OPERATIONS MANAGEMENT
Operation / Process Strategy
Dr. Hakeem-Ur-Rehman
IQTM – PU
Operations / Process Strategy
▪ Process strategy is the pattern of decisions made in managing processes so
that they will achieve their competitive priorities.
▪ A process involves the use of an organization’s resources to provide
something of value.
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Process Strategy Decisions: Major Decisions for Effective Processes
▪ Process Structure determines
Customer Involvement
o Process type (job shop etc.) relative to the kinds of resources
refers to the ways in
needed
which customers
o how resources are partitioned between them and their key
become part of the
characteristics
process and the extent of
• A ( f a c i l i t y) layout put these decisions into tangible form.
their participation.
▪ Resource flexibility is the ease with which
employees and equipment can handle a wide
variety of products, output levels, duties, and
functions.
▪ Capital intensity is the mix of equipment and
human skills in a process.
is a fundamental rethinking and radical redesign of processes to
is the systematic study of the improve performance dramatically in terms of cost, quality, service, and speed.
activities and flows of each process to
improve it.
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Process Structure in Manufacturing: Product-Process Matrix
Fixed Position Layout
Plant Layout Design
Facility Layout Product Layout
= Process Layout
Process Layout
Cellular
Manufacturing Layout
Hybrid Layout
Facility Layout
= Product Layout
Process Structure in Manufacturing: Type of Production Process & Layout
Project:
▪ Processes that produce products of high variety and low volume are
termed projects
▪ Project processes are used to make a one-off product to a customer
specification
▪ A feature of a project is that the location of the product is stationary
Examples
▪ Ships /Sub Marines
▪ Civil Projects
Fixed Position Layout
Process Structure in Manufacturing: Type of Production Process & Layout
Job Shop Process: A process with the flexibility needed to produce a wide variety of products in significant quantities, with
considerable divergence in the steps performed.
▪ Because customization is high and most jobs have a different sequence of steps, this process choice creates flexible flows
through the operations rather than a line flow.
Key Points
▪ skilled persons are used to make the products
▪ Same type of machines together (Functional layout)
▪ small customer order size
Examples:
▪ Automobile repair shops
▪ Tailoring Shops
▪ Machine shops
▪ manufacturers of specialty furniture
Process Structure in Manufacturing: Type of Production Process & Layout
Batch Production: A process that differs from the job process with respect to volume, variety, and quantity.
Job Shop Batch Production
Offer greater responsiveness to varying customer requirements the greater standardization of the products
Both labor and equipment must be highly flexible and Batch processes involve greater similarity among the units
adaptable. produced,
and require less flexibility to product variation.
Job Shops and Batch Processes
Injection Molding Machine
▪ Step # 1:
Mould (1) to produce desired number of items, placed into
Examples A Bakery
the machine
▪ Step # 2:
Mould (1) will be removed
▪ Step # 3:
Mould (2) will take the place of Mould (1) for the production
of another product
Process Structure in Manufacturing: Type of Production Process
Mass Production: Processes that produce products of high volume and low variety are termed line, repetitive, or mass processes
▪ Production process is broken down into a number of small, simple tasks
▪ Product-based layout: Equipment and people are highly specialized and arranged sequentially according to the steps required
to make a product or product family.
▪ Production is often “paced.” (Worker Paced or Machine Paced(Conveyor System))
▪ Best suited to high-volume production of standardized products.
▪ In order to ensure a smooth flow of product, line balancing technique can be used
▪ Because of the low product variety, utilization of equipment is high
Car Manufacturing: An Example of a Mass Process Electronic Equipment Manufacturing: An Example of a Mass Process
Process Structure in Manufacturing: Type of Production Process
Continuous Production
▪ Processes that operate continually to produce a very high volume of a very standardized product are termed continuous
▪ Continuous processes use a large amount of equipment specialised and dedicated to producing a single product (such as an oil
refinery for example)
▪ To make this large investment in dedicated equipment cost effective, continuous processes operate 24 hours a day
▪ The role of labour in the operation of the processes is mainly one of monitoring and control of the process equipment with
little contact with the product itself
Examples:
o Oil Refinery
o Electricity production
o Fertilizer Plant
o Cement Plant
Oil Refinery: An Example of a Continuous Process
Process Structure in Manufacturing: Product-Process Matrix…
https://www.youtube.com/watch?v=m62whN6CWBM&t=2s 1
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Linking Processes Together to Make a Sweater
▪ Group technology or GT is a manufacturing
▪ Hybrid Manufacturing Processes: A technique in which parts having similarities in
general term referring to a geometry, manufacturing process and/or functions
manufacturing process that seeks to are manufactured in one location using a small
combine the characteristics, and hence number of machines or processes.
advantages, of more than one of the ▪ Cellular layout: in which the resources are
classic processes Such as group physically arranged according to the dominant flow
technology. of activities for the product family.
▪ 3D printing: An additive manufacturing
process that creates a physical object from a digital
design.
3D Printing: Additive Manufacturing
https://www.youtube.com/watch?v=EHvO-MlzAIM 1
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Production & Inventory Strategies
Process types based on the point of customer order
▪ Make To Stock:
o Producing in anticipation of demand. (e.g., Televisions, Mobiles, Books, airline flights, etc)
o Critical operations issues: Forecasting future demand, maintaining inventory levels
▪ Make To Order:
o Producing to customer specifications after an order has been received. (e.g., manufacturing furniture like bed, chairs etc.)
o Critical operations issues: Customer customization, minimizing the time required to complete the order
▪ Assemble To Order (Build To Order):
o Adding options according to customer specifications (e.g., Computer systems, Industrial equipment, etc.)
o Critical operations issues: minimizing the inventory level of standard components, minimizing the delivery time of the finished products.
Lead Time and Manufacturing Environment
Factors affecting the Choice of Manufacturing Process
▪ Effect of volume / Variety Where Does Customization Occur in the Supply Chain?
▪ Capacity of the Plant
▪ Lead Time
▪ Flexibility and Efficiency
Process Structure in Services
High Contact Services
o Customer is an essence in the production of services.
o Scheduling is difficult as customer demand varies.
o Work force attitude effects the customer’s view of the services.
o Examples: Teachers, Doctors, Taxi drivers
Low Contact Services
o Customer cannot strongly influence the process by which the service
is provided.
o Standardization makes managerial control easy and straightforward.
o Low contact service firms tend to have a systematic and predictable
operation.
o Example: Insurance Company, Post Office etc.
▪ PROFESSIONAL SERVICE
▪ highly customized and very labor intensive (i.e., Lawyer, Doctor)
▪ SERVICE SHOP
▪ customized and labor intensive (i.e., School, Hospital)
▪ MASS SERVICE
▪ less customized and less labor intensive (i.e., Banking, Ticket
Collectors at sports events and concerts)
▪ SERVICE FACTORY
▪ least customized and least labor intensive (i.e., Airlines)
Measures of Process Performance
The amount of resources allocated in The degree to which customer CTQs are
meeting and exceeding customer CTQs met and exceeded
Process Focused Customer Focused
It is about HOW work is done. It's about WHAT work is done.
▪ Examples: ▪ Examples:
o Cost per transaction o Percent Defective
o Time per activity o Response Time
o Amount of rework o Billing Accuracy
What is Productivity?
▪ PRODUCTIVITY
o A measure of the effective use of resources, usually expressed as the ratio of output to
input
Productivity = Output / Input
Examples of Productivity Measurement
▪ You have just determined that your service employees have used a total of 2400 hours of labor this week to
process 560 insurance forms. Last week the same crew used only 2000 hours of labor to process 480 forms. Is
productivity increasing or decreasing?
▪ ANSWER: Last week’s productivity = 480/2000 = 0.24, and this week’s productivity is = 560/2400 =
0.23. So, productivity is decreasing slightly.
A company that processes fruits and vegetables is able to produce 400 cases of canned peaches in one-half hour with
four workers. What is labour productivity?
ANSWER:
Labour Productivity = Quantity produced
Labour Hours
= 400 cases .
4 workers X (1/2) hour /Worker
= 200 cases per labour hour
Examples of Productivity Measurement…
▪ A Wrapping paper company produced 2,000 rolls of paper one day.
Standard price is $1/roll. Labour cost was $160, material cost was $50,
and overhead was $320. Determine the multifactor productivity.
▪ ANSWER:
MFP = (2000 Rolls) ($1/roll)
$160+$50+$320
= 3.77 rolls per dollar
Factors Affecting Productivity
CAPITAL QUALITY
MANAGEMENT
TECHNOLOGY
BOTTLENECK
OPERATIONS
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Q&A
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