OPERATIONS MANAGEMENT REVIEWER

(1ST SEMESTER – FINALS

Module 8: Process Selection and Facility Layout Module 9: Work Design and Measurement
FIVE TYPES OF MANUFACTURING PROCESSES: WORK MEASUREMENT
• Job Shop • Determines the time it should take to do a job.
o production areas, like workstations and workshops, JOB DESIGN
are used instead of an assembly line. • Act of specifying the contents and methods of jobs.
o Small Scale SPECIALIZATION
o Ex. Veterinary services, Repair Shop, Emergency • Work that concentrates in some aspects of a product
room.
or service.
• Batch
o number of batches that are created will be enough BEHAVIORAL APPROACH TO JOB DESIGN
to serve a particular customer's needs. In-between • Job Enlargement
batches, the equipment will be cleaned and left o Giving a worker a large portion of the total task, by
alone until another batch is required. horizontal loading.
o Moderate Volume • Job Rotation
o Ex. Commercial bakery, Movie Theater or Cinema. o Workers periodically exchange jobs – use to avoid
• Repetitive / Assembly Line having one or more monotonous job.
o These types of rapid manufacturing operations will • Job Enrichment
produce the same or very similar products en masse o Increase responsibility for planning and
24/7. coordination tasks by vertical loading.
o High Volume of Standardized Goods/ Services
o Ex. Automatic Carwash, Factories. Module 10: Location Planning and Analysis
• Continuous LOCATION DECISION FACTORS
o Similar to repetitive, key difference here is that the
raw materials used are gases, liquids, powders, and Regional Factors
slurries, instead of solid-state components. • Location of raw materials
o VERY High volumes of standardized of non- • Location of markets
discrete Goods • Labor factors
o Ex. Oil refinery, Water purification, electricity • Climate and taxes
supply.
• Project Communications Consideration
o an operation designed to produce unique but similar • Quality of life
products. • Services
o Nonrepetitive set of activities directed toward a • Attitudes
unique goal within a limited time frame. • Taxes
o Ex. Building a bridge, Creating a movie • Environmental Regulations
• Utilities
AUTOMATION
• Developer Support
• Machinery that has sensing and control devices that
enables it to operate automatically. Site Related Factors
o FIXED AUTOMATION (Least Flexible) • Land
• Transportation
o PROGRAMMABLE AUTOMATION • Environmental
▪ Computer-aided Design and Manufacturing • Legal
systems
(CAD/CAM) MULTIPLE PLANT STRATEGIES
▪ Numerically Controlled (N/C) Machines • Product plant strategy
▪ Robot o assign different products to different plants which can
▪ Manufacturing cell generate higher volume and result in cost savings
• Market area plant strategy
o FLEXIBLE AUTOMATION o assign different market areas to different plants.
▪ Flexible Manufacturing Systems (FMS) o plants are designed to service geographic needs (e.g.
▪ Computer-integrated manufacturing (CIM) west coast, southeast) and may have higher costs than
in a “product strategy”
• Process plant strategy
o assign different processes to different plants.
o different plants concentrate on different aspects of
a process. Automobile manufacturers often use
this approach, with different plants for engines,
transmissions, body stamping, and even radiators.
NATURE OF LOCATION DECISIONS TRANSCENDENT (JUDGMENTAL) PERSPECTIVE
• It is synonymous with superiority or excellence.
Strategic Importance
• Walter Shewart (1931) defined quality as a goodness
• Long term commitment/costs
of product.
• Impact on investments, revenues, and operations
o “Both absolute and universally recognizable, a
• Supply chains mark of uncompromising standards and high
Objectives achievement.”
• Profit potential • Quality cannot be defined precisely – you just
• No single location may be better than others. know it when you see it. High quality is not
• Identify several locations from which to choose. correlated with price.
Options • Transcend (to rise above or extend notably beyond
• Expand existing facilities. ordinary limits)
• New facility in another location
• Move to another existing facility. PRODUCT PERSPECTIVE
• Do nothing. • Quality is related to the quantity of some product
attribute or the number of different features in a
Module 11: Introduction to Quality product like mobile phones.
• Larger number of product attributes are equivalent to
H. JAMES HARRINGTON
higher quality, so designers incorporate more features
• From where I stand, CEOs around the world have
into products, whether customers want them or not.
lost much of their interest in quality... We are more
• Good marketing research is needed to assess what
interested in reducing cost, removing waste, and
features customers want in a product.
reducing cycle time... Maybe it’s time we got back to
basic quality measurements. We talk about getting to USER PERSPECTIVE
the root cause of the problems. • It leads to user-based definition of quality – fitness
• Well, I think we need to get to the root results of our for intended use, or how well the product performs its
actions by measuring the level of customer intended function.
satisfaction improvements, the increase in mean time o Both a Cadillac CTS and a Honda Civic are fit for
to failure, reducing percent defective during the first use, they simply serve different needs and
90 days of usage, stopping product recalls, and different groups of customers.
lowering return rates – not dollars saved, inventory
turns, or output per hour. We are trying to do
everything for everybody, and as a result we are VALUE PERSPECTIVE
missing the real quality objective – better and better • Quality is based on value that is the relationship of
products and services. product benefits to price.
• Consumers no longer buy solely on the basis of the
Introduction price; they compare the total quality of the total
• The first job we have is to turn out quality package of goods and services that a business offers
merchandise that consumer will buy and keep on (customer benefit package) with price and with
buying. If we produce it efficiently and economically, competitive offerings.
we will earn a profit, in which you will share. o A good example is generic pharmaceuticals which
(William Cooper Procter,1887) provide same medical benefits at a lower price.
• Productivity is the measure of efficiency, or the • Value Pricing (P&G, 1990s)
amount of output achieved per unit of input) o offering products at “everyday” low prices in an
• Cost of operation and quality of the goods and attempt to counter the common consumer practice
services that create customer satisfaction. of buying whatever brand happens to be on
• All contributing to profitability. special.
• Competitive demands in business continually seek to
Quality
satisfy consumers’ needs at lower prices.
• is uniquely positioned to accelerate organizational
• The ability to keep prices low requires a strong
growth through better execution and alignment and it
internal focus on efficiency and quality, as quality
also provide the voice of the customer critical to
improvements in operations generally reduce costs by
developing innovative products and services.
reducing rework and scrap.
• High quality goods and services can provide an
• Organization must focus on continually improving
organization with a competitive edge.
both the consumer benefit package and the quality
• It generates satisfied and loyal customers who reward
and efficiency of their internal operations.
the organization.
MANUFACTURING PERSPECTIVE • Customer focus – We understand that customers are
• For the Donald R. Keough, former president and the core focus of any business. Meeting their
COO of Coca-Cola Company, quality is “about expectations is essential to growth, and this principle
manufacturing a product that people can depend on means your customers are at the heart of your
every time they reach for it.” business.
• Quality is defined as conformance to specifications.
To determine if a good is manufactured or a service is • Leadership – Strong leadership means better quality
delivered as it was designed. and consistency. Managerial processes provide a
• Specifications are targets and tolerances determined unified approach so that everybody is on the same
by designs of goods and services. page.
• Targets are ideal values for which production is to
strive. • Process approach – An interrelated approach across
• Tolerances are necessary because it is impossible to all of your business processes will drive consistency
meet targets all of the time. and efficiency in results.

CUSTOMER PERSPECTIVE • Continual improvement – Analyze and review your

• ANSI and ASQ (1978) defined quality as the totality business processes on a frequent basis. This will help
of features and characteristics of a product or service achieve continuous improvement for your business
that bears on its ability to satisfy given needs. that can be maintained both short-term and long-
• Quality is defined as meeting or exceeding customer term.
expectations. (1980) • Factual approach to decision making – Data is
• Customers can be internal or external. king, therefore any decisions that are taken should be
in the best interests of your business, evidenced by
facts that drive optimal results.
Integrating Quality Perspectives in the Value Chain
• Relationship management – Establishing and
maintaining strong relationships with clients and
suppliers is key to better business performance.
KANO MODEL IN CUSTOMER REQUIREMENTS
Theory and developed by professor Noriaki Kano in the
1980's.
3 MAIN TYPES OF KANO MODEL
• Dissatisfiers ("Must Haves")
o Basic requirements that customers expected in a
product or service.
• Figure1.1 shows the essential elements of a value o Example: Smartphone
chain in manufacturing for developing, producing, • Satisfiers ("Wants")
and distributing goods to customers. o Requirements that customers expressly say they
• Each function is an internal customer of others, and want.
the firm itself may be an external customer or o Example: Battery Life of Laptop
supplier to other firms. • Exciters Or Delighters ("Never Thought")
• Customer perspective provides the basis for o New or innovative features that customer does not
coordinating the entire value chain. expect or even anticipate.
o Example: Car
FOUR KEY PROCESSES ON CUSTOMER-
Module 12: Customer Focus FOCUSED ORGANIZATION
PRINCIPLE OF QUALITY MANAGEMENT 1. MAKING SINCERE COMMITMENTS TO
CUSTOMERS
The core principles are the basis for quality management
• Customer Commitment
across your business, helping your business to maximize
o Organization that truly believe in the quality of their
performance improvement and meet compliance
products make sincere commitments to their
standards. The seven quality management principles of
customers.
ISO 9001 are:
o Effective commitments address the principal
• Engagement of people – Align and engage people concerns of customers, are free from conditions that
across all levels of your business to help create and might weaken customers’ trust and confidence and
deliver processes and procedures that add value to are communicated clearly and simply to customers
elevate both your business and your workforce.
2. ENSURING QUALITY CUSTOMER CONTACT • Customer Engagement
• Customer Contact and Interaction o It refers to customers’ investment in a commitment
o Customers interact with organization in many to a brand and product offerings.
different ways such as face to face with a o Is an important outcome of a customer-focused
salesperson or customer service representative or culture and the organization’s listening, learning
online on a website is called “moment of truth” (Jan and performance-excellence strategy.
Carlzon, CEO of Scandinavian Airlines) customers o Was introduced in the 2009-2010 Baldrige criteria
form perceptions about quality of the service by for performance excellence.
comparing their expectations with the actual • Characteristics Of Customer Engagement
outcomes. o Customer retention and loyalty
o Customers’ willingness to make an effort to do
3. SELECTING AND DEVELOPING CUSTOMER business with the organization.
CONTACT EMPLOYEES o Customers’ willingness to actively advocate for and
recommend the brand and product offerings.
4. MANAGING COMPLAINTS AND SERVICE
RECOVERY Module 13: Workforce Focus

CUSTOMER SATISFACTION AND ENGAGEMENT EVOLUTION OF WORKFORCE MANAGEMENT

• Frederick W. Taylor
• Customer Satisfaction o Father of Scientific Management
o “The result of delivering a product or service that o promulgated the departure from the craftmanship
meets customer requirements.” (ASQ Quality concept and replace it by scientific management.
Glossary) o He separates planning from execution, concluding
o Vital to keeping customer and a growing a business. that foremen and workers of those days lacked the
o Satisfaction drives profitability education necessary to plan their work.
o Taylor system improved productivity.
• American Customer Satisfaction Index o Taylor philosophy contributed to the development
o University of Michigan Business School and of labor unions and established an adversarial
American Society for Quality released ACSI in relationship between labor and management that
1994 must completely overcome.
o ACSI is an economic indicator that measures o Taylor system was the key force behind the
customer satisfaction at the national level. explosive economic development of the 20th
o ACSI’s goal is to raise the public’s perception and century.
understanding of quality, as do the consumer price o On the other hand, Taylor system failed to exploit
index and other economic indicators – that will help an organization’s most important asset - the
to interpret price and productivity measures and knowledge and creativity of workforce.
promote customer-driven quality. • Frank and Lillian Gilbreth and Henry Gantt
o ACSI is based on customer evaluation of the quality o refined Taylor system through motion study,
of goods and services purchased in the US and methods improvements, scheduling, and wage
produced by both domestic firms and foreign firms incentive systems.
with a substantial US market share.
o The ACSI model is used to compute four levels of WORKFORCE MANAGEMENT (HUMAN
indexes: a national customer satisfaction index and RESOURCE MANAGEMENT OR HRM)
indexes for seven industrial sectors, 40 specific • is the function performed in organization that
industries, and 203 organizations and agencies facilitates the most effective use of people
within those industries. (employees) to achieve organizational and individual
goals.
• builds a high-performance workplace and maintain
an environment for quality excellence to enable
employees and the organization to achieve strategic
objectives and adapt to change.
• Activities includes:
o determining the organization’s workforce needs;
o assisting in the design of work system;
o recruiting, selecting, training and developing,
counseling, motivating and rewarding employees;
o acting as a liaison with unions and government
organizations;
o and handling other matters of employee well-being.
Strategic Human Resource Management KEY INVENTORY TERMS
• is concerned with the contributions HR strategies • Lead time
make to organizational effectiveness, and how these o Time interval between ordering and receiving
contributions are accomplished. the order.
• It involves designing and implementing a set of • Holding (carrying) costs
internally consistent policies and practices to ensure o Cost to carry an item in inventory for a length of
that an organization’s human capital* contributes to time, usually a year.
overall business objectives. • Ordering costs
• Employees collective knowledge, skills and abilities o Costs of ordering and receiving inventory.
• Research shows that strategic human resource • Shortage costs
management practices are positively associated with o Costs when demand exceeds supply.
organizational performance indicators such as share
Economic Order Quantity Models
price, profits, net sales per employee, gross rate of
return on assets, employee retention, employee Assumptions of EOQ Model
attitudes and customer retention rates. • Only one product is involved
PERFORMANCE • Annual demand requirements known
• is an extent to which an individual contributes to • Demand is even throughout the year
achieving the goals and objectives of an organization. • Lead time does not vary
• Each order is received in a single delivery
High Performance Work • There are no quantity discounts
• is work approaches used to systematically pursue
TOTAL COST
ever-higher levels of overall organizational and
𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐶𝑜𝑠𝑡
human performance.
+ 𝐴𝑛𝑛𝑢𝑎𝑙 𝑂𝑟𝑑𝑒𝑟𝑖𝑛𝑔 𝐶𝑜𝑠𝑡
• It is characterized by flexibility, innovation,
knowledge and skill sharing, alignment with or
organizational directions, customer focus, and rapid 𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦
response to changing business needs and marketplace 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = (𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡) +
2
requirements. 𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑚𝑎𝑛𝑑
(𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡) +
𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦
EMPLOYEE INVOLVEMENT
• EI refers to any activity by which employees
participate in work-related decisions and DERIVING THE EOQ
improvement activities. • Using calculus, we take the derivative of the total
• Tom Peters suggested involving everyone in cost function and set the derivative (slope) equal to
everything, in such activities as quality and zero and solve for Q.
productivity improvement, measuring and monitoring
√2 (𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑚𝑎𝑛𝑑)(𝑂𝑟𝑑𝑒𝑟 𝑜𝑟 𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡)
results, budget development and etc. 𝑄0𝑃𝑇 =
• Employee suggestion system is a management tool 𝐴𝑛𝑛𝑢𝑎𝑙 𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡
for submission, evaluation, and implementation of an Minimum Total Cost
employee’s idea to save cost, increase quality or • The total cost curve reaches its minimum where the
improve other elements of work such as safety. carrying and ordering costs are equal.
Economic Production Quantity (EPQ)
• Production done in batches or lots
• Capacity to produce a part exceeds the part’s usage or
Module 14: Inventory Management demand rate
• Assumptions of EPQ are similar to EOQ except
Inventory Counting Systems
orders are received incrementally during production
• Periodic System
o Physical count of items made at periodic Economic Production Quantity Assumptions
intervals. • Only one item is involved
• Perpetual Inventory System • Annual demand is known
o keeps track of removals from inventory • Usage rate is constant
continuously, thus monitoring current levels of • Usage occurs continually
each item. • Production rate is constant
• Two-Bin System • Lead time does not vary
o Two containers of inventory; reorder when the • No quantity discounts
first is empty.
• Universal Bar Code
o Bar code printed on a label that has information
about the item to which it is attached.
ECONOMIC RUN SIZE
• Scheduling
√2 (𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑚𝑎𝑛𝑑)(𝑂𝑟𝑑𝑒𝑟 𝑜𝑟 𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡) Establishing the timing of the use of equipment,
o
𝑄0 = 𝑥
𝐴𝑛𝑛𝑢𝑎𝑙 𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 facilities and human activities in an organization
• Production and delivery
√𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑜𝑟 𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑅𝑎𝑡𝑒
• Customer service
𝑃 𝑜𝑟 𝐷 𝑅𝑎𝑡𝑒 − 𝑈𝑠𝑎𝑔𝑒 𝑅𝑎𝑡𝑒 o the support you offer your customers from the
TOTAL COSTS WITH PURCHASING COST moment they first contact your business to the
𝑇𝐶 = 𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑎𝑟𝑟𝑦𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 + months and years afterward
𝐴𝑛𝑛𝑢𝑎𝑙 𝑂𝑟𝑑𝑒𝑟𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 + 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔 𝐶𝑜𝑠𝑡 Module 16: Scheduling
or HIGH-VOLUME SYSTEMS
𝑇𝐶 =
𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦
(𝐻𝑜𝑙𝑑𝑖𝑛𝑔 𝐶𝑜𝑠𝑡) + • Flow system
2
𝐴𝑛𝑛𝑢𝑎𝑙 𝐷𝑒𝑚𝑎𝑛𝑑
o High-volume system with Standardized equipment
(𝑆𝑒𝑡𝑢𝑝 𝐶𝑜𝑠𝑡) + and activities
𝑂𝑟𝑑𝑒𝑟 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦
𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑖𝑛𝑔 𝐶𝑜𝑠𝑡/ 𝑃𝐷) • Flow-shop scheduling
o Scheduling for high-volume flow system
Module 15: Supply Chain Management
HIGH-VOLUME SUCCESS FACTORS
SUPPLY CHAIN • Process and product design
• the sequence of organizations - their facilities, • Preventive maintenance
functions, and activities - that are involved in • Rapid repair when breakdown occurs
producing and delivering a product or service. • Optimal product mixes
• Sometimes referred to as value chains. • Minimization of quality problems
• Reliability and timing of supplies
CENTRALIZED VS DECENTRALIZED
PURCHASING SCHEDULING LOW-VOLUME SYSTEMS
• Centralized purchasing
• Job-shop scheduling
o Purchasing is handled by one special department.
Scheduling for low-volume systems with many
o
• Decentralized purchasing
variations in requirements
o Individual departments or separate locations handle
• Loading
their own purchasing requirements.
o assignment of jobs to process centers
PURCHASING CYCLE ▪ Infinite loading
1. Requisition received ▪ Finite loading
2. Supplier selected ▪ Vertical loading
3. Order is placed ▪ Horizontal loading
4. Monitor orders ▪ Forward scheduling
5. Receive orders ▪ Backward scheduling
▪ Schedule chart
FUNCTIONS AND ACTIVITIES
• Forecasting GANTT LOAD CHART
o assures a business with a defined plan to overcome • used as a visual aid for loading and scheduling.
risks and contingencies that might otherwise affect • Example:
revenue and financial allocation.
• Purchasing Work Mon. Tues. Wed. Thurs. Fri.
o is responsible for obtaining the materials, parts, and Center
supplies and services needed to produce a product 1 Job 3 Job 4
or provide a service.
2 Job 3 Job 7
• Inventory management
o the process of storing, ordering, and selling of
3 Job 1 Job 6 Job 7
goods and services. 4 Job 10
• Information management
o the collection, storage, management and
maintenance of data and other types of information.
• Quality assurance
o refers to any planned and systematic activity
towards providing consumers with products of
appropriate quality, along with the confidence that
products meet consumers’ requirements and
developed many useful techniques for measuring,
controlling and improving quality.