OPERATIONAL MANAGEMENT o other terms depending on the orgs

▪ administrator
OVERVIEW
⮚ business function responsible for planning, ▪ general manager

coordinating, and controlling the resources needed ▪ director

to produce products and services for a company
▪ chief operation officer
⮚ overall – from setting up the business up to finishing
the products and deliver it to the end users
WHAT OPERATIONS MANAGER DO?
⮚ operation is a process
● basic management functions (POLSC)
o planning
ORGANIZATION MANAGEMENT IS:
o organizing
● management function – involves managing of the o staffing
operations and processes of the organization o leading
o supply chain – product design, trend, until o controlling
the product is produced
o forecasting – assumption about the market HISTORICAL DEVELOPMENT OF OM
o quality control – organization’s standard, if
it meets the quality of the product
o logistics – backbone of any org, deliver the
product to users/customers
● org’s core function – involves managing ppl,
technology, info, and other resources
● in every org whether service/manufacturing,
profit/non-profit – for all, not only for business also
for govt

ROLE OF OM
● transforms inputs to outputs – from raw materials to
finished products
INPUTS OUTPUTS

people, materials, money goods and services

IMPORTANCE OF OM
● reduce costs – with proper planning and effective
decisions, the budget set should be utilized
efficiently
o preemptive defense – identify situations
that can hinder to achieve the process
● increases revenue

● reduce the amt of investments

● provide the basis for future innovations

● more profit

WHO LEADS THE OPERATIONS OF THE MANAGEMENT?

● the operations manager

Page | 1
 Industrial revolution late
1700s
o change production by substituting machine
WHY STUDY OM power for labor power

● one of three major functions (marketing, finance, o concept of division of labor and
operations) of any org interchangeable parts

● want and need to know how goods and services are Scientific management early
produced 1900s
o focus on improving output by redesigning
● want to understand what operations managers do jobs and determining acceptable level of
work outputs
● such a costly part of any org
o henry ford

Human relations movement 1930s-

60s
o philosophy based on the factors other than
money contributes to workers’ productivity
OM’s TRANSFORMATION PROCESS
Management science 1940s-
Inputs >>> Transformation process >>>> Outputs 60s
o focused on the development of
quantitative techniques to solve operations
problems

Computer age 1960s

o enable process of huge amount of data and

allow the wide produce of all quantitative
procedures

Environmental issues 1970s

OM’s TRANSFORMATION ROLE
JIT & TQM 1980s
● add value
o designed for high volume production using
o increase product value at each stage
minimal amt of inventory due to
o value added is the net increase bet output
coordination of flow of materials to arrive
product value and input material value at right time, place, and quality
● provide and efficient transformation
o focused on giving quality to eliminate
o efficiency – performing acts well for least causes of produce defects and making
possible cost quality and all-encompassing org’s
philosophy
DIFFERENCES OF SERVICE AND MANUFACTURER
Reengineering 1990s

SERVICES
● intangible product
MANUFACTURERS
● redesigning a company’s processes to
increase efficiency, improved quality,
● tangible product
reduces cost

● cannot be inventoried ● inventoried Global competition 1980s

● more up to date computer hardware and

● high customer contact ● low customer contact
provide more computing power

● short response time ● longer response time Flexibility 1990s

● labor intensive ● capital intensive ● competed either by mass producing or

offering products in small volume

Time-based competition 1990s

SIMILARITIES FOR SERVICE AND MANUFACTURERS
1. use tech
●
Page | 2
Supply chain management 1990s
 2. have quality, productivity, and response issues
3. must forecast demand FROM TO
4. can have capacity, layout, and location issues
5. have customers, suppliers, scheduling, and staffing ● local or national focus ● global focus
issues
● batch shipments ● JIT
NOTES:
● some orgs are a blend of service/manufacturing/ ● low bid purchasing ● supply chain
quasi-manufacturing (QM) orgs partnering
● QM characteristics: low customer contact and ● lengthy product dev
capital intensive ● rapid product dev,
● standard products alliances
TODAY’S OM ENVIRONMENT
● mass customization
● customers demand better quality, greater speed, ● job specialization
and lower costs
● empowered
● companies implementing lean system concepts – a
employees, teams
total systems approach to efficient operations
● recognized need to better manage info using ERP
and CRM systems (customer relations, the way they
maintain customers)
● increased cross-functional decision-making

OM ACROSS THE ORG

● most are supported by functions of operations,
marketing, and finance
● major functional areas must interact to achieve the
org goals
● marketing is not fully able to meet customer needs if
they do not understand what operations can
produce
● finance cannot judge the need for capital
investments if they do not understand operations
concepts and needs
● info systems enable the info flow throughout the org
● human resources must understand job reqs and
worker skills
● accounting needs to consider inventory
management, capacity info, and labor standards
CHALLENGES IN OM
● globalization
● sustainability
● ethical conduct
MEASUREMENT OF OPERATION’S QUALITY MANAGEMENT
WHAT IS THE NEED FOR MEASURING ORGANIZATION’S
OPERATIONS?
● promotes the effective use of scarce resources and
delivery of needed services
● provides info needed to manage health plans,
providers, and other vendors and contractors
● it enables managers to precisely communicate
performance expectations to subordinates for
several reasons:
o may know how the org is really performing
and can identify performance gaps, and
o to effectively make and support decisions
regarding sources, plans, and policies
BALANCED SCORECARD
● translates an org’s mission and strategy into a set of
performance measure that provides framework for
implementing its strategy
o identify proper strategies, policies, or
procedure they need to implement
depending on the organization or business

DETAILED CHALLENGES IN OM
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 ● focus on the important performance metrics that
drive success
● strategic performance metric used to identify and
improve various internal business functions and their
resulting external outcomes
BENEFITS AND IMPORTANCE OF BALANCED SCORECARD
● improved strategic planning
o allows organization to create structure for
their strategy
o allows the management and the
organization as a whole to look at the goals
and understand which objective is
impacting more
● improved strategy communication
o more priority is given to the strategy that
creates more positive impact that exist to
improve strategy communication, the
snapshot of a business strategy and ensures
that the stakeholders know what the plan is
● aligning stakeholders
o they need to protect their investments and
interest in the org, so they need to know
the ideas and strategy to be implemented
o they need to feel security and follow the
strategy
o avoids miscommunication and makes it
easy for everyone to understand the
information
o people understands that strategy is one
thing, but making sure that everyone
involved is taking steps to participate in that
strategy is the only way for it to succeed.
● improved measurement and reporting
o continuous improvement to the
measurement
o it is a process of making performance easier
to measure, that shows the importance of a
balanced scorecard.
● organization alignment
o helps org align their org goals with strategic
business goals
BASIC FUNCTIONS OF BSC
● measurement system
● communication tool
● strategy implementation
FOUR PERSPECTIVE OF BSC – interrelated with each other
● financial analysis
o to succeed financially, how should we
appear to our shareholders?
o company's operating income, profitability,
and return on investment are measured
● customer analysis
o to achieve our vision, how should we
appear to customers?
o looks at the investment in customer service
and retention
● learning and growth
o to achieve our vision, how will we sustain
our ability to change and improve?
o assessment of employee satisfaction and
retention, as well as information system
o identify what makes the client satisfied
● internal business process
o to satisfy our shareholders and customers,
what processes must we excel at?
o how internal businesses are linked to
strategic goal
WHY USE THE BALANCED SCORECARD
● brings together disparate elements of a company’s
competitive agenda in as single report
● by having all important operational metrics together,
managers are forced to consider whether one
improvement has been achieved at the expense of
another
ELEMENTS OF A BALANCED SCORECARD (8 ACTIONABLE
STEPS)
1. preparation
a. identifies the business unit for which a top-
level scorecard is appropriate
2. first round of interviews
3. first executive workshop
4. second round of interviews
Page | 4
 5. second executive workshop a. arguably most important principle
a. senior managers, collaborators, middle b. customers are lifeblood of org – business
managers debate the visions and strategies would not exist without customers
and alternative scorecard working group c. need to understand existing and current
until they get the right process for their org trends
6. third executive workshop d. marketing, logistics, and sales are people
a. senior executive im reach consensus on the involved
vision and objective
7. implementation 2. leadership
a. a newly formed team implements a plan a. strong purposeful and unifying leadership
that aims to reach performance measure b. leaders are responsible for creating a
database and existence to communicate the productive business environment
balance scorecard c. implanting this principle lies upon the vision
8. periodic reviews of the business
a. monitoring
b. a quarterly or monthly bluebook on the 3. involvement of people
balance scorecard measures a. hires qualified people

4. process approach
QUALITY MANAGEMENT a. can help companies to avoid logistical
problem that often stem from confusion
QUALITY about the right way to go from things
b. continuous process even when a key team
● abt making org’s performance for their stakeholders,
member is missing
from improving products, services, systems, and
processes to making sure that the whole org is fit 5. system approach to management
and effective a. identifying and understanding and managing
● standards the process using a clear system to help
design the business
● conformance of reqs b. allows everyone to have access to certain
process and stay up to date
● degree of excellence, which a thing possesses

6. continuous improvement
WHY SHOULD ORG CARE ABT QUALITY? a. business should be pushing for improvement
● enhance org’s brand and reputation cause if not the competitor will be
b. if the company is considered the number one
● protect it against risks when it comes to a particular business, those
at the lower are continue improving them to
● increase its efficiency
keep up
● boots its profits and position it to keep growing
7. factual approach to decision making
o making staff and customer happier
a. effective decisions are made based on the
rational analysis
WHAT DOES QUALITY APPLY TO?
b. must have info before settling down in a
● product decision
● service
8. mutually beneficial supplier relationship
● process a. should have good relationship with its
suppliers
● task b. can have exclusivity to avoid the supplies to
be not available for their manufacturing
● action or decision
processes

QM PRINCIPLES STEPS TO EFFECTIVELY MANAGING QUALITY

1. customer focus

Page | 5
 1. determining quality characteristics
● org exist to provide goods/services to society
2. measuring quality characteristics
3. setting quality levels ● great products are the key to success
4. deciding how to monitor quality levels
a. setting up appropriate standards ● top orgs typically focus on core products
b. will check if they conform to the standards
● customers buy satisfaction, not just a physical good
5. correcting and improving quality (using 7 QC tools
and technique) or particular service
6. continue to make improvements (using Deming cycle ● fundamental to an org’s strategy with implications
method) throughout the operations function

7 BASIC TOOLS OF QM ● goods or services are the basis for an org’s existence

● limited and predictable life cycles require constantly

1. Graphs (Control charts)
a. used to study how a process change over o production, growth, maturity, decline
time ● looking for designing and developing new products
2. Pareto Analysis
a. aka pareto distribution diagram ● new products generate substantial revenue
b. vertical bar graph in which values are
plotted in decreasing order of relative PRODUCT DECISION
frequency from left to right
3. Scatter diagram
● objective: to develop and implement a product
4. Histogram
a. display of statistical information that uses strategy that meets the demands of the marketplace
rectangles to show the frequency of data with a competitive advantage
items in successive numerical intervals of ● refers to company’s mindful decisions, major or
equal size minor regarding their product
5. Cause and effect diagram o ranks first among the 4P’s of marketing
6. Check sheet (product, price, place, and promotion)
o the orgs take these decisions to attain their
objectives and become profitable in the
DESIGN OF GOODS AND SERVICES
long run

HOW PRODUCER/MANUFACTURER DESIGN THE PRODUCT?

PRODUCT AND SERVICE DESIGN
● the marketing requested for it Design Strategy:

● sales ordered for it ● set of guiding principles that aligns the

business mission and vision with the design
● engineering designed for it of its products or services
● production produce for it ● good strategy helps businesses figure out
what to do next
● crew assembled and modified for it
● ensures the team produces what the
● logistic deliver for it
business needs to meets its customer needs

WHAT ARE GOODS AND SERVICES Note:

● output of an economic system ● products and service design/ redesign should be
● goods – tangible items sold to customers closely related to an org’s strategy

● services – tasks performed for the benefit of the MAJOR FACTORS IN DESIGN STRATEGY
recipients ● cost
o consider even from the earliest production
GOODS AND SERVICES IN THE ORG
● quality
Page | 6
 o must be up to date with the materials and
● to reduce the development time and cost to the
technology
minimum
● time-to-market
● to reduce the cost of the product
o length of time from the inception of the
product until its release to the market ● main focus:
● customer satisfaction o customer satisfaction
● secondary focus:
● competitive advantage
o function of product/service
o factors that allows to produce goods or
o cost/profit
services better than competitors
o quality
o appearance
o ease of production/assembly
PRODUCT OR SERVICE DESIGN ACTIVITIES o ease of maintenance/service

PRODUCT LIFECYCLE
● translate customer wants and needs into product
and service reqs
▪ length of time from a product being introduced to
● refine existing products and services
consumers until it is removed from the market
● develop new products and services ▪ operations function must be able to introduce new

● formulate quality goals products successfully

▪ time spent at each stage differ from product to
● formulate cost targets
product
● construct and test prototypes ▪ used by management and marketing professionals to
● document specifications help determine:
o advertising scheds
REASONS FOR PRODUCT OR SERVICE DESIGN o price point
o expansion to new market
o packaging redesign, and more
● economic
o low demand, excessive warranty claims STAGES OF PRODUCT LIFECYCLE
● social and demographic
1. introduction
o changing tastes, aging population
2. growth
● political, liab, or legal 3. maturity
o safety issues, new regulations, govt changes 4. decline

● competitive INTRODUCTORY PHASE

o new services and product in the market,
promotions ● fine tuning may warrant unusual expenses for:
● technological o research
o components, production processes o product dev
o major factor behind product design and o process modification and enhancement
development o supplier dev
● challenges:
OBJECTIVES OF PRODUCT AND SERVICE DESIGN
o small / no market
o high costs
● to increase profit to the org o losses, not profits
● to achieve the desired product/service quality ● benefits:

Page | 7
 o limited competition o cheaper market
o high price

GROWTH PHASE

● product design begins to stabilize

o effective forecasting of capacity becomes
necessary
o adding or enhancing capacity may be
necessary
● challenges:
o increasing compe
o lower prices
o diff marketing approach
● benefits:
o reduced costs
o greater consumer awareness
o increase in profits
MATURITY PHASE
● competitors now established
o high volume, innovative prod may be
needed
o improved cost control, reduction options,
paring down of product line
● challenges:
o sales volume peak
o decreasing market share
o profit start to decrease
● benefits:
o continues reduction in costs
o increased market share through
differentiation
DECLINE PHASE
● unless product makes a special contribution to the
org, must plan to terminate offering
● challenges:
o market in decline
o falling sales and profits
o product withdrawal
● benefits:
o cheaper production
OPERATIONS STRATEGY
● total pattern of decisions w/c shape the long-term
capabilities of any type of operations and their
contribution to the overall strat
o increase on component community
o package products and services
o use multiple – use platforms
o consider tactics for mass customization
o look for continual improvement
o shorten time to market
SERVICE DESIGN
● concerned with the design of services and making
them better suit the need of the services users and
customers
o service is an act
o service delivery system
▪ facilities
▪ processes
▪ skills
o many services are bundled with products
● involves:
o physical resources needed
o services that are purchased ro consumer by
the customer
o explicit services
o implicit services
● service
o something that is done to or for a customer
● service delivery system

Page | 8
 o facilities, processes. and skills needed to o deliver the products through a distribution
provide a service system
● product bundle ● set of entities that are involved in the design of new
o combination of goods and services provided products and services
to a customer ● efficient management of the end-to-end process
● service package starting from the design of the product/service to
o physical resources needed to the time when it has been sold, consumed, and
finally disposed of by the customer, thus includes:
o product design
o procurement
o planning and forecasting, production
▪ planning - maximize the resources
and reduce waste
▪ forecasting - Identify the buyer and
quantity of how it will sell
o distribution
▪ direct – zero level

▪ subcontractor – another set of

distribution channel using their
party
● reduce costs for the
business
● second level of
distribution in business
● second level of
distribution in
manufacturing
o manufacturer >
seller/retailer >
intermediaries >
end users
o fulfillment
▪ success of the company when it
comes to ideas
o aftersales support
▪ updating customers

▪ should know abt the ideas of the

business and certain product
▪ for complaints of the customers
SUPPLY CHAIN MANAGEMENT
▪ customer relations

● management of integrated activities that: ● interconnection of org that relate to each other thru
o procure raw materials upstream and downstream linkages bet the
o transform those materials into processes that produce value to the ultimate
intermediated good and final product consumers in product and services

Page | 9

● all activities associated w/ the flow and
transformation of goods from raw materials to end
users
● the term supply chain refers to the entire network of
companies that work together to design, produce,
deliver, and service products
b. appropriate management of the flow of
info, product or funds is a key to supply
chain success
3. replenishment of the material/product whenever
required
a. replenishment – restoration of a stock or
supply to a former level or condition

4. cost quality improvement

manufacturer a. to achieve the cost distribution
supplier
quality balance and
consumer optimization retailer

5. shortening the time to order

raw materials a. reduce order time:
i. SCM helps to reduce the time
STRATEGIC IMPORTANCE OF THE SUPPLY CHAIN required for ordering and fulfilling
the same
● important part of every org, small or large

● active management of supply chain activities to 6. speedy delivery

maximize customer value and achieve a sustainable
competitive advantage
● deals w/ the movement of
o storing materials needed to create a
product
o inv management
o keeping track of finished goods from where
they were created to who they go to
● bottom line: there is no overstating the importance
of SCM
o if companies uses SCM, the org is then be
able to function at optimal capacity to
provide and distribute products and
materials
SUPPLY CHAIN MANAGEMENT OBJECTIVES
1. to maximize overall value generated
a. higher SCM profitability/surplus, higher
success
b. supply chain profitability
i. difference bet amt paid by the
consumer to purchase the product
and the cost incurred by the org to
produce and supply the product to
the customer at right time
ii. profit = amt paid by the customer –
total cost for the company
a. with proper SCM, marketer or distributor
can supply products or materials to the
market with fast speed
7. delivery optimization
a. to meet consumer demand for guaranteed
delivery of high quality and low cost with
minimal lead time
i. lead time – amt of time from
initiation and completion of a
process
8. efficiency
a. SCM improves the efficiency of the supply
chain at all points
9. world class performance
a. SCM helps to achieve world class
performance
10. more awareness
a. SCM can help to achieve more awareness of
supply chain dynamics and efficiency
11. demand fulfillment
a. managing demand and a supply is a key and
challenging task for company/management
personnel
12. inventory optimization
a. beneficial to optimized pre-production and
post-production inventory level

2. to look for sources of revenue and cost 13. business characteristics

a. only one source of revenue – customers
Page | 10
 a. careful study of company’s micro and
macro level of supply chain management
can provide good understanding of business
characteristics
14. flexibility
a. well managed supply chain provides flexible
planning and better control mechanism
15. transportation cost optimization
a. minimized cost – SCM helps to reduce or
minimize the transpo cost
16. efficacy
a. more efficiency and efficacy – SCM is like a
boon for greater labor efficiency,
equipment and space efficiency
17. better distribution
a. improved distribution – SCM can maximize
the efficiency of the distribution side
b. marketers/distributors can achieve an
optimized level of distribution by utilizing all
available resources properly
18. cost reduction
a. helps reduce the system wide cost of the
company to satisfy service level equipment
b. company cost – manufacturing, fixed assets,
inventories, transpo
c. service levels – response time
hrs/day/week/month
19. better decision
a. helps top and middle-level management in
better decision
b. can be used as a strategic management tool
for competitive advantage
SUPPLY CHAIN STRATEGIES
● negotiating w/ many suppliers
o commonly used for commodity products
o purchasing is typically based on price
o supplier pitted against each other
o supplier is responsible for tech, expertise,
forecasting, cost, quality, and delivery
BENEFITS OF SCM
● long-term partnering w/ few suppliers
o buyer forms longer term relationships w/
few suppliers
o create value thru economies of scale and
learning curve improvements
o suppliers more willing to participate in JIT
programs and contribute design and tech
expertise
o cost of changing suppliers is huge
● vertical integration
o developing ability to produce goods or
service prev purchased
o integration may be forward, towards the
customer, or backward, towards suppliers
o can improve cost, quality, and inventory but
requires capital, managerial skills, and
demand
o risky in industries w/ rapid tech change
● keiretsu
o middle ground bet few suppliers and
vertical integration
o supplier becomes part of the company
alliance
o often provide financial support for suppliers
through ownership/loans
o members expect long-term relationships
and provide tech expertise and stable
deliveries
o may extend thru several levels of the supply
chain
▪ form of corporate structure in w/c
a number of org link together,
usually by taking small stakes in
each other and usually as a result
of having a close business
relationship, often as suppliers to
each other
● reduce uncertainty along the chain
● proper inv levels in the chain
Page | 11

● minimize delays
● eliminate rush (unplanned) activity
● provide good customer service
TECH IN THE SCM
● internet and web can be very effective
communication enhancers
● software includes demand forecasting tools and
planning tools to allow all SC mem to coordinate
their acts and adjust their prod levels
● software can allow members to:
o review performance
o monitor current perf
o predict future prod levels of products
INVENTORY MANAGEMENT
INVENTORY
● stock of goods/list of goods
● accounting - stock of finished goods
● manufacturing - raw material, WIP, stores
● refers to stockpile of production, a firm is offering
for sale and the compon6that make up the
production
● aggregate of those items of tangible personal
property which
○ held for sale in ordinary course of business
○ in process of production for such sales
KINDS OF INVENTORIES
● raw materials - basic reqs
● WIP -
● consumables
● finished goods - final output of certain process
● spares - components of a finished product
INVENTORY MANAGEMENT
● formulation and administration of plans and policies
to efficiently and satisfactorily meet production and
merchandising reqs and minimize costs relative to
inventories
● consists of raw material, stores, spares, packing
materials, coal, petroleum products, WIP, and
finished products in stock either at the factory or
deposits
● business strat, deals with managing order
processing, manufacturing, storing, and selling raw
materials and finished goods
○ ensures product availability at warehouse,
retailers, and distributors
Effective inventory management system is an integral part of
supply chain management (SCM).
● plays crucial role in overseeing purchases of
production components from suppliers and fulfilling
customer orders
● businesses use strategy to meet customer demands
and grow sales effectively
● helps track the movement of products from
manufacturing units to warehouses and then to
point of sale
OBJECTIVES OF IM
● to efficient and smooth production process
○ it has production schedule
○ need spare parts
● to maintain optimum inventory to maximize
profitability
● to meet seasonal demand of products
● to avoid price increase in the future
● to ensure level and site of inventories required
● to plan when to ensure and where to purchase
● to avoid both overstock and understock of inventory
STEPS IN INVENTORY MANAGEMENT
1. business must track the inventory in the market and
warehouse regularly to balance demand and supply
chain
2. the business gets orders from diff points of sale. it
then manufactures finished goods and transport
them to markets
3. availability of stocks in the market is a significant
aspect of supply chain management, making them
available at the right time
4. until goods reach points of sale, the business tracks
their movement at each step in the inventory and
supply chain management processes
5. small businesses can manually track inventory using
electronic spreadsheets. companies producing large
volumes of goods used advanced software as a
Page | 12
 service (SaaS) and enterprise resource planning  to maintain only a minimum possible inventory
(ERP) software because of inventory holding cost and opportunity
cost of funds invested in inventory
 control investment in inventories and keep at
optimum level

IM should strike a bal. bet too much inventory and too little
inventory.
 efficient management and effective control of
inventories help in achieving:
o better operation results
o reducing investment in working capital
o has significant influence on the profitability
DANGER OF EXCESSIVE AND LOW-LEVEL INVENTORIES of a concern

Excessive Low PLANT LAYOUT

 unnecessary tie up  frequent
the firm’s finds and interruptions in
loss of profit the production  plant layout ideally involves allocation of space and
 excessive carrying sched resulting
arrangement of equipment in such a manner that
cost (cost relating under utilization of
overall operating costs are minimized
to storing unsold capacity and lower
goods) sales  arrangement of physical facilities such as
 risk of liquidity machineries, equipment, furniture
 arrangement of equipment, materials, etc. facilities
Aim of IM thus should be to avoid excessive inventory and to and services of the plant within the selected work
maintain adequate inventory for smooth running of the area to achieve productivity as high as possible
business operations.  plant layout starts with building design and goes up
 efforts should be made to place orders at the right to the movement of worktable and material
time with the right source to purchase at the right handling system
quantity at the right price and quality

OBJECTIVES
EFFECTIVE IM
 maintain sufficient stock of raw materials
 ensure a continuous supply of materials to
production
 minimize the carrying cost and time
 maintain sufficient stock finished goods
 ensure that materials are available for use
 ensure finished goods are available for delivery to
customers
 minimize the investments and carrying cost and time
 protect inventory against deterioration,
obsolescence, and unauthorized use
 control investment in inventories and keep at
optimum level
PROBLEMS FACED BY MANAGEMENT
 to maintain a large size inventories for efficient and
smooth productions and sales operation
1. bottlenecks and point of congestion are eliminated
by line balancing so that material handling and
transpo is minimized
2. workstations are designed suitably, so that
movement by the workers is minimized
3. waiting time of the semi-finished products is
minimized
4. increase flexibility for changes in product design and
future modifications
5. utilization of cubic space, means beside using the
floor space, its ceiling height also utilized to
accommodate more material in the same space
6. improved work methods and reduced production
cycle time
7. to make the workplace safe, ventilated, and free
from dust, noise, fume, etc.
a. leads to satisfactions amongst the workers
and thus better employer-employee rs
8. to increase productivity and better product quality
by reducing the cost of production

Page | 13
TYPES OF PLANT LAYOUT
 process
 production
 combination
 fixed position
PROCESS LAYOUT
 keep similar machines and similar operations in
one place
 machines are arranged acc to their function
o all lathes should be in one place, all
milling at another
 employed for industries engaged in job order
production and non-repetitive kind of
maintenance or manufacturing acts
ADVANTAGES
o better utilization of available
equipment
o less no. of machine is required to do
the operation
o workers are dealing with only on type
of machine so product qual will be
better
o workers in one section are not affected
by the operation carried out in another
section
DISADVANTAGES
o for the same amt of production, the
process layout needs more space
o automatic material handling is difficult
o production control becomes difficult
o RM has to travel a longer distance for
being processed to FG
 increases material handling
and associated costs
o needs more inspection and efficient
coordination
PRODUCT LAYOUT
 line layout
 various operations on RM are performed in a
sequence and machines are placed accordingly the
production flow line
 for continuous production that is involving a
continuous flow of in-process materials towards the
finished product stage
ADVANTAGES
o less space required for the same volume of
production
o material handling is lesser which reduces
time and cost
o coordination will be better, production
planning, and control will easier
o fewer skill workers maybe do the work
DISADVANTAGES
o specified product determines the layout,
change in product involves major change in
layout
 flexibility in the layout is reduced
o rate of production depends upon the
output rate of the slowest machine
o difficult to increase production beyond
capacities of production line
COMBINATION LAYOUT
 combines the advantages of both process and
product layout – these days pure process and
product layouts are rare
 possible where the item is made in different types
and size
 in such case, machinery is arranged in a process
layout, but process grouping is then arranged in the
sequence of various types and sizes of products
ADVANTAGES
o combines advantage of process and product
layout
o useful when a number of items are
produced in the same sequence but in small
numbers and no item justified for indiv
production line
FIXED POSITION LAYOUT
 other types of layouts, product moves past the
stationary production equipment, but in fixed
position layout, product kept stationary, and
equipment moves around it
 applicable in shipbuilding, aircraft manufacturer
ADVANTAGES
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 o possible to assign one or more skilled
workers from the start of a project to finish
in order to ensure continuity of work
o involves the least movement of materials,
manufacturing of large size product is
possible
DISADVANTAGES
o low content of WIP
o high equipment handling costs
FACTORS AFFECTING PLANT LAYOUT
PRINCIPLES OF PLANT LAYOUT
1. plant location and building
a. topography, shape, climate conditions, and
size of the site will influence the general
arrangement of the layout and the flow of
work in and out of the building
2. nature of product
a. production of heavy and bulky materials
needs different layout as compared to small
and light items
b. production is carried in a sequence; product
layout is suitable.
i. soap manufacturing
ii. sugar producing unit
iii. breweries
c. intermittent or assembly industries, process
type of layout best suited
d. products with complex and dangerous
operations would require isolation instead
of integration of processes
3. plant environment
a. heat, light, noise, ventilation, and other
aspects of plant climate should be given
due consideration
4. repair and maintenance
a. machines should not be installed so closely
that it may created the problems of their
maintenance and repairs
b. not only should access to parts for regular
maintenance such as oiling, be considered
in layout but also access to machine parts
and components when replacement and
repair are fairly common
5. management policy
a. relate to future volume of production,
scope for expansion, size of the plant, level
of plant integration processes, facilities to
employees, sales and marketing policies,
purchasing policies, and type of production,
6. human needs
a. adequate
7. types of machinery and equipment
a. general purpose machines – product layout
b. special purpose machines – process layout
8. production process
a. assembly line, product layout
b. job order and intermittent – process layout
 principles of minimum movement
o as far as possible, materials should be move
over minimum distances
 principles of flow
o work area should be arranged acc to the
sequence of operation so there are
continuous flow materials without
backtracking or congestion
 principles of space
o available of cubic space should be
effectively use both vertically and
horizontally
 principles of safety
o there should be consideration for safety
and convenience of workers
o should be built-in provision for safety and
comfort
 principles of flexibility
o layout should be designed in a manner that
production can be rearranged when it
becomes necessary in future account of
expansion or tech changes
 principles of interdependence
o interdependent operations and processes
located in close proximity to each other
 principle of overall integration
o all the plant and facilities should be fully
integrated so as to maximize efficiency and
minimize cost of production
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  principle of minimum investment
o layout should yield savings in fixed capital
investment through optimum utilization
PRODUCTION PLANNING AND CAPACITY
CAPACITY PLANNING
 determining the long-term capacity needs of an org
 determining how these needs will be satisfied
DETERMINATION OF PLANT CAPACITY
 Design Capacity
o rate of the output of goods or services
under full scale operating condi
 System Capacity
o max output of a specific product that the
system of workers and equipment can
produce
PLANT CAPACITY
 referred to as production capacity refers to the
volume or number of units that can manufactured
OPERATIONAL DECISIONS
during a given period
Plant Capacity= jobs per hours∗hours per shift∗shift per day∗working daycontrol
STRATEGIC CAPCITY PLANNING
Lead strategy company anticipates an increase
in demand and thus increases its
production capacity beforehand
Lag strategy also beneficial for smaller
organizations that have low
capacity requirements
company does not have any addtl
inventory with it
as enough resources to meet
actual demand, not projected
demand estimates
Match strategy considered a moderate str as it is
an integration of both lead and lag
strategies
Adjustment strategy involves either reducing or adding
to the capacity in small amts
depending upon the prevalent
consumer demand
PLANNING DECISION
1. strategic decision (top-level)
2. tactical decision (middle-level)
3. operational decision (lower level)
STRATEGIC DECISIONS
 warehouse location
 building a new plant
 mergers and acquisitions
 new product planning
 social responsibility
 planning R&D planning
TACTICAL DECISIONS
 pricing a product
 budget analysis
 shirt-term forecasting
 plant layout
 reward system design
 make or buy analysis
 negotiations
 production scheduling
 inventory
per year
 daily operator scheduling
 order entry
 machine loading
PHASES OF PRODUCTION PLANNING AND CONTROL
1. planning
 nervous system of the production operation
 aims at efficient utilization of material,
resources, people, and facilities in any
undertaking through planning, coordination, and
controlling the production activities that
transform the raw materials into finished
products or components as a most optimal
manner
 all the activities in the manufacturing or
production cycle must be planned, coordinated,
organized, and controlled to its objectives
 totality of the production—basically, the supply
chain
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 a. pre-planning – involves product planning  scheduling
and development, facilities, plant planning,  loading
plant location
PRODUCTION CONTROL
i. product development and design  dispatching
 plant layout  flowing up
ii. demand forecasting  inspection
 there’s the surety that the  corrective
produced products will be in
demand
iii. order writing FACTORS AFFECTING CAPACITY PLANNING
iv. master scheduling
v. MRP (material resource planning) Product design every product has its own unique recipe
Process design processes of the making of the product
b. active planning – the worker is ordered to should be time effective but qual cannot
start the product be reduced
Product variety product having less variation can be
i. process planning and routing processed together to reduce the overall
time
ii. material planning tools planning
iii. loading
iv. scheduling
TYPE OF CAPACITY
2. action
a. dispatching includes - transition from
Production capacity max rate of production or output of
planning phase to action phase. the workers
an org (e.g., 100 cars per day)
is ordered to start manufacturing the Design capacity max output that can possible be
product attained in the ideal condition
Effective capacity max output given a product mix,
i. job order scheduling difficulties, machine
ii. store issue order maintenance, quality factors,
iii. tool order absenteeism
iv. time ticket Maximum capacity max output that a facility can achieve
under ideal condi – aka peak
v. inspection
vi. order move order
DETERMINANT OF EFFECTIVE CAPACITY
3. control
 many decisions abt the design of the production
a. progress reporting
system and operation of the production system may
i. data regarding what is happening with
have an impact on capacity
the job collected – it also helps make
 main factors related to the ff:
comparison with present level of
o facilities
performance
o product or services
b. corrective action o process
i. the tasks under corrective action o human resource considerations
primarily make provisions for an o operations
unexpected event o external forces
ii. includes creating sched and capacity
modifications DEVELOPING CAPACITY ALTERNATIVES
 example: make or buy
decision, sched modifications,  to enhance capacity management, the following
expediting the work, schedule approaches to capacity alternative could be
flexibility developed:
o designing flexibility into the system
PRODUCTION PLANNING o differentiating bet. new and mature
 planning products or services
 routing
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 o taking a “big picture” approach to capacity
changes
o preparing to deal with “chunks” of capacity
o attempting to smooth out capacity
requirements
o usually automated which reduces
the costs of labor required for
production beneficial when
producing a large number of item
in short period of time

PRODUCTION PLANNING HOW TO MAKE PRODUCTION PLAN

 process of deciding how a product or service will be  estimate/forecast product demand

manufactures before the manufacturing begins  access inventory
 how you plan to manage your supply chain, raw  resource planning
materials, employees, and the physical space where  monitor production
the manufacturing process takes place  adjust the plan to make production more
efficient in the future

PRODUCTION PLANNING BEST PRACTICES

TYPES OF PRODUCTION PLANNING
 make accurate forecasts
 job method (job based or project based)  know your capacity
o production focus on manufacturing
a single product and either
handled by a single worker
o small scale production up to larger,
more complex production

 batch production method

o used when items are produced in
groups rather indiv or through
continuous production

 flow method
o demand driven method that is
characterized by the continuous
flow of units through the
production line
o television, refrigerator, or any
other household appliances

 process method/ process manufacturing

method
o type of continuous process similar
to mass production and flow
productions but is characterized
but the continuous production of
materials through the production
line
o example: production and
processing of liquids, gases, or
chemicals where the product is
being produced in a uniform and
standardized sequence

 mass production method

o similar to flow production

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