OM, Theory-Constraints, Prod. Sys, Process Flow, Lean Prod., GT, JIT, Kanban

WHAT IS OPERATIONS MANAGEMENT?Defined

Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services. Like marketing and finance, OM is a functional field of business with clear line management responsibilities.
Major, overall activities of OM, often include product creation, development, production and distribution. Related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Although it seems to be quite similar to Production Management, there are at least two points of difference between the terms. First, the term Production management is more used for a system where tangible goods are produced. Whereas Operations Management is more frequently used where various inputs are transformed into intangible services. Viewed from this perspective, OM will cover suc serviceorganisations as banks, airlines, utiliies, pollution control agencies, super bazaars, ducational institutions, ibraries, consultancy firms and police departments, in additon to Manufacturing enterprises.

Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, wholesale, etc.

IMPORTANCE OF OPERATIONS MANAGEMENT
1. Improves productivity:
- Effective control of the conversion process of inputs into outputs (e.g., fewer defect output, less wastage of material inputs, effective allocation of staff, will lead to more output per unit time).
** Higher productivity leads to higher profits

2. Improves our ability to meet customer needs:
- Ensure provision of high quality products and services at reasonable prices (not just cheap output)
- Enables us to provide service to our target customers better than our competitors
** Meeting customer needs is crucial to long term survival of the firm.

3. Central to the building of a brand name/reputation of the company/firm, as a competitive weapon:
- High-quality product/service provider
- Low cost/good value producer/service provider (e.g., Woolworths, Sony & Panasonic)
- Fast delivery or response/lead time (e.g., Hong Kong – for 2 hrs suit tailoring)

4. Improves the living standards of citizens and wealth of nations:
- Has impact on GDP per capital – high output per unit time
- High-value added vs. skills needed to manufacture

OPERATIONS MANAGEMENT PRIORITIES
For firms to survive, Operations Management strategies and objectives must support Business Strategies. OPM must meet customer requirements/competitive priorities, most of which are;
- High quality – demand characteristics of domestic customers (e.g., Germany or Japan)
- Low cost (e.g., for rural low income customers)
- Shorter lead time/quicker response time (e.g., AA for breakdowns)
- Greater ability to change/adaptability/flexibility(e.g., Can Coke, 1 litre, 2.5 litres bottles)
- Reliability of service or products offered/Lower variability of specifications of products
- Higher service levels (total package of service)
**Coffee Shop: Cleanliness, lighting, speed of service (total shopping experience)
# Operations Management objectives must aim to give a firm an “operational-based competitive advantage”, by emphasizing specific areas of operations that can enable it to meet customer requirements shown above.

OPERATIONAL-BASED COMPETITIVE ADVANTAGE
Operational based competitive advantage can be achieved by:
- Doing things right the first time - Quality advantage;
defect free output, lower costs, improved competitiveness, can even lead to higher prices (e.g., Sony, Toyota, etc).
- Doing things cost effectively - Cost advantage;
cost efficiency leads to price competitiveness and decent profits. Lack of cost competitiveness can lead to large-scale retrenchments
- Do things fast: Speed advantage;
can lose sales if slow. Reputation for speed is important
- Change things quickly: Adaptability-advantage;
(ability to change from making Tea, Coffee, etc); Change operations to meet customer demand for variety ; for example, SME Furniture manufacturer (beds, chairs, tables, sofa)
- Do things right every time: Reliability-advantage;
offer error-free products or services to customers EVERY time
- Do things better: Service-advantage and continuous improvement (e.g., TQM – all aspects of business are important in delivering quality service to customer).




RELATIONSHIP WITH OTHER FUNCTIONAL AREAS:
The production system must work closely with other functional areas to achieve trhe best operating system. Accounting and Marketing are two such functional area where conflicts can occur and where cooperation and joint planning should occur.

Problems in cost accounting measurements: Cost accounting is used for performance measurement , cost determinations, investment justification, and inventory valuation.
From Cost Accounting view-point, performance has been traditionally been based on cost and full utilization. This logic forces supervisors to activate their workers all the time, which leads to excessive inventory. The cost accounting measurement system can also instigate other problems. For example, attempting to use idle time to increase utilization can create a bottleneck. Any measurement system should support the objectives of the firm and not stand in the way. Fortunately, the cost accounting measurement philosophy is changing.

Marketing and Production:
Marketing and Production should communicate and conduct their activities in close harmony. In practice, however, they act very independently. There are many reasons for this.
Marketing people are judges on the growth of the company in terms of sales, market share, and new products introduced. Marketing is sales oriented. Manufacturing people are evaluated on cost and utilization. Thus, Marketing wants a variety of products to increase the company’s position, whereas manufacturing is trying to reduce cost.
The solution to coping wit these differences is to develop an equitable set of measurements to evaluate performance in each area and to promote strong lines of communication so that they both contribute to reaching the firm’s goals.



RECENT TRENDS IN OPERATIONS MANAGEMENT:
The OM of today presents certain characteristics which make it look totally different from what it was during the past. Specifically , today’s production system is characterized by basically features:

Manufacturing as Competitive Advantage: Today the plants have excess capacities, competition is mounting and firms look and gain competitive advantage to survive and succeed. TQM, BPR, JIT, Flexible Manufacturing System FMS, Computer Integrated Manufacturing (CIM), and The Virtual Corporation are only some techniques that the companies are employing to gain competitive advantage.

Services orientation: The services sector is gaining greater relevance these days. The production system , therefore, needs to be organized, keeping in mind the peculiar requirements of the service component. The entire manufacturing needs to be geared to serve
- Intangible and perishable nature of the services,
- Constant interaction with clients,
- Small volumes of production to serve local markets, and
- Need to locate facilities to serve local markets.

Disappearance of Smokestacks : Smokestacks (term used by Alvin Toffler in his book ‘Power Shift’) represented industrial establishments which ejected thick smoke , polluting the environment around. They are disappearing gradually. Today’s factories are aesthetically designed and built, environment friendly, in fact, the are a home away from home.

Small has Become Beautiful: It was E.F. Schumacher who, in his book ‘Small is Beautiful’ opposed giant organizations and increased specialization. He advocated instead, intermediate technology based on smaller working units, community ownership and regional workplaces utilizing local labor and resources. Today, we find small and tiny manufacturing units sprouting everywhere. Increasing customization, flexible manufacturing system and similar other developments have made economies of scale and giant organizations irrelevant. Big organizations like Hindustan Aeronautics Limited are already showing signs of decay, and tiny units owned and managed by family members are doing roaring business.





MANUFACTURING AND THEORY OF CONSTRAINT:
Theory of constraints (TOC) is an overall management philosophy that aims to continually achieve more of the goal of a system. If that system is a for-profit business, then the goal becomes one of making more money, in the present as well as in the future.
According to TOC, every organization has one key constraint which limits the systems performance relative to its goal. These constraints can be broadly classified as either an internal constraint or a market constraint. In order to manage the performance of the system, the constraint must be identified and managed correctly (according to the Five Focusing Steps below).

Theory of Constraints is based on the premise that the rate of revenue generation is limited by at least one constraining process (i.e. a bottleneck). Only by increasing throughput (flow) at the bottleneck process can overall throughput be increased.
The key steps in implementing an effective TOC approach are:
Step zero: Articulate the goal of the organization. Frequently, this is something like, "Make money now and in the future."
Identify the constraint (the thing that prevents the organization from obtaining more of the goal)
Decide how to exploit the constraint (make sure the constraint is doing things that the constraint uniquely does, and not doing things that it should not do)
Subordinate all other processes to above decision (align all other processes to the decision made above)
Elevate the constraint (if required, permanently increase capacity of the constraint; "buy more")
If, as a result of these steps, the constraint has moved, return to Step 1. Don't let inertia become the constraint.

Throughput (defined):
In the business management theory of constraints, throughput is the rate at which a system produces money, in contrast to output, which may be sold or stored in a warehouse. The signal provided by throughput is received (or not) at the point of sale -- exactly the right time. Output that becomes part of the inventory in a warehouse may mislead investors or others about the organization's condition by inflating the apparent value of its assets. The theory of constraints and throughput accounting explicitly avoid that trap.
Bottleneck (defined):
A bottleneck is defined as any resource whose capacity is less than the demand placed on it. A bottleneck is a constraint within the system that limits throughput. It is that oint in the manufacturing process where flow thins to a narrow stream. A bottleneck may be a machine, scarce or highly skilled labor, or a specialized tool.



Within manufacturing operations and operations management, the solution seeks to pull materials through the system, rather than push them into the system.
Drum-Buffer-Rope
Simplified Drum-Buffer-Rope
Drum-Buffer-Rope is a manufacturing execution methodology, named for its three components. The drum is the physical constraint of the plant: the work center or machine or operation that limits the ability of the entire system to produce more. The rest of the plant follows the beat of the drum. They make sure the drum has work and that anything the drum has processed does not get wasted.
The buffer protects the drum, so that it always has work flowing to it. Buffers in DBR have time as their unit of measure, rather than quantity of material. This makes the priority system operate strictly based on the time an order is expected to be at the buffered operation. In traditional DBR usually calls for buffers at several points in the system: the constraint, synchronization points and at shipping. S-DBR requires only a single buffer at shipping.
The rope is the work release mechanism for the plant. Only a "buffer time" before an order is due does it get released into the plant. Pulling work into the system earlier than a buffer time guarantees high work-in-process and slows down the entire system.

Traditional Drum-Buffer-Rope (DBR)
The traditional DBR model is designed to regulate the flow of work-in-process (WIP) through a production line at or near the full capacity of the most restricted resource in the manufacturing chain. To achieve this optimum flow, the entry of work orders into production is synchronized with the current production rate of the least capable part of the process, referred to as the capacity-constrained resource (CCR). The production rate of this CCR is typically likened to the rhythm of a drum, and it provides the pace for the rest of the system. The rope is essentially a communication device that connects the CCR to the material release point and ensures that raw material is not inserted into the production process at a rate faster than the CCR can accommodate it. The purpose of the rope is to protect the CCR from being swamped with work-in- process. To protect the CCR from being "starved" for productive work to do, a time buffer is created to ensure that work-in- process arrives at the CCR well before it is scheduled to be processed.





TYPES OF PRODUCTION SYSTEM:
PS is a system in itself and like any other system PS consists of inputs, conversion process, outputs, goals/objectives, feedback, control mechanisms. The 5 Ps of Production – people, plant, parts, processes, planning n control process are the resources of PS.
Features of Production System:
- As the PS expands , the Corporate Hirarchy within it also expands.
- As……., different [parts may perform specialized functions.
- Control may be either feedback or feed forward.
Types of PS:
A) Product Oriented
- Usually made to stock system . Product is something tangible.
- No customer participation
- Capacity defined as ‘output’
- Relatively easy capacity p[planning
- More focus on inventory control.
- Quality control is easy.
- Ease of access to market one of the important factor in most cases.
B) Services Oriented
- Usually made to order system. Services are intangible. You produce service when there is order.
- More customer participation.
- Services defined as input.(example, seating capacity of restaurant)
- Relatively difficult capacity planning, because services are intangible and we define capacity in terms of inputs.
- No inventory.
- Ease of access to markets, most important factor.

Organizing Process Flow:
Five types of process are distinguished. They are:

Project: deals with one-of-a-kind products that are tailored to the unique requirements of each customer. A construction company , with its many kinds and sizes of projects , is an example[le of this. Since, the products cannot be standard, the conversion process must be flexible in its equipment capabilities, human skills and procedures.

Job Shop: it is a process appropriate for manufactures of small batches of different products, each of which is custom designed and hence requires its own unique set of processing steps. Printing press illustrates job shop technology. Each product uses only a small portion of the shop’s human resources and general purpose equipment. Much time is spent waiting for access to equipment; some equipment is overloaded while the other equipment is idle, depending upon the mix of jobs at hand.

Batch technology: is a step ahead from job shop in product standardization but is not as standardized as the assembly line process. In this kind, each time a fixed lot / size/ batch of a particular product is produced before switching to next variety. Like job shop it also produces, a wide variety of products in a wide variety of volumes. The system must be flexible for the low volume / high variety products.

Assembly Line: This technology facilitates a narrow range of standardized products. For example, laundry appliances. Since the product designs are relatively stable , specialized equipment , human skills , and management systems can be developed and dedicated to the limited range of products and volumes. Beyond this range the system is rigid.

Continuous flow technology: This is exemplified by chemical plants and oil refineries. Materials and products are produced in continuous, endless flows, rather than in batches of discrete units. The product is highly standardized. This technology affords high volume, around the clock operation, with capital intensive and specialized automation.





LEAN PRODUCTION:
Lean production is an integrated set of activities designed to achieve high-volume production using minimal inventories of raw materials , work-in-process, and finished goods. Parts arrive at the next workstation ‘ just in time’ and are completed and move through the process quickly. Lean is also based in the logic that nothing will be produced until it is needed.
Fig. The elements of lean production were developed in Japan and embodied in Toyota Production System- the benchmark for lean manufacturing. The TPS was developed to improve quality and productivity and is predicated upon two philosophies that are central to the Japanese culture ; Elimination of waste and respect for people.

Elimination of waste:

Seven types of waste need special attention:
Waste from over production
Waste of waiting time for processing
Transportation waste
Inventory waste
Processing waste
Waste of motion
Waste from product

Method/Techniques for eliminating waste :

Focused Factory Networks: The Japanese build small specialized plants rather than large vertically integrated manufacturing facilities. (Toyota has 12 plants in and around Toyota City). They find large operations and their bureaucracies difficult to manage and not in line with their management styles . Plants designed for one purpose can be constructed and operated more economically.

Group Technology: GT is a philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a specialized work cell. Instead of transferring jobs from one department to another to specialized workers , GT considers all operations required to make a part and groups those machines together. This eliminates movement and waiting time between operations, reduce inventory and reduce the number of employees required. Workers , however , must be flexible to run several machines and processes. Due to their advanced skill level, these workers have advanced job security.
Quality at the source: It means ‘do it right the first time’ and when something goes wrong , ‘stop the process or assembly line immediately.’ Workers become their own inspectors , personally responsible for their output.

JIT production: JIT means producing what is needed when needed and no more. Anything over the minimum amount necessary is viewed as waste , because effort and material expended for something not needed now cannot be utilized now. JIT is typically applied to repetitive manufacturing. Under JIT the ideal lot size is 1.
Uniform plant loading: Smoothing the production flow to dampen the reaction waves that normally occur in response to schedule variations. Toyota found that they could d this by building the same mix of products every day in small quantities. Thus, they always have a total mix available to respond to variations in demand.

Kanban production control system: The Japanese word "Kanban" is a common everyday term meaning "signboard". Kanban is a signaling system. As its name suggests, Kanban historically uses cards to signal the need for an item. However, other devices such as plastic markers (Kanban squares) or balls (often golf balls) or an empty part-transport trolley can also be used to trigger the movement, production, or supply of a unit in a factory. For example if, in the production of a widget, the operator has two shelves, one on either side of their workplace. The raw materials can be designated to arrive on one shelf and the finished articles placed on the other. These shelves can then be designated to act as Kanban. The outgoing Kanban signals the customer's need so that when it is empty, the operator must produce one more widget. Kanban is frequently known as a "pull" system, as everything is pulled from the previous production stage in response to actual demand. Demand forecasts are not used in Kanban systems. This is the opposite of the traditional "push" manufacturing philosophy, in which everything is made to forecasted future needs.

Minimized Setup Times: Because small lot sizes are the norm, machines must be quickly set up to produce the mixed models on the line. To achieve such setup time reduction, setups are divided into internal and external activities. Internal setups must be done while a machine is stopped. External setups can be done while a machine is running.

RESPECT FOR PEOPLE:
Viewing workers as assets and not as human machines.
Seeking cooperation of workers and unions.
Extending job security, avoiding hire and fire policy as far as possible.
Rewarding for better productivity.
Developing long term relationship with vendors and sub-contractors.
Using bottom round management.