LOGISTICS MANAGEMENT

Chapter 5: Essentials of Operations

Management
 Reference
▪ Prescribed textbook:
Coyle, J. J., Langley, C. J. & Bardi, E. J. 2003, The Management of Business Logistics: A Supply
Chain Perspective, 7th edn, Thomson Learning, Canada.
▪ Reference textbook:

Bloomberg, D.J., Murray, A. and Hanna, J.B. 1998, The Management of Integrated Logistics: A
Pacific Rim Perspective, 2nd edn, Sprint Print, Prentice-Hall.
Bowersox, D.J. Closs, D.J. and Cooper, M.B. 2002, Supply Chain Logistics Management, McGraw-
Hill/Irwin, New York.
Christopher, M. 1998, Logistics & Supply Chain Management, 2nd edn, Pearson Education. Essex.
Cooper, J. 1994, Logistics & Distribution Planning, Kogan Page, London.
Coyle, J.J., Bardi, E.J. and Langley, C.J. 2003, The Management of Business Logistics, West
Publishing Company, New York.
Greasley, A. 2006, Operations Management, John Wiley & Sons Ltd, Chichester, England.
Johnson, J.C. 1999, Contemporary Logistics, Prentice Hall, Upper Saddle River, N.J.
Stock, J.R. and Lambert D.M. 2001, Strategic Logistics Management, 4th Edn, Irwin/McGraw-Hill,
Boston.
Rushton, A., Croucher, P. and Baker, P. 2006, The Handbook of Logistics and distribution
Management, 3rd edn, Kogan Page, UK.
Lambert, D. M., Stock, J. R. and Ellram, L. M. 1998, Fundamentals of Logistics Management,
McGraw Hill, USA.
▪ List of additional readings:
Matthias, O. and Brown, S. 2016, ‘Implementing operations strategy through Lean processes
within health care: The example of NHS in the UK’, International Journal of Operations & Production
Management, Vol. 36, No. 11, pp. 1435 – 1457.
 Content

5.1 Operations management

5.2 Operations performance

5.3 Process design

5.4 Capacity management

5.5 Lean operations

 5.1 Operations Management

• Operations management is the activity of

managing the resources which are devoted to the
production and delivery of products and services
• Everything you can see around you (except the
flesh and blood) has been produced by an
operation
• Every service you consumed today (radio
station, bus service, lecture, etc.) has also been
produced by an operation
Operations Management: Some Examples of Core
Functions in Organisations
Operations Management in All Types of
Organisations

Automobile assembly factory – Operations

management uses machines to efficiently
assemble products that satisfy current
customer demands
 Operations Management in All Types of
Organisations (C)
Advertising agency – Operations
management uses our staff’s knowledge
and experience to creatively present
ideas that delight clients and address
their real needs
Operations Management in All Types of
Organisations (C)

Disaster relief
charity – Operations
management uses
ours and our partners’
resources to speedily
provide the supplies
and services that
relieve community
suffering
 Operations Management in All Types of
Organisations (C)
machines to efficiently assemble products

diagnose to treat real and

knowledge to effectively perceived patient
conditions
concerns

people to effectively create services that will

address current and
potential client
needs

ours and our to speedily provide supplies and

partners’ services that relieve
resources community suffering

our staff’s to creatively present ideas that delight

knowledge and clients and address
experience their real needs
Operations Management: Input, Process, Output

Source: Slack et al. (2016)

Operations Management: Input, Process, Output -
Examples
Operations Management and Triple Bottom Line
Operations Management and Triple Bottom Line
(C)

Source: Slack et al. (2016)

5.2 Operations Management Performance
Objectives
học

Quality Being RIGHT

Speed Being FAST

Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

The Benefits of Excelling at Operations
Management Performance Objectives

Source: Slack et al. (2016)

Học thuộc
Operations Management Performance Objectives
Versus Strategic and Societal Objectives

Source: Slack et al. (2016)

Operations Management Measurement: Polar
Diagrams

Polar diagrams are used to indicate the relative

importance of each performance objective to an
operation or process.

They can also be used to indicate the difference

between different products and services produced
by an operation Cost

or process. Speed Dependa

bility

Quality Flexibility
Operations Management Measurement: Polar
Diagrams Examples
5.3 Product, Service, and Process Design

Source: Slack et al. (2016)

Product, Service, and Process Design (C)
học
Process Mapping

take note
 Process Mapping: Example

lắp ráp

=> Purpose process mapping: To define the steps and sequence in a process
 Process Mapping: Little’s Law

Throughput time (TH) = Work-in-progress (WIP) ×

Cycle time (CT)
Cycle time = 2
minutes

WIP = 10
Throughput time = ?

Throughput time = 10 × 2 minutes

Throughput time = 20 minutes
 Process Mapping: Example of Little’s Law

Throughput time (TH) = Work-in-progress (WIP) x Cycle time

(CT)
Need to mark 500 exam scripts in 5 days (working 7 hours a day). Takes 1 hour
to mark a script. How many markers are needed?

Throughput time = 5 days x 7 hours = 35 hours

35 hours = 500 scripts x Cycle times

Cycle time = 35 hours = 0.07 hours

500 scripts

Number of markers = Work content = 1 hour = 14.29

Cycle time 0.07
5.4 Capacity Management: What is Capacity?

• Capacity in the static, physical sense means the

scale of an operation
• But this may not reflect the operation’s
processing capability
• So we must incorporate a time dimension
appropriate to the use of assets. For example:
➢ 24,000 litres per day
➢ 10,000 calls per day
➢ 57 patients per session, etc.
Capacity Management Planning
Design Capacity, Effective Capacity and Actual
Output
Design Capacity, Effective Capacity and Actual
Output: Example
Actual output
Efficiency =
idea conditions Effective capacity

Planned loss
Design of 59 hours
capacity

Avoidable loss –
Effective
58 hours per
capacity
week

168 hours 109 hours Actual output –

per week per week 51 hours per
week

Actual output
Utilization=
Design capacity
 Ways of Reconciling Capacity and Demand

How do you cope with

fluctuations in demand?

Absorb Adjust output Change

Demand to match demand
demand
Level Demand
capacity management
Chase
demand
Level capacity is strategy to absorb demand
when there is fluctuation in demand
Ways of Reconciling Capacity and Demand:
Absorb Demand
Absorb
demand
Have
excess
Keep output Make customer wait:
capacity when demand exceed
level capacity

Make
Make to
customer
stock Make to stock: do not change the output level
wait
Part finished Queues
Finished goods, or Backlogs
Customer inventory
Ways of Reconciling Capacity and Demand: Adjust
Output to Match Demand

Adjust output to
match demand
nhớ hết

Hire Fire

Temporary labour Lay-off

Overtime Short time

Subcontract Third-party
work
Ways of Reconciling Capacity and Demand: Adjust
Change Demand
học

Change
demand

Change pattern of demand.

Develop alternative products and/or services.

 5.5 Lean Operations: Definition

‘The key principle of lean is relatively

straightforward to understand; it means moving
towards the elimination of all waste in order to
develop an operation that is faster, more
dependable, produces higher quality products and
services and, above all, operates at low cost’.
Lean Operations: The 4 Elements
Lean Operations: Muda, Mura and Muri as Causes
of Waste
Muda, mura, and muri are Japanese terms conveying three causes of
waste.
❑ Muda – are activities in a process that are wasteful because they
do not add value to the operation or the customer.

❑ Mura – means ‘lack of consistency’ or unevenness that results in

periodic overloading of staff or equipment.

❑ Muri – means absurd or unreasonable. It is based on the idea that

unnecessary or unreasonable requirements put on a process will
result in poor outcomes.
These three causes of waste are related. Inconsistent processes (mura)
lead to overburdening resources (muri) which causes non-value-adding
activities (muda).
Lean Operations: 7 Types of Waste - TIMWOOD

Waste activities consume time, resources and space, but

do not contribute to satisfying customer needs.

❑ Over-production
❑ Waiting time
nhớ tên
❑ Transport

❑ (Over processing) - Process inefficiencies

❑ Inventory

❑ (Wasted) motion

❑ Defectives
Lean Operations: 7 Types of Waste – TIMWOOD
(C)

Over-production
Make more than is required by the customer, or to
make it earlier than required.
• Taking multiple copies of the document which are not
required.
Waiting time
Any delay between when one process step/activity ends
and the next step/activity begins.
• Waiting for a manager to approve an application.
which type of => waiting time
Lean Operations: 7 Types of Waste – TIMWOOD
(C)

Transport
Movement of work between departments or offices that
does not add to the value of the product or service.
• Multiple approvals across different departments.

(Over) Processing
Adding more value to a service or product than
customers want or will pay for.
• Capturing extra information from the customer which is
not used.
Lean Operations: 7 Types of Waste – TIMWOOD
(C)
Inventory
More materials or information on hand than is currently required.
• 100 applications waiting together for data entry.

Motion
Needless movement of people.
While ‘transportation’ refers to the movement of work, ‘motion’
involves movement of workers.
• Running to a printer on a different floor for a printout.
Defects/Inspection
Any aspect of the service that does not conform to customer needs.
• Incorrect customer details captured in the system.
 Lean Operations: Some Daily Examples of
TIMWOOD
Activity Waste Category
➢ Making extra copies just in case Over-production
➢ Document movement between departments Transport
➢ Supervisory approval delays Waiting
➢ Files waiting to be worked on Inventory
➢ Multiple calls to the customer for same issue Over-production
➢ Incorrect customer address Defect
➢ Cupboard full of office supplies Inventory
➢ Capturing additional fields in the system Over-processing
➢ Running for photocopier to other floor on building Motion
➢ Incorrect processing of salary Defect
➢ Customer on hold Waiting
học
➢ Forms moving different locations Transport
 Lean Operations: The 5Ss Method

➢ Sort (seiri) – Eliminate what is not needed and keep what is

needed.

➢ Straighten (seiton) – Position things in such a way that they

can be easily reached whenever they are needed.

➢ Shine (seiso) – Keep things clean and tidy; no refuse or dirt

in the work area.

➢ Standardize (seiketsu) – Maintain cleanliness and order –

perpetual neatness.

➢ Sustain (shitsuke) – Develop a commitment and pride in

keeping to standards.
Lean Operations: The 5Ss Method – Sort (Seri)

Eliminate all unnecessary items!!

Unnecessary refers to those things that are
not needed for current work.

Keep only things that are required

in doing the job.
Lean Operations: The 5Ss Method – Straiten
(Seiton)

Arrange items so that they can be found quickly

by anybody, anywhere, anytime. Items should be
easy to find, easy to use and easy to put away.
Tools
̶ Colour coding , signboards, labelling.
Keep things in order.
Lean Operations: The 5Ss Method – Shine (Seiso)

Everything is clean, neat, tidy and ready to use.

Tools:
̶ Five-minute shine.
̶ Cleaning and inspection checklists.
̶ Checklist of activities needing maintenance.

A clean workplace enhances health

e.g. the ‘5-second stapler’ test!
and productivity.
Lean Operations: The 5Ss Method – Standardise
(Seiketsu)
To prevent setbacks in the first three pillars (sort, set in order and shine).
Tools
̶ Best practice documentation and sharing.
̶ SOPs documented and posted.
̶ Checklists and job cycle charts.

Disorganized folders on the shared drive Standardization of folders

Learn a smarter way to work.
Lean Operations: The 5Ss Method – Sustain
(Shitsuke)

To make 5S a habit in the way we do our day-to-day

activities.

Tools include …
̶ 5S contests.
̶ Visual management boards showing 5S audit.
̶ Slogans.
̶ Handbooks.
̶ Poka Yoke!

Make 5 S a habit