MMPO-003 TRIPLE BOTTOM LINE

WHAT IS OPERATION STRATEGY? The concept of "Triple Bottom Line" (TBL) reporting has been
Operations strategy refers to combinations of strategic decisions more popular over the past few years in management,
and actions related to the role, objectives and activities of consulting, investing, and business circles. According to the TBL
operations performed in an organisation in response to the paradigm, a company's overall performance should be assessed
market requirement (Fig. 2.1). It involves a pattern of crucial in terms of its social/ethical and environmental performance in
decisions for an organisation’s departments based on inputs in addition to its traditional financial bottom line, which is profit
its overall corporate strategy. In this way, it establishes a maximization.
connection between some aspects of the operations system and It considers the social, economic, and environmental facets of
the company’s strategic goals. Strategic decisions include how performance. This deviates from customary reporting
much capacity should be added to the system, what kind of frameworks since it includes ecological (or environmental) and
manufacturing technologies and processes should be employed, social indicators, for which it may be difficult to determine the
what types of products should be created, and how the supply appropriate measurement techniques.
chain should be set up. It’s crucial to recognise the critical
indicators of operational excellence when making these
selections.

The concept of TBL has been adopted over time as a guiding

principle for many important organizations’ corporate strategy
and operations. The principle behind TBL is that it requires
organizations to be accountable to all of its stakeholders,
PERSPECTIVES ON OPERATIONS STRATEGY including those who are directly impacted by the actions of the
The ideas and definitions of operations strategy vary widely other party or stakeholders in the company, as well as to the
amongst authors. Four “perspectives” develop from them: organization itself.
a) Operation strategy is a “top-down” representation of what People (Social) Dimension: The TBL's "people" component is
the entire team or company desires to accomplish. b) the first and focuses on how organizations should treat their
Operations strategy is a “bottom-up” practice where strategy is workers and the communities they have an impact on them in a
built over time by operations improvements. c) Operations just and beneficial manner.
strategy encompasses converting market requirements into Environmental (Planet) Dimension: In the second level of TBL,
operations strategy. d) Utilising the potential of operational sustainable environmental actions are referred to as a planet. A
resources in targeted markets is an essential component of TBL company works to preserve the environment and avoids
operations strategy. Neither of these four viewpoints doing anything that can upset the delicate ecological balance.
comprehensively explains what operations strategy represents. Profit (Economic) Dimension: The third and final dimension of
However, they give some insight into the forces that shape the the TBL, profit, which is determined after deducting all input
operations strategy’s content when taken as a whole. costs, including the cost of capital invested, serves as a
Top-down strategies: A huge corporation needs a plan to representation of the organization's economic value.
determine where it should be in the global, economic, political, Adopting a triple-bottom-line strategy may appear unrealistic to
and social environments. This will include choices regarding the some in a society that prioritizes profit too much. But innovative
kinds of businesses the group wants to run, the regions of the businesses have repeatedly demonstrated that it's possible to
world it wants to operate in, and so on. Such choices help to make money while doing good.
define the corporation’s corporate strategy. Additionally, each PROCESS OF CAPACITY PLANNING
corporate division within the group must develop its business Capacity planning is concerned with defining the long-term and
strategy that outlines its unique mission and goals. This business the shortterm capacity needs of an organization and
strategy directs the company’s interactions with its clients, determining how those needs will be satisfied. Capacity
markets, and rivals. Similarly, functional strategies inside an planning decisions are taken based upon the consumer demand
organisation must consider each function’s role in advancing the and this is merged with the human, material and financial
company’s strategic goals. resources of the organization. Capacity requirements can be
‘Bottom-up’ strategies: The “top-down” perspective offers a evaluated from two perspectives—long-term capacity strategies
conventional view on how effective plans must be put together. and short-term capacity strategies.
However, the hierarchy of the strategy’s stages has a more Long-Term Capacity Strategies Long-term capacity
complicated link between them. This hierarchical model helps requirements are more difficult to determine because the
think about strategy but does not always accurately reflect how future demand and technology are uncertain. Forecasting for
strategies are created. When any business firm reviews its five or ten years into the future is riskier and more difficult. Even
corporate strategy, they consider experience (conditions, sometimes company’s today’s products may not be existing in
backgrounds, and skills they gain through previous the future. Long range capacity requirements are dependent on
activity).Similarly, corporations will talk to each function inside marketing plans, product development and lifecycle of the
the company about its limitations and potential while examining product.
its strategies, even though they consider some ideas generated Short-Term Capacity Strategies Managers often use forecasts of
from daily functional operations. product demand to estimate the short-term workload the
The market influence on performance objectives: The facility must handle. Managers looking ahead up to 12 months,
organisation’s main objective is to satisfy the market anticipate output requirements for different products, and
requirements; without fulfilling the client’s needs, no firm could services. Managers then compare requirements with existing
survive in the long run. However, understanding the market capacity and then take decisions as to when the capacity
requirements is part of the marketing function, which is also adjustments are needed.
essential for operational functio.
Order-winning and qualifying objectives: A handy way of
determining the relative importance of competitive factors is to
distinguish between ‘order-winning’ and ‘qualifying’ factors.
Orderwinning factors are those things that directly and
significantly contribute to winning a business.
MMPO-003 Qualitative Forecasting Techniques
Concepts of Forecasting Qualitative forecasting methods depend on judgments given by
Forecasting is the art and science of predicting future events; management, and they do not use any specific models or
until the last few decades, forecasting was mainly an art, but it processes. Thus, this method is also known as Judgement
has also become a science. There will be no universal Method. This technique is subjective as different individuals
forecasting method for all situations. using the same qualitative method derive different results and
Generally, forecasting and predicting are used interchangeably arrive at different forecasts. This method is most useful when
in day-to-day usage. Adam and Ebert have defined and there is a lack of data or when past data are not a reliable
distinguished the two as follows: predictor of the future.
Forecasting: "Is a process of estimating a future event by casting Qualitative techniques are used in Events like New product
forward past data. The past data are systematically combined in development, Technology development & innovation, the
a predetermined way to obtain the estimate of the future". arrival of a new competitor, or formation of a new coalition, or
Prediction: "Is a process of estimating a future event based on calling a labour strike since Historical data is unavailable. It is
subjective considerations other than just past data; these often used for long-range and Middle range forecasts where
subjective considerations need not be combined in a external factors may play a significant role.
predetermined way." Some Qualitative or Judgement techniques are listed below: 1.
Selection of a Suitable Forecasting Technique Interviews – Direct, Telephonic, or Online 2. Traditional or
Selecting a suitable forecasting technique depends on the Structured Meetings 3. Role Playing 4. Questionnaire – In
following factors that companies consider essential: person or Mail 5. Delphi Technique 6. The Market Survey and
User Sophistication: Forecasting methods must be matched to Market Testing
the knowledge and sophistication of the manager (user). If not, Delphi technique: Delphi Technique is an “Opinion – Capture
managers could be reluctant to use results from techniques as Technique” type where experts' viewpoints are collected to
they need help understanding. analyze, and recommendations are generated as solutions for
Software Sophistication vs. ease of application: The status of problems or issues. Thus, it is a method of forecasting applied to
current forecasting systems in use should match the the subjective nature of demand values. This method is used
advancements in the field. when estimating the demand becomes difficult, and there are
Time and Resources available: The forecasting method is mixed reactions in the market regarding a particular thing.
selected based on the time available to collect the data and The precautions to be followed in this method are as follows:
prepare the forecast, the necessary resources involved, and the • Panel members must be unknown to each other. • The initial
costs of the forecasting method. Detailed forecast requires questionnaire should be unambiguous and explain every matter
actual data to be collected and takes several months, costing about which opinion is sought. • Opportunity to review views
thousands of money. given by any panellist. • Statistical assessment of the group
Use or Decision characteristics: The forecasting method should response. • Feedback from individuals and groups is to be
be related to decisions in terms of accuracy, time horizon, and controlled, and contributions of information and knowledge are
number of items to be forecast. discussed with all panellists again.
Historical Data Availability: Selecting an appropriate forecasting advantages: 1. There is no excessive influence from strong or
method is often constrained by data availability and the level of persuasive individuals.2. He does not have to disagree publicly
detail required. with eminent figures. 3. There is no temptation to get carried
Data Pattern: The data pattern is the most critical factor away by popular opinion. 4. Because his identity is protected, he
affecting the forecasting method and determining whether a can always change his mind. 5. Diverse viewpoints are also
time-series method or a casual model is needed. consciously gathered. Relatively cheap to administer and
The best fit to historical data: The predictions should fit economizes on the time required by members. 6. Facilitates
accurately in the future. Usually, it is said that the model that conceptualizations of complex phenomena.
fits best for historical data is the best predictive model with Quantitative Forecasting Techniques
minor errors, but this may only be true in some cases. Quantitative methods use some or the other underlying model
Qualitative forecasting versus quantitative forecasting: It has to arrive at a forecast, assuming that past historical data and its
always been a concern of managers. Quantitative forecasting patterns are reliable sources for future predictions upon being
models do better when the data includes significant random processed by time series or causal mode. These methods are
noise or non-linear seasonal patterns. more accurate, and computers can speed up the process.
FORECASTING MODELS 1. Time Series models: Time series models relate quantities
Forecasting can be done for "longer Range," a period of two strictly to time. They are time-ordered sequences of
years or more, or "medium range," a period of six months to observations taken at regular intervals over a period. This model
two years into the future. While medium-term planning is the is further classified as follows: a. Trend projection(long-term) •
typical time frame for general decisions like aggregate planning, Trend Projection using the Least Square Method b.
budgeting, and other resource acquisition and allocation Decomposition methods(intermediate term) • Simple moving
decisions, long-term forecasting is a common horizon for average • Double moving average • Semi-average method c.
planning facilities and processes. Smoothing methods(short-term) • Single Exponential smoothing
• Double Exponential smoothing 2. Causal models: Casual
Models relate quantities to other factors. This model’s future
consists of • Simple Regression analysis • Multiple Regression
analysis • Correlation analysis • Econometric model • Input-
Output model • Simulation method.
IMPORTANCE OF FORECASTING IN BUSINESS
The importance of forecasting lies in its ability to help
planners(managers) take better actions for the future in
advance while discharging their functions more effectively as
they are better informed. This information helps them with
focused thinking and generates choices toward set objectives.
Thus, the importance of a forecast is directly proportional to the
Results of an action based on a forecast & No forecast. The
importance is greater if the difference is positive and significant;
otherwise, the forecast is unimportant. This is the future
impacted by the ability to use statistical forecasting techniques
that are error-free in order to have less deviation and to
generate reliable/accurate forecasts that are directly related.
MMPO-003 AGGREGATE PRODUCTION PLANNING CONCEPTS
APPLICATIONS OF FORECASTING IN MANAGEMENT Long-Term Decisions The organization's size constitutes one of
Forecasting plays an essential role by providing inputs in various the variables influencing Aggregate Production Planning. This
functional management areas such as Marketing, Production, will determine the length of the long-term decisions using the
Finance and Personnel. Aggregate Production Planning idea. Continuous Aggregate
The various varieties of forecasts used in each of the areas Production Planning typically ranges from two to ten years. Long
mentioned above are as follows: term decision-making should begin with the organization
analyzing long term goals and objectives.
Intermediate Decision-Making Intermediate choices regarding
planning have an impact on the company's workforce level.
Specifically, the organization will analyze the staff's output
capability through intermediate Aggregate Production Planning.
This planning also has an impact on the ability to make quick
decisions.Intermediate Aggregate Production Planning
encompasses many other parts of the business, such as
production planning and setting requirements for output.
Short-Term Decisions After making long-term and intermediate
decisions, a corporation ought to create its short-term
aggregate plan. Materials planning, capacity requirement
planning, final assembly planning, and production activities
management are all examples of immediate Aggregate
Production Planning choices.
AGGREGATE PRODUCTION PLANNING IMPORTANCE
Aggregate Production Planning assists in achieving equilibrium
among the company's operational goals, financial objectives,
and general goals. It acts as an interface for capacity and
demand planning.
When demand does not equal capacity, an organization might
try to reconcile the two through pricing, advertising,
management of orders, and new demand development. If
capacity does not equal demand, an organization might strive to
balance the two using multiple options, such as • Laying
The Concept of EOQ off/hiring excess/inadequate workers till demand
The inventory problems in which demand is assumed to be fixed decreases/increases. • Including overtime as part of the
and wholly predetermined are usually called Economic Order schedule creates additional capacity. • Employing temporary
Quantity (EOQ) or lot size problems. If the purchased quantity is staff or contracting out an operation to a subcontractor.
less, the order cost will be higher. The ordering cost decreases The critical points are, • Obtaining financial objectives via
as the purchase amount increases, but the carrying cost lowering all variable expenses & boosting the bottom line. • The
increases. The total cost curve in the figure below equals the utilization of the given manufacturing facilities to the greatest
sum of ordering and carrying costs. The Economic Order extent possible • Provide customer delight by matching demand
Quantity (EOQ) or Q* is the order size, which minimizes the and lowering client waiting times. • Minimize the amount of
total annual costs of carrying inventory and the cost of Ordering. stock expenditure & the ability to fulfill schedule objectives by
establishing a pleased and fulfilled staff.
AGGREGATE PRODUCTION PLANNING OBJECTIVES AND
APPROACHES
Minimize Inventory Investment: Through material resource
planning, APP software achieves the best possible balance
between attempts to reduce the cost of inventory management
and storage costs and efforts to guarantee enough inventory on
hand to satisfy independent and dependent requests.
Maximize Production Rates while Minimizing Fluctuation:
Aggregate Production Planning software compares production
capacity to demand estimates to maximize the total production
rate while preventing idle times.
Minimize Workforce Demand and Fluctuation: A workforce
plan that balances the cost of hiring new employees or laying
them off due to workforce fluctuations with the cost of
Continuous Inventory Systems A continuous Inventory System,
employee idle time and/or overtime is calculated using data
also known as a Fixed-order-quantity system,is a continual
from demand predictions and material resource planning using
record of the inventory level for every item maintained.
Aggregate Production Planning software.
Whenever the inventory on hand decreases to a predetermined
Maximize Facility and Production Equipment Utilization:
level, referred to as the reorder point, a new order is placed to
Software for Aggregate Production Planning targets maximum
replenish the inventory stock.The order that is placed is for a
utilization across the Aggregate Production Planning period
fixed amount that minimizes the total inventory costs.
while taking into consideration the manufacturing facilities and
Periodic Inventory Systems The periodic inventory system is
equipment that are already available.
also known as a Fixed-time-period system. In this system, the
inventory on hand is counted at specific intervals, i.e., every
week or at the end of each month. After the inventory in stock is
determined, an order is placed for an amount that will bring the
inventory back up to a desired level.
MMPO-003
TYPES OF PRODUCTION SYSTEMS
Production systems offer diverse working methods for
converting input resources like labor, machines, measurement
techniques, information and communication, energy, and
money into output in the form of goods and services that
consumers value. Production systems can be divided into the
following three groups:
Job Shop Production: Job-shop production is defined as creating
a single or small number of goods created and manufactured
following customer specifications in a certain amount of time
and money. This stands out for having a modest volume and a
wide range of products. General-purpose machines are
arranged in various departments in a job shop.
Characteristics: 1. Wide range of goods with low volume. 2.
Making use of general-purpose machinery and resources. 3.
Highly skilled workers who can rise to the challenges presented
due to customization and uniqueness. 4. A large stock of
supplies, equipment, and parts. 5. Extensive planning is required
to sequence each product's requirements, each work center's
capacity, and order priority.
Advantages: The benefits of job-shop production are as follows:
1. A wide range of items can be manufactured due to general-
purpose equipment and facilities. 2. As each job allows them to
learn, operators will advance in their knowledge and
competence. 3. Operators' full potential can be used. 4. There is
room for creative approaches and original concepts.
Limitations: The confines of job-shop production are as follows:
1. A higher price is owing to frequent set-up modifications. 2.
Greater inventory levels across the board result in higher
inventory costs. 3. Production scheduling becomes complicated.
4. More space is needed.
Batch Production: As per the American Production and
Inventory Control Society (APICS), batch production is a type of
manufacturing in which a job is processed by the functional
departments in lots or batches, with each lot perhaps
undergoing a different routine.
Characteristics: 1. Shorter manufacturing runs. 2. Flexible
equipment and plant. 3. A plant and machinery set-up is
employed to produce an item in a batch, and a different set-up
is needed to process the next Batch. 4. Manufacturing costs and
lead times are lower than for manufacturing on a job-order
basis.
Advantages: 1. More practical use of equipment and facilities. 2.
Encourages the specialization of functions. 3. Unit cost is less
expensive than production on a job-order basis. 4. Lower
investment in machinery and plant. 5. Flexibility to handle a
variety of things. 6. Operators are happy with their jobs.
Limitations: 1. Material handling is complicated because of
uneven and prolonged flows. 2. Complexity exists in production
planning and control.3. Compared to continuous manufacturing,
the work-in-progress inventory is higher. 4. Set-up costs are
higher as a result of frequent set-up modifications.
Mass Production Systems: Mass Production is the term used to
describe the continuous process used to manufacture discrete
parts or assemblies. The extremely high manufacturing volume
justifies this production system. The equipment is set up in a
line or product configuration.
Characteristics: 1. Standardization of the product and process
flow. 2. Special purpose machines with increased output rates
and production capacity. 3. Large volume of products. 4. A
shorter production cycle time. 5. Less work in process inventory.
6. Well-balanced Production lines. 7. Materials, parts, and
components flow continuously without interruption and
reverting. 8. Controlling and planning production is simple. 9.
Complete automation can be used for material handling.
Advantages: 1. A higher output rate with a shorter cycle time. 2.
Greater capacity use as a result of line balancing. 3. Less skilled
workers are required. 4. Minimal process stock. 5. Lesser cost
per unit of production.
Limitations: 1. If one machine fails, the entire production line
will stop. 2. Given the changes in the product design, the line
layout requires significant adjustment. 3. Significant investment
in manufacturing facilities. 4. The slowest process determines
the cycle time.