Production/Operations Management Reviewer

Module 1 Lesson 1
Production is the creation of goods and services. Production and Operations
Management (P/OM) is activities that relate to the creation of goods and
services through the transformation of inputs into outputs. Inputs are the
companys resources combined together to produce goods. Outputs are the
finished products. Activities creating goods and services take place in all
organizations. In manufacturing firms, there is the tangible product such as
refrigerators, computers, television sets, etc.
In other types of firms where there are no physical products created,
production function may be less obvious. Transformation takes place, but
people may not have observed it. Examples are the services offered by
schools/universities, banks, airline companies, etc. The production that goes
on in these companies is usually referred to as Operations Management.
MANAGING OPERATIONS
Organizations are established to produce goods that are manufactured more
efficiently by the concerted efforts of a group of people rather than by
individuals working alone. A typical business has three functions: finance,
marketing and production/operations.
Firms use the money generated by adding value for research and
development, investment in new plants and equipment, and profits.
DESIGNING AND OPERATING PRODUCTION SYSTEMS
An operations manager is responsible for the creation of goods and services.
His work involves planning, coordinating, and controlling the elements that
make up the process, including workers, equipment, facilities, allocation of
resources, and work methods.
It also includes product and service design, a vital, ongoing process that
most organizations must do. Operations people can also be a source of new
ideas for improvements in the processes that provide the goods and services.
From a practical standpoint, product and service design and the processes
that provide them, are the lifeblood of a competitive organization.
The degree of standardization and the volume of output of a product or
service influence the way production is organized. Systems with
standardized output can generally take advantage of standardized methods,
materials and mechanization. They all contribute to higher volumes and
lower unit costs.

line supervisors, management trainees and foremen. On the other hand, staff
positions (supportive of line positions throughout the organization) include
computer analysts, web programmers and designers, project analysts,
inventory and material planning control, production planning, logistics and
quality control.
When making career choices in P/OM, you consider the following:
(a) opportunity for advancement and professional development,
(b) job satisfaction,
(b) monetary rewards,
(c) quality of life,
(d) individual needs and desires, and
(e) work group characteristics.
Operations Management career decisions are open to change.
MODEL
A model is an abstraction of reality. It presents a simplified version of
something.
Nonetheless, they all have certain common features. They are all decisionmaking aids and concepts of more complex life and situations.
The goal of modeling is to develop a sample that adequately represents some
real life experience. Once a model has been developed, a great deal can be
learned about it by manipulating its variables and observing the results. If the
model is a good one, the knowledge gained will apply to its real-life
counterpart.
TYPES OF MODELS IN PRODUCTION/OPERATIONS
MANAGEMENT
1. Verbal Models
These express the relationship among variables through words. They are
descriptive.
2. Schematic Models
They show pictorial relationships among variables.
Charts and diagrams are schematic. Legends, symbols and scales are also
categorized under this type.
History of Operations Management

DIFFERENT TYPES OF OPERATIONS

1. Projects
A project is a set of activities directed toward a unique goal. Projects are
relatively large scale. A project approach would be used in the development
of a new product, installation of a computerized production line, transfer of
equipment to a new facility, and construction of a hospital.
2. Job Shop
- maintains the ability to perform certain types of operations but generally is
not responsible for specific products. Instead, it pertains to specific customer
needs like repair work, healthcare, etc.
3. Batch Processing
- is used when companies need to produce moderate volumes of similar
products. Examples are food processors that typically produce their products
in batches.
4. Repetitive Operation
- is a common method used to produce high volumes of standardized goods.
Organizations using this type of operation generally confine output to one or
a relatively small number of similar products or services. These production
systems often lend themselves to automation or other use of specialized
equipment.
5. Continuous Processing
Continuous processing is employed when a highly uniform product or
service is produced or rendered. Processing of chemicals, photographic film,
newsprint, and oil products are all examples of this type of operation.
PRODUCTION/OPERATIONS MANAGEMENT CAREERS
In line positions (positions directly related to achievement of the
organizations financial, marketing and operating objectives), there are first-

3. Ionic Models

- are scaled physical replicas of objects or processes. Architectural models of

new buildings and highway engineering replicas of a proposed overpass
system are ionic models.
4. Mathematical Models
They show functional relationships among variables by using mathematical
symbols and operations.
5. Physical Models
Physical models look like their real-life counterparts.
BENEFITS DERIVED FROM USING MODELS
1. They are easy to use and less expensive.
2. They require users to organize and quantify information.
3. They give organized methods to problem solving.
4. They increase problem comprehension.
5. They make users specific in formulating objectives.
6. They provide a consistent format in problem analysis.
LIMITATIONS OF MODELS
Although models maybe beneficial to the firm, their use may have certain
limitations:
1. Quantitative information may be emphasized at the expense of qualitative
information.
2. Models may be incorrectly applied and the results misinterpreted.
3. Model building may not provide a good accomplishment.
RECENT TRENDS IN P/OM
1. Global Marketplace
Markets and companies are becoming increasingly global in nature. With
globalization, the world has become a borderless community where there is
free entry of goods and service. A good example is the General Agreement
on Tariff and Trade (GATT). It involves more than 120 countries that have
agreed to open their economies, reduce tariffs and subsidies, and expand
protection of intellectual property.
2. Total Quality Management (TQM)
Under this approach, the entire organization from the president down
becomes committed to a never-ending quest for quality goods and services.
3. Time Reduction
This approach is used considerably in the delivery of goods after an order
has been made, and also in the processing of goods.
4. Flexibility
This refers to the ability to adapt quickly to changes in demand, in the mix of
products demanded and in product design. It has become a major
competitive factor.
5. Technology
Technological advances have led to a vast array of new products and
processes.
Technological advances in new methods, raw materials and new equipment
have also made their mark on operations.
6. Worker Participation
More and more companies are pushing the responsibility for decisionmaking and problem solving to lower levels in the organization. They
recognize the value of the workers knowledge, skills and attitudes in
improving the production system.
7. Environmental Issues
Pollution and waste control are key issues managers must address.
Waste disposal regulation has led to the creation of opportunities for
businesses that specialize in waste management and recycling.

Lesson 2: Strategies in gaining productive and competitive advantages

PRODUCTIVITY
Productivity is an index that measures output (goods and services) relative to
the input (labor, materials, energy and other resources) used to produce
them. It is expressed in the ratio of the output to input.

A productivity ratio can be computed for a single operation, a department, an

organization, or even an entire country.

PARTIAL PRODUCTIVITY MEASURES

1. Labor Productivity
Units of output per labor hour
Units of output per shift
Peso value of output per labor hour
2. Machine Productivity
Units of output per machine hour
Peso value of output per machine hour
3. Capital Productivity
Units of output per peso input
Peso value of output per peso input
4. Energy Productivity
Units of output per kilowatt hour
Peso value of output per kilowatt hour
IMPROVING PRODUCTIVITY
1.
Develop productivity measures for all operations.
2. Look at the system as a whole in deciding which operations are most
critical.
3. Develop methods for achieving productivity improvements.
4. Measure improvements and publicize them.
5. Dont confuse productivity with efficiency. Efficiency pertains to getting
the most out of a given set of resources. Productivity, on the other hand, is
for effective use of overall resources.
STRATEGIC PLANNING
is the process of thinking through the current mission of the
organization and the environmental conditions facing it, then
setting forth a guide for tomorrows decisions and results. It is
built on the following fundamental concepts:
1. current results based on future conditions and results
2. strategic planning in a process
3. philosophy
4. linkages or structures within an organization
In the operations function, strategic planning is the broad, overall planning
that precedes the more detailed operational planning.
STRATEGY
Strategies are plans for achieving goals
Strategies give focus for decision-making. They support the mission, vision,
and goals of the organization.
An organizations strategy has a long-term impact on its nature and
characteristics. In large measure, strategies affect the ability of an
organization to compete.
An organizations mission and vision are the reasons for its existence. These
vary among organizations, and even among individuals.
Mission Statement- serve to guide the formulation of strategies for the
organization, as well as decision making at all levels. It provides a general
direction for an organization and allows it to set organizational goals that
give substance to the overall goals.
For effective strategies, planners should consider the special attributes or
abilities possessed by an organization that give competitive edge. Special
attributes of organizations may still be reflected in their 4Ps (price, product,
place, promotion), resources, quality time, flexibility, and customer service.
In studying the aspects of the environment, the organization should
concentrate on the competitors; changing consumer needs; legal, economic,
political, and environmental issues. Managers, when making strategies,
should know whats cooking in the organization. They have to consider the
strengths, weaknesses, opportunities and threats of the business (SWOT).
COMPETITIVENESS
Competitiveness refers to how effectively an organization meets the needs of
customers, relative to other organizations that offer similar goods or services.

If all other factors are equal, customers will choose a product or service that
has the lower price.
Quality relates to the buyers perceptions of how well the product or service
will serve its purpose. Product differentiation refers to any special features
that cause a product or service to be perceived by the buyer as more suitable
than a competitors product or service.
If a company is flexible, it responds to changes.
Finally, time is based on how quickly a product or service is delivered to
customers.

THE DECISION PROCESS

Decision making is a fundamental process of management, and most of the
efforts of the managers are related to this process. Successful decision
making follows a process that consists of these steps.
1. Identify the Problem.
This is the focal point of the process. One danger is that problem solving
efforts will be directed toward removing the symptoms of the problem rather
than the actual problem itself.
2. Specify Criteria for Selecting a Solution.
The decision maker must identify the criteria by which proposed solutions
will be judged. Common criteria often relate to costs, profits, returns on
investment, risk, company image, impact on demand, or similar variables.
3. Develop Alternatives.
In the search for alternatives, there is always the danger that one or more
potentially superior alternatives will be overlooked.
4. Analyze and Compare Alternatives.
This is often enhanced by the use of mathematical or statistical techniques.
5. Select the Best Alternative.
This will depend basically on the objective of the decision maker and the
criteria that are being used to evaluate alternatives.
6. Implementing the Chosen Alternative.
This means carrying out the action indicated by the chosen alternative.
7. Monitor the Results for Achieving Desired Results.
DECISION ENVIRONMENTS
Environmental scanning is a very important factor to consider before making
decisions. There are three environments for consideration.
1. Certainty
Certainty means that relevant parameters such as costs, capacity and demand
have known values.
2. Risk
It means that certain parameters have probabilistic outcomes
3. Uncertainty
This means that it is impossible to assess the likelihood of various possible
future events.
DECISION TREES
A Decision Tree is a schematic representation of the alternatives to the
decision maker and their possible consequences. The term gets its name from
the tree-like appearance of the diagram. A decision tree is composed of a
number of nodes that have branches emanating from them. Square nodes
denote decision points and circular nodes denote chance events. Read the
tree from left to right. Branches leaving square nodes represent alternatives,
while branches leaving circular nodes represent chance events on the
possible state of nature.
After the tree has been drawn, it is analyzed from right to left that is, starting
with the last decision made. For each decision, choose the alternative that
will yield the greatest return (or the lowest cost). If chance events follow a
decision, choose the alternative that has the highest expected monetary
values
Analyze decision from right to left:
1. Determine which alternative you would select for each possible second
decision.
2. Determine the product of the chance probabilities and their respective
payoffs for the remaining branches.
Example on page 25
Lesson 3: Quality Management
QUALITY

Quality refers to the ability of the product or service to consistently meet or

exceed customers expectations. It is very important because customers
expect satisfaction from what they paid for. The term is used in a variety of
ways. Sometimes it refers to the grade of the product line.
DETERMINANTS OF QUALITY
1. Design
The design phase is the starting point for level of quality. It involves
decisions on the specific characteristics of the product or service such as
size, shape and location.
2. Quality of Conformance
This refers to the degree to which goods and services conform to the intent
of the designers.
3. Ease of Use
Ease of use and user instructions are important. The products or services
should be user-friendly and the customers, patients or other users should
be clearly informed on what they should or should not do.
MODERN QUALITY MANAGEMENT
Modern quality management is now evolving toward emphasis on
preventing mistakes rather than finding and correcting them. Moreover,
quality is no longer the exclusive domain of the quality control department,
but has become the responsibility of everybody in the organization.
Suppliers are treated less as adversaries and more as partners.
QUALITY GURUS
Guru is an Indian word, meaning teacher or expert.
W. EDWARDS DEMING
He was a statistics professor at New York University. In the 1940s, he went
to Japan after the World War II to assist the Japanese in improving quality
and productivity.
The Japanese were so impressed that in 1951 after a series of lectures they
established the
Deming Prize, which is awarded annually to firms that have distinguished
themselves with their quality management programs. He was responsible for
the 14 Points needed to achieve quality in organizations. In addition, he
stressed the need to reduce variation in output (deviation from standard),
which can be accomplished by distinguishing between special causes of
variation.
DEMING'S 14 POINTS TO ACHIEVE QUALITY
1. Create constancy of purpose over the long term. Innovate and put
resources into research, equipment and training.
2. Learn new attitudes, reject complacency. Learn to be smart.
3. Request evidence of process controls from suppliers don't rely on
inspection.
4. Reduce the number of suppliers. Hook them into cooperative
relationships.
5. Use statistical process control find the source of faults.
6. Make major changes in training for fully trained, motivated staff.
7. Improve the quality of supervision and information to supervisors.
8. Emphasize participation over fear and insecurity.
9. Remove inter-departmental barriers and bureaucracy.
10. Get rid of empty slogans and carping posters lead by example.
11. Focus on the quality of work standards more than numerical.
12. Train staff to use useful statistical methods so that they can investigate
and communicate. Have experts in support who can give guidance.
13. Re-train in new skills to parallel developments in processes, materials,
products, equipment, procedures etc.
14. Create a top management focus to push the first 13 points. Every
manager must accept responsibility for change.
JOSEPH M. JURAN
taught Japanese manufacturers how to improve on quality.
He views quality as fitness for use. He also believes that roughly
80 percent of quality defects are management controllable. He
describes quality management in terms of a trilogy consisting of
quality planning, quality control and quality improvement.
A key in Jurans philosophy is the commitment of management to
continuous improvement.
He illustrates this idea via the Quality Spiral. With the quality
spiral concept, quality would start from the planning stage to
quality control and quality improvement. Continuous
improvement must be strictly observed. Joseph Juran's work

emphasizes the need for specialist knowledge and tools for

successful conduct of the Quality Function.
PHILIP B. CROSBY
Crosby developed the concept of Zero Defects. He believed that any level of
defects would be costly, and management must install programs that can help
the organization move toward accomplishing of the goal of zero defect. The
idea beyond his
QUALITY is FREE concept is that the costs of poor quality will be much
greater than traditionally defined. Crosby's Quality Improvement Process is
based upon Four Absolutes of Quality Management:
1. Quality is defined as conformance to requirements, neither as goodness
nor elegance.
2. The system for causing quality is prevention, not appraisal.
3. The performance standard must be Zero Defects, not what is close
enough.
4. The measurement of quality is the price of non-conformance, not catalogs.

People should be trained to follow good housekeeping practices, which

should be inculcated as a habit.
BENEFITS OF FIVE-S
The benefits that may be derived from the implementation of five S are:
1. A sense of discipline is inculcated among all workers to keep the
workplace clean, in
order to improve performance and motivation.
2. Development of team spirit and cooperation.
3. Better and safer ways of work methods.
4. Minimal risk of accidents.
5. Dust-free environment and cleanliness of machines, resulting in better
performance
and maintainability.
6. Clean work place.
7. Inventory of materials is more organized and visible.
Lesson 4: Product Service and Design

TOTAL QUALITY MANAGEMENT (TQM)

The term Total Quality Management (TQM) refers to an organization-wide
effort to achieve quality. It is a philosophy about quality that involves
everyone in the organization in the quest for quality.
The TQM approach can be described as follows:
1. Find out what your customers want.
2. Design a product or service that will meet or exceed what customers want.
Make it easy to use and easy to produce.
3. Design a production process that facilitates doing the job right the first
time.
Determine where mistakes are likely to occur and try to prevent them. When
mistakes do occur, find out why, so that they are less likely to occur again.
4. Keep track of results and use those to guide improvement in the system.
Never stop trying to improve.
5. Extend these concepts to suppliers and distributors.
THE FIVE S (5-S)
Takashi Osada, author of Five S has stated that 5S existed in Japanese
culture for a very long time, but it was only in the early 1980s that it was
used as one of the tools and techniques for Total Quality Management.
5-S was derived from the first letter of five Japanese words: Seiri, Seition,
Seiso, Seiketsu, and Shitsuke.
Seiri (Organization)
Seiri calls for the organization of office/work space by discarding
unnecessary items. Excess furniture and outdated equipment should be
removed and may be dispatched for sale or stored off-site. Dead files and
paperwork that is not required onhand can also be archived off-site.
Seiton (Neatness)
Seiton is the arrangement of every usable item so that it can be easily picked
up when required a place for everything, and everything in its place.
Filing cabinets and bookshelves should be rearranged to provide easy access.
Seiso (Cleaning)
Cleaning your work place thoroughly is the essence of seiso, so that there is
no dust on floors, machines and equipment. Once the rubbish and excess
furniture, equipment, and machines are removed, a good cleaning contractor
should be hired.
Seiketsu (Standardization)
A high standard of housekeeping should be maintained at the work place.
Paper color-coding can be used to help differentiate between faxes (in and
out), letters and internal memoranda. Bookcases rather than filing cabinets
are also suggested, so that files can be seen at a glance and retrieved quickly.
Shitsuke (Discipline)

PRODUCT
According to Philip Kotler, a marketing guru, a product is anything that is
offered to a market for attention, acquisition, use or consumption, and that
might satisfy a need or want. CLASSIFICATIONS OF PRODUCTS
A. According to Products Durability
1. Durable Goods
Durable goods are consumer goods that are used over an extended period of
time. Examples are cars, appliances and pieces of jewelry.
2. Non-durable Goods
Non-durable goods are consumer goods which are quickly consumed, worn
out or outdated like bath soaps, sugar and pencils.
3. Services
Services are activities, tasks, benefits, or satisfaction that are offered for a
price, such as film developing, ferris wheel rides, dental prophylaxis, and
haircuts.
B. According to End User Types
1. Consumer Goods
Consumer goods are goods that are bought by household consumers for their
own final consumption. Consumer goods are classified as convenience,
shopping, specialty and unsought goods.
2. Industrial Goods
Industrial goods are goods bought by business people for resale, for further
processing or for use in producing other products. They are classified into
five categories.

PRODUCT LIFE CYCLE

The Product Life Cycle is a graphic presentation of a products sales history
from its birth or market beginning, to its death or withdrawal from the
market.
Introductory period.
At the introductory stage, the product is launched full scale into the market.
It is the period of attempting to gain market acceptances for the product.
As time passes, the Growth stage follows with production and design
improvements that usually create a more reliable and less costly product.
Demand increases for these reasons and because of increasing awareness of
the product or services.
At the next stage in the life cycle, the product reaches Maturity. There are
few, if any, design changes, and demand levels off.
As the product approaches the end of its growth period, sales begin to
decline.
In the last stage of a life cycle, some firms adopt a defensive research
posture where they attempt to prolong the useful life of a product or service
by improving the reliability of the item, reducing costs in producing the
item, redesigning it, or changing the packaging. This is the Decline stage.
The decline stage is characterized by falling sales and falling profits. Most
competitors have withdrawn from the market. Surviving firms compete
within a smaller market, driving profit margins even lower.
PRODUCT AND SERVICE DESIGN
Product and service design plays a strategic role in the degree to which an
organization is able to achieve its goals. It is a major factor in customer
satisfaction, product and service quality and production costs. Organizations
become involved in product or service design for a variety of reasons. An
obvious one is to be competitive by offering new products or services.
Another one is to make the business grow and increase profit. Furthermore,
the best organizations try to develop new products or services as an alternate
to downsizing.
TRENDS IN PRODUCT AND SERVICE DESIGN
1. Increased emphasis on customer satisfaction
2. Competition
3. Time reduction in introducing new products and services
4. Time reduction in the production of goods or rendering of services
5. Attention to environmental concerns/issues
6. Design of user-friendly products and services
THE DESIGN PROCESS
1. Motivation
For a new business or product, the motivation is definitely to achieve the
goals of the organization. Ultimately, the customer is the driving force of the
product and service design. Failure to satisfy the customers can result in
customer complaints, returns, warranty claims,
2. Ideas for Improvement

A business must carefully study new ideas for improving designs. Marketing
can tap sources of ideas in many ways like focus groups, surveys, and
analysis of buying patterns.
3. Organizational Capabilities
Ideas for new or improved products and services cannot be entertained in a
vacuum. Production capability must be a basic consideration.
4. Forecasting
Forecasts of future demand can be very useful in the design process. The
amount of information on hand can help in forecasting demand for new
products and services.
Forecasting techniques are classified as qualitative or quantitative.
STANDARDIZATION
An important issue that often arises in both product/service design concerns
the degree of standardization. Standardization refers to the extent to which
there is absence of variety in a product, service or process. Standardized
products are made in large quantities of identical items like computers,
calculators, and even VCD players.
Standardized service implies that every customer or item processed receives
essentially the same services like in a beauty parlor, where even if there are
different types of hair, they may receive the same service.
Standardization also has disadvantages. A major one relates to the reduction
in variety. This can limit the range of customers to whom a product or
services appeals.
Customers may reluctantly accept a product only because nothing else suits
their needs.
But that creates the risk that a competitor will introduce a better product or
greater variety and gain a competitive advantage.
Another disadvantage is that a manufacturer may freeze or standardize the
design prematurely, and once frozen, it may find compelling reasons to resist
modification.

MODULE 2
Lesson 1
PROCESS SELECTION AND CAPACITY PLANNING
Strategic planning for operations helps managers know the operations
function.
Capacity planning affects operations costs and break-even relationships,
investments required and big risks.
Product and service choice, process selection, capacity planning and choices
about location and layout are among the most basic decisions managers must
make.
Process Selection refers to the way an organization chooses to produce its
goods or provide its services. It occurs as a matter of direction when new
products or services are being planned.
Capacity is the rate of productive capability of a facility. It is usually
expressed as volume of output per time period.
Capacity Planning normally involves the activities ranging from capacity
alternative that are most appropriate to achieving strategic mission.
Measures of capacity are useful in defining two measures of effectiveness,
Efficiency and Utilization. Efficiency is the ratio of actual output to effective
capacity while utilization is the ratio of actual output to design capacity.

Batch processing performs many jobs with frequent shifting from one job to
another. It tends to have a high to moderate processing variety range. Most
food items are produced by batch systems.
CALCULATING PROCESSING REQUIREMENTS
In assessing capacity alternatives, a necessary piece of information is the
capacity requirement of products to be processed. To determine this, an
operations manager should make accurate forecasts of standard processing
times, work days in a year, and the number of shifts to be utilized.
Example on page 50
COST-VOLUME ANALYSIS
Cost-volume analysis focuses on relationships between cost, revenue, and
volume of output. The purpose of cost-volume analysis is to estimate the
income of an organization under different operating conditions.
These costs are then classified as fixed costs or variable costs. Fixed costs
tend to remain constant regardless of volume of output like rental costs,
equipment costs, administrative costs, etc.
Variable costs
Variable costs are cost that varies directly with the volume of output. The
major components of variable costs are generally materials and labor costs.
FC = Fixed costs
R = Revenue/unit
VC = Variable costs Q = Quantity
TC = Total costs
QBEP = Break-even quantity
TR = Total revenue P = Profit
SP = Specified profit
Total costs
Total costs are arrived at by getting the sum of the fixed cost and the product
of the variable costs/unit and quantity.
Break-even Point
This is the volume at which total costs and total revenue are equal. When
volume is less than the BEP, there is loss rather than profit, and vice versa.
Total profit can be computed using the formula:

Example on page 51

We can tell that there is just a slight difference between the efficiency and
utilization of the company although the efficiency should be regarded as
more meaningful. Thus, 877 units/day may not be bad after all.
TYPES OF PROCESSING
1. Continuous
Continuous processing systems produce large volumes of one highly
standardized item. There is little or no processing variety. Sugar, soaps and
shampoos are produced by a continuous processing system.
2. Repetitive
Repetitive operations can be semi-continuous because they tend to involve
long runs of one or a few similar items. The output of the operations is fairly
standard, involving very little processing variety. Cars and appliances are
produced by repetitive systems.
3. Batch

AUTOMATION
Industries can be classified into two: capital intensive and labor intensive.
Capital intensive industries make use of machines to produce goods or
services. Labor intensive industries use people to produce goods or service.
Capital intensive firms would need more capital to start the business, while
labor intensive firms may be started with lesser capital.
Automation is the substitution of machinery for human labor. The machinery
includes sensory and control devices that enable it to operate automatically.
A key question in process planning is whether to computerize or not.
Automation offers a number of advantages over human labor. It has low
variability. It is difficult for a human to perform a task in exactly the same
way in the same amount of time and on repetitive basis. Moreover, machines
do not get bored or distracted, nor do they go on strike, ask for higher wages
or file labor grievances.

Lesson 2: Location Planning

LOCATION PLANNING
The location of a business may have a very great impact on its success
The addition of a new location to complement an existing system is often a
realistic alternative. Location decisions for many types of businesses are
made infrequently, but they tend to have a significant impact on the
organization.
There are two primary reasons why location decisions are a highly important
part of production systems design. One is that they entail a long-term

commitment which makes mistakes difficult to overcome. The other is that

location decisions often have an impact on investment requirements,
operating costs and revenues, and operations.
FACTORS THAT AFFECT LOCATION DECISIONS
1. Regional factors
The primary regional factors involve raw materials, markets and labor
considerations.
2. Location of raw materials
Firms locate near or at the source of materials for three primary reasons:
necessity, perishability of goods, and transportation costs. Mining
operations, farming, forestry and fishing fall under necessity.
3. Location of markets
Profit-oriented firms frequently locate near the markets they intend to serve
as part of their competitive strategy, whereas non-profit organizations choose
locations relative to the needs of the users of their services.
4. Labor factors
Primary labor considerations relate to the cost and availability of labor, wage
rates in an area, labor productivity and attitudes toward work, and whether
unions are serious potential problems. 5. Other factors
Climate and taxes sometimes play a role in location decisions.
The growth in multinational operations over the past several decades is
evidence of the importance of foreign locations. A firm contemplating a
foreign location must carefully evaluate the potential benefits against the
potential problems.
As a general rule, profit-oriented organizations base their decisions on profit
potential, whereas nonprofit organizations strive to achieve a balance
between cost and the level of customer service they provide.
Managers can consider four options in location planning:
1. Expansion of an existing feature of a product or service
2. Adding new locations and retaining existing ones
3. Shutting down a location and moving it to another
4. Status quo (doing nothing)
STEPS TO FOLLOW WHEN MAKING LOCATION DECISIONS
1. Work on criteria to be used in assessing location alternatives (community
service, increased revenues).
2. Spot relevant factors like location of markets or raw materials.
3. Make decision choices.
4. Assess the choices and select one among them.
REASONS FOR LOCATIONAL CHANGES
1. Changes in resources may happen. The cost or availability of labor, raw
materials, and supporting resources like subcontractors may change.
2. The location for demand may change. As product markets change, it may
be desirable to change facility location to provide better service to
customers.
3. Companies may merge, making facilities redundant.
4. New products may be introduced, changing the availability of resources
and markets.
5. Political and economic conditions may change.
GENERAL PROCEDURES FOR LOCATION PLANNING
1. The preliminary screening
The planning process begins with the preliminary screening. For some kinds
of facilities, particular environmental or labor considerations are important.
Aircraft manufacturers must be located near a variety of subcontractors.
Also, primary aluminum producers need electrical power.
2. Detailed study
Once the preliminary screening limits alternative sites to just a few, a more
detailed study begins. At each potential site, a labor survey may be
conducted to assess the local skills.
For assessing community attitudes and for developing strategies in gaining
acceptance, survey research techniques can be very helpful. A good
instrument in dealing with this procedure is the Factor Rating. Factor rating
is a decision procedure in which each alternative is rated according to each
factor relevant to the decision, and each factor is weighted according to
importance. Example is a rating scale from 1-10 where 10 is the highest and
1 the lowest.
TRENDS IN LOCATIONS AND PROBABLE FUTURE
APPROACHES
Recent trends in locating facilities, especially manufacturing facilities, reveal
a combination of competitive and technological factors.

Another trend is the just-in-time (JIT) techniques which encourage suppliers

and customers to locate near each other to reduce supplier lead times.
One advantage of this is the possibility that the future will see a trend toward
smaller factories located close to markets. Advances in information
technology will enhance the ability of manufacturing firms to gather, track,
and distribute information that link purchasing, marketing and distribution,
engineering and manufacturing.

Lesson 3: Layout Planning

LAYOUT PLANNING
Planning the layout of machines and assembly lines has always been given
priority in an operation.
Layout decisions are important for three basic reasons. First, they require
substantial investments of money and effort. Second, they involve long-term
commitments, which make mistakes difficult to overcome. Finally, they have
a significant impact on the cost and efficiency of short-term operations.
Redesigning layouts are done because of the following
a. Inefficient operations
b. Accidents or safety hazards
c. Innovations in design of products or services
d. Changes in volumes of output
e. Transformation in methods or equipment
f. Reinvention of environmental and other legal requirements
g. Centralized management
LAYOUTS
A layout is a physical configuration of departments, work stations and
equipment in the conversion process. There are three basic layouts: Processoriented, Productoriented and Fixed-position. These designs are
differentiated by the types of workflows they entail.
BASIC LAYOUTS
1. Process Layouts
A process-oriented layout is appropriate for irregular operations when work
flow is not consistent for all output. Variable work flow occurs when a
variety of products or variation on a single product are produced.
Process layouts are designed to facilitate processing items or providing
services that present a variety of processing requirements.
2. Product Layouts
A product layout is suitable for producing one standardized product, usually
in large volumes. Each unit of output requires the same sequence of
operations from beginning to end. A job is divided into a series of
standardized tasks, permitting specialization of both labor and equipment.
Example figure on page 65
Product layouts achieve a high degree of labor and equipment utilization,
which tends to affect their high equipment costs.
3. Fixed-position Layouts
The item being worked on remains motionless and workers, materials and
equipments are moved about as needed. These layouts are used in buildings,
power plants, dams, shipbuilding, and production of large aircraft and space
mission rockets.
Fixed-position layouts are widely used for farming, firefighting, road
building, home building, remodeling and repair, and drilling for oil. In each
case, compelling reasons bring workers, materials and equipment to the
products location instead of the other way around.
PRODUCT LAYOUT MODELS
Models are used to serve as guides. Product layouts should consider the
following points:

1. Graphic and Schematic Analysis

Assembly line layouts are most often designed by industrial engineers.
Historically, they have used manual trial-and-error techniques and templates,
drawings and graphical procedures.
2. Modeling the Product Layout
Mathematical and computer-based heuristic models can identify and evaluate
alternative layouts more rapidly than manual or intuitive methods.
3. Defining the Layout Problem
The fundamental problem of layout planning for assembly lines is the
determination of the number of stations and then assigning tasks to each
station so that a desired level of output is achieved.
Process layouts and product layouts represent two ends of a range, from
small batches to continuous production. Process layouts are more conducive
to the production of a wider range of products or services than product
layouts.
LINE BALANCING
Line balancing is the process of deciding how to assign tasks to
workstations. The goal of line balancing is to obtain task groupings that
represent approximately equal time requirements.
This minimizes the idle (inactive) time along the line and results in high
utilization of labor and equipment. Idle time occurs if task times are not
equal among workstations; some stations are capable of producing at higher
rates than others.
Unbalanced lines are undesirable in terms of inefficient utilization of labor
and equipment and because they may create morale problems at the slower
stations for workers who must work continuously.
CYCLE TIME
The cycle time is the maximum time allowed at each workstation to
complete its set of tasks on a unit. It also establishes the output rate of a line.
Example on page 67
The illustration on the previous page shows a very useful tool, which is
called a precedence diagram. It depicts the elemental tasks to be performed
in any sequence requirements. This simple diagram is read from left to right;
the initial tasks are on the
left and final tasks on the right. You must finish Task 1 first before
proceeding to Task 2.
Task 2 and 3 must be completed before 4, and so on.

JOB DESIGN
Job design follows the planning and designing of work. It specifies the
content of each job and determines how work is distributed within the
organization.
In general, the goal of job design is to create a work system that is
productive and efficient, taking into consideration the costs and benefits of
alternatives for the organization and the workers. Therefore, job designers
are concerned with who will do a job, how the job will be done, and where
the job will be done.
JOB ANALYSIS
Job analysis is the process of studying the different positions in the company
and describing the duties and responsibilities that go with jobs, and of
grouping similar positions into job categories. It means looking at what the
employee does, how he does it, the purpose for doing it, the skill involved,
the supervision required, and the existing working conditions.
USES OF JOB ANALYSIS
1. To know the duties of each job by studying its requirements in terms of
skills and responsibilities.
2. To serve as a guide in getting competent employees.
3. To serve as a basis for job evaluation and wage and salary administration.
4. To help determine working conditions that are dangerous, unpleasant or
unhealthy.
5. To function as a guide in establishing standards of performance and
production standards.
6. To simplify work procedures and improve methods through the time-and
motion study.
7. To help in supervising employees and their tasks.
8. To standardize job titles and jobs provided by equipment that reflect the
functions required of each job.
9. To enable management to establish statistical controls and know what type
of jobs are needed at any time either for expansion or reduction.
Job analysis is usually undertaken on three occasions:
1. When the organization is starting.
2. When a new job is created.
3. When a job is changed significantly due to the new methods or
procedures, or new technology.
JOB EVALUATION
Job evaluation is the process of determining the worth of one job in relation
to the other jobs in the company. Its main objective is to determine the
relative positions or levels of the jobs in the company.
Job evaluation is a means to determine the relative values of jobs. This is
done by comparing jobs on the basis of several factors covering the duties,
responsibilities, working conditions and other requirements of the jobs.
FACTORS IN EVALUATING JOBS
1. Education, mental ability, experience and training
2. Effort (mental and physical)
3. Responsibilities and accountabilities
4. Working conditions

Lesson 4: Work Systems Design

WORK SYSTEMS DESIGN
The basic concept in manufacturing or service is the job, a group of related
tasks or activities that need to be performed to meet organizational
objectives. Jobs are then grouped into larger units called departments, and
departments are grouped into basic functions such as Marketing, Finance and
Production. The operations manager must be aware of jobs and human
relations. The operation manager should treat the worker as an individual
and not as a machine.
The importance of work system designs is underscored by the organizations
dependence on human efforts to accomplish its goal. Work design is one of
the oldest fields of operations management.
The shift was the result of studies conducted on work system design, which
revealed the general dissatisfaction felt by many workers with their jobs.

FLOW PROCESS CHARTS

Flow Process Charts are used to analyze interstation activities, attempting to
portray the overall production process. To capture this flow, analysts classify
each movement of the product through the conversion process into one of
five standard categories.
1. Operation
A large circle represents an operation. Work performed in manufacturing the
product such as encoding, mixing, requisition, cash registry, etc.
2. Transportation
The movement of a product or its parts among stations like moving material
through a conveyor, by cart or by carrying.
3. Storage
Intervals during the production, or its parts waits, or is at rest, like raw
materials in a bulk chamber, finished products stacked in racks, or files
protected in cabinets.
4. Inspection
Work performed to verify that the product meets mechanical, dimensional
and operational requirements.
5. Delay
Temporary storage before or after a production operates. Example is waiting
for

the elevator, materials on floor waiting to be processed or papers waiting to

be filed.
MOTION STUDY
The systematic study of the human motions used to perform an operation.
The purpose of studying this is to eliminate unnecessary motions and to,
identify the best sequence of motion for maximum efficiency. There are a
number of different techniques that motion study analysts can use to develop
different procedures like motion study principles and charts.

COMPENSATION
Compensation is a commonly used conventional system of work
measurement resulting in a fixed hourly or monthly wage. Compensation
may also be referred to as an incentive system resulting in a variable wage.
Although the compensation system does not always provide the intended
motivation, performance, satisfaction, and loyalty.
.

MOST COMMONLY USED METHODS IN MOTION STUDY

1. Motion Study Principles
Motion study principles are guidelines for designing motion-efficient work
procedures. The guidelines are necessary to eliminate unnecessary motions
as well as improving arrangement of the workplace and the design of tools
and equipment.
2. Therbligs
A therblig (a term originated by the Gilbreths where the surname is spelled
backwards except for the TH) is a basic elemental motion into which a job
can be broken down. The idea behind the development of therbligs is to
break down the jobs into small elements by eliminating, combining or
rearranging them.
3. Micro motion Study
Micro motion study is the use of motion pictures and slow motion to study
movements that are too fast to analyze.
BEHAVIORAL DIMENSIONS IN JOB DESIGN
In an effort to make jobs more human and meaningful, job design should
include job enlargement, job rotation and job enrichment.
In his Two-factor Theory, Frederick Herzberg supported job enrichment in
order to make the job interesting and challenging thus, encouraging the
employees for greater advancement and satisfaction.
Job enlargement means giving a worker large portion of a total task. If jobs
are enlarged, workers will be more interested and challenged. In the case of a
production worker, he can perform monitoring while carefully encoding the
system in the production. There are two aspects in the job enlargement
program.
1. When additional simple tasks are introduced into a job that was initially
simple in nature, this process is called horizontal job enlargement.
2. Vertical job enlargement is adding or introducing through proper
planning and controlling certain tasks in doing the job that will enable the
worker to do the whole process of the job and not only part of it.
Job rotation is moving employees into a job for a short period of time and
then out again. This approach may be used to avoid having one or a few
employees stuck in a monotonous job.
Job rotation works best when workers can be transferred to more interesting
jobs.
WORK MEASUREMENT
Work measurement is the determination of the degree and quantity of labor
in performing tasks. From the workers standpoint, time standards provide an
indication of expected output. They reflect the amount of time it should take
an average worker to do a given job, working under typical conditions.
Although some small manufacturers and service organizations rely on
subjective estimate of job times, the commonly used methods of work
measurement are:
1) stopwatch time
2) time study
3) historical times
4) work sampling among popular methods
WORK SAMPLING
Work sampling is a work measurement technique that involves defining the
state of workers, observing the job over time, and computing the workers
time. Work sampling does not involve stopwatch measurement because it is
based on random sampling techniques derived from statistical sampling
theory.
The steps involved in work sampling are:
1. Decision of activities described as working and not working.
2. Observation of the worker at selected intervals whether hes working or
not.
3. Computation of the workers time while working on a task.

Module 3
Lesson 1: Product Strategy
PRODUCT STRATEGY
Products should be offered not only as physical acquisitions but also as
solutions to a need.
The product concept holds that consumers favor products that offer the best
quality, performance and innovative features. From the name itself, the
primary focus is the product.
PRODUCT SELECTION
Product selection is choosing the product or service to provide to customers
or clients. For example, hospitals specialize in various types of patients and
medical procedures.
NEW PRODUCT OPPORTUNITIES
The following factors influence the market opportunities.
1. Economic change
Economic change brings increasing levels of influence in the long run but
causes economic cycles and price changes in the short run.

2. Sociological and demographic

This may appear in such factors such as decreasing family size. It may
change size preference for homes, apartments and cars.
3. Technological change
This refers to Fast changing technology like the emergence of mobile
phones, small computers, new models of cars, etc.
4. Political change
This may result in trade agreements, tariffs etc. Best examples are the GATT
(General Agreement on Tariff and Trade) and WTO (World Trade
Organization).
5. Other changes like market practices, professional standards, supplies and
distributors.
Products are created; they live and die, then they are cast aside by a changing
society.
Product life cycles may be a matter of a few hours (newspaper), months
(seasonal fashions), years (betamax), or decades (volkswagen beetle).
Regardless of the length of the cycle, the operations manager has to design a
system that helps introduce new products successfully.
Proper handling of products is a must, especially during its decline stage.
PRODUCT DEVELOPMENT
A new product is developed through a series of stages. The formal
development of new products provides benefits such as higher success rates
in terms of sales and profits, increased customer satisfaction, and
achievement of better quality and low-priced products.
The best way to this is through a formal team approach. The teams provide
the necessary communication and coordination.
For the teams to have successful product development, there must be:
1. support from the top management
2. qualified, experienced leadership.
3. formal organization of the team
4. training programs to teach the skills
5. diverse, cooperative team
6. adequate staffing, funding and vendor assistance
There are three distinct categories of new products:
1. Innovative products are truly unique products. They satisfy a real need
that is not being satisfied at the time it is introduced. A good example is the
finger scan, a security device that electronically compares the marks on a
persons finger with the image of a finger entered on the computer.
2. Replacement products are significantly different from existing products
in form, function and benefits. Like flat screen tvs.
3. Imitative products are new to the company but not entirely new to the
market. These products imitate competitive products with identical features.
Most detergents, bath soaps, shampoos and toothpastes belong to this
classification.
STAGES OF PRODUCT DEVELOPMENT
1. Idea generation
Idea generation involves continuing searches for product ideas that are in
line with the needs of the target market and the objectives of the
organization. It is the exploration stage of new product development. New
product ideas can be obtained from internal sources, customers, competitors,
distributors and suppliers etc.
2. Idea screening
Idea screening is the stage in which alternative ideas are sorted. This
involves analyzing new ideas to determine which ones need further study
and which are to be rejected. Because mistakes happen, managers in charge
of screening must do this with caution, and must balance the costs of
additional investigation against the loss of a viable product idea.
3. Concept development and testing
It is the development of screened ideas into product concepts. A product
concept is a concrete version of the product idea detailing all of the products
characteristics, color, style, design, cost size, use, and others.
Usually, consumers are presented with the idea in pictures or in written form.
They are asked if they would use it, if they like it, if they would buy it, and
so on.
4. Marketing strategy development
Marketing strategy development involves working out a marketing strategy
in introducing the product to the market. It consists of 3 parts.
The first part describes the target market, the positioning of the product, the
market share, and the target sales and profits for the first few years.
The second part describes the pricing, distribution, and marketing budget for
the first year of production.

The third part describes the long-run goods of the company in terms of sales,
profits and marketing mix strategy.
5. Business analysis
Business analysis requires both creativity and analytical thinking. Although
qualitative evaluations of the product and its likely success are still
important, business analysis requires quantitative facts and figures. In short,
the business analysis emphasizes performance criteria and chances for
success in the marketplace.
6. Product development
Product development follows favorable results of the business analysis, that
is, a sample trial model of the product is developed. For tangible products, a
small quantity of the prototype is manufactured according to designated
specifications.
Laboratory tests and other technical evaluations are carried out to determine
whether
it is practical to produce the product.
7. Test marketing
Test marketing is an experimental procedure in which the company tests a
new product under realistic market conditions in order to obtain a measure of
its potential sales when it is distributed nationally. Test markets are cities or
small geographical areas, where the new product is distributed and sold in
typical market settings to actual consumers.
PACKAGING
A package is basically an extension of the product offered for sale. It is the
container or wrapper of the product. Packaging refers to all the activities of
designing and producing the container or wrapper for a product. With
services, the container is not the tangible package but the package of value
for the consumer.
PURPOSES OF PACKAGING
1. For safety and practical purposes
Packaging protects a product on its way from the producer to the final
consumer. Some protection is provided on containers of medicines.
Packaging also protects the product from spilling, spoilage and evaporation.
2. For a companys marketing program
Packaging helps identify a product and prevents substitution of competitive
products.
3. For increasing profit and sales volume
Packaged goods are usually more attractive and therefore help encourage
additional sales. A package that is easy to handle helps minimize losses from
damage and eventually helps cut marketing costs.
OTHER IMAGE-BUILDING FEATURES OF PRODUCTS
1. Product design
A distinctive design may be the only feature that differentiates a product
from its competitors. Engineering design as well as appearance design
contributes to the products promotional appeal. A good design also
improves the salability of a product by making it easier to handle and
operate.
2. Color
Color is a very significant component in a customers acceptance or rejection
of a product. Since many firms offer color in their products, it does not give
a selling advantage to the product. The selling advantage is the
managements knowledge of when to change colors.
3. Product quality
The quality level of a product should be compatible with its intended use
4. Warranties
Over the years, many sellers have used warranties as promotional devices to
stimulate sales by reducing consumers risks. The purpose of a warranty is to
assure buyers that they will be compensated in case the product does not
perform according to expectations.
5. After sales service
Firms offer post-sales services such as maintenance and repair, not only to
satisfy customers, but also to increase revenues and build relationships.
Lesson 2: INVENTORY MANAGEMENT
An inventory is a stock or store of goods. It is a detailed list of things in
stock for a period of time.
Most problems in inventory fall into one of the following categories:
1. The proper quantity or how much to order
2. The proper time to order the quantity or when to order
There are three main types of inventory. These are:

1. raw materials inventory

2. work in process
3. finished goods inventory
Inventory management refers to the formulation and administration of
plans and policies to efficiently and satisfactorily meet manufacturing and
merchandising requirements and minimize cost relative to inventories.
Good inventory management is often an indication of a well-run
organization.
Inventory levels must be planned carefully in order to balance the cost of
holding inventory and the cost of providing reasonable levels of customer
service.
Inventories are vital parts of a business.
A typical manufacturing firm carries different types of inventories, including
the following:
1. raw materials and purchased parts
2. partially completed goods
3. finished goods inventories or merchandise
4. replacement parts, tools and supplies
FUNCTIONS OF INVENTORY
1. To meet anticipated demand.
2. To ease production requirements.
3. To combine components of the production-distribution system.
4. To protect against stock-outs.
5. To take advantage of order cycles.
6. To hedge against price increases or to take advantage of quantity
discounts.
7. To permit operations.
Inadequate control of inventories can result in both under- and over-stocking
of items.
Under-stocking results in:
1. missed deliveries
2. lost sales
3. dissatisfied customers
4. production bottlenecks
Over-stocking, on the other hand, unnecessarily ties up funds that might be
more productive elsewhere.
An effective inventory management must have the following:
1. A system to keep track of the inventory on hand and on order.
2. A reliable forecast of demand that includes an indication of possible
forecast error.
3. Knowledge of lead times and lead time variability.
4. Reasonable estimates on inventory holding costs, ordering costs and
shortage
costs.
5. A classification system for inventory requirements.
AIDS IN ANALYZING INVENTORY
The following ratios are used in determining the adequacy of inventory
level:

Example on page 93
RELEVANT COSTS IN INVENTORY MANAGEMENT
Costs are generally classified into three: total cost, fixed cost and variable
cost. In inventory management there are also three types of costs:
1. Ordering Costs
Ordering costs include costs associated with getting an item into the firms
inventory. These are incurred every time an order is placed. Examples are
clerical costs involved in the preparation of purchase requisitions and
purchase orders, in following up orders, and in receiving the goods. Total
ordering cost is composed of:
1) purchase order cost

2) shipping costs
3) receiving and setting up of equipment
Ordering cost increases as the number of orders increases
2. Carrying Costs
Carrying cost or holding cost increases as the size of the inventory increases.
It is the cost of maintaining inventories. If the firm borrows money to
finance the inventory, the interest on the money invested in the inventory is a
major contribution to the carrying cost. Examples are:
1. weighing and storage costs,
2. property taxes,
3. insurance on inventory,
4. cost of capital tied up in inventory records and handling costs.
5. Stock-out Costs
Stock-out cost is the total effect of a companys failure to service customers
or fill their orders or conduct operations smoothly arising from stock outs
like:
1) cost of idle time and overtime
2) inputted value on lost customers goodwill
3) non-realization of contribution margin on lost sales
ECONOMIC ORDER QUANTITY (EOQ)
Economic order quantity refers to the order size that will minimize the total
relevant costs, namely, ordering and carrying costs. The formula for getting
the EOQ is:

OTHER CONCEPTS RELATED TO INVENTORY MANAGEMENT

1. Lead Time
Lead time refers to the length of time it takes to order and receive goods. It is
also called the reorder period.
2. Lead Time Usage
Lead time usage refers to the normal usage during lead time.
3. Safety Stock
Safety stocks refer to the additional quantity of goods in stock at the time an
order is placed to minimize the possibility of stock outs.
4. Reorder Point
The inventory level at the time an order is placed. It is equal to lead time
usage plus safety stock. Example on page 96 sample problems on page 97
onwards

Lesson 3: Just in time

JUST-IN-TIME SYSTEM (JIT)
Just in time refers to a production system in which the movement of goods
during production and deliveries from suppliers are carefully timed in each
step of the process.
The purpose is to be sure that the next batch of raw materials would arrive
for processing just as the preceding batch is completed.
The JIT approach was developed at the Toyota Motor Company of Japan by
Taiichi Ohno and his colleagues. The goal of JIT is a balanced system. It
means achieving a smooth, rapid flow of materials through the system. The
idea is to make the
process time short as possible by using resources in the best possible way.
The objectives of JIT are to:
1. to have a smooth flow of products through the system
2. establish a flexible system
3. minimize set-up times and lead times
4. inventory management
5. eliminate unproductive resources
The beginnings of the JIT production system are rooted in the historical
situation that Toyota faced. After World War II, Ohno expressed his plans to
catch up with the American car manufacturers. He examined the American
car industry and found that it is best to make lots or batches of an item
before switching to a new item. They also made use of the EOQ in terms of
ordering and stocking the many parts needed to assemble the car.
He identified a number of sources of waste that he felt should be eliminated:
1. Overproduction

2. Waiting time
3. Irrelevant transportation or movement of goods
4. Unwanted processing time
5. Over or under-stocking
6. Defects
COMPOSITION OF A SOUND JIT SYSTEM
1. Product Design
It means the use of standard parts to reduce time and costs. It also concerns
quality of work for the products to be created, and extension of standard
parts.
2. Process Design
It involves the effective operation of JIT systems in permitting greater
flexibility in scheduling, quality improvement and little inventory storage.
The
bottom-line is to lessen the burden of work in process without compromising
the output generation.
3. Personnel Requirements
People will be treated as valuable objects, or an important element in an
organization where they are continually trained to develop relevant skills and
are molded to be leaders and not just facilitators or order givers.
4. Manufacturing Planning and Control
It utilizes systems for moving work and workstations that are both pushed
and pulled for proper completion of tasks. It also involves close vendor
relationships and minimizing transaction processing.
ADVANTAGES OF JIT SYSTEMS
The benefits that may be derived from the successful implementation of the
just in time system are:
1. Greater efficiency in processing goods and inventory management.
2. Minimizing redundancy and space requirements.
3. Smooth production flow with few disruptions.
4. Decentralization in management
5. Emphasis on product quality.
6. Provides healthy relationships with vendors.
7. Less lead time and scrap.
RELEVANT JAPANESE TERMS
1. Andon. It means trouble lights, which immediately signal to the
production. It is also a light where there is a problem to be resolved.
2. Jikoda. It means enabling machines to be autonomous (independent) and
able to automatically detect defects.
3. Muda. It means waste.
4. Mura. It means uneven.
5. Muri. It means excess.
6. Poka-yoke. These are proven machines and methods for prevention of
production errors.
7. Shojinka. A workforce flexible enough to cope with changes in
production and using different machines.
8. Soikofu. It is thinking creatively or having creative or inventive ideas.
In the Toyota system, the Andon (indicating a stoppage of the line), is hung
from the factory ceiling so that it can be clearly seen by everyone.
AMERICAN ADOPTION OF JIT
General Motors in the USA
IMPORTANT POINTS TO REMEMBER WITH JIT
1. JIT has a steady production system of clearly defined standard products.
2. JIT has a reasonable number of units made.
3. JIT creates high value products.
4. JIT has a flexible working practices and a disciplined workforce.
5. JIT provides short setup time on machines.
6. With JIT, quality is assured.
KANBAN
Kanban is a signal, message or communication (wave hands, shout, sending
a card, electrical impulses) that is used to control the flow of items through
the production process.
A major benefit of the Kanban system is simplicity.
CONVERTING TO A JIT SYSTEM
A number of well-known firms have converted a portion of their operations
to JIT Systems. To increase the probability of successful conversion,
companies should adopt a carefully planned approach that includes the
following elements:

1. Commitment of top management to the conversion and their involvement

in the process, the cost and time to finish the conversion.
2. Careful operations study.
3. Support and cooperation of workers.
4. Reducing setup times.
5. Gradual conversion from start to finish.
6. Converting suppliers to JIT and prepare to work closely to them
7. Readiness to meet obstacles to conversion.
JIT IN SERVICES
JIT in services is a natural extension of the JIT concept. The most obvious
example is just-in-time deliveries. Delivering supplies of parts and materials
to the production floor or the next day operation as they are needed.
JIT services can be a major competitive advantage for the companies that
can achieve it. An important key to JIT service is the ability to provide
service when it is needed. That requires flexibility on the part of the
provider, which generally means short
setup times, and it requires clear communication on the part of the
requisitioner.
Lesson 4: Materials Management in Operations
MATERIALS MANAGEMENT
Materials are the physical items used during the production process. They
include not only the parts and raw materials that become the finished goods,
but also the physical items needed to support the production process like
fuels, machinery, etc.
Materials Management is concerned with:
1. purchasing
2. storage and movement of materials during production
3. distribution of finished goods.
Purchasing is a function responsible for obtaining material inputs for the
operating system. This lesson describes the purchasing function as it
operates in most organizations. Purchasing should be in close coordination
with the other functional areas like accounting, data processing, design,
receiving, operations, legal aspects and most especially, the suppliers.

MAKE OR BUY
The issue of whether to make or buy arises during these circumstances:
1. in response to unreliable suppliers
2. the capacity of an organization
3. increasing cost
The following factors are taken into account when deciding whether to make
or buy:
1. cost to make versus cost to buy
2. stability of demand and possible seasonality
3. quality available from suppliers compared with a firms own quality
capability
4. the desire to maintain close control over operations
5. stability of technology
6. consistency of necessary operations
7. expertise, patents and related factors
VENDOR ANALYSIS
Vendor analysis means evaluating the sources of supply in terms of price,
quality, reputation and service. The company often provides suppliers with
detailed specifications of the materials or parts instead of buying items off
the shelf.
The main factors to look for when a company selects a vendor are:
1. prices
2. quality
3. services
4. location
5. suppliers policy

6. suppliers flexibility
Suppliers can be sources of ideas that contribute to the competitiveness of
the organization.

3. Load Chart

BAR CODING
Bar Codes are the patterns of alternating wide and narrow black lines and
white spaces, and numbers and symbols, that you see on everyday products
at supermarkets and other retail stores. The bar codes are read by scanning
devices that use the information for a variety of purposes, such as:
1. recording prices and quantities
2. printing sales receipts
3. updating inventory records
Bar codes are used in manufacturing and distribution. They are also used to:
1. update inventory records
2. monitor quality losses
3. observe productivity

MODULE 4

Bar codes provide companies with a tremendous ability to monitor and

control items in manufacturing and distribution by providing accurate, up-todate information on quantity, quality, location and other data.

FORECASTING
Forecasting is telling in advance a possible event that may take place in the
future.
Forecasts are commonly not accurate.
Business forecasting pertains to more than just predicting demand. It is used
to predict profits, revenues, even interest rates and GNP. Successful
forecasting requires a skillful blending of art and science.

SCHEDULING
Scheduling pertains to establishing the timing of the use of specific
resources of the organization. It relates to the use of equipment, facilities and
human activities.
Operations planning and scheduling systems are concerned with the:
1. volume and timing of outputs
2. the utilization of operations capacity and
3. balancing outputs with capacity at desired levels for competitive
effectiveness.
Scheduling decisions are the final steps in the transformation process before
actual output occurs. Many decisions about system design and operation
have to be made long before scheduling decisions.
Scheduling encompasses allocating workloads to specific work centers and
determining the sequence in which operations are to be performed. They are
characterized by standardized equipment and activities that provide identical
or highly similar operations on customers or products as they pass through
the system.
Consequently, the following factors often determine the success of a system.
1. Process and Product Design
Cost and manufacturability are as important as achieving a smooth flow of
work through the system.
2. Preventive Maintenance
Keeping equipment in good operating order can minimize breakdowns that
would disrupt the flow of work.
3. Rapid Repairs when Breakdowns Occurs
This can require specialist as well as stocks of critical spare parts
4. Optional Product Mixes
Techniques such as linear programming can be used to determine optimal
blends in inputs to achieve desired outputs at minimal cost.
5. Minimization of Quality Problems
Quality problems can be extremely disruptive, requiring shutdowns while
problems are resolved. Moreover, when output fails to meet quality
standards, not only is there loss of output, but there is also a waste of the
labor, material, time and other resources that go with it.
6. Reliability and Timing of Supplies
Shortage in supplies is an obvious source of disruption and must be avoided.
LOADING
Loading refers to the assignment of jobs to work centers and to various
machines in the work centers. When making assignments, managers often
seek an arrangement that will:
1. minimize processing and set-up costs
2. minimize idle time among work centers
3. minimize job completion time, depending on the situation
Charts that can be used in this activity are:
1. Gantt Chart
2. Schedule Chart

Lesson 1: Forecasting

STEPS IN FORECASTING SYSTEMS

a. Determine the use of the forecast.
b. Select the items or quantities that are to be forecasted.
c. Determine the time horizon of the forecast.
d. Select the data needed to make the forecast.
e. Validate.
f. Make the forecast.
g. Implement the forecast.
When history is taken as the beginning point for forecasting, it is believed
that future patterns tend to be extensions of past ones and that some useful
forecasts can be made by studying past behavior. This kind of forecasting is
said to have a high degree of inaccuracy when extended far into the future.
TYPES OF FORECASTS
A. MOVING AVERAGE METHOD
The Moving Average Method is the simplest method in forecasting. With this
method, a number of periods for which moving average will be computed
can be selected. The number of periods represented by N is called an order
of moving average.
Then, take the average demand for the most recent N periods. This average
demand then becomes the forecast for the next period.
Example on page 117
B. WEIGHTED MOVING AVERAGE
In the weighted moving average forecast, weights will be assigned to the
different periods and greater weight is usually given to the most recent
period. It may be expressed as follows:

Example on page 118

C. EXPONENTIAL SMOOTHING
Exponential smoothing is a forecasting method that can be handled
efficiently by computers. The formula is:

Example on page 119

D. TREND PROJECTIONS
The trend projection technique fits a trend line to a series of historical data,
and then projects the line into the future from medium to long range
forecasts.

A least square line is described in terms of its y intercept + its slope. If we

can compute the y intercept and slope; the line can be expressed by the
following equation:

constraint is called the feasible solution, and these points are located in the
feasible region.
PARTS OF THE LINEAR PROGRAM
The linear program has two parts, the objective function and the constraints.
1. The Objective Function
The objective function is an algebraic expression introduced by the word
maximize or minimize. The constraints are introduced by the phrase
subject to.
2. Constraints
Constraints have two parts, the implicit and explicit. Implicit constraints are
those that are indirect, like a raw material as a variable to a given problem. It
is needless to specify in the problem that the quantity is always positive.
Explicit constraints, on the other hand, are conditions of the problems which
are to be expressed in mathematical sentences.
STEPS IN USING THE GRAPHICAL METHOD
1. Represent the unknown in the problem.
2. Tabulate the data about the unknown.
3. Set up the objective function and the constraints in mathematical format.
4. Plot the constraints.
5. Substitute the coordinates at the vertices of the feasible region in the
objective function.
6. Determine the optimum solution
Example on page 128
Finding the Optimum Solution:
Taking the coordinates at the vertices and substituting them in the objective
function:
Vertices Objective: 180x + 120y

Example on page 120-121

E. JUDGEMENTAL FORECASTING
In modern times, forecasts of the social and economic environment have
become more necessary in business so as to keep the production manager
informed about what is likely to happen.
When good data are not readily available, we tend to consult experts or
experienced individuals to ask for their personal judgment, in which case we
rely primarily on human judgment to interpret available data and make
projections about the future.
One kind of judgmental forecast is the Delphi Technique, where several
experts opinions solicited in an environment in which all of them
individually have access to the information, but the majority opinion is not
disclosed in order to prevent them from influencing each other.
But in business, it is better to forecast than not to forecast at all.
Lesson 2: Linear Programming
LINEAR PROGRAMMING
The linear programming technique involves a sequence of steps that will
lead to an optimal solution to a class of problems. The word linear implies
direct proportionality of relationship of the different variables.
Programming means making schedules or plans of activities that will be
undertaken in the future.
These decisions may include:
1) allocation of scarce resources
2) assignment problems
3) transportation problems, etc.
Linear programming is planning by the use of linear relationship of variables
involved. There are two ways of solving a linear programming problem.
These are the graphical method of solving problems, and the simplex
method.
THE GRAPHICAL METHOD
The Graphical method makes use of graphs to arrive at the optimum
solution.
Optimum solution is a solution that makes the objective function as large as
possible as
in the case of the maximization process, and as small as possible as in the
minimization process. The set of all points in the graph satisfying the

Example on page 129

Example on page 130
Lesson 3: Information Technology in P/OM
INFORMATION TECHNOLOGY in P/OM
Computer technology is used because computer-aided design and
manufacturing systems have become cheaper and easier to use, encouraging
even decidedly low-tech companies to trade their drafting tables for
computer terminals.
COMPUTER INTEGRATED MANUFACTURING (CIM)
Computer Integrated Manufacturing (CIM) refers to the integrated operation
of computer technology tin the creation of goods and service to achieve the
objective of the organization.
It is also a system for linking a broad range of manufacturing activities
through an integrating computer system that includes engineering design,
flexible manufacturing systems and production planning and control. In
effect, a CIM system integrates information from other areas of an
organization with manufacturing. is a manufacturing philosophy in which the
functions of the organization, from product definition to the disposition of
the final product, are designed and integrated to achieve clearly enunciated
organizational goals efficiently and effectively.
REASONS FOR THE EMERGENCE OF CIM
Shorter time to market the new products
Increase in manufacturing productivity
Shorter customer lead times
Improved quality
Improved customer service
Shorter vendor lead times
Reduced inventory levels
Greater flexibility and responsiveness
Lower total cost
Greater long-term flexibility
A CIM specialist is usually an Information Systems Engineer. His tasks
are designing, developing, implementing and administering computer and
software application environments for the production site. These software
programs may include real-time sensor systems, barcode and other remote
data capture systems, industrial databases, computer networks, web-based
applications and wireless telecommunication application systems.

Information systems engineers currently hold positions as systems analysts,

programmers in industrial, banking, and health care organizations,
information systems managers, chief information officers, chief executive
officers, and as entrepreneurs operating their own companies.
CIM is the functional integration of the following functions:
1. Administration and Financial System
This includes invoicing, long range planning and budgeting within the
organization.
2. Engineering Support System
It deals with designs of the product and the development of processes.
3. Production Management
It deals with the coordination of manufacturing related activities to achieve
balance between the goals of customer service, process efficiency and
minimum inventory investment.
4. Execution Layer System
This are computer based operations, which directly affect the execution of
production.
Information sciences have great impact on the creation of goods and
extension of service.
COMPUTER AIDED DESIGN (CAD)
Computer aided design uses computer graphics for product design. The
designer can modify an existing design or create a new one on a cathode ray
tube (CRT) by means of a light pen, a keyboard, a joystick or a similar
device.
A major benefit of CAD is the increased productivity of designer. No longer
is it necessary to laboriously prepare mechanical drawings for products or
parts and revise them repeatedly to correct errors or incorporate revisions.
An increasing number of CAD designers are moving beyond solid modeling
into hybrid software that combines the speed and ease of use of solid
modeling with the design flexibility of surface modeling. This combination
provides an ideal CAD solution for companies designing products where
aesthetics (having or showing appreciation of beauty in nature and art) and
ergonomics (the study of relationship between individuals and their work or
working environment) are key considerations, especially in products like
automotive and aerospace components, housing for electrical appliances,
ceramics, footwear, packaging, sports equipment and toys, as well as all
types of tooling.
CAD is a very interesting tool, but CAD developers and high-tech
companies in general are worried about the recent decline of interest in math
and science two critical areas for the pursuit of architecture and
engineering studies that they have noticed among the younger generation.
M
Educational institutions are encouraged to include CAD in their program to
increase students awareness of the recent technology.
COMPUTER AIDED MANUFACTURING (CAM)
Computer aided manufacturing refers to the use of computers in process
control ranging from robots to automated quality control. These systems
replace human functions with machine functions. The only disadvantage of
CAM is its high cost of installation.
Advantages of CAM:
a. It reduces labor.
b. It handles dirty, dangerous and boring tasks.
c. It produces high consistent quality.
The use of robots in manufacturing is sometimes an option. A robot is a
machine consisting of a mechanical arm, a power supply and a controller.
TYPES OF ROBOTS
1. Industrial Robots
These have arm-like projections and holders that perform factory work
customarily done by humans.
2. Pick-and-Place Robots
These are the simplest version. The name comes from its application in
materials handling, picking something from one spot and placing it at
another. The control system is electromechanical.
3. Servo Robot
This is the most common industrial robot. The name servo was coined from
one or more servomechanisms that enable the arm and gripper to alter
direction in midair without tripping to mechanical switch.
4. Programmable Robot

This is a servo robot directed by a programmable controller that memorizes a

sequence of arm-and-gripper movements.
5. Sensory Robot
This is a computerized robot with one or more artificial senses, usually sight
or touch.
6. Assembly Robot
This is a computerized robot designed specifically for assembly line jobs.
Experts predict that an even greater benefit of CAM will come from the
ability of the machine to do extremely complex jobs. For prototypes
(samples) and very small runs (flows), this approach will be much quicker
and cheaper. It can give lead times of two weeks, instead of two months or
more for castings.
Another field of study in CAM is micro manufacturing. This system
involves fabrication (manufacture) of selected devices which promote high
rates of mass and heat transfer.
FLEXIBLE MANUFACTURING SYSTEMS (FMS)
Flexible manufacturing systems is a group of machines that include
supervisory computer control, automatic material handling, and possibly
robots or other automated processing equipment.
Reprogrammable controllers enable these systems to produce a variety of
similar product systems that may range from three or four machines to more
than a dozen.
One is that the type of system can handle a relatively narrow range of part
variety, so it must be used for a family of similar parts.
Finally, companies sometimes prefer a gradual, not slow approach to
automation, and
FMS is actually the opposite.
The latest use of FMS is in the field of production engineering. This is a
field of work that provides users with a "learning factory" environment in
which they can implement production engineering concepts communicated
in lectures and readings from schools and articles. Equipment includes two
engine lathes, four vertical milling machines, a drill press, a cutoff saw, a
grinder, modular fixturing equipment, and sundry work holding and cutting
tools.
COURSES FOR AN INFORMATION SYSTEMS ENGINEERING
DEGREE
ENGR 112 - Engineering Orientation (engineering problem solving with
computers)
IE 411 - Visual Programming for Industrial Applications
IE 412 - Information Systems Engineering
IE 413 - ECommerce Applications for Engineers
IE 414 - Mobile Computing Applications
IE 415 - Industrial Simulation
IE 416 - Artificial Intelligence Systems for Engineering
IE 417 - Bar Codes and Automatic Data Capture
IE 418 - Telecommunication Concepts
IE 419 - Wireless Networks
Lesson 4: Linear Assignment Method
LINEAR ASSIGNMENT METHOD
The assignment method is a special type of transportation method where the
resources are allocated to the destinations on one-on-one bases so as to
minimize the total cost.
Commonly used criteria in the assignment model include costs, profits,
efficiency and performance.
The following is an example of an assignment problem. A, B,C,D on the
horizontal axis represents the machines that will be used and 1, 2, 3, 4 on the
vertical axis are the jobs to be done. The figures inside are the costs. The
problem would be to determine what machines and jobs would give the
company the least cost.

3. Cover the zero entries by vertical and horizontal lines, using the least
number of lines possible. This can be done by covering first the row or
column having the most number of zeros.

Framework of an assignment problem

An assignment is optimum if the number of lines used is equal to the number
of rows of the number of columns.
1. Subtract the smallest cost from each entry in each row. If each zero can
now be assigned one-to-one correspondence with the jobs, an optimal
solution is reached. If not, go to step 2.
The actual table after the first step is shown below.

2. Subtract the smallest cost in each column. If the zero entries can now be
distributed one-to-one correspondence with the jobs, an optimal solution is
reached. If it cant, go on to step 3. On column A, the smallest cost is 0,
column B is 0, column C 0 and column D 1. Performing this step, we can
get these values seen below.

4. Subtract the smallest uncovered cost from each uncovered cost. Note that
from the uncovered costs, 2 is the smallest found on column B, row 3.

Since it takes four lines to cover all the zeros, then it is already optimal. Lets
now assign the jobs as follows:
Job 1 can go to Machine C.
Job 2 can go to Machine B.
Job 3 can go to Machine A, B or D.
Job 4 can go to Machine A.
Final Decision:
Job 1 to Machine C = 13
Job 2 to Machine B = 16
Job 3 to Machine D = 16
Job 4 to Machine A = 15
60.00 (The minimum cost for the jobs allocated and machines to be
operated.) example on page 145