Area of Study 3: The Operations Management Function

Chapter 7: Optimising OperationsArea of Study 3: The Operations Management Function1Examine some strategies currently being used by organisations in order to optimise their operations and improve competitivenessLook at the following aspects of the operating system:Facilities design and layoutImpact of technologyMaterials and supply chain managementManagement of quality2Facilities Design and Layout3Optimising the use of physical spaceOptimising the use of equipment and raw materialsInsufficient workspace will often result in bottlenecks and blockages in workflowWorkspace must also not be too large as this can hinder productivity

Equipment and materials must be easily accessible, reliable and operational to maximise its use

4Regular maintenance programEssential to keeping equipment and facilities operationalMultiskilling of workers necessary for equipment to be fully utilisedRegular maintenance will avert expensive downtime5Layout of plant and equipmentAppropriate layout of plant and equipment will streamline the production process and allow for efficient flow of production.

6Layout of plant and equipmentFixed position/project layoutProcess/functional layoutProduct remains in one position while it is being built or constructedAll labour and resources bought to itAdvantages: greater flexibility, made to exact specificationsDisadvantages: expensive as time consuming, high labour input requirementsPieces of equipment with like functions are grouped togetherUsed for products requiring large degree of variety that are produced in small amountsE.g. hospital7Layout of plant and equipmentProduct layoutProducts move to the equipment on a conveyor beltUsed when employing mass production techniquesAssembly line machines pass a product past workers who perform a small specialised taskAdvantages:Low unit costsConstant rate of outputConsistent quality standardsDisadvantages:Initial high set up costsUnmotivated employees (repetitive work)No allowance for customisation8Layout of plant and equipmentVirtual FactoryDecentralisation of productive activities so that production does not occur at one work siteAdvantages:Reduced fixed costsConcentration of expertiseAbility to take advantage of cost savings offered by low-wage countriesDisadvantages:Language and cultural barriersHigh set up costsDifficult to change suppliersPolitical and economic disruptionEthical and social responsibility issues9Layout of plant and equipmentOther ConsiderationsEmployee work environment:Furniture and equipmentProtective clothingLighting and temperatureOccupational Health and SafetyLegal requirements and obligationsEffective communication channels

Activity 7.4

Tomorrow: Activity 7.2 If on excursion this is weekend homework10Improving Operations Through Technology11Technological developments can help operations manager to achieve:More outputs producedQuality of outputs enhancedFewer errors madeLess wasteAutomation: techniques and equipment used to achieve automatic, as opposed to human, operation or control of a process, equipment or a system

12CAM Computer-aided manufacturingCAD Computer-aided DesignControl of machinery, tools and equipment through a computerFed instructions from a central computer for greater precisionWhat production run consists of time, number of units, sizes etc.Using computers to design products instead of drafting by handCan easily experiment with variations of designCostly to introduce but saves time and money in long run13Computer-aided EngineeringRoboticsComputer simulations save time and moneyUseful for crash-test simulations for car design and stress simulations for bridges and buildingsUse of computer controlled robots to perform manual tasks, especially on an assembly lineReplacing functions previously performed by human labourCan prevent injuries, improve quality and be cost-effective14Flexible Manufacturing Systems (FMS)Service IndustriesCreates total computer control of all aspects of the operations systemDetect things such as machine breakdown

E-commerce: transactions occur over the internet (e.g. online shopping, banking etc.)Computerisation: reduced operating costsMobile phones: offers potential productivity gains, greater workplace flexibility and employee work-life balanceCommunication via the internet: significant cost savings15Organisational websites are important makreting tools. They act as virtual shop fronts and sources of product information

15Problems associated with the implementation of technologyCost technology is expensive and can get out-of-date quicklyTraining some or all employees would have ot be trained in use and repair of new technologyRepairs staff will need to be employed to maintain and repair the new technologyRedundancies technology can replace workers fewer workers required to maintain productivity16Materials and supply chain management17Materials managementThe systems that are implemented to ensure that the right materials are available in the right numbers for the right cost when requiredNecessitates decisions about:How much to orderWhen to orderControl of stock security system18Must be carefully planned and coordinated and include:Developing a reliable and accurate inventory system to determine what items to order and in what quantities. Key is to maintain a level of inventory that allows production without any delays but avoiding the cost of holding excess stockSystem of inventory control that determines how and when to store items capable of tracking movement of raw materials, components and part complete units while protecting against loss due to theft or damage19Materials management StepsMaster production schedule (MPS)Materials requirement plan (MRP)Document shows:what the business plans to produceHow they plan to produce it within given time periodPart of the tactical planning responsibility of operations manager

Outlines all the materials required in production targets set in MPS20Supply ChainBroad term that takes in the concepts of:Sourcing and purchasing of required materialsDistributionLogisticsMaterials managementTotal supply chain management optimises to reduce waste and unnecessary cost

21Just in timeAn inventory management system which aims to avoid holding any stocks (either as inputs or finished goods). Supplies arrive just as needed for production, and finished products are immediately despatched or sold to customersAdvantages: great potential for productivity improvements and cost savingsDisadvantages: factors affecting delivery schedule has potential to completely shut down whole production process22ABC AnalysisClassification of inventory into items according to their value and importance in the production processItems that are required frequently are kept in stock. Expensive and less frequently required only ordered as the need arises23Procurement of inputsLocating and acquiring a regular and reliable supply of high quality inputsSome suppliers will need prior warning of requirementsPlanning must occur to ascertain exact amounts of materials requiredNeed to anticipate possibility of future price rises or falls, world market conditions, changes in the value of the Australian dollar or potential industrial action at a suppliers production facilitySystem (such as JIT/ABC) must be established to keep inventory at the required levels to avert theft and loss of materials in storage24Transport and distribution (logistics)Efficient system of transporting finished products to the customerMay involve contracts with transport specialists such as couriersFrequency of deliveries must be established, as must the routes taken

Activity 7.525The Management of Quality26Quality: the degree of excellence in a good or service and its ability to satisfy the customerCustomers look for the best quality at the lowest priceQuality management programs aim to:Minimise waste and defect rates in productionObtain consistently high standards of product and serviceAchieve set quality standards or benchmarks27Quality controlProcess of checking the quality standards of work done or quality of raw materials or componentsAims to detect defects after they occurProduct recall can occur if defect makes product unsafe28Quality assuranceA system established to ensure that predetermined quality standards are achievedAvoiding errors before they occur

Quality certification: provides confidence to organisations stakeholders and adds potential for selling into export marketsStandards usually cover aspects such as:Process in regards to customer satisfactionTraining of staffDocumentation of processesControlsCorrection actionAuditing of processes29Total Quality ManagementHolistic approach to quality where all members of an organisation aim to participate in ongoing improvement of organisational culture and production processesQuality circle: group of workers who meet regularly to discuss quality and production issues, proposed changes put to managementCore TQM Concepts:1. Continuous process improvement2. Customer focus3. Defect prevention4. Universal responsibility30Activity 7.6Activity 7.7Activity 7.831Ethical and Socially responsible management of operations32InputsTransformation processSuppliers of an organisation should treat workers and the environment appropriatelySuppliers should be treated appropriately by organisations that use themMethods used to transform inputs should be such that they do not cause pollutionIf there is unavoidable waste it might be able to be put to some use in the community33OutputsThe goods and services produced should not cause problems for societyProducts should be safeShould enhance quality of livesRead Environmental management systems page 168

Chapter Summary Questions***Exam Preparation Question***34