Operations Management

and Total Quality Management

Bachelor of Science in Accountancy

1st Year, Bloc 1 and 2

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Instructor: Mr. Lovell Magcawas
CFL Manager
 Session #6: Operations Strategy

What is Strategy?

Strategy is the direction and scope of an organization over the long term: ideally, which matches its
resources to its changing environment, and in particular its markets, customers or clients so as to meet
stakeholder expectations.
Strategy can be seen to exist at 3 main levels of corporate, business and functional:

Corporate Level Strategy

At the highest or corporate level the strategy provides long-range guidance for the whole organization - What business should
we be in? This level answers the foundational question of what you want to achieve. Is it growth, stability, or retrenchment?

Business Level Strategy

Here the concern is with the products and services that should be offered in the market defined at the corporate level.
This level focuses on, how you’re going to compete in this business? Will it be through customer intimacy, product or service
leadership, or lowest total cost? What’s the differentiation based on?

Functional Level Strategy (Market Level Strategy)

This is where the functions of the business (e.g. operations, marketing, finance) make long-range plans which support the
competitive advantage being pursued by the business strategy. How does the function contribute to the business strategy?
This strategy level focuses on how you’re going to grow. Will it be through market penetration, market development, product
or service development, or diversification?
What is Operations Strategy?

Operations Strategy is the total pattern of decisions which shape the long-term capabilities of any type of
operation and their contribution to overall strategy, through the reconciliation of market requirements with
operations resources (Slack and Lewis, 2011).

From the previous definition operations strategy is concerned with the reconciliation of market requirements and
operations resources. It does this by:

• Satisfying market requirements (measured by competitive factors) by setting appropriate performance

objectives for operations
• Taking decisions on the deployment of operations resources which effect the performance objectives for
operations
Operations strategies drive a company’s operations, the part of the business that produces and distributes
goods and services. Operations strategy underlies overall business strategy, and both are critical for a
company to compete in an ever-changing market. With an effective ops strategy, operations management
professionals can optimize the use of resources, people, processes, and technology.

Technology and business models are rapidly changing, so businesses must keep pace and look to the
future.

“Those who get stuck on their own paradigms…perish,” says Tim Lewko, CEO and Managing Partner
of Thinking Dimensions Global.
Lean Operations

The term Lean was first used by John Krafcik in his article “Triumph of the Lean Production System” which
appeared in 1988. This paper found that productivity and quality levels in car assembly plants was not
determined by an assembly plant’s location. However plants that operated with a “lean” production policy
were able to manufacture a wide range of models, yet maintain high levels of quality and productivity. The
message was further disseminated by the book “The Machine That Changed the World” (1991) by Womack
& Roos.

The term ‘lean’ approach aims to meet demand instantly, deliver perfect quality and eliminate waste in all its
forms.

Three key elements of Lean Operations are eliminate waste, involve everyone and continuous improvement.
Eliminate Waste

Waste is considered as any activity which does not add value to the operation.
Ohno (1988) classified 7 wastes, the priority should be to avoid these wastes, only then to cut:

TIMWOOD

T ransportation (Transporting) - unnecessary movements/handling

I nventory - raw material, work in progress and finished goods
M otion (Unnecessary Motions) - ergonomics and layout
W aiting - need to keep a flow of material/customers
O verproduction (Over Production) - making too much too early
O verprocessing (Over Processing) - too much capacity in one machine instead of a number of smaller ones
D efects - costs of defects tend to escalate the longer they remain undetected
The 7 service customer wastes can be the basis for an
improvement program (Bicheno, 2008):

Delay - on the part of customers waiting for service, for

delivery, in queues, for response, not arriving as
promised.
Duplication - having to re-enter data, repeat details on
forms and answering queries from several sources within
the same.
Unnecessary movements - Queuing several times, poor
ergonomics in the service.
Unclear communication unclear industry jargon and
unclear communication.
Incorrect inventory - Products being out-of-stock or
expired.
Opportunity lost - to retain or win customers, failure to
establish rapport, ignoring customers, unfriendliness, not
recognising opportunities to 'go the extra mile'.
Errors in the service transaction, product defects in the
product-service bundle, lost or damaged
 The 7 Wastes of Lean for Frontline Kaizen - Lean Manufacturing Training

https://www.youtube.com/watch?v=f2aXncAl87I

Source: YouTube, Lean Smarts, The 7 Wastes of Lean for Frontline Kaizen - Lean Manufacturing Training,
Published on June 6, 2020
Time Duration: 6:04 mins.

Involvement of Everyone

Some organizations view the lean approach as consisting almost exclusively of waste elimination. However
effective waste elimination is best achieved through changes in staff behavior. Lean aims to create a new
culture in which all employees are encouraged to contribute to improvement efforts through generating ideas.
In order to undertake this level of involvement the organization will provide training to staff in a wide range of
areas, including techniques such as statistical process control (SPC) and more general problem solving
techniques.
Continuous Improvement (CI)

Continuous Improvement or Kaizen, the Japanese term

(Kai means "Change" and Zen means "Good" = Good Change or Continuous Improvement), is a philosophy
which believes that it is possible to get to the ideals of Lean by a continuous stream of improvements over time.
Continuous Improvement is needed because customer’s views are continually changing and standards are
rising. Kaizen is about moving tacit knowledge to explicit knowledge.

What is Kaizen? A Continuous Improvement Culture

https://www.youtube.com/watch?v=0dZYC2XBF2U

Source: YouTube, Lean Smarts, What is Kaizen? A Continuous Improvement Culture, Published on August 9,
2019
Time Duration: 4:10 mins.
Visual control is used to facilitate continuous improvement work. Visibility is achieved through what is called
the five S’s (seiri, seiton, seiso, seiketsu, shitsuke) which roughly translate as organization, tidiness, cleanliness,
maintenance and discipline.

5S began as part of the Toyota Production System (TPS), the manufacturing method begun by leaders at the
Toyota Motor Company in the early and mid-20th century. This system, often referred to as Lean manufacturing
in the West, aims to increase the value of products or services for customers. This is often accomplished by
finding and eliminating waste from production processes.

5S Translation

The term 5S comes from five Japanese words and in English, these words are often translated to:

• Seiri - Sort (Select)

The first step of 5S, Sort, involves going through all the tools, furniture, materials, equipment, etc. in a work
area to determine what needs to be present and what can be removed.

• Seiton - Set in Order (Systematize)

Once the extra clutter is gone, it's easier to see what's what. Now work groups can come up with their own
strategies for sorting through the remaining items.
• Seiso - Shine (Sweep)
The Shine stage of 5S focuses on cleaning up the work area, which means sweeping, mopping, dusting, wiping
down surfaces, putting tools and materials away, etc. Shine also involves performing regular maintenance on
equipment and machinery. Planning for maintenance ahead of time means businesses can catch problems and
prevent breakdowns. That means less wasted time and no loss of profits related to work stoppages.

• Seiketsu - Standardize
The problem is, when 5S is new at a company, it's easy to clean and get organized…and then slowly let things
slide back to the way they were. Standardize makes 5S different from the typical spring-cleaning project.
Standardize systematizes everything that just happened and turns one-time efforts into habits. Standardize
assigns regular tasks, creates schedules, and posts instructions so these activities become routines. It makes
standard operating procedures for 5S so that orderliness doesn't fall by the wayside.

• Shitsuke - Sustain
Once standard procedures for 5S are in place, businesses must perform the ongoing work of maintaining those
procedures and updating them as necessary. Sustain refers to the process of keeping 5S running smoothly, but
also of keeping everyone in the organization involved. Managers need to participate, as do employees out on
the manufacturing floor, in the warehouse, or in the office. Sustain is about making 5S a long-term program, not
just an event or short-term project. Ideally, 5S becomes a part of an organization's culture. And when 5S is
sustained over time, that's when businesses will start to notice continuous positive results.
Benefits of 5S

Over time, the 5S methodology leads to many benefits, including:

• Reduced costs
• Higher quality
• Increased productivity
• Greater employee satisfaction
• A safer work environment

What is 5S?

https://www.youtube.com/watch?v=cJD5-G7fwmY

Source: YouTube, Online PM Courses - Mike Clayton, What is 5S?, Published on November 11, 2020
Time Duration: 7:11 mins.
Business Process Reengineering (BPR)

Defined by Hammer and Champy (1993) as:

‘the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in
critical, contemporary measures of performance, such as cost, quality, service and speed.

What does this definition mean……

Fundamental rethinking - reengineering usually refers to the changing of significant business processes
Radical redesign - involves a complete rethink about the way the business operates
Dramatic improvements - tens or hundreds of percent improvement
Critical contemporary measures of performance - process measures based on competitive factors of cost,
quality, service and speed.
Implementing Business Process Redesign

The task of designing processes should be undertaken in a structured manner and the steps involved can be
described as:

Identifying and documenting the process activities

Identifying processes for improvement
Evaluating process design alternatives

1. Identifying and documenting the process activities

The identification of activities in a current process design is a data collection exercise using methods such as
examination of current documentation, interviews, and observation. In order to provide a framework for the design
and improvement of service processes the techniques of process mapping and service blueprinting can be utilized.

2. Identifying processes for improvement

The identification of the relevant business processes for improvement can be undertaken using a scoring system
in which prioritization is governed by importance to customers and performance against competitors. Other
measurement systems can be used such as a process marking guide covering the amount of impact and extent of
innovation required of a process to meet performance across a number of critical success factors.

3. Evaluating Process Design Alternatives

In which a process can be designed to meet particular objectives and so it is necessary to generate a range of
innovative solutions for evaluation.
 Business Process Reengineering with Application

https://www.youtube.com/watch?v=IZHqAo4QryE

Source: YouTube, Jacqueline Christopher, Business Process Reengineering with Application, Published on
February 24, 2019
Time Duration: 4:53 min

Enterprise Resource Planning (ERP)

Enterprise resource Planning (ERP) refers to a type of software that organizations use to manage day-to-day
business activities such as accounting, procurement, project management, risk management and compliance, and
supply chain operations. A complete ERP suite also includes enterprise performance management, software that
helps plan, budget, predict, and report on an organization’s financial results.

ERP systems tie together a multitude of business processes and enable the flow of data between them. By
collecting an organization’s shared transactional data from multiple sources, ERP systems eliminate data
duplication and provide data integrity with a single source of truth.

Today, ERP systems are critical for managing thousands of businesses of all sizes and in all industries. To these
companies, ERP is as indispensable as the electricity that keeps the lights on.
 Why do we need ERP?

https://www.youtube.com/watch?v=fH2CEkShyBs

Source: YouTube, mo cityu, Why do we need ERP?, Published on January 18, 2017
Time Duration: 8:05 mins.

Quality

Garvin (1988) provides 5 different perspectives on a definition of quality:

Transcendent - exceptional, The ‘best’ available - Rolls Royce

Product Based - measurable attributes - car acceleration, speed
User Based - individual requirements - offer lots of options
Operations Based - conforms to internal specification - no defects
Value Based - ‘value for money’ - meets needs for lowest price
Defining Product Quality

How do customers define product quality? Garvin (1984) defines eight dimensions of quality or quality
characteristics which the customer looks for in a product:

Performance
Features
Reliability
Conformance
Durability
Serviceability
Aesthetics
Other perceptions

The customer will trade-off these quality characteristics against the cost of the product in order to get a value for
money product. This implies no one way to superior product quality.
Defining Service Quality

How do customers define service quality? Parasuraman, Zeithaml and Berry (1985) define quality in services
along 5 dimensions:

Reliability - delivered, Ok every time

Responsiveness - delivery quick service and respond quickly to problems
Assurance - employees delivering service should show competence
Empathy - employees demonstrate an effort to understand customer needs
Tangibles - physical surroundings must be appropriate

Total Quality Management (TQM)

Total Quality Management (TQM) is a philosophy and approach which aims to ensure that high quality, as defined
by the customer, is a primary concern throughout the organization and all parts of the organization work towards
this goal. TQM does not prescribe a number of steps that must be followed in order to achieve high quality but
rather should be considered a framework within which organizations can work. The TQM process will be
dependent on factors such as customer needs, employee skills and the current state of quality management within
the organization.
Six Sigma

Six Sigma is a quality improvement initiative to achieve quality levels which are within 6 sigma control limits,
corresponding to a rate of 3.4 defective parts per million (PPM). Thus 6 sigma can be defined as the process of
comparing process outputs against customer requirements. However 6-sigma has developed from this
examination of process variation to become a companywide initiative to reduce costs through process efficiency
and increase revenues through process effectiveness. 6 sigma has an emphasis on training - level of expertise is
denoted by black belt, green belt etc. Six Sigma contains plans for both increasing effectiveness and efficiency
leading to so increased revenues and thus improving company performance.

• Improving Effectiveness

The level of effectiveness of the organization is reflected in the level of customer satisfaction. This means that
efforts to improve effectiveness will focus on identifying and meeting internal and external customer requirements.

• Improving Efficiency

The aim of every process improvement approach using Six Sigma is to achieve measurable cost savings through
a focus on decreasing process variation.
 Six Sigma

https://www.youtube.com/watch?v=4EDYfSl-fmc

Source: YouTube, Simplilearn, Six Sigma in 9 Minutes, Published on February 25, 2020
Time Duration: 8:05 mins.

Six Sigma: 2 Major Methodologies

The DMAIC Methodology

6 sigma incorporates a structured approach to improvement called DMAIC. This is a five step methodology of define,
measure, analyze, improve and control and is used to both improve process performance and to improve process or
product design. It is a cyclical approach like the PDCA cycle.

Define - Identify a potential area of improvement and define the project

Measure - Decide what characteristics of the process require
Analyze - Use the data collected in the measure phase to document current performance.
Improve - Eliminate the root causes of non-random variation to achieve improvements in predictability, dispersion and
Control - Verify and embed the change through the use of techniques such as control

The DMADV Methodology (Define, Measure, Analyze, Design, Verify) Creating a new product or service from scratch.
Agile Operations

Agile Operations aim to respond quickly to market demand in order to retain current markets and gain new market
share. As a strategy agile operations can be seen to embrace uncertainty in markets and achieve competitive
advantage by the flexibility and speed of their response to them. The focus of agility has moved from an individual
organization to supply chains in which several companies work together. A supply chain is a series of activities that
moves materials from suppliers, through operations to customers.

The traditional way to deal with uncertainty of demand is to improve forecast quality. However difficult to do in volatile
markets, so emphasis is on reducing 3 critical lead times:

1. Time-to-market - how long does it take to recognize a market opportunity and bring products/services to market

2. Time-to-serve - how long does it take to capture a customer’s order and to deliver the product

3. Time-to-react - how long does it take to adjust the output of the business in response to volatile demand
Agile Supply Chains Infrastructural Decisions
Lean Supply Chains (see Sessions #10, #11 and #12)
Leagility - combining Lean and Agile
Mass Customization Planning and Control
Quick Response Manufacturing (QRM) Inventory Management
Capacity Management
Supply Chain Management

Structural Decisions (see Sessions #8 and #9)

Process Types
Layout Types Project Management (see Session #15)
Facility Location
Process Technology Executing Projects
Product/Service and Product Design Network Analysis
Job and Work Design
 Operations Strategy Examples

With the rapidly changing marketplace in recent years, some companies have excelled in part due to their strong
operations strategies.

Here a few examples:

Amazon: Once known for books, Amazon is now known as the go-to platform for online shoppers of any product. Its
distribution network is widely touted and even includes experiments with drone delivery. Amazon Go, grocery store
with no cashiers.
Apple Computers: Apple is long recognized in
operations circles for its operational excellence and
supply chain management.

Walmart: This retailing giant managed to undercut

many competitors on the price and variety of a wide
range of products.
FedEx: FedEx made speed of delivery its calling card,
achieving it with excellent operations.

IKEA: The world’s largest furniture retailer undercut

many home goods competitors on price and variety
with its warehouse concept.
 Session #7: Technology and Operations Management

In last decade or so technology has changed the way organization conduct their business. Advent of technology
in operation management has increased productivity of the organization.
The scope of Technology and operation management has evolved over a period of time and has moved from
development of products into design, management and improvement of operating system and processes.
Usage of technology in operation management has ensured that organizations are able to reduce the cost,
improve the delivery process, standardize and improve quality and focus on customization, thereby creating
value for customers.
 Operations Processes: Technology / Business Studies

https://www.youtube.com/watch?v=gY7t7jWVa1Y

Source: YouTube, iitutor.com, Operations Processes: Technology / Business Studies, Published on

December 21, 2015
Time Duration: 9:16 mins.
Integration of Technology with Production System
Technology drives efficiency in organization and increases’ productivity of the organization. However, bringing
technology in the production system is highly complex process, and it needs to following steps:

Technology Acquisition: technology acquired should align with overall objectives of the organization and should
be approved after elaborate cost-benefit analysis.
Technology acquisitions involve bringing in new technologies from external sources rather than using the firm's own
internal research and development activities. By its nature, a technology acquisition is a technology transfer, with
transaction costs associated with the various stages of the acquisition process.

Technology Integration: technology affects all aspects of production i.e. capital, labor and customer. Therefore, a
solid technology integration plan is required.
Technology integration is the use of technology resources - computers, mobile devices like smartphones and
tablets, digital cameras, social media platforms and networks, software applications, the Internet, etc.

Technology Verification: once technology integrated, it is important to check whether technology is delivering
operational effectiveness and is been used to its fullest.
Develop Verification Process. Test protocols are a key element in a larger overall verification process.
Technology in Manufacturing and Design

Technology is getting extensively used in customization of design products and services. The usage of
computers and supporting electronic systems is integral part of modern industrial and services industry. Current
techniques can be broadly classified into following categories:

Computer-Aided Design (CAD): CAD facilitates linking of two more complex components of design at very
high level of accuracy thus delivering higher productivity.

Computer-aided design (CAD) involves creating computer models defined by geometrical parameters. These
models typically appear on a computer monitor as a three-dimensional representation of a part or a system of
parts, which can be readily altered by changing relevant parameters. CAD systems enable designers to view
objects under a wide variety of representations and to test these objects by simulating real-world conditions.

What is C.A.D. and Where can it be used?

https://www.youtube.com/watch?v=ehlN_aZSTrU
Source: YouTube, MAXFRANCIS CORBETT, What is C.A.D. and Where can it be used?, Published on May 7,
2020
Time Duration: 9:02 mins.
 Computer Aided Design
https://www.youtube.com/watch?v=JoGfw5BplCg
Source: YouTube, St. Louis Community College, Computer Aided Design, Published on October 1, 2019
Time Duration: 9:02 mins.
Computer-Aided Manufacturing System (CAM): Precision is very essential in operating any machines and
therefore, Computerized Numerically Controlled machines are used, thus ensuring highest level of accuracy.

Computer-aided manufacturing (CAM) uses geometrical design data to control automated machinery. CAM
systems are associated with computer numerical control (CNC) or direct numerical control (DNC) systems.
These systems differ from older forms of numerical control (NC) in that geometrical data are encoded
mechanically. Since both CAD and CAM use computer-based methods for encoding geometrical data, it is
possible for the processes of design and manufacture to be highly integrated. Computer-aided design and
manufacturing systems are commonly referred to as CAD/CAM.

Computer Aided Manufacturing (CAM)

https://www.youtube.com/watch?v=FdipJNG_vV8
Source: YouTube, Marshall Manufacturing, Computer Aided Manufacturing (CAM), Published on March 11, 2013
Time Duration: 1:23 mins.
 Computer Aided Manufacturing Demonstration
https://www.youtube.com/watch?v=qjc1WEDDPhI

Source: YouTube, vladwa, Computer Aided Manufacturing Demonstration, Published on October 18, 2015
Time Duration: 3:26 mins.

Standard for the Exchange of Product Data: As the name suggests product design is transmitted among CAM
and CAM in three dimensions. Standard for The Exchange of Product Data process sharing of product across all
phases of product life cycle and serves as neutral file exchange.

STEP, stands for Standard for The Exchange of Product model data. STEP is a 3D model file that is built in an
ISO Standard Exchange format. Often it is the format employed when users who are running different CAD
software programs want to exchange 3D models. Housed within the file is three-dimensional data that is
identifiable by a variety of software systems. STEP file format is modular in nature, enabling developers to revise
it according to their own specs. This file format dates back to 1984, as a follow-up response to Initial Graphics
Exchange Specification (IGES).
 CAD Tip: What you need to know about IGES and STEP files
https://www.youtube.com/watch?v=Y6amNRlaAqs

Source: YouTube, Lars Christensen, CAD Tip: What you need to know about IGES and STEP files, Published on
August 13, 2015
Time Duration: 5:13 mins.

Software Systems in Manufacturing

There are various software systems available to integrated operations and manufacturing functions with other
business functions of organization. Some of the common software systems are Enterprise Resource Planning
(ERP), Supply-Chain Management (SCM), New-Product Development (NPD) and Customer Relationship
Management (CRM).
Enterprises Resources Planning (ERP) links all business functions like manufacturing, marketing, human
resource and finance through a common software platform. The main benefits of the ERP solution are that it not
only reduces database errors but also delivers value to customer through faster delivery and order fulfillment.
Automation in Production and Operations
Automation reduces manual intervention in the manufacturing process. It increases productivity and reduces
margin of error thereby facilitating economies of scale (Increasing Production/Productivity and Lowering Costs).
There are disadvantages of automation also, such as unemployment, high breakdown cost and initial capital
investment. Therefore, automation may not be suitable in all situations and in the end alignment with an overall
organization objective is important.

Challenges
Technology can be facilitating factor in bringing about change in operations and production management. But it
may not be feasible to use technology in all aspects with challenge coming through high initial cost of investment,
high cost of maintenance and mismanagement.