Operation management NOTES

Topic 1: Introduction to operation management

1. What is Operation management – the activities and responsibilities of
managing the production and delivery of products and services
2. What is Operation function – the arrangement of resources that are
devoted to the production and delivery of products and services
3. Model of the operations management
a) Transformed resources – the resources that are treated, transformed or
converted in some way
 Materials
 Information
 Customers
b) Transforming resources – the resources that act upon the transformed
resources
 Facilities
 Staff
4. Transformation process
a) Materials processing
i) Transform physical properties
ii) Change location- parcel delivery
iii) Change possession – retail operations
iv) Storage – warehouse
b) Information processing
i) Transform info properties – accountants
ii) Possession of info – libraries, archives
iii) Location of info – telecommunications
c) Customer processing
i) Change physical properties – hairdressers
ii) Accommodation – hotels
iii) Psychological state – music, theatre
5. Outputs from transformation process
a) Tangible – goods and services
b) Storability – goods storable; services not storable
c) Transportability
d) Customer contact – low contact for goods; high contact for services
e) Quality – goods judged based on final product; services judged on both
outcome and the way it was produced
6. Operations levels
a) LVL 1 – Supply network – flow between operations
b) LVL 2 – Operation – flow between processes
c) LVL 3 – Process – flow between resources
7. Operation flow – the flow of transformed resources between operations,
processes and transforming resources
a) External operations interact with internal processes to form the external
supply network
 b) Processes form an internal “supply network” and become each other’s
customers and suppliers
8. The 4 V’s
a) Volume
b) Variety
c) Variation in demand
d) Visibility
9. Key terms
a) Support functions – the functions that facilitate the working of the core
functions
b) Transformation process model – model that describes operations in
terms of their input resources, transforming processes and outputs of
goods and services
Topic 2: Operation Performance
1. Four stage model of operations – Hayes and Wheelwright categorize the
degree to which OM has a positive influence on strategy
a) Direct
i) Operation strategy
ii) Social environmental and economic performance
b) Develop
c) Deliver
d) Design
2. Performance levels
a) Societal level – the triple bottom line
i) Planet – the environmental account, environmental impact of the
operation
ii) Profit – the economic account, profitability, return on assets
iii) People – the social account, impact of the operation on the quality of
people’s life
iv) Stakeholders are the people and groups who have a legitimate
interest in the operation’s activities
b) Strategical level – operation strategic impact
i) Learning
ii) Capital
iii) Risk
iv) Cost
v) Revenue
c) Operational level – operation performance objectives
i) Quality – consistent conformance to customer’s expectations
(1) External – enhances the product or service in the market, avoids
customer complains
(2) Internal – it brings other benefits to the operation
ii) Speed – elapsed time between customers requesting products and
receiving them
iii) Cost
iv) Dependability
 v) Flexibility
(1) Product/service flexibility – the ability to introduce new or modified
products and services
(2) Mix flexibility – the ability to produce a wide range of products and
services
(3) Volume flexibility – the ability to change the volume of goods and
services produced
(4) Delivery flexibility – the delivery time of its products and services
3. Polar diagrams – used to indicate the relative importance of each
performance objective to an operation or process
4. Trade- offs
a) Improving the performance of one objective might only be achieved by
sacrificing performance in another
b) Operations that lie on the efficient frontier have performance levels that
dominate those which do not
c) And operations strategy improvement path can be described in terms of
repositioning and or overcoming its performance trade- offs
5. Key terms
a) Mass customization – the ability to produce products or services in high
volume, yet vary their specifications to the needs of the customers
b) Agility – the ability of an operation to respond quickly and at low cost as
market requirements change
c) Productivity
Topic 3: Operation strategy
1. Role of the operation function
a) As Implementer – operations implement the business strategy
b) As Supporter – operations support business strategy
c) As Driver – operations drive business strategy
2. What is strategy?
a) Setting broad objectives that direct the organization towards its overall
goals
b) Planning the path that will achieve these goals
c) Dealing with the whole picture rather than individual activities
3. Strategic decisions – widespread, define the position of the organization to
its environment and move the organization closer to its long-term goals
4. Operations VS operational
a) Operations – are the resources that create products and services
b) Operational – focuses on day-to day activities and detailed
5. Operation strategy VS Operations management
a) OM – short term decisions / OS – long term decisions
b) OM – Micro level processes / OS – macro level of total operations
c) OM – detailed / OS – aggregated
d) OM – concrete/ OS – philosophical
6. 4 stage model of operations contribution
7. Four perspectives on operations strategy
a) Top-down perspective – what the business wants
b) Market requirement perspective – what the market position requires
c) Bottom-up perspective – what day-to-day experience suggests op
should do
d) Operation resources perspective – what operations resources can do
8. Top-down and bottom-up perspectives of strategy
a) Corporate strategy
b) Business strategy
c) Operations strategy
d) Operational experience (Emergent sense of what the strategy should
be)
9. Mintzberg’ concept of emergent strategy


10. The resource perspective
a) Resource constrains and capabilities
b) Intangible resources
c) Strategic resources and sustainable competitive advantage
Topic 4: Design
1. Product and service innovation

(1)
2. Innovation, design, creativity
a) Creativity  Innovation  Design  Products and services
i) Innovation
(1) Incremental – S- shaped improvement in performance
(2) Radical – innovation following multiple S- shaped curves
3. Henderson- Clark model
 High/ Low impact on architectural knowledge (AK)
 High/ Low impact on component knowledge (CK)
a) Architectural innovation – High AK / Low CK
b) Radical innovation – High AK / High CK
c) Incremental innovation – Low AK / Low CK
d) Modular innovation – Low AK / High CK
4. What is design in a product and service?
a) A concept – understanding the nature, use and value of the product
b) A package – group of products that provide those benefits defined in the
concept
c) A process – the way the products will be created and delivered
5. Stages of product/ service design
a) Concept generation – formalize the underlying idea behind a product or
service
b) Concept screening
c) Preliminary design
d) Evaluation and improvement
i) Quality function deployment - technique
used to ensure that the eventual design
of a product or service actually meets
the needs of its customers
ii) Value engineering - approach to cost
reduction in product design
iii) Taguchi methods – design technique
that uses design combinations to test
the robustness of a design
e) Prototyping and final design
6. Key terms
a) Feasibility – the ability of an operation to produce a process, product or
service
b) Design funnel – a model that helps us reduce the alternative designs
until we reach the final one
c) Component (or product) structure – diagram that shows the constituted
parts of a product or service package and the order in which the
component parts are brought together
d) Standardization – the degree to which processes, products and services
are prevented from varying over time
e) Commonality – degree to which a range of products or services
incorporate identical components
f) Modularization – the use of standard sub-components
g) Simultaneous (or concurrent) engineering – overlapping the stages in
the design processes
Topic 5: Structure and scope
1. Supply network perspective – setting an operation in the context of all the
other
a) Supply side – a network of perspective means setting an operation
i) First tier – have relationship with the operation
ii) Second tier – may also supply an operation directly missing out a
link in the network
b) Demand site – chains of customers that receive the products and
services produced by an operation
i) First tier – suppliers and customers that are in immediate
relationships with an operation with no intermediary operations
ii) Second tier - suppliers and customers who are separated from the
operation
2. Why consider the supply network
a) Understand competitiveness
i) Immediate supply network – suppliers and customers that have
direct contact with an operation
b) Identify significant links in the network
i) Downstream – operations in a supply chain between the operation
being considered and the end customer
ii) Upstream – operations in a supply chain that are towards the supply
side of the operation
c) Focus on long term issues
3. Design decisions in supply network
a) Outsourcing – contracting out to a supplier work previously done within
the operation
b) Vertical integration (do or buy) – the extent to which an operation
chooses to “own” the network of processes that produce a product or
service
c) Location – geographical position of the operation or process
4. Location decisions
a) Change demand
b) Change supply
c) Expansion purposes
d) Depletion of basic inputs
5. Factors that affect location decisions
a) Near to the raw materials
b) Near to markets
c) Labor conditions
d) Cost of land
e) Future plans for expansion
f) Power and fuel
g) Water supply
h) Civic values
i) Taxes
j) Climate
6. Location techniques
a) Weighted score method – comparing the attractiveness of alternative
locations that allocates a score to the factors that are significant in the
decision and weights each score by the significance of the factor
b) The center of gravity method – uses the physical analogy of balance to
determine the geographical location that balances the weighted
importance of the other operations with which the one being located has
a direct relationship
7. Key terms
a) Disintermediation – the emergence of an operation in a supply network
that separates two operations that were previously in direct contact
b) Spatially variable cost – costs that are significant in the location decision
that vary with geographical position
c) Economies of scale – the manner in which the costs of running an
operation decrease as it gets larger
d) Diseconomies of scale – opposite of economies of scale
e) Capacity leading – strategy of planning capacity levels such that they
are always greater than or equal to forecast demand
f) Capacity lagging - strategy of planning capacity levels such that they
are always less than or equal to forecast demand

Topic 6: Process design

1. What we have in the design

a) Supply network
b) Process technology
c) Layout and flow
d) People, jobs, and organizations, facilities
e) Product design
2. Nature and purpose of design
a) The decisions taken during the design of the product can influence the
decisions taken during the design of the processes
3. Difference between Product and Service design
a) Product - overlapping activities of the product and process design can
be beneficial
b) Service - overlapping between the service and the process design is
implicit in the nature of the service
4. Objectives
a) Quality
b) Speed
c) Cost
d) Dependability
e) Sustainability
f) Flexibility
5. Key terms
a) Throughput rate - number of products passing through the processs in a
unit of time
b) Cycle time - time between each item passing through the process
c) Throughput time - average time for the products to move through the
process
d) Utilization – ratio of the actual output from a process or facility to its
design capacity
e) Process mapping – processes in terms of how the activities within the
process relate to each other
f) Process mapping symbols – used to classify different types of activity
g) High level process mapping – an aggregated process map that shows
broad activities rather than detailed activities
6. Process types in designs for products
a) Project - V. High Variety/ V. Low Volume
i) Project processes – deal with discrete usually high customized
products
ii) One off, custom
iii) Defined start and finish
iv) Objectives - cost, time, and quality
v) Many skills needed
b) Jobbing - High Variety/ Low Volume
i) Very small quantities
ii) High variety/ low repetition
iii) Skills not many
c) Batch - Low Variety/ High Volume
i) Standard products and repeated processes - can be special
ii) Set ups at each stage
iii) Specialized skills
d) Mass - Lower Variety/ Higher Volume
i) Standard repeat products
 ii) Low skills
iii) No set ups
e) Continuous - V. Low Variety/ V. High Volume
i) Expensive to start and stop
ii) Repeated products
iii) Mostly automated
iv) Few changeovers
7. Combination of processes
a) Variety
b) Volume
c) Labor
d) Equipment
e) Cost
f) Ease of substitution
8. Service process types
a) Process task - Complex and repeated - same as product
b) Process flow - Intermittient and Continuous - same as product
c) Professional service - V. High Variety/ V. Low Volume
d) Service shop - Mid Variety/ Mid Volume
e) Mass service - V. Low Variety/ V. High Volume

Topic 7: Layout and Flow

1. What is layout? - relative positioning of the transformed resources and the
allocation of tasks, both of which create the FLOW
2. Layout types
a) Fixed positioning - V. High Variety/ V. Low Volume - resource location
analysis
i) Advantages
(1) Higher product mix and flexibility
(2) Product/ customer not moved
(3) Higher variety of task
ii) Disadvantages
(1) Schedule
(2) Higher unit cost
b) Functional layout - High Variety/ Low Volume - flow charts and
relationship analysis
i) Advantages
(1) High product mix/ mid flexibility
(2) Relative robust
(3) Easy supervision
ii) Disadvantages
(1) Low utilization
(2) Higher work in progress
(3) Complex flow
c) Cell layout - Low Variety/ High Volume - product flow analysis
i) Advantages
 (1) Good compromise
(2) Fast throughput
(3) Group work
ii) Disadvantages
(1) Costly to rearrange the layout
(2) Need more plant
d) Product layout - V. Low Variety/ V. High Volume - assembly line
i) Advantages
(1) Low cost per unit
(2) Special equipment
ii) Disadvantages
(1) Low flexibility
(2) Not very robust in case of distortion
(3) Work very repetitive
3. Types of cell - based on amount of indirect resources (AIR) and Proportion
of transformed resources needed (PTRN)
a) Specialized functional manufacturing - Low PTRN and High AIR
b) Small multi-machine manufacturing - Low PTRN and Low AIR
c) Plant - within- a- plant manufacturing - High PTRN and High AIR
d) Complete component manufacturing - High PTRN and Low AIR
4. Long and thin vs short and fat
a) long/short - number of stages
b) thin/ fat - amount of work
i) Advantages of LONG AND THIN
(1) Controlled flow
(2) Simple material handling
(3) Lower capital needed
(4) High efficiency
(5) High space utilization
ii) Advantages of SHORT AND FAT
(1) High flexibility
(2) High volume flexibility
(3) high robustness
(4) High ownership
(5) Low monotonous
Topic 9: People planning
1. People in operations
a) Understand how the operations can be organized
b) Contribute to HR strategy
c) Allocate work times
d) Design individuals and group’s jobs
e) Design the working environment
2. Operations culture
a) Operations believe - what people within the operations function accept
as self evident (what ops should the team know)
3. Contribute to HR strategy
 a) Being a strategic partner to the business
b) Administering HR procedures and processes
c) Being an employee champ
d) Change agent
e) Work related stress
4. OM function organization?

5.
6. Elements of job design
a) Environment
b) Tech
c) Tasks and allocations to each person
d) The best method of performing each job
e) How long does it take?
f) Maintaining commitment
7. Influences on job design
a) Division of labour
b) Team work
c) Flexible working
d) Scientific management - involves designing job methods and
systematically investigating factors affecting efficiency and economy in
human work to improve situations and enhance efficiency.
i) Method study - involves systematically recording and evaluating
existing and proposed work methods to develop more effective and
cost-effective approaches.
 ii) Work measurement - is the process of determining the time required
for a qualified worker to perform a specific job at a specific level of
performance.
e) Ergonomics approach - is concerned primarily with the physiological
aspects of job design
i) How someone interacts with the physical aspects of the workspace
ii) How someone interacts with the environment
f) Behavioral approaches - job enlargement and enrichment

8. Empowerment - giving the staff the ability to change how they do their jobs
and the authority to make changes to the job itself/ how is performed
9. Enlargement - process of allocating a larger number of tasks to individuals
10. Staff as cost VS Staff as resource

11.

Topic 10: The nature of planning and control

1. Planning and control
a. Planning – is deciding
b. Control – process of coping with any changes that affect the plan
2. Types of planning and control
a. Long term
 i. Uses aggregated demand forecasts
ii. Determines resources in aggregated form
iii. Objectives set in largely financial terms
b. Medium term planning and control
i. Uses partially disaggregated demand forecasts
ii. Determines resources and contingencies
iii. Objectives set in both financial and operations terms
c. Short term planning and control
i. Uses totally disaggregated forecast or actual demand
ii. Makes interventions to resources to correct deviations from plan
iii. Operations objectives
3. Dependent and independent demand
a. Dependent demand – demand relatively predictable because it is
derived from some other know factor
b. Independent demand – not obviously or directly dependent on the
demand for another product
4. PD ratios – ratio that contrasts the total length of time customers have to
wait between asking for a product and receiving it, and total throughput
time to the product
a. Resource to order – operations that buy in resources and produce
only when they are demanded by specific customer
b. Create to order or make to order – operations that produce only
when they are demanded by specific customers
c. Make to stock – operations that produce products prior to their being
demanded by specific customer
5. Loading – amount of work that is allocated to a work center
a. Valuable operating time – amount of time at a piece of equipment or
work center that is available for productive working after stoppages
and inefficiencies have been accounted for
b. Finite loading – allocates work to a work center only up to set limit
c. Infinite loading – allocates work to work centers without capacity limit
d. Sequencing – decides on the order in which work is to be performed
6. Scheduling
a. Forward scheduling – loading work onto work centers as soon as it is
practical to do so
b. Backward scheduling – starting jobs at a time when they should be
finished exactly when they are due
c. Rostering – staff scheduling – allocation of working times to
individuals so as to adjust the capacity of an operation
7. Types of control
a. Push control – indicate that work is being sent forward to
workstations as soon as it is finished on the previous station
b. Pull control – workstation request work from the previous station only
when it is required
 c. Drum, buffer, rope – approach derived from theory of constraints,
uses the bottleneck stage in a process to control materials
movement
d. Theory of constraints(TOC) – philosophy of operations management
that focuses attention on capacity constraints or bottleneck parts of
an operation; uses optimized production technology
Topic 11: Capacity planning
1. What is capacity? – maximum level of value-added activity that an
operation, or process, or facility, is capable of over a period of time
a. Objectives – can be judged by its effect on: (cost, revenue,
working capital, service level)
i. Identify the alternative capacity plans
ii. Understand consequences
iii. Measure aggregate capacity and demand
iv. Choose the most appropriate capacity plan
2. Aggregated planning and control – indicate medium term capacity
planning that aggregates different products and services together in
order to get a broad view of demand and capacity
3. Types of capacity
a. Design capacity – capacity of a process or facility as it is
designed to be
b. Effective capacity – useful capacity of a process or operation
after maintenance, changeover and other stoppages and
loading have been accounted for
c. Utilization – ration of actual output from a process or facility to
its design capacity
4. Overall equipment effectiveness – method of judging the
effectiveness of how operations equipment is used
5. Types of capacity and demand – all approaches to medium term
capacity
a. Level capacity plan – attempts to keep output from an operation
or its capacity constant, irrespective of demand
i. have excess capacity
ii. make to stock
iii. make customers wait
b. Chase demand plan – attempts to adjust output and/or capacity
to match demand
i. Hire and fire
ii. Subcontracting and third-party work
iii. Overtime and short time
 iv. Temporary labor and lay-off
c. Demand management – attempt to change or influence demand
to fit available capacity
6. Yield management – collection of methods that can be used to
ensure that an operation maximizes its potential to generate profit
7. Queuing theory – mathematical approach that models random arrival
and processing activities in order to predict the behavior of queuing
system