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1 Edition 2011
OPERATIONS MANAGEMENT-INDEX
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1 2 3 4 5 6 7 8 9 10
TOPICS
INTRODUCTION KEY TERMS IN OPERATIONS MANAGEMENT FIVE GUIDING PRINCIPLES IN TQM THEORY OF CONSTRAINTS OPERATIONS STRAGEGY PRODUCT DESIGN AND PROCESS DESIGN AGGREGATE/CAPACITY PLANNING TYPES OF PRODUCTION FACTORY LOCATION FACTORY LAYOUT
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4 to 18 19 to 21 22 23 24 to 29 30 to 35 36 to 61 62 to 71 72 to 82 83 to 97
OPERATIONS MANAGEMENT-INDEX
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11 12 13 14
TOPICS
MATERIAL HANDLING PRODUCTIVITY BASICS OF JOB SCHEDULING BASICS OF ERP
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98 to 109 110 to 112 113 to 116 117 to 120 121 122 to 125 126 to 134 135 to 138 139 140 to 143 144 to 145 3
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METHOD STUDY
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JOB SEQUENCING
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OPERATIONS MANAGEMENT-INTRODUCTION
Definition Production and Operations Management (POM) is about transformation of production and operational inputs into outputs that when distributed, meets the needs of customers. Operations Management is the systematic direction and control of processes that transform inputs into finished goods and services.
INPUTS
TRANSFORMATION PROCESS
OUTPUTS
The process in the above diagram is often referred to as the Conversion Process. There are different methods of handling the conversion or production process-Job, Batch, Flow.
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OPERATIONS MANAGEMENT-INTRODUCTION
POM incorporates many tasks that are interdependent, but which can be grouped under five main headings: PRODUCT Marketers in a business must ensure that a business sells products that meets customers needs and wants. The role of Production and Operations is to ensure that the business actually makes required products in accordance with the plan. The role of Product in POM therefore concerns the area such as: Performance Aesthetics Quality Reliability Quantity Production cost Delivery dates
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OPERATIONS MANAGEMENT-INTRODUCTION
PLANT To make Product, Plant of some kind is needed. This will compromise the bulk of the fixed cost of the business. In determining the Plant to use, management must consider areas such as: Future demand (volume, timing) Design and layout of factory, equipment, offices Productivity and reliability of equipment Need for maintenance Health and safety (particularly the operation of equipment) Environmental issues (e.g. disposal of waste products)
PROCESSES
There are many different ways of producing a product. Management must choose the best process or series of processes. They will consider:
OPERATIONS MANAGEMENT-INTRODUCTION
Available capacity Available skills Type of production
OPERATIONS MANAGEMENT-INTRODUCTION
PEOPLE Production depends on people, whose skills, experience and motivation vary. Key people related decisions will consider the following areas: Wages and salaries Safety and training
OPERATIONS MANAGEMENT-INTRODUCTION
Definitions The terms production management and operations management are often interchanged. Production is directly related to the manufacturing of goods. In the world of services, production refers to the service delivery. Operations refers to the daily actions necessary for the system to work. A Production System is a system whose function is to transform an input into desired output by means of a process (the production process) and of resources.
Hospital
Resources
Resources
Prepare
Drinkable coffee
When somebody prepares coffee in the morning, she/he performs different operations and makes different decisions. Here we will review these operations and decisions and draw a parallel between the problems the coffee maker faces and those faced by a production manager in his/her company. 11
OPERATIONS MANAGEMENT-INTRODUCTION
0.When do you make coffee in the morning?
Before washing is convenient because it is ready when you come back from the bathroom. You must here schedule the production of coffee and the other activities.
Scheduling/project management
In a company, you need to organize the different activities(sequence,priority,----)
Location
Where are the different ingredients? Usually, the coffee and the filters are together and close to the coffee machine. The coffee machine is close to the water filter. You place the different elements to avoid useless trips and handling.
Layout
In a company, where to locate your plant or your shop is a strategic question. The layout is also critical. It usually follows the material flow. 12
Forecasting
Then, you must decide whether you prepare the coffee for the breakfast or for the whole day. Your aim is a compromise between work and quality.
Lot sizing
You do not want to run out of coffee this morning but you do not want to waste coffee either.
Inventory control
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Process design
You measure each operation in order to check whether your process is still optimal. If it takes much time, perhaps you should buy other filters or a new machine?
Productivity measurement
In a company, the production process are specified with lot of details. They are permanently controlled and many redesigns take place.
4.Drink coffee
You want to check the quality of the products and of the process. By drinking a single cup, you decide about the quality of the whole pot. You do not want to drink the whole pot before deciding its a good coffee.
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Maintenance
You should keep your production system in good shape. Keeping a clean environment also prevents dirt from mixing with coffee when you prepare it.
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OPERATIONS MANAGEMENT-INTRODUCTION
If you have a long way to buy the raw material, you will buy in big quantities. If the coffee is very expensive, you will buy quite often small quantities. A compromise must be found
Lot sizing
You do not want to run out of coffee or of filters. But if the shop is quite often closed, you could keep some safety stock of raw material.
Inventory control
How to choose between different coffee qualities at different prices in different shops which are accessible at different times?
Purchasing
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Investment analysis
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OPERATIONS MANAGEMENT-INTRODUCTION
Here is the list of problems/subjects encountered during the description of the makoffee production system.
Scheduling/Project mngt. Facility Location Facility layout Forecasting Lot sizing Inventory control Process design Work measurement Quality control Maintenance and reliability Material req. planning Lot sizing Inventory control Purchasing Forecasting Aggregate planning When do you schedule makoffee? Where is the coffee machine? Where are the components? How much coffee for today? Do I prepare coffee for the whole day? What is the risk of running out of coffee? How do I make coffee? Can I improve the time it takes? Is the coffee good? How often do I clean the coffee machine? How many filters do I need and when? Do I buy them one by one? What if the shop is closed? What is the best shop? Will I always drink as much coffee? Shall I buy a bigger pot now?
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Investment analysis
Or do I go on my small pot?
1.
Project Management Planning, directing and controlling resources (people, equipment, material) to meet the technical cost and time constraints of a project. Productivity is the ratio of the input facilities to the output of goods and services. Throughput time the average time that it takes a unit to move through an entire process. Throughput rate the output rate that the process is expected to produce over a period of time. Total Quality Management managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.
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2. 3. 4. 5.
6. 7. 8.
Six Sigma a statistical term to describe the quality goal of no more than four defects out of every million units. PDCA Cycle also called The Deming Cycle refers to the plando-check-act cycle of continuous improvement. Continuous improvement the philosophy of continually seeking improvements in processes through the use of team efforts.
9.
10. Lean production integrated activities designed to achieve high volume, high quality production using minimal inventories of raw material, work in process and finished goods.
11. Kanban an inventory or production control system that uses a signaling device to regulate flows.
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12. Throughput the rate at which money is generated by the system through sales (Goldratts definition). 13. Inventory the money that the system has invested in purchasing things it intends to sell (Goldratts definition). 14. Operating Expenses all the money that the system spends to turn inventory into throughput (Goldratts definition).
15. Value analysis / Value engineering analysis with purpose of simplifying products & processes by achieving equivalent or better performance at a lower cost.
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When things go wrong, first ask what in the process broke down, not who did it.
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Divisional (Business)
How do we compete?
Fin
HR
Mkt
Prod Dev
Ops
Opportunities?
Govt& Policy changes Motivation New Markets Resource availability Manage ment systems
Quality
RBI intervention
Capacity
Strengths?
Equipment age
Interest rates Cost Structure Technology Exchange rates Skills Limited access to world markets. IR Competitors plans
New Products
Weaknesses?
Employee age
New Technologies
Threats?
New Competitors 27
SWOT Analysis
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Feasibility Studies
Product Design Advance Product Planning Advance Design Product Process Design and Development Product Evaluation and Improvement Product Use and Support Continuous interaction Produce and Market New Products
Process Design
Organizing the process flows Relation of Process Design to Process Flow Evaluating the Process Design
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Which machine will have the lowest cost per unit of output ,if run for the whole year? If only 4000 pieces are to be produced in a year, which machine would have the lowest cost per piece? Will your answer to above vary if you are informed that 12.5% of the output of machine B gets rejected at the inspection stage. If so, what would be the new solution. 33
The annual requirement is 1500 nos. Operating cost per hour is Rs 128 for both the processes. Material cost is the same in each case. Which method would you choose for production during period of one year? 34
Data Time for the job Set up time Cost per hour
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Output planning
Aggregate output planning
Operations
Capacity planning
Aggregate capacity planning
Loading Shop floor control Sequencing Detailed scheduling Expediting 38 Short term capacity control
Effective capacity: It is the capacity which is used within the current budget period. It is also known as practical capacity or operating capacity.
Actual capacity: This is actual output achieved during a particular time period.
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Measures of capacity
No of vehicles Tons of steel Megawatts of electricity generated Barrels of beer Output rate capacities
Determination of Capacity
Capacity determination is a strategic decision in factory planning. Capacity decisions are important because: They have a long term impact Capacity determines selection of appropriate technology, type of labor and equipments, etc. Right capacity ensures commercial viability of the business venture. Capacity influences the competitiveness of a firm.
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Market consideration
Resources available
Capacity decisions
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A firm has 4 work centre a, b, c and d in series with individual capacities in units per day shown in the figure below. The actual output is also shown in the figure:
A 430 B 380 C 350 D 410
Actual Output
310/day
2. A work centre operates 5 days a week on a 2 shifts per day basis, each shift of 8 hours duration. There are five machines of the sme capacity in this work centre.If the machines are utilized 80% of the time at a system efficiency of 90%, what is the rated output in standard hours per week.
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Product
1 A B C 3000 2000 1200 2 4000 1500 1800
Week
3 1200 3000 2500 4 2500 3500 2000
The bill of labor in key work centers for the companys three major products A,B & C is as below:
Dept. A X Y Z
0.20hr
0.08hr 0.11hr
Sources of demand
1
Product P
2 Week 3 4 20 10 5 10 1
Product Q 2 Week 3 4 10 5 10
Intra company orders Branch warehouse orders R&D orders Customer demand (forecast +on hand order)
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The safety stock for product P is 25 and for Q is 30.The lot size for P is 60 and for Q is 70.The beginning inventory for P is 50 and for Q is 60.Prepare a master production schedule for these two products.
Determine the production rate required to meet the average demand if the available working days are as below:
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(b) Determine the monthly inventory balance required to follow a plan of letting the inventory absorb all fluctuations in demand. assuming a constant workforce, no idle time or overtime, no back orders, no use of sub-contractors and no capacity adjustment, and no safety stock, determine the beginning inventory to avoid backlogging of order during any month (i.e. no negative inventory). 53
Work days/month 22 19 21 21 22 20
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Month
Production Requirement(Units)
Working days
22 19 21 21 22 20
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The company wants to met the production requirements by adopting one of the two levels of manufacturing as follows:
Strategy 1: Maintain a constant workforce level based on average production requirements during the 6 months, allow inventory to accumulate and fill shortages from next months production. Strategy 2: Fix the constant workforce level at minimum necessary to meet the low Oct demand and sub-contract any monthly difference between requirements and production. Which strategy should the firm adopt?
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Jan
Feb March April
The company is thinking of adopting one of the following strategies: Plan 1 : Vary workforce levels to meet the demand. Plan 2 : Maintain 30 employees and use inventory and stock outs to absorb demand fluctuations. Which strategy would you recommend? Assume nil inventory at the start.
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Month
1 2 3 4 5 6
Month
7 8 9 10 11 12
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It is difficult to satisfy all the above factors for plant location. However, a compromise between what is wanted and what can obtained may be the only solution.
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The disadvantage is that the required movement of materials and machines may be cumbersome and costly. 84
for Product 1, Product 2 and Product 3 have their own line of machines (K,L,M, and R,S,T) and, even though machines A,K,R are identical and interchangeable, work is not transferred from one product line to another. 85
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In actual practice, most layouts are a combination of the basic layouts discussed above. They are made to utilize the advantage of all three types of layout. Criteria for a good layout While the techniques employed in making a layout are normal work-study techniques, the process is a creative one which cannot be set down with any finality, and one in which experience plays a very great part. Furthermore, it is not possible to define a good layout with any precision. However, there are certain criteria which will be satisfied by a good layout, and these are discussed below:
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5. Maximum Accessibility All servicing and maintenance points should be readily accessible. For example, a machine should not be placed against a wall in such a manner that a grease-gun cannot reach the grease nipples. The maintenance under these circumstances is likely to be skimped at best and will occupy excessive time. Similarly, a piece of plant in front of a fuse box will impede the work of the electricians and may cause unnecessary stoppage of the machine when the fuse box is opened. If it is impossible to avoid obscuring a serviced point, then the equipment concerned should be capable of being moved. It should not be a permanent installation.
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10.Maximum Security Safeguards against fire, moisture, theft and general deterioration should be provided, as far as possible, in the original layout.
11.Unidirectional Flow Work lanes and transport lanes must not cross. At every point in a factory, material must flow in one direction only, and a layout which does not conform to this will result in considerable difficulties, if not downright chaos, and should be avoided.
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1. The overall process time and cost will be minimized by reducing unnecessary handling and by generally increasing the effectiveness of all work. 2. Labour supervision and production control will be simplified by the elimination of hidden corners in which both men and materials can be misplaced. 3. Changes in programme will be most readily accommodated. 4. Total output from a given plant will be as high as possible by making the maximum effective use of available space. 5. A feeling of unity amongst employees will be encouraged by avoiding unnecessary segregation. 6. Quality of products will be sustained by safer and better methods of production.
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Symptoms of a poor Layout The main symptoms of a poor layout are: 1. Lack of control. 2. Congestion of men and materials. 3. Excessive re-handling. 4. Long transportation lines. 5. Frequent accidents. 6. Low worker performance.
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b) Avoid re-handling: It may not be possible to eliminate re-handling completely. Nevertheless, re-handling is a wasteful and costly operation. Re-handling can be reduced by (i) not keeping anything on floor, (ii) avoiding transfers from floor to container or vice versa or from container to container, and (iii) avoiding making of materials.
c) Combine handling with other operations: Many times, handling may be made a productive activity by combining with other operations, such as production, inspection and storage. In process industries, materials undergo physical and chemical changes while in movement, handling devices may be used as live storage of materials may be sorted and inspected while they are being handled
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e) Handle materials in unit loads: It is easier and quicker to move a number of materials at a unit rather than piece by piece. Modern material handling devices are designed to take advantage of unutilized loads.
f) Use gravity where possible and mechanical means, if necessary: The simplest and cheapest way to handle materials is by using gravity. Often chutes and inclined boards can be conveniently used to transport materials quickly to the point of use without much investment on costly handling equipment. Where it is not possible to use gravity for various practical reasons, some mechanical means should be considered. Lifting and carrying of heavy materials mechanically saves time and reduces fatigue of workers.
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OPERATIONS MANAGEMENT-PRODUCTIVITY
Productivity is a measure of how much input is required to produce a given output, i.e., it is the ratio of output to input. Factors affecting productivity Technology employed. Tools and raw materials used. Organization structure. Planning and scheduling of work. Plant layout. Innovations. Personnel policies. Work environment. Materials management. Skills of the workforce. Health, attitude towards workers, staff. Continuous training to the workers and staff. Proper maintenance of machines. Management Union relationship. Morale of the employees. Discipline. Transport and canteen facilities.
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OPERATIONS MANAGEMENT-PRODUCTIVITY
Techniques to improve productivity Better planning and training of employees. Use of time and motion studies to study and improve work performance. Better transportation and material handling system. Providing work incentives and other benefits to workers. Involvement of workers in decision-making. Improvement in technology of production process. Simplification, standardization and specialization techniques like PERT, CPM. Better and efficient utilization of resources. Use of linear programming and other quantitative techniques. ABC analysis to identify more important items and then apply inventory control to reduce capital investments.
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OPERATIONS MANAGEMENT-PRODUCTIVITY
Measurement of productivity 1) Labour productivity = amount of output amount of labour 2) Capital productivity = sales turnover capital employed 3) Profit productivity = profit investment
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A production schedule can identify resource conflicts, control the release the jobs to the shop, and ensure that required raw materials are ordered on time.
Better coordination to increase productivity and minimizing operating cost.
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90 Job No: 10 11 Hours Required Hours Available Hours Required Hours Available 9 81 11 70
45 14 31 9 22
45 10 35 7 28
12
13 14 15
8 62
4 58 10 48 2 46
5 17
3 14 7 7 2 5
11 101
5 96 6 90 5 85
7 21
5 16 9 7 2 5 116
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Resistance in sharing sensitive internal information between departments can reduce the effectiveness of the software.
The system may be over-engineered relative to the actual needs of the customer.
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The use of statistical quality control ensures rapid and efficient inspection at a minimum cost. It minimizes waste by identifying the causes of excessive variability in the quality of product. SQC exerts more effective pressure for quality improvement than 100% inspection. Control Charts :
A Control Chart is a graphical aid for depiction of quality variation in output from a production process. As opposed to the aim of acceptance sampling (to reject or accept products already produced), control charts aid in the production of a better product. The charts have three main applications: To determine the actual capability of production processes. To guide modification to improve the output of the processes. To monitor the output wherein the current status of the output quality provides an early warning of deviations from the quality goals.
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Within the ISO 9000 family are specialized standards that include ISO9001,9002,9003. Below is a description of each: 9001 applies to organizations doing design development, production, testing and servicing of product. 9002 applies to organizations not having design responsibility. 9003 applies only to testing of a product.
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Task
A B C D E F G H
Machine 2 5 4 9 6 8 7 5 4 I Machine 6 8 7 4 3 9 3 8 11 2
Determine the optimum sequence that minimizes the total elapsed time required to complete the tasks on two machines. 140
45
30
15
50
20
35
Determine the optimum sequence to minimize the total manufacturing time for all the products. Also find the idle time on both the machines. 141
Determine a sequence for the five jobs that will minimize the total elapsed time. Find also the idle time of the machines A, B and C.
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Find an optimum sequence for the following sequencing problem of four jobs and five machines. The processing time in hours is given below:
Job 1 2 3 4 A 7 6 5 8 B 5 6 4 3 C 2 4 5 3 D 3 5 6 2 E 9 10 8 6
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