operations v4

8/14/2019 Operations v4

http://slidepdf.com/reader/full/operations-v4 1/80

Operations

Higher Business Management



Today…

Role and Importance of Operations

IPO

Production Planning

Production Systems

Key Factors




Access to raw materials, machines andworkers does not guarantee that you

will obtain the outcomes you desire.Organisation is essential.

Procedures must be established to

control and direct what is done, whom itis done by and when.

This is the Operating System.



I P O

INPUTS PROCESS OUTPUT

Operations Management is concerned with the way organisations

transform inputs into finished articles (outputs)



Production Planning

Planning is crucial in helping a firm achieveits objectives.

Ideally, production should be a constantlevel (exact number of workers required,materials to be used, and the number &type of machinery will be known in advance)

Production in reality will vary due to

changes in consumer demand, staff shortages and machine breakdowns andmaintenance.



Production Systems

Nature of the final product

Market size

Resources availableStage of development of the business

Labour-intensive v Capital-intensiveproduction

Availability of technology - automation



Production Systems – Key FactorsNature of the final product – different products

produced in different ways e.g. agriculturalproducts compared to aircraft

Market size – mass markets can use standardised

production systems like Reebok (left and rightshoes made in different factories); whereassmaller or luxury markets may be customised

Resources available – finance, number of workers& their skills, machinery, factory capacity



What factors will influence the

type of production system that a

manufacturer chooses?



Recap…


IPO

Production Planning

Production Systems

Key Factors



Today…

Use of Technology in Production

C.A.D.

C.A.M.

Benefits of New Technology

Costs of New Technology



Use of Technology in Production There have been significant changes in production

techniques due to the advancement of technology. New

technologies used in production include:

CAD: Computer Aided Design; computers used to helpdesign a product.

CAM: Computer Aided Manufacture; computers used

to control machines.CIM: Computer Integrated Manufacturing;computers used to control extensive parts of theproduction process.

Robots: Machines which can be programmed and re-

programmed to perform physical tasks. Automation has resulted in a large proportion of the

production process being controlled by machines. Thedemand for multi-skilled and skilled workers is now greaterresulting in the decrease in the need for unskilled workers.



Computer Aided Design (C.A.D) C.A.D is the use of computers in creating and editing design

drawings. The products are designed on a computer

allowing the designer to change the design; makeimprovements; change details; or, change the specificationcompletely.

C.A.D is used in many different areas:

Architecture:Computer graphics can be used

to create ‘visionary architecture’to assess plans and designs.Enables the client to view their‘virtual’ property.

Animation: Recent films produced using

computer animation include: Toy Story; Ants & FindingNemo

ArtificialIntelligence: The computer simulation gives theimpression of being in a real 3D environment. This

is used regularly by defence organisations to trainsoldiers.



Computer Aided Manufacturing (C.A.M) C.A.M means that robots now perform the tasks

once conducted by humans. Computers now control large parts of the

production process to replace humans doingmundane repetitive tasks.

Humans are now responsible for supervising therunning of the machines – it is their responsibility toprogram and maintain the computers.

A result of C.A.M has been an increase in the levelsof accuracy and quality in production.

In order to keep up with the pace of technological change, there is an increasein demand for highly-skilled employees.



Benefits of New Technology Companies are now able to increase their rate of

productivity as computers and machines conduct therepetitive tasks required to produce the product. As aresult, manufacturing costs are significantly reduced.

The use of computers and machines ensures a highquality standard as they are able to produce at the

same rate continuously. The only way in which qualitymay be affected if there has been a fault in thetechnology or wrong instructions have beeninputted by the operator.

Using new technology enables the company

to offer a wider range of products to itscustomers.



Costs of New Technology Training: staff will need to be trained so that they know how to

effectively and productively manage the machines/computers. Motivation: it may be difficult to motivate employees to be

productive if they feel that they are no longer actively involved inthe production process.

Maintenance: it is important that the equipment is maintained toensure that no faults occur in the production process.

Capital: a large amount of capital is required in the set-up of theproduction process as the machinery/computers are extremelyexpensive.

Control: it may be difficult to constantly monitor whether or notthe quality standards are being met.



Recap…

Use of Technology in Production

C.A.D.

C.A.M.

Benefits of New Technology

Costs of New Technology



Today…

Purchasing Mix

Stock

Why is it important to control stock?Levels of stock

Stock control diagram

Cost/benefits of stock

Bar codes



Purchasing – Materials Management

THE PURCHASING MIX

Alternative suppliers

Delivery time

Price

QualityQuantity

Storage Facilities



Purchasing Mix

Alternative suppliers – are suppliers dependable?Local or national suppliers? Additional costs?

Delivery time – lead times long or short?

Reliability and keeping promises!

Price – discounts and bulk buying vs cost of keeping stock? Credit terms v discounts



Purchasing Mix

Quality – supplier guarantee of consistent quality materials

Quantity – storage adds 15-30% onto cost of purchasing.

Storage Facilities – storage capacity?Safety, security, other conditions of storage?



What are the main factors that

will affect purchasing

decisions?



Stock Stock is a resource which is held in a specific location awaiting

use. Holding stock can be expensive to a business as there are a

variety of costs associated to it eg. maintaining warehouse;employee wages etc.

There are 3 basic categories which describe stock:

Raw Materials: resources required to produce a product.Work-In-Progress: goods which are still to be completed(currently in the process of being produced).

Finished Goods:final product which is waiting to bedistributed to the end-user (customer).



Why Is It Important To Control Stock?

It is important for businesses to have an effective stock control systemto ensure that there is minimal wastage and expense.

Furthermore, businesses must ensure that the stock held matches theresources required.

An effective control system would have the following factors:

Regular stock checks to ensure that records are accurate

and up-to-date. If an order were to be placed it isimperative that the business is aware if they can fulfilthe demand.

Security of storage must be of a high standard to preventstock being damaged or stolen.

Ensure that costs are minimised whilst also ensuringthat the correct level of stock is held.



Levels of Stock A business which holds stock will implement the following stock

levels in order to meet customer demand at all times.Minimum Level: this is the minimum amount of stock neededin case the required supply were to be delivered late. Thebusiness will never allow the stock level to drop below a certainpoint in order to prevent a resource shortage.

Maximum Level: this is the maximum amount of stock which

can be held in the warehouse at any given time. This level isrestricted by factors such as space; cost; and, delivery time.

Re-Order Level: this is when the stock level drops to a certainpoint and the process will automatically re-order the requiredstock. In order to decide at what point to re-order, businessesmust consider the following: how long is the delivery time? how

reliable is the supplier?



Stock Control Diagram



Cost/Benefit Analysis of Holding Stock

Supplies are availablewhen you need them.

Any increase indemand can be met.

Discounts available forbulk buying.

Customers’ orders canbe met immediately.

Money could be usedmore efficiently.

Financial costs

associated withwarehousing andinsurance.

Labour costs involvedin stock control.

Value of stock maydecrease if fashionschange or passes sellby date.

Benefits Of Holding Stock Costs Of Holding Stock



What are the 4 main decisions to

be made in minimising stock

holding costs?



Bar codesBar codes have now become the global

language of business, and are standardised sono two companies will pick the same bar codefor different products. They make it easy todescribe the raw materials and products beingbought and sold.

“Without bar codes our operations would not

work” – Nestle UK supply chain manager

http://images.google.co.uk/imgres?imgurl=http://www.judaismvschristianity.com/666_in_barcodes_files/USP_666.jpg&imgrefurl=http://www.judaismvschristianity.com/666_in_barcodes.htm&h=234&w=315&sz=15&tbnid=nkfIGuALYKUJ:&tbnh=83&tbnw=112&start=6&prev=/images%3Fq%3Dbar%2Bcodes%26hl%3Den%26lr%3D



Why are bar codes important in

modern business?



Recap…

Purchasing Mix

Stock

Why is it important to control stock?Levels of stock

Stock control diagram

Cost/benefits of stockBar codes



Today…

Toyota: a supermarket for cars

Just in Time production

Effective JIT

Advantages and Disadvantages of JIT



Just In Time Production (JIT)

JIT production is a Japanese approach to production that

involves keeping the stock levels to a minimum.

Stocks arrive just in time to be used in production.

As a result, costs are cut by reducing the amount of

stocks held by the business.

Goods are not produced unless the business has anorder from the customer.

JIT strives to eliminate waste by producingthe right part in the right place at the right time!



Effective JIT

In order to be effective and efficient JIT requiresthe following factors to be in place:

Highly skilled and flexible workforce which areable to respond to the challenges of JIT.

Absolute certainty regarding delivery times toensure that production runs to schedule (if thedelivery was late this would halt production).

If suppliers provide sub-standard items thewhole system fails as there isn’t an alternativeresource waiting in stock.



Advantages & Disadvantages of JIT

Less space required forstock.

Able to respond quicklyto changes in demand.

Closer relationship withsuppliers.

Capital can be used for

other priorities asopposed to beingtied up in stocks.

Production may bestopped if supplies aredelayed.

Sales may be lost if notmeeting customerdemands.

Increased ordering and

admin costs. Depending on the

efficiency of the supplier.

AdvantagesDisadvantages



Explain why JIT systems can

reduce costs to business



Recap…


Just in Time production

Effective JIT

Advantages and Disadvantages of JIT



Today…

Payment systems

Distribution and delivery



Payment Systems

Flat Rate

Overtime

Piecework

PRP

Profit sharing

Share save/share options



Flat Rate

This payment method involves theemployee receiving a basic rate of

pay per time period that he works(e.g. £5 per hour, £50 per day,£400 per week).

The pay is not related to output orproductivity.



Overtime

Any time that the employee works above theagreed number of hours per week may makehim eligible for overtime payments, often at

‘time and a half’ (e.g. £7.50 per hour insteadof £5 per hour).

Double time is paid after a certain number of hours of overtime and would be £10 per hour

in our example.



Piecework

This payment method involves theemployee receiving an amount of moneyper unit (or per ‘piece’) that he produces.

Therefore his pay is directly linked to hisproductivity level.

However, it is possible that in order toboost his earnings, an employee mayreduce the quality and craftsmanship perunit, so that he can produce more outputin a given period of time.



Performance Related Pay

This is a method of giving pay riseson an individual basis, related to the

employee achieving a number of targets over the past year.

This is common with managerial and

professional workers.Appraisals may be linked to PRP.



Profit Sharing

This involves each employee receiving a share of theprofit of the business each year, effectivelyrepresenting an annual pay rise.

It aims to increase the levels of effort, motivation andproductivity of each employee, since their annual pay-award will be related to the profitability of thebusiness.

However, if the business makes low profits (or even a

loss) then this is likely to have a detrimental effect onthe level of motivation of the employees.



Share/save options

A common form of payment in many PLCs is what istermed ‘share options’. This basically involves eachemployee receiving a part of each month’s salary in theform of shares (usually at a discounted price).

This forms a profitable savings-plan for the employee, and

he can sell them after a given period of time. This should motivate the employees to work harder and

increase their efforts, since the share price will rise as thecompany becomes more profitable, therefore increasingthe capital gain on their shares.



Distribution & Delivery

Design and layout

Mechanical handling

Transportation

Scheduling



Design and layout

warehouses should be on ground level to reduce handling times from delivery tostorage. Stock rotation should be in operation.



Mechanical handling

some warehouses havespecialist stock-handlingequipment built into theirwarehouse.

Tesco has a conveyor beltwhich can link up withtheir trucks to take thecages inside the factory.

Other methods would be

using pallets and forkliftsto transport them insidethe warehouse

http://images.google.co.uk/imgres?imgurl=http://members.aol.com/gardjunc/pallets.jpg&imgrefurl=http://members.aol.com/gardjunc/ACC32.htm&h=152&w=192&sz=5&tbnid=7DfcduyBPOcJ:&tbnh=77&tbnw=97&start=7&prev=/images%3Fq%3Dpallets%26hl%3Den%26lr%3D%26sa%3DG



Transportation

businesses can use their owntransport which gives them completecontrol over delivery, but has highinvestment and running costs;

or it can hire transport which is

cheaper and can deal with changes involume, but gives less control;

and finally public transport whichalthough very cheap is highlyunreliable and no control

http://images.google.co.uk/imgres?imgurl=http://www.tesco.com/everylittlehelps/images/picenvironment14.jpg&imgrefurl=http://www.tesco.com/everylittlehelps/environmentdetail.htm&h=129&w=150&sz=6&tbnid=fpWInI3yXTYJ:&tbnh=77&tbnw=90&start=3&prev=/images%3Fq%3Dtesco%2Blorry%26hl%3Den%26lr%3D%26sa%3DG



Scheduling

this makes sure all factorsof production are takeninto account and workingin harmony.

To ensure smooth deliveryfrom supplier tomanufacturer to end user



M ethods of Transporting G oods i

64%7%

24%

5%

road

rail

water

pipel in



Recap…

Payment systems

Distribution and delivery



Today…

Types of production:

Job

Batch

Flow



Job Production

Job Production concentrates on producingone product from start to finish. Once oneproduct is complete, another can begin.

It is extremely labour intensive

Some examples: Wedding dress

Painting

House extension



Job Production +/-

Easy to organiseproduction

Can customise orders

‘one-off’ orders can beaccommodated

Workers involved inentire production

process from start tofinish

Production costslikely to be high

Production timemay be longer

Investment inmachinery may behigher as specialistequipment may beneeded



Batch Production

Batch production enables items to becreated in bulk (‘a batch’)

General purpose equipment andmethods are used to produce smallquantities of items that will be madeand sold for a limited time only

Commonly used in food production Big Macs Gregg’s Rolls



Batch Production +/-

Allows flexibleproduction

Stocks of part-finished goodscan be held andcompleted later

Workers canspecialise

Production runs of smallbatches can beexpensive to produce

If production runs aredifferent there may beextra costs and timedelays in setting updifferent equipment

Repetitive work for

employees



Flow Production

Aka continuous production, flowproduction enables products to becreated in a series of steps.

Large amounts of goods producedand is highly capital intensive(machinery, automation)

Cars are massed produced for alarge market using flow production



Flow Production +/-

Economies of scale

Automatedproduction linessave time andmoney

Quality systemscan be built intothe production

Standard productproduced (opposite of customised)

High set-up costs of automated lines

Repetitive and boringwork

Long production runsmay produce more thanis needed



Using examples, describe the 3types of production used by

firms



Recap…

Types of production:

Job

Batch

Flow



Today…

Importance of quality

Quality standards

Quality control

Quality assurance



Importance of Quality

Quality is ensuring that the end-to-endcustomer requirements are met to the highestpossible standard.

It is imperative to businesses that their productionprocess meets quality standards throughout so thatthe end result delivers customer satisfaction.

Quality focuses on reducing errors, faults and cuttingout flaws.

It is important that all employees are informed of the

quality levels and standards expected of thecompany. Eg. IBM produces weekly quality reportsindicating current performance levels.



Quality Standards

British Standards Institute Kite Mark

ISO 9000

ABTA

Investors in People



Quality Control There are 3 stages in attempting to

improve on quality:

1.Quality Control

2.Quality Assurance

3. Total Quality Management



Quality Control

This process was a traditional method of qualitycontrol, whereby inspectors were required to spotcheck the final products.

Whenever sub-standard products were found it was

the duty of the inspector to remove the items anddiscard them. This proved to be an extremely costlyexercise as it resulted in a high level of wastage.

At no point in the process were the productionworkers involved in determining what was the

expected level of quality.



Quality Assurance

This process of quality control made theproduction workers aware of the standardwhich was required by the business.

Quality checks would be conducted at eachstage of production.

The workers would operate as ateam to check and monitor the

progress and accuracy of theproduction process.



Recap…

Importance of quality

Quality standards

Quality controlQuality assurance



Today…

TQM

Kaizen

BenchmarkingQuality Circles

Q



Total Quality Management

The main principle of TQM is that every employee ismotivated to think about their personal contribution toproviding quality to customers.

Every employee has a responsibility to ensure that a

quality product leaves the workplace. To encourage this level of participation in the quality

process, management give more independence to theworkforce and constantly seek their opinions andcomments on ways in which quality can be improved in

the business.



Total Quality Management As no errors are tolerated, tasks must be completed

correctly first time! In order for TQM to be effective the following factors must

be implemented:

Clearly defined policy on the required levels of quality.

Every employee must be focused on customersatisfaction.

Staff must be provided with appropriate training toensure they know how to meet the set standard.

People should be appointed to constantly check and

monitor that the process is working. Teamwork, at all levels, should be encouraged.



TQM - Kaizen

The Japanese have perfected theconcept of total involvement in the lifeof the organisation.

Workers are part of a team; there areteam songs and team competitions.

Everyone is expected to strive

towards continual improvement.



What are the features of TQM?



Benchmarking

Benchmarking is a form of qualityassurance which takes the best

performers in an industry as thestandard to be aimed for.

Benchmarking involves using

different sources such ascustomers, trade journalists andbusiness analysts.

Other Methods of Ensuring Quality



Other Methods of Ensuring Quality

Work Study – analysis of workmethods which has two main types:

1. Method Study – looks for the best way toperform a task

2. Work Measurement – looks at the timetaken to do specific tasks

Other methods include: incentiveschemes and quality circles.



Quality Circles A group of 6-12 people who meet to

identify quality problems, considersolutions & recommend suitableoutcomes to management.

Members drawn from factory floorbut include engineers, qualityinspectors & salesmen to offerdifferent viewpoints. (Managers mayor may not be included)

Why use Quality Circles? No-one knows production problems

better than the workers

Workers appreciate the chance todisplay their knowledge and skill



How Do Quality Circles Work?

Characteristics

Volunteers

Set Rules and PrioritiesDecisions made by Consensus

Use of organized approaches to

Problem-Solving



How Do Quality Circles Work?

All members of a Circle need toreceive training

Members need to be empoweredMembers need to have the support

of Senior Management

How Can They be Used in an



How Can They be Used in an

Organization?

Increase Productivity

Improve Quality

Boost Employee Morale

operations v4

Documents