Fundamentals of Service Operations Management Learning Guide

Part 1 Operations Management

 

Contents

 

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Operations Management

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Part 2 Service Operations Management

Learning Objectives and Outcomes

Teaching and Learning Resources

 

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Learning Centres

 

Operations Management

 

Rationale

 

 

Business operations are those ongoing recurring activities involved in the running of a business for the purpose of producing value for the stakeholders. They are contrasted with project management (business change managers are responsible for bridging the gap between the projects and business operations[1]), and consist of business processes.

 

Sig Sigma Methodologies

The outcome of business operations is the harvesting of value from assets owned by a business. Assets can be either physical or intangible. An example of value derived from a physical asset like a building is rent. An example of value derived from an intangible asset like an idea is a royalty. The effort involved in "harvesting" this value is what constitutes business operations.

 

 

Learning Objectives and Outcomes

This is a non-taught unit designed for self-directed study by those intending to enhance their professional or managerial competence, knowledge, understanding, and skills in operations management

.

After completing the course, students/entrepreneurs will be able to

1. Identify or define the set of decisions that operations managers make.

2. Identify or define the trends and challenges facing operations managers.

3. Identify or define the customer-supplier relationships between processes.

4. Describe or explain operations in terms of inputs, processes, outputs, information flows, suppliers, and customers.

5. Describe or explain the importance of taking a process view to operations in a firm.

6. Describe or explain operations as a function alongside finance, accounting, marketing, and human resources.

7. Describe or explain how operations can be used as a competitive weapon.

 

 

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Learning Contents Tutorials and Lectures Assignments Recommended Texys Readings Learner Support Discussion Forums Workshops Web Cases Case Studies Resources Staff Development Subject Reviews

Introduction

Tutorials

 

Readings

Operations management is an area of business concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed, and effective in terms of meeting customer requirements. It is concerned with managing the process that converts inputs (in the forms of materials, labour and energy) into outputs (in the form of goods and services).

Operations traditionally refers to the production of goods and services separately, although the distinction between these two main types of operations is increasingly difficult to make as manufacturers tend to merge product and service offerings. More generally, Operations Management aims to increase the content of value-added activities in any given process. Fundamentally, these value-adding creative activities should be aligned with market opportunity (see Marketing) for optimal enterprise performance.

According to the U.S. Department of Education, Operations Management is the field concerned with managing and directing the physical and/or technical functions of a firm or organization, particularly those relating to development, production, and manufacturing. Operations Management programs typically include instruction in principles of general management, manufacturing and production systems, plant management, equipment maintenance management, production control, industrial labour relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning.[1][2]

 

Operations Management Topics

 

See also

 

 

Competitiveness and Operations Strategy

Tutorials

 

Readings

Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market. The usefulness of the concept, particularly in the context of national competitiveness, is vigorously disputed by economists, such as Paul Krugman [1].

 

The Roadmap: Cluster for Competitiveness

 

 

The term may also be applied to markets, where it is used to refer to the extent to which the market structure may be regarded as perfectly competitive. This usage has nothing to do with the extent to which individual firms are "competitive'.

 

 

See also

 

External Links

Competitiveness

 

In some ways the very term ‘operation strategy’ sounds like a contradiction in terms. Operations is, after all, about the day-to-day creation and delivery of products and services. So how can it be strategic? In fact, the issue is one of distinguishing between two words which are similar but have different meanings. These are operations and operational.

Operations refers to those parts of the business which are concerned with producing products and services. Operational is the opposite of strategic in the sense that it means ‘short-term’ and ‘limited in its influence’. Other functions of the business such as marketing or finance have both strategic and operational activities.

 

Operating Strategy

 

For example, marketing strategy covers the overall long-term approach to how the organisation wants to position itself in its markets. The operational side of marketing refers to the day by day tactics of how to manage things like advertising, pricing, and so on. It is just the same with operations.

Operations strategy looks at the long-term issues of how to manage the resources which produce products and services. The more operational subject of operations management looks at the more detailed and ‘shop floor’ issues of designing, planning and controlling, and improving the resources which produce products and services.

Content and process

The content of operations strategy is concerned with the specific decisions which shape and develop the long-term direction of the operation. Think of content as the building blocks of an operations strategy. The process of operations strategy refers to the procedures which are used to formulate operations strategies. It is the way we go about the activity of devising strategy. Think of operations strategy content as what the organisation is deciding to do and process as how the organisation has made that decision.

Read more ...

 

 

Processes in Manufacturing and Services

Tutorials

Readings

Manufacturing, a branch of industry, is the application of tools and a processing medium to the transformation of raw materials into finished goods for sale. This effort includes all intermediate processes required for the production and integration of a product's components. Some industries, such as semiconductor and steel manufacturers use the term fabrication instead. The manufacturing sector is closely connected with engineering and Industrial Design.

 

Lean Manufacturing

According to some economists, manufacturing is a wealth producing sector of an economy, whereas a service sector tends to be wealth consuming.[1] [2] Emerging technologies have provided some new growth in advanced manufacturing employment opportunities in the Manufacturing Belt in the United States. The Midwest region of the United States has a higher employment to population ratio (the number of people employed as a percent of the population) than the Northeast, the South, or the Sun Belt states. [3] It is also the focal point on the continent for the automobile industry. Manufacturing provides important material support for national infrastructure and for national defence.

On the other hand, some manufacturing may involve significant social and environmental costs. The clean-up costs of hazardous waste, for example, may outweigh the benefits. Hazardous materials may expose workers to health risks. Developed countries regulate manufacturing activity with labour laws and environmental laws. In the United States, manufacturers are subject to regulations by the Occupational Safety and Health Administration and the Environmental Protection Agency In Europe, pollution taxes to offset environmental costs are another form of regulation on manufacturing activity.

 

Labour Unions and craft guilds have played a historic role negotiation of worker rights and wages. Environment laws and labour protections that are available in developed nations may not be available in the third world. Tort law and product liability impose additional costs on manufacturing.

Examples of major manufacturers in the United States include General Motors Corporation, Ford Motor Company, Chrysler, Boeing, Gates Rubber Company and Pfizer. Examples in Europe include France's Airbus and Michelin Tire. Modern proponents of Fair Trade policy and a strong manufacturing base for the U.S. economy include economists like Paul Craig Roberts, Ravi Batra, and Lou Dobbs.

 

 

See also

 

External links

 

 

Process Measurement and Analysis

Tutorials

 

Readings

Manufacturing Process Management (MPM) is a collection of technology and methods used in the manufacture of products. It incorporates such technologies as computer-aided production engineering (CAPE), Advanced Planning & Scheduling (APS) , computer-aided manufacturing (CAM), Manufacturing Execution System (MES) , computer-aided quality assurance (CAQ), the utilization of CAD and AEC tools for factory layout and digital mockup (DMU) and simulation for assembly analysis. As the digital manufacturing part of the PLM process it is the bridge from product design to production planning and on to resource and inventory scheduling. As CAD defines what is to be made; and ERP/MRP defines when it is to be made; MPM defines how it will be made.

 

Team Guide

 

A cornerstone of MPM is the central repository for manufacturing data management (MDM) similar to PDM for design data. MPM takes the product data eBOM (engineering Bill of Material) to create the process oriented mBOM (manufacturing) along with a bill of process (BOP). This together with the management of resources such as tools, machines and work centres forms the so called 3PR data (product process plant resources).

The integration of all these tools and activities aids in the exploration of alternative production line scenarios; making assembly lines more efficient with the aim of reduced lead time to product launch, shorter product times and reduced work in progress (WIP) inventories as well as allowing rapid response to product or product changes.

Topics and Technology

 

See also

 

A Time and Motion Study (or time-motion study) is a business efficiency technique combining the Time Study work of Frederick Winslow Taylor with the Motion Study work of Frank and Lillian Gilbreth (best known through the biographical 1950 film and book
Cheaper by the Dozen). It is a major part of Scientific management (Taylorism).

A time and motion study would be used to reduce the number of motions in performing a task in order to increase productivity. The best known experiment involved bricklaying. Through carefully scrutinising a bricklayer's job, Frank Gilbreth reduced the number of motions in laying a brick from 18 to about 5. Hence the bricklayer both increased productivity and decreased fatigue.

The Gilbreths developed what they called therbligs ("therblig" being "Gilbreth" spelled backwards, with a slight variation), a classification scheme comprising 17 basic hand motions.

See also

 

 

Quality Management

Tutorials

 

Readings

Quality in Business, Engineering & Manufacturing

Many different techniques and concepts have evolved to improve product or service quality, including SPC, Zero Defects, Six Sigma, Malcolm Baldrige National Quality Award, quality circles, TQM, Theory of Constraints (TOC), Quality Management Systems (ISO 9000 and others) and continuous improvement.

 

See also

 

 ISO9000 Flow Chart

 

The meaning for the term quality has developed over time. Various interpretations are given below:

"Degree to which a set of inherent characteristic fulfils requirements" as ISO 9000

"Conformance to requirements" (Philip B. Crosby in the 1980s). The difficulty with this is that the requirements may not fully represent what the customer wants; Crosby treats this as a separate problem.

"Fitness for use" (Joseph M. Juran). Fitness is defined by the customer.

A two-dimensional model of quality (Noriaki Kano and others). The quality has two dimensions: "must-be quality" and "attractive quality". The former is near to the "fitness for use" and the latter is what the customer would love, but has not yet thought about. Supporters characterize this model more succinctly as: "Products and services that meet or exceed customers' expectations". One writer believes (without citation) that this is today the most used interpretation for the term quality.

"Value to some person" (Gerald M. Weinberg)

(W. Edwards Deming), "Costs go down and productivity goes up, as improvement of quality is accomplished by better management of design, engineering, testing and by improvement of processes. Better quality at lower price has a chance to capture a market. Cutting costs without improvement of quality is futile." "Quality and the Required Style of Management" 1988 See http://www.deming.org/

"The loss a product imposes on society after it is shipped" (Genichi Taguchi). Taguchi's definition of quality is based on a more comprehensive view of the production system.

Energy quality, associated with both the energy engineering of industrial systems and the qualitative differences in the trophic levels of an ecosystem.

One key distinction to make is there are two common applications of the term Quality as form of activity or function within a business. One is Quality Assurance which is the "prevention of defects", such as the deployment of a Quality Management System and preventative activities like FMEA. The other is Quality Control which is the "detection of defects", most commonly associated with testing which takes place within a Quality Management System typically referred to as Verification and Validation.

However, the American Society for Quality defines "quality" as "a subjective term for which each person has his or her own definition. In technical usage, quality can have two meanings: 1. the characteristics of a product or service that bear on its ability to satisfy stated or implied needs. 2. a product or service free of deficiencies. " Source: http://www.asq.org/glossary/q.html

The quality of a product or service refers to the perception of the degree to which the product or service meets the customer's expectations. Quality has no specific meaning unless related to a specific function and/or object. Quality is a perceptual, conditional and somewhat subjective attribute.

The dimensions of quality refer to the attributes that quality achieves in Operations Management

 

Forecasting

Tutorials

 

Readings

Forecasting is the process of estimation in unknown situations. Prediction is a similar, but more general term, and usually refers to estimation of time series, cross-sectional or longitudinal data. In more recent years, Forecasting has evolved into the practice of Demand Planning in every day business forecasting for manufacturing companies. The discipline of demand planning, also sometimes referred to as supply chain forecasting, embraces both statistical forecasting and consensus process.

Forecasting is commonly used in discussion of time-series data.

 

Introduces MATLAB and gets you started using it

 

See also

 

External links

 

 

Forecasting Principles and Applications

Forecasting Principles and Applications

Resources for Forecasting Principles and Applications, Irwin/McGraw -Hill, New York, 1998, by Stephen A. DeLurgio, Sr.

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Facility Location, Capacity and Layout

Tutorials

 

Readings

 

The general facility location problem is: given a set of facility locations and a set of customers who are served from the facilities then:

1. which facilities should be used

2. which customers should be served from

3. which facilities so as to minimise the total cost of serving all the customers.

Typically here facilities are regarded as "open" (used to serve at least one customer) or "closed" and there is a fixed cost which is incurred if a facility is open. Which facilities to have open and which closed is our decision.

See also

 

Facility Location

 

 

Production and Operations Management

Product and Operations Management

 

BEDI, KANISHKA


ISBN: 0-19-566757-3
Publication date: February 2004

 

 

Waiting Line Management

Tutorials

Readings

Queueing Theory (also commonly spelled queuing theory) is the mathematical study of waiting lines (or queues).

Queueing Theory

The theory enables mathematical analysis of several related processes, including arriving at the (back of the) queue, waiting in the queue (essentially a storage process), and being served by the server(s) at the front of the queue. The theory permits the derivation and calculation of several performance measures including the average waiting time in the queue or the system, the expected number waiting or receiving service and the probability of encountering the system in certain states, such as empty, full, having an available server or having to wait a certain time to be served.

Queueing Theory Queueing theory is generally considered a branch of operations research because the results are often used when making business decisions about the resources needed to provide service. It is applicable in a wide variety of situations that may be encountered in business, commerce, industry, public service and engineering. Applications are frequently encountered in customer service situations as well as transport and telecommunication and it is occasionally linked to ride theory. Queueing theory is directly applicable to intelligent transportation systems, call centres, PABXs, networks, telecommunications, server queueing, mainframe computer queueing of telecommunications terminals, advanced telecommunications systems, and traffic flow.

 

 

See also

 

External links

 

 

Human Resource Issues in OM

Tutorials

 

Readings

In Labour Economics, is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have created a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.

 

The microeconomics of labor markets

 

See also

 

Typical steps in the BPO transition process

 

 

Project Management

Tutorials

 

Readings

Project Management is the discipline of organizing and managing resources in such a way that these resources deliver all the work required to complete a project within defined scope, quality, time and cost constraints. A project is a temporary and one-time endeavour undertaken to create a unique product or service, that brings about beneficial change or added value. This property of being a temporary and a one-time undertaking contrasts with processes, or operations, which are permanent or semi-permanent ongoing functional work to create the same product or service over and over again. The management of these two systems is often very different and requires varying technical skills and philosophy, hence requiring the development of project management.

 

Project Management Processes

 

The first challenge of project management is to ensure that a project is delivered within defined constraints. The second, more ambitious challenge is the optimized allocation and integration of inputs needed to meet predefined objectives. A project is a carefully defined set of activities that use resources (money, people, materials, energy, space, provisions, communication, quality, risk, etc.) to meet the predefined objectives.

 

See also

 

 

 

External links

 

 

Supply Chain Management

Tutorials

 

Readings

Supply Chain Management (SCM) is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. The term supply chain management was coined by consultant Keith Oliver, of strategy consulting firm Booz Allen Hamilton in 1982.

 

The definition one America professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies.

Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned.

Some experts distinguish supply chain management and logistics, while others consider the terms to be interchangeable.

Supply chain management is also a category of software products.

 

See also

The Closed Loop System

Managing Distribution Stocks

 

 

Just-In-Time Systems

Tutorials

 

Readings

Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or Kanban (看板 Kanban?), that tell production processes to make the next part. Kanban are usually simple visual signals, such as the presence or absence of a part on a shelf. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.

New stock is ordered when stock reaches the re-order level. This saves warehouse space and costs. However, one drawback of the JIT system is that the re-order level is determined by historical demand. If demand rises above the historical average planning duration demand, the firm could deplete inventory and cause customer service issues. To meet a 95% service rate a firm must carry about 2 standard deviations of demand in safety stock. Forecasted shifts in demand should be planned for around the Kanban until trends can be established to reset the appropriate Kanban level. In recent years manufacturers have touted a trailing 13 week average as a better predictor than most forecasters could provide.

 

"Just-in-time" and its Logistic

 

A related term is Kaizen which is an approach to productivity improvement literally meaning "continuous improvement" of process.

 

See also

 

External links

NWLEAN: http://www.nwlean.net/” - The Northwest Lean Networks - A free knowledge-sharing website, with over 10,000 professionals discussing the various aspects of lean implementation.

“Lean Blog” A blog focused on lean manufacturing, Toyota Production System, and lean healthcare news.

Strengths & Weaknesses of Just In Time

“Just In Time drives on” - The Manufacturer Magazine US - An article discussing the continued impact of Just In Time in the automotive sector

“Just in Time Under Fire: The Five Major Constraints Upon JIT Practices” - Published academic paper discusses weakness of JIT Philosophy and names five major areas of concern - customer-driven & economic conditions, logistics, organisational culture & conditions, intractable accounting & finance practices, and small supplier difficulties

"The Lean Library The Lean Library includes books reviews, recommendations and more information on lean.

Links to Value-adding Lean Resources NOT Available on Wikipedia

Just in time

Just-in-time

 

BENEFITS OF JIT

 

Aggregate Planning

Tutorials

 

Readings

Aggregate Planning is an operational activity which does an aggregate plan for the production process, in advance of 2 to 18 months, to give an idea to management as to what quantity of materials and other resources are to be procured and when, so that the total cost of operations of the organisation is kept to the minimum over that period.

 

CAPACITY PLANNING AND AGGREGATE PRODUCTION PLANNING

 

The quantity of outsourcing, subcontracting of items, overtime of labour, numbers to be hired and fired in each period and the amount of inventory to be held in stock and to be backlogged for each period are decided. All of these activities are done within the framework of the company ethics, policies, and long term commitment to the society, community and the country of operation.

Aggregate planning has certain prerequisite inputs which are inevitable. They include:

Information about the resources and the facilities available.

Demand forecast for the period for which the planning has to be done.

Cost of various alternatives and resources. This includes cost of holding inventory, ordering cost, cost of production through various production alternatives like subcontracting, back ordering and overtime.

Organisational policies regarding the usage of above alternatives.

 

 

Inventory Systems for Independent Demand. Inventory Systems for Dependent Demand

Tutorials

 

Readings

Inventory is a list of goods and materials, or those goods and materials themselves, held available in stock by a business. Inventory are held in order to manage and hide from the customer the fact that manufacture delay is longer than delivery delay, and also to ease the effect of imperfections in the manufacturing process that lower production efficiencies if production capacity stands idle for lack of materials.

Cycle Counting

 

See also

 

 

Scheduling

Tutorials

 

Readings

Scheduling is an important tool for manufacturing and engineering, where it can have a major impact on the productivity of a process. In manufacturing, the purpose of scheduling is to minimize the production time and costs, by telling a production facility what to make, when, with which staff, and on which equipment. Production scheduling aims to maximize the efficiency of the operation and reduce costs.

Production scheduling tools greatly outperform older manual scheduling methods. This provides the production scheduler with powerful graphical interfaces which can be used to visually optimise real-time work loads in various stages of the production, and pattern recognition allows the software to automatically create scheduling opportunities which might not be apparent without this view into the data. For example, an airline might wish to minimize the number of airport gates required for its aircraft, in order to reduce costs, and scheduling software can allow the planners to see how this can be done, by analysing time tables, aircraft usage, or the flow of passengers.

Companies use backward and forward scheduling to allocate plant and machinery resources, plan human resources, plan production processes and purchase materials.

Forward scheduling is planning the tasks from the date resources become available to determine the shipping date or the due date.

Backward scheduling is planning the tasks from the due date or required-by date to determine the start date and/or any changes in capacity required.

 

The Relationship between Capacity Planning, Aggregate Planning, Master Schedule and Short Term Scheduling

The benefits of production scheduling include:

  • Process change-over reduction
  • Inventory reduction, levelling
  • Reduced scheduling effort
  • Increased production efficiency
  • Labour load levelling
  • Accurate delivery date quotes
  • Real time information

 

 

See also

 

External links

 

 

Recommended Text

 

Successful Service Operations Management

Successful Service Operations Management
by Richard Metters

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Principles of Supply Chain Management

Principles of Supply Chain Management
by Wisner, Leong, and Tan

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Fundamentals of Operations Management, 3/e

 

OM Articles

 

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Resources

 

What is Operations Management?

 

 

 

 

Case Studies

 

Toyota Manufacturing UK

Toyota Manufacturing UK (TMUK) is the automotive manufacturing operation of Toyota in the United Kingdom.

A factory at Burnaston, Derbyshire assembles cars. The first car produced was a Carina on 16 December 1992. Since then production has included Avensis, Corolla and Auris models. An engine factory is located on Deeside, North Wales.

The processes at Burnaston include stamping, welding, painting, plastic mouldings and assembly and at Deeside machining, assembly and aluminium casting.[1]

On 26 February 2007, Chancellor Gordon Brown visited the Burnaston facility to celebrate the official launch of the Auris in the UK and TMUK used the occasion to announce an investment of GBP 100 million in its Deeside factory to build a petrol engine for the Auris.[2] Initial reporting on the engine called it a hybrid and it is expected to be used as part of a Hybrid Synergy Drive system.

See also

 

References

  1. Toyota Manufacturing UK. The Facts. Retrieved on 2007 March 10.
  2. BBC. Toyota £100m safeguards 700 jobs. Retrieved on 2007 February 26.

 

 

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