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Operations and Supply Chain Management

University of Waterloo

Operating System Elements

ON APRIL 26, 2022 / BY PETER CARR / IN OPERATING
SYSTEM ELEMENTS
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Introduction

Operating Systems include a number of elements that enable them to

deliver their product or service. The operating system model used will
influence the approach taken to the management of these elements. The
most common operating system elements are introduced below, along
with a description of how the operating system models impact them.

Scheduling

When we make a reservation at a restaurant for dinner, we expect that

our table will be available when we arrive, that our order will be taken
promptly, our food will arrive in a reasonable period of time and that
sufficient time will be available for us to enjoy our meal before the table
is needed for the next diners. When a manufacturing company that
makes cell phones promises a delivery date to its corporate customers,
this promise is based on having the parts available from suppliers to
assemble the phones, the workers and equipment available in their
factory to do the phone assembly and the capacity available to deliver
the completed phones to the corporate buyer’s warehouse.

For both the restaurant and the cell phone manufacturer, meeting their
customer requirements applies scheduling tools and techniques which
enable them to also meet their own business objectives, such as
minimising cost, improving quality and enhancing their reputation as a
reliable supplier. This usually requires carefully prioritising and
balancing sometimes conflicting objectives. For example, the cell phone
company reduce the frequency of changing from producing one phone
type to another, reducing downtime and increasing the number of
phones produced but also making some customers wait longer for
some of their phone types.

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Scheduling determines when specific activities will be completed in

operations. It is based on achieving specific objectives that include
satisfying customers and maximising business performance. It will
often be undertaken in a progressively more detailed way, with a
Capacity Plan that will specify the work that will be completed over a
long period (often a year or more), such as the number of customers
that will be served in a year in the restaurant. This will be used to
determine the facilities required an any investment that may be made
to change this. Aggregate Planning, enables allocation of resources on a
shorter timescale (often monthly), taking into account shorter term
issues such as staff shortages, engineering projects, etc.

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On a weekly basis, a Master Schedule may be produced that allocates

resources in more detail and is used to produce work instructions daily
or hourly. Rules are normally used to create the schedule that are
designed to achieve the business objectives. For example, the restaurant
wants to ensure that each table in the restaurant will be able to be used
by three groups per evening so they will only allow bookings at 5.30
pm, 7.30 pm and 9.30 pm. The cell phone company wants to make sure
it meets the promises that it has made to its customers about their
delivery dates so it will schedule based on working on the orders that
have the shortest time until their delivery date.

Computer applications will often be used to create schedules that will

be used in operations an supply chain management. These will
determine when work will be done, based on the rules that the
organisation has determined are best suited to their needs.

The following video introduces operational planning and scheduling:

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Inventory Management

Inventory is all of the raw materials, parts, supplies and finished

products that an organisation uses and stores in the course of doing
business. For an airline this would include the spares and parts needed
to maintain and operate its aircraft. In a pharmaceutical company it
would include the raw materials for the production process and in a
clothing retail business it would include of the clothes in the physical
stores before they are sold and in the various stages of production prior
to that.

Inventory allows organisations to operate effectively – making sure

they have the materials available to complete orders on time, to keep
their equipment and people working to create product even if other
areas of production or supply are disrupted, to maintain supply as
demand changes in the market, to benefit from volume discounts of
purchases of supplies and protect against the impact of inflation.

While inventory is necessary it is lo expensive. It involves costs in the

value of the inventory itself and in the moving, storage and recording
that is necessary to look after it. It also be used to allow organisations to
operate with inefficient processes, such as poor machine maintenance,
poor quality practices and poor raw material supply, as it enables the
disruptions these cause to be accommodated more easily, rather than
fixing the problems.

Inventory management requires establishing a balance between the

benefits that inventory provides and the costs that it creates. Process
improvement should enable inventory to be reduced over time. Many
techniques are used to manage inventory effectively, including ABC

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analysis, which categorises inventory and manages each category

separately and the Economic Order Quantity, which balances ordering
and storage costs, and volume discounts to determine the amount and
frequency of ordering from suppliers and the batch sizes in production.

The following video introduces inventory management:

Forecasting

When a producer of boxes of granola cereal receives an order from a

supermarket customer, they need to deliver that order within a few
days. The time that is needed to order and receive the grains, nuts and
fruit that go into the granola and the time needed to process these and
package them may be significantly longer than that. Businesses therefor
predict, or forecast, the orders that they will receive (the demand) from
the supermarket and order from their suppliers and produce enough
granola to meet the orders they expect to receive. By doing this they can
meet the expectations of the supermarket.

Forecasts enable organisations to plan the management of their supply

chains – which suppliers they will need and the relationships and
contracts they will have with them. They also help them decide on the
required capacity for their own operations, including the numbers and
type of people they employ.

Forecasting, often applying mathematical techniques, is used in most

organisations today but has become increasingly difficult as markets
have changed more rapidly in recent years. New techniques have been
developed, particularly utilising new large data sets, data analytics and
artificial intelligence that are intended to make forecasting more

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accurate and enable effective operation in more volatile market

environments, as well as to improve effectiveness.

There are two main approaches to forecasting. Quantitative forecasting

makes predictions based on historical and other data to anticipate what
the future may hold. Qualitative forecasting utilises human judgement
of what will happen in the future, often involving consulting with
market experts.

Forecasts are often inaccurate, especially with the events of recent

years. While increasingly advanced forecasting techniques that apply
information-based technologies are rapidly evolving, it is also
important to remember that reduction of lead times reduces the
forecasting required. If operations and supply chains can respond
sufficiently rapidly to meet changing market demand, forecasting is not
necessary or can be done less with less impact on the business when it
is inaccurate. This has increased interest in Lean and Agile operating
system models.

Demand Management

While forecasting attempts to predict demand, demand management

manages the organisation’s response to the forecast and actual demand.
Most organisations have a fixed capacity for the production and
delivery of the products and services they offer. For example, a
company that produces barbecues can only produce a set number of
barbecues per year. An exceptionally hot summer that was not
anticipated in their market forecast led to levels of demand that
exceeded the capacity of the company to fulfill it. Demand management
enabled the company to respond to this situation which might have

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included, increasing prices, which would reduce demand and increase

profit, or employing more people and running an extra production shift
and producing more barbecues.

Demand management enables organisations to respond to changes in

demand, through changing their capacity or through changing the
demand itself. Where demand exceeds capacity they can create new
production facilities, employ more people, purchase new equipment,
etc. They can also increase prices, but tis ill usually be a short term
measure – increasing capacity is likely to be more financially beneficial
in the longer term.

Where capacity exceeds demand, facilities can be closed, numbers of

employees can be reduced, etc., which will align capacity with the
lower demand. Alternatively, prices could be cut or product
improvements could be made that might restore the balance between
capacity and demand.

This video describes the use of demand management in India’s

electricity utilities:

Quality Management

The management of quality is important for ensuring that the quality of

product or service that the customer receives meets their needs and the
reputation of the company is maintained or enhanced. It is also
important for minimising production costs and achieving good levels of
operations performance. For example, delivering poor quality service in
a toy manufacturer will cause products to be rejected during the
production process, increasing costs, and create customer

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dissatisfaction when poor quality product is purchased by the

customer.

Understanding the true cost of producing poor quality is necessary in

understanding the importance of quality in operations and supply
chain management. Not only does poor quality result in dissatisfied
customers and a loss of business but it also impacts the costs of
production, including the levels of inventory held, the costs of
producing to replace poor quality products, the costs of product returns
and compensation to customers etc. Producing at low quality levels is
usually more expensive than producing higher quality using a good
quality process.

In recent years, Total Quality Management (TQM) has been adopted by

many organisations. It is an approach to managing quality that
emphasises process improvement so that good quality is produced
every time, reduction of dependency on inspection and positive
motivation of employees to support their involvement in continuous
improvement activities.

A range of quality tools are available that support quality improvement

activities. These include tools that facilitate employee team based
improvement activity such as process flow charting, cause and effect
analysis and brainstorming. Other tools apply statistical techniques to
detect process variation such as statistical process control. Information
technology has enabled much more data to be gathered from
production processes that can be used in process improvement.

Sic Sigma is a commonly used approach that incorporates TQM and

utilises statistical methods in improving organisational processes.

This video explains Total Quality Management:

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Performance Measurement

Operations and supply chain management should be supported by

effective performance measurement. They indicate how the
organisation is progressing towards its operational goals and where
intervention may be necessary. They also provide feedback on changes
that the organisation is making, such as the introduction of new
technologies or the provision of training for employees. For example, a
bank might be aiming to achieve higher levels of customer service
through new employee practices. Statistics of customer satisfaction,
based on surveys of customers, might indicate how this is being
impacted by the changes.

Performance measurement should be aligned with the strategic

priorities of the organisations and support action that will enable these
to be achieved. They should be communicated openly and be used as a
basis for innovation continuous improvement activity. Metrics should
exist at al organisation levels that provide guidance on performance –
senior managers should have aggregate metrics that provide an
overview of performance while shopfloor teams might have measures
of team equipment performance that are within their control.

All metrics should be accompanied by education on their

interpretation. Metrics may be interpreted and acted upon in different
ways by different people. It is very important that the organisation
ensure that interpretation is aligned with the objectives of the
organisation. For example, low levels of machine maintenance cost may
be viewed positively as indication careful cost management or it may
indicate that machine maintenance is being neglected and that future
equipment problems are likely.

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Performance metrics are discussed in this video:

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