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Unit 1: Operations Management: Learning Outcome # 1

Important Notes to the EM


1. This Training Module is of Basic Level and explores different basic aspects of Operations Management.
2. Please consult books like The Six Sigma Way:How to Maximise the Impact of Your change and Improvement Effort, Operations
Management Theory and Practice by B Mahadevan, Traction:Get a grip on your business by Gino Wickman, Theory and Applications of
Operations Research Paperback by Dilip kumar, Operations Management by William J Stevenson.
3. Regarding any doubt or query please consult the instructor and various other online resources (marked in below each article)
4. Please take the tests provided at the end of each module to have an elaborate understanding as to where you stand in understanding these
5. All the concepts and references provided in this manual is only for guidance and providing an employee with a deeper view on various
nuances of the subject so as to optimize efficiency of the employee and at the same time through collated improvement provide tangible
improvement in the Organisational Performance.
6. Which concept to use at which point of time in perusal of work requires proper understanding and experience . Hence , All readers are
requested to read the manual in depth and re read the same after a gap of 3 months or more to remember them and interpret them again and
again after on job trials too.
Content and Visual Description:

The text in light yellow is notes to the Employee. Please read notes at each instance.
The notes to graphics and tech are instructions for the graphics and technical teams. They will not appear on screen. This text gives the
description about the treatment used for a screen and the images and animations to be used. They will be in gray.
Post Test Evaluation :
No Learning can be said to be Complete without proper evaluation of the same through both practical and Theoretical Tests. Theoretical Tests provide a
peek into the cognitive efficiency of the learner but may not provide an accurate picture of future implementation of the same which can lead to
organisational and work efficiency improvement but it does provide a reflection of the hardwork , concentration and interest put in by the employee to
learn the given module and it also provides a progress report to the trainer and the employee himself about their efforts and learnability respectively.
How to interpret Results:

Overall % of Questions Correct

>60% & <90%

Level of Proficiency exhibited by Employee




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Notes to the Trainer

Some Concepts might not be clear to the
employee . Need to re teach the areas in which
employee has got wrong answers..
Need to re teach the entire Unit

Unit 1: Operations Management: Learning Outcome # 1


Supply Chain And Operations Management :Introduction

Page #
Page Title

Introduction (Word limit: 10)
Introduction/Static Screen
An operation is the process by which a company or organization converts raw materials, labor and capital into a final
product or service. In an automobile company, for example, materials and labor are transformed by manufacturing
operations into cars. In a hospital, nurses and doctors use medicines, care and equipment to help sick patients become
healthy. In a bank, staff members use computers and systems to manage the flow of money among accounts and provide
customers with statements and other banking services. Whatever the operation, decisions have to be made to establish
work schedules for employees, forecast demand for products and services, improve and maintain quality, ensure
adequate inventory, transport and store products and materials, and order materials and parts. These all require
operational decisions that can be made using the managerial techniques and computing technologies.
Broadly , Operations Management can be further sub divided into following major topics :
1.Supply chain management
.2.Planning and Control
4.Quality Management
6,Computer Modeling and Decision Making
7,Quality and Process Improvement Methods
8.Service Operations Management
9.Enterprise Planning and Control Systems
10 Qualitative Methods used for Forcasting and statistical Inferential technique
Supply chain management (SCM) is the management of the flow of goods and services.[2] It includes the movement
and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.
Interconnected or interlinked networks, channels and node businesses are involved in the provision of products and
services required by end customers in a supply chain.
Major developments in SCM can be classified under 6 stages :
1.Creation Era(The term "supply chain management" was first coined by Keith Oliver in 1982., The characteristics of this
era of supply chain management include the need for large-scale changes, re-engineering, downsizing driven by cost
reduction programs, and widespread attention to Japanese management practices.)
2.Integration Era (This era of supply chain management studies was highlighted with the development of electronic data
interchange (EDI) systems in the 1960s, and developed through the 1990s by the introduction of enterprise resource
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Unit 1: Operations Management: Learning Outcome # 1

planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of Internet-based
collaborative systems. This era of supply chain evolution is characterized by both increasing value added and cost
reductions through integration)

3,Globalization(The third movement of supply chain management development, the globalization era, can be
characterized by the attention given to global systems of supplier relationships and the expansion of supply chains
beyond national boundaries and into other continents)
4.Specialisation Era I (In the 1990s, companies began to focus on "core competencies" and specialization. They
abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This
changed management requirements, by extending the supply chain beyond the company walls and distributing
management across specialized supply chain partnerships.This transition also refocused the fundamental perspectives of
each organization. Original equipment manufacturers (OEMs) became brand owners that required visibility deep into their
supply base. They had to control the entire supply chain from above, instead of from within. Contract manufacturers had
to manage bills of material with different part-numbering schemes from multiple OEMs and support customer requests for
work-in-process visibility and vendor-managed inventory (VMI).)
5.Specialisation Era II (Debuted in late 1990s ,Outsourced technology hosting for supply chain solutions has taken new
root primarily in transportation and collaboration categories. This has progressed from the application service provider
(ASP) model from roughly 1998 through 2003, to the on-demand model from approximately 2003 through 2006, to the
software as a service (SaaS) model currently in focus today. Supply chain specialization enables companies to improve
their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to
focus on their core competencies and assemble networks of specific, best-in-class partners to contribute to the overall
value chain itself, thereby increasing overall performance and efficiency.)
6.Supply Chain Management 2.0(Building on globalization and specialization, the term "SCM 2.0" has been coined to
describe both changes within supply chains themselves as well as the evolution of processes, methods, and tools to
manage them in this new "era" ushered in by Globalisation. The growing popularity of collaborative platforms is
highlighted by the rise of TradeCards supply chain collaboration platform, which connects multiple buyers and suppliers
with financial institutions, enabling them to conduct automated supply-chain finance transactions. During this phase,
speed of the supply chain increased due to global competition; rapid price fluctuations; changing oil prices; short product
life cycles; expanded specialization; near-, far-, and off-shoring; and talent scarcity. )

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Unit 1: Operations Management: Learning Outcome # 1

Note to Employee
Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by William
J Stevenson.
There should be a colourful next button to move between screens from the user perspective
The content should be displayed in 2-3 separate screens


Supply Chain And Operations Management :Strategy ,Planning and Control

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Page Title

Operations Strategy ,Planning and Control (Word limit: 10)
Introduction/Static Screen
While Organisational Strategies are plans for achieveing organisational Goals .Long term implications are most relevant
in it . However, From tactical and operational perspective, the time frames are much shorter. Mostly Operational Strategy
allies with Organisational Strategy,Mission , Mission Statement, Tactics and Goals. Lets take the following example:
Mission: Live a good life
Goals: Successful career, good income
Strategy: Obtain a college education
Tactics: Select a college and a major; decide how to finance college.
Operations :Register, buy books ,take courses and study
In broader context most Operations Strategies try align itself with the one of the 3 organisational strategies which are
possible .
Organisational Strategy
Low cost
Scale based Profit

Operations Strategy
Outsource operations to third world countries that have low labour
Use capital intensive methods to achieve high output volume and low
unit cost
Focus on narrow product lines or limited service to achieve higher

Strategic operations management decisions can be further broken down into the following :
Decision Area
Product and Service Design
Process Selection and Layout
Work design

What the decisions affect

Costs,quality,liability and environmental issues
Cost structure, flexibility
Costs, flexibility ,skill level needed , capacity
Quality of work life, employee safety, productivity

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Supply Chains

Costs ,visibility
Ability to Meet or exceed customer expectations
Costs, shortages
Costs, Equipment reliability, Productivity
Flexibility , efficiency
Costs,quality agility, shortages, vendor relations
Costs,new products, services, or operating systems

Strategies in operations can be further classified into :

1. Quality based strategies (Focus on maintaining or improving the quality of an organizations products or services.)
2. Time based strategies (Focus on reduction of time needed to accomplish tasks)
Time based strategies usually focus on reduction in time of :
1. Planning Time (The time needed to react to competitive threat ,to develop strategies and select tactics, to
approve proposed changes to facilities to adopt new technologies and so on)
2. Product/Service design time (The time required to develop and market new or redesigned products or services)
3. Processing time (The time needed to produce goods or provide services. This includes time of scheduling ,
repairing equipment , methods used ,inventories, quality , training and the like )
4. Changeover time (The time needed to change from one type of product or service to another. It includes new
equipment settings and attachments , different methods , equipment , schedules or materials)
5. Delivery time (Time needed to fill orders)
6. Response time for complaints (Time needed to handle all kinds of complaints)

If we look at operations as a whole from point of view of planning and control then the following picture finds significance:




Output Goods and



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Material requirement planning (MRP) :A computer based information system that translates master schedule
requirement s for end items into time phased requirements for subassemblies components and raw materials.
Inputs for MRP are:
1. Bill of Materials( tells the composition of final product)
2. Master schedule (tells how much finished product is desired)
3. Inventory Records(tells how much inventory is on hand and on order)
Outputs from MRP are:
1. Planned order schedule
2. Order Release
3. Performance control reports
4. Exception reports
Master Schedule : One of three primary inputs in MRP and states which end items are to be produced and when these
are needed and in what quantitites.

Master schedule for end item X whose 100 units are to be needed at the start of week 4 and another 150 units will be
needed at the start of week 8, looks like :
Item :X



Bill of Materials contains listing of all the assemblies ,subassemblies, parts and raw materials that are needed to produce
one unit of a finished product. The listings are all hierarchical where the end item is shown at the top.
BOMs can be :
1. Modular BOM(hierarchical in nature with top level denoting final product)
2. Configurable BOM(used where there are lot of options and products are highly configureable)
3. Multilevel BOM (displays all items in parent child relationship. It is like a tree with several levels)
Some of the pictorial depiction of BOM are:

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Inventory Records refer to stored information on the status of each item by time period called time buckets . This include
gross requirement , scheduled receipts , expected amount on hand. It also include other details for each item such as
supplier , lead time , lot size policy.
Item X

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on Hand

Overall the process flow end to end looks like:

Note to Employee
Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by Wiliam
There should be a colourful next button to move between screens from the user perspective
Please display the content in 6-7 screens

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Supply Chain And Operations Management :Introduction

Page #
Page Title

Scheduling (Word limit: 10)
Introduction/Static Screen
Scheduling is establishing the timing of the use of equipment , facilities and human activities in an organisation.
There are two types of scheduling in production processes:
1)Forward scheduling is planning the tasks from the date resources become available to determine the shipping date or
the due date.
2)Backward scheduling is planning the tasks from the due date or required-by date to determine the start date and/or
any changes in capacity required.
The benefits of production scheduling include:

Process change-over reduction

Inventory reduction, leveling
Reduced scheduling effort
Increased production efficiency
Labor load leveling
Accurate delivery date quotes
Real time information

Production scheduling can take a significant amount of computing power if there are a large number of tasks. Therefore a
range of short-cut algorithms (heuristics) (a.k.a. dispatching rules) are used:

Stochastic Algorithms
Heuristic Algorithms

Basic concept behind stochastic Algorithm is as follows :

A single machine is available which can make all the products, but not in a perfectly interchangeable way. Instead the
machine needs to be set up to produce one product, incurring a setup cost and/or setup time, after which it will produce
this product at a known rate

. When it is desired to produce a different product, the machine is stopped and another

costly setup is required to begin producing the next product. Let

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be the setup cost when switching from product i to

Unit 1: Operations Management: Learning Outcome # 1

product j and inventory cost

is charged based on average inventory level of each item. N is the number of runs made,
U the use rate, L the lot size and T the planning period.
To give a very concrete example, the machine might be a bottling machine and the products could be cases of bottled
apple juice, orange juice and milk. The setup corresponds to the process of stopping the machine, cleaning it out and
loading the tank of the machine with the desired fluid. This product switching must not be done too often or the setup
costs will be large, but equally too long a production run of apple juice would be undesirable because it would lead to a
large inventory investment and carrying cost for unsold cases of apple juice and perhaps stock-outs in orange juice and
milk. The ELSP seeks the optimal trade off between these two extremes
One of the famous Stochastic Algorithm are Rogers algorithm :
Steps of rogers algorithm are as follows:
= use period


, the unit cost for a lot of size L

the total cost for N lots. To obtain the optimum we impose:

Which yields

as the optimum lot size. Now let:

be the total cost for NLalots of size La

be the incremental cost of changing from

size L to L+a

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be the incremental cost of changing

from size L to L-a

Total quantity of an item required = UT
Total production time for an item = UT/P
Check that productive capacity is satisfied:


as a whole number
If for a certain item, 0 is not an even number, calculate:

And change L0 to L in the direction which incurs the least cost increase between + and -

4.Compute tp=L/P for each item and list items in order of increasing =L/U
5.For each pair of items ij check:


To forms pairs take the i with the i+1th, i+2th, etc. If any of these inequalities is violated, calculate + and - for
lot size increments of 2U and in order of size of cost change make step-by-step lot size changes. Repeat this
step until both inequalities are satisfied.
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Form all possible pairs as in Step 5

For each pair, select i < j
Determine whether tpi > tpj, tpi < tpj or tpi = tpj
Select a value for eij(eij=0,1,2,3,...,i - tpi - tpj) and calculate tpi+e and tpj+e
Calculate Mii-Mjj by setting Mi=k and Mj=1,2,3,...,T/j; k(1,2,...,T/i). Then check if one of the
following boundary conditions is satisfied:


If none of the boundary conditions is satisfied then eij is non-interfering: if i=1 in eij, pick the next larger e in substep 4, if i1 go back to sub-step 2. If some boundary condition is satisfied go to sub-step 4. If, for any pair, no
non-interfering e appears, go back to Step 5.

7.Enter items in schedule and check it's feasibility

One example of Heuristic Algorithm is as below :
function mdd(processed, task)
return max(processed + task.processTime, task.dueDate)
function mddSort(tasks)
unsortedTasks = copy(tasks)
sortedTasks = list
processed = 0

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while unsortedTasks isn't empty

bestTask = unsortedTasks.getFirst()
bestMdd = mdd(processed, bestTask)
for task in unsortedTasks
mdd = mdd(processed, task)
if mdd < bestMdd then
bestMdd = mdd
bestTask = task
processed += bestTask.processTime
return sortedTasks

Practical example of the heuristic algorithm is as follows :

Lets take example of scheduling flight departures

Each flight is characterized by:

a due date: The time after which the plane is expected to have taken off
a processing time: The amount of time the plane takes to take off
a weight: An arbitrary value to specify the priority of the flight.

We need to find an order for the flight to take off that will result in the smallest total weighted tardiness.
For this example we will use the following values:


Flight scheduling
Due date Processing time


In the default order, the total weighted tardiness is 136. The first step is to compute the modified due date for
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each flight. Since the current time is 0 and, in our example, we dont have any flight whose due date is smaller
than its processing time, the mdd of each flight is equal to its due date:

Modified due date


The flight with the smallest MDD (Flight n 3) is then processed, and the new modified due date is computed.
The current time is now 5.

Due date

Processing time

Modified due date


The operation is repeated until no more flights are left unscheduled.

We obtain the following results:


Flight scheduling
Due date Processing time

In this order, the total weighted tardiness is 92

This example can be generalized to schedule any list of job characterized by a due date and a processing time.

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Note to Employee
Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operation Managment by William
There should be a colourful next button to move between screens from the user perspective
The content should distributed properly in 6-7 screens


Supply Chain And Operations Management :Introduction

Page #
Page Title

Operational Research and Transportation Problem(Word limit: 10)
Introduction/Static Screen

The Transportation and Assignment problems deal with assigning sources and jobs to destinations and
machines. We will discuss the transportation problem first.
There is a type of linear programming problem that may be solved using a simplified version of the simplex
technique called transportation method. Because of its major application in solving problems involving several
product sources and several destinations of products, this type of problem is frequently called the transportation
problem. It gets its name from its application to problems involving transporting products from several sources
to several destinations. Although the formation can be used to represent more general assignment and
scheduling problems as well as transportation and distribution problems. The two common objectives of such
problems are either (1) minimize the cost of shipping m units to n destinations or (2) maximize the profit of
shipping m units to n destinations.
Let us assume there are m sources supplying n destinations. Source capacities, destinations requirements and
costs of material shipping from each source to each destination are given constantly. The transportation
problem can be described using following linear programming mathematical model and usually it appears in a

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transportation tableau.
There are three general steps in solving transportation problems.
We will now discuss each one in the context of a simple example. Suppose one company has four factories
supplying four warehouses and its management wants to determine the minimum-cost shipping schedule for its
weekly output of chests. Factory supply, warehouse demands, and shipping costs per one chest (unit) are shown
in Table below

Table Data for Transportation Problem

At first, it is necessary to prepare an initial feasible solution, which may be done in several different ways; the
only requirement is that the destination needs be met within the constraints of source supply.
The Transportation Matrix
The transportation matrix for this example appears in Table 7.2, where supply availability at each factory is
shown in the far right column and the warehouse demands are shown in the bottom row. The unit shipping
costs are shown in the small boxes within the cells (see transportation tableau at the initiation of solving all
cells are empty). It is important at this step to make sure that the total supply availabilities and total demand
requirements are equal. Often there is an excess supply or demand. In such situations, for the transportation
method to work, a dummy warehouse or factory must be added. Procedurally, this involves inserting an extra
row (for an additional factory) or an extra column (for an ad warehouse). The amount of supply or demand
required by the dummy equals the difference between the row and column totals.

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In this case there is:

Total factory supply 51
Total warehouse requirements 52
This involves inserting an extra row - an additional factory. The amount of supply by the dummy equals the
difference between the row and column totals. In this case there is 52 51 = 1. The cost figures in each cell of
the dummy row would be set at zero so any units sent there would not incur a transportation cost. Theoretically,
this adjustment is equivalent to the simplex procedure of inserting a slack variable in a constraint inequality to
convert it to an equation, and, as in the simplex, the cost of the dummy would be zero in the objective function.

Table 7.2 "Transportation Matrix for Chests Problem With an Additional Factory (Dummy)"

Initial Feasible Solution

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Initial allocation entails assigning numbers to cells to satisfy supply and demand constraints. Next we will
discuss several methods for doing this: the Northwest-Corner method, Least-Cost method, and Vogel's
approximation method (VAM).
Table 7.3 shows a northwest-corner assignment. (Cell A-E was assigned first, A-F second, B-F third, and so
forth.) Total cost : 10*10 + 30*4 + 15*10 + 30*1 + 20*12 + 20*2 + 45*12 + 0*1 = 1220($).
Inspection of Table 7.3 indicates some high-cost cells were assigned and some low-cost cells bypassed by using
the northwest-comer method. Indeed, this is to be expected since this method ignores costs in favor of
following an easily programmable allocation algorithm.
Table 7.4 shows a least-cost assignment. (Cell Dummy-E was assigned first, C-E second, B-H third, A-H
fourth, and so on.) Total cost : 30*3 + 25*6 + 15*5 +10*10 + 10*9 + 20*6 + 40*12 + 0*1= 1105 ($).
Table 7.5 shows the VAM assignments. (Cell Dummy-G was assigned first, B-F second, C-E third, A-H fourth,
and so on.) Note that this starting solution is very close to the optimal solution obtained after making all
possible improvements (see next chapter) to the starting solution obtained using the northwest-comer method.
(See Table 7.3.) Total cost: 15*14 + 15*10 + 10*10 + 20*4 + 20*1 + 40*5 + 35*7 + 0*1 = 1005 ($).

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Table 7.3 Northwest Corner Assignment

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Table 7.4"Least - Cost Assignment"

Table 7.5 "VAM Assignment"

Develop Optimal Solution
To develop an optimal solution in a transportation problem involves evaluating each unused cell to determine
whether a shift into it is advantageous from a total-cost stand point. If it is, the shift is made, and the process is
repeated. When all cells have been evaluated and appropriate shifts made, the problem is solved. One approach
to making this evaluation is the Stepping stone method.
The term stepping stone appeared in early descriptions of the method, in which unused cells were referred to as
"water" and used cells as "stones" from the analogy of walking on a path of stones half-submerged in water.
The stepping stone method was applied to the VAM initial solution, as shown in Table 7.5
Table 7.6 shows the optimal solutions reached by the Stepping stone method. Such solution is very close to the
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solution found using VAM method.

Table 7.6 "Optimal Matrix, With Minimum Transportation Cost of $1,000."

Alternate Optimal Solutions
When the evaluation of any empty cell yields the same cost as the existing allocation, an alternate optimal
solution exists (see Stepping Stone Method alternate solutions). Assume that all other cells are optimally
assigned. In such cases, management has additional flexibility and can invoke nontransportation cost factors in
deciding on a final shipping schedule.

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Table 7.7 "Alternate Optimal Matrix for the Chest Transportation Problem, With Minimum Transportation
Cost of $1,000.
Degeneracy exists in a transportation problem when the number of filled cells is less than the number of rows
plus the number of columns minus one (m + n - 1). Degeneracy may be observed either during the initial
allocation when the first entry in a row or column satisfies both the row and column requirements or during the
Stepping stone method application, when the added and subtracted values are equal. Degeneracy requires some
adjustment in the matrix to evaluate the solution achieved. The form of this adjustment involves inserting some
value in an empty cell so a closed path can be developed to evaluate other empty cells. This value may be
thought of as an infinitely small amount, having no direct bearing on the cost of the solution.
Procedurally, the value (often denoted by the Greek letter epsilon, - ) is used in exactly the same manner as a
real number except that it may initially be placed in any empty cell, even though row and column requirements
have been met by real numbers. A degenerate transportation problem showing a Northwest Corner initial
allocation is presented in Table 7.8, where we can see that if
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were not assigned to the matrix, it would be

Unit 1: Operations Management: Learning Outcome # 1

impossible to evaluate several cells.

Once a has been inserted into the solution, it remains there until it is removed by subtraction or until a final
solution is reached.
While the choice of where to put an
is arbitrary, it saves time if it is placed where it may be used to evaluate
as many cells as possible without being shifted.

Table "Degenerate Transportation Problem With

Note to Employee

Added. Number of filled cells = 4

Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by William
J Stevenson.
There should be a colourful next button to move between screens from the user perspective
The content should be divided in 9-10 screens


Supply Chain And Operations Management :Introduction

Page #
Page Title

TQM and Quality Control (Word limit: 10)
Introduction/Static Screen
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Quality of a firms goods or services can adversely affect a firm in various ways . Some ways in which a firm can be
affected are:
1.Loss of business share (In competitive world , quality loss effectively means business loss as competitor companies
would soon emerge as more viable alternative)
2. Loss of reputation ( Quality defect , delay can spread as a word very rapidly among customers )
3.Loss of customers (Loss of confidence is inevitable owing to poor quality of product or delay in re-correcting the
products )
4. Reduction in Productivity (Actual number of defect free products produced will be less)
5.Liability (Damages or injuries resulting from faulty design and damages to be paid for incorrect product delivery )
Responsibility of providing quality products is of :
1. Top management (As they develop strategy for quality and provide guidance)
2. Design Team (Design features of the product or services .)
3. Procurement Team (Raw material to be used and required specified machinery quality both are its
4. Production/Operations Team (Are responsible that processes yield products as per design specifications)
5. Quality Assurance Team (Perform checking and analyse data on pr oblems)
6. Packaging and Shipping team (Ensures goods are not damaged on transit, packages clearly labelled)
7. Marketing and Sales Team (Clearly communicates customer needs )
8. Customer Service (Works on remedy of the quality defect)
Costs of Quality are:
1. Appraisal Cost ( relate to inspection , testing and other intended activities performed to uncover defective
products or services)
2. Prevention Costs ( costs related to reducing the potential for quality problems)
3. Internal Failure Costs ( Costs related to defective products or services before they are delivered to customers)
4. External Failure Costs ( Costs related to delivering substandard products or services to customers)

Return on Quality is an approach that evaluates the financial return of investment in quality

Quality Certification
ISO 9000
ISO 14000

Reason for certification

Quality management , Quality assurance
Assessing Companys environmental Performance

ISO 9000 includes following categories :

1. System requirements
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Management Requirement
Resource Requirement
Realization of Requirements
Remedial Requirements

Eight quality management principles form the basis of latest version of ISO 9000:
1. A customer focus
2. Leadership
3. Involvement of people
4. A process approach
5. A system approach to management
6. Continual Improvement
7. Use of a factual approach to decision making
8. Mutually beneficial supplier relationship
The Standards for ISO 14000 certification bear upon three major areas:
1. Management systems systems development and integration of environmental responsibilities into business
2. Operations consumption of natural resources and energy
3. Environmental systems measuring ,assessing and managing emissions ,effluents and other waste systems.
Some certifications and programs are available to monitor implementation of TQM( Total Quality Management) .TQM
implementation usually involves:
1. Continuous improvement ( Through a series of Kaizens (change for betterment))
2. Competitive Benchmarking (Eg Xerox used Mail order company L.L. Beans to benchmark order filling )
3. Employee empowerment (Giving decision making in the hands of those who are closest to the job)
4. Team Approach (Use of teams for problem solving)
5. Decisions based on facts rather than opinions (data based decision making)
6. Knowledge of tools (Employees are trained on quality tools)
7. Supplier quality (Suppliers to be included in quality assurance and quality improvement efforts)
8. Champion (Promote TQM within the organisation)
9. Quality at the source (Each worker responsible for quality of his or her work)

Six Sigma is a business process for improving quality ,reducing costs and increasing customer satisfaction. It works on
1.improving process performance
2.reducing variations
3.utilizing statistical methods
4.designing a structured improvement strategy
5.involves definition, measurement , analysis , improvement and control.
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For success of six sigma buy in from top management is of utmost importance .Other key players are :
Player Name
Program champion

Identify and rank potential projects , help select and
evaluate candidates , manage program resources and
serve as advocates for the program
Provide Extensive training in statistics and use of quality
Project team leaders responsible for implementing
process management projects.
Members of project teams

Master black belts

Black belts
Green Belts

Six sigma projects has one or more objectives such as reducing defects , reducing costs , reducing project and or
process variability, reducing delivery time , increasing productivity or improve and control (DMAIC.)
Obstruction towards Implementing TQM are:

Lack of company wide definition of Quality

Lack of strategic plan for change
Lack of customer focus
Poor intra organizational communication
Lack of employee empowerment
View of quality
Emphasis on short term results
In ordinate presence of internal politics
Lack of strong motivation
Lack of time to devote to quality initiatives
Lack of leadership

For monitoring process control mostly Control charts are used :

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The control chart is a graph used to study how a process changes over time. Data are plotted in time order. A control
chart always has a central line for the average, an upper line for the upper control limit and a lower line for the lower
control limit. These lines are determined from historical data.
In the words of statistics ,Control charts,or process-behavior charts, in statistical process control are tools used to
determine if a manufacturing or business process is in a state of statistical control

Features of Control charts are :

Points representing a statistic (e.g., a mean, range, proportion) of measurements of a quality characteristic in
samples taken from the process at different times (i.e., the data)
The mean of this statistic using all the samples is calculated (e.g., the mean of the means, mean of the ranges,
mean of the proportions)
A centre line is drawn at the value of the mean of the statistic
The standard error (e.g., standard deviation/sqrt(sample size) for the mean) of the statistic is also calculated
using all the samples
Upper and lower control limits (sometimes called "natural process limits") that indicate the threshold at which the
process output is considered statistically 'unlikely' and are drawn typically at 3 standard errors from the centre

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The chart may have other optional features, including:

Upper and lower warning or control limits, drawn as separate lines, typically two standard errors above and below
the centre line
Division into zones, with the addition of rules governing frequencies of observations in each zone
Annotation with events of interest, as determined by the Quality Engineer in charge of the process's quality

When to Use a Control Chart

When controlling ongoing processes by finding and correcting problems as they occur.
When predicting the expected range of outcomes from a process.
When determining whether a process is stable (in statistical control).
When analyzing patterns of process variation from special causes (non-routine events) or common causes (built
into the process).
When determining whether your quality improvement project should aim to prevent specific problems or to make
fundamental c


there are several rule sets for detection of signal, this is just one set. The rule set should be clearly stated as below :
1. Any point outside of the control limits Analyse the point
2. A Run of 7 Points all above or All below the central line - Stop the production
When a point falls outside of the limits established for a given control chart, those responsible for the underlying process
are expected to determine whether a special cause has occurred. If one has, it is appropriate to determine if the results
with the special cause are better than or worse than results from common causes alone. If worse, then that cause should
be eliminated if possible. If better, it may be appropriate to intentionally retain the special cause within the system
producing the results
It is known that even when a process is in control (that is, no special causes are present in the system), there is
approximately a 0.27% probability of a point exceeding 3-sigma control limits. So, even an in control process plotted on a
properly constructed control chart will eventually signal the possible presence of a special cause, even though one may

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not have actually occurred

Types of control charts are :


and R chart
and s chart
Shewhart individuals
control chart (ImR
chart or XmR chart)
Three-way chart
EWMA chart

Process observation

Quality characteristic measurement

within one subgroup
Quality characteristic measurement
within one subgroup
Quality characteristic measurement for
one observation
Quality characteristic measurement
within one subgroup
Fraction nonconforming within one
Number nonconforming within one
Number of nonconformances within
one subgroup
Nonconformances per unit within one
Exponentially weighted moving
average of quality characteristic
measurement within one subgroup

















Size of
shift to
Large (
Large (
Large (
Large (
Large (
Large (
Large (
Large (


X bar and R chart is one of the mostly commonly used Control chart .

In statistical quality control, the and R chart is a type of control chart used to monitor variables data when samples are
collected at regular intervals from a business or industrial process

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The chart is advantageous in the following situations

1. The sample size is relatively small (say, n 10 and s charts are typically used for larger sample sizes)
2. The sample size is constant
3. Humans must perform the calculations for the chart
The "chart" actually consists of a pair of charts: One to monitor the process standard deviation (as approximated by the
sample moving range) and another to monitor the process mean, as is done with the and s and individuals control
charts. The and R chart plots the mean value for the quality characteristic across all units in the sample,
, plus the
range of the quality characteristic across all units in the sample as follows:
R = xmax - xmin.
The normal distribution is the basis for the charts and requires the following assumptions:

The quality characteristic to be monitored is adequately modeled by a normally distributed random variable
The parameters and for the random variable are the same for each unit and each unit is independent of its
predecessors or successors
The inspection procedure is same for each sample and is carried out consistently from sample to sample

The control limits for this chart type are:[3]

(lower) and

(upper) for monitoring the process variability

for monitoring the process mean

where and
are the estimates of the long-term process mean and range
established during control-chart setup and A2, D3, and D4 are sample size-specific anti-biasing constants. The
anti-biasing constants are typically found in the appendices of textbooks on statistical process control.

Note to Employee

Elaborate examples of the above sub classifications is included in the Wikipedia and

Note to Graphics

There should be a colourful next button to move between screens from the user perspective
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Note to Tech

Content to be filled in 8-9 static screens


Supply Chain And Operations Management :Introduction

Page #
Page Title

Process Improvements and Quality Tools (Word limit: 10)
Introduction/Static Screen
Process improvement is a systematic approach to improving a process. It involves following steps:
Step 1 : Define the problem and establish an improvement goal
Step 2: Develop performance measures and collect data
Step 3: Analyze the problem
Step 4: Generate potential solutions
Step 5:Choose a solution
Step 6:Implement the solution
Step 7: Monitor the solution to see if it accomplishes the goal

Usually control chart methods leads to an accurate understanding of the presence of a problem . Once the problem is
known analysis of the problem can be done through 7 qc tools.

7 QC tools that are widely used are :

1. Cause-and-effect diagram (also called Ishikawa or fishbone chart): Identifies many possible causes for an effect
or problem and sorts ideas into useful categories.
2. Check sheet: A structured, prepared form for collecting and analyzing data; a generic tool that can be adapted for
a wide variety of purposes.
3. Control charts: Graphs used to study how a process changes over time.
4. Histogram: The most commonly used graph for showing frequency distributions, or how often each different value
in a set of data occurs.
5. Pareto chart: Shows on a bar graph which factors are more significant.
6. Scatter diagram: Graphs pairs of numerical data, one variable on each axis, to look for a relationship.
7. Stratification: A technique that separates data gathered from a variety of sources so that patterns can be seen
(some lists replace stratification with flowchart or run chart).
Generating Potential Solutions can now be done in the following ways :

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1.Brain storming ( For generating a free flow of ideas in a group of people)

2. Affinity Diagram(tool for organising data into logical categories)
3.Quality Circles(Groups of workers who meet to discuss ways of improving products or processes)
4. Interviewing ( Identifying problems and collecting information)
5.Benchmarking (process of measuring performance against the same or another industry)
6.5w2h approach( What why where when who how and how much questions are asked about a process)
Eg of affinity diagram is as follows :

Note to Employee
Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by William
J Stevenson.
There should be a colourful next button to move between screens from the user perspective
The content in this case should be distributed in 2-3 screens.

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Supply Chain And Operations Management :Introduction

Page #
Page Title

Enterprise Planning and Control System (Word limit: 10)
Introduction/Static Screen
Enterprise resource planning (ERP) is a category of business-management softwaretypically a suite of integrated
applicationsthat an organization can use to collect, store, manage and interpret data from many business activities,

product planning, purchase

manufacturing or service delivery
marketing and sales
inventory management
shipping and payment

ERP provides an integrated view of core business processes, often in real-time, using common databases maintained by
a database management system. ERP systems track business resourcescash, raw materials, production capacity
and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system
share data across various departments (manufacturing, purchasing, sales, accounting, etc.) that provide the data. ERP
facilitates information flow between all business functions, and manages connections to outside stakeholders.

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ERP (Enterprise Resource Planning) systems typically include the following characteristics:

An integrated system that operates in (or near) real time without relying on periodic updates
A common database that supports all applications
A consistent look and feel across modules
Installation of the system with elaborate application/data integration by the Information Technology (IT)
department, provided the implementation is not done in small steps

ERP systems connect to realtime data and transaction data in a variety of ways. These systems are typically configured
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by systems integrators, who bring unique knowledge on process, equipment, and vendor solutions.
Connectivity to plant floor information is provided in the following ways :
Direct integrationERP systems have connectivity (communications to plant floor equipment) as part of their product
offering. This requires that the vendors offer specific support for the plant floor equipment their customers operate. ERP
vendors must be experts in their own products and connectivity to other vendor products, including those of their
Database integrationERP systems connect to plant floor data sources through staging tables in a database. Plant
floor systems deposit the necessary information into the database. The ERP system reads the information in the table.
The benefit of staging is that ERP vendors do not need to master the complexities of equipment integration. Connectivity
becomes the responsibility of the systems integrator.
Enterprise appliance transaction modules (EATM)These devices communicate directly with plant floor equipment
and with the ERP system via methods supported by the ERP system. EATM can employ a staging table, web services, or
systemspecific program interfaces (APIs). An EATM offers the benefit of being an offtheshelf solution.
Customintegration solutionsMany system integrators offer custom solutions. These systems tend to have the
highest level of initial integration cost, and can have a higher long term maintenance and reliability costs. Long term costs
can be minimized through careful system testing and thorough documentation. Customintegrated solutions typically run
on workstation or server-class computers
Advantages of ERP are :
The fundamental advantage of ERP is that integrated myriad business processes saves time and expense. Management
can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from
this integration include:

Sales forecasting, which allows inventory optimization.

Chronological history of every transaction through relevant data compilation in every area of operation.
Order tracking, from acceptance through fulfillment
Revenue tracking, from invoice through cash receipt
Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor

ERP systems centralize business data, which:

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Eliminates the need to synchronize changes between multiple systemsconsolidation of finance, marketing,
sales, human resource, and manufacturing applications
Brings legitimacy and transparency to each bit of statistical data
Facilitates standard product naming/coding
Provides a comprehensive enterprise view (no "islands of information"), making realtime information available to
management anywhere, any time to make proper decisions
Protects sensitive data by consolidating multiple security systems into a single structure

Disadvantages of ERP :

Customization can be problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an
organizations lowest common denominator needs, forcing the organization to find workarounds to meet unique
Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from
other critical activities.
ERP can cost more than less integrated or less comprehensive solutions.
High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support,
maintenance, and upgrade expenses.
Overcoming resistance to sharing sensitive information between departments can divert management attention.
Integration of truly independent businesses can create unnecessary dependencies.
Extensive training requirements take resources from daily operations.
Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time,
planning, and money.

Various Open source ERP softwares are:



Software license

Adaxa Suite






Apache OFBiz


Apache License


of origin

Integrated ERP built on

Began as a fork of Compiere


Business Solutions and

Applications Framework from
the Apache Software


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Last stable

2015 (3.8

Unit 1: Operations Management: Learning Outcome # 1









MIT license




Zope, or

GNU Enterprise


Acquired by Consona
Corporation in June 2010
Web application (LAMP based
system) to manage small and
medium companies, foundations
or freelancers
A framework for building
ERP/CRM applications.
Business Information Manager.
Based on unified model for mid
to large size organizations





2014 (5.5)


7 April


ERP for small and medium-size



Web application






ino erp

Java, Eclipse


Tools to develop interactive

database applications
ERP for small and medium-size
businesses (initial focus has
been electronic manufacturing)
OSGI + Adempiere
First Dynamic Pull Based ERP
System;Designed to provide
better Inventory Turn
ERP and CRM system











ERP for higher education

Double entry accounting and
ERP system (fork of SQLLedger)
Renamed from OpenERP to
reflect that is more than just
ERP and Point of Sale (POS)

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2015 (3.1)






2015 (9.0)


2013 (3.0)

Unit 1: Operations Management: Learning Outcome # 1


Python, GTK+






Note to Employee


Expanded from Phreebooks

accounting engine


2012 (3.4)


Accounting, CRM and ERP




Double entry accounting and

ERP system
Originally forked from TinyERP,
cleaned-up code base with
continuous update/migration
LAMP-based system


2015 (3.8)




Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by William
J Stevenson.
There should be a colourful next button to move between screens from the user perspective
There should be 9 screens at max for the content in this case


Supply Chain And Operations Management :Introduction

Page #
Page Title

Logistics (Word limit: 10)
Introduction/Static Screen

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Logistics is generally the detailed organization and implementation of a complex operation. In a general business sense,
logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet
requirements of customers or corporations. The resources managed in logistics can include physical items such as food,
materials, animals, equipment, and liquids; as well as abstract items, such as time and information. The logistics of
physical items usually involves the integration of information flow, material handling, production, packaging, inventory,
transportation, warehousing, and often security.

A basic distinction in the nature of logistics activities is between inbound and outbound logistics.
Inbound logistics is one of the primary processes of logistics, concentrating on purchasing and arranging the inbound
movement of materials, parts, and/or finished inventory from suppliers to manufacturing or assembly plants, warehouses,
or retail stores.
Outbound logistics is the process related to the storage and movement of the final product and the related information
flows from the end of the production line to the end user.
Given the services performed by logisticians, the main fields of logistics can be broken down as follows:

Procurement logistics
Distribution logistics
After-sales logistics
Disposal logistics
Reverse logistics
Green logistics
Global logistics
Domestics logistics
Concierge Service
RAM logistics
Asset Control Logistics
POS Material Logistics
Emergency Logistics
Production Logistics

Procurement logistics consists of activities such as market research, requirements planning, make-or-buy decisions,
supplier management, ordering, and order controlling. The targets in procurement logistics might be contradictory:
maximizing efficiency by concentrating on core competences, outsourcing while maintaining the autonomy of the
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company, or minimizing procurement costs while maximizing security within the supply process.
Distribution logistics has, as main tasks, the delivery of the finished products to the customer. It consists of order
processing, warehousing, and transportation. Distribution logistics is necessary because the time, place, and quantity of
production differs with the time, place, and quantity of consumption.
Disposal logistics has as its main function to reduce logistics cost(s) and enhance service(s) related to the disposal of
waste produced during the operation of a business.
Reverse logistics denotes all those operations related to the reuse of products and materials. The reverse logistics
process includes the management and the sale of surpluses, as well as products being returned to vendors from buyers.
Reverse logistics stands for all operations related to the reuse of products and materials. It is "the process of planning,
implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and
related information from the point of consumption to the point of origin for the purpose of recapturing value or proper
disposal. More precisely, reverse logistics is the process of moving goods from their typical final destination for the
purpose of capturing value, or proper disposal. The opposite of reverse logistics is forward logistics.
Green Logistics describes all attempts to measure and minimize the ecological impact of logistics activities. This
includes all activities of the forward and reverse flows. This can be achieved through intermodal freight transport, path
optimization, vehicle saturation and city logistics.
RAM Logistics combines both business logistics and military logistics since it is concerned with highly complicated
technological systems for which Reliability, Availability and Maintainability are essential, ex: weapon systems and military
Asset Control Logistics: companies in the retail channels, both organized retailers and suppliers, often deploy assets
required for the display, preservation, promotion of their products. Some examples are refrigerators,
stands[disambiguation needed], display monitors, seasonal equipment, poster stands & frames.
Emergency logistics (or Humanitarian Logistics) is a term used by the logistics, supply chain, and manufacturing
industries to denote specific time-critical modes of transport used to move goods or objects rapidly in the event of an
emergency. The reason for enlisting emergency logistics services could be a production delay or anticipated production
delay, or an urgent need for specialized equipment to prevent events such as aircraft being grounded (also known as
"aircraft on ground"AOG), ships being delayed, or telecommunications failure. Humanitarian logistics involves
governments, the military, aid agencies, donors, non-governmental organizations and emergency logistics services are
typically sourced from a specialist provider.
.production logistics describes logistic processes within a value adding system (ex: factory or a mine). Production

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logistics aims to ensure that each machine and workstation receives the right product in the right quantity and quality at
the right time. The concern is with production, testing, transportation, storage and supply. Production logistics can
operate in existing as well as new plants: since manufacturing in an existing plant is a constantly changing process,
machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system
accordingly. Production logistics provides the means to achieve customer response and capital efficiency. Production
logistics becomes more important with decreasing batch sizes. In many industries (e.g. mobile phones), the short-term
goal is a batch size of one, allowing even a single customer's demand to be fulfilled efficiently. Track and tracing, which is
an essential part of production logistics due to product safety and reliability issues, is also gaining importance, especially
in the automotive and medical industries.

Note to Employee
Note to Graphics
Note to Tech

Elaborate examples of the above sub classifications is included in the Wikipedia and Operations Management by William
J Stevenson.
There should be a colourful next button to move between screens from the user perspective
At max 3 screens should be used for this content.

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