Unit 3: Production/Operations Management

INTRODUCTION
Operations Management is present in many occupations as well as those of manufacturing
and service industries. I believe it to be present in daily duties of any person although they
may never notice. With this in mind I see operations management as a skill anyone has with
an aim of achieving an outcome of something they are working towards in a logical process
with thought of awareness of a system structure.

ROLE OF OPERATIONS MANAGEMENT IN CORPORATE PROFITABILITY

1 Product Quality –
The quality of a product refers to its capability of meeting or exceeding a
customer’s
expectations. Operations management ensures that products meet the quality standards
and offers opportunities to identify areas where quality can be improved. One
of the main functions of operations management ensures that products are designed to
be reliable and durable to meet customer’s expectations of quality over quantity.

2 Customer Satisfaction –
Customer satisfaction is essential for any manufacturing operation as it ensures
future business from your current customers. While operations management takes care of
creating products and services of high quality, it also ensures that customer needs are met.
When your operations are running smoothly, it will allow you to deliver your products on
time to your customers and increase their satisfaction
3 Revenue Increase –
Increased product quality and consumer satisfaction will give your company to have a good
reputation within the industry. This reputation will further aid your company to attract
more customers and expand its market share

4 Waste Reduction –
Waste reduction is one of the most important components of operations
management. Various techniques can be used to identify and eliminate waste
within manufacturing operations, such as lean manufacturing strategies and JIT
scheduling to manage inventory costs. Eliminating waste within your operation will
allow you to increase profits by eliminating unnecessary costs and ultimately
improving the overall production process within the operation.
5 Collaboration –
Adequately implementing operations management strategies require collaboration
between many individuals at all levels of the organization. Many business strategies
involved in operations management include supply chain configuration, sales, capacity to
hold money, and optimal utilization of human resources.
COMPETITIVE ADVANTAGE BY USING OPERATIONS MANAGEMENT
Competitive advantage requires the creation of a system that has a unique advantage over
competitors. The main goal is to create customer value and experience in an efficient and
sustainable way. Implementing operations management strategies that compete on
differentiation, low cost and response are usually the best catalysts in achieving
competitive advantage.
Low cost: Low-cost leadership is about achieving maximum value from your customers’
viewpoint. This strategy requires an in-depth analysis of the 10 operations management
decisions in an effort to drive down operations cost while at the same time meeting
customers’ expectations. The ten operations managements decisions consist of:
 Product
 Quality
 Process
 Location
 Layout
 Human Resources
 Supply chain
 Inventory
 Scheduling
 Maintenance
Types of Manufacturing Systems
Not all manufacturing systems are the same, and different companies may use different
types of manufacturing systems depending on what they manufacture, how they want to
manufacture it, how big they are and a number of other factors. Here is a quick and
comprehensive breakdown of the different types of manufacturing systems commonly in
use today.

Continuous Manufacturing System

This is the classic mass production system and the one laypeople most commonly think of
when they think of manufacturing. In a continuous manufacturing system, a product moves
along an assembly line, with various specialized workers performing actions to assemble
the product at stations along the way.

Continuous manufacturing allows for higher output and lower unit costs, but requires a
large capital investment due to the amount of labor and machinery you need, and so are
more often found in larger operations.

Intermittent Manufacturing System

In an intermittent manufacturing system, the company produces multiple identical items
at the same time. The nature of the system means the products must be standardized and
there is little or no allowance for customization. This is an effective alternative to
continuous manufacturing for companies that are not willing or able to make as large a
capital investment but are usually most effective for low-volume or limited production
runs.

Flexible Manufacturing System

Many modern companies have already implemented or are moving towards a flexible
manufacturing system. For these systems, companies invest in several machines that they
can easily reconfigure to make a lot of products in a short period of time. Characteristics of
flexible systems usually include robots or other automated devices that replace or augment
human labor.

Like continuous management systems, the initial cost of machines can be quite high — but
these systems allow you to produce more goods with fewer labor requirements. They are
also more adaptable to changing marketplace conditions.
Custom Manufacturing System
A custom manufacturing system is one that a company will use for a very specified product
line. It is not appropriate for businesses where you need to mass-produce products. In a
custom manufacturing system, each product is made by hand or by a single operator using
a machine designed for this purpose.

This system does allow you to customize individual products for the customer, but because
it is so time-consuming, it is really only suitable for companies producing finely-crafted,
low volume, higher-priced items.

As you are first starting up a manufacturing business, you will want to give some thought
to which of these systems will work best for your business and which you want to adopt. If
you have an existing manufacturing system in place, you may want to ask yourself if it is
the most effective system for what you are trying to accomplish.

If your current manufacturing system is not yielding the best results, it may be time for a
change. This may be a costly and time-consuming venture at first, but it also may pay big
dividends in the long run.

The major types of manufacturing systems

Manufacturing engineering classifies or divides these processes into two categories:
continuous and discrete.

Continuous process
Its main characteristic is the production of batches of products by quantity or weight,
whose evaluation is carried out through a group of variables of continuous range.

These variables are physical or chemical, such as weight, strength, volume, color, time,
density, conductivity, elasticity, viscosity and transparency, among others.

For example, continuous processes are used in the production of minerals, steel, gasoline,
foams and industrial gases.

Discrete process
This process produces pieces, parts, assemblies or components that can be easily counted
and classified as products, whose properties or attributes may be acceptable or not
acceptable according to their quality.
The attributes in this process are measured by non-continuous scales or by numbering or
counting scales.

Examples of this process are the manufacture of parts of vehicles -plastic or steel- and the
manufacture of electronic circuits, among others.

As in the continuous process, in the discrete process, components or accounting parts can
be manufactured that can be evaluated or classified as high or low quality.

In this category come the fruit harvests or feet of young, with certain characteristics of
weight, volume, phenotype, among others.

Characteristics of manufacturing systems

To become more efficient and competitive, currently productive organizations have had to
adopt new technologies, improve their systems and production methods and adapt to
markets.

The particularities of the manufacturing systems are very varied in terms of density, shape,
size, aesthetics or strength. These systems are used in the field of industry.

However, there are still many companies with traditional manufacturing systems, whose
main characteristics are:

- They are designed for specific products.

- The flow is online, by the way in which the machines are arranged in a row.

- The process ends in the last machine in the row.

- The inventory of products in the production chain is low.

- Eliminate costs more efficiently.

- The variety of products is low.

- The machines manufacture specific products. They are not adaptable, as is the case
today.

- There is low demand for products.

 Operations Planning and Control
Operations planning and control follows operations design because once a product/service
has been designed, it needs to be produced. Operations planning and control is concerned
with ensuring that the day-to-day production process proceeds smoothly.

Quality is an important part of this process as quality should be one of the key performance
objectives against which any operation is measured, but quality can go further than this.
The integration of quality processes, systems and techniques into operations planning and
control can ensure that the whole process is quality based.

Planning and Control Activities

Operational planning is an estimation of what needs to be done to ensure operational

processes are efficient and effective-that supply always meets demand. Operational control
is to ensure that operations conform with this estimation, and if they do not, adjustments
can be made.

Typical activities in the planning and control process include:

 setting objectives-so that you know what is to be achieved by your plans and by when

 allocating tasks and responsibilities-who is to be involved with the new product and
service and how they are to be involved

 scheduling-work patterns, process scheduling, supply and demand scheduling

 assessing resource requirements-people and their skills, money (budgets), time, raw
materials, plant and equipment, capacity

 Monitoring and evaluating performance-the control part, involving control activities,

measures and control techniques.

Forecasting for operations

Forecasting in operations management can help plan production of goods and services in
advance. By using predictive analytics, businesses can save resources and reduce expenses.

Planning production operations without an estimation of how much you’d be able to sell
or how many resources will be at work at all times is probably one of the biggest mistakes
any operations manager could make.
A poor estimate of demand or availability of workforce can lead to either shortage of
products or a pile up of inventory, both of which can be detrimental to any business’s
growth plans. Therefore, forecasting is a key skill that operations managers responsible for
deciding a company’s production quantity and schedule need to nurture. Forecasting in
operations management is complex, but it aids in decision making and planning based
on predictive data analytics.

Here’s everything you’d need to know about forecasting to avoid any misjudgements in the
production planning process.

Forecasting in operations varies according to the available data, industry size and
respective goals. The three common forecasting models we discuss here use both
qualitative and quantitative data. Although they are useful in making educated predictions,
there is usually some degree of forecast error involved, which makes it important to use
them with caution.

Types of forecasts
Economic forecasts: Make predictions related to inflation, money supplies, and other
economic factors that can affect businesses and production schedules. These forecasts
often influence medium to long-range planning.

Technological forecasts: Keep track of rate of technological progress. As technologies

mature and become more applicable to business use cases, you may want to invest in new
facilities, equipment and processes. These forecasts impact long-range planning.

Demand forecasts: Estimate consumer demand for a business' products or services. You
can use a demand forecast to estimate production and all relevant inputs including the
quantity of raw materials or number of workforce required. These forecasts can impact
short, medium, and long-term planning. These are also referred to as sales forecasts.
 Materials Requirement Planning
Material requirements planning (MRP) is a system for calculating the materials and
components needed to manufacture a product. It consists of three primary steps: taking
inventory of the materials and components on hand, identifying which additional ones are
needed and then scheduling their production or purchase.

MRP, which is done primarily through specialized software, helps ensure that the right
inventory is available for the production process exactly when it is needed and at the
lowest possible cost. As such, MRP improves the efficiency, flexibility and profitability of
manufacturing operations. It can make factory workers more productive, improve product
quality and minimize material and labor costs. MRP also helps manufacturers respond
more quickly to increased demand for their products and avoid production delays and
inventory stockouts that can result in lost customers, which in turn contributes to revenue
growth and stability.

MRP is widely used by manufacturers and has undeniably been one of the key enablers in
the growth and wide availability of affordable consumer goods and, consequently, has
raised the standard of living in most countries. Without a way to automate the complex
calculations and data management of MRP processes, it is unlikely that individual
manufacturers could have scaled up operations as rapidly as they have in the half century
since MRP software arrived.

A Material Requirements Planning (MRP) system accelerates the manufacturing

production process by determining what raw materials, components and subassemblies
are needed, and when to assemble the finished goods, based on demand and bill of
materials (BOM). It does this by asking three main questions:

 What is needed?
 How much is needed?
 When is it needed by?
The answers to these questions provide clarity into what materials are needed, how many
and when to fulfil the required demand and help facilitate an efficient and effective
production schedule.
 Operations scheduling:
Operations scheduling follows the sequence of operations that is specified on the
production route. The scheduling reserves capacity on the resource groups, based on the
operation times that are defined on the production route.

The operations schedule also drives master planning and determines calculations for
material requirements. Operations scheduling considers the following information:

 Backlogged productions – Products that are planned, released, or started

 Material availability – Inventory, sub productions, suppliers, and vendors
 Capacity availability – Resources that are required for production

Objectives of Operations Scheduling
 Maximize Resource Utilization: One area that incurs high costs for a manufacturing
company is the poor utilization of all resources. This can be due to a poor schedule that
leaves machines idle for long periods of time.
 Manufacturing Time Reduction: When a proper schedule is created, your overall
production time should be reduced. This is usually because all operations required to make
a product will be performed only when they are needed. Therefore, the start to finish time
will be shorter as you will have less time between the various operations.
 Inventory Minimization: To elaborate on the last point, a shorter manufacturing time
usually means that you have less WIP inventory items waiting on availability on a resource.
In addition, if your production starts so that it can be completed just before it needs to be
shipped out, you will have less inventory to hold on to.
 Optimizing Efficiency of Labor: A great production schedule will be one that minimizes
the amounts of back and forth and changeovers/setup time on machines. In addition, when
workers know which item they are producing next and where the material is coming from,
they will be more efficient.
 Service Level Improvement: Having an efficient production schedule not only benefits
the workers on the shop floor but also the customer service employees. By looking at the
schedule, they will know when products will be completed and they will be able to give a
more accurate lead time. They will also be able to notify customers in advance in the event
that a disruption occurs which would cause jobs products to be late.
 Increasing Profits and Output: Overall, having an efficient schedule will increase the
number of products that are capable of being produced. This is turn will decrease
production costs, as all resources will be utilized optimally. The overall result will be
increased profits and increased on-time delivery.

Functions of Operations Scheduling

 Resource Allocation: The first part of scheduling operations is to allocate resources to
each job. This is different than assigning jobs to departments as not every machine or labor
 resource is capable of producing each item. This will give you a more realistic picture of the
actual capacity you possess.
 Sequence of Jobs: The next part is to determine the right sequence of jobs that will be
performed on each resource. A common technique used is grouping jobs together as to
minimize the amount of setup and changeover required. This could be running jobs of
similar color or materials one after the other to reduce machine setup.
 Start and End Time of Job: When your operations are scheduled in the right order, you
will now have a specific start and end time. For the most accurate schedule, you should
consider the different machine run rates for various products and various machines.
Knowing when operations are supposed to start and finish will help you notify customers
of the status of their order.
 Maximum Utilization of Plant: Often, resources are not utilized to their full capacity. This
leaves many resources idle for long periods of time which can be costly. One method to
improve the overall schedule is to focus on the scheduling of operations on resources that
are bottlenecks or that cost a lot to run. This will ensure that those resources are always
processing items while upstream and downstream operations are adjusted to limit the
number of WIP items.
 Information on Machines: Operations scheduling means that you have up-to-date
operations on machines and the products that are being produced. Shop floor feedback on
the status of operations offers additional visibility on the status of orders.
 Shop Floor Control: Having optimized operation schedules ensures that everyone knows
what should be started and completed when. This gives additional structure and control
over the shop floor operation