Operations

Describe the transformation process for a paper factory/ passenger ferry
Input resources / transformation / Paper manufacturer

Transformed resource: Wood pulp, recycled paper, chemicals, etc.
Transforming resource: Paper-making machinery, staff

Transformation:
– Changing the physical and chemical composition of materials
– Materials processing
(a manufacturing operation)

Output:
Paper

Passenger ferry

Transformed resource: Passengers (at one port)
Transforming resource: Ship, crew

Transformation:
– Changing the location of passengers
– Customer processing
(a service operation)

Output:
Passengers (at destination port)

Operations which process principally materials, information or customers?
Materials:
Brewery (physical composition)
Retail operations (possession)
Parcel delivery (location)

Information:
Accountant (possession)
Telecoms company (location)

Customers:
Massage Parlor (psychological state)
Theatre (psychological state)
Hospital (physiological state)

What is a hierarchy of operations?
Idea that any operation can be viewed and analyzed on three levels – supply network (flow between operations), operations (flow between processes), processes (flow between resources)

e.g. Supply network
Farmers / Manufacturers – Wholesalers – Restaurant – Customer

Restaurant operation
Customer books table – Orders food – Food is cooked – Food is served – Food is eaten – Bill is paid

Cooking process
(Transformed resources) Food, Ingredients (Transforming resources) Oven, pots, pans – (Transformation process) Ingredients are combined and cooked – (output) A restaurant dish

What are the characteristics of operations (the 4 v’s)?
What are the implications of high and low?
Volume
Low: 1)Low repetition 2)Each staff member performs more of job 3) Less systemization 4)High unit costs
High: 1)High repeatability 2) Systemization 3) Capital intensive 4) Low unit costs

Variation of demand
High: 1)Anticipation 2) Flexibility needed 3) Changing capacity
Low: 1) Stable 2) Routine 3)Predictable 4)High utilization

Variety
High: 1)Complex 2)Flexible 3)Match customers needs
Low: 1)Well defined 2) Routine 3) Regular 4)Standardized

Visibility
High: 1)Satisfaction governed by customer perception
2) Customer contact skills needed
Low: 1) High staff utilization 2)Low contact skills 3)Time lag between production and consumption

Apply the four Vs model to three different eating places (restaurants, cafes or somewhere else where food is served), and to assess how each of the four Vs impacts on its operations management.
1. Volume
Actual volume (the number of customers served)
The capacity of the operation (the maximum the operation could cope with)
Seat occupation rate
e.g. with about 40 seats which is open 8 hours a day, if a customer occupied a seat for two hours on average, the capacity would be:

8 × 40 × 0.5 = 160 customers a day.

2.Variety
There are two important aspects to measuring variety for restaurants. The first is the range of different foods that the restaurant serves. Just count the number of different items on the menu to get an indication of this. The second is whether the restaurant will ‘customise’ food to your own preference. For example, does it serve steak well done, medium and rare? Does it allow you to choose the fillings for your sandwiches?

3.Variation
Possibly the easiest way to measure variation is the ratio of peak demand in a day or a week, to the lowest demand during that day or week. Again, you could try asking the restaurant manager for this information, or (if you have time) make observations throughout the day or even the week. For example, the restaurant might be up to its full capacity for part of the day but, at its quietest point, only 10 per cent full.

4.Visibility
This is a relatively simple issue. Simply ask, ‘How much of the preparation of the food do you witness?’ It is unusual to see every aspect of food preparation – preparing the vegetables, slicing the bread, etc. But you may see food being cooked and assembled in some burger restaurants. The other way of looking at this issue is to ask yourself whether the preparation of the food is being deliberately put ‘center stage’ in the restaurant. Some restaurants have a policy of doing this so as to entertain customers while they are waiting for their food.

Hayes and Wheelwright’s four stages of operations contribution
1. Internal neutral
– Operations is holding the company back from competing
– does not contribute competitively
– it attempts to improve by avoiding mistakes
2. External neutral
– Operations begins to compare itself to ‘best practice’ I outside market
3. Internally supportive
– One of the best operations in the market
– Develop a view of competitive and strategic goals and develops appropriate operational resources to support it.
4. Externally supportive
– Driving function within the business
– Provides the foundation for competitive success

(Some would say Stage 4 doesn’t exist since ‘operations’ cannot take a leading role and drive strategy. Those taking a ‘marketing orientation’ would say operations is a supportive function which exists to deliver what the marketing requires.)

What are the 5 performance objectives?
What benefits do they provide the organization with?
1. Quality
– customer satisfaction
– fewer mistakes made by each process reduces the cost of having to remediate problems
– increase dependability internally which leads to efficient and stable processes

2. Speed
– faster throughput reduces inventories
– shorter lead time and faster the throughput the later forecasting can be left which reduces risks

3. Dependability
– saves time and reduces costs
– gives stability and predictability to operations internally so each process can concentrate on improving its own area of responsibility

4. Flexibility
(product flexibility, mix flexibility, volume flexibility, delivery flexibility)
-maintains dependability in spite of unexpected events/disruptions

5. Cost
(A universally attractive objective)

4 perspectives on operations strategy
•the top-down perspective: what the business wants operations to do
•the bottom-up perspective: what day-to-day experience suggests operations should do
•the market requirements perspective: what the market position requires operations to do
•the operations resources perspective: what operations resources can do.
How can the relative importance of different competitive factors be determined?
1, Order-winning factors – contribute directly and significantly to winning business
2. Qualifying factors – may not b major competitive determinants of success but operation’s performance needs to be over a particular ‘qualifying’ level to be considered.
3. Less important factors – have little impact on customers no matter how the operation performs them.
What are likely to be order-winning factors for businesses at different stages of the product life-cycle?
1. Introduction to the market – product/service specification
2. Growth in market acceptance – availability
3. Maturity of market, sales level off – low price, dependability
4. Decline as market becomes saturated – Low price
Operations strategic decision areas
Structural decision areas
the “building blocks” of the operation; they define its overall tangible shape and architecture.

1. Facilities
The location, size and focus of operational resources. Decisions about where to locate production facilities, how large each should be, what goods or services should be produced at each location, what markets each facility should serve, etc.

2. Capacity management
The capacity of operations and their ability to respond to changes in customer demand. The use of facilities, working hours and staffing levels.

3. Technology
The technology of the equipment used in operations processes. For example, the degree of automation used, the configuration of equipment.

4. Supply network
The extent to which operations are conducted in-house or are sub-contracted. The choice of suppliers, their location, the extent of dependence on particular suppliers, and how relationships with suppliers are managed.

Infrastructure decision areas
Infrastructural decisions, on the other hand, affect the people, systems, and culture

1. Planning and control
The systems used for planning and controlling operations.

2. Quality
Quality management policies and practices.

3. Work organisation
Organisational structures, responsibilities and accountabilities in operations.

4. Human resources
Recruitment and selection, training and development, management style.

5. Performance measurement
Financial and non-financial performance management and its linkage to recognition and reward systems.

6. New product development
The systems and procedures used to develop and design new products and services.

Three views of trade offs in operations
Three views of trade offs in operations
1. Emphasises ‘repositioning’ performance objectives by trading off improvements in one area for a reduction in performance elsewhere.
(e.g. improve quality of teaching (hiring more qualified teachers) but also increase cost)
2. Increase the overall effectiveness of the operations to establish a new ‘efficient frontier’
(e.g. establish new classroom practices/ micro-operational improvements to increase quality but maintain cost)
3. Operational ‘focus’ – dedicating each operation to a concise, manageable set of objectives, services, products to promote increased efficiency. An ‘operation-within-an-operation’ concept allows organisations to accrue the benefits of focus without setting up independent operations.
(e.g. more ESL departments with senior teachers responsible for improving standards relevant to student’s preferences, motivations, needs)
Three general approaches to managing processes with different volume/variety characteristics
High variety/low volume
Professional services (service)
Project processes (manufacturing)

Medium variety/medium volume
Service shops (service)
Batch processes (manufacturing)

Low variety/high volume
Mass service (service)
Continuous process (manufacturing)

What management decisions does Kings need to take with regards to its supply network?
– How much of the network should be outsourced?
– Disintermediation? Should agents be used?
– How wide is it process span? Upstream/ Downstream integration?
– Long-term capacity management?
– The shape of its network?
– Co-opetition with suppliers, customers, universities
1. Advantages and disadvantages of outsourcing

2. Why might Kings keep parts of its supply network in-house?

1. Adv.
Quality – Supplier may have specialized knowledge
Speed of response – Can be built into supply contract
Dependability – Late delivery penalties can be built into contract
Flexibility – Outsource suppliers may be larger wither wider capabilities
Cost – Outsources companies can achieve economies of scale

Disadv.
Quality – origins of quality problems are easier to trace in-house
Flexibility – easier to alert in-house operations to required changes even though they may be unable to respond
Cost – capture the profits from outsource supplier

2. – If activity is of strategic importance
– If they have specialized knowledge
– If their operations performance is superior
– If operations performance improvement is likely

Supply-side and demand-side factors on location decisions
Supply side (vary to influence costs):
– Proximity to suppliers reduces transport costs
– Land costs
– Cheaper labour costs
– Community factors (tax rates, political stability, local amenities, support services)

Demand-side (vary to influence revenue):
– More convenience for customers
– Better image for customers
– More suitable (intrinsic characteristics of site)

What location techniques can be used to make objective decisions about location of operations?
Weighted-score method
Identifying the criteria which will be used to evaluate the various locations and their relative importance.
e.g. Suitability of location (weighting 4)
Rate of local property (weighting 3)
Evaluating each location out of 100.
e.g. Suitability – Brighton (80) Bournemouth (70)

Centre-of-gravity method
To find a location which minimizes transportation costs

3 aspects of product/service design
concept – the nature, use and value of the product
e.g. an economical two-seat convertible sports car

package – ‘component’ products and services that provide benefits defined in the concept.
i.e. core products/ supporting goods or services

process – the way in which it will be created and delivered to the customer

5 stages of concept design with examples and related concepts
Concept generation
e.g. R and D, focus groups with customers, ideas from staff, ideas from competitor activity, reverse engineering (taking apart competitor products in order to understand it)

Concept screening – assessing design against criteria (feasibility, acceptability, vulnerability) e.g. design funnel which reduces many options to one final design

Preliminary design – specifying the components of the package, reducing design complexity (standardization, commonality, modularization)

Design evaluation –
e.g. Value engineering – prevent unnecessary costs before producing the product/service, design is subject to rigorous scrutiny by designers, purchasing specialists, financial analysts to find any similar components that could do the same job at a lower cost
Taguchi methods – to test robustness of the design e.g. can design cope with staff shortages

Prototyping and final design

Benefits of interactive design
Interactive design involves ones stage of development starting before the previous one has finished, so there is simultaneous (or concurrent) work on the stages. Simultaneous development to reduce time to market (TTM), which has several benefits:

– it does not have to make such drastic improvements for each new product because it introduces new products more frequently
– sequential design stages cause delays to revenues and cash flows
– fewer development costs

Expert systems (ESs) can be used in operations management to assist with decision making in which areas:
Expert systems use an ‘inference engine’ which performs the reasoning or logic on the criteria that have been defined as governing the decision. ESs can be used for:
– capacity planning
– facility location
– facility layout
– scheduling
– inventory control
What is RFID ?
Radio frequency identification (RFID) uses Electronic Product Codes (EPC) – a unique number that is embedded in a smart chip. At various stages of manufacturing, distribution, storage and sale each smart tag can be scanned and info transmitted to the internet.

– help save money in lost products
– identify location of potentially dangerous products to be recalled
– tracking data on how customers use the product after sale

Types of customer-processing technology
Slack et al. classify customer processing technologies in terms of type of interaction between customer and the technology. This can be:
•Active interaction: in which a customer interacts directly with the technology (e.g., a bank’s ATM).
•Passive interaction: in which the customer has no, or very limited, control over the technology (e.g., cinemas and moving walkways).
•Hidden interaction: in which the customer is typically unaware of the technology (e.g., security cameras and bar code scanners).
•Interaction through an intermediary: in which the customer interacts with the person (typically a representative or employee of the processing organisation) who operates the technology (e.g. call centres and travel agents).
‘Planning’ and ‘control’ are the two interrelated terms associated with activities aimed at reconciling the supply from an operation with the demand for its outputs.

What is the difference between planning and control?

‘Planning’ and ‘control’ are the two interrelated terms associated with activities aimed at reconciling the supply from an operation with the demand for its outputs.

Planning is concerned with deciding:
•what activities should take place in the operation
•when they should take place
•what resources should be allocated to them.

Control is concerned with:
•understanding what is actually happening in the operation
•deciding whether there is a significant deviation from what should be happening
•(if there is deviation) changing resources in order to affect the operation’s activities.

Difference between short-term and long-term planning and control?
Long-term planning and control:
– Uses aggregated demand forecasts
– Determines resources in aggregated form
– Objectives set in largely financial terms

Short-term planning and control:
– Uses total disaggregated forecasts or actual demand
– Makes interventions to resources to correct deviations from plans (control)
– Ad hoc consideration of operations objectives

How do high variety/low volume operations plan and control business activities?
– planning occurs on a relatively short-term basis
– slow customer responsiveness
– detailed control decisions
– high robustness (ability to deal with changes in the environment)
Dependent demand vs independent demand
Dependent:
Demand which is relatively predictable because it is dependent upon some other factor which is known. Demand forecasting is relatively straightforward. Resource-to-order or create-to-order planning and control.
e.g. Demand for King ESL places will be derived from number of international students applying for a place at a partnering UK university

Independent:
No firm visibility of customer orders. Bases planning and control on experience and understanding of the market.

How does P/D ratio relate to how the operation chooses to respond to demand ?
In produce-to-stock planning and control, the P/D ratio is high. D (demand time – the time customers have to wait for the product) is far shorter than P (throughput time). Resources are obtained and products produced and stocked before customer orders. Produce-to-stock planning has a higher proportion of speculative activity and risk.

Part produce to order
Produce to order

In resource-to-order planning and control, resources are obtained, produced and delivered only when orders are received. So, P = D. Reducing the P/D ratio takes some of the risk out of planning and control.

What 4 activities are involved in planning and controlling volume and timing?

What possibilities are there for each activity?

1. Loading – How much work is allocated, valuable operating time, finite loading (if safe, possible, cost of limiting the load is not prohibitive) or infinite loading (if not possible to limit the load, not necessary or if the cost of limiting the load is prohibitive)

2. Sequencing – customer priority (aggrieved or important customers served first), due date (DD), first come first served (FCFS), longest operation time (LOT) (to keep utilization high), shortest operation time (SOT) (to ease cash flow problems)

3. Scheduling – forward scheduling – doing work as soon as it is practical to do so (high labour utilization, flexible) backward scheduling – starting jobs so they are finished just before they are due (lower material costs, less exposed to risk if customer changes their mind, focuses the operation on customer due dates)
Staff rostering – staff scheduling (to ensure capacity matches demand, the length of shifts are attractive to staff, holiday dates accommodated, sufficient flexibility and robustness)

4. Monitoring and controlling

Difference between push and pull control (monitoring and controlling the operation)?
Push control – each work centre pushes out material without considering whether succeeding work centres can make use of it. Work centres are coordinated by means of centralised operations planning. Characterised by high idle times, inventory and queues.

Pull control – material is moved only when the next stage wants it and requests it. Inventory cannot accumulate. Associated with JIS philosophy.

Drum, buffer, rope concept helps to decide where in a process, control should occur. Work processes are not perfectly balanced, this means there is a part which is likely to be acting as a bottleneck on the work flowing through the process. The bottleneck should be the drum (set the rhythm for the rest of the process to follow). It is sensible to keep a buffer of inventory before the drum. Communication rope is required at the drum to control prior activities and ensure activities before the bottleneck do not overproduce.

What factors facilitate control of operations?
1. If there is consensus over operation’s objectives
2. If output is measurable
3. If the effects of interventions into the operation are predictable
4. If there is repetition of operation activities to facilitate learning and improvement
Capacity plans will affect several different aspects of performance….
1. Cost – surplus capacity, under utilization
2. Revenues – capacity levels equal or higher than demand ensure no revenue is lost
3. Working capital – producing extra inventory prior to demand has to be funded before generating revenue
4. Quality of products/services – e.g. part-time staff
5. Speed of response
6. Dependability
7. Flexibility – especially volume flexibility
Input and output capacity measures for:
a university
a theatre
an airline
a brewery
Input capacity measures:
a university – number of students
a theatre – number of seats
an airline – number of seats available
a brewery – volume of fermentation tanks

Output capacity measures:
a university – number of students graduated per year
a theatre – number of customers entertained per week
an airline – number of passengers transported per week
a brewery – litres per week

Utilization (capacity ratio)
actual output / design capacity

design capacity = theoretical capacity of operation if everything is completely full and runs at full speed

Efficiency (capacity ratio)
actual output / effective capacity

effective capacity = design capacity minus unavoidable problems (market and technical demands of the operation)

How is Overall equipment effectiveness (OEE) measured?

How are the three aspects of performance associated with it measured?

OEE = Availability rate x Performance rate x Quality rate
OEE = a x p x q

Availability rate = total operating time / loading time
Performance rate = net operating time / total operating time
Quality rate = valuable operating time / net operating time

Total operating time – loading time minus availability losses (set-up and change overs, breakdown failure)
Net operating time – total operating time minus speed losses (slow running equipment, equipment idling)
Valuable operating time – Net operating time minus quality losses

3 alternative capacity plans
level capacity plans – ignore fluctuations and keep capacity at a uniform level
e.g. use anticipation inventory to supply future demand

chase demand plans – adjust capacity plans to reflect demand fluctuations

demand management – attempt to change demand to fit capacity availability

Methods of adjusting demand
– Overtime
– Varying the size of the workforce
– Using part-time staff
– Sub-contracting
What type of operations is yield management used for?

What methods can be used to try to maximize the yield from capacity?

Operations which:
– have relatively fixed capacity
– the service cannot be stored
– the service is sold in advance
– the marginal cost of making a sale is relatively low

Methods:
– overbooking capacity
– price discounting
– varying service types (e.g. discounting, upgrading etc.)

What can cumulative aggregated demand volume representations be used for?
Assessing the feasibility and capability of a capacity plan. To see whether anticipation inventory can reconcile future demand or whether demand will outstrip supply.
5 types of inventory
Buffer inventory – compensate for unexpected fluctuations in supply and demand

Cycle inventory – because of batching

Decoupling inventory – inventory accumulated between two different interdependent work centres as a buffer against unevenness or breakdowns. Allows work centres to operate independently and maximize utilization and efficiency

Anticipation inventory – to compensate for seasonal demand fluctuations

Pipeline inventory – exists because material cannot be transported instantaneously between points in the warehouse

Disadvantages of holding inventory
1. Ties up working capital
2. Incurs storage costs
3. Becomes obsolete
4. Becomes damaged or deteriorates
5. Involves administration and insurance costs
Costs associated with commercial order-quantity decisions
(how much to purchase of a given material/product?)
1. Cost of placing orders
2. Price discount costs
3. Stock-out costs – lost revenue and dissatisfied customers
4. Working capital costs
5. Storage costs
6. Obsolescence costs
7. Operating inefficiency costs – JIT philosophies suggest high inventory levels prevent us from seeing the full extent of problems within the operation
Consignment stock
Large quantities are delivered to the customer who pays storage costs, but the supplier only charges for inventory when it is used.
EOQ
Economic order quantity (EOQ)
Attempts to find the best balance between the advantages and disadvantages of holding stock.

Co
Order costs – Cost of placing order, price discount costs

Ch
Holding costs – Working capital, storage, obsolescence risk costs

EOQ = √ (2CoD / Ch)

Criticisms of EOQ
1. Simplistic
2. JIT suggests it is a reactive approach. Managers should ask “How can I change operations to reduce the overall inventory I need to hold?” instead of “What is the optimum order quantity?”
3. Cost minimization may not always be an appropriate objective for inventory management
4. The perpetual inventory principle is a common problem with all inventory systems. Any errors in recording transactions (e.g. keying errors) can lead to discrepancies between the recorded and actual inventory and these errors are perpetuated until physical stock checks are made.
What is lead time usage?
The amount of buffer inventory that will be used between order replenishment and the inventory arriving when there is uncertainty in demand and order lead-times. Higher lead time usage may result in stock outs.
Inventory decisions – continuous or periodic reviews?
Continuous – when inventory reaches a certain level

Periodic – at a point in time

How can a company decide which inventory to concentrate their management efforts on?
Analysing the usage value of items and categorizing them (A, B and C)

Usage value = usage rate x individual value

Companies should also consider:
– consequence of stock-out
– uncertainty of supply
– high obsolescence or deterioration risks

Activities of Supply chain management?
– Procurement/purchasing and supply chain management
– Physical distribution management
How can procurement have such an effect on total profitability?
– Purchase costs make up a large proportion of total costs
Long-term and short-term factors for rating alternative suppliers?
Long-term:
Range of products
Quality of products
Responsiveness
Delivery and Volume flexibility
Total cost of being supplied

Short-term:
Potential for innovation
Ease of doing business
Willingness to share risk
Long-term commitment to supply
Technical/financial/operational capabilities

Advantages of single and multi-sourcing
Single-sourcing
Adv.
– More supplier quality assurance possibilities (SQA)
– Strong relationships
– Dependency encourages commitment and effort
– Better communication and easier to collaborate on new developments
– Higher confidentiality
– More scale economies

Multi-sourcing (e.g. traditional market supply relationships)
Adv.
– Purchaser can drive down price and supplier cannot exert upward pressure on prices
– Can switch sources in case of supply failure
– Wide source of knowledge and expertise
– Flexibility
– Allows a supplier specialising in a small number of products to gain economies of scale.

Three types of electronic marketplaces for suppliers and purchasers
– A private e-marketplace = conduct business with partners and suppliers by previous arrangement
– The consortium e-marketplace = several large businesses combine to create an e-marketplace controlled by the consortium
– A third-party e-marketplace = an independent party creates an unbiased, market-driven e-marketplace for buyers and sellers in an industry
What factors promote global sourcing?
What factors could cause problems?
– Cost savings from low-cost-country suppliers (competitive industries often force businesses to look to cut costs)
– Trading blocs lower tariff barriers (e.g. EU)
– Improved transportation infrastructures

Problems:
– Language/communication difficulties
– Risk of delays
– Cross-border taxes
– Geopolitical / operational risks

‘Partnership’ supply relationships in supply chains are seen as a compromise between …. and ….
vertical integration (owning the resources which supply you) and pure market relationships (having only a transactional relationship with those who supply you)
Close ‘partnership’ relationships are achieved by ….
– Sharing success
– Long-term expectations (but not permanent)
– Multiple points of contact
– Joint learning
– Few relationships (but not necessarily single sourcing)
– Information transparency
– Joint coordination
VMI
Vendor-managed inventory (VMI) is when the buyer of a product (business) provides certain information to a supplier of that product and the supplier takes full responsibility for maintaining an agreed inventory of the material, usually at the buyer’s consumption location (usually a store). A third-party logistics provider can also be involved to make sure that the buyer has the required level of inventory by adjusting the demand and supply gaps. As a symbiotic relationship, VMI makes it less likely that a business will unintentionally become out of stock of a good and reduces inventory in the supply chain.
Why are companies more concerned with supply chain vulnerability?
– Global sourcing is more common
– Supply chains tend to hold far less buffer inventory
How does JIT / lean approach improve productivity?
By emphasizing simplification and zero-excess waste, it aims to produce and deliver only the necessary quantity of parts at the right quality, at the right time and place, while using a minimum amount of facilities, equipment, materials and human resources.

Eliminate waste:
– Inventory is a ‘blanket of obscurity’
– Reducing buffer inventory reduces degree of insulation between stages and exposes problems.
– Lower-capacity utilization but no surplus production
goes into inventory

Continuous improvement:
– It is possible to get closer to the ideal of ‘perfect quality and no waste’ over time.

Involve everyone:
– Respect-for-humans system
– Team-based problem solving
– Job enrichment/rotation and multi-skilling

Seven types of waste according to JIT
1. Over-production
2. Waiting time
3. Transport
4. process
5. Inventory
6. Motion
7. Defectives
Working practices for ‘involvement of everyone’ lean principle
1.Discipline
2. Flexibility
3. Equality
4. Autonomy
5. L and D
6. Quality of working life (QWL)
JIT techniques
1. JIT planning and control
– Kanban pull system
– Levelled or Mixed modelling scheduling – equalizing mix of products
(instead of producing 200 As, 120 Bs and 80 Cs, a steady mixed stream in the same ratio is produced AABABCAB)
– Synchronization by classifying parts as runners, repeaters, strangers
2. Use small simple machines
– more robust system
– produce smaller batches
3. Layout for smooth flow
4. Total productive maintenance (TPM)
– Process owners are encouraged to assume ownership of machines and undertake simple maintenance and repair tasks
5. Reduce setup times
6. Visibility
– Problems are more detectable and it is easier for staff to share in management and improvement
7. Product design for process ease
Difference between MRP and JIT
MRP:
– Push system
– Highly dependent on stock record data
– Fixed operations environment with fixed lead times used to calculate when materials should arrive at the next operation
– Less flexible

JIT:
– Pull system
– Control of the pull between stages is achieved using cards, tokens or simple visual clues
– Decision making is largely decentralized
– Scheduling is ‘rate-based’ (output of a part per unit of time) not ‘volume-based’ (number of parts to be made in a week)
– Minimized lead times

5 approaches to ‘quality’
1. Transcendent approach – the best possible product
e.g. Rolls Royce
2. Manufacturing-based approach – free from errors
3. User-based approach – fit for purpose
4. Product-based approach – precise, measurable set of characteristics
5. Value-based approach
Types of quality problems
1. Customer’s specification – Operation’s specification gap
Mismatch between customer’s expectations and operation’s own internal quality specifications.

2. Concept – specification gap

3. Quality specification – actual quality gap

4. Actual quality – communicated image gap
Mismatch between the actual product and the image portrayed through advertising campaigns

What are the steps of conformance to specification?
1. Define the quality characteristics of product
(functionality, appearance, reliability, durability, recovery, contact)

2. Decide how to measure each quality characteristic
(disaggregating quality characteristics (e.g. appearance) into measurable sub-components (e.g. colour match, surface finish, visible scratches)

3. Set quality standards

4. Control quality against standards
Where in process should checks take place?
Every product or take a sample?

5. Find and correct causes of poor quality

6. Continue to make improvements

Difference between variables and attributes (measuring characteristics)
Variables – measured on a continuously variable scale
e.g. number of blemishes visible on car

Attributes – assessed by judgment and are dichotomous, i.e. have two states (OK or not OK)
e.g. Is the colour to specification?

TQM is based on the belief that:
TQM is based on the belief that:
•organisations need to make improving quality a central and strategic part of their operations
•quality improvement is the business of everyone in the organisation
•organisations should seek to improve every aspect of everything that they do
(internal customer and internal supplier)
•the pursuit of quality improvement is a continuous and never-ending task.
How does TQM differ to traditional approaches in its ideas about cost and quality
TQM rejects the notion of a trade-off between quality costs, which was central to traditional thinking about quality.
TQM recognizes all costs and benefits of quality:
– Prevention costs (trying to prevent problems, failures)
– Appraisal costs (controlling quality)
– Internal failure costs (costs of scrapped parts)
– External failure costs (loss of customer goodwill)
How can a business determine the most important performance measures for a business (KPIs) and prioritize competitive factors for improvement?

How can they linked to business strategy?

Using a importance-performance matrix
Comparing:
performance against competitors (good, ok, bad) importance for customers (less important, qualifying factors, order winning factors)

Segregating competitive factors into:
Excess
Appropriate
Improve
Urgent

Performance measures can involve different levels of aggregation:
Overall strategic objectives (broad strategic measures)
Generic operations performance measures
Disaggregated detailed performance measures (high diagnostic power and frequency of measurement)

How can performance targets be set?
Historically-based targets
Strategic targets
External performance-based targets
Absolute performance targets
What is benchmarking?

What are the drawbacks?

Activity of comparing methods and/or performance with other processes in order to learn from them.

1. Internal benchmarking – Comparison with other parts of the organization
2. External benchmarking – against parts of an external organization
3. Non-competitive benchmarking – against external organizations which are not direct competitors
4. Competitive benchmarking

Disadvantages:
– Limits the organization to currently accepted methods instead of searching for ‘best practice’
– Other organization’s methods may be inappropriate

Two main approaches to improvement
Breakthrough improvement – major or dramatic change in the way an operation works e.g. introduction of a new more efficient computer-based system
Business Process Re-engineering (BPR) – the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements.
– Organize work around outcomes of process rather than tasks which go into it.
– Check to see whether internal customers can be their own supplier rather than depending on another function of the business
– Do not separate those who do the work from those who manage it.

Continuous improvement – known as ‘kaizen’ improvements, small incremental steps, whole philosophy relying primarily on people who operate the system, its is not the rate of improvement that is important but the momentum e.g. simplifying the question sequence when booking students on courses
Improvement cycles (DMAIC cycle)
Define, Measure, Analyze, Improve, Control

Criticisms of BPR
– By nature, BPR looks only at work activities rather than people who perform the work, disregarding HR.
– Proponents cannot agree whether it should be implemented gradually or radically
– BPR can be used an excuse to ‘downsize’ and put short-term interests of shareholders first