Instances of Operations Management - Term Paper Example

 Operations Management Table of Contents 1. Introduction 3 1. Introduction 3 2. Production Processes 4 2. Production Processes 4 3. Service Processes 6 3. Service Processes 6 4. Capacity Management 8 4. Capacity Management 8 5. Quality Management 10 5. Quality Management 10 6. Equipment and other Physical resources 12 6. Equipment and other Physical resources 12 7. Supply chain/network 14 7. Supply chain/network 14 8. Inventory Management 15 8. Inventory Management 15 9. Demand Management 16 9. Demand Management 16 10. Conclusions 18 10. Conclusions 18 References 19 References 19 Table of Figures Figure 2.1. Example of OM for production process (Stevenson 34) 5 Figure 3.1. Service blue print for coffee delivery (Metters and Pullman 81) 7 Figure 4.1. Capacity management with OM (Hill 87) 10 Figure 5.1. Quality management with OM (Baird, Jia and Reeve 791) 12 Figure 6.1. Equipment and machine layout (O'Kane 311) 13 Figure 7.1. SCM and OM for a production process (Hines 105) 15 Figure 9.1 Inputs for demand management (Crum and Palmatier 34) 17 1. Introduction Operations Management - OM is the management practice that oversees the design, implementation, monitoring and control of business process used in the manufacture and delivery of goods and services. The focus of OM is on improvement of the organisation processes and helping them to run smoothly and efficiently (Blanchard 3). This document examines instances of OM Applied To Different Areas Of An Organisation. 2. Production Processes OM techniques are used in the production process to improve its efficiency, increase the productivity, and reduce the lead-time and to improve machine capacity utilisation. Manufacturing operations are made up of two distinct systems and these are the process based systems and component production systems. Process based systems are continuous process as seen in chemicals manufacturing plant where the same chemical is produced continuously. Part production systems adopt the batch production method where different parts are manufactured in a batch, the total production run for the batch may extend to a few days, and then a new part is taken up. These systems are seen in automobile production workshops where individual parts are manufactured and assembled. With an increase in outsourcing of semi finished and finished parts, many organisations such appoint vendors who supply the ready parts (Chase, Jacobs, Aquilano 37-39). However, OM in an organisation does not extend to the external procurement process. Supply chain management governs this procurement and this is a different business practice. The focus of this section is on OM applications used for part production processes. Following figure illustrates a value stream mapping and process flow in a machine shop that manufactures a component. Figure 2.1. Example of OM for production process (Stevenson 34) As seen in the above figure, four machining operations are indicated in the production control workflow namely, milling, welding, painting, assembly, inspection. The workflow also has other peripheral activities such as, external suppliers and customers and the workflow between these entities and the production control unit. The objectives defined for OM are improving the efficiency and throughput time of the process cycle. With reference to Figure 2.1, a review of time and schedules for various activities indicates that the total lead-time to deliver the component is 68 days while the value added time during which the component is machined is only 15 minutes. In other words, the firm is holding inventory of 68 days and by reducing the lead-time, the firm can realise substantial savings (Krajewski and Ritzman 45). The lead-time includes 5 days needed to procure raw materials and semi-finished products from suppliers and the waiting time between the machining operations. Important metrics are given for each machining activity namely, C/T or the cycle time, C/O - Changeover time and the uptime that gives the percentage of time in a shift when actual machining activity is carried out. The number of people needed for each operation is indicated in the figure. The focus of OM is to reduce the waiting time between operations. The milling operation with a cycle time of 2 minutes has a waiting period of 5 days while the welding operation with a C/T of 4 minutes has a waiting time of 10 days. A similar pattern is evident in the other operations where painting operation with a C/T of 7 minutes has a delay of 15 days and assembly operation with a C/T of 2 minutes has a waiting time of 8 days. Reasons for delay could be heavy load on the machines, lack of spare capacity, constraints of economic batch production and demand for other components. OM techniques help in analysing the reason for the excessive delay time and bringing it down from 68 days to a much lower value. 3. Service Processes Services process cover a wide range of industries namely, hospitality, restaurant, spare parts and engineering goods sales and service, customer relationship management, financial service, tourism sector, hospital and healthcare and many others. The objectives of OM remain the same as in process management, with the difference that in service industry, customer satisfaction and impression formed with the customer is important. Another important aspect is that in the service industry, many services are delivered directly to the customers (Armistead 248-251). Two perspectives are important in this sector, the first perspective is customer satisfaction and the second is to improve the operations and increase their efficiency. The first factor of customer satisfaction is achieved by the quality of products and services, the timeliness of delivery and other factors such as etiquette, manners and the method of presentation. The second perspective is the efficiency and cost effectiveness of the process employed in producing and delivering the products and services (Fitzsimmons 73). A seminal work by Metters and Pullman (46-49) indicates that the two perspectives are interlinked since the optimum quality of the product produced depends on the organisational processes and adherence to the schedule. Please refer to the following figure, which illustrates the process flow for coffee delivery. Figure 3.1. Service blue print for coffee delivery (Metters and Pullman 81) Two operation areas and business processes are obvious in the above figure. The upper portion or the customer facing process, highlights the activities used to deliver a cup of coffee and the customer sees this part of the process. The lower portion indicates the internal process used to prepare different mixes and order supplies and these processes remain hidden from the customers. Referring to the upper portion, the activities included in serving the customer a cup of coffee are, 'take the drink order', 'collect payment', 'make drink', 'deliver drink' and in case the drink spills, the process moves back to the 'make drink' step (Metters and Pullman 81-83). Customer satisfaction is achieved when the waitress takes the order with the least waiting time, collects the payment while giving the change, the chef makes the correct type of coffee that tastes as promised and the waitress delivers the drink and all activities are completed in the least amount of time (Fitzsimmons 79). The background process must ensure that raw materials such as coffee mixes, cups and other materials of the correct quality are available in the right quantity and at the right time (Metters and Pullman 84). Excess procurement will lead to excess inventory while under procurement means a stock out situation. Operation management covers the whole cycle of the coffee manufacturing and delivery activities and the raw material procurement activities. 4. Capacity Management One of the most important business areas where OM is applied is capacity management. It is the business process used to evaluate the production facilities to determine the existing production capacity and the steps needed to meet future capacity. A production line or a manufacturing cell is designed considering ideal conditions and a constant loading to give the ideal or the design capacity and this is usually at 100%. However, 100% capacity utilisation is not always possible due to machine maintenance, tool and set up changes, operator absenteeism, machine breakdown or material shortage. Therefore, effective capacity is used to determine the actual number of components that can be produced in a production line. The effective capacity utilisation is usually about 90-95% of the design capacity and a lower value of 60-70% indicates that the production process needs improvement (Krajewski and Ritzman 122-125). OM techniques are used to reduce the gap between design and effective capacity by studying bottle neck areas, using improved tooling, increasing the machining parameters, improving the workflow, reducing the idle time between operations and outsourcing some of the roughing operations (Hill 21). Please refer to the following figure, which illustrates a workflow in a machine shop. Figure 4.1. Capacity management with OM (Hill 87) In Figure 4.1, the machining processes that use different machines are raw material cutting, drilling and tapping, CNC machining and soldering. The other operations are manual and the cycle time is less. One area where capacity can be improved is the CNC machine operations. It is possible to remove operations such as tapping and long hole drilling and introduce another column drill/ tap machine on which the operation is much faster. This helps to improve the capacity of the line. 5. Quality Management Quality management is the defining set of processes that ensures that processes used to manufacture products and services are consistent and meet the requirements of material specification, dimensional accuracy and functional standards. Four main components make up quality management namely quality control, quality assurance, quality planning and quality improvement. The most salient feature is that quality planning and management is a pre-emptive effort that monitors the processes used in the manufacture and it is not confined to only inspection of components (Westcott 12-13). OM is not a quality improvement tool but it provides data that quality management tools use to improve the quality. Some of the quality management tools are paretto analysis, run charts, Fishbone analysis and tools from six sigma. When performing an OM implementation, data is gathered about the machining time, bottleneck areas, operations that show high variance from drawing specifications and processes that have higher quality problems of non-conformance. This data serves as the basis for quality improvement. Quality improvement programs can involve investment in the form of procuring new machines and new tooling and the organisation must be able to invest in these initiatives. Therefore, OM provides the inputs for the production line and points out areas that need improvement and quality management then uses a set of tools to evaluate each operation and then suggests methods to control variance (Mohrman, Teanksai and Lawler 27-28). Please refer to the following figure that illustrates a small set up in a machine shop (Baird, Jia and Reeve 790-792). Number of units of product A that were manufactured in a shift was at 60% of the design capacity and OM techniques aided in identifying that the grinding operation had a higher cycle time. Quality management techniques helped to identify the root cause as the second lathe operation whose machine spindle had a higher than permissible run out. To avoid pockets during grinding, the operator kept extra allowance leading to excessive cycle time for grinding. The spindle bearings were replaced, the drawing specifications were maintained, and this led to a decrease in the grinding cycle time. Figure 5.1. Quality management with OM (Baird, Jia and Reeve 791) 6. Equipment and other Physical resources Equipment and other physical assets in OM consider the plant and machinery and the production system layout of machinery, material-handling equipment, machining waste collection and disposal system and sufficient lighting. Modern machine shops also use computers and software to analyse the workflows and to create scenarios for better utilisation of the machines and equipment. Some important points for consideration for equipment are that the equipment should not endanger the safety of workshop personnel and the work must flow uninterrupted without having to travel forward for one operation and then moving back for another operation (Wisner 63). Please refer to the following, which illustrates a workflow and layout for 6 and cylinder head machining. Figure 6.1. Equipment and machine layout (O'Kane 311) As seen in the above figure, machining of the 6 and 8 cylinder heads is done using 13 workstations. The same machines are used for batch production of the components. Operation numbers 10, 20, 30, 40 and 45 are common for both components but for 8 cylinder components, operation 50/ 80 are done on a different machine since this involves boring of the value seat, a critical operation done using special purpose machines. Different flow lines are seen for other operations, identified by solid and dotted lines. The production flow also crisscross and travel backward for operations 70, 80 and 100. However, in some cases, when due to cost constraints and lower demand, it is not possible to have separate lines for each product (O'Kane 312). In such cases, the workflow moves forward and backward and the work handling equipment must have the capacity the workload. 7. Supply chain/network Supply chain management - SCM is a process used to manage the flow of raw materials, work-in-process items, finished goods ready for sale and rejected goods returned by the customers. It coordinates and controls the movement of goods from different vendors to the central procurement organisation and then to the customer networks. SCM has two distinct networks and these are the downside networks that encompass dealers and customers and the upside network that encompass vendors that supply raw materials and finished goods. SCM focuses on the logistics part of the processes where components are moved from one node to another and it does not delve into the machining and quality aspects of the processes. An efficient OM is critical for SCM success since it administers operations at each vendor to see that right quality components are manufactured as per the schedule and the optimum economic order quantity (Blanchard 45-49). Please refer to the following figure, which illustrates two vendors supplying components. Figure 7.1. SCM and OM for a production process (Hines 105) The above figure indicates the workflow for two suppliers along with the workstation names and type of operation. The two suppliers produce parts that are shipped to a central procuring organisation for assembly. SCM provides the services related to providing raw materials for the two suppliers, collecting and shipping the finished components. OM assumes the responsibility of maintaining the work schedules so that the freight truck does not face delays in moving the finished goods. The task of OM is to ensure that scheduling and work planning, cycle times are balanced while quality management guides the quality of the finished parts (Hines 105-107). 8. Inventory Management Inventory management is the practice of managing the raw materials needed for production and the finished goods ready for despatch. Inventory represents idle funds that are locked in the goods since these must be processed and sold and therefore, having a high inventory indicates that more funds of the firm remain blocked. On the other hand, a just-in-time inventory, even though it is ideal, faces the risk of running out of raw material. Therefore, a balance inventory is considered, based on experience of consumption, demand and sale. OM aids in calculating the minimum and maximum reorder quantity for goods. As seen in the previous sections, a certain lead-time is required to process a component from the raw material to finish stage. OM helps to reduce the lead-time by improving the process time and by reducing the waiting time. When the lead-time is reduced, the inventory decreases proportionality and the funds blocked in idle inventory is reduced (Cannella 176-177). The example given in figure 2.1 is considered for this paper and it shows the excessive lead-time of for the machining operations and shipping. The total value added time where the actual machining is done is 15 minutes while the lead-time is 68 days. Even after the components are ready, shipping operations takes 30 days and this delay represents the idle time in which inventory is blocked. OM practices have the potential to reduce this lead-time and idle inventory. 9. Demand Management Demand management is the study of market trends and economic factors to forecast the future demand for products. Organisations need to plan and they adopt a model to forecast the number of units that they can sell. Dealers and traders also provide firm inputs about the quantity they need and this forms one input for the demand. The other input is the market scenario and this process has certain risks, especially in volatile market and for high technology markets where the demand drops without notice. As an example, the manufacturer of raincoats and umbrellas and warn clothing assumes certain weather conditions and manufacturers a certain quantity of products. However, a dry and hot weather without rains or a warm winter would reduce the demand for the products (Crum and Palmatier 5-9). Please refer to the following figure, which illustrates different methods for forecasting demands. Figure 9.1 Inputs for demand management (Crum and Palmatier 34) Organisations used powerful enterprise resource planning software that has a module to forecast demand and even raise purchase orders. Many large organisations with large volumes of purchase parts need sufficient time to increase or reduce future production since a large number of vendors are involved. 10. Conclusions The paper discussed various important applications of OM that are used in organisation processes. It is clear the OM can be integrated with a large number of organisation systems to improve their efficiency and increase the productivity. References Armistead, Colin., Customer Service and Operations Management in Service Businesses. Research Paper, Cranfield School of Management, Cranfield Institute of Technology. Cranfield, Bedford. 1995 Baird, Kevin., Jia. Kristal. & Reeve, Hu. The relationships between organizational culture, total quality management practices and operational performance. International Journal of Operations & Production Management, 31:7 (2011), pp. 789-814 Blanchard, David. Supply Chain Management Best Practices, 2nd. Edition. London: John Wiley & Sons. 2006 Cannella, Sam. Up-to-date Supply Chain Management: the Coordinated (S,R). In "Advanced Manufacturing and Sustainable Logistics". Dangelmaier W. et al. (Eds.) 175-185. Springer-Verlag Berlin. 2010 Chase, Richard., Jacobs, Robert,. R. & Aquilano, Nicholas. Operations Management for Competitive Advantage, 11th ed. London: McGraw-Hill, 2007 Crum, Colleen. & Palmatier, George. Demand Management Best Practices: Process, Principles, and Collaboration. London: J. Ross Publishing. 2003 Fitzsimmons, Frank. Service Management, 2edition. London: Irwin/McGraw-Hill, 1998 Ford, Harris., "How Many Parts to Make at Once". Operations Research, 38: 6 (1990), pp. 947–950 Hill, T., Manufacturing Strategy-Text and Cases, 3rd ed. London: McGraw Hill. 2000 Hill, Joyce. Capacity Requirements Planning. Upper Saddle River, New Jersey: Prentice Hall. 2006 Hines, Tom. Supply chain strategies: Customer driven and customer focused. Oxford: Elsevier. 2004 Krajewski, Lee. & Ritzman, Larry. Operations Management: Processes and Value Chains. Upper Saddle River, New Jersey: Prentice Hall. 2005 Metters, King. & Pullman, Walton. Successful Service Operations Management 2nd edition. London: Thomson, 2006 Mohrman, Susan., Tenkasi, Ramkrishnan V. & Lawler, Edward. 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