Principles Of Management Production Operations Mgmt and TQM GTU MBA

7/31/2019 Principles Of Management Production Operations Mgmt and TQM GTU MBA

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Productivity, OperationsManagement,

and Total Quality Management


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What is Productivity?

Productivity is the output-input ratio within a time periodwith due consideration for quality.

Productivity of a skilled-worker is easier to measure. Eg.

Production line workers, front-line workers However it gets difficult to measure the productivity of

knowledge workers. Eg. Managers, engineers,programmers.

Generally knowledge workers often assist otherorganizational units. Eg. Advertising manager

Quality of knowledge workers output is often hard tomeasure. Eg. The effect of a strategic decision may notbe evident for several years


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Management: Manufacturing andService

One of the major areas in any kind of enterprise isproduction and operations management.

Production management deals with those activities

necessary to manufacture products. Operations management deals with activities

necessary to produce and deliver a service as well asa physical product.


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Service organizations do not produce a physical outputbut provide some service as an output.

Management: Manufacturing and

Service


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Operations Management System


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Operations ManagementSystem

Inputs: Inputs include needs of customers, information,technology, labour, fixed assets, and variable assets thatare relevant to the transformation process

Some physical elements such as land, plant site,buildings, machines are relatively permanent.

Other physical elements, such as materials and suppliesare consumed in the process of producing outputs

Transformation process consists of planning, operatingand controlling the system.

Outputs consists of products and services and may beeven information.


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Examples of OperationsSystem

Inputs Transformation Outputs

Plant, factory,machines, people,

materials

Assembling Bicycles Completed Bicycles

Students with limitedknowledge, skills, andattitudes

Lectures, cases,exercises, termpapers

Students withenhanced knowledge,skills, and attitudes

Client Problem Consulting: data-collection analysis,evaluation ofalternatives, selectionof alternative,

recommendation

Consulting Reportrecommending courseof action


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Operations Management SystemPlanning Operations

Planning Operations: Objectives, Premises, andSelection of an end product is to be done. After that thespecifications are determined and technological

feasibility of producing it is considered. The design of an operations system requires decisions

concerning the location, the process to be used, thequantity to be produced, and the quality of the product.


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Operations Management SystemPlanning Operations- Cont

Special interests in a product design: Various interestsof functional managers must be considered.

For eg. A production manager may want a product that

can be produced without any difficulty. A sales managersinterest is likely to be the needs of the customers andcompetitive prices.

The finance managers concerns are likely to be costs

and profits, high return on investment. The divergent interests of these functionality oriented

mangers influence what products will be manufacturedand marketed.


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Steps in Product and Production Design

1. Create product ideas

2. Select the product

3. Prepare a preliminary design4. Reach a final decision

5. Decide whether the enterprise's current facilities areadequate or if new or modified facilities are required.

6. Select the process7. After the product is designed, prepare the layout of

the facilities to be used, plan the system of production,and schedule the various tasks that must be done.


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System Design: In producing a product, companies canconsider several basic kinds of production layouts.

1. In the order of which the product is produced or

assembled. i.e assembly line.2. According to the process. (for services)

3. Fixed-position layout. Used for the assembly forextremely large or bulky items such as ships

4. According to the nature of the project. Eg. Building abridge or a tunnel

5. Layout to facilitate the sale of products.

6. Design to facilitate storage or movement of products.


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Operations Management SystemOperating the System

After a product has been selected and the system forproducing it has been designed and built, the next majorstep is to operate the system.

This requires setting up an organization structure,staffing the positions, and training people

Other activities, such as purchasing and maintaining theinventory are also required in operating the system.


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Operations Management SystemControlling Operations

It involves controlling production, product quality, andreliability levels, inventory levels, work-forceperformance

Today information technology plays a vital role in thecontrolling process.

Systems are available for quickly and systematicallycollecting the data bearing on total operation, for

keeping these data readily available, and for reportingwithout delay the status of any of a large number ofprojects at any instant.


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Tools and Techniques for ImprovingProductivity

Inventory planning and control

Just-in-time inventory system

Outsourcing

Operations Research Value Engineering

Quality Circles

Total Quality Management

Lean Manufacturing

Computer-Aided Techniques


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Inventory Planning & Control

Economic Order Quantity (EOQ) approach to determineinventory levels, has been used by firms for many years.

It works reasonably well for finding order quantitieswhen demand is predictable & fairly constant throughout

the year. While the calculation itself is fairly simple the task of

determining the correct data inputs to accuratelyrepresent your inventory and operation is a bit of a task.

Qe = Qe = economic order quantityD = demand per year, S = set up cost, H = inventoryholding cost per unit

2DS

H


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Just-in-Time Inventory System

One reason for Japans high manufacturing productivityis the cost reduction it achieves through its just-in-timeinventory method.

The supplier delivers the components and parts of theproduction line only when needed and just-in-time tobe assembled.

Also known as zero inventory and stocklessproduction.

Requirements for JIT:1. Quality of the parts must be very high

2. Dependable relationship and smooth cooperation withsuppliers

3. Dependable transportation


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Outsourcing

Production and operations are contracted to outsidevendors that have expertise in specific areas.

The aim may beto reduce costs by saving onpersonnel, or be able to reassign employees to othertasks that are more important.

It enables a company to focus on its core competencies

Ex. Nike Inc., the large supplier of athletic shoes, uses

outsourcing for all of its shoe production, keeping thefocus only on the production of sophisticated Nike AirSystem. It also outsources advertising


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Operations Research

Operations research is the application of scientificmethods to the study of alternatives in a problemsituation, with a view to obtaining a quantitative basis forarriving at a best solution.

It has also been made possible with the development ofrapid computing machines, since much of the advantageof operations research depends on the ability to apply, atlow costs, involved mathematical formulas to use data

with complex relationships


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Essentials of OperationsResearch

1. It emphasizes on models or the logical representationof a reality or a problem.

2. It emphasizes goals in a problem area and the

development of measures of effectiveness indetermining whether a given solution shows promiseof achieving those goals

3. The model incorporates the variables in a problem, or

atleast those that appear to be important to its solution


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Essentials of OperationsResearch

4. It puts the model and its variables, constraints, and goalsin mathematical terms so that they may be clearlyidentified, subjected to mathematical simplification, andreadily utilized for calculation by substituting quantities

for symbols.

5. It quantifies the variables in a problem to the extentpossible, since only quantifiable data can be insertedinto a model to yield a measurable result

6. It supplements much unavailable data with usablemathematical and statistical devices as the probabilities.Thus often making the mathematical and computingproblem workable within a small margin of error.


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Limitations of OperationsResearch

1. The number of variables and interrelationships in manymanagerial problems plus the complexities of humanrelationships and reactions, calls for a high order ofmathematics than nuclear physics.

2. Although probabilities and approximations aresubstituted for unknown quantities, a major portion ofimportant managerial decisions still involve qualitativefactors.

3. Lack of information when developing the problem areasand constructing the mathematical model leads toincomplete models

4. Gap between practicing managers and trainedoperations researchers. Mangers in general lack aknowledge and appreciation of mathematics .


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Linear programming

A technique for determining the optimum combination oflimited resources to obtain a desired goal.

It is one of the most successful applications of

operations research It is based on the assumption that a linear, or straight-

line relationship exists between variables and that thelimits of variations can be determined.

This technique is especially useful in cases where inputdata can be quantified and objectives are subject todefinite measurement.


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Value Engineering

Value engineering is the process of analyzing theoperations of the product or service, estimating thevalue of each operation, and attempting to improve

that operation by trying to keep costs low at each stepor part.

Steps to be followed:

1. Divide the product into parts and operations.

2. Identify the costs for each part and operation

3. Identify each parts relative contribution to the value tothe final output or product

4. Find a new approach for those items which appear tohave a high cost and low value


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Work Simplification

Work simplification is the process of obtaining theparticipation of workers in simplifying their work.

Training sessions are conducted to teach the concepts

and principles of techniques such as work-flowanalyses, layout of the work.


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Quality Circle

Quality Circle, is a group of people from the sameorganizational area who meet regularly to solveproblems they experience at work.

Members are trained in solving problems, usually afacilitator works with each group, which normallyconsists of six to twelve members

The problems dealt with are more complex and require

the involvement of several team members.


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Guidelines for Effective QualityControl

Quality improvement must not be a fad

While top-management commitment is of vitalimportance, everybody in an organization, from top tobottom, must be committed to quality

Most quality problems require the cooperation andcoordination of many functional departments

Ideas and suggestion for quality improvements cancome from many, often unexpected, sources

Quality control should be done at crucial steps. It is notenough to test the product at the end of the assemblyline

Planning alone is not enough. Provisions must be made

for its implementation.


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Computer-aided Techniques

CAD (Computer Aided Design)/CAM (Computer AidedManufacturing) help engineers design products muchmore quickly than they could with the traditional paper-and-pencil approach.

Firms can respond more rapidly to the requests ofcustomers with specific requirements.


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Lean Manufacturing

A study at the Massachusetts Institute of Technologythat compared American, Japanese, and European carmanufacturers showed that the Japanese gained a

competitive advantage from the use of fewer workers, ashorter development time, lower inventories, fewersuppliers, less production space, and less investment toproduce more models


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Mass Production versus Lean

Production Managerial Practices

MASS PRODUCTION

Irregular/Random andinconsistent

improvements Satisfied with good

enough

High inventory

acceptable Me management with

emphasis on individualperformance

Workers considered the

LEAN PRODUCTION

Continuousimprovements (kaizen)

with strategicbreakthroughs

Aiming at zero defects

Just-in-time inventory

system We, or, team

management

Responsibility for

problems rest on


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Kaizen

Kaizen is a combination of two Japanese words KAI andZEN Kai to change or modify

Zen to improve or make better A Japanese concept meaning continuous improvement.

Basic principle is that large number of small improvementsover a period of time will result in substantial improvementsin organizational performance.

The cumulative effect of these small but consistentimprovements may lead to quantum improvement inperformance, changing the vision of the company andmorale of the employees

Kaizen cross-functional teams are formed to sustainKaizen activities.


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Kaizen

Kaizen does not just merely mean doing things betterbut it is an unending process to eliminate waste,improve quality ,cost and delivery and thereby creatingmore and more satisfied customers.

Kaizen principles

1. Focus on customers

2. Challenge the status quo seek continuousimprovements in products, services and processes

Encourage employees to be creative and innovative

Nurture supportive relationship

Develop self discipline, a sense of personalresponsibility and accountability


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Total Quality Management

Total quality management is the organization's long-term commitment to the continuous improvement ofquality, throughout the organization and with theactive participation of all members at all levels, tomeet and exceed customer expectations.


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Six Sigma Quality

Six-Sigma is a quality matrix that counts the number ofdefects per million opportunities (DPMO)

The name, sixsigma refers to the variation that exists

within plus or minus three standard deviations of theprocess outputs

3

1,000,000x

unitsofNo.x

unitpererrorfor

iesopportunitofNumber

defectsofNumber

DPMO


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Six-Sigma Practice

Measure: Select critical quality characteristics,determine the frequency of defects, define performancestandards, and evaluate current performance

Analyze: Understand what, when, where and why ofdefects and causes by analyzing sources of variations

Improve: Brainstorm and generate ideas, narrow the listof potential solutions and then select the best solution,validate the solution and develop implementation

strategy Control: Maintain improvements by revalidating

measurements, and implementing statistical processcontrol system to monitor performance.

Anal tical Tools for Si Sigma and


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Analytical Tools for Six Sigma andContinuous Improvement: Flow Chart

No,Continue

MaterialReceived

fromSupplier

InspectMaterial for

Defects

Defectsfound?

Return toSupplierfor Credit

YesProvides an understanding ofwhat to measure and control atwhat point of the process

Can be used to find quality

problems

C ti I t R


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Continuous Improvement: RunChart

Run charts show trends of data for a process over atime.

- It only denotes the presence of trends, and

- Denotes sudden shifts in the process

It has a limited capacity to indicate any problem in theprocess and nature of problem.

0.440.460.480.5

0.520.540.560.58

1 2 3 4 5 6 7 8 9 10 11 12Time (Hours)

Measured

data


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Continuous Improvement: ParetoAnalysis

A Pareto diagram isa special type ofvertical bar diagramthat displays the

relative frequency ofvarious categories ofproblems or events. The bars are

arranged indescending order ofmagnitude.Can be used to findwhen 80% of the

problems may beattributed to 20% of

Wrong

order

No.

ofComplaints/Problems

Late

deliveries

Cold

food

Taste Other

Categories of Problems

80%

Continuous Improvement:


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Continuous Improvement:Checksheet

Billing Errors

Error Type 1

Error Type 2

Error Type 3

Error Type 4

Frequency

Can be used to keep track of defects and measure thefrequency of the errors


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2008 Weihrich and Cannice

Chapter 7. The Nature of Organizing, Entrepreneuring, and

Reengineering

Continuous Improvement: Cause & Effect

Diagram/fishbone

Effect

ManMachine

MaterialMethod

Environment

Possible causes: The resultsor effect

Can be used to systematically track backwards tofind a possible cause of a quality problem

QualityInstruction

SettingMaintenance

Training

SkillWorking Hrs.

Working Conditions


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Cause-and-Effect Diagram

QualityProblem

Out of adjustment

Tooling problems

Old / worn

MachinesFaultytesting equipment

Incorrect specifications

Improper methods

Measurement

Poor supervision

Lack of concentration

Inadequate training

Human

Deficienciesin product design

Ineffective qualitymanagement

Poor process design

Process

Inaccuratetemperaturecontrol

Dust and Dirt

Environment

Defective from vendor

Not to specifications

Material-handling problems

Materials


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Supply Chain Management

Supply chain management focuses on the sequence ofgetting raw materials and subassemblies through the

manufacturing process in an economical manner.

Supply Chain Management spans all movement andstorage of raw materials, work-in-process inventory, andfinished goods from point of origin to point of

consumption

Porters Value Chain Process


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Porter s Value Chain ProcessModel

The value chain process model includes the primaryactivities of inbound logistics, operations, outboundlogistics, marketing/sales, and service, with the process

supported by the enterprise infrastructure, humanresources management, technology, and procurement.

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Principles Of Management Production Operations Mgmt and TQM GTU MBA