1. Operations Management Dr inż. Jacek Rudnicki E-mail: jacek
Operations Management Dr inż. Jacek Rudnicki Internet page:  1

2. Scope of Operations Management course
1. Introduction to Operations Management.
2. Operations/Production Management System. Midterm production planning. Sales and Operations Planning (SOP).
3. Master Production Scheduling (MPS).
4. Inventory Management. Inventory Control Systems.
5. Material Requirements Planning (MRP).
6. Production Scheduling and Control.
7. JIT/Lean Production.
8. Exam.

3. Introduction to Operations Management1
operations & production,
productivity,
operations management aims and decisions,
production processes,
types of production environment,
types of layout,
types of products structure

4. Operations Management
Production Management
Production and Services Management
Operations Management (OM)
Production Logistics
Operations and Supply Chain Management ? 4

5. New Challenges in Operations Management
New conditions for enterprises:
Globalization
Domestic and foreign competition
Escalation of customer requirements – quicker, better, cheaper and individually customized products
Very short product live cycles
Advances in technology (Internet, Intelligent robots, Industry 4.0)
The new conditions create new challenges for Operations Management
To improve their competiveness the enterprises must evolve:
From To
Local or national focus Global focus
Large batch shipments Just-in-time shipments
Cheap purchasing Supply chain partnering
Lengthy product development Rapid product development
Standard products Mass customization
Narrow job specialization Empowered, high skilled
employees, team work 30

6. Challenges for the Operations Management
Global focus – Low-cost, reliable world wide communication and transportation networks. Operations menagers are re
Just in Time performance – Large financial resources are involved in inventory and inventory slow down response to the dynamic changes in the marketplace. Operations managers are cutting inventories from raw materials to finished goods.
Supply chain partnering. Shorter product life cycles and rapid changes in material and process technology, require more participation by suppliers. Suppliers supply over 50% of the value of products. O.m. are creating the long-term partnerships with critical suppliers.
Rapid product development - Shorter product life cycles, needs the faster design technology and more effective design management.
Mass customization – Mass product individualisation. Operations managers are responding with production processes that are flexible enough to respond effectively and efficiently to individual needs of customers.
Empowered employees - More sophisticated and a more technical work-place have to require more competence at the workplace. Operations managers move more decision making to the individual worker.

7. Products (Goods, Services)
Operations
OPERATIONS add value to the product. The outputs of the operations should be worth more to the consumer than the total cost of the inputs
OPERATIONS employ labour and management (people), and use facilities and equipment (capital) to change materials into finished good (car) or to provide services (car wash)
Transformation
process
Products (Goods, Services)
People
Capital
Materials
INPUTS
OUTPUTS
OPERATIONS 7

8. Operations Management
Operations management (OM) is the set of activities that creates goods and services through the transformation of inputs into outputs
Operations management - the function responsible for managing the process of creation of goods and services. It involves planning, organizing and controlling all the resources needed to produce a company’s products
Operations system infrastructure
Operations system structure
PRODUCTION SYSTEM
Transformation process
PRODUCTS (goods, services)
Human Resources
Capital Resources
Material Resources
INPUTS
OPERATIONS
OUTPUTS
OPERATIONS MANAGEMENT
Information feedback
decision

9. Flows in enterprise Enterprise (Management system)
Finance Management
Capital and Cash Flow
Information Management
Information Flow
Operations Management
Materials Flow

10. Logistics principles of Operations Management
Principles of Operations Management (7R):
Right product
Right quantity
Right quality
Right place
Right time
Right price (cost)
Right customer

11. Operations Management aims
Operations aims:
increase productivity
reduce costs
decrease cycle times (lead times)
improve flexibility to meet rapidly changing customers needs
improve quality
improve customer service.
An organisation that can achieve these aims will gain a competitive advantage

12. Decisions of Operations Management
Product design. What product to produce ?
Process design. What process to apply?
Capacity design. How large a facility to build?
Facility location. Where to locate facility?
Layout design. Layout selection. Process or product oriented layout?
Job design. Work measurement. How work is organized & measure?
Planning and scheduling. What to produce, how much to produce and when to produce? What materials, how much and when to purchase?
Quality. How to improve quality?

13. Framework for Operations Management
The Organization’s Goals and Objectives
DESIGNING THE SYSTEM
Product/service
design
Facility location
Job design
Proces design
Facility layout
Work
measurement
Capacity
PLANNING SYSTEM
Long-term planning
Medium-term planning
Production scheduling
MANAGING AND CONTROLING SYSTEM
Managing people
Inventory management
Information management
Quality management
Productivity improvements
MARKET FEEDBACK
PERFORMANCE

14. Organizational Functions
Marketing responsible for:
sales
recognizing customer demand
Finance/Accounting responsible for
managing cash flow
capital investments
Operations resposible for
creating product or service 25

15. Functions in Airline Organizations (Service)
Marketing
Operations
Finance/
Accounting
Flight
Operations
Ground
Support
Facility
Maintenance
Catering 26

16. Functions in Manufacturing Company
Marketing
Operations
Finance/
Accounting
Manufacturing
Production
Control
Quality
Control
Purchasing 28

17. Goods versus Services Good Service Tangible product
Consistent product definition
Production separate from consumption
Can be inventoried
Low customer interaction
Product is transportable
Intangible product
Inconsistent product definition
Produced & consumed at same time
Difficould to inventory
High customer interaction
Provider, not product is transportable 31

18. Adam Smith Born 1723 - died1790 „Wealth of Nations” edited 1776
The wealth of nations is productivity
Work division and specialization - the way to improve productivity

19. Frederick W. Taylor Born 1856; died 1915
Known as ‘father of scientific management’
In 1881, as chief engineer for Midvale Steel, studied how tasks were done
Began first: time & motion studies
Created efficiency principles
Taylor: Management Should Take More Responsibility for:
Matching employees to right job
Providing the proper training
Providing proper work methods and tools
Establishing motivation for work to be accomplished 8

20. Henry Ford ‘Make them all alike!’ Born 1863; died 1947
In 1903, created Ford Motor Company
In 1913, first used moving assembly line to make Model T
Unfinished product moved by conveyor next to work station
Paid workers very well for 1911 ($5/day!)
‘Make them all alike!’ 11

21. Operations as Value Adding Process
Value added – part of product value created and added to the product in production process
Value - something the customer is ready to pay for
F value of product atitudes for customer
Value Indicator V = =
C production costs
V >> 1 – a condition of purchase of the product by the customer
The ways to increase V :
Increase the product value
Decrease costs
7 WAYS OF DECREASING OF PRODUCTION COSTS
Change „material” – make value analysis if cheaper material can be used
Increase productivity
Reduce material costs
Reduce energy consumption and energy costs
Reduce production lead time
Improve quality
Move production to cheaper labour cost country

22. Measures of operations processes performance

23. Measures of operations process performance
EFFECTIVENESS
Actual OUTPUTS (100%)
EFFECTIVENESS =
Planned OUTPUTS
EFFECTIVE means the system acheives the planned results
VALUE of OUTPUTS
EFFICIENCY =
VALUE of INPUTS
EFFICIENCY
EFFICIENT means the system uses a „reasonable” amount of inputs (costs) to acheives the desired outputs
PRODUCTIVITY
- measure of efficiency
OUTPUTS
PRODUCTIVITY =
INPUTS

24. Productivity
PRODUCTIVITY – a measure of how efficiently inputs are converted into outputs; the ratio of outputs to inputs
Units produced and sold
PRODUCTIVITY =
Single INPUT used
Single–factor productivity - measures output relative to a single input
Labour or Material or Machine or Energy) costs (For example: 2000 units produced/200 h. used, P = 10unit/h.)
OUTPUT
PRODUCTIVITY =
Labour + Material + Energy + Capital + Others
Multifactor productivity - measures output levels relative to multiple factors such
Labour, Material, Machine, Energy costs. For example, a company produces weekly the equivalent of $10,000 in the form of finished goods and the weekly value of all the inputs (labor, materials and other) costs is $5,000. Total productivity for the week is:
P = $10 000/ $5000 = 2
The core Operations Management objective: to improve Productivity
The way to improve productivity:
Increase outputs,
Decrease inputs
Increase outputs through increase inputs

25. The Material Flow Cycle Time
Raw materials - Wood
Final product - Boards
Cycle time - the total time needed to complete a business process (also called through-put time)

26. The Material Flow Cycle
Other
Wait
Time
Move
Queue
Setup
Run
Input
Cycle Time
Output
© 1998 by Prentice Hall, Inc.
A Simon & Schuster Company
Upper Saddle River, N.J
Run time: Job is at machine and being worked on
Setup time: Job is at the work station, and the work station is being "setup."
Queue time: Job is where it should be, but is not being processed because other work precedes it.
Move time: The time a job spends in transit
Wait time: When one process is finished, but the job is waiting to be moved to the next work area.
Other: "Just-in-case" inventory.
The ways of production cycle time reduction:
Parallel processes
Layout changing
Waste (non value adding activities) elimination or reduction
Other 12

27. Process Efficiency Indicator
Value adding times
Process Efficiency Indicator =
Total cycle time
PEI – ratio of value adding times to the product to total cycle time (product transit time through the production process)
The Goal to achive: total cycle time = value adding times

28. Types of production processes
Increase of Product’s and Process’s Repetetivness
Project and job processes
Intermittent or batch processes
Repetitive or flow and continuous processes
Make to Order
Assembly to Order
Ferrari
Make to Stock
Popular cars
Household goods production, washing machines
Electronic goods industry
Engineering to Order
Bolide for Formule 1
Sheep building
Hause building
Film production
Presidencial companion
Master thesis
Clothes to order
Machines production to order
Furniture, windows, doors, bicycles,
Refinery
Metallurgical
Energetic industry
Chemical
Food
Apparatus processes

29. Relations between costs and production volume depending on production process
Total revenue cost
Revenue cost = Fixed cost + Variables Cost
Intermittent process
Project type process
Continuous process
Use
Project or job proces
Fixed–positions Layout
Use
Intermittent process
Process Layout
Use
Continuous process
Product Layout
Production volume

30. Volume and Variety of Products influence on process choice
Poor Strategy
(Fixed costs and cost changing to other products are high)
Volume and
Variety of
Products
Low Volume High
Variety Process
(Intermittent)
Repetitive
Process
(Modular)
High Volume
Low Variety
(Continous)
One or very few
units per lot
Projects
Very small runs, high
variety
Job Shops
Modest runs, modest
Disconnected
Long runs, modest
variations
Connected
Very long runs,
Changes in
attributes
Continuous
Equipment utilization
5%-25%
20%-75%
70%-80%
(High variable costs)
The Hayes – Weelwright Matrix

31. Types of production processes
Continuous process
Intermittent process
Job and project process
Process
Product differentiation
Very high
Very low
High
Products examples
Food, cosmetics, tires.
Books, shoes, clothes, furniture, bicycles
Ships,
Houses
Product standarization
Low
Medium
Low (few or one)
Medium (diffrent batches )
Production volume
Machines and equipment
General purpose
Semi - specialized
Specialized
Labour
Highly
skilled
Low skills
Semi- skilled
Communications service, Quick food services
Tailored software, master thesis.
Flow of work
Highly defined and fixed
More defined
Variable

32. Production lines – Continuous flow process procesy ciągłe
Production lines (assembly lines):
Product oriented 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” (tact)
One piece flow
Best suited to high-volume production of standardized products

33. Types of production system layout
1. Product Layout (Product-Focused Process Orientation)
Sewing pants workstation
Cutting pants workstation
Finishing workstation
Packing workstation
Pants production line
Product layout – is formed by grouping different machines and workers with different skills to produce a product or family of products in a single cell, line or department
2. Process Layout (Process-Focused Process Orientation)
Process layout – is formed by grouping similar machines and workers with similar skills in order to perform the same process on different products in a single department

34. Process Layout and Product Layout

35. Process versus Product Layout
Process Layout
Product Layout
Customized goods
Standardised goods
Functional grouping of activities (machines)
Sequential arrangement of activities (machines)
Varied path/routing
Fixed path/routing
Low/fluctuating demand
High/stable demand
General purpose equipment
Special purpose equipment
Fixed costs - low
Variable costs - high
Fixed costs - high
Variable costs - low
Labour skills high/varied
Labour skills limited
The Factors influencing the choice of layout
Product and product differentiation (variety)
Quantity – production volume

36. Production Environments
PRODUCTION ENVIRONEMENT  „enterprise - customer” relations
Classical production environments
MAKE TO STOCK
MAKE TO ORDER
FIRM
supplier
CUSTOMER
receiver
FIRM
supplier
CUSTOMER
receiver
Standard products
(standarization)
Lack of customer influence on product features
Repetetive production (mass processes, big batch processes)
Customer oriented products
(customization)
Big customer influence on final product features
Intermittant production (one of a kind processes, small batch processes)
„SALE OF WHAT WAS ALREADY MANUFACURED” ”
„MANUFACTURING OF WHAT WAS ALREADY SOLD”

37. Contemporary Production Environments
PRODUCTION STAGE
DISTRIBUTION STAGE
ENGINEER TO ORDER - ETO
MAKE TO ORDER - MTO
ASSEMBLE TO ORDER - ATO
MAKE TO STOCK - MTS
FINISH TO ORDER - FTO
COMPLETE TO ORDER - CTO
PACK TO ORDER - PTO

38. Production environments - order decoupling point
Purchasing
Fabrication
of components
Production
of subassemblies
Assembly
of products
Make To Stock S U P L I E R
ODP C U S T O M E R
Assembly To Order
ODP
Make To Order
ODP
Engineer To Order
ODP
Forecasts based production standards
ODP
Customer Orders based production customer oriented
ODP
Order Decoupling Point – ODP decouples orders based processes and forecasts based processes

39. Types of product structure
Make to Stock
Type „A”
MTS
Make to Order
MTO
Type „V”
Assembly to Order
MTO
MTS
Type „X”
Products
Raw materials, parts
Optional modules
Low
High
Product diversification
Few
Number of modules
Raw materials diversification