactly your customer base is. Then, based on this data, find out what
these customers might expect from your products in terms of quality. This strategy focuses
on customer intentions and needs and thus help you identify the core aspects of a
successful quality management system.
The Merits of a Strong Leadership
Many organizations make the mistake of leaving quality management strategies under the
control of low-level managers. A complex process such as this requires strong leadership on
its own. The system would need a senior manager or an executive to take care of the entire
management process. The supervisors at the top should be responsible for planning for
things ahead and setting policies that help to satisfy the core goal or vision. A quality
management plan can easily lose track without oversight from the leadership.
What Is Quality Control (QC)?
Quality control (QC) is a process through which a business seeks to ensure that product
quality is maintained or improved. Quality control requires the company to create an
environment where management and employees strive for perfection. This is done by
training personnel, creating benchmarks for product quality, and testing products to check
for statistically significant variations.
Why Is QC Needed?
Creating a product is costly, time-consuming, and can be unsafe without controls in place.
Additionally, if a company sends defective products out for purchase, it could be held liable
for injuries or issues that arise from using its products. Quality control inspectors ensure
that defective or unsafe products are identified, and the causes are corrected.
How Is It Done?
Quality testing is generally completed in each step of a manufacturing or business process.
Employees often begin by testing raw materials, pulling samples from the manufacturing
line, and testing the finished product. Testing at the various stages of manufacturing helps
identify where a production problem is occurring and the remedial steps it requires to
prevent it in the future.

What Is Total Quality Management (TQM)?

Total quality management (TQM) is the continual process of detecting and reducing or
eliminating errors in manufacturing, streamlining supply chain management, improving the
customer experience, and ensuring that employees are up to speed with training. Total
quality management aims to hold all parties involved in the production process accountable
for the overall quality of the final product or service.
Pros
 Delivers stronger, higher quality products to customers
 Results in lower company-wide costs
 Minimizes waste throughout the entire production and sale process
 Enables a company to become more adaptable
Cons
 May require substantial financial investment to convert to TQM practices
 Often requires conversion to TQM practices over a long period of time
 Requires company-wide buy-in to be successful

Total Quality Control (TQC) is the practice of the quality control and management that is to
develop, design, produce and service a quality product from design to delivery it with the
most economical, useful, and satisfactory to the consumer. A TQC is the application of
quality management principles to all areas of business that approaches to the long-term
business success with continuous improvement in all aspects of an organisation as a
standard process.

1. Grid Layout
Characteristics include having retail fixtures (gondolas) placed in long rows - also known as
‘runs’. These gondolas are also usually located at right angles throughout the store, which
allows shoppers to become familiar with the location of products.
If executed correctly, you’ll enable your customers to shop your entire store.
Advantages
Your store is well organised and has an atmosphere of efficiency, which leads to customer
familiarity;
The maximum amount of floor space is used at a lower cost; and
It’s easier for merchandisers to stock your shelves.
Disadvantages
The many rows in your store can give off a cold and sterile atmosphere while it’s also
difficult to see over your rows.
There are few opportunities for special displays, and your store can appear plain and
uninteresting to customers.
This layout can stimulate rushed shopping behaviour.
Loop Layout In A Retail Store

2. Loop Layout
The second store layout option available to you is the loop layout, which is also known as
the race track layout.
Loop Layout Definition
In fact, there is a reason why it’s called the loop layout as you can direct your customers in a
so-called ‘closed loop’ around your store, guiding them past all your products before
arriving at your check-out counter.
Advantages
You have an opportunity to create unique displays for your store;
It allows for a friendly and relaxed atmosphere; and
Your customers are exposed to more of your merchandise.
Disadvantages
In using this design format, you can often waste your selling space;
It doesn’t encourage your customers to browse;
It can be frustrating for customers who know what they want to buy.
Free Flow Layout In A Retail Store

3. Free-flow layout
Considered the simplest type of store layout, your free-flow layout groups your fixtures and
merchandise into a free-flowing pattern on your sales floor.
Free Flow Store Layout Definition
That makes it seem like there are no rules for this layout, but that’s not true. There are rules
but just not as many.
Ironically, this can be the most complex layout to master considering that you need to keep
your customer’s behaviour and buying patterns in mind.
Are you setting up your store plan but not sure where to begin? Just a note of warning:
should you have a wide variety of merchandise, this layout fails to provide cues to your
customers for them to know where one department ends and another one begins.
Advantages
This layout allows your customers to browse and wander freely;
It leads to an increase in impulse buying as customers are exposed to more merchandise;
and.
Your store is visually appealing as there is an opportunity to create unique and exciting
displays.
Disadvantages
You don’t make the most of your floor space.
Your stock control and handling are more complex than other layouts.
Loitering is encouraging, which can confuse your customer.
Herringbone Layout In A Retail Store

4. Herringbone Layout
While your grid layout may be the most used layout form for retailers, if you have a small
retail space, it might not make sense.
That is where your Herringbone layout comes in. It’s best used for retail spaces that are
both narrow and very long.
Herringbone Layout Definition
To keep your customers in your store, you can also break up your space by offering areas to
relax, such as a chair in a bookstore or a bench in a shoe shop.
Advantages
Best suited to stores with a lot of products on their shelves but with minimal space;
It adds visual appeal to your store; and
You can maximise your retail floor space.
Disadvantages
Limited visibility of all your paths can allow for an increase in shoplifting;
This layout can make your store feel cramped;
There is limited scope for browsing.
UNIT 3
Resource Planning – MRP sheet (L4L)
Resource Planning is a process of identifying, forecasting, and allocating various types of
business resources to the projects at the right time and cost. It also ensures the efficient and
effective utilization of resources across the enterprise. These business resources can be
human resources, equipment, assets, facilities, and more.
In other words, it’s the process of strategic planning to make the best use of resources
depending on their capacity and availability by following a systematic process.

MRP helps businesses and manufacturers define what is needed, how much is needed, and
when materials are needed and works backward from a production plan for finished goods.
What Are the 3 Main Inputs for MRP?
The three basic inputs of an MRP system include the Master Production Schedule (MPS),
Inventory Status File (ISF), and Bill of Materials (BOM).
How Does MRP Benefit a Business?
MRP ensures that materials and components are available when they're needed, inventory
levels are optimized, manufacturing efficiency is improved, and customer satisfaction
increases.
What Are the Outputs of an MRP System?
Using required inputs, the MRP calculates what materials are needed, how much is needed
to complete a build, and exactly when materials are needed in the build process.
Advantages and Disadvantages of MRP
Pros
Materials and components are available
when needed
Minimized inventory levels and associated
costs
Reduced customer lead times
Increased manufacturing efficiency
Increased labor productivity
Cons
Heavy reliance on input data accuracy
Expensive to implement
Lack of flexibility in the production schedule
Tendency to hold more inventory than
needed
Less capable than an overall ERP system

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Scheduling of Operations
Scheduling is the process of arranging, controlling and optimizing work and workloads in a
production process or manufacturing process. Scheduling is used to allocate plant and
machinery resources, plan human resources, plan production processes and purchase
materials. Scheduling brings order to what would otherwise be a chaotic situation.
Designing and sticking to a schedule is an everyday activity for most people.
If the operations scheduling is carried out in an efficient manner, then there occurs a
considerable improvement in the performance in the delivery. Also helps in the
achievement of the goals that have been set by the company. Efficient operations
scheduling playa a very critical part in the reduction of the production lead times.

Objectives of the Operations Scheduling.

 Making efficient use of the labour.
 Making best possible use of the equipment that are available for the use.
 Increasing the profit.
 Improving the service level.
 Maximizing the delivery performance i.e. meeting the delivery dates.
 Reducing the manufacturing time.
 Minimizing the production costs.
 Minimizing the worker costs.

Functions of the operations scheduling

 Allocation of the resources.
 Making maximum use of the plant at minimum possible cost.
 Ensure that the needs of the manpower are optimum.
 Specifying the start and the end time for each job (actively scheduled).
 Getting quick feedback from the shops regarding the delays and the various
interruptions.
 Possess up – to – date information for the availability of the materials, expected
delivery dates etc.
 Possess up – to – date data on the machine regarding its breakdown, servicing etc.

What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves the
active streamlining of a business's supply-side activities to maximize customer value and
gain a competitive advantage in the marketplace.
5 Parts of SCM
The supply chain manager tries to minimize shortages and keep costs down. The job is
not only about logistics and purchasing inventory.
In SCM, the supply chain manager coordinates the logistics of all aspects of the supply
chain which consists of the following five parts.
Planning
To get the best results from SCM, the process usually begins with planning to match
supply with customer and manufacturing demands. Firms must predict what their future
needs will be and act accordingly.
Sourcing
Efficient SCM processes rely very heavily on strong relationships with suppliers. Sourcing
entails working with vendors to supply the raw materials needed throughout the
manufacturing process. A company may be able to plan and work with a supplier to
source goods in advance
Manufacturing
At the heart of the supply chain management process, the company transforms raw
materials by using machinery, labor, or other external forces to make something new.
This final product is the ultimate goal of the manufacturing process, though it is not the
final stage of supply chain management. The manufacturing process may be further
divided into sub-tasks such as assembly, testing, inspection, or packaging. During the
manufacturing process, a firm must be mindful of waste or other controllable factors
that may cause deviations from original plans.
Delivering
Once products are made and sales are finalized, a company must get the products into
the hands of its customers. The distribution process is often seen as a brand image
contributor, as up until this point, the customer has not yet interacted with the product.
In strong SCM processes, a company has robust logistic capabilities and delivery
channels to ensure timely, safe, and inexpensive delivery of products.
Returning
The supply chain management process concludes with support for the product and
customer returns. Its bad enough that a customer needs to return a product, and its
even worse if its due to an error on the company's part. This return process is often
called reverse logistics, and the company must ensure it has the capabilities to receive
returned products and correctly assign refunds for returns received.

Vendor Management:
Vendor management is a term that describes the processes organizations use to manage
their suppliers, who are also known as vendors. Vendor management includes activities
such as selecting vendors, negotiating contracts, controlling costs, reducing vendor-
related risks and ensuring service delivery.
 The Six Stages of Vendor Management
Most vendor management strategies are broken into six distinct stages that help
organize and solidify a buyer’s relationship with suppliers. In chronological order, these
are:
Establish business goals: Before enlisting the help of a vendor, establish SMART goals so
both you and your prospects understand what needs to get done.
Vendor locating and selecting: Thoroughly analyze every vendor prospect to ensure that
they have the resources, experience, and personnel to satisfy your goals and KPIs.
Risk assessment: Exercising due diligence to ensure that every prospect is transparent
regarding key metrics such as total annual spend, on-time delivery rates, and aggregated
internal risk assessments.
Contract negotiation: Reach mutually beneficial contract terms and agree upon risk KPIs
for performance monitoring.
Supplier onboarding: Collecting the documentation required to process and set up a
company as an approved vendor.
Risk mitigation and monitoring: Collect necessary data for frequent, ongoing risk
reporting and ensure vendor due diligence.

UNIT 4

Inventory planning
Inventory planning is the process of determining the optimal quantity and timing of
inventory for the purpose of aligning it with sales and production capacity. Inventory
planning affects a company's cash flow and profits while contributing to an efficient supply
chain.
What is inventory?
Inventory is everything a company utilizes to sell or produce products, from finished goods
and parts to raw materials. And depending on what goods or services your business
provides, inventory can be anything from bananas to nails to raw silk to priceless works of
art. Usually, inventory is managed via an inventory management system: a sheet of paper or
a notebook, a spreadsheet, or inventory management software. Businesses practice tight
inventory control because it affects productivity and profitability. And even if a business
doesn’t sell or consume every day, just about every company can benefit from managing
assets like computers and furniture.

What are the 4 types of inventory?

The four types of inventory most commonly used are Raw Materials, Work-In-Process (WIP),
Finished Goods, and Maintenance, Repair, and Overhaul (MRO). You can practice better
inventory control and smarter inventory management when you know the type of inventory
you have. That includes choosing the best inventory management software to keep track of
all that inventory.
1. Raw Materials
Materials that are needed to turn your inventory into a finished product are raw materials.
These inventory items are bits and pieces of component parts that are currently in stock but
have not yet been used in either work-in-process or finished goods inventory.
There are two types of raw materials: direct materials—which are used directly in finished
goods, and indirect materials—which are part of overhead or factory costs.
Inventory example: For example, direct raw materials might be leather to make belts for
your company would fall under this category. Or, if you sell artificial flowers for your interior
design business, the cotton used would be considered direct raw materials, too.
Indirect raw materials might be lightbulbs, batteries, or anything else that indirectly
contributes to keeping your shop running.
2. Work-In-Process
Inventory that is being worked on is Work-In-Process (WIP), just like the name sounds. From
a cost perspective, WIP includes raw materials (plus, sometimes labor costs) that are still “in
production” when the accounting period ends.
In other words, whatever direct and indirect raw materials your business is using to create
finished goods is WIP inventory.
Inventory example: If you sell medical equipment, the packaging would be considered WIP.
That’s because the medicine cannot be sold to the consumer until it is stored in proper
packaging. It’s literally a work-in-process.
3. Finished Goods
Maybe the most straightforward of all inventory types is finished goods inventory. That
inventory you have listed for sale on your website? Those are finished goods. Any product
that is ready to be sold to your customers falls under this category.
Inventory example: Finished goods could be a pre-packaged fruit salad, a monogrammed
bathrobe, or a custom-built laptop ready for an employee to use.
4. Overhaul / MRO
Also known as Maintenance, Repair, and Operating Supplies, MRO inventory is all about the
small details. It is inventory that is required to assemble and sell the finished product but is
not built into the product itself.
Depending on the specifics of your business, this inventory might be in storage, at a
supplier, or in transit out for delivery.
Inventory example: For example, gloves to handle the packaging of a product would be
considered MRO. Basic office supplies such as pens, highlighters, and paper would also be in
this category.

What is Inventory Classification?

Inventory classification means to group the inventory items based on various parameters. These
could be inventory type, contribution to sales, frequency of sales, inventory value.
Classification by inventory type:
A primary inventory classification in any business is by its type. There are the following three types of
inventory in a business:
Raw materials: Raw materials are essential products from which one makes the final product. These
products are sold to industries and households. Raw materials are mainly obtained from natural
resources. Few examples are wood for paper, leather for shoes, milk for sweets, etc.
Work-in-process: These are semi-finished goods made of raw materials. Such inventory items are
yet to be completed for final sales.
Finished goods: These are the finished items one sells to the customers.

Classification by contribution to sales:

What is ABC inventory classification?
Many retailers categorize their inventory using the ABC classification method, which is
based on the Pareto principle, which states that 80% of your results come from 20% of
actions. When applied to the context of inventory, it means that 80% of revenues are
generated by 20% of your products. 
With ABC classification, inventory is classified according to the value of the product unit. For
most retailers, the classification structure looks like this: 
Group A inventory: The 20% of SKUs that contribute to 80% of revenue.
Group B inventory: The 30% of SKUs that contribute to 15% of revenue. 
Group C inventory: The 50% of SKUs that contribute to 5% of revenue. 

Classification by frequency of sales:

Some inventory items sell quickly, and some sell with a delay. Hence, a seller can classify the
inventory items based on the frequency of their sales.
Say, for example, Sam is an automobile dealer. He deals in cars of various brands. In his
inventory, he has cars of Mercedes brand and Toyota brand. Cars of Mercedes brand do not
sell frequently. But when sold, they contribute maximum to sales. Cars of Toyota brand sell
frequently but are relatively lower in value. Hence, contribution to sales is not as high as
Mercedes.

Inventory Control System

An inventory control system is a technology solution that manages and tracks a company's
goods through the supply chain. This technology will integrate and manage purchasing,
shipping, receiving, warehousing, and returns into a single system.
The best inventory control system will automate a lot of manual processes. It will provide an
accurate picture of what inventory you have, where it is, and when you need to reorder to
keep your stock at optimal levels.

Types of Inventory Control Systems

Inventory control systems have evolved. Earlier systems were little more than spreadsheets,
and now machine learning is adding more automation to inventory control. There are two
key types of inventory control systems.
Periodic Inventory Control System
The periodic inventory control system pertains to a recurring count of goods at specific
intervals. In this system, warehouse managers manually count their inventory on a monthly,
quarterly, or annual basis. The exact period depends on an organization’s needs and
business activities.
Pros: It’s relatively simple and easy to manage for smaller inventories. It doesn’t require any
specialized technology and equipment, making it easier to train individuals in.
Cons: It becomes a lengthy process for companies with expansive inventories. The manual
counting process is also highly prone to human error.
Best for: The periodic system is ideal for small companies with minimal inventory. It also
works best for businesses selling niche products and counting larger-sized goods.

Perpetual Inventory Control System

The perpetual inventory control system provides an accurate count of inventory levels in
real-time. It utilizes technology, such as barcodes and Radio Frequency Identification (RFID)
tags, for tracking products. The information is then logged in a centralized database that
warehouse managers can easily access.
Pros: This method removes the need for manual counting. It gives warehouse managers a
snapshot of their inventory counts over a specific period of time. Doing so drives data-driven
decision-making for sales, ordering, and inventory management.
Cons: An inventory control software can be expensive to maintain. Moreover, it might not
capture discrepancies due to product theft, loss, damage, and scanning errors.
Best for: The perpetual system works best for companies with multiple locations. It’s also
great for businesses maintaining large inventories.

Why Are Inventory Control Systems Important?

For your business to run smoothly and be profitable, you need to have the product on the
shelves when a customer demands it. Underneath this simple statement lies the complexity
of purchases, sales, shipping, receiving, and storage. An inventory control system will
automate and manage this complexity so you can focus on other parts of your business.
1. Real-time inventory levels.
A perpetual inventory system will update inventory levels globally whenever a product is
sold, purchased, manufactured, or returned. With an accurate real-time inventory, you can
analyse inventory flow to set effective reorder points. This helps eliminate out-of-stock
situations and excess inventory
2. Optimize your logistic workflow.
Your supply chain is complex. There are a lot of steps involved in getting a product to your
customer. An effective inventory control system will not only allow you to track a product
each step of the way, but also give you the tools to find bottlenecks in your logistic
workflow. This gives you more time to work on improvements.
3. Financial savings.
There are many ways inaccurate inventory can cost you. If you don't have a product in stock,
a customer could cancel an order and buy that product somewhere else rather than wait on
a backorder. On the other hand, an inaccurate inventory can also lead to excess stock which
will increase storage cost, insurance cost, and taxes. An inventory control system will save
you money by keeping inventory at optimal levels.
4. Reduce manual labour inaccuracies.
Physical inventory tracking can be prone to errors and fraud. By tracking a product from
purchase order to customer delivery, an inventory control system will take human error and
theft out of the equation.
5. Improve customer satisfaction.
In this day and age of next-day or even same-day delivery, customers expect to get their
orders quickly. If your inventory is inaccurate, a customer could order an item you show in
stock but don't actually have. This could result in a backorder or cancelled order, which can
lead to an unhappy customer who may not order from your store next time.

Inventory control for deterministic demand items

In brief, a deterministic model is a method based on the assumption that all parameters and
variables associated with an inventory stock are known and that there is no uncertainty
associated with demand and replenishment of inventory stock.
Deterministic models of inventory control are used to determine the optimal inventory of a
single item when demand is mostly largely obscure. Under this model, inventory is built up
at a constant rate to meet a determined or accepted demand.
For example, a business has received an order in January for 100 model trains for delivery to
be completed by November for the holiday season. Due to the deadline being 10 months
away, the trains can be produced at a rate of ten per month.

The most common deterministic models used in inventory control today are:
Economic Ordering Quantity (EOQ) Model
One of the important decisions to be made in inventory management is how much
inventory stock to actually buy. The EOQ is a company’s optimal order quantity that
minimises its total costs related to ordering, receiving and holding the inventory.
Because of this model’s assumptions that demand, ordering, and holding costs remain
constant over time — it is best to use this model in similar circumstances. EOQ also gives
solutions to other problems like, at what frequency, when and helping determine reserve
stock quantities.

ABC Analysis
Also known as selective inventory control, the ABC analysis suggests that inventory values
are not equal, and so divides your inventory stock into three categories A, B and C. The
inventory stock with the highest value are classified as ‘A’ inventory. The items with
relatively low value as ‘B’ inventory and the items which are the least valuable are classified
as ‘C’ inventory. The ABC Analysis allows different inventory management techniques to be
applied to different segments of the inventory in order to increase revenue and decrease
costs.

Inventory Turnover Ratio

This inventory ratio establishes the relationship between the average inventory and the cost
of inventory sold during a particular period. This is calculated using the following formula:
Inventory Turnover Ratio = Cost of Goods Sold /Average Inventory
Average inventory is used instead of ending inventory because many businesses
merchandise fluctuates greatly throughout the year. When comparing the current year’s
inventory ratio with those of previous years, it will reveal the following points relating to
inventories:
Fast-Moving Items: High inventory ratio as this has high demand
Slow-Moving Items: Low turnover ratio, as they have a lower demand they should be
maintained at minimum quantity levels
Dormant or obsolete Items: Zero demand. These should be liquidated or disposed of as
early as possible to curb further losses