Operations Management

Less human effort, equipment, time, space, capital

Work should add value to the customer, waste is activity than does not add value from the customer's perspec
Value added activities generate revenue
Seven types of Muda -
Overproduction
Unnecessary Inventory - problems are exposed when inventory is reduced
Transportation
Over Processing - unnecessary steps that do not add value
Waiting
Unnecessary Motion
Product defects and rework

In healthcare, NVAS and VAS (Value added services)

Value Stream Map

end-to-end system mapping
understand the flow of materials, customers and information

Uniform plant loading - Heijunka

Quality at source - Poka-Yoke

Pull method - customer demand activates the production of service or item

Convert internal to external set-ups

Overall Equipment Effectiveness (OEE)

Availablity x Performance x Quality

Sort, Straighten, Shine, Standardise, Sustain

Toyota design rules

Activity - content, sequence, timing, outcome
Connection - streamlined communication
Pathway

A3 Report Flow
Problem definition & description, Problem Analysis, Implementation plan, Results, Future steps

Innovation is needed for continuous improvement

Quality Management
Quality - Degree to which performance of a product or service meets or exceeds customer expectations
Performance - Expectations

Performance Quality
Conformance quality- The degree of match between specifications and the actual product or service
Performance – primary product characteristics
Features – secondary characteristics
Reliability – How often does the product fail? Measures of variability
Consistency of performance •Range
Conformance to standards – meeting design •Variance and the stan
specifications •Coefficient of variatio
Durability – How long the product lasts; its life span •Box Plot (IQR)
before replacement •Stem and Leaf Diagra
Serviceability – ease of repair, speed of repair •Histogram
Aesthetics – sensory characteristics (sound, feel, look)
Perceived Quality – past performance, reputation, recognition Costs of quality can be
Cost of quality control
Companies need not pursue all eight dimensions
Proper market research is key
Cost of failure
Modern definition of quality - Quality is inversely proportional to variability

Coefficient of Variation, c = σ / µ

Costs of quality estimated to be between 15%-20% of sales at most companies

Inspection occurs at three points: before production, during production and after production.
Inspection before and after production involves acceptance sampling and during production is referred to as p

External and internal failure costs together accounted for 50%-80% of COQ

Quality control
Takes corrective action when the output does not meet the standards

Quality control efforts that occur during production are referred to as Statistical Process Control

Where to inspect?
Before a costly operation or where significant value is added to the product

High-cost, low volume items require intensive inspection

Product attribute
Process attribute

Common Cause
Assignable or Special Cause

A process is said to be out of control when it exhibits assignable variation

Control Charts
“the voice of the process"

If all the points lie inside the limit, but behave in a nonrandom manner, process is out of control

A process that is operating with only chance cause of variation present is said to be in statistical control.

Control Charts for variables • Variables data are measured on a continuous scale
X-bar chart for process average
R-chart for process variability

Control Charts for attributes X- BAR Chart

p-charts for percent defective in a sample
c-charts for counts (e.g. # of defects)

Best strategy is to eliminate the R-chart assignable causes first.

Control Chart Patterns ( Run Tests )

Bias - below the centre line
Trend - above the centre line
Upward Trend
Downward Trend

Recognizing non-random patterns on the control chart

• One point plots outside 3σ limits

• Two or three consecutive points plot beyond 2σ limits
• Four out of 5 consecutive points plot at a distance of 1σ or beyond from the centre line
• Eight consecutive points on one side of centre line
For attribute control chart, samples should be fairly large, frequently in the range of 50-300

The ability of the process to meet design specifications, which are set by design department or customer req

Measures of Process Capability

• Process Capability Ratio
• Process Capability Index

1. Calculate Cpk to check centrality

2. Calculate Cp to check whether the
process variation are within design
specifications

Aggregate Planning

Over intermediate time horizon, aggregate forecast is more accurate than individual forecast.

The overall goal of aggregate planning is to use various sources of capacity so that supply meet demand over t

All models are lumped together and represent a single product; hence the term aggregate planning.

Aggregation on the basis of -

Output rate
labour hours or machine hours

Proactive • Alter demand to match capacity

Reactive • Alter capacity to match demand

Level Production - maintain constant workforce & adjust inventory

Chase production - service businesses

Linear Programming - Appropriate when cost and variable relationships are linear

Simulation Models - understand system behaviour

Simulation does not produce optimal solutions, it merely indicates approximate behaviour for a set of inputs

Spreadsheet & Simulation - Heuristic (trial and error)

SERVICE OPERATIONS MANAGEMENT managing the process of creation of goods and services and provid

Four distinctive characteristics: Five components that describe a service:

Intangibility Supporting facility
Variability Facilitating goods
Inseparability Information
Perishability Explicit services
Implicit services

Tools & Techniques for Service design

Concurrent Engineering holistic understanding, interdisciplinary team work
Blue Printing Line of Interaction, Visibility, Internal interactions
Poka-Yoke Warning Control
Process Mapping
Benchmarking
Toyota production system (TPS) same output with less manpower, material & machinery
Activities, Connections, Pathways

Service Quality
SERVQUAL / GAP model Walk-through Audit
5 Broad Dimensions:
Reliability Bottleneck - lowest capacity & highest utilization
Responsiveness Throughput time (Flow time) - Process + Transport + Wait time
Assurance Process Velocity - Throughput time / Value added time
Empathy Average flow time X Flow rate = Average Inventory
Tangibles

Supply Chain Management efficient integration of suppliers, factories, warehouses and Stores

Supply Chain Surplus

Efficient Supply Chain Tradeoff b/w both

Responsive Supply Chain

Inventory Raw material, WIP, Finished goods

Transportation
Information
Sourcing In-house if risks associated with sourcing are significant
Pricing EDLP vs High-Low Pricing Diiferential pricing - highly responsive

Inventory Control Systems

Fixed order quantity Perpetual system or Continuous Inventory system
Fixed time period periodic review system

Inventory costs -
Ordering costs
Set-up costs when a firm produces its own inventory
Holding or Carrying costs

Reorder point -> average daily demand X lead time

Cycle inventory -> lot size/2

Order qty. -> Avg. demand + Safety stock - Inventory on hand

Transportation economics
Economy of Scale cost/kg Speed
Economy of Distance cost/km Availability
Dependability
Capability
Inter-Modal Transport Frequency
Birdyback
Fishyback
Piggyback

No. of Shipments -> Shipping time/ Order cycle

Cross Docking - combines Break-bulk & Consolidation

MRP
computerized inventory management system for managing dependent demand items
determine what, when & how much to order

BOM - describes the relationship between end items & lower level items
Also known as Product Structure file

Order Changes Report

Performance control Report
Exception Report

Lot-for-Lot (L4L) Economic Order Quantity (EOQ) Cost per item

eliminates holding costs balances setup & holding costs Order cost
Inv. Carrying cost/wee
GR
SR Demand
On Hand Yearly
NR H
POReceipts
PORelease EOQ

Rough-cut capacity planning

Capacity requirement planning

When lead times vary – safety time is used

When quantities vary – safety stock is used

Techniques for updating MRP Schedule

Regeneration
Net change
 the customer's perspective

Lean - tools & techniques

1. Pull Systems
2. Cellular Layout
3. Uniform Plant Loading (Heijunka)
4. Small lot sizes
5. Minimized set-up times
6. Kanban Systems
7. Quality at source (Poka-Yoke)
8. Flexible Resource
9. Total Productive maintenance
10. 5S

mer expectations

uct or service
 Measures of variability (or spread out)

•Variance and the standard deviation

•Coefficient of variation
•Box Plot (IQR)
•Stem and Leaf Diagram
•Histogram

Costs of quality can be categorized as

Cost of quality control

Cost of failure

uction is referred to as process control

statistical control.

R Chart

P-Chart
Assumption: Sample size same for all samples
Appropriate when data consists of two categories of items

Go No-Go Gauges for attribute measurement

rtment or customer requirements, is called process capability

ply meet demand over the intermediate time horizon in the most efficient way possible

ate planning.

Aggregate Planning Has an effect on

• Costs
• Equipment utilization
• Customer satisfaction
• Employment levels
• Synchronization of flow throughout the supply chain
 our for a set of inputs

and services and providing them directly to customer

Three approaches to Delivering On-Site Service

Production line approach
Self service approach
Personal attention approach

& machinery

Transport + Wait time

e added time Lower is better

warehouses and Stores

Flows in Supply Chain Decision Phases of a Supply Chain

Information Design several years
Product Planning quarter to a year
Funds Operations weekly or daily

Three Key Drivers

Inventory
Logistics
Sourcing
 ELDP - more efficient

Cost per item 10 sqrt ( 2 SD / H)

Order cost 47
Inv. Carrying cost/week 0.05 D - annual demand
 S - ordering cost
H - holding cost per unit for a year
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