OPERATIONS MANAGEMENT MODULE

I. Unit Title

Unit 1 - INTRODUCTION TO OPERATIONS MANAGEMENT

II. Title of the Lesson:

Lesson 1. Understanding Operations Management, and The Role of

Operations Management in the Organization

III. Duration: 3 hours Week 1

IV. Introduction

The Operations Management module provides a general introduction to Operations

and Process Management and explains how the Operations function fits within the
organization overall. The module also explores how actors outside the core
Operations function have a role in, and engage in the management of processes.
The module will show students the wide organizational scope of Operations
Management activity and will establish an understanding of the core concepts
underlying the discipline. The module is introductory in nature, and while focused
primarily on large organizations, also looks at small organizations and even the
management of individual “human” processes. The module is intended as an
introduction to operations management in both service and manufacturing
organizations. Its intention is to provide the building blocks of those basic principles
which are broadly applicable to most organizations. The module will introduce the
basic principles of the “lean” operation, and show how managers can adopt lean
principles in practice.
The module will explore the main critical works in Operations Management,
00but Operations Management is primarily an applied subject, so the module will
also expose students to practical problems via case studies, and analysis of “live”
operations.

V. Objectives/Competencies
 To understand how operation management transform inputs into goods
and services that adds value for the customer.
 To learn about the role of operations management in the organization.

VI. Pre-test
Read the situation and answer the question below.
Imagine some of the challenges of running a large restaurant. Each day the
restaurant manager has to ensure hundreds of customers are served on time with
food of good quality while maintaining a friendly, helpful service. They are

Page 1 of 101
responsible for a team of employees ranging from chefs to front of house waiters
etc., checking that the employees arrive on time and work effectively. Operations
managers are responsible for ordering and arranging deliveries of food, drink and
other supplies. The building also needs to be utilized and maintained efficiently.
This scenario is typical of an operations manager’s role.
Question: What do you think will happen if one of these responsibilities will be
missed out or not done correctly by the owner or manager of the large restaurant?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
_______________

VII. Lesson Proper/Course Methodology

ACTIVITY
Read the quotation and answer the question:
“A business that makes nothing but money is a poor kind of business”
-Henry Ford
1. What do you this quote tells you?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
____

ANALYSIS
Operations Management

Page 2 of 101
 Operations management is the management of processes that transform
inputs into goods and services that add value for the customer.
Countless operating decisions must be made that have both long- and short-
term impacts on the organization’s ability to produce goods and services that provide
added value to customers. If the organization has made mostly good operating
decisions in designing and executing its transformation system to meet the needs of
customers, its prospects for long-term survival are greatly enhanced. For example, if
an organization makes furniture, some of the operations management decisions
involve the following:
• purchasing wood and fabric,
• hiring and training workers,
• location and layout of the furniture factory,
• purchase cutting tools and other fabrication equipment.
If the organization makes good operations decisions, it will be able to produce
affordable, functional, and attractive furniture that customers will purchase at a price
that will earn profits for the company.
The Role of Operations Management in the Organization
Operations is one of the three strategic functions of any organization. This means
that it is a vital part of accomplishing the organization’s strategy and ensuring its
long-term survival. The other two areas of strategic importance to the organization
are marketing and finance. The operations strategy should support the overall
organization strategy.

Every business is managed through multiple business functions each responsible for
managing certain aspects of the business. Figure 1-1 illustrates this by showing that
the vice president of each of these functions reports directly to the president or CEO
of the company. Marketing is responsible for sales, generating customer demand,
and understanding customer wants and needs. Finance is responsible for managing

Page 3 of 101
cash flow, current assets, and capital investments. MIS is responsible for managing
flows of information. Most of us have some idea of what finance and marketing are
about, but what does operations management do?

• Operations management (OM) is the business function responsible for

managing the process of creation of goods and services.
• It involves planning, organizing, coordinating, and controlling all the resources
needed to produce a company’s goods and services.
• Because operations management is a management function, it involves
managing people, equipment, technology, information, and all the other
resources needed in the production of goods and services.
Operations management is the central core function of every company. This is true
regardless of the size of the company, the industry it is in, whether it is
manufacturing or service, or is for-profit or not-for-profit.

Example of Business Operation Overlap

Consider a pharmaceutical company such as Merck. The marketing function of
Merck is responsible for promoting new pharmaceuticals to target customers and
bringing customer feedback to the organization. Marketing is essentially the window
to customers.
The finance function of Merck makes sure that they have needed capital for different
processes including research and development R&D.
However, it is the operations function that plans and coordinates all the resources
needed to design, produce, and deliver the various pharmaceuticals to hospitals,
pharmacies, and other locations where needed. Without operations, there would be
no products to sell to customers.

ABSTRACTION
1. Can Marketing Department function without the coordination with Finance
Department?

Page 4 of 101
 2. Can Operation Department function without the coordination with Finance
Department?

Title of the Lesson:

Lesson 2 - The Transformation Role of Operations Management and the
Differences in Manufacturing and Service Operations

I. Duration: 3 hours, Week 2

II. Introduction
A transformation process is any activity or group of activities that takes one or
more inputs, transforms and adds value to them, and provides outputs for customers
or clients. Where the inputs are raw materials, it is relatively easy to identify the
transformation involved, as when milk is transformed into cheese and butter. Where
the inputs are information or people, the nature of the transformation may be less
obvious.

III. Objectives/Competencies
1. Learn about the traditional transformation model of inputs and outputs.
2. Learn about the difference between manufacturing organizations and service
organizations.

IV. Lesson Proper/Course Methodology

ANALYSIS
The Transformation Role of Operations Management
We say that operations management performs a transformation role in the process
of converting inputs such as raw materials into finished goods and services.
These inputs include:
• human resources, such as workers, staff, and managers;
• facilities and processes, such as buildings and equipment; they
also include materials, technology, and information.
In the traditional transformation model outputs are the goods and services a
company produces. This is shown in Figure 1-2.

Page 5 of 101
At a manufacturing plant the transformation is the physical change of raw materials
into products, such as transforming steel into automobiles, cloth into jackets, or
plastic into toys. This is equally true of service organizations.
At a can vegetables manufacturing plant, OM is involved in organizing resources
such as:

At a hospital which is a service operation OM is involved in organizing resources,

such as:

Page 6 of 101
Differences in Manufacturing Versus Service Operations
All organizations can be broadly divided into two categories: manufacturing
organizations and service organizations. Although both categories have an OM
function, these differences pose unique challenges for the operations function as the
nature of what is being produced is different. There are two primary distinctions
between these categories of organizations.
• Manufacturing organizations produce a physical or tangible product that can
be stored in inventory before it is needed by the customer.
• Service organizations, on the other hand, produce intangible products that
cannot be produced ahead of time.
• Manufacturing organizations customers typically have no direct contact with
the process of production. Customer contact occurs through distributors or
retailers.

For example, a customer buying a computer never comes in contact with the factory
where the computer is produced. However, in service organizations the customers
are typically present during the creation of the service. Customers here usually come
in contact with some aspect of the operation. Consider a restaurant or a barber
shop, where the customer is present during the creation of the service. We can
further divide a service operation into high contact and low contact segments.
High contact segments are those parts of the operation where the customer is
present, such as the service area of the post office or the dining area of a restaurant.
However, these services also have a low contact segment. These can be thought of
as “back room” or “behind the scenes” segments.
Examples would include the kitchen segment at a fast-food restaurant or the
laboratory for specimen analysis at a hospital.

Page 7 of 101
 In addition to pure manufacturing and pure service, there are companies that
have some characteristics of each type of organization. It is difficult to tell whether
these companies are actually manufacturing or service organizations. An excellent
example is an automated warehouse or a mail-order catalog business.
These businesses have low customer contact and are capital intensive. They are
most like manufacturing organizations yet they provide a service. We call these
companies quasi-manufacturing organizations.
The operational requirements of these two types of organizations are different, from
labor to inventory issues. These differences are shown in Table 1-1. As a result, it is
important to understand how to manage both service and manufacturing operations.

Table 1-1 Comparing Manufacturing and Service Operations

Manufacturers Services

Tangible product. Intangible product.

Product can be inventoried. Product cannot be inventoried.

Low customer contact. High customer contact.

Longer response time. Short response time.

Capital intensive. Labor intensive.

I. Title of the Lesson:

Lesson 3 - Basics of Supply Chain Management and Process

Page 8 of 101
II. Duration: 3 hours Week 3

III. Introduction
Operations management plays a critical role in the organization and supply chain.
Without OM there would be no products to sell. However, operations cannot work in
isolation from other business functions.
Ensuring that OM fits in with the other organizational functions is necessary but not
sufficient. The reason is that each company depends on other members of its supply
chain to be able to deliver the right products to its customers in a timely and cost-
effective manner. In the upstream part of a company’s supply chain, a company
depends on its suppliers for the delivery of raw materials and components in time to
meet production needs. If deliveries of these materials are late, or are of poor quality,
production will be delayed, regardless of how efficient a company’s operations
process is.

IV. Objectives/Competencies
1. To learn the basics of supply chain management processes
2. Learn How to do a supply chain management.

V. Lesson Proper/Course Methodology

ANALYSIS

The Role of Manufacturing and Service Operations in the Organization and

Supply Chain
Operations management plays a critical role in the organization and supply chain.
Without OM there would be no products to sell. However, operations cannot work in
isolation from other business functions. Recall that each business function manages
unique aspects of the business, and they all must work together.

Page 9 of 101
The Basics of Supply Chain Management Processes
There are key supply chain processes that you must take into consideration to
effectively understand and manage them. These processes are all at play
regardless of the type of supply chain you’re using.

Customer Relationship Management (CRM) comes first, because as the

principles of SCM state, you must adapt everything in the supply chain to the
customer. If no one is buying, there’s no need to produce anything. At the front of
your supply chain, where a store’s staff interacts with its consumers, they must have
plans in place for ongoing relationships. They need CRM tools to gather customer
information for marketing and market research, all to determine the products and
services to offer in the future.

Customer service management is another process that ties in, as it is where you
gather negative and positive feedback to determine future needs.

Demand management is closely linked with the previous two, as it takes customer
interactions and orders into account to determine the workload all the way up the
supply chain. At its core, customers buying more means make more, and customers
buying less means make less. Customer forecasting is an important task that
analysts must perform well to determine the current demand and what it will be in
the future, to prevent waste in the supply chain.

Page 10 of 101
Product development is an important part of the supply chain that is informed by
consumer demand. You must work with CRM and customer service data to
determine what they want, which influences new products, product line extensions,
and also what to stop making. You must integrate suppliers in this process because
it affects cost, quality, and delivery time.

Supplier relationship management goes without saying - if you want to produce

your products on time and on budget, you need a solid rapport with everyone you’re
outsourcing to in the chain. This impacts manufacturing flow management, which
ensures everything gets where it needs to go without delay, and at the correct spec.

Order fulfillment involves coordinating with distribution centers and either retail
locations or 3PL to get the product direct to consumers. You’ve now made it all the
way back to the beginning of the cycle, and need to pay attention to new CRM and
customer service data.

Returns management, also known as the “reverse supply chain,” is a vital part of
the flow of products that doesn’t fit perfectly into the clean supply chain cycle. It
involves picking up online orders from 3PL locations or from consumers’ addresses
and accepting returns at retail locations. Once these items are put back into
inventory, they must be ready to get to a different customer while the product run is
still live.

For example, operations must work with marketing to understand the exact wants of
a particular group of customers. It can then design the exact products customers
want and create the production processes to efficiently produce these products.
Marketing, on the other hand, must understand operations’ capabilities, including the
types of products it can produce and the limitations of the production process.
Without communication between marketing and operations, the company may find
itself in a situation where it is producing products the customers don’t want.
Operations must also work closely with purchasing to understand availability of
materials, cost and quality issues, availability of sources of supply, and lead times.
Operations links marketing—with its ties to customers—to sourcing—with links to
sources of supply. Operations must understand exactly what customers want and be
able to ensure that sourcing can get the materials needed at the right price and at
the right time to support product designs, or offer alternative material options.

Page 11 of 101
On the downstream side, a company depends on its distributors and retailers for the
delivery of the product to the final customer. If these are not delivered on time, are
damaged in the transportation process, or are poorly displayed at the retail location,
sales will suffer. Also, if the operations function of other members of the supply chain
is not managed properly, excess costs will result, which will be passed down to other
members of the supply chain in the form of higher prices.

How to do a Supply Chain Management (SCM)

A firm’s SCM efforts start with the development and execution of a long-term supply
chain strategy. Among other things, this strategy should:
• Identify what supply chains the firm wants to compete in.
• Help managers understand how the firm will provide value to the supply
chain.
• Guide the selection of supply chain partners, including suppliers,
subcontractors, transportation providers, and distributors.
As firms struggle to understand what supply chains they compete in, it is often
valuable to map the physical flows and information flows that make up these supply
chains. From these maps, firms can begin to understand how they add value, and
what information is needed to make the supply chain work in the most effective and
efficient way possible.
Of course, the firm’s supply chain strategy does not exist in a vacuum. It must be
consistent with both the overall business strategy and efforts within such areas as
purchasing, logistics, manufacturing and marketing.

Explain in your own understanding:

“It’s not about money. It’s about the people you have, and how you’re led”

Page 12 of 101
 - Steve Jobs
__________________________________________________________________

ABSTRACTION
Operations management is the administration of business practices to create the
highest level of efficiency possible within an organization. Explain (20 points)

VI. Reflection/Learning Insights

Write an essay in not more than 100 words about the importance of Operations
Management in business (10 points)

VII. Post-test
What kind of knowledge should you share to the suppliers? Employees? Write your
answer in not more than 70 words each question.

VIII. REFERENCES

Operations Management, Eighth Edition, by William J. Stevenson Copyright

© 2005 by The McGraw-Hill Companies, Inc.

Pearson Prentice Hall --- Introduction to Operations and Supply Chain Management,
2/e --- Bozarth and Handfield, ISBN: 0131791036
https://www.investopedia.com/terms/o/operations-management.asp
https://www.informit.com/articles/article.
https://www.birmingham.ac.uk/postgraduate/courses/taught/business/onlinemba/
operations-management

http://www.open.edu/openlearn/money-business/introduction-
operationsmanagement/content-section-0

https://courses.lumenlearning.com/boundless-business/chapter/introduction-
tooperations-management/ https://www.smartsheet.com/supply-chain-
management
https://www.open.edu/openlearn/money-business/leadershipmanagement/
understanding-operations-management

https://scm.ncsu.edu/scm-articles/article/how-do-you-do-scm

Page 13 of 101
I. Unit Title
Unit 2 - Competitiveness, Strategy, and Productivity

II. Title of the Lessons:

Lesson 1. How companies compete and why companies fail.

Duration: 3 hours, Week 4

III. Introduction

In this chapter you will learn about the different ways companies compete and why
some firms do a very good job of competing. You will learn how effective strategies
can lead to competitive organizations, and you will learn what productivity is, why it
is important, and what organizations can do to improve it.

IV. Objectives/Competencies
1. List the several ways that business organizations compete.
2. Explain several reasons that business organizations fail.

V. Pre-test
The name of the game is competition. The playing field is global. Those who
understand how to play the game will succeed; those who don’t are doomed to
failure.

Question: Is this true or false? Explain.

__________________________________________________________________

VII. Lesson Proper/Course Methodology

ACTIVITY
Read the situation below and answer the question:
Amazon received the top spot in customer service in a recent BusinessWeek
ranking. Although most Amazon customers never talk with an employee, when
something goes wrong, Amazon excels in dealing with the problem. In one case,
when a New Jersey woman received a workbook she ordered that was described as
“like new,” she was surprised to discover that it wasn’t even close to new—
worksheets had already been filled in. She complained to the merchant but didn’t get
a response. Then she complained to Amazon. She promptly received a refund, even

Page 14 of 101
though she had paid the merchant, not Amazon. And she wasn’t asked to return the
book.
1. What do you this situation tells you?
__________________________________________________________________

COMPETITIVENESS

Companies must be competitive to sell their goods and services in the marketplace.
Competitiveness is an important factor in determining whether a company
prospers, barely gets by, or fails.
Business organizations compete through some combination of their marketing
and operations functions. Marketing influences competitiveness in several ways,
including identifying consumer wants and needs, pricing, and advertising and
promotion.
1. Identifying consumer wants and/or needs is a basic input in an organization’s
decision-making process, and central to competitiveness. The ideal is to achieve
a perfect match between those wants and needs and the organization’s goods
and/or services.
2. Price and quality are key factors in consumer buying decisions. It is important to
understand the trade-off decision consumers make between price and quality.
3. Advertising and promotion are ways organizations can inform potential
customers about features of their products or services, and attract buyers.

Operations has a major influence on competitiveness through product and service

design, cost, location, quality, response time, flexibility, inventory and supply chain
management, and service. Many of these are interrelated.
1. Product and service design should reflect joint efforts of many areas of the
firm to achieve a match between financial resources, operations capabilities,
supply chain capabilities, and consumer wants and needs. Special
characteristics or features of a product or service can be a key factor in
consumer buying decisions. Other key factors include innovation and the time-
to-market for new products and services.
2. Cost of an organization’s output is a key variable that affects pricing decisions
and profits. Cost-reduction efforts are generally ongoing in business
organizations.
3. Productivity (discussed later in the chapter) is an important determinant of cost.
Organizations with higher productivity rates than their competitors have a
competitive cost advantage. A company may outsource a portion of its operation
to achieve lower costs, higher productivity, or better quality.

Page 15 of 101
4. Location can be important in terms of cost and convenience for customers.
Location near inputs can result in lower input costs. Location near markets can
result in lower transportation costs and quicker delivery times. Convenient
location is particularly important in the retail sector.
5. Quality refers to materials, workmanship, design, and service. Consumers
judge quality in terms of how well they think a product or service will satisfy its
intended purpose. Customers are generally willing to pay more for a product or
service if they perceive the product or service has a higher quality than that of a
competitor.
6. Quick response can be a competitive advantage. One way is quickly bringing
new or improved products or services to the market. Another is being able to
quickly deliver existing products and services to a customer after they are
ordered, and still another is quickly handling customer complaints.
7. Flexibility is the ability to respond to changes. Changes might relate to
alterations in design features of a product or service, or to the volume
demanded by customers, or the mix of products or services offered by an
organization. High flexibility can be a competitive advantage in a changeable

environment. ****

8. Inventory management can be a competitive advantage by effectively

matching
supplies of goods with demand.
8. Supply chain management involves coordinating internal and external
operations (buyers and suppliers) to achieve timely and cost-effective delivery of
goods throughout the system.
9. Service might involve after-sale activities customers perceive as value-added,
such as delivery, setup, warranty work, and technical support. Or it might involve
extra attention while work is in progress, such as courtesy, keeping the
customer informed, and attention to details. Service quality can be a key
differentiator; and it is one that is often sustainable. Moreover, businesses rated
highly by their customers for service quality tend to be more profitable, and grow
faster, than businesses that are not rated highly.
4. Managers and workers are the people at the heart and soul of an organization,
and if they are competent and motivated, they can provide a distinct
competitive edge by their skills and the ideas they create. One often overlooked
skill is answering the telephone. How complaint calls or requests for information
are handled can be a positive or a negative. If a person answering is rude or
not helpful, that can produce a negative image. Conversely, if calls are handled
promptly and cheerfully, that can produce a positive image and, potentially, a
competitive advantage.
Page 16 of 101
Why Some Organizations Fail

Organizations fail, or perform poorly, for a variety of reasons. Being aware of those
reasons can help managers avoid making similar mistakes. Among the chief reasons
are the following:
1. Neglecting operations strategy.
2. Failing to take advantage of strengths and opportunities, and/or failing to
recognize competitive threats.
3. Putting too much emphasis on short-term financial performance at the
expense of research and development.
4. Placing too much emphasis on product and service design and not enough
on process design and improvement.
5. Neglecting investments in capital and human resources.
6. Failing to establish good internal communications and cooperation among
different functional areas.
7. Failing to consider customer wants and needs.

The key to successfully competing is to determine what customers want and then
directing efforts toward meeting (or even exceeding) customer expectations. Two
basic issues must be addressed.
First: What do the customers want? (Which items on the preceding list of the ways
business organizations compete are important to customers?)
Second: What is the best way to satisfy those wants?
Operations must work with marketing to obtain information on the relative
importance of the various items to each major customer or target market.
Understanding competitive issues can help managers develop successful strategies.

I. Title of the Lesson:

Lesson 2 – Mission and Strategies: What are the term mission and strategy
and its importance? Comparing organization strategy and operation.

Duration: 3 hours Week 5

Introduction

Strategy relates to the plans that determine how an organization pursues its goals.
Operations strategy is particularly important in an organization.

An organization’s mission is the reason for its existence. It is expressed in its

mission statement. For a business organization, the mission statement should
answer the question “What business are we in?” Missions vary from organization to

Page 17 of 101
organization, depending on the nature of their business. Table 2.1 provides several
examples of mission statements.
A mission statement serves as the basis for organizational goals, which provide
more detail and describe the scope of the mission. The mission and goals often
relate to how an organization wants to be perceived by the general public, and by its
employees, suppliers, and customers. Goals serve as a foundation for the
development of organizational strategies. These, in turn, provide the basis for
strategies and tactics of the functional units of the organization.
Organizational strategy is important because it guides the organization by
providing direction for, and alignment of, the goals and strategies of the functional
units. Moreover, strategies can be the main reason for the success or failure of an
organization.

II. Objectives/Competencies
1. Define the term mission and strategy and explain why they are important
2. Discuss and compare organization strategy and operations strategy, and
explain why it is important to link the two.
3. Describe and give examples of time-based strategies.

III. Lesson Proper/Course Methodology

ANALYSIS
MISSION AND STRATEGIES

A strategic plan starts with a clearly defined business mission.

Mintzberg defines a mission as follows:

“A mission describes the organization’s basic function in society, in terms of the

products and services it produces for its customers”.

A clear business mission should have each of the following elements:

Page 18 of 101
Taking each element of the above diagram in turn, what should a good mission
contain?
(1) A Purpose
Why does the business exist? Is it to create wealth for shareholders? Does it exist to
satisfy the needs of all stakeholders (including employees, and society at large?)

(2) A Strategy and Strategic Scope

A mission statement provides the commercial logic for the business and so defines
two things:
 The products or services it offers (and therefore its competitive position)
 The competences through which it tries to succeed and its method of
competing

A business’ strategic scope defines the boundaries of its operations. These are set
by management.
For example, these boundaries may be set in terms of geography, market, business
method, product etc. The decisions management make about strategic scope define
the nature of the business.

(3) Policies and Standards of Behavior

A mission needs to be translated into everyday actions. For example, if the business
mission includes delivering “outstanding customer service”, then policies and
standards should be created and monitored that test delivery.
These might include monitoring the speed with which telephone calls are answered
in the sales call center, the number of complaints received from customers, or the
extent of positive customer feedback via questionnaires.

(4) Values and Culture

The values of a business are the basic, often un-stated, beliefs of the people who
work in the business. These would include:
• Business principles (e.g. social policy, commitments to customers)
• Loyalty and commitment (e.g. are employees inspired to sacrifice their personal
goals for the good of the business as a whole? And does the business
demonstrate a high level of commitment and loyalty to its staff?)
• Guidance on expected behavior – a strong sense of mission helps create a work
environment where there is a common purpose

What role does the mission statement play in marketing planning?

In practice, a strong mission statement can help in three main ways:
 It provides an outline of how the marketing plan should seek to fulfill the mission
Page 19 of 101
 It provides a means of evaluating and screening the marketing plan; are marketing
decisions consistent with the mission?
 It provides an incentive to implement the marketing plan

There are three basic business strategies:

• Low cost.
• Responsiveness.
• Differentiation from competitors
• Examples of selected portions of company mission statements

Microsoft - To help people and businesses throughout the world to realize their
full potential.
Nike - To bring inspiration and innovation to every athlete in the world.
Verizon - To help people and businesses communicate with each other.
Walt Disney - To be one of the world’s leading producers and providers of
entertainment and information.

Strategies and Tactics

If you think of goals as destinations, then strategies are the roadmaps for
reaching the destinations. Strategies provide focus for decision making. Generally
speaking, organizations have overall strategies called organizational strategies,
which relate to the entire organization. They also have functional strategies, which
relate to each of the functional areas of the organization. The functional strategies
should support the overall strategies of the organization, just as the organizational
strategies should support the goals and mission of the organization.
Tactics are the methods and actions used to accomplish strategies. They are
more specific than strategies, and they provide guidance and direction for carrying
out actual operations, which need the most specific and detailed plans and decision
making in an organization. You might think of tactics as the “how to” part of the
process (e.g., how to reach the destination, following the strategy roadmap) and
operations as the actual “doing” part of the process. Much of this book deals with
tactical operations.

Page 20 of 101
 It should be apparent that the overall relationship that exists from the mission
down to actual operations is hierarchical. This is illustrated in Figure 2.1 .
A simple example may help to put this hierarchy into perspective.

FIGURE 2.1 Planning and decision making are hierarchical in organizations

Here are some examples of different strategies an organization might

choose from:
Low cost. Outsource operations to third-world countries that
have low labor costs.

Scale-based strategies Use capital-intensive methods to achieve high

output volume and low unit costs.

Specialization. Focus on narrow product lines or limited service to

achieve higher quality.

Newness. Focus on innovation to create new products or

services.

Flexible operations. Focus on quick response and/or customization.

High quality. Focus on achieving higher quality than competitors.
Service. Focus on various aspects of service (e.g., helpful,
courteous, reliable, etc.).

Sustainability. Focus on environmental-friendly and energy efficient

operations.

A wide range of business organizations are beginning to recognize the strategic

advantages of sustainability, not only in economic terms, but also in promotional
benefit by publicizing their sustainability efforts and achievements.

Page 21 of 101
Core competencies: The special attributes or abilities that give an organization a
competitive edge

Sometimes organizations will combine two or more of these or other approaches into
their strategy. However, unless they are careful, they risk losing focus and not
achieving advantage in any category. Generally speaking, strategy formulation takes
into account the way organizations compete and a particular organization’s
assessment of its own strengths and weaknesses in order to take advantage of its
core competencies — those special attributes or abilities possessed by an
organization that give it a competitive edge. The most effective organizations use
an approach that develops core competencies based on customer needs as well as
on what the competition is doing. Marketing and operations work closely to match
customer needs with operations capabilities. Competitor competencies are important
for several reasons.
For example, if a competitor is able to supply high-quality products, it may be
necessary to meet that high quality as a baseline. However, merely matching a
competitor is usually not sufficient to gain market share. It may be necessary to
exceed the quality level of the competitor or gain an edge by excelling in one or
more other dimensions, such as rapid delivery or service after the sale. Walmart, for
example, has been very successful in managing its supply chain, which has
contributed to its competitive advantage. To be effective, strategies and core
competencies need to be aligned.

Distinctive competencies
GE has a distinctive competency in management development. Toyota has
one in lean manufacturing. A distinctive competence can give a business a big
advantage over its competitors.

Environmental scanning

One popular method of environmental scanning is SWOT analysis. These

external factors determine the decisions a business makes. Environmental scans
should include a good, hard look at competition, economics, technology, legal
issues, and social/demographic factors.

SWOT
Page 22 of 101
 Examples include competitors, prices of raw materials, and customer
shopping trends. A SWOT analysis organizes your top strengths, weaknesses,
opportunities, and threats into an organized list and is usually presented in a simple
two-by-two grid.

Order qualifiers

Characteristics that customers perceive as minimum standards of acceptability

to be considered as a potential purchase

Order winners

Characteristics of an organization’s goods or services that cause it to be

perceived as better than the competition

Another key factor to consider when developing strategies is technological

change, which can present real opportunities and threats to an organization.
Technological changes occur in products (high-definition TV, improved computer
chips, improved cellular telephone systems, and improved designs for earth
quakeproof structures); in services (faster order processing, faster delivery); and in
processes (robotics, automation, computer-assisted processing, point of-sale
scanners, and flexible manufacturing systems). The obvious benefit is a competitive

1. Economic conditions. These include the general health and direction of the
economy, inflation and deflation, interest rates, tax laws, and tariffs.

2. Political conditions. These include favorable or unfavorable attitudes toward

business, political stability or instability, and wars. 3.

restrictions, minimum wage laws, product liability laws and recent court experience,
labor laws, and patents.

4. Technology. This can include the rate at which product innovations are
occurring, current and future process technology (equipment, materials handling),
and design technology.

5. Competition. This includes the number and strength of competitors, the basis
of competition (price, quality, special features), and the ease of market entry.

6. Markets. This includes size, location, brand loyalties, ease of entry, potential
for growth, long-term stability, and demographics.
Page 23 of 101
1. Human resources. These include the skills and abilities of managers and
workers; special talents (creativity, designing, problem solving); loyalty to the
organization; expertise; dedication; and experience.

2. Facilities and equipment. Capacities, location, age, and cost to maintain or

replace can have a significant impact on operations.

3. Financial resources. Cash flow, access to additional funding, existing debt

burden, and cost of capital are important considerations.

4. Customers. Loyalty, existing relationships, and understanding of wants and

needs are important.

5. Products and services. These include existing products and services, and
the potential for new products and services.

6. Technology. This includes existing technology, the ability to integrate new

technology, and the probable impact of technology on current and future operations.

7. Suppliers. Supplier relationships, dependability of suppliers, quality, flexibility,

and service are typical considerations.

8. Other. Other factors include patents, labor relations, company or product

image, distribution channels, relationships with distributors, maintenance of facilities
and equipment, access to resources, and access to markets.

Organization strategies and their implications for operations management

Organization Strategy Implications for Operations Management

Low price Requires low variation in products/services and a high-

volume, steady flow of goods results in maximum use
of resources through the system. Standardized work,
material, and inventory requirements.
High quality Entails higher initial cost for product and service
design, and process design, and more emphasis on
assuring supplier quality.
Quick response Requires flexibility, extra capacity, and higher levels of
some inventory items.
Newness/innovation Entails large investment in research and development
for new or improved products and services plus the
Page 24 of 101
 need to adapt operations and supply processes to suit
new products or services.
Product or service variety Requires high variation in resource and more
emphasis on product and service design; higher
worker skills needed, cost estimation more difficult;
scheduling more complex; quality assurance more
involved; inventory management more complex; and
matching supply to demand more difficult.
Sustainability Affects location planning, product and service design,
process design, outsourcing decisions, returns
policies, and waste management.

I. Title of the Lesson:

Lesson 3 – Productivity

Duration: 3 hours, Week 6

Introduction

Productivity relates to the effective use of resources, and it has a direct impact on
competitiveness. Operations management is chiefly responsible for productivity.
II. Objectives/Competencies

1. Define the term productivity and explain why it is important to

organizations and countries
2. Provide some reasons for poor productivity and some ways of improving
it
3. Discuss the important factors of productivity.
4. Learn about how to improve productivity.

III. Lesson Proper/Course Methodology

ANALYSIS

PRODUCTIVITY

Page 25 of 101
 One of the primary responsibilities of a manager is to achieve productive use of an
organization’s resources. The term productivity is used to describe this. Productivity is an
index that measures output (goods and services) relative to the input (labor, materials, energy,
and other resources) used to produce it. It is usually expressed as the ratio of output to input:

For a nation, the rate of productivity growth is of great importance. Productivity

growth is the increase in productivity from one period to the next relative to the
productivity in the preceding period. Thus,

Computing Productivity

Productivity measures can be based on a single input (partial productivity), on more

than one input (multifactor productivity), or on all inputs (total productivity

The choice of productivity measure depends primarily on the purpose of the

measurement. If the purpose is to track improvements in labor productivity, then
labor becomes the obvious input measure.

Partial measures are often of greatest use in operations management. Below

provides some examples of partial productivity measures.

Some examples of partial productivity measures

Labor productivity Units of output per labor hour
Units of output per shift
Value-added per labor hour
Dollar value of output per labor hour
Machine productivity Units of output per machine hour
Dollar value of output per machine hour
Page 26 of 101
Capital productivity Units of output per dollar input Dollar value of output
per dollar input
Energy productivity Units of output per kilowatt-hour Dollar value of
output per kilowatt-hour

Now let's discuss briefly above listed important factors that affect productivity.

1. Technical factors: Productivity largely depends on technology. Technical

factors are the most important ones. These include proper location, layout
and size of the plant and machinery, correct design of machines and
equipment, research and development, automation and computerization, etc.
If the organization uses the latest technology, then its productiveness will be
high.
2. Production factors: Productivity is related to the production-factors. The
production of all departments should be properly planned, coordinated and
controlled. The right quality of raw-materials should be used for production.
The production process should be simplified and standardized. If everything is
well it will increase the productiveness.
3. Organizational factors: Productivity is directly proportional to the
organizational factors. A simple type of organization should be used. Authority

Page 27 of 101
 and Responsibility of every individual and department should be defined
properly. The line and staff relationships should also be clearly defined. So,
conflicts between line and staff should be avoided. There should be a division
of labor and specialization as far as possible. This will increase organization's
productiveness.
4. Personnel factors: Productivity of organization is directly related to
personnel factors. The right individual should be selected for suitable posts.
After selection, they should be given proper training and development. They
should be given better working conditions and work-environment. They should
be properly motivated; financially, non-financially and with positive incentives.
Incentive wage policies should be introduced. Job security should also be
given. Opinion or suggestions of workers should be given importance. There
should be proper transfer, promotion and other personnel policies. All this will
increase the productiveness of the organization.
5. Finance factors: Productivity relies on the finance factors. Finance is the life-
blood of modem business. There should be a better control over both fixed
capital and working capital. There should be proper Financial Planning.
Capital expenditure should be properly controlled. Both over and
underutilization of capital should be avoided. The management should see
that they get proper returns on the capital which is invested in the business. If
the finance is managed properly the productiveness of the organization will
increase.
6. Management factors: Productivity of organization rests on the management
factors. The management of organization should be scientific, professional,
future-oriented, sincere and competent. Managers should possess
imagination, judgement skills and willingness to take risks. They should make
optimum use of the available resources to get maximum output at the lowest
cost. They should use the recent techniques of production. They should
develop better relations with employees and trade unions. They should
encourage the employees to give suggestions. They should provide a good
working environment, and should motivate employees to increase their
output. Efficient management is the most significant factor for increasing
productiveness and decreasing cost.
7. Government factors: Productivity depends on government factors. The
management should have a proper knowledge about the government rules
and regulations. They should also maintain good relations with the
government.
8. Location factors: Productivity also depends on location factors such as Law
and order situation, infrastructure facilities, nearness to market, nearness to
sources of raw-materials, skilled workforce, etc.
Page 28 of 101
Improving Productivity
A company or a department can take a number of key steps toward improving
productivity:
1. Develop productivity measures for all operations. Measurement is the first step in
managing and controlling an operation.
2. Look at the system as a whole in deciding which operations are most critical. It is
overall productivity that is important. Managers need to reflect on the value of
potential productivity improvements before okaying improvement efforts. The
issue is effectiveness.
3. Develop methods for achieving productivity improvements, such as soliciting ideas
from workers (perhaps organizing teams of workers, engineers, and managers),
studying how other firms have increased productivity, and reexamining the way
work is done.
4. Establish reasonable goals for improvement.
5. Make it clear that management supports and encourages productivity
improvement. Consider incentives to reward workers for contributions.
6. Measure improvements and publicize them.
Don’t confuse productivity with efficiency. Efficiency is a narrower concept that
pertains to getting the most out of a fixed set of resources; productivity is a broader
concept that pertains to effective use of overall resources. For example, an efficiency
perspective on mowing a lawn given a hand mower would focus on the best way to
use the hand mower; a productivity perspective would include the possibility of using
a power mower.
KEY POINTS
1. Competitive pressure often means that business organizations must
frequently assess their competitors’ strengths and weaknesses, as well as their own,
to remain competitive.
2. Strategy formulation is critical because strategies provide direction for the
organization, so they can play a role in the success or failure of a business
organization.
3. Functional strategies and supply chain strategies need to be aligned with
the goals and strategies of the overall organization.
4. The three primary business strategies are low cost, responsiveness, and
differentiation.
5. Productivity is a key factor in the cost of goods and services. Increases in
productivity can become a competitive advantage.

High productivity is particularly important for organizations that have a strategy of low
costs.

Page 29 of 101
Abstraction
Rita is a college student in living in Davao. She would like to have a career in
business, have a good job, and earn enough income to live comfortably. A possible
scenario for achieving her goals would be: Mission:
___________________________

Goal: _____________________________

Strategy: ___________________________

Tactics: ___________________________

Operations: ____________________________________________________

Questions

1. Why is high productivity important for a nation?

2. Why do you suppose that service jobs have lower productivity than
manufacturing jobs?

3. How can a company gain a competitive advantage by having higher productivity

than its competitors have?

VI. Reflection/Learning Insights

“Companies that solely focus on competition will die. Those that focus on value
creation will thrive.” – Edward de Bono

In 50 words write your understanding about the quote.

VII Post-test

1. Select two stores you shop at, and state how they compete.
2. List the key ways that organizations compete.
3. Contrast the terms strategies and tactics.
4. Productivity should be a concern of every business organization.
a. How is productivity defined?
b. How are productivity measures used?
c. Why is productivity important?
d. What part of the organization has primary responsibility for productivity?
e. How is efficiency different from productivity?

5. List some factors that can affect productivity and some ways that productivity
can be improved.

VIII REFERENCES

Page 30 of 101
 https://www.tutor2u.net/business/strategy/mission.htm

http://bbagroupb.weebly.com/uploads/

https://kalyan-city.blogspot.com/

Bartlett , Christopher A. , and Sumantra Ghoshal . “Going Global: Lessons from

Late Movers.” Harvard Business Review, March–April 2000 , pp. 132–42 .
Bernstein , Aaron . “Backlash: Behind the Anxiety of Globalization.”
BusinessWeek, April 24, 2000 , pp. 38–44 . Blackburn, Joseph D., ed.
Time-Based Competition. Homewood, IL: Business One Irwin , 1991 . Colvin ,
Geoffrey . “Managing in the Info Era.” Fortune, March 6, 2000 , pp. F6–F9
.
Hachman , Mark . “Supply-Chain Program Boosts Productivity at Seagate Tech.”
Electronic Buyers News, January 17, 2000 .
Hammer , Michael , and Steven Stanton . “Ignore Operations at Your Peril.”
Harvard Business Review, 6565, April 2004 .
Hill , Terry . Manufacturing Strategy: Text and Cases, 3rd ed. New York:
McGraw-Hill , 2000 .
Holstein , William J. “Are Raises Bad for America?” U.S. News & World
Report,
August 30, 1999 , pp. 48–50 .
Ingold , Anthony , Ian Yeoman , and Una McMahon- Beattie , eds. Yield
Management: Strategies for the Service Industries, 2nd ed. London: Continuum
, 2001 .
Roach , Stephen . “In Search of Productivity.” Harvard Business Review,
September–October 1998 , p. 153 .
Ross , D. F. Competing Through Supply Chain Management. New York:
Chapman and Hall , 1998 .
Stalk , George , P. Evans , and L. E. Shulman . “Competing on Capabilities:
The
New Rules of Corporate Strategy.” Harvard Business Review, March–April
1992 , pp. 57–69 .
Werbach , Adam . Strategy for Sustainability: A Business Manifesto. Boston:
Harvard Business Press , 2009 .

https://www.tutor2u.net/business/strategy/mission.htm
http://bbagroupb.weebly.com/uploads/ https://kalyan-city.blogspot.com/

1. Unit Title:
Unit 3 - FORECASTING

II. Title of the Lessons: What are Forecasting and its uses, the elements of
forecasting? What are forecasting process, its judgement, causal method?

Page 31 of 101
III. Duration: 3 hours, Week 6-7

IV. Introduction

The need for a good understanding of future product demand is critical in the
industry today. Too much product and you are faced with the decision on what to do
with it; too little product and you are missing sales revenue. Product Demand is
either in the process of increasing or decreasing, but the one thing that is always
constant is that future demand is always changing.

Companies use forecasting to help them develop business strategies. Financial and
operational decisions are made based on economic conditions and how the future
looks, albeit uncertain. Past data is collected and analyzed so that patterns can be
found.

It is not unusual to hear a company's management speak about forecasts: "Our

sales did not meet the forecasted numbers," or "we feel confident in our forecasted
economic growth and expect to exceed our targets." In the end, all financial
forecasts are informed guesses regardless of whether they reflect the specifics of a
business, such as sales growth, or predictions for the economy as a whole. In this
chapter, we will look at some of the methods and processes behind financial
forecasts as well as the risks in trying predict the future.

V. Objectives/Competencies
1. Learn mechanisms of arriving at measures for planning the future.
2. Make use forecasting to make valuable and well-informed business decisions.
3. Prepare for the future by examining the most probable future demand pattern.
4. Provide sufficient time with a fair degree of accuracy and reliability to prepare
for future demand.

VI. Lesson Proper/Course Methodology

ACTIVITY

•Predict the next number in the pattern:

a) 3.7, 3.7, 3.7, 3.7, 3.7, ?

b) 2.5, 4.5, 6.5, 8.5, 10.5, ?

c) 5.0, 7.5, 6.0, 4.5, 7.0, 9.5, 8.0, 6.5, ?

ANALYSIS

Forecasting

What is Forecasting?
• Determining future events based on historical acts and data
Some Thoughts on Forecasts

• Forecasts tend to be wrong!

• Forecasts can be biased! (Marketing, Sales, etc.)
• Forecasts tend to be better for near future So Why Forecast?

• Better to have “Educated Guess” about future than to Not Forecast at All!
Educated guessing
Page 32 of 101
• Underlying basis of all business decisions

• Production

• Inventory

• Personnel
• Facilities
Realities of Forecasting

• Forecasts are seldom perfect

• Most forecasting methods assume that there is some underlying
stability in the system
• Both product family and aggregated product forecasts are more
accurate than individual product forecasts

Why do we need to forecast?

Throughout the day we forecast very different things such as weather, traffic,
stock market, state of our company from different perspectives.
Virtually every business attempt is based on forecasting. Not all of them are
derived from sophisticated methods. However, “Best" educated guesses about future
are more valuable for purpose of Planning than no forecasts and hence no planning.

Importance of Forecasting in Operations Management

Departments throughout the organization depend on forecasts to formulate and

execute their plans.

• Finance needs forecasts to project cash flows and capital requirements.

• Human resources need forecasts to anticipate hiring needs.
• Production needs forecasts to plan production levels, workforce, material
requirements, inventories, etc.

What departments in your university needs to forecast?

Demand is not the only variable of interest to forecasters.

• Manufacturers also forecast worker absenteeism, machine availability,

material costs, transportation and production lead times, etc.
• Besides demand, service providers are also interested in forecasts of
population, of
other demographic variables, of weather, etc.

Forecasts affect decisions and

activities throughout an
organization

• Accounting, finance
Page 33 of 101
 • Finance
• Human resources
• Marketing
• MIS
• Operations
• Product / service design

Types of Forecasts by Time Horizon

• Short-range forecast
• Usually, < 3 months
• Job scheduling, worker assignments
• Medium-range forecast
• 3 months to 2 years
• Sales/production planning
• Long-range forecast
• > 2 years
• New product planning

Short vs. Long Term

• Medium/long range forecasts

• More comprehensive issues
• Support management decisions
• Short-term forecasting usually employs different methodologies than longer-term
forecasting
• Short-term forecasts tend to be more accurate than longer term forecasts

How to Forecast?

• Qualitative Methods –
-Based On educated opinion and judgment (Subjective)
- Particularly Useful When Lacking Numerical Data
(Example: Design and Introduction Phases of a Product’s Life Cycle)

• Quantitative Methods
-Based On Data (Objective)

Forecasting Approaches

Qualitative
• Used when situation is vague & little data exist
• New products
• New technology
Involves intuition, experience
• e.g., forecasting sales on Internet
Quantitative
• Used when situation is ‘stable’ and historical data exist
• Existing products

Page 34 of 101
• Current technology
• Involves mathematical techniques
• e.g., forecasting sales of color televisions
Qualitative Methods

• Executive Judgment

• Sales Force Composite

Market Research/Survey

Delphi Method

Page 35 of 101
As opposed to regular panels where the individuals involved are in direct

communication, this method eliminates the effects of group potential dominance

of the most vocal members. The group involves individuals from inside as well

as outside the organization.

Typically, the procedure consists of the following steps:

Each expert in the group makes his/her own forecasts in form of statements

• The coordinator collects all group statements and summarizes them

• The coordinator provides this summary and gives another set of questions to
each group member including feedback as to the input of other experts.  The
above steps are repeated until a consensus is reached.
Quantitative Methods

• Time Series & Regression

• Time Series - Popular Forecasting Approach in Operations Management
• Assumption:
 “Patterns” That Occurred in the Past Will Continue to Occur in the Future

• Patterns
o Random Variation

Page 36 of 101
o Trend

o o

o
o
o
o
o
o
o
o
o
o
o
o

o Seasonal

Page 37 of 101
Page 38 of 101
Page 39 of 101
o Cyclical

Time Series Models

• Short Term
• Naïve
• Simple Moving Average
• Weighted Moving Average

Page 40 of 101
• Exponential Smoothing

Page 41 of 101
Page 42 of 101
Page 43 of 101
Page 44 of 101
Page 45 of 101
Reflection/Learning Insights

“I never think of the future — it comes soon enough.” — Albert Einstein In

50 words write your understanding about the quote.

VII. Post-test

1. What is forecasting?
2. How does it help a firm?
3. Describe the four qualitative forecasting approaches
4. Describe the quantitative forecasting approaches
5. What approach will let you weight more recent data versus older data?

VIII. REFERENCES

https://www.aspen-systems.com/solutions/enhanced-modules/forecasting

https://www.investopedia.com/articles/financial-theory/11/basics-business-
forcasting.asp
https://www.managementstudyguide.com/demand-forecasting.htm

https://www.investopedia.com/articles/financial-theory/11/basics-business-
forcasting.asp

Unit Title
UNIT 4 - Product and Service Design

I. Title of the Lessons

Lesson 1. Definitions of Service Design. What are the differences and phases
between product and service design? What are the reasons for design or re-design?
What are the trends and objective of product and service design?

II. Duration: 3 hours, Week 8

III. Introduction

In this chapter you will find many insights into product and service design. Among
the topics covered are the steps involved in product and service design or redesign,
sources of ideas for design or redesign, legal, ethical and other issues, design
elements for both manufacturing and service, and quality function deployment
(QFD).
Product and service design—or redesign—should be closely tied to an
organization’s strategy. It is a major factor in cost, quality, time to market, customer
satisfaction, and competitive advantage.

Page 46 of 101
IV. Objectives/Competencies
1. Learn the meaning of service design.
2. Identify the differences between product and service design.
3. Identify some key reasons for design or redesign.
4. Describe the phases in product design and development and key issues in
manufacturing design.
5. Learn the trends in product and service design.

V. Pre-test
“Design is not just what it looks like and feels like. Design is how it works.”
-Steve Jobs
In not more than 50 words share your idea about this famous quote.
__________________________________________________________________
__________________________________________________________________

Why product and service design are strategically important?

1.
2.
3.

VII. Lesson Proper/Course Methodology

ACTIVITY

Page 47 of 101
Share your idea about the illustration above in 1 paragraph of not more than 50
words.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________

ANALYSIS
Service Design Definitions
• Service
 Something that is done to, or for, a customer
• Service delivery system
 The facilities, processes, and skills needed to provide a service
• Product bundle
 The combination of goods and services provided to a customer
• Service package
 The physical resources needed to perform the service, accompanying
goods, and the explicit (core features) and implicit (ancillary features)
services included

Service Design
• Begins with a choice of service strategy, which determines the nature and
focus of the service, and the target market

– Key issues in service design

• Degree of variation in service requirements
• Degree of customer contact and involvement

Differences between Service and Product Design

1. Products are generally tangible, services intangible
2. Services are created and delivered at the same time
3. Services cannot be inventoried
4. Services are highly visible to consumers
5. Some services have low barriers to entry and exit
6. Location is often important to service design, with convenience as a major
factor
7. Service systems range from those with little or no customer contact to those
that have a very high degree of customer contact

Page 48 of 101
 8. Demand variability alternately creates waiting lines or idle service resources
9. Differences between Service and Product Design
10. Products are generally tangible, services intangible
11. Services are created and delivered at the same time
12. Services cannot be inventoried
13. Services are highly visible to consumers
14. Some services have low barriers to entry and exit
15. Location is often important to service design, with convenience as a major
factor
16. Service systems range from those with little or no customer contact to those
that have a very high degree of customer contact
17. Demand variability alternately creates waiting lines or idle service resources

Phases in Products Design & Development

1. Feasibility analysis
 Demand, development and production cost, potential profit, technical
analysis, capacity req., skills needed, fit with mission.
2. Product specifications
 What’s needed to meet customer wants
3. Process specifications
 Weigh alternative processes in terms of cost, resources, profit, quality
4. Prototype development
 Few units are made to find problems with the product or process
5. Design review
 Changes are made or project is abandoned
6. Market test
 Determine customer acceptance. If unsuccessful return to Design review.
7. Product introduction
 promotion
8. Follow-up evaluation
 Based on feedback changes may be made.

Strategic Product and Service Design

The essence of an organization is the goods and services it offers
• Every aspect of the organization is structured around them

Product and Service design (or redesign) should be closely tied to an organization’s
strategy

Page 49 of 101
What Does Product & Service Design Do?
• Translate customer wants and needs into product and service requirements
• Refine existing products and services
• Develop new products and services
• Formulate quality goals
• Formulate cost targets
• Construct and test prototypes
• Document specifications
• Translate product and service specifications into process specifications

Key Questions for Product and Service design

1. Is there a demand for it?
• Market size  Demand profile
2. Can we do it?
• Manufacturability - the capability of an organization to produce an item at
an acceptable profit
• Serviceability - the capability of an organization to provide a service at an
acceptable cost or profit
3. What level of quality is appropriate?
• Customer expectations
• Competitor quality
• Fit with current offering
4. Does it make sense from an economic standpoint?
• Liability issues, ethical considerations, sustainability issues, costs and
profits

Reasons for Design or Re-Design

 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 profits.
Furthermore, the best organizations try to develop new products or services
as an alternative to downsizing.
 When productivity gains result in the need for fewer workers, developing new
products or services can mean adding jobs and retaining people instead of
letting them go.
 Sometimes product or service design is actually redesign. This, too, occurs,
for a number of reasons such as customer complaints, accidents or injuries,
excessive warranty claims, or low demand. The desire to achieve cost
reductions in labor or materials can also be a motivating factor.

Page 50 of 101
The driving forces for product and service design (or redesign) are market
Opportunities or Threats:

– Economic
• Low demand, excessive warranty claims, need to reduce costs
– Social and Demographic
• Aging populations, population shifts
– Political, Liability, or Legal
• Government changes, safety issues, new regulations
– Competitive
• New or changed products and services
– Cost or Availability
• Raw materials, components, labor, water, energy
– Technological
• Product components, processes

Trends in product and service design

o Over the last few years, the designing, of products and services has increased
emphasis on a number of aspects of design. Some of these are strictly related to
product design, while others are related to both product and service design.
Among them are the following:

o Increased emphasis on customer satisfaction and increased pressure to be

competitive. Total quality management programs, which have customer
satisfaction as their primary focus, contribute to this.

o Increased emphasis on reducing the time needed to introduce a new product or

services.

o Increased emphasis on reducing the time needed to produce a product or

provide a service. Reduced production time usually results in lower cost and
higher quality.

o Greater attention to the capabilities of the organization to produce or deliver the

item.

o Greater attention to environmental concerns, including waste minimization,

recycling parts, and disposal of worn-out products.
o Increased emphasis on designing products and services that are user-friendly.

I. Title of the Lesson:

Lesson 2 – Idea Generation in Product and Service Design, what are the design
considerations, and end of life programs? How life cycle of product of product and
service works and what are the other kinds of service designs?

Page 51 of 101
II. Duration: 3 hours, Week 9

III. Introduction

Idea generation is the creative process of generating, developing, and

communicating new ideas in a visual, concrete, or abstract format. All of these ideas
are formulated as part of our design thinking process which begins with innovation
and then moves to development and finally to actualization.

New product ideas are seldom revolutionary, they are mostly evolutionary. Many
develop from the products of the past, making improvements in quality; convenience,
cost or variety. The truly innovative product starts a new sequence of these
evolutionary products.

IV. Objectives/Competencies

1. Identify what product service design are based upon.

2. Learn about what the different design considerations are.
3. Identify the End-of-Life (EOL) Programs.
4. Learn about the product service Life-Stages.

V. Lesson Proper/Course Methodology ANALYSIS

Idea Generation in Product Service Design

1. Idea Generation Supply-Chain Based

• Ideas can come from anywhere in the supply chain:

 Customers
• Surveys, focus groups, complaints, suggestions
 Suppliers
 Distributors
 Employees

Airbus files patent for saddle seats on planes

By Frances Cha, CNN • Updated 18th July 2014

Page 52 of 101
 For air travelers who like to gripe about being cramped in economy, here
comes another warning that they've never had it so good.
Airbus has filed a patent application showing detailed renderings of what may
be the plane seat of the future.
The design shows narrow rows of folding saddle seats with low backrests on
which passengers perch rather than recline.

Share your ideas about this patent:

__________________________________________________________________
__________________________________________________________________

2. Idea Generation Competitor-Based

• Studying how a competitor operates and its products and services

• Reverse engineering

– Dismantling and inspecting a competitor’s product to discover product

improvements

Page 53 of 101
Discussion

Discuss the following questions:

1. Is reverse engineering ethical?

__________________________________________________________________
__________________________________________________________________
2. Can reverse engineering be used for service?
______________________________________________________________
____
__________________________________________________________________
__________________________________________________________________

3. Idea Generation Research Based

• Research and Development (R&D)

Page 54 of 101
 – Organized efforts to increase scientific knowledge or product
innovation

– Basic research

• Objective: advancing the state of knowledge about a subject without

any near-term expectation of commercial applications

– Applied research

• Objective: achieving commercial applications

– Development

• Converts the results of applied research into useful commercial

applications.

4. Design Considerations

1. Design Considerations – Legal

• Legal Considerations
Product liability
 The responsibility a manufacturer has for any
injuries or damages caused by as faulty product
 Some of the concomitant costs of Litigation
o Legal and insurance costs
of Settlement costs of Costly product recalls
o Reputation effects Uniform Commercial
Code
 Under the UCC, products carry an implication of merchantability and fitness
2. Design Considerations – Ethics
• Designers are often under pressure to
 Speed up the design process
 Cut costs
• These pressures force trade-off decisions  What if a product has bugs? o
Release the product and risk damage to your reputation o Work out the bugs
and forego revenue
2. Design Considerations – Human Factors

• Safety and Liability • Adding new features  Good? Bad?

2. Design Considerations – Cultural Factors
• Customers come from all over the world.
• Different designs for different countries or regions.
 Language 
Other?
• Localization

Page 55 of 101
 2. Design Considerations – Environmental Factors: Sustainability

• Recap: Sustainability
 Using resources in ways that do not harm ecological systems that support
human existence
• Key aspects of designing for sustainability
 Cradle-to-grave assessment (Life-Cycle assessment)
 End-of-life programs
 The 3-Rs o Reduction of costs and materials used
o Re-using parts of returned products o
Recycling

End-of-Life (EOL) Programs

• EOL programs deal with products (business and consumer) that have reached
the end of their useful lives

• The goal of such programs is to reduce the dumping or incineration of products

(e.g., electronics) which may pose hazards to the environment

Page 56 of 101
a. Reduce: Costs and Materials
– Value analysis
 Examination of the function of parts and materials in an effort to reduce the cost
and/or improve the performance of a product
 Common questions used in value analysis o Is the item necessary; does it have
value; could it be eliminated?
o Are there alternative sources for the item? o Could another material, part, or
service be used instead?
o Can two or more parts be combined? o Can specifications be less stringent to
save time or money? o Do suppliers/providers have suggestions for
improvements?
o Can packaging be improved or made less costly?

b. Re-Use: Remanufacturing

• Remanufacturing

– Refurbishing used products by replacing worn-out or defective components

• Can be performed by the original manufacturer or another company

– Reasons to remanufacture:

• Remanufactured products can be sold for about 50% of the cost of a new product

• The process requires mostly unskilled and semi-skilled workers

• In the global market, European lawmakers are increasingly requiring

manufacturers to take back used products

– Design for disassembly (DFD)

• Designing a product to that used products can be easily taken apart

c. Recycle

• Recycling

– Recovering materials for future use

• Applies to manufactured parts

• Also applies to materials used during production

– Why recycle?

• Cost savings

• Environmental concerns

• Environmental regulations

– Companies doing business in the EU must show that a specified proportion of

their products are recyclable

Page 57 of 101
– Design for recycling (DFR)

• Product design that takes into account the ability to disassemble a used product to
recover the recyclable parts

Other Design Considerations Product/Service Life-Stages

Standardization

– Extent to which there is an absence of variety in a product, service, or

process

• Products are made in large quantities of identical items

• Every customer or item processed receives essentially the same

service

Advantages & Disadvantages of Standardization

Advantages

1. Fewer parts to deal with in inventory and in manufacturing

2. Reduced training costs and time

3. More routine purchasing, handling, and inspection procedures

4. Orders fillable from inventory

Page 58 of 101
 5. Opportunities for long production runs and automation

6. Need for fewer parts justifies expenditures on perfecting designs and

improving quality control procedures

Disadvantages

1. Designs may be frozen with too many imperfections remaining.

2. High cost of design changes increases resistance to improvements

3. Decreased variety results in less consumer appeal

Designing for Mass Customization

• Mass customization

– is a marketing and manufacturing technique which combines the flexibility

and personalization of custom-made products with the low unit costs
associated with mass production. Other names for mass customization
include made-to-order or built-to-order.

– Facilitating Techniques

• Delayed differentiation - is a technique commonly used by companies that

create generic and family-based products that need to be differentiated
into specific end products.

Page 59 of 101
 • Modular design - modularity in design, is a design theory and practice that
subdivides a system into smaller parts called modules (such as modular
process skids), which can be independently created, modified, replaced or
exchanged between different systems.

A form of standardization in which component parts are grouped into modules that are easily
replaced or interchanged

• Advantages
– easier diagnosis and remedy of failures
– easier repair and replacement
– simplification of manufacturing and assembly
– training costs are relatively low
• Disadvantages
– Limited number of possible product configurations
– Limited ability to repair a faulty module; the entire module must often
be scrapped

Page 60 of 101
Robust Design

• Robust design

– A design that results in products or services that can function over a

broad range of conditions

• The more robust a product or service, the less likely it will fail
due to a change in the environment in which it is used or in
which it is performed

– Pertains to product as well as process design

Operations Strategy

• Effective product and service design can help the organization achieve
competitive advantage:
– Packaging products and ancillary services to increase sales

– Using multiple-use platforms

– Implementing tactics that will achieve the benefits of high volume while
satisfying customer needs for variety
Page 61 of 101
 – Continually monitoring products and services for small improvement
opportunities

– Reducing the time, it takes to get a new or redesigned product or

service to the market

ABSTRACTION

“Design can be art. Design can be simple. That’s why it’s so complicated.”

–Paul Rand

Share what you have learned by explaining this quote in not more than 60 words.

__________________________________________________________________
__________________________________________________________________
________________________________________________________

APPLICATION

Give your own idea about the sentences below.

1. Designing environmentally friendly products.

__________________________________________________________________
____________________________

2. Implementing tactics that will achieve the benefits of high volume while
satisfying customer needs for variety, such as mass customization.

__________________________________________________________________
____________________________

3. Continually monitoring products and services for small improvements.

__________________________________________________________________
Page 62 of 101
____________________________

VI. Reflection/Learning Insights

What is meant by the term life cycle? Why would this be a consideration in product
or service design?

__________________________________________________________________
____________________________

VII. Post-test

1. What are the reasons for product and service design?

__________________________________________________________________
____________________________

2. What are the objectives of product and service design?

__________________________________________________________________
____________________________

3. Why is product design important?

__________________________________________________________________
____________________________

4. What are the differences between product and service design?

__________________________________________________________________
____________________________
5. What does service design mean?

__________________________________________________________________
____________________________

6. What are some of the factors that cause organizations to redesign their
products?

__________________________________________________________________
__________________________________________________________________
____________________________

7. Why would life cycle be a consideration in product or service design?

__________________________________________________________________
____________________________

REERENCES
Page 63 of 101
Baldwin, Carliss C., and Kim B. Clark. “Managing in the Age of Modularity.” Harvard
Business Review, September–October 1997, pp. 84–93.

Clausing, Don. “Total Quality Development.” New York: The American Society of
Mechanical Engineers, 1995.

Cohen, Morris A., and Uday M. Apte. Manufacturing Automation. McGraw-Hill, 1997.

Duray, Rebecca, and Glenn W. Milligan. “Improving Customer Satisfaction Through

Mass Customization.” Quality Progress, August 1999, pp. 60–66.
Feitzinger, Edward, and Hau L. Lee. “Mass Customization at Hewlett-Packard: The
Power of Postponement.” Harvard Business Review, January–February 1997, pp.
116–121.

Gilmore, James, and B. Joseph Pine II. “The Four Faces of Mass Customization.”
Harvard Business Review, January–February 1997, pp. 91–101.

Gilmore, James, and B. Joseph Pine II. Markets of One: Creating Customer-Unique
Value Through Mass Customization. Boston: Harvard Business School Press,2000.

Gorman, Michael E. Transforming Nature: Ethics, Invention, and Design. Boston:

Kluwer Academic Publishers, 1998.

Groover, Mikell P. Automation, Production Systems, and Computer-Aided

Manufacturing. 2nd ed. Englewood Cliffs, NJ: Prentice Hall, 2001

Heskett, James L., W. Earl Sasser Jr, and Leonard A. Schlesinger. The Service Profit
Chain. New York: Free Press, 1997.

Lovelock, Christopher H. Service Marketing: People, Technology, Strategy. 2nd ed.

Englewood Cliffs, NJ: Prentice Hall, 2001.

Peace, Glen Stuart. Taguchi Methods—A Hands-On Approach. Reading,

MA:Addison-Wesley, 1993.

Prasad, Biren. Concurrent Engineering Fundamentals: Integrated Product

Development.

Englewood Cliffs, NJ: Prentice Hall PTR, 1997. Rosenthal, Stephen R. Effective
Product Development. Burr Ridge, IL: Irwin, 1992.

Shaw, John C. The Service Focus. Burr Ridge, IL: Irwin, 1990. Smyth, J. E., D. A.
Soberman, and A. J. Easson. The Law and Business Administration in Canada, 7th
ed. Scarborough, ON: Prentice-Hall Canada, 1995.

Ternicko, John. Step-by-Step QFD: Customer-Driven Product Design. 2nd ed

Boca Raton, FL: CRC Press, 1997. Ulrich, Karl T., and Steven D. Eppinger. Product
Design and Development. New York: McGraw-Hill, 1995.

https://www.academia.edu/30032288/Chapter_4_product_and_service_design

https://nzifst.org.nz/resources/creatingnewfoods/document

Page 64 of 101
Unit Title

Unit 5 – Design Work System

I. Title of the Lesson:

Lesson 1. Job Design: What is work measurement, establishment of time
standards and worker compensation?

II. Duration: 3 hours, Week 12-13

III. Introduction

The importance of work design has been often overlooked because the work
of Operations Manager in the past was not linked with the Human Resource
Department of the same organization. Times have changed and now Operations side
work in tandem with Human Resource Department. Operations Managers are
trained to understand the two basic approaches to job design. This lecture provided
us with an opportunity that we discussed the advantages and disadvantages of
specialization and Behavioral approaches to Job Design. Supplementary discussions
focused on Method Analysis and Motion Study Techniques, which focused on
efficiency aspect of the job. This may ignore the behavior aspect but still form an
important and integral part of job design.
The work measurements dealt specifically with the length of time needed to
complete a job and was linked with Worker Compensation.

IV. Objectives/Competencies

1. Describe the two basic approaches to job design.

2. Entails method analysis which in turn centers on how jobs are performed.
3. To learn how motivation and trust form an important dimension in Design of
Work systems.
4. To learn working conditions that in turn will lead to work measurements which
leads to reward and compensation of the individual working for the organization.

VI. Pre-test
“Lenora” has been working in a specialized and narrow field of Information
Technology. for many years. Though not formally trained, she has acquired most of
her skills on the job and has risen to a high level in a large organization. Because
she works in a narrow field, she doesn’t often get the chance to branch out into her
personal areas of interest, and the nature of her work can mean she has as many as
5 “bosses” to answer to. Due to the nature of her work, she has been highly
compensated but has extremely low job motivation and high job dissatisfaction.

Page 65 of 101
What do you think would be the next move of Lenora? In 2 paragraphs only, with not
less than 40 words each.
__________________________________________________________________
_______________

VII. Lesson Proper/Course Methodology

ACTIVITY

“The more decisions you put off, and the longer you delay them, the more expensive
they become.”
―Craig Villamor, Google Maps
Write what you understand about this quote in not more than 60 words.
__________________________________________________________________
____________________________________
ANALYSIS
Job Design
Job design involves specifying the content and methods of job. In general,
the goal of the job design is to create a work system that is not only
productive but also efficient.
Job designers are concerned with:-
What will be done
Who will do the job
How the job will be done
Where the job will be done
Ergonomics

A successful Job Design must have the following qualities

1. Carried out by experienced personnel who have the necessary training
and background.
2. Consistent with the goals of the organization.
3. In documented form.
4. Understood and agreed by both management and employees.
5. Shared with the new employees.
6. Factors that affect Job Design

FACTORS that affect Job design include:

• Lack of knowledge of the employees  Lack of Management support.
• Lack of documented job design which often leads to poor audit review and
referral.
• Job Design can be carried out in 2 ways the Efficient School and the Behavior
School.
• Efficiency School was popular in 1950s based on Frederick W Taylor's
Scientific Management principles.

Page 66 of 101
 • Behavior school is relatively new concept and focused on ways to eliminate
workers dissatisfaction and incorporate the feeling of control in work.

Design of Work Systems

1. Specialization
2. Behavioral Approaches to Job Design
3. Teams
4. Methods Analysis
5. Motions Study
6. Working conditions

1. Specialization
 The term specialization refers to work that concentrates on some aspect of a
product or service.
 Jobs that have a narrow scope.
 Assembly lines, medical specialties, MBA courses.
 Specialization jobs tend to yield high productivity, low unit costs and lead to
high standard of living in most of the industrial nations.

Specialization in Business: Advantages and Disadvantages

Page 67 of 101
 2. Behavioral Approaches to Job Design

In order to make jobs more interesting and meaningful job designers often consider
Job Enlargement, Job Rotation and Job Enrichment.

 Job Enlargement relates to giving a worker a larger portion of the total task by
horizontal loading
 Job Rotation pertains to Workers periodically exchange jobs
 Job Enrichment is increasing responsibility for planning and coordination
tasks, by vertical loading

Motivation

The importance of these approaches to job design is that they have the
potential to increase the motivational power of jobs by increasing worker
satisfaction through improvement in quality of work life.

 Motivation always influences quality and productivity.

 It contributes to work environment where as
 Trust influences productivity and employee-management relations
3. Teams

Page 68 of 101
Organization adopts teams in order to exploit the benefits of teams

 Higher quality
 Higher productivity
 Greater worker satisfaction

Self-directed teams are groups of empowered to make certain changes in their work
process

4. Methods Analysis

Methods analysis deals with analyzing how a job gets done, begins with overall
analysis and then moves to specific details, (e.g. accidents, quality problems).

Page 69 of 101
Methods Analysis Procedure is simple and effective and does the following:

 Identifies the operation to be studied

 Gets employee input
 Studies and documents the current method
 Analyzes the job
 Proposes new methods
 Installs new methods
 Follow-ups to ensure improvements have been achieved

Selecting an operation to study

Sometimes a supervisor or a foreman may request an operations or part of the

operations to be studied. This would be with the intent to increase productivity and
reduce costs. Th e guidelines for studying a job would include
 A high labor content.
 Repeated frequently.
 Unsafe, tiring, unpleasant, noisy and environmentally poor.
 Quality problems, scheduling bottlenecks etc.

Analyzing the Job and proposing new methods

Job Design Analyst should question the integrity and effectiveness of present
and proposed methods. He or she should use charts, graphs and verbal descriptions
to capture how the job is being performed. This can be the first basis and can lead to
improvement in job design.

• Flow process chart

o Chart used to examine the overall sequence of an operation by focusing on
movements of the operator or flow of materials
• Worker-machine chart o Chart used to determine portions of a work cycle
during which an operator and equipment are busy or idle

Page 70 of 101
Experienced Job design analysts often develop a checklist and try to answer these
questions

 Why is there a delay or storage at this point?  How can travel distances be
shortened  Can material handlings be reduced?
 Would a rearrangement of the workplace result in greater efficiency.
 Can similar activities be grouped?
 Would the use of additional or improved equipment be helpful?
 Does the worker have any suggestion or recommendation for improvement?

Installing the Improved Method

Successful implementation of the proposed method changes requires

convincing management of the desirability of the new method and obtaining the
cooperation of the worker.

If the worker has been consulted than the task of installing the new method is easier
otherwise it can become the toughest part. If there is a paradigm change (major
change or new method) from the old method, the implementation makes take a
longer time. Follow up is required to ensure that the changes have been
incorporated.

5. Motion Study and Motion Study Techniques

Motion Study is the systematic study of the human motions used to perform an
operation. The purpose is to eliminate /weed-out unnecessary motions and identify
the best sequence of operations for maximum efficiency. Motion study forms an
important part in productivity improvements. It is based on Frank Gilbreths brick
laying trade in the early 20th century, through the use of time motion study
techniques.

Page 71 of 101
Motion Study Techniques often incorporate the following four types

• Motion study principles - guidelines for designing motion efficient work

procedures
• Analysis of therbligs basic elemental motions into which a job can be broken
down
• Micro motion study - use of motion pictures and slow motion to study motions
that otherwise
• would be too rapid to analyze
• Charts
Motion study principles -
Gilbreths work laid the foundation for motion study principles, which are guidelines
for designing motion efficient work procedures. The guidelines are divided into three
categories.
• Principles of the use of body.
• Principles for the arrangement of the work place.
• Principles for the designs of tools and equipment.
Developing Work Methods

An operations manager along with an analyst aims for motion efficiency by achieving
the following:

1. Elimination of unnecessary motions

2. Combination of various activities
3. Reduction in fatigue
4. Improvement in the arrangement of the workplace
5. Improvement in the design of tools and equipment

6. Working Conditions and Compensation

Page 72 of 101
 Work Measurement determines how long it should take to do a job. This may
be focusing on an individual’s performance or completion of a mega scale project.
When we discuss the design part of work systems we often discuss the importance
of standard time in work measurement. Standard time is the amount of time it should
take a qualified worker to complete a specified task, working at sustainable rate,
using given methods, tools and equipment, raw materials and work place
arrangements. It also employs the following common types of work measurement
techniques.

Page 73 of 101
Stopwatch time study

Stopwatch time study is used to develop a time standard based on observations of

one worker taken over number of cycles. That is then applied to work of others of
the same organization who perform from the same work. The basic steps in stop
watch time study include:
• Define the task to be studied and inform the workers who be studied.
• Determine the number of cycles to observe.
• Time the job and rate the workers performance
• Compute the standard time
Also, the number of cycles that must be timed is a function of three things

• The variability of observed times

• The desired accuracy
• The desired level of confidence interval for the estimated job time
Desired accuracy is expressed as percentage of the mean of the Observed Time.

N= (zs/a x -)2

Where:

• Z is the number of normal standard deviations needed for desired confidence

• S is sample standard deviation
• a is desired accuracy percentage
• x- (x bar) is the sample mean EXAMPLE:

A Mechanical Engineer working for an automobile manufacture in Lahore presents

the following information to the Operations Manager. The assembly workers take a
mean time of 120 minutes to assemble a single car with a standard deviation of 5
minutes. The confidence limit if 95%. The Operations Manager will need how many
observations if the desired maximum error is + 5%

Solution

Given Data

S= 5 minutes, Z is 1.96

( since 95 CI) x- = 120

minutes, a= 5 %

The formula is

N= (zs/a x -)2

Substituting the values

N= ( (1.96)(5)/(0.05)(120))2

=(96.04)/(36)=2.67 studies = 3 studies

Page 74 of 101
Compensation
An operations Manager comes across two types of compensation, working for any
service or manufacturing based organization:

• Time-based system, which is the compensation based on time an

employee has worked during a pay period.
• Output-based (incentive) system, which is compensation based on
the amount of output an employee produces during a pay period.

Characteristics and Form of Incentive Plan

Operations Manager making use of an Incentive Plan must be able to understand

and identify the following characteristics and form of Incentive Plan.

 Accurate
 Easy to apply
 Consistent
 Easy to understand
 Fair
 Compensation

Types of Individual Incentive Plans

Some organizations have employed various types of individual incentive plans which
h find judicious applications in other countries of the world.

• Group Incentive Plans

• Knowledge-Based Pay System
• Management Compensation
Of the three mentioned above, the operation manager should be able to identify the
advantages and disadvantages of each type of incentive plan.

Page 75 of 101
Compensation plan

• Individual Incentive Plans

• Group Incentive Plans
• Knowledge-Based Pay System
• Management Compensation

ABSTRACTION

Personality has a significant influence on individual employee behavior. This

can also be extended to team behavior.

Explain in your own understanding:

VIII. Reflection/Learning Insights

Some designers see a work design system as a threat. What can be a solution for
this problem?

REFERENCES

https://www.zeepedia.com/read.php?design_of_work_systems_job_design_specialization_metho
ds_analysis_production_operations_management&b=55&c=21 https://www.iedunote.com/creating-effective-
team

Unit Title

Unit 6 - Quality
I. Title of the Lesson:
Lesson 1. Understanding Quality

II. Duration: 3 hours, Week 12-13

III. Introduction

Broadly defined, quality refers to the ability of a product or service to consistently

meet or exceed customer requirements or expectations. However, different
customers will have different requirements, so a working definition of quality is
customer-dependent.

Page 76 of 101
 For a decade or so, quality was an important focal point in business. But after
a while, the emphasis on quality began to fade, and quality took a backseat to other
concerns. However, there has been an upsurge recently in the need for attention to
quality. Much of this has been driven by recent experience with costs and adverse
publicity associated with wide-ranging recalls that have included automobiles,
ground meat, toys, produce, dog food, and pharmaceuticals.

IV. Objectives/Competencies

At the end of this module, students are expected to;

1. Define quality term and quality assurance and control process.
2. Understand the concept of total productive maintenance and total quality
management.
3. Understand the basic concept of ISO.
4. Enumerate and understand the quality control process.
5. Identify the basic elements of total quality management.

V. Pre-test
How do you respond to a complaint about a product that had been bought from the
company you are working with?
__________________________________________________________________
_______________

VII. Lesson Proper/Course Methodology

ACTIVITY
“Quality is never an accident; it is always the result of high intention, sincere effort,
intelligent direction and skillful execution; it represents the wise choice of many
alternatives.”
– William A. Foster

Write what you understand about this quote in not more than 60 words.
__________________________________________________________________
____________________________________

ANALYSIS

1. Definition of Quality
Quality is sometimes defined as "meeting the requirements of the customer." The
term quality assurance describes any systematic process for ensuring quality during
Page 77 of 101
the successive steps in developing a product or service. ISO 9000 is a standard for
ensuring that a company's quality assurance system follows best industry practices.

Quality in business, engineering and manufacturing has a pragmatic interpretation as

the non-inferiority or superiority of something; it is also defined as “fitness for
purpose”. Consumers may focus on the specification quality of a product/service, or
how it compares to competitors in the marketplace.

What Is Quality Management?

First, what is quality? It is a measure of the level of acceptability of a product or

service. The ASQ Quality Glossary defines quality management as “the application
of a quality management system in managing a process to achieve maximum
customer satisfaction at the lowest overall cost to the organization while continuing
to improve the process.” Quality management has four parts: quality planning,
quality assurance (defect prevention), quality control (which includes product
inspection and other elements, such as competence), and quality improvement.

There are five aspects of quality in a business context:

a. Producing - providing something.
b. Checking - confirming that something has been done correctly.
c. Quality Control - controlling a process to ensure that the outcomes are
predictable.
d. Quality Management – directing an organization so that it optimizes its
performance through analysis and improvement.
e. Quality Assurance – obtaining confidence that a product or service will be
satisfactory. (Normally performed by a purchaser)

Page 78 of 101
Quality has many meanings – many of them are subjective, such as the term
“excellent” or “outstanding” quality. In the quality management field, quality has a
more specific meaning. “According to ISO 9001:2008, quality is defined as “the
degree to which a set of inherent characteristics fulfils requirements”. The very
favorable experience of the client of a business when they have received a good or
service that significantly surpasses what they had initially anticipated. A marketing
department can use instances of customer’s delight to a company’s advantage by
requesting referrals and obtaining testimonials from delighted customers that can
help attract new customers.

Page 79 of 101
Page 80 of 101
Quality Assurance
Quality assurance refers to the processes and procedures that systematically
monitor different aspects of a service, process or facility to detect, correct and
ensure that quality standards are being met.

Page 81 of 101
 2. What is Process Control?
Process control refers to the methods that are used to control process variables
when manufacturing a product. For example, factors such as the proportion of one
ingredient to another, the temperature of the materials, how well the ingredients are
mixed, and the pressure under which the materials are held can significantly impact
the quality of an end product. Manufacturers control the production process for three
reasons:
a. Reduce variability
b. Increase efficiency
c. Ensure safety

Diagram of process control system:

3. What is Total Productive Maintenance?

Page 82 of 101
Total productive maintenance (TPM) is the systematic execution of maintenance by
all employees through small group activities. Analyzing the three words of T, P, M we
have
 Total – all-encompassing maintenance and production individuals working
together.
 Productive – production of goods and services that meet or exceed
customers’ expectations.
 Maintenance - keeping equipment and plant in as good as better than the
original condition at all times.

4. Quality Control Process

A system for maintaining desired standards in a product or process by inspecting
samples of the product. Maintenance of standards of quality of manufactured goods.
Quality is the key element in every stage of the production process from raw
materials to finished product. Every manufacturer is faced with the problem if
maintenance of the quality of his product. The term “Quality Control” is used to
coordinate all those activities which are directed for defining controlling and
maintaining quality.

4.1. Eight Elements of Quality Control Process

Quality Control is systematic control by management of the variables in the
manufacturing process that affect goodness of the end product. Quality
control may be defined as that technique or group of techniques of the industrial

Page 83 of 101
management by means of which products of uniform acceptable quality are
manufactured.
To be successful implementing TQM, an organization must concentrate on the eight
key elements:
a. Ethics. Management draws up a business code of ethics to which all
personnel should adhere. Sometimes an external company is contracted to
help produce a document.
b. Integrity. Clients expect to find integrity in an organization. Integrity
encompasses morals, values, fairness, honesty and sincerity. If somebody
makes a mistake, they should feel comfortable in admitting their error.
c. Trust. TQM cannot work without trust. It is essential for both the clients and
the individual participants at all levels of the company. When workers are
trusted to make decisions, they start to take pride in the organization for which
they work.
d. Training. Workers can only be highly productive when they receive
appropriate training. Training can focus on areas such as interpersonal skills,
working in a team, problem solving or performance analysis. Training should
be on-going and given as the need arises.
e. Teamwork. The Total in TQM refers to the total involvement of an
organization’s staff. People working in a team are more likely to make creative
suggestions than those working in isolation.
f. Leadership. Leadership does not only refer to top management. In the case
of TQM leadership is found at all levels. Workers need to be guided by
leaders with a clear vision of the company’s goals.
g. Communication. Communication is the vital link between all of the
organization’s elements. Information needs to be shared regularly and
constantly. Communication takes place in three directions: downwards from
top management to employees; upwards where workers provide
management; and sideways where communication crosses over between
different departments and to external suppliers and customers.
h. Recognition. Individuals and teams should have their efforts, ideas and
achievements recognized. Recognition increases self-esteem and this, in
turn, increases productivity. Recognition should come as soon as possible
after the act that is being recognized.

4.2. Key role of process management

Page 84 of 101
 a. Establishment of the quality standards which are acceptable to the customer and
economical for the manufacturing operations to maintain.
b. Location of flaws in the raw materials or in the processing of that material which will
cause trouble at subsequent operations.
c. To analyze the trend and extent of quality deviation in a part or product during
manufacturing process.
d. Determination of the cause of such deviation where it is not due to chance
variables.
e. Taking the necessary corrective steps to keep the quality of the product from
dropping below the tolerance limits.
f. To segregate defective goods

APPLICATION
1. What is TQM?
2. What is quality control? And why it is important for every business?
3. Enumerate and discuss briefly the elements of TQM.
4. Define quality in your own words.

VIII. Reflection/Learning Insights

Write an essay about the importance of quality either in product, service or
organization.

IX. REFERENCES

Mallayan, U. S. and Pugazh, M. (2010). TOTAL QUALITY MANAGEMENT. Arasan

Ganesan
Polytechnic College Sivakas
Oakland, J. S. (2014). Total Quality Management and Operational Excellence 4 TH
Edition.
Florence Production Ltd, Stoodleigh, Devon, UK. ISBN: 978-0-415-63549-3 (hbk)
ISBN:
978-0-415-63550-9 (pbk) ISBN: 978-1-315-81572-5 (ebk)
Stevenson, W. J. (2015). Operations Management. Published by McGraw-Hill
Education, 2 Penn
Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education.
ISBN 978- 0-07-802410-8
Selmer, J. and de Leon, C. (2014). MANAGEMENT AND CULTURE IN THE
PHILIPPINES.
https://www.researchgate.net/publication/265194904_MANAGEMENT_AND_CULT
U
RE_IN_THE_PHILIPPINES

Page 85 of 101
I. Unit Title
Unit 7 – Total Quality Management

II. Title of the Lesson:

Problem Solving & Process Improvement Methods

III. Duration: 3 hours, Week 14-15

IV. Introduction

Problem solving is one of the basic procedures of TQM. In order to be

successful, problem-solving efforts should follow a standard approach. An
important aspect of problem solving in the TQM approach is eliminating the cause
so that the problem and making sure it does not recur. This is why users of the
TQM approach often like to think of problems as “opportunities for improvement.”
No two organizations have the same TQM implementation. There is no
recipe for organization success, however, there are a number of great TQM models
that organizations can use which we will discuss in this lesson.

V. Objectives/Competencies
At the end of this module, students are expected to;

1. Understand what models company apply in solving their problems.

2. Understand the different process improvement methods.

VI. Pre-test
Total Quality Management (TQM) is a management approach of an organization
centered on quality, based on the participation of all its members and aiming at long
term success through customer satisfaction and benefits to all members of the
organization and society.
Explain in your own words in not more than 70 words.
_________________________________________________________________________________
________________________

VII. Lesson Proper/Course Methodology

ACTIVITY

Page 86 of 101
What do think this mean?

_________________________________________________________________________________
________________________
ANALYSIS

Total quality management (TQM) describes a management system wherein a

company attains organizational advancement through a commitment to customer
requirements. A company meets those requirements when it empowers every
employee in every department to maintain high standards and strive for continuous
improvement.

Organizations have been free to deploy and adapt TQM as they see fit, giving way
too many definitions of the methodology. Despite these challenges to
standardization, it’s possible to describe generally accepted principles:
• Customer Satisfaction
• Employee Commitment: This creates empowerment through training and
suggestion mechanisms.
• Fact-Based Decision Making: Teams collect data and process statistics
to ensure that work meets specifications.
• Effective Communications: There should be an open dialogue
throughout an organization.
• Strategic Thinking: Quality must be part of an organization’s long-term
vision.
• Integrated System: A shared vision, including knowledge of and
commitment to principles of quality, keep everyone in a company
Page 87 of 101
 connected. Taiichi Ohno recognized that even suppliers are an important
part of the system.
• Process-Centered: You can deconstruct every activity into processes,
and, therefore, locate and repeat the best process.
• Continuous Improvement: Every employee should always be thinking
about how to better perform their job.

Why Is Total Quality Management Important to an Organization?

TQM tools and principles acquire power not when an organization creates a
dedicated quality department, but when it includes the whole company in the
pursuit of high quality. An example is the quality circle, in which workers directly
involved in a process brainstorm to discover solutions. “People are a fabulous
resource that is frequently underutilized. The leadership often doesn’t recognize
the value that they bring to the everyday workplace. Employees know how to fix
problems”. In addition to tapping a native resource, implementing a TQM
philosophy can help an organization to:

• Ensure customer satisfaction and customer loyalty

• Ensure increased revenues and higher productivity
• Reduce waste and inventory
• Improve design
• Adapt to changing markets and regulatory environments
• Increase productivity
• Enhance market image
Page 88 of 101
 • Eliminate defects and waste
• Increase job security
• Improve employee morale
• Reduce costs
• Increase profitability
TQM organizations understand that customers will only be satisfied if they
consistently receive products and services that meet their needs, are delivered
when expected, and are priced for value. TQM organizations use the techniques of
process management to develop cost-controlled processes that are stable and
capable of meeting customer expectations.

What Are the Costs of Quality?

A fundamental tenet of TQM is that the cost of doing things right the first time is far
less than the potential cost of re-doing things. There are also residual losses when
customers abandon products and brands for quality reasons. Some schools of
thought view quality as having a cost which cannot be recouped. Juran, Deming,
and Feigenbaum held a different view. For advocates of TQM, the cost of quality
really describes the cost of not creating a quality deliverable. There are four
primary cost categories:
• Appraisal Costs: Appraisal costs cover inspection and testing throughout
the production cycle. This includes verifying that the materials received from
the supplier meet specifications and ensuring that products are acceptable at
each stage of production.

Page 89 of 101
• Prevention Costs: Prevention costs include proper setup of work areas for
efficiency and safety, and proper training and planning. This type of cost also
includes conducting reviews. Prevention-related activities often receive the
smallest allocation of a company’s budget.

• External Failure Costs: This category concerns the cost of issues following
a product’s market release. They may include warranty issues, product
recalls, returns, and repairs.

• Internal Failure Costs: Internal failures are the costs of problems before
products reach customers. Examples of internal failures include broken
machines, which cause delay and downtime, poor materials, scrapped
product runs, and designs that require rework.

Page 90 of 101
The model begins with understanding customer needs. TQM organizations have
processes that continuously collect, analyze, and act on customer information.
Activities are often extended to understanding competitor's customers. Developing
an intimate understanding of customer needs allows TQM organizations to predict
future customer behavior.

Process Improvement Methods

1. The Plan-Do-Study-Act Cycle

The plan-do-study-act (PDSA) cycle, also referred to as either the Shewhart
cycle or the Deming wheel, is the conceptual basis for problem-solving activities.
The cycle is illustrated in Figure 10.1. Representing the process with a circle
underscores its continuing nature. There are four basic steps in the cycle:

Page 91 of 101
 a. Plan. Begin by studying the current process. Document that process. Then
collect data on the process or problem. Next, analyze the data and develop a
plan for improvement. Specify measures for evaluating the plan.
b. Do. Implement the plan, on a small scale if possible. Document any changes
made during this phase. Collect data systematically for evaluation.
c. Study. Evaluate the data collection during the do phase. Check how closely
the results match the original goals of the plan phase.
d. Act. If the results are successful, standardize the new method and
communicate the new method to all people associated with the process.
Implement training for the new method. If the results are unsuccessful, revise
the plan and repeat the process or cease this project.
Employing this sequence of steps provides a systematic approach to continuous
improvement.

2. KAIZEN (or Continuous Improvement)

Japanese term for a gradual approach to ever higher standards in quality
enhancement and waste reduction, through small but continual improvements
involving everyone from the chief executive to the lowest level workers. Kaizen, or
‘Continuous Improvement’ is a policy of constantly introducing small
incremental changes in a business in order to improve quality and/or efficiency.

Page 92 of 101
Kaizen can be roughly translated from Japanese to mean "good change." The
philosophy behind kaizen is often credited to Dr. W. Edwards Deming. Dr. Deming
was invited by Japanese industrial leaders and engineers to help rebuild Japan
after World War II.

2.1. Five Elements of KAIZEN

a. Teamwork
b. Personal discipline
c. Improved morale
d. Quality circles
e. Suggestions for improvement

2.2. Key Features of KAIZEN

a. Improvements are based on many, small changes rather than the radical changes
that might arise from Research and Development
b. As the ideas come from the workers themselves, they are less likely to be radically
different, and therefore easier to implement
c. Small improvements are less likely to require major capital investment than major
process changes
d. The ideas come from the talents of the existing workforce, as opposed to using
R&D, consultants or equipment – any of which could be very expensive
e. All employees should continually be seeking ways to improve their own
performance 6. It helps encourage workers to take ownership for their work, and
can help reinforce team working, thereby improving worker motivation

2.3. Benefits of KAIZEN

The goal of kaizen is to eliminate waste in the process
 Making job easier and safer
 Making job more productive
 Removing donkeywork from the job
 Removing irritation from the job
 Improving product quality and Saving time and cost

Page 93 of 101
 3. Just in Time
An inventory strategy companies employ to increase efficiency and
decrease waste by receiving goods only as they are needed in the production
process, thereby reducing inventory costs.

Just-in-time (JIT) is an inventory strategy that strives to improve a business’s

return on investment by reducing in-process inventory and associated carrying
costs. This saves warehouse space and costs. However, the complete
mechanism for making this work is often misunderstood.
Just-in-time manufacturing was a concept introduced to the United States by the Ford
Motor company.

3.1. Benefits of JIT

a. Reduced setup time.
b. The flow of goods from warehouse to shelves improves.
c. Employees with multiple skills are used more efficiently.
d. Production scheduling and work hour consistency synchronized with
demand.
e. Increased emphasis on supplier relationships.
f. Supplies come in at regular intervals throughout the production day.
g. Minimizes storage space needed.
h. Smaller chance of inventory breaking/expiring.

4. 5S Process
The 5S Process, or simply "5S", is a structured program to systematically achieve total
organization, cleanliness, and standardization in the workplace. A well-organized
workplace results in a safer, more efficient, and more productive operation. It boosts the
Page 94 of 101
morale of the workers, promoting a sense of pride in their work and ownership of their
responsibilities.

4.1. Seiri
The first step of the "5S" process, seiri, refers to the act of throwing away all
unwanted, unnecessary, and unrelated materials in the workplace. Even the
number of necessary items in the workplace must be kept to its absolute minimum.
Because of seiri, simplification of tasks, effective use of space, and careful
purchase of items follow.
4.2. Seiton
Seiton, or orderliness, is all about efficiency. This step consists of putting
everything in an assigned place so that it can be accessed or retrieved quickly, as
well as returned in that same place quickly. The correct place, position, or holder
for every tool, item, or material must be chosen carefully in relation to how the work
will be performed and who will use them. Every single item must be allocated its
own place for safekeeping, and each location must be labeled for easy
identification of what it's for.
4.3. Seiso
Seiso, the third step in "5S", says that 'everyone is a janitor.' Seiso consists of
cleaning up the workplace and giving it a 'shine'. Cleaning must be done by
everyone in the organization, from operators to managers. No area should be left
uncleaned. Everyone should see the 'workplace' through the eyes of a visitor -
always thinking if it is clean enough to make a good impression.
4.4. Seiketsu
The fourth step of "5S", or seiketsu, more or less translates to 'standardized cleanup'. It
consists of defining the standards by which personnel must measure and maintain
'cleanliness'. Personnel must therefore practice 'seiketsu' starting with their personal
tidiness. Visual management is an important ingredient of seiketsu. Personnel are trained
Page 95 of 101
to detect abnormalities using their five senses and to correct such abnormalities
immediately.
4.5. Shitsuke
The last step of "5S", Shitsuke, means 'Discipline.' It denotes commitment to
maintain orderliness and to practice the first 4 S as a way of life. The emphasis of
shitsuke is elimination of bad habits and constant practice of good ones. Once true
shitsuke is achieved, personnel voluntarily observe cleanliness and orderliness at
all times, without having to be reminded by management.

5. Lean Management System

Lean management is an approach to managing an organization that supports the
concept of continuous improvement, a long-term approach to work that
systematically seeks to achieve small, incremental changes in processes in order
to improve efficiency and quality.
The primary purpose of lean management is to produce value for the
customer through the optimization of resources and create a steady workflow
based on real customer demands. It seeks to eliminate any waste of time, effort or
money by identifying each step in a business process and then revising or cutting
out steps that do not create value. The philosophy has its roots in manufacturing.

Page 96 of 101
 5.1. Principles of Lean Management
Lean management incorporates five guiding principles that are used by managers
within an organization as the guidelines to the lean methodology. The five principles
are:
a. Identifying value, the first step in lean management, means finding the
problem that the customer needs solved and making the product the
solution. Specifically, the product must be the part of the solution that the
customer will readily pay for. Any process or activity that does not add value
-- meaning it does not add usefulness, importance or worth -- to the final
product is considered waste and should be eliminated.
b. Value stream mapping refers to the process of mapping out the company's
workflow, including all actions and people who contribute to the process of
creating and delivering the end product to the consumer. Value stream
mapping helps managers visualize which processes are led by what teams
and identify the people responsible for measuring, evaluating and improving
the process. This visualization helps managers determine which parts of the
system do not bring value to the workflow.

Page 97 of 101
c. Creating a continuous workflow means ensuring each team's workflow
progresses smoothly and preventing any interruptions or bottlenecks
that may occur with cross-functional teamwork. Kanban, a lean management
technique that utilizes a visual cue to trigger action, is used to enable easy
communication between teams so they can address what needs to be done
and when it needs to be done by.

Page 98 of 101
 d. Developing a pull system ensures that the continuous workflow
remains stable and guarantees that the teams deliver work assignments
faster and with less effort. A pull system is a specific lean technique that
decreases the waste of any production process. It ensure that new work is
only started if there is a demand for it, thus providing the advantage of
minimizing overhead and optimizing storage costs.

e. Facilitating continuous improvement refers to a variety of techniques that

are used to identify what an organization has done, what it needs to do, any
possible obstacles that may arise and how all members of the organization
can make their work processes better. Ensuring all employees contribute to
the continuous improvement of the workflow protects the organization
whenever problems emerge.

6. Sustained Improvement
The never-ending improvement cycle ensures that the organization learns from
results, standardizes what it does well in a documented quality management
system and improves operations and outputs from what it learns. But the emphasis

Page 99 of 101
must be that this is done in a planned, systematic and conscientious way to create
a climate – a way of life – that permeates the whole organization.
There are three basic principles of sustained improvement:
a. Focusing on the customer.
b. Understanding the process.
c. All employees committed to quality.

ABSTRACTION
1. Discuss briefly the different methods used for TQM continuous improvement.
_________________________________________________________________________________
________________________

APPLICATION
1. Among the different methods discussed in this module, what do you think is the
best method that an organization can adapt to solve TQM problems and
sustained improvement? Explain your answer.
_________________________________________________________________________________
________________________

VI. Reflection/Learning Insights

What are the effects of Total Quality Management practices on the performance
of the company that employs it?

_________________________________________________________________________________
Page 100 of 101
_________________________________________________________________________________
________________________________________________________________________________
VII. Post-test
How did Toyota become the leading automobile manufacturer?

_________________________________________________________________________________
________________________

VIII. Final Requirement

Make an essay for not more than 200 words for this topic:
How operations management evolved over time?
_________________________________________________________________________________
_________________________________________________________________________________
IX. REFERENCES

https://www.smartsheet.com/total-quality-management

Mallayan, U. S. and Pugazh, M. (2010). TOTAL QUALITY MANAGEMENT. Arasan

Ganesan

Polytechnic College Sivakas

Oakland, J. S. (2014). Total Quality Management and Operational Excellence

4TH Edition.

Florence Production Ltd, Stoodleigh, Devon, UK. ISBN: 978-0-415-63549-3 (hbk)

ISBN:

978-0-415-63550-9 (pbk) ISBN: 978-1-315-81572-5 (ebk)

Stevenson, W. J. (2015). Operations Management. Published by McGraw-Hill

Education, 2 Penn

Plaza, New York, NY 10121. Copyright © 2015 by McGraw-Hill Education.

ISBN 978- 0-07-802410-8

Selmer, J. and de Leon, C. (2014). MANAGEMENT AND CULTURE IN THE

PHILIPPINES.

https://www.researchgate.net/publication/265194904_MANAGEMENT_AND_CULT
U

RE_IN_THE_PHILIPPINES

Page 101 of 101