PRODUCTION & OPERATIONS MANAGEMENT

MRS.P SHILPA ROY ICSSR TEACHER FELLOW,IPE ASST .PROFESSOR ,MIPGS

PRODUCTION & OPERATIONS MANAGEMENT

WHAT IS POM? WHY SHOULD ONE READ OR KNOW ? HOW DID IT COME INTO EXISTENCE? HOW USEFUL IS IT TO US?

Chapter 1
Introduction to Operations Management

Overview
Introduction y Historical Milestones in OM y Factors Affecting OM Today y Different Ways of Studying OM y Wrap-Up: What World-Class Producers Do
y

Introduction
Operations management is the management of an organizations productive resources or its production system. y A production system takes inputs and converts them into outputs. y The conversion process is the predominant activity of a production system. y The primary concern of an operations manager is the activities of the conversion process.
y

Organizational Model
Finance Sales HRM

OM
Marketing MIS QA

Engineering

Accounting

EntryEntry-Level Jobs in OM
Purchasing planner/buyer y Production (or operations) supervisor y Production (or operations) scheduler/controller y Production (or operations) analyst y Inventory analyst y Quality specialist
y

Historical Milestones in OM
The Industrial Revolution y Post-Civil War Period y Scientific Management y Human Relations and Behaviorism y Operations Research y The Service Revolution
y

The Industrial Revolution

The industrial revolution developed in England in the 1700s. y The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories. y Adam Smiths The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor. y Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.
y

The Industrial Revolution

y y y y y y

The industrial revolution spread from England to other European countries and to the United Sates. In 1790 an American, Eli Whitney, developed the concept of interchangeable parts. The first great industry in the US was the textile industry. In the 1800s the development of the gasoline engine and electricity further advanced the revolution. By the mid-1800s, the old cottage system of production had been replaced by the factory system. . . . more

PostPost-Civil War Period

During the post-Civil War period great expansion of production capacity occurred. y By post-Civil War the following developments set the stage for the great production explosion of the 20th century:
y

increased capital and production capacity the expanded urban workforce new Western US markets an effective national transportation system

Scientific Management
y

Frederick Taylor is known as the father of scientific management. His shop system employed these steps:
Each workers skill, strength, and learning ability were determined. Stopwatch studies were conducted to precisely set standard output per worker on each task. Material specifications, work methods, and routing sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.

Scientific Management
y

In the 1920s, Ford Motor Companys operation embodied the key elements of scientific management:
standardized product designs mass production low manufacturing costs mechanized assembly lines specialization of labor interchangeable parts

Human Relations and Behavioralism

In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production. y Researchers and managers alike were recognizing that psychological and sociological factors affected production. y From the work of behavioralists came a gradual change in the way managers thought about and treated workers.
y

Operations Research
During World War II, enormous quantities of resources (personnel, supplies, equipment, ) had to be deployed. y Military operations research (OR) teams were formed to deal with the complexity of the deployment. y After the war, operations researchers found their way back to universities, industry, government, and consulting firms. y OR helps operations managers make decisions when problems are complex and wrong decisions are costly.
y

The Service Revolution

y y y y y y

The creation of services organizations accelerated sharply after World War II. Today, more than two-thirds of the US workforce is employed in services. About two-thirds of the US GDP is from services. There is a huge trade surplus in services. Investment per office worker now exceeds the investment per factory worker. Thus there is a growing need for service operations management.

The Computer Revolution

y y y y y y

Explosive growth of computer and communication technologies Easy access to information and the availability of more information Advances in software applications such as Enterprise Resource Planning (ERP) software Widespread use of email More and more firms becoming involved in E-Business using the Internet faster, better decisions over greater distances

Today's Factors Affecting OM

Global Competition y Quality, Customer Service, and Cost Challenges y Rapid Expansion of Advanced Technologies y Continued Growth of the Service Sector y Scarcity of Operations Resources y Social-Responsibility Issues
y

Studying Operations Management

Operations as a System y Decision Making in OM
y

Operations as a System
Production System Conversion Subsystem
Control Subsystem

Inputs

Outputs

Inputs of an Operations System

y y y

External
Legal, Economic, Social, Technological

Market
Competition, Customer Desires, Product Info.

Primary Resources
Materials, Personnel, Capital, Utilities

Conversion Subsystem
Physical (Manufacturing) y Locational Services (Transportation) y Exchange Services (Retailing) y Storage Services (Warehousing) y Other Private Services (Insurance) y Government Services (Federal)
y

Outputs of an Operations System

y

Direct
Products Services

Indirect
Waste Pollution Technological Advances

Production as an Organization Function

US companies cannot compete with marketing, finance, accounting, and engineering alone. y We focus on OM as we think of global competitiveness, because that is where the vast majority of a firms workers, capital assets, and expenses reside. y To succeed, a firm must have a strong operations function teaming with the other organization functions.
y

Decision Making in OM
Strategic Decisions y Operating Decisions y Control Decisions
y

Strategic Decisions
These decisions are of strategic importance and have long-term significance for the organization. y Examples include deciding:
y

the design for a new products production process where to locate a new factory whether to launch a new-product development plan

Operating Decisions
These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits. y Examples include deciding:
y

how much finished-goods inventory to carry the amount of overtime to use next week the details for purchasing raw material next month

Control Decisions
These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance. y Examples include deciding:
y

labor cost standards for a new product frequency of preventive maintenance new quality control acceptance criteria

What Controls the Operations System?

Information about the outputs, the conversions, and the inputs is fed back to management. y This information is matched with managements expectations y When there is a difference, management must take corrective action to maintain control of the system
y

WrapWrap-Up: World Class Practice

OM important in any organization y Global competition forces rapid evolution of OM y Decision based framework focus of course
y

Strategic, Operating, and Control

TYPES OF PRODUCTION SYSTEM

MRS SHILPA ROY

JOB PRODUCTION
Job Production: In this system Products are manufactured to meet the requirements of a specific order. The quality involved is small and the manufacturing of the product will take place as per the specifications given by the customer. This system may be further classified as. (i) The Job produced only once: Here the customer visit the firm and book his order. After the completion of the product, he takes delivery of the product and leaves the firm. He may not visit the firm to book the order for the same product. The firm has to plan for material,process and manpower only after receiving the order from the customer. The firms have no scope for pre-planning the production of the product.
y

JOB
(ii) The job produced at irregular intervals: Here the customer visits the firm to place orders for the same type of the product at irregular intervals.The firm will not have any idea of customers visit. Here also planning for materials, process and manpower will start only after taking the order from the customer. In case the firm maintains the record of the Jobs Produced by it, it can refer to the previous plans, when the customer arrives at the firm to book the order.

(iii) The

Jobs Produced periodically at regular intervals: In this system, the customer arrives at the firm to place orders for the same type of product at regular intervals. Here firm knows very well that the customer visits at regular intervals, it can plan for materials, and process and manpower and have them in a master file. As soon as the customer visits and books the order, the firm can start production. If the volume of the order is considerably large and the number of regularly visiting customers are large in number, the Job Production system slowly transform into Batch Production system. Job Production Shop:Tailors shop; cycle and vehicles repair shops, Job typing shops, small Workshops.

BATCH PRODUCTION
Batch Production is the manufacture of number of identical products either to meet the specific order or to satisfy the demand. When the Production of plant and equipment is terminated, the plant and equipment can be used for producing similar products. y This system also can be classified under three categories.
y

THEY ARE:
y

A batch produced only once: Here customer places order with the firm for the product of his specification. The size of the order is greater than that of job production order. The firm has to plan for the resources after taking the order from the customer.

2..
y

A Batch produced at irregular intervals as per Customer order or when the need arises: As the frequency is irregular, the firm can maintain a file of its detailed plans and it can refer to its previous files and start production.

3..
A Batch Produced periodically at known Intervals: Here the firm either receives order from the customer at regular intervals or it may produce the product to satisfy the demand . It can have well designed file of its plans, material requirement and instructions for the ready reference. It can also purchase materials required in bulk in advance. As the frequency of regular orders goes on increasing the Batch Production system becomes Mass Production System. Here also, incase the demand for a particular product ceases, the plant and machinery can be used for producing other products with slight modification in layout or in machinery and equipment. y Batch Production Shop: Tyre Production Shops, Readymade dress companies, Cosmetic manufacturing companies...etc.
y

Continuous Production: Continuous Production system is the specialized manufacture of identical products on which the machinery and equipment is fully engaged. The continuous production is normally associated with large quantities and with high rate of demand. Hence the advantage of automatic production is taken. This system is classified as y MASS PRODUCTION y FLOW PRODUCTION
y

Mass Production: Here same type of product is produced to meet the demand of an assembly line or the market. This system needs good planning for material, process, maintenance of machines and instruction to operators. Purchases of materials in bulk quantities is advisable. Mass Production Shops: Components of industrial products

Flow Production: The difference between Mass and Flow Production is the type of product and its relation to the plant. In Mass Production identical products are produced in large numbers. If the demand falls or ceases, the machinery and equipment, after slight modification be used for manufacturing products of similar nature. In flow production, the plant and equipment is designed for a specified product. Hence if the demand falls for the product or ceases, the plant cannot be used for manufacturing other products. It is to be scraped. Flow Production: Cement Factory, Sugar factory, Oil refineries...etc.,

VIDEO

Production of clothes - YouTube.mp4

JIT/Lean Production
y Just-in-time (JIT): A highly coordinated processing system in which goods move through the system, and services are performed, just as they are needed,
y y y

JIT JIT

lean production pull (demand) system

JIT operates with very little fat

15-43

Goal of JIT
The ultimate goal of JIT is a balanced system. Achieves a smooth, rapid flow of materials through the system

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Summary Figure 15.1

JIT Goals and Building Blocks

Ultimate A Goal balanced rapid flow

Supporting Goals

Eliminate disruptions Eliminate waste

Make the system flexible

Product Design

Process Design

Personnel Elements

Manufacturing Planning

Building Blocks

15-45

Supporting Goals
y y y

Eliminate disruptions Make system flexible Eliminate waste, especially excess inventory

15-46

Sources of Waste
y y y y y y

Overproduction Waiting time Unnecessary transportation Processing waste Inefficient work methods Product defects

15-47

Kaizen Philosophy
Waste is the enemy y Improvement should be done gradually and continuously y Everyone should be involved y Built on a cheap strategy y Can be applied anywhere
y

15-48

Kaizen Philosophy (contd)

Supported by a visual system y Focuses attention where value is created y Process oriented y Stresses main effort of improvement should come from new thinking and work style y The essence of organizational learning is to learn while doing
y
15-49

Big vs. Little JIT

y

Big JIT broad focus

Vendor relations Human relations Technology management Materials and inventory management

Little JIT narrow focus

Scheduling materials Scheduling services of production

15-50

JIT Building Blocks

y y y y

Product design Process design Personnel/organizational elements Manufacturing planning and control

15-51

Product Design
y y y y

Standard parts Modular design Highly capable production systems Concurrent engineering

15-52

Process Design
y y

Small lot sizes

Setup time reduction y Manufacturing cells y Limited work in process y Quality improvement y Production flexibility y Balanced system
y

Little inventory storage

15-53

Benefits of Small Lot Sizes

Reduces inventory Less rework Less storage space Problems are more apparent Increases product flexibility Easier to balance operations

15-54

SingleSingle-Minute Exchange
Single-minute exchange of die (SMED): A system for reducing changeover time y Categorize changeover activities
y

Internal activities that can only be done while machine is stopped External activities that do not require stopping the machine

15-55

Production Flexibility
y

Reduce downtime by reducing changeover time Use preventive maintenance to reduce breakdowns Cross-train workers to help clear bottlenecks

15-56

Production Flexibility (contd)

Use many small units of capacity y Use off-line buffers y Reserve capacity for important customers
y

15-57

Quality Improvement
y

Autonomation
Automatic detection of defects during production

Jidoka
Japanese term for autonomation

15-58

Production Flexibility
Balance system: Distributing the workload evenly among work stations y Work assigned to each work station must be less than or equal to the cycle time y Cycle time is set equal to the takt time y Takt time is the cycle time needed to match customer demand for final product
y

15-59

Personnel/Organizational Elements
y y y y y

Workers as assets Cross-trained workers Continuous improvement Cost accounting Leadership/project management
15-60

Manufacturing Planning and Control

y y y y y

Level loading Pull systems Visual systems Close vendor relationships Reduced transaction processing Preventive maintenance
15-61

Pull/Push Systems
y

Pull system: System for moving work where a workstation pulls output from the preceding station as needed. (e.g. Kanban) Push system: System for moving work where output is pushed to the next station as it is completed

15-62

Kanban Production Control System

y

Kanban: Card or other device that communicates demand for work or materials from the preceding station Kanban is the Japanese word meaning signal or visible record Paperless production control system Authority to pull, or produce comes from a downstream process.
15-63

y y

Kanban Formula
N = DT(1+X) C

N = Total number of containers D = Planned usage rate of using work center T = Average waiting time for replenishment of parts plus average production time for a container of parts X = Policy variable set by management - possible inefficiency in the system C = Capacity of a standard container
15-64

Limited Work in Process

y

Benefits
Lower carrying costs Increased flexibility Aids scheduling Saves cost of rework and scrap

Two general approaches

Kanban focuses on individual work stations Constant work in process (CONWIP) focuses on the system as a whole
15-65

Traditional Supplier Network

Figure 15.4a

Buyer
Supplier Supplier Supplier Supplier Supplier Supplier Supplier

15-66

Tiered Supplier Network

Figure 15.4b

Buyer
First Tier Supplier Second Tier Supplier Supplier Supplier Supplier

Third Tier Supplier

Supplier

Supplier

Supplier

Supplier

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Preventive Maintenance and Housekeeping

Preventative maintenance: Maintaining equipment in good condition and replacing parts that have a tendency to fail before they actually fail. y Housekeeping: Maintaining a workplace that is clean and free of unnecessary materials.
y

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Housekeeping Five Ss
1. 2. 3. 4. 5.

Sort Straighten Sweep Standardize Self-discipline

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5S
What is 5S and why do we want to do it?

What is 5S and why do we want to do it?

5S is short for: Sort, Set in Order, Shine, Standardize and Sustain 5S represents 5 disciplines for maintaining a visual workplace (visual controls and information systems). These are foundational to Kaizen (continuous improvement) and a manufacturing strategy based "Lean Manufacturing" (waste removing) concepts. 5S is one of the activities that will help ensure our companys survival.

5S
- All unneeded tools, parts and supplies are removed from the area 2. Set in Order - A place for everything and everything is in its place 3. Shine - The area is cleaned as the work is performed 4. Standardize - Cleaning and identification methods are consistently applied 5. Sustain - 5S is a habit and is continually improved
1. Sort

Also - Work areas are safe and free of hazardous or dangerous conditions

Some New Words

Red Tag-Process for tagging, removing and disposing of items not needed in the work area. Lean Manufacturing-concepts that seek continuous improvement by removing waste in processes Some Japanese words you need to know: Kaizen(pronounced ki zen) - improvement Kaizen Event and 5S Event-Planned improvements to a specific area or process (usually take 3 to 5 days). 5S Events focus on making 5S improvements. Muda-(pronounced moo da) - waste Gemba-(pronounced gim ba) - workplace

Some 5S Examples

After 5S - Cleaned, organized and drawers labeled (less time and frustration hunting) Before 5S

5S Examples - Sort, Set in Order

See the difference? 1. Sort - All unneeded tools, parts and supplies are removed area 2. Set in Order - A place for everything and everything is place from the in its

5S Examples - Shine

3. Shine - The area is cleaned as the work is performed (best) and\or there is a routine to keep the work area clean.

5S Examples - Standardize
4. Standardize - Cleaning and identification methods are consistently applied Departments have weekly 5S tours Every job has duties that use Sort, Set in Order and Shine We all have common duties to do our part to keep all areas of the plant in shape - breakroom, restrooms, locker area, parking lot, etc

5S Examples - Sustain
5. Sustain

- 5S is a habit and is continually improved

5S is a simple concept with powerful results. You will get additional information on 5S so that you will be well equipped. Our experience is that the more we do 5S the better the work environment becomes: cleaner, safer, more organized, the work is easier, less confusion and less stress. Use the 5S (work\home\play) - The more you use it the easier it becomes and life just gets better and better.

The Good, Bad and the Ugly

First the Bad and the Ugly - Life Without 5S

The Good

Comparison of JIT and Traditional

Table 15.3

Factor Inventory Deliveries Lot sizes Setup; runs Vendors Workers

Traditional
Much to offset forecast errors, late deliveries Few, large Large Few, long runs Long-term relationships are unusual

JIT
Minimal necessary to operate Many, small Small Many, short runs Partners

Necessary to do the work Assets

1581

Transitioning to a JIT System

y y y y y y y

Get top management commitment Decide which parts need most effort Obtain support of workers Start by trying to reduce setup times Gradually convert operations Convert suppliers to JIT Prepare for obstacles
15-82

Obstacles to Conversion
Management may not be committed y Workers/management may not be cooperative
y

Difficult to change company culture y Suppliers may resist

y

Why?

15-83

Suppliers May Resist JIT

Unwilling to commit resources y Uneasy about long-term commitments y Frequent, small deliveries may be difficult y Burden of quality control shifts to supplier y Frequent engineering changes may cause JIT changes
y

15-84

JIT in Services
The basic goal of the demand flow technology in the service organization is to provide optimum response to the customer with the highest quality service and lowest possible cost.
Eliminate disruptions Make system flexible Reduce setup and lead times Eliminate waste Minimize WIP Simplify the process

15-85

JIT II
y

JIT II: a supplier representative works right in the companys plant, making sure there is an appropriate supply on hand.

15-86

Benefits of JIT Systems

y y y y y

Reduced inventory levels High quality Flexibility Reduced lead times Increased productivity

15-87

Benefits of JIT Systems (contd)

y y y y y

Increased equipment utilization Reduced scrap and rework Reduced space requirements Pressure for good vendor relationships Reduced need for indirect labor

15-88

Elements of JIT
Table 15.4

Smooth flow of work (the ultimate goal) y Elimination of waste y Continuous improvement y Eliminating anything that does not add value y Simple systems that are easy to manage y Use of product layouts to minimize moving materials and parts y Quality at the source
y
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Elements of JIT (contd)

Table 15.4

Poka-yoke fail safe tools and methods y Preventative maintenance y Good housekeeping y Set-up time reduction
y y y

Cross-trained employees A pull system

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What is Waste (Muda)?

Some of the main forms of waste are: Overproduction Waiting for materials, machines, or instruction Transportation or movement Excessive inventory Inefficient machine processing and/or operation Producing defects Part or line changeover or machine setup Inadequate housekeeping Miscommunication or inadequate instruction

Improvement (Kaizen) Principles

Get rid of all old (false) assumptions. Don't look for excuses, look for ways to make it happen . . Don't worry about being perfect - even if you only get half right start NOW! It does not cost money to do KAIZEN. If something is wrong Fix it NOW. Good ideas flow when the going gets tough. Ask "WHY" five times - get to the root cause. Look for wisdom from Ten people rather than one. Never stop doing KAIZEN.

What is Lean Manufacturing?

Lean is a Team Based continuous improvement process designed for long term maximization of company resources. Lean is an approach to achieving manufacturing excellence based upon the continued elimination of waste. Wasteis defined as activities that do not add value to the product. Lean Manufacturing utilizes techniques and principles that improve efficiencies of value added activities.

What is Lean Manufacturing?

Value Added Activities: Transform raw materials and information into parts or products. NonValue Added Activities: Consume resources that do not contribute to the physical change of the product.

Seven Types of Deadly Waste

Overproduction Overproduction occurs when operations continue after they should have stopped. The results of overproduction are; Products being produced in excess of whats required Products being made too early -Excess inventory carrying costs y Waiting Also known as queuing, waiting refers to the periods of inactivity in a downstream process that occur because an upstream activity does not deliver on time. Idle downstream resources are then often used in activities that either dont add value or result in overproduction.
y


Transport This is unnecessary motion or movement of materials, such as work-in-process (WIP) being transported from one operation to another. Ideally transport should be minimized for two reasons; It adds time to the process during which no value-added activity is being performed. Handling damage could be incurred. y Extra Processing This term refers to extra operations, such as rework, reprocessing, handling or storage that occurs because of defects, overproduction or excess inventory.
y

Inventory This refers to inventory that is not directly required to fulfill current Customer orders. Inventory includes raw materials, workin-process and finished goods. Inventory all requires additional handling and space. Motion This term refers to the extra steps taken by employees and equipment to accommodate inefficient process layout, defects, reprocessing, overproduction or excess inventory. Motion takes time and adds no value to the product or service. To move and add value is called work. To move and not add value is called motion. Motion, then, means moving without working, moving and adding cost. Defects These are products or services that do not conform to the specification or Customers expectation, thus causing Customer dissatisfaction

The 7 Types of Waste (muda) as defined by Taiicho Ohno (Toyota executive, 1912-1990)

1.Defects 2.Overproduction of things not demanded by actual customers 3.Inventories awaiting further processing or consumption 4.Unnecessary over-processing (for example, relying on inspections rather than designing the process to eliminate problems) 5.Unnecessary motion of employees 6.Unnecessary transport and handling of goods 7.Waiting for an upstream process to deliver, or for a machine to finish processing, or for a supporting function to be completed, or for an interrupted worker to get back to work... And a few more types of waste... 8.Confusion - missing or misinformation. Confusing goals & metrics. 9.Unsafe or unergonomic work conditions 10.Underutilized human potential - skills, talents, and creativity

Muda, Muda, Mura, and Muri

Muda = waste (in its many forms) Muda waste is often accompanied or caused by... y Mura = unevenness, overburden, strain y Muri = demand that exceeds process and equipment capacities
y

Pressures Requiring Companies To Become Lean

Past Conditions y Sellers Market y Rapid Expansion Shrinking Markets y High Unit Volume y High Quality Higher y Delivery & Service Better Service y Financial Muscle Current Reality Buyers Market Slower Growth & Flexibility Quality Quicker Delivery and Asset Utilization

Pressures Requiring Companies To Become Lean

High Costs y Labor y Material y Burden -Overhead Poor Quality
y y y
y

Internal between departments & processes External rework due to vendors, O.V.S.s Internal Customers on time to satisfy requirements
External Customers on time to satisfy requirements

Late Delivery

Batch Vs. Lean Manufacturing

Lean Characteristics
y y y y y y y y y

Kaizen Quick Step Pull Systems Waste Elimination Tact Time/Line Balancing Point of Use / Kanban Work Cells O.P.F. Error Proofing Source Inspection Visual Factory Flexible Low Cost Automation

Results: y Reduced Costs y Reduced inventory

y
y

Reduced Obsolescence
Reduced WI

y
y

Reduced Cycle Times

x Increased Productivity x Improved Utilization of Space x Reduced Lead Times

Reduced Scrap y Improved Quality

Reduced Material Handling