Chapter 8 The Operations

Learning Outcomes (Part 1 of 3)

•Define operations management (OM) and understand
the importance of OM for any organisation
• Understand the nature and dynamics of OM
• Link OM with creativity, design, technology and
innovation
• Explain the essence of OM in terms of value and time
• Understand OM as the transformation function
•Distinguish between the different OM systems in
terms of the types of operations
 Learning Outcomes (Part 2 of 3)
•Understand the concepts of OM in terms of
process management
•Explain OM in terms of productivity and
the performance objectives
• Understand operations strategy
•Explain OM planning and control in terms of
demand management and capacity management
•Explain OM planning and control in terms of
techniques used for forecasting, inventory management
and scheduling
Learning Outcomes (Part 3 of 3)
•Understand the OM body of knowledge in terms
of project management, total quality management
(TQM) and safety, health and environmental (SHE)
management, taking note of the importance of
integration concepts of future modern operations in
terms of lean synchronisation, enterprise resources
planning (ERP) and corporate social responsibility
(CSR).
How is it made?
The dynamics of
operations management
• “Engine” that drives the organisation – inputs are changed to
The outputs;
operation value is added

Creativity • Create something new, can have a considerable impact on

and the organisation

operations
Creative designs • Design can determine success or
inherent in failure
operations
• People want to overcome problems – search for a solution
Technology • Innovation – technology applied for the first time
and • Technology – application of existing knowledge to
innovation methods
• Value added – difference between the cost of inputs and the value or
price of outputs
Value and • JIT (Just in time) systems are also known as ”lean production”
• Total Quality Management (TQM)- holistic & integrative approach
time to quality
OPERATION
S
MANAGEME
NT
 What Is The Core?

Operations
Manufacturing Service Delivery
Management

Operations is the
manufacturing process
(transformation function)
The Transformation Process
Remember, we discussed the transformation process in
chapter 1

INPUT Transformatio OUTPU

n
S Systems TS
• Transformin • Macro- • Value
g processes
Resources: • Good &
• People Services
•
• Micro-
Creativity
• Capital processes • Improvement
• R&D s
• Technology • Operations • New
• Transforme systems designs
d (Assembly • Competitiv
lines,
resources workshops e
• Energy etc. ) advantages
• Materials
• Customers
The Transformation Process
Let’s take the example of Chocolate Éclair
toffees…

TRANSFORMATI
INPU ON
OUTPU
T PROCESS (value T
is added) Toffees
Butter
Cream Kettles
Condensed milk
Powdered milk Assembly lines
Glucose & liquid
sugar Rollers etc.
The Transformation Process
Here is another example of a transformation process – involving you! If you think about
the type of student and person you were when you attended your first lecture at the UFS
and who you are now. There is certainly a difference, because you have been exposed to
some type of transformation process. Now, imagine yourself at the end of your study years
– what will the output be?

TRANSFORMAT OUTPUT
INPUT IO
N PROCESS * An
Student (value is added) increase in
knowledge
+ * Lectures
* A tertiary
Course * Discussions degree in
Material * Assignments BCom, BSc,
* Test/ Exams BA,
BEd
 Process management is inherent to
operations management
NB!!! Transformation process doesn't only
occur in a
factory.
 Process Overview:

Each function adds

value to the business =
VALUE
CHAIN
Have a look at the picture on this slide.

All these processes and activities are

necessary so that a loaf of bread are
available on the shelf at the shop. All of
these are interrelated and connected – which
means, if the one process is not managed
well, the rest of the elements will be
affected.

What would happen if the wheat had a

disease which the farmer did not control
and the wheat production is lower?
Or, what would happen if there is a national
fuel shortage and no trucks can deliver?

See how all of these are related and how

process management is inherent to
operations management.
 Process management is inherent to
Operations Management
 Distinguishing characteristics of processes:
Market Segment & Product Range – provides various items
that are manufactured
Process Velocity - refers to ratio of total throughput time for a
product in terms of the value-added time
The Number of Items – economies of scale, standardisation,
repeatability of process
Visibility of Output – refers to how much of the
operation’s activities the customer is exposed to
Demand Pattern – can be highly variable, irregular, non-
routine and unpredictable
Lead Time - (queue time, processing time, setup time, waiting
time,
inspection time and transport time)
 Process management is inherent to
Operations Management

 All processes have different lead times.

Operations management always attempts to reduce
or eliminate lead times in a process.

What type of lead times to we get

in a process?

Let’s see on the next slide…

 Process management is inherent to
Operations Management
 Process flowcharting
 You might have seen some
sort of a flow chart in your
life. Flowcharts not only
helps
people understand
to certainproces (with all
steps and s the various role-a
players involved), but the is
very important for
Operations Management in
organisations as it can be a
powerful tool to enhance
quality and processes.
Have a look at the process flowchart below. What do you see? Do you
think that the operations function would work well in an organisation
where people are not sure what to do when a certain event occurs?
 Operations Management Performance Objectives

 Performance Objectives:

 Service/ Customer care

 Quality
 Speed
 Cost effective
 Low lead times
 Reduction in stock
holding
 Flexibility
 Low cost & affordability
 OM Performance Objectives

 Trade-off Theory
One aspect must be played
against another

e.g.
Quality versus cost

Operations management must

ensure that one aspect does not
deteriorate while others improve =
Continuous Improvement
 OM Performance Objectives

The importance and prominence of each of the

objectives is different from business to business and
is dependent on the overall business strategy.

Example: Lamborghini vs Chery QQ3.

Describe their respective business strategy with
regards to the performance objectives.
 OM Performance Objectives
Another way to think about performance objectives of
an organisation, is to think about what consumers
believe certain organisations/brands promise to offer or
what consumers expect.
 Quality. Woolworths versus Crazy Store? Who is

most likely to have “quality” as a performance

objective?
 Reliability. Toyota versus GWM. Which brand

between these has established itself as reliable?

 Speed. McDonald’s versus Stadium Fast Foods.

Which one is known to deliver food the fastest

 Productivity is central to Operations
Management
 Operations as CENTRAL to
productivity
 MORE outputs with FEWER Increased
inputs Productivit
 SAME outputs with FEWER y
inputs
 SAME inputs with MORE
output Macr
Micr
o
o
 Macro productivity vs micro productivity
Macro-
productivity
 A Nation’s entire production
 Sum of the productivity of
individual business
enterprises
 Combining productivity
 GDP (Gross Domestic Product)
is used to determine this.
 Formula: Value of total
output of country / total
population (inputs)
Micro-productivity
 Individual business productivity
 Focus on value, effectiveness,
efficiency, utilization, impact and
quality
 Productivity measurement = output income/
input expenses
 Value added productivity (remember the bread
example?)
 Increase/ improve productivity (refer to
previous slide)
 External component of productivity
improvement – factors beyond control of
business management (remember different
external environments in Chapter 2)
 Internal soft components of productivity
improvement -intangible (difficult to change
e.g. training, culture and the organisation)
 Internal hard components of productivity
improvement – tangible (easy to change e.g. new
methods, machines, equipment, process
STRATEG
Y
 Operations Strategy and Design

Operation
s
Strategy
Total pattern of decisions and
actions that formulate the Design
role, objectives and activities
of each part of the operation Choose an APPROPRIATE
design
so that they
CONTRIBUTE & SUPPORT
the
organisations
BUSINESS
 Operations design
 Lean supply vs agile supply
 Products and services will demand a specific
operations design
Which one should a business use for their products or services?
The table will assist you in determining this.
 Transformation
System
Inputs Outputs

Which types of operations design are available?

Hint… look on the next
 Continuous or Job/Batch Project
repetitive
Product Type Standardised Diversified Unique
According to requirements
Product Flow Standardised Virtually none
of particular product
Materials flow
Handling depends on the
Materials determinable, Special equipment=
product= highly variable
Building systemised and HIGH COST
and expensive.
often automated.
Raw Variable because
High turnover Low turnover
Materials of production
Inventory time.
Work-in-progress Small quantities Large quantities Single Project

Fixed Cost: Fixed Cost: Fixed Cost:

Production Cost Relatively Relatively Relatively
Components high Variable low Variable high Variable
Cost: Low Cost: High Cost: High

Highly skilled artisans High degree

Highly working without of
Labour
specialised supervision & with adaptability
Requirement
routine tasks at a moderate adaptability to various
s
 Operational Strategy and Design

 Relationship between operation system and layout type

 Projects and large jobs = FIXED POSITION LAYOUT

Building a bridge
Building a stadium
4 possible arrangements/grouping of machinery

• Raw materials stored in 1 spot

Fixed • ALL other means of production are brought to
the raw materials
 Operational Strategy and Design

 Relationship between operation system and layout

design
 Jobs and batch processes = PROCESS LAYOUT

Farmers harvest grapes in the vineyard, let the grapes ferment in

barrels in cellars, bottle the grapes as wine.
4 Possible Arrangements/Grouping of
Machinery

Horizontal • Similar machines are grouped together-

in sections
(Process
Layout)
 Operational Strategy and Design

 Relationship between operation system and layout

design
 Mass processes or pure continuous repetitive processes =
PRODUCT LAYOUT

Canned goods Chocolates

Baking bread – machine approach Manufacturing body lotion – employee
approach
All elements in the process are done
by machines e.g. Employees are involved in each step of
manufacturing process e.g.
 mixing dough
 portioning and preparation of  filling of bottles
dough  putting sticker on bottle
 baking  packaging
 packaging
4 possible arrangements/grouping of machinery

Vertical • Placed in a straight line, one behind the other

(Product
Layout)
Different components are manufactured at different facilities and then
assembled with a specific line method
4 possible arrangements/grouping of machinery

• Various methods of grouping machinery can be

Combination used.
• E.g. Aircraft manufacturer
 Operational Strategy and Design
Have you ever been in a situation where you had to make salad,
sandwiches, coffee, whatever as a part of a group of people in a social or
work setting? Most of the times it is a bit chaotic in the beginning as no one
really takes charge and everyone is trying to figure out how to get things
done. Most often an “effective layout” needs to be established before things
start to really work.
Aim of

=
Effective Streamline work flow by
Layout
minimising handling
distance and increasing
facility utilisation
Operations planning and control

Who, what,
when, how
and where?
Long-,
Medium- and
Short-term
planning

Control over the

transformation
process
 Operations planning and control

 Demand = Capacity
 Planning for future production capacity occurs
in 3 stages, namely:

Demand Forecasting

Attuning capacity of
machines/resources/facilities

Determining strategies for

the
full utilisation of capacity.
Operations planning and control

Determining the
demand for products
produced by the business with
a
view to accommodate
future events

Important elements of forecasts:

 Timely
 Accurate
 Reliable
 Significant units
 Written - On Paper
 Cost effective
 Understandable
 Casual Methods
Determine
Time-series
cause and Multi-period pattern
Analysis effect projections
relationship Forecast for
Quantitative
more than one
method future period
Data NO seasonal/ trend
manipulated component is
mathematically present

Single period pattern

Qualitative
Techniques Categories projections
Using historical
Based on of data for only one
Judgement. Forecastin period
GUT feeling g (Most recent
demand quantities)
Leave out…

 Pages 247 - 250

 8.5.3 Capacity determinants

 8.5.4 Fixed-capacity planning

 8.5.5 Match capacity to a change in demand

 Operations planning and control

What is Operational Scheduling?

Determines the amount of work as well as the sequence

in which
work must be performed.

 Keep in mind...
 Deal with different types of capacity/resources
simultaneously
 Machines and staff will have different
 Operations planning and control
 The Activities of Operations Scheduling
 MPS (Master Production Schedule)
 Indicates the planned production per time interval (per
month)
 Pushing, pulling, routing, sizing & timing through
workstations

PUSH
Does NOT consider the
consumer

PULL
Pace is determined by
the consumer
 Operations planning and control

 Operations scheduling comprises of 4

activities:
Operations must be TIMED and
ROUTED.

Dispatching- issuing a shop

order for operation to take place.

Control or establish the status

of
the shop order.
If necessary, the order may be
EXPEDITED
 Operations planning and control

 The Activities of Operations Scheduling

 Effective Scheduling
 Planning and control differ for each product or operation

 Characterised by:
 Being realistic and allowing for any essential changes
 Provide enough time for all operations (before/during/after)
 Having capacity available
 Allocate responsibility to workers- in order to stay on
schedule
 Operations planning and control
 Activities of operations
scheduling
Backward Scheduling
•Get the date when the
product is needed and
use it as a starting point
•Subtract time needed
from due date.
Forward Scheduling
•Begin at the present
time and schedule from
then forward.
•Add all the time needed
to complete the
operation, and inform the
consumer.
Leave out…

 Pages 252 - 253

 8.5.6.3 Gantt charts and other techniques

 8.5.7 Project management demand network

techniques
Operations
Improvement
Leadership for quality

Continuous improvement through total

quality
management (TQM)

Benchmarking

Measuring quality costs

Maintenance &

replacement

Safety, health and environmental

management (SHE)
 Operations
Improvement
 Leadership for Quality

 Effective and constant

communication.
 Creating the right attitude and
motivation for employees.
 Identify and develop the skills
and abilities of employees.
 Employees- understand the
basics of sound management.
Operations
Improvement
Operations
Improvement
 Continuous improvement through Total
Quality
Management.

 TQM is concerned with the improvement of ALL

aspects of operations performance.
 ‘Smartness’
 Competitiveness
 Flexibility
 Effectiveness- Entire organisation (including staff)

 Quality is important to both internal and external

Operations
Improvement
 Continuous improvement through Total
Quality
Management.

 Quality Services
dimensions: Products / Goods
 Reliability  Performance
 Responsiveness  Features
 Competence  Reliability
 Conformance
 Durability
 Operations
Improvement
 Benchmarkin
g
Similar Comparing
processes are Generic Interna
Internal
compared,
Processes Processes and
regardless of
the industry.
l Functions

Comparing
similar Specific
functions Functiona Competitiv competitor
comparison
between l e
industry leaders
 Operations
Improvement
 Maintenance and Replacement
 Machinery and Equipment cannot last forever.

 Consequences of defective machinery and

equipment:

 Reduced production capacity

 Increased production costs
 Lower quality products and services
 Threats to safety
 Customer dissatisfaction
 Operations
Improvement
 Preventive
maintenance
 Training of maintenance
 Teams should be properly trained that any possible failures
can be dealt with effectively
 Determining / predicting the possible time of failure
 Determine scientifically
 Proper records should be kept

 Implementing Japanese principles

 Workers accept responsibility for preventing possible
failures
Operations
Improvement
 Safety, Health
and
Environmental
Management
 Focus on well-being of the
internal customer.

 Safety,
health and
environment
Thank you for joining! Any
questions?