Chapter 8 The Operations Function

How is it made?
So… we just think of
manufacturing?

Which ingredients/ materials?

What does it look/taste like?

Oh No, there is much more…

let’s see.
 The dynamics of operations
management
• “Engine” that drives the organisation – inputs are
The operation changed to outputs; value is added

Creativity and • Create something new, can have a considerable

impact on the organisation
operations
Creative
designs • Design can determine success or failure
inherent in
operations • People want to overcome problems – search for a
Technology and solution
• Innovation – technology applied for the frst time
innovation • Technology – application of existing knowledge to
methods
• Value added – diference between the cost of inputs and the
value or price of outputs
• JIT (Just in time) systems are also known as ”lean
Value and time production”
• Total Quality Management (TQM)- holistic & integrative
approach to quality
OPERATIONS
MANAGEMEN
T
 What Is The Core?

Operations
Manufacturing Service Delivery
Management

Operations is the
manufacturing process
(transformation function)
The Transformation Process
Remember, we discussed the transformation process in
chapter 1

INPUTS Transformat OUTPU

ion Systems
TS
• Transforming • Macro- • Value
Resources: processes
• People • Good &
• Creativity
• Micro- Services
• Capital
• R&D
processes • Improvem
• Technology ents
• Operations
• Transformed systems • New
resources (Assembly designs
lines,
• Energy
workshops
• Materials • Competiti
etc. )
• Customers ve
The Transformation
Process
Let’s take the example of Chocolate Éclair
toffees…

TRANSFORMA
INPUT TION PROCESS OUTPUT
(value is
added)
Toffees
Butter
Cream Kettles
Condensed milk
Powdered milk Assembly lines
Glucose & liquid
sugar
Rollers etc.
The Transformation
Process
Here is another example of a transformation process – involving you! If
you think about the type of student and person you were when you
attended your frst lecture at the UFS and who you are now. There is
certainly a diference, because you have been exposed to some type of
transformation process. Now, imagine yourself at the end of your study
years – what will the output TRANSFORM
be?
ATION OUTPUT
INPUT PROCESS * An
(value is increase in
Student added) knowledge
+ * Lectures * A tertiary
* Discussions degree in
Course BCom, BSc,
Material * Assignments
BA, BEd
* Test/ Exams
Process management is inherent to
operations management
NB!!! Transformation process doesn't
only occur in a factory.
 Process Overview:

Each function adds v

alue to
the business = VAL
UE CHAIN
Have a look at the picture on
this slide.

All these processes and activities

are necessary so that a loaf of
bread are available on the shelf at
the shop. All of these are
interrelated and connected – which
means, if the one process is not
managed well, the rest of the
elements will be afected.

What would happen if the wheat

had a disease which the farmer did
not control and the wheat
production is lower?
Or, what would happen if there is a
national fuel shortage and no trucks
can deliver?

See how all of these are related and

how process management is
inherent to operations
 Process management is inherent to
Operations Management

 Distinguishing characteristics of processes:

Market Segment & Product Range – provides
various items that are manufactured
Process Velocity - refers to ratio of total
throughput time for a product in terms of the value-
added time
The Number of Items – economies of scale,
standardisation, repeatability of process
Visibility of Output – refers to how much of the
operation’s activities the customer is exposed to
Demand Pattern – can be highly variable,
irregular, non-routine and unpredictable
Lead Time - (queue time, processing time, setup
time, waiting time, inspection time and transport
time)
 Process management is
inherent to
Operations Management

 All processes have diferent lead times.

Operations management always
attempts to reduce or eliminate lead
times in a process.

What type of lead times to we get

in a process?

Let’s see on the next slide…

 Process management is
inherent to Operations
Management
 Process
flowcharting
 You might have seen
some sort of a flow
chart in your life.
Flowcharts not only
helps people to
understand a certain
process (with all the
steps and the various
role-players involved),
but is very important for
Operations
Management in
organisations as it can
be a powerful tool to
Have a look at the process flowchart below. What do you
see? Do you think that the operations function would work
well in an organisation where people are not sure what to
do when a certain event occurs?
Operations Management Performance
Objectives
 Performance Objectives:

 Service/ Customer care

 Quality
 Speed
 Cost efective
 Low lead times
 Reduction in stock holding
 Flexibility
 Low cost & afordability
 OM Performance Objectives

 Trade-of Theory
 One aspect must be played
against another

e.g. Quality versus cost

 Operations management must

ensure that one aspect does
not deteriorate while others
improve = Continuous
Improvement
 OM Performance Objectives

The importance and prominence of each of

the objectives is diferent from business to
business and is dependent on the overall
business strategy.

Example: Lamborghini vs Chery QQ3.

Describe their respective business strategy
with regards to the performance objectives.
 OM Performance
Objectives
Another way to think about performance
objectives of an organisation, is to think
about what consumers believe certain
organisations/brands promise to ofer or
what consumers expect.
 Quality. Woolworths versus Crazy Store?

Who is most likely to have “quality” as a

performance objective?
 Reliability. Toyota versus GWM. Which

brand between these has established itself

as reliable?
 Productivity is central to
Operations Management
 Operations as CENTRAL to productivity

 MORE outputs with FEWER inputs

Increase
 SAME outputs with FEWER inputs d
 SAME inputs with MORE outputProducti
vity

Macr
o Micro
 Macro productivity vs micro
productivity
Macro-productivity Micro-productivity
 A Nation’s entire  Individual business productivity
production
 Focus on value, efectiveness,
efciency, utilization, impact and
 Sum of the productivity quality
of individual business  Productivity measurement = output
enterprises income/ input expenses
 Combining
 Value added productivity (remember
productivity the bread example?)
 Increase/ improve productivity (refer to
 GDP (Gross Domestic previous slide)
Product) is used to  External component of productivity
determine this. improvement – factors beyond control
 Formula: Value of total of business management (remember
diferent external environments in
output of country /
Chapter 2)
total population  Internal soft components of
(inputs) productivity improvement -intangible
(difcult to change e.g. training, culture
and the organisation)
 Internal hard components of
STRATEGY
& DESIGN
Operations Strategy and Design

Operation
s
Strategy
Total pattern of decisions
and actions that Design
formulate the role,
objectives and activities Choose an
APPROPRIATE design
of each part of the
operation so that they
CONTRIBUTE & SUPPORT
the organisations
BUSINESS STRATEGY.
Operations design
 Lean supply vs agile supply
 Products and services will demand a
specifc operations design
Which one should a business use for their
products or services?
The table will assist you in determining this.
 Transformation
System
Inputs Outputs

Which types of operations design are

available?
 Continuous Job/Batch Project
or repetitive
Product
Standardised Diversifed Unique
Type
According to
Product
Standardised requirements of Virtually none
Flow
particular product
Materials flow
Handling depends on
determinable, Special
Materials the product= highly
systemised equipment=
Building variable and
and often HIGH COST
expensive.
automated.
Variable
Raw
because of
Materials High turnover Low turnover
production
Inventory
time.
Work-in-
Small quantities Large quantities Single Project
progress
Fixed Cost: Fixed Cost: Fixed Cost:
Production
Relatively high Relatively low Relatively high
Cost
Variable Cost: Variable Cost: Variable Cost:
Components
Low High High
Operational Strategy and Design

 Relationship between operation system and

layout type
 Projects and large jobs = FIXED POSITION
LAYOUT

Building a bridge
Building a stadium
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials

Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Operational Strategy and Design
 Relationship between operation system and
layout design
 Jobs and batch processes = PROCESS LAYOUT

Farmers harvest grapes in the vineyard, let the grapes ferment in

barrels in cellars, bottle the grapes as wine.
4 Possible Arrangements/Grouping of
Machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials

Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Operational Strategy and Design
 Relationship between operation system and
layout design
 Mass processes or pure continuous repetitive
processes = PRODUCT LAYOUT

Canned goods Chocolates

Baking bread – machine approach Manufacturing body lotion – employee
approach
All elements in the process are done
by machines e.g. Employees are involved in each step of
manufacturing process e.g.
 mixing dough
 portioning and preparation of  filling of bottles
dough  putting sticker on bottle
 baking  packaging
 packaging
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials

Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• Aircraft manufacturer
Different components are manufactured at different facilities and then
assembled with a specific line method
4 possible arrangements/grouping of
machinery
• Raw materials stored in 1 spot
Fixed • ALL other means of production are
brought to the raw materials

Horizontal
• Similar machines are grouped
(Process together- in sections
Layout)
Vertical
• Placed in a straight line, one behind
(Product the other
Layout)
• Various methods of grouping
Combination machinery can be used.
• E.g. Aircraft manufacturer
Operational Strategy and Design
Have you ever been in a situation where you had to make
salad, sandwiches, cofee, whatever as a part of a group of
people in a social or work setting? Most of the times it is a
bit chaotic in the beginning as no one really takes charge
and everyone is trying to fgure out how to get things done.
Most often an “efective layout” needs to be established
before things start to really work.
Aim of
=
Effective
Layout
Streamline work flow
by minimising
handling distance and
increasing facility
Operations planning and control

Who, what,
when, how
and where?
Long-,
Medium- and
Short-term
planning

Control over the

transformation
process
Operations planning and control
 Demand = Capacity
 Planning for future production
capacity occurs in 3 stages, namely:

Demand Forecasting

Attuning capacity of
machines/resources/facilities

Determining strategies for the

full utilisation of capacity.
Operations planning and control

Determining the
demand for products
produced by the business with a
view to accommodate
future events

Important elements of forecasts:

 Timely
 Accurate

I NG?  Reliable

AST  Significant units

EC
FOR
 Written - On Paper
 Cost effective
 Understandable
 Casual
Methods
Determine
Time-series Multi-period
cause and pattern projections
Analysis effect
Quantitative Forecast for
relationship more than one
method future period
Data NO seasonal/
manipulated trend component
mathematically is present

Single period
Qualitative pattern projections
Techniques Categor Using historical
Based on ies of data for only
one period
Judgement. Forecas
(Most recent
GUT feeling ting demand
quantities)
Leave out…

 Pages 247 - 250

 8.5.3 Capacity determinants
 8.5.4 Fixed-capacity planning
 8.5.5 Match capacity to a change in

demand
Operations planning and control

What is Operational
Scheduling?

Determines the amount of work as well as the

sequence in which work must be performed.

 Keep in mind...
 Deal with diferent types of
capacity/resources simultaneously
 Machines and staf will have
 Operations planning and
control
 The Activities of Operations Scheduling
 MPS (Master Production Schedule)
 Indicates the planned production per time
interval (per month)
 Pushing, pulling, routing, sizing & timing
through workstations
PUSH
Does NOT consider the
consumer

PULL
Pace is determined by
the consumer
Operations planning and control
 Operations scheduling comprises of 4
activities:
Operations must be TIMED and
ROUTED.

Dispatching- issuing a shop order

for operation to take place.

Control or establish the status of

the shop order.

If necessary, the order may be

EXPEDITED
Operations planning and control
 The Activities of Operations Scheduling

 Efective Scheduling

 Planningand control difer for each product or

operation
 Characterised by:
 Being realistic and allowing for any essential
changes
 Provide enough time for all operations
(before/during/after)
 Having capacity available
 Allocate responsibility to workers- in order to
Operations planning and control
 Activities of operations scheduling

Forward Scheduling
Backward Scheduling
• Begin at the present
• Get the date when the time and schedule
product is needed and from then forward.
use it as a starting
point • Add all the time
needed to complete
• Subtract time needed the operation, and
from due date. inform the consumer.
Leave out…

 Pages 252 - 253

 8.5.6.3 Gantt charts and other

techniques
 8.5.7 Project management demand

network techniques
Operations Improvement
Leadership for quality

Continuous improvement through

total quality management (TQM)

Benchmarking

Measuring quality costs

Maintenance & replacement

Safety, health and environmental

management (SHE)

Good housekeeping
 Operations Improvement

 Leadership for
Quality

 Efective and constant

communication.
 Creating the right attitude
and motivation for
employees.
 Identify and develop the
skills and abilities of
employees.
Operations Improvement
 Operations Improvement
 Continuous improvement through Total
Quality Management.

 TQM is concerned with the improvement of

ALL aspects of operations performance.
 ‘Smartness’
 Competitiveness
 Flexibility
 Efectiveness- Entire organisation (including staf)

 Quality is important to both internal and

external customers
 Operations Improvement
 Continuous improvement through Total
Quality Management.

 Quality dimensions:
Services Products / Goods
 Reliability  Performance
 Responsiveness  Features
 Competence  Reliability
 Conformance
 Durability
 Operations Improvement
 Benchmarking
Similar
processes are
Generic Comparing
Internal
compared, Process Internal Processes and
regardless of
the industry.
es Functions

Comparing
similar Function Competi Specific
competitor
functions
between al tive comparison
industry leaders
 Operations Improvement
 Maintenance and
Replacement
 Machinery and Equipment cannot last
forever.

 Consequences of defective machinery

and equipment:

 Reduced production capacity

 Increased production costs
 Lower quality products and services
 Operations Improvement
 Preventive maintenance

 Training of maintenance
 Teams should be properly trained that any
possible failures can be dealt with efectively
 Determining / predicting the possible time of
failure
 Determine scientifcally
 Proper records should be kept

 Implementing Japanese principles

 Workers accept responsibility for preventing
Operations Improvement

 Safety, Health
and
Environmental
Management
 Focus on well-being of the
internal customer.
 Safety, health and
environment in which
Thank you for joining! Any questions?