Industrial Operations and Management Practices

Chapter I: Operations and Productivity

Learning Objectives:
 Define operations management
 Explain the distinction between goods and services
 Explain the difference between production and productivity
 Compute single-factor productivity
 Compute multifactor productivity
 Identify the critical variables in enhancing productivity

Introduction
Every day, operations managers around the world create products to ensure societal well-
being. These goods come in a variety of shapes and sizes. They may be Whirlpool washing
machines, DreamWorks movies, Disney World rides, or Hard Rock Cafe meals. Each day, these
businesses generate thousands of sophisticated items, thus delivering exactly how the consumer
requests, whenever and where the customer desires. For more than 35 million visitors globally
each year, Hard Rock performs this. This is a difficult endeavor, and operations managers have
demanding jobs whether they work for Whirlpool, DreamWorks, Disney, or Hard Rock.

What is Operations Management (OM)

Operations management (OM)
Activities that relate to the creation of goods and services through the transformation of inputs to
outputs.
Production
The creation of goods and services.
The production function may be less visible in a company that doesn't produce tangible
goods or products. We frequently refer to these actions as services. Services could be "hidden"
from the general public and even the client. The solution could be in the shape of a liver
transplant, a money transfer from a savings account to a checking account, or the filling of either
a vacant seat on a plane or a student's education. The manufacturing processes that take place
within the company are frequently referred to as operations, or operations management,
regardless of whether the final outcome is a good or a service.

Manual in Industrial Operations and Management Practices 1

Organizing to Produce Goods and Services
To create goods and services, all organizations perform three functions (see Figure 1.1).
These functions are the necessary ingredients not only for production but also for an
organization’s
survival. They are:
1. Marketing , which generates the demand, or at least takes the order for a product or service
(nothing happens until there is a sale).
2. Production/operations , which creates, produces, and delivers the product.
3. Finance/accounting , which tracks how well the organization is doing, pays the bills, and
collects the money.

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 Figure 1.1
The Supply Chain
Through the three functions—marketing, operations, and finance—value for the customer
is created. However, firms seldom create this value by themselves. Instead, they rely on a variety
of suppliers who provide everything from raw materials to accounting services. These suppliers,
when taken together, can be thought of as a supply chain. A supply chain (see Figure 1.2 ) is a
global network of organizations and activities that supply a firm with goods and services. As our
society becomes more technologically oriented, we see increasing specialization.
Specialized expert knowledge, instant communication, and cheaper transportation also
foster specialization and worldwide supply chains. It does not pay for a firm to try to do
everything. The expertise that comes with specialization exists up and down the supply chain,
adding value at each step. When supply chain members collaborate to achieve high levels of
customer satisfaction, we have a tremendous force for efficiency and competitive advantage.
Competition in the 21st century is not between companies; it is between supply chains.

Figure 1.2
Soft Drink Supply Chain

A supply chain for a bottle of Coke requires a beet or sugar cane farmer, a syrup producer, a
bottler, a distributor, and a retailer, each adding value to satisfy a customer. Only with
collaborations between all supply chain members can efficiency and customer satisfaction be
maximized. The supply chain, in general, starts with the provider of basic raw materials and
continues all the way to the final customer at the retail store.

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Why Study OM?
We study OM for four reasons:
1. OM is one of the three major functions of any organization, and it is integrally related to
all the other business functions. All organizations market (sell), finance (account), and
produce (operate), and it is important to know how the OM activity functions. Therefore,
we study how people organize themselves for productive enterprise.
2. We study OM because we want to know how goods and services are produced. The
production function is the segment of our society that creates our products and services.
3. We study OM to understand what operations managers do. Regardless of your job in an
organization, you can perform better if you understand what operations managers do. In
addition, understanding OM will help you explore the numerous and lucrative career
opportunities in the field.
4. We study OM because it is such a costly part of an organization. A large percentage of the
revenue of most firms is spent in the OM function. Indeed, OM provides a major
opportunity for an organization to improve its profitability and enhance its service to
society.

Tip: Good OM managers are scarce, and as a result, career opportunities and pay are excellent.

What Operations Managers Do

All good managers perform the basic functions of the management process. The
management process involves planning, organizing, staffing, leading, and controlling. Operations
managers apply this management process to the decisions they make in the OM function. The 10
strategic OM decisions are introduced in Table 1.1. Successfully addressing each of these
decisions requires planning, organizing, staffing, leading, and controlling.

Manual in Industrial Operations and Management Practices 4

Tip: An operations manager must successfully address the 10 decisions around which this text is
organized.

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The Heritage of Operations Management
The field of OM is relatively young, but its history is rich and interesting. The
innovations and contributions of numerous individuals have enhanced our lives and the OM
discipline.

 Eli Whitney (1800) is credited for the early popularization of interchangeable parts,
which was achieved through standardization and quality control. Through a contract he
signed with the U.S. government for 10,000 muskets, he was able to command a
premium price because of their interchangeable parts.
 Frederick W. Taylor (1881), known as the father of scientific management, contributed to
personnel selection, planning and scheduling, motion study, and the now popular field of
ergonomics.
 One of his major contributions was his belief that management should be much more
resourceful and aggressive in the improvement of work methods. Taylor and his
colleagues, Henry L. Gantt and Frank and Lillian Gilbreth, were among the first to
systematically seek the best way to produce.
 Another of Taylor’s contributions was the belief that management should assume more
responsibility for:
1. Matching employees to the right job.
2. Providing the proper training.
3. Providing proper work methods and tools.
4. Establishing legitimate incentives for work to be accomplished.
 By 1913, Henry Ford and Charles Sorensen combined what they knew about
standardized
parts with the quasi-assembly lines of the meatpacking and mail-order industries and
added the revolutionary concept of the assembly line, where men stood still and material
moved.
 Quality control is another historically significant contribution to the field of OM. Walter
Shewhart (1924) combined his knowledge of statistics with the need for quality control
and

Manual in Industrial Operations and Management Practices 6

 provided the foundations for statistical sampling in quality control. W. Edwards Deming
(1950) believed, as did Frederick Taylor, that management must do more to improve the
work environment and processes to improve quality.
 Operations management will continue progressing as contributions from other
disciplines,
including industrial engineering, statistics, management, and economics , improve
decision-making.
 Innovations from the physical sciences (biology, anatomy, chemistry, physics) have also
contributed to advances in OM. These innovations include new adhesives, faster
integrated
circuits, gamma rays to sanitize food products, and specialized glass for iPhones and
plasma TVs. Innovation in products and processes often depends on advances in the
physical sciences.

Operations for Goods and Services

Manufacturers produce a tangible product, while service products are often intangible. But many
products are a combination of a good and a service, which complicates the definition of a
service.
Services- Economic activities typically produce intangible products (such as education,
entertainment, lodging, government, financial, and health services).
The operation activities for both goods and services are often very similar. For instance,
both have quality standards, are designed and produced on a schedule that meets customer
demand, and are made in a facility where people are employed. However, some major
differences do exist between goods and services.
Table 1.2
Differences between Goods and Services

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Service sector - The segment of the economy that includes trade, financial, lodging, education,
legal, medical, and other professional occupations.
The Productivity Challenge
The creation of goods and services requires changing resources into goods and services.
The more efficiently we make this change, the more productive we are, and the more value is
added to the good or service provided. Productivity is the ratio of outputs (goods and services)
divided by the inputs (resources, such as labor and capital) (see Figure 1.3). The operations
manager’s job is to enhance (improve) this ratio of outputs to inputs. Improving productivity
means improving efficiency.

Manual in Industrial Operations and Management Practices 8

 Figure 1.3
The Economic System Adds Value by Transforming Inputs to Outputs
An effective feedback loop evaluates performance against a strategy or standard. It also
evaluates customer satisfaction and sends signals to managers controlling the inputs and
transformation process.

Productivity Measurement
Single-factor productivity. Indicates the ratio of goods and services produced (outputs) to one
resource (input).
Multifactor productivity. Indicates the ratio of goods and services produced (outputs) to many
or all resources (inputs).

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Productivity Variables
Productivity variables. The three factors are critical to productivity improvement—labor,
capital, and the art and science of management.
1. Labor, which contributes about 10% of the annual increase.
2. Capital, which contributes about 38% of the annual increase.
3. Management, which contributes about 52% of the annual increase.

Current Challenges in Operations Management

 Globalization: The rapid decline in the cost of communication and transportation has made
markets global. Similarly, resources in the form of capital, materials, talent, and labor are
also now global. As a result, countries throughout the world are contributing to
globalization as they vie for economic growth. Operations managers are rapidly seeking

Manual in Industrial Operations and Management Practices 10

 creative designs, efficient production, and high-quality goods via international
collaboration.
 Supply-chain partnering: Shorter product life cycles, demanding customers, and fast
changes in technology, materials, and processes require supply-chain partners to be in
tune with the needs of end users. And because suppliers may be able to contribute unique
expertise, operations managers are outsourcing and building long-term partnerships with
critical players in the supply chain.
 Sustainability: Operations managers’ continuing battle to improve productivity is
concerned with designing products and processes that are ecologically sustainable. This
means designing green products and packaging that minimize resource use, can be
recycled or reused, and are generally environmentally friendly.
 Rapid product development: Technology combined with rapid international communication
of news, entertainment, and lifestyles is dramatically chopping away at the life span of
products. OM is answering with new management structures, enhanced collaboration,
digital technology, and creative alliances that are more responsive and effective.
 Mass customization: Once managers recognize the world as the marketplace, the cultural
and individual differences become quite obvious. In a world where consumers are
increasingly aware of innovation and options, substantial pressure is placed on firms to
respond in a creative way. And OM must rapidly respond with product designs and
flexible production processes that cater to the individual whims of consumers. The goal is
to produce customized products whenever and wherever needed.
 Lean operations: Lean is the management model sweeping the world and providing the
standard against which operations managers must compete. Lean can be thought of as the
driving force in a well-run operation, where the customer is satisfied, employees are
respected, and waste does not exist. This text's theme is to build more efficient
organizations, where management creates enriched jobs that help employees engage in
continuous improvement and where goods and services are produced and delivered when
and where the customer desires them. These ideas are also captured in the phrase Lean.

Ethics, Social Responsibility, and Sustainability

Manual in Industrial Operations and Management Practices 11

Stakeholders. Those with a vested interest in an organization including customers, distributors,
suppliers, owners, lenders, employees, and community members.
Identifying ethical and socially responsible responses while developing sustainable
processes that are also effective and efficient productive systems is not easy. Managers are also
challenged to:
◆ Develop and produce safe, high-quality green products
◆ Train, retain, and motivate employees in a safe workplace
◆ Honor stakeholder commitments

Exercise No. 1
Car Battery
Direction: Answer the following case completely
Note:
1. Write your Name, Section and College

Manual in Industrial Operations and Management Practices 12

 2. Short Bond Paper
3. 1” all sides margin
4. Times New Roman 12
5. Cite your sources (if necessary)

The American car battery industry boasts that its recycling rate now exceeds 95%, the
highest rate for any commodity. However, with changes brought about by specialization and
globalization, parts of the recycling system are moving offshore. This is particularly true of
automobile batteries, which contain lead. The Environmental Protection Agency (EPA) is
contributing to the offshore flow with newly implemented standards that make domestic battery
recycling increasingly difficult and expensive. The result is a major increase in used batteries
going to Mexico, where environmental standards and control are less demanding than they are in
the U.S. One in five batteries is now exported to Mexico. There is seldom difficulty finding
buyers because lead is expensive and in worldwide demand. While U.S. recyclers operate in
sealed, mechanized plants, with smokestacks equipped with scrubbers and plant surroundings
monitored for traces of lead, this is not the case in most Mexican plants. The harm from lead is
legendary, with long-run residual effects. Health issues include high blood pressure, kidney
damage, detrimental effects on fetuses during pregnancy, neurological problems, and arrested
development in children.

Given the two scenarios below, what action do you take?

a) You own an independent auto repair shop and are trying to dispose of a few old batteries each
week safely. (Your battery supplier is an auto parts supplier who refuses to take your old
batteries.)
b) You are the manager of a large retailer responsible for disposing of thousands of used batteries
daily.

Rubrics:
Focus Content Organization Format
The single The presence of The order developed Follow the correct
ideas developed and sustained within format
controlling point

Manual in Industrial Operations and Management Practices 13

 made with an through facts, and across paragraphs
examples, using transitional
awareness of the
anecdotes, details, devices and including
task about a opinions, statistics, the introduction and
reasons, and/or conclusion
specific topic
explanations
4 Sharp, distinct Substantial, specific, Sophisticated The correct Format
controlling point and/or illustrative arrangement of was completely
made about a single content content with evident followed
topic with evident demonstrating and/or subtle
awareness of task strong development transition
and sophisticated
ideas

3 Apparent point Sufficiently Functional The correct format

made about a single developed content arrangement of was followed with
topic with sufficient with adequate content that sustains a minimum
awareness of task elaboration and logical order with discrepancy to the
explanation some evidence of correct format
transition

2 No apparent point Limited content with Confused or There is a huge

but evidence of a inadequate inconsistent discrepancy to the
specific topic elaboration or arrangement of correct format
explanation content with or
without attempts of
transition

1 Minimal evidence Superficial and/or Minimal control of Minimal similarity

of a topic minimal content content arrangement to the correct format

Chapter 2: Operations Strategy in a Global Environment

Manual in Industrial Operations and Management Practices 14

Learning Objectives:
1. Define mission and strategy
2. Identify and explain three strategic approaches to competitive advantage
3. Understand the significance of key success factors and core competencies
4. Use factor rating to evaluate both country and outsource providers
5. Identify and explain four global operations strategy options
Introduction:
In today's interconnected and rapidly evolving business landscape, operations and supply
chains play a pivotal role in the success of organizations. This report delves into the intricacies of
global operations and supply chains, highlighting their significance, challenges, and strategies for
optimization. By examining various industries and case studies, this report aims to provide
insights into the complexities of managing operations and supply chains on a global scale.

Importance of Global Operations and Supply Chains:

Global operations and supply chains are integral to the functioning of multinational
corporations, enabling them to source materials, produce goods, and distribute products across
the world efficiently. The following points underscore their importance:
1. Market Expansion: Organizations can access a broader customer base by establishing
global supply chains, allowing them to tap into new markets and revenue streams.
2. Cost Efficiency: Global supply chains enable companies to take advantage of cost
disparities across regions, optimizing production and procurement costs.
3. Risk Diversification: By diversifying suppliers and production locations, companies can
mitigate risks arising from geopolitical uncertainties, natural disasters, and other
disruptions.
4. Innovation and Collaboration: Global operations foster collaboration with diverse partners,
facilitating knowledge transfer and innovation.

10 key decisions in operations management:

Manual in Industrial Operations and Management Practices 15

 Operations management involves making a wide range of decisions to efficiently and
effectively manage the processes, resources, and activities that produce goods and deliver
services.

Product Design and Development: Deciding on the design and features of a product or service,
taking into account customer needs, market trends, and technological advancements.
Quality Management: Setting and maintaining quality standards for products or services,
ensuring consistency and meeting customer expectations.
Process Selection: Choosing the most suitable production processes, methods, and technologies
to manufacture products or deliver services efficiently.
Capacity Planning: Determining the capacity (production or service delivery capabilities)
needed to meet current and future demand while avoiding overutilization or underutilization of
resources.
Facility Location: Selecting optimal locations for facilities such as factories, warehouses, or
service centers to minimize costs and optimize distribution.
Layout Design: Designing the layout of facilities to enhance productivity, minimize material
movement, and improve communication and collaboration among employees.
Supply Chain Management: Managing the flow of materials, information, and funds across the
entire supply chain, including suppliers, manufacturers, distributors, and retailers.
Inventory Management: Deciding on inventory levels, reorder points, and strategies (e.g., just-
in-time) to ensure sufficient stock while minimizing holding costs.
Scheduling: Creating production schedules, employee work schedules, and delivery schedules to
optimize resource utilization and meet customer demands.
Maintenance and Reliability: Developing maintenance strategies to ensure equipment and
machinery are well-maintained, reliable, and available for production or service delivery.

Challenges in Global Operations and Supply Chains:

Managing global operations and supply chains comes with various challenges:

 Complexity: Coordinating activities across different regions with varying regulations,

cultures, and time zones is complex and demanding.

Manual in Industrial Operations and Management Practices 16

  Supply Chain Disruptions: Global operations are susceptible to disruptions like trade
disputes, transportation bottlenecks, and global health crises, as demonstrated by the
COVID-19 pandemic.
 Communication and Collaboration: Effective communication and collaboration between
dispersed teams and partners can be challenging, impacting decision-making and
responsiveness.
 Quality Control: Ensuring consistent product quality across different locations is
challenging due to variations in manufacturing processes and quality standards.

Strategies for Optimizing Global Operations and Supply Chains:

To address the challenges, organizations adopt several strategies:
1. Risk Management: Develop comprehensive risk management strategies that anticipate
potential disruptions and establish contingency plans.
2. Technology Adoption: Embrace technologies like IoT, AI, and blockchain to enhance
visibility, traceability, and decision-making in supply chains.
3. Localization: Balance global integration with local responsiveness by tailoring strategies to
specific market needs and regulations.
4. Supplier Relationships: Nurture strong relationships with suppliers to foster collaboration,
innovation, and resilience in the supply chain.

Global operations and supply chains are critical components of today's business landscape,
enabling companies to expand their markets, optimize costs, and manage risks. However, they
come with challenges that require strategic approaches and technological innovations. By
understanding these complexities and adopting effective strategies, organizations can navigate
the intricacies of global operations and supply chains to achieve sustainable growth and success.

Developing Missions and Strategies

The process of developing missions and strategies is fundamental to the success of any
organization. This report aims to explore the significance of crafting clear missions and effective
strategies, the key steps involved, challenges encountered, and best practices. By examining real-

Manual in Industrial Operations and Management Practices 17

world examples and scholarly sources, this report provides insights into the art of formulating
missions and strategies for sustainable growth and competitive advantage.

Mission- The purpose or rationale for an organization’s existence.

Strategy- How an organization expects to achieve its missions and goals.
Competitive advantage- The creation of a unique advantage over competitors.

Table 2.1
Example Mission Statements of Three Companies

Importance of Developing Missions and Strategies:

Missions define an organization's purpose and provide a sense of direction, while strategies
outline the approach to achieving goals. Their importance is underscored by the following
points:
Alignment: Clear missions align all stakeholders towards a common objective, promoting
unity and shared purpose.
Direction: Missions provide a roadmap for decision-making and strategic planning,
ensuring that all efforts are cohesive and goal-oriented.
Competitive Advantage: Well-crafted strategies enable organizations to differentiate
themselves from competitors and capitalize on their strengths.

Manual in Industrial Operations and Management Practices 18

 Resource Allocation: Strategies guide the allocation of resources, optimizing efficiency and
enhancing overall performance.

Achieving Competitive Advantage through Operations

 Differentiation - Distinguishing the offerings of an organization in a way that the customer
perceives as adding value.
 Experience differentiation - Engaging a customer with a product through imaginative
use of the five senses, so the customer “experiences” the product.
 Low-cost leadership - Achieving maximum value, as perceived by the customer.
 Response - A set of values related to rapid, flexible, and reliable performance.

Key Steps in Developing Missions and Strategies:

The process of developing missions and strategies involves several crucial steps:

Environmental Analysis: Conduct an assessment of the external and internal environment

to identify opportunities, threats, strengths, and weaknesses.
Mission Formulation: Create a clear and concise mission statement that encapsulates the
organization's purpose, values, and aspirations.
Goal Setting: Define specific, measurable, achievable, relevant, and time-bound (SMART)
goals aligned with the mission.
Strategy Formulation: Develop strategies that outline how the organization will achieve its
goals, considering factors like differentiation, cost leadership, and market focus.
Implementation and Execution: Translate strategies into actionable plans, allocate
resources, and establish mechanisms for tracking progress.

Challenges in Developing Missions and Strategies:

Organizations often face challenges during the mission and strategy development process:

Ambiguity: Crafting a clear and concise mission statement that accurately captures the
organization's essence can be challenging.

Manual in Industrial Operations and Management Practices 19

 Environmental Complexity: Analyzing the dynamic external environment requires constant
monitoring and adaptation.
Strategic Inertia: Organizations may struggle to pivot from established strategies, even
when market conditions change.
Resistance to Change: Implementing new strategies can face resistance from employees
accustomed to existing practices.

Best Practices for Effective Mission and Strategy Development:

To overcome challenges and create successful missions and strategies, organizations can adopt
the following best practices:

Inclusivity: Involve stakeholders from different levels of the organization to ensure diverse
perspectives are considered.
Flexibility: Develop strategies that allow for adaptation to changing circumstances and
market dynamics.
Alignment: Ensure that missions and strategies are aligned with the organization's core
values and culture.
Continuous Review: Regularly assess and adjust missions and strategies to stay relevant
and responsive to evolving conditions.

SWOT analysis - A method of determining internal strengths and weaknesses and external
opportunities and threats.
Key success factors (KSFs) - Activities or factors that are key to achieving competitive
advantage.

Product Life Cycle

The product life cycle is a concept used in marketing and business to describe the stages
that a product goes through from its introduction to its eventual decline and discontinuation. It
illustrates the trajectory of a product's sales and profitability over time. The product life cycle
consists of several distinct stages:

Manual in Industrial Operations and Management Practices 20

Introduction: This is the initial stage when a new product is introduced to the market. Sales are
typically low, and the focus is on building awareness and attracting early adopters. Marketing
efforts are directed towards creating a strong market presence and establishing the product's
unique value proposition.

Growth: In this stage, the product experiences rapid sales growth as it gains popularity among a
larger segment of the market. Positive word-of-mouth and increased consumer awareness
contribute to higher sales volumes. Competitors might also start entering the market at this point,
leading to increased competition.

Maturity: During the maturity stage, the product reaches its peak sales and market saturation.
The market becomes more saturated, and growth slows down. Competitors are plentiful, and
companies might engage in aggressive marketing strategies to maintain or gain market share.
Price competition might intensify during this phase.

Decline: In the decline stage, sales begin to decline due to factors such as changing consumer
preferences, technological advancements, or the emergence of newer and more innovative
products. Companies might choose to discontinue the product or only offer it to a niche market
that still values its unique features.

Manual in Industrial Operations and Management Practices 21

 Figure 2.1
Product Life Cycle

Real-World Examples:
Google: Google's mission statement, "to organize the world's information and make it
universally accessible and useful," reflects its commitment to information accessibility.
Tesla: Tesla's strategy to revolutionize the automotive industry through electric vehicles
and renewable energy sources exemplifies a bold and disruptive approach.

Developing missions and strategies is a pivotal undertaking that shapes an organization's

trajectory. Clear missions guide purpose, while effective strategies propel growth and
competitiveness. By navigating challenges, following key steps, and embracing best practices,
organizations can craft missions and strategies that drive innovation, resilience, and long-term
success.
Manual in Industrial Operations and Management Practices 22
Achieving Competitive Advantage Through Operations

In the realm of modern business, operations have emerged as a crucial driver of

competitive advantage. This report delves into how organizations can leverage their operational
strategies to gain a competitive edge in the marketplace. By examining the significance of
operations, exploring key operational strategies, analyzing real-world case studies, and drawing
on academic sources, this report provides insights into how operations can be a potent source of
sustainable differentiation and success.

Significance of Operations in Achieving Competitive Advantage:

Operations encompass the processes and activities that transform inputs into outputs, whether
they are goods or services. Their significance in achieving competitive advantage lies in the
following aspects:

Efficiency: Streamlined operations can lead to cost reductions and resource optimization,
thereby enhancing an organization's cost competitiveness.
Quality: Operations that prioritize quality control and consistency contribute to customer
satisfaction, loyalty, and a positive brand image.
Innovation: Agile operations that embrace technological advancements and innovative practices
foster product and process innovation, leading to differentiation.
Speed and Flexibility: Operations that enable quick response to market changes and customer
demands offer a competitive edge in rapidly evolving industries.

Key Operational Strategies for Competitive Advantage:

To achieve competitive advantage through operations, organizations can adopt several
strategic approaches:

Lean Operations: Implement lean principles to eliminate waste, reduce lead times, and enhance
operational efficiency.
Supply Chain Management: Optimize supply chain networks for efficiency, resilience, and
responsiveness to minimize disruptions and costs.

Manual in Industrial Operations and Management Practices 23

Quality Management: Implement Total Quality Management (TQM) practices to ensure
consistent product and service quality, leading to customer satisfaction and loyalty.
Mass Customization: Combine the benefits of mass production with customization to meet
individual customer preferences efficiently.
Agile Manufacturing: Implement agile manufacturing practices to rapidly adapt to changing
market demands and maintain a competitive edge.

Real-World Case Studies:

Toyota: Toyota's production system, often referred to as the Toyota Way, emphasizes lean
manufacturing principles to optimize operations, reduce waste, and ensure high-quality products.

Amazon: Amazon's fulfillment centers showcase advanced supply chain management strategies,
enabling the company to offer speedy and reliable deliveries to customers.

Krajewski, L. J., Ritzman, L. P., & Malhotra, M. K. (2018). Operations Management: Processes
and Supply Chains. Pearson. This comprehensive textbook explores various operational
strategies and their impact on competitiveness.

Operations play a pivotal role in determining an organization's competitive advantage. By

strategically aligning operations with business objectives, organizations can achieve efficiency,
quality, innovation, and flexibility that set them apart from competitors. The adoption of key
operational strategies, as evidenced by real-world case studies and supported by academic
sources, serves as a roadmap for organizations aiming to harness the power of operations to
achieve sustainable differentiation and success in today's dynamic business landscape.

Issues in Operations Strategy: A Comprehensive Analysis

Operations strategy is a critical aspect of an organization's success, encompassing

decisions related to resource allocation, process design, and overall operational efficiency. This
report delves into the various issues that organizations encounter when developing and

Manual in Industrial Operations and Management Practices 24

implementing operations strategies. By examining these challenges through real-world examples
and supported by academic sources, this report provides insights into how organizations can
address these issues to optimize their operations and enhance competitive advantage.

Key Issues in Operations Strategy:

Several issues can pose challenges in operations strategy development and implementation:

Alignment with Business Strategy: Ensuring that operations strategies are fully aligned with
the broader business goals and objectives can be complex.

Globalization and Complexity: The global nature of operations can introduce complexities in
managing supply chains, sourcing materials, and coordinating production across borders.

Resource Constraints: Balancing resource limitations, such as budget and personnel, with the
need for efficient operations can be a recurring challenge.

Technology Integration: Integrating new technologies into existing operations while

minimizing disruptions requires careful planning and execution.

Risk Management: Addressing supply chain disruptions, regulatory changes, and geopolitical
uncertainties is vital for maintaining operational continuity.

Real-World Examples:

Boeing 737 Max Crisis: The Boeing 737 Max crisis exemplifies how supply chain issues and
operational decisions can lead to serious safety and reputational challenges.

Samsung's Galaxy Note 7 Recall: Samsung's recall of the Galaxy Note 7 due to battery issues
highlights the importance of quality control and risk management in operations.

Manual in Industrial Operations and Management Practices 25

Addressing Issues and Best Practices:

Strategic Alignment: Regular communication between operations and business strategy teams is
crucial for ensuring alignment and addressing discrepancies.

Supply Chain Visibility: Adopt technologies such as IoT and blockchain to enhance visibility and
traceability in supply chains, aiding risk management.

Scenario Planning: Develop contingency plans to mitigate the impact of potential disruptions on
operations.

Continuous Improvement: Implement methodologies like Lean and Six Sigma to continuously
identify and eliminate operational inefficiencies.

Issues in operations strategy are inherent to the complexities of modern business

environments. By understanding these challenges, drawing insights from academic sources, and
learning from real-world examples, organizations can proactively address these issues to
optimize their operations, enhance efficiency, and maintain a competitive edge. Implementing
strategic alignment, leveraging technology, and embracing continuous improvement practices
can enable organizations to navigate operational challenges effectively and drive sustainable
success.

Manual in Industrial Operations and Management Practices 26

 Case Study No. 2
Rapid Lube
Direction: Answer the following case completely
Note:
1. Write your Name, Section and College
2. Short Bond Paper
3. 1” all sides margin
4. Times New Roman 12
5. Cite your sources (if necessary)
A huge market exists for automobile tune-ups, oil changes, and lubrication service for more
than 250 million vehicles on U.S. roads. Some of this demand is filled by full-service auto
dealerships, some by Walmart and Firestone, and some by other tire/ service dealers. However,
Rapid-Lube, Mobil-Lube, Jiffy-Lube and others have also developed strategies to accommodate
this opportunity.
Rapid-Lube stations perform oil changes, lubrication, and interior cleaning in a spotless
environment. The buildings are clean, usually painted white, and often surrounded by neatly
trimmed landscaping. To facilitate fast service, cars can be driven through three abreast. At
Rapid-Lube, the customer is greeted by service representatives who are graduates of Rapid- Lube
U. The Rapid-Lube school is not unlike McDonald’s Hamburger University near Chicago or
Holiday Inn’s training school in Memphis. The greeter takes the order, which typically includes
fluid checks (oil, water, brake fluid, transmission fluid, differential grease) and the necessary
lubrication, as well as filter changes for air and oil. Service personnel in neat uniforms then move
into action. The standard three-person team has one person checking fluid levels under the hood,
another assigned
interior vacuuming and window cleaning, and the third in the garage pit, removing the oil filter,
draining the oil, checking the differential and transmission, and lubricating as necessary.
Precise task assignments and good training are designed to move the car into and out of the
bay in 10 minutes. The business model is to charge no more, and hopefully less, than gas
stations, automotive repair chains, and auto dealers, while providing better and faster service.
Discussion Questions

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1. What constitutes the mission of Rapid-Lube?
2. How does the Rapid-Lube operations strategy provide competitive advantage? ( Hint:
Evaluate how Rapid-Lube’s traditional competitors perform the 10 decisions of operations
management vs. how Rapid-Lube performs them.)
3. Is it likely that Rapid-Lube has increased productivity over its more traditional competitors?
Why? How would we measure productivity in this industry?

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Chapter 3: Project Management
Learning Objectives:
1. To know the importance of project management
2. To use the different tools in project management; Gannt Chart, PERT, CPM

Project management is the systematic process of planning, organizing, executing, controlling,

and closing a temporary endeavor to achieve specific goals and objectives. It involves
coordinating resources, such as people, time, and budget, in a structured and controlled manner
to complete a unique project within defined constraints. Project management encompasses a
range of activities, from initiating a project and defining its scope to monitoring progress,
managing risks, and ensuring successful delivery while meeting the project's requirements and
stakeholder expectations.

The Importance of Project Management

Scheduling projects can be a difficult challenge for operations managers. The stakes in
project management are high. Cost overruns and unnecessary delays occur due to poor
scheduling and poor controls.
Projects that take months or years to complete are usually developed outside the normal
production system. Project organizations within the firm may be set up to handle such jobs and
are often disbanded when the project is complete.

The management of projects involves three phases;

1. Planning: This phase includes goal setting, defining the project, and team organization.
2. Scheduling: This phase relates people, money, and supplies to specific activities and relates
activities to each other.
3. Controlling: Here the firm monitors resources, costs, quality, and budgets. It also revises or
changes plans and shifts resources to meet time and cost demands.

Project Planning
Projects can be defined as a series of related tasks directed toward a major output

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Project organization - An organization formed to ensure that programs (projects) receive the
proper management and attention.
Project Managers
Project managers receive high visibility in a firm and are responsible for making sure that (1) all
necessary activities are finished in proper sequence and on time; (2) the project comes in within
budget; (3) the project meets its quality goals; and (4) the people assigned to the project receive
the motivation, direction, and information needed to do their jobs.

Ethical Issues Faced in Project Management

Project managers not only have high visibility but they also face ethical decisions on a daily
basis. How they act establishes the code of conduct for the project. Project managers often deal
with (1) offers of gifts from contractors, (2) pressure to alter status reports to mask the reality of
delays, (3) false reports for charges of time and expenses, and (4) pressures to compromise
quality to meet bonuses or avoid penalties related to schedules.

Figure 3.1
A sample Project Organization

The project organization may be most helpful when:

1. Work tasks can be defined with a specific goal and deadline.
2. The job is unique or somewhat unfamiliar to the existing organization.
3. The work contains complex interrelated tasks requiring specialized skills.

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4. The project is temporary but critical to the organization.
5. The project cuts across organizational lines.

Work breakdown structure (WBS)

A hierarchical description of a project into more and more detailed components.

Project Scheduling
Project scheduling involves sequencing and allotting time to all project activities. At this stage,
managers decide how long each activity will take and compute the resources needed at each
stage of production.
Gantt charts - Planning charts used to schedule resources and allocate time.

Figure 3.2
Sample Gantt Chart

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Project Controlling

Controlling projects can be difficult. The stakes are high; cost overruns and unnecessary
delays can occur due to poor planning, scheduling, and controls. Some projects are “well-
defined,” whereas others may be “ill-defined.” Projects typically only become well-defined after
detailed initial planning and careful definition of required inputs, resources, processes, and
outputs.

Program evaluation and review technique (PERT)

A project management technique that employs three time estimates for each activity.
Critical path method (CPM)
A project management technique that uses only one time factor per activity.
Critical path
The computed longest time path(s) through a network.

The Framework of PERT and CPM

PERT and CPM both follow six basic steps:
1. Define the project and prepare the work breakdown structure.
2. Develop the relationships among the activities. Decide which activities must precede and
which must follow others.
3. Draw the network connecting all the activities.
4. Assign time and/or cost estimates to each activity.
5. Compute the longest-time path through the network. This is called the critical path.
6. Use the network to help plan, schedule, monitor, and control the project.

PERT and CPM are important because they can help answer questions such as the following
about projects with thousands of activities:
1. When will the entire project be completed?
2. What are the critical activities or tasks in the project—that is, which activities will delay
the entire project if they are late?
3. Which are the noncritical activities—the ones that can run late without delaying the whole

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project’s completion?
4. What is the probability that the project will be completed by a specific date?
5. At any particular date, is the project on schedule, behind schedule, or ahead of schedule?
6. On any given date, is the money spent equal to, less than, or greater than the budgeted
amount?
7. Are there enough resources available to finish the project on time?
8. If the project is to be finished in a shorter amount of time, what is the best way to accomplish
this goal at the least cost?
Network Diagrams and Approaches
The first step in a PERT or CPM network is to divide the entire project into significant
activities in accordance with the work breakdown structure. There are two approaches for
drawing a project network: activity on node (AON) and activity on arrow (AOA). Under the
AON convention, nodes designate activities. Under AOA, arrows represent activities. Activities
consume time and resources. The basic difference between AON and AOA is that the nodes in an
AON diagram represent activities. In an AOA network, the nodes represent the starting and
finishing times of an activity and are also called events. So, nodes in AOA consume neither time
nor resources.

Activity-on-node (AON)
A network diagram in which nodes designate activities.
Activity-on-arrow (AOA)
A network diagram in which arrows designate activities.

Example 1
Predecessor Relationships for Pollution Control in Milwaukee Paper
Milwaukee Paper Manufacturing had long delayed the expense of installing advanced
computerized air pollution control equipment in its facility. But when the board of directors
adopted a new proactive policy on sustainability, it did not just authorize the budget for the state-
of-the-art equipment. It directed the plant manager, Julie Ann Williams, to complete the
installation in time for a major announcement of the policy, on Earth Day, exactly 16 weeks
away! Under strict deadline from her bosses, Williams needs to be sure that installation of the

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filtering system progresses smoothly and on time. Given the following information, develop a
table showing activity precedence relationships.

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Some Problems:
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Chapter 4: FORECASTING
Learning Objectives:
1. Understand the three-time horizons and which models apply for each
2. Explain when to use each of the four qualitative models
3. Apply the naive, moving-average, exponential smoothing, and trend methods
4. Compute three measures of forecast accuracy

Forecasting is the art and science of predicting future events. Forecasting may involve taking
historical data (such as past sales) and projecting them into the future with a mathematical
model.

Forecasting Time Horizons

1. Short-range forecast: This forecast has a time span of up to 1 year but is generally less
than 3 months. It is used for planning purchasing, job scheduling, workforce levels, job
assignments, and production levels.
2. Medium-range forecast: A medium-range, or intermediate, forecast generally spans from
3 months to 3 years. It is useful in sales planning, production planning and budgeting,
cash budgeting, and analysis of various operating plans.
3. Long-range forecast: Generally 3 years or more in time span, long-range forecasts are
used
in planning for new products, capital expenditures, facility location or expansion, and
research and development.

Types of Forecast
1. Economic forecasts. Planning indicators that are valuable in helping organizations prepare
medium- to long-range forecasts.
2. Technological forecasts. Long-term forecasts concerned with the rates of technological
progress.
3. Demand forecasts. Projections of a company’s sales for each time period in the planning
horizon.
The Strategic Importance of Forecasting

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Supply-Chain Management
Good supplier relations and the ensuing advantages in product innovation, cost, and speed to
market depend on accurate forecasts. Here are just three examples:
◆ Apple has built an effective global system where it controls nearly every piece of the supply
chain, from product design to retail store. With rapid communication and accurate data shared up
and down the supply chain, innovation is enhanced, inventory costs are reduced, and speed to
market is improved. Once a product goes on sale, Apple tracks demand by the hour for each store
and adjusts production forecasts daily. At Apple, forecasts for its supply chain are a strategic
weapon.
◆ Toyota develops sophisticated car forecasts with input from a variety of sources, including
dealers. But forecasting the demand for accessories such as navigation systems, custom wheels,
spoilers, and so on is particularly difficult. And there are over 1,000 items that vary by model and
color. As a result, Toyota not only reviews reams of data with regard to vehicles that have been
built and wholesaled but also looks in detail at vehicle forecasts before it makes judgments about
the future accessory demand. When this is done correctly, the result is an efficient supply chain
and satisfied customers.
◆ Walmart collaborates with suppliers such as Sara Lee and Procter & Gamble to make sure
the right item is available at the right time in the right place and at the right price. For instance, in
hurricane season, Walmart’s ability to analyze 700 million store–item combinations means it can
forecast that not only flashlights but also Pop-Tarts and beer sell at seven times the normal
demand rate. These forecasting systems are known as collaborative planning, forecasting, and
replenishment (CPFR). They combine the intelligence of multiple supply-chain partners. The
goal of CPFR is to create significantly more accurate information that can power the supply
chain to greater sales and profits.

Human Resources
Hiring, training, and laying off workers all depend on anticipated demand. If the human
resources department must hire additional workers without warning, the amount of training
declines, and the quality of the workforce suffers. A large Louisiana chemical firm almost lost its
biggest customer when a quick expansion to around-the-clock shifts led to a total breakdown in
quality control on the second and third shifts.

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Capacity
When capacity is inadequate, the resulting shortages can lead to loss of customers and market
share. This is exactly what happened to Nabisco when it underestimated the huge demand for its
new Snackwell Devil’s Food Cookies. Even with production lines working overtime, Nabisco
could not keep up with demand, and it lost customers. Nintendo faced this problem when its Wii
was introduced and exceeded all forecasts for demand. Amazon made the same error with its
Kindle. On the other hand, when excess capacity exists, costs can skyrocket.

Seven Steps in the Forecasting System

Forecasting follows seven basic steps. We use Disney World, the focus of this chapter’s Global
Company Profile , as an example of each step:
1. Determine the use of the forecast: Disney uses park attendance forecasts to drive decisions
about staffing, opening times, ride availability, and food supplies.
2. Select the items to be forecasted: For Disney World, there are six main parks. A forecast of
daily attendance at each is the main number that determines labor, maintenance, and scheduling.
3. Determine the time horizon of the forecast: Is it short, medium, or long term? Disney develops
daily, weekly, monthly, annual, and 5-year forecasts.
4. Select the forecasting model(s): Disney uses a variety of statistical models that we shall
discuss, including moving averages, econometrics, and regression analysis. It also employs
judgmental, or nonquantitative, models.
5. Gather the data needed to make the forecast: Disney’s forecasting team employs 35 analysts
and 70 field personnel to survey 1 million people/businesses every year. Disney also uses a firm
called Global Insights for travel industry forecasts and gathers data on exchange rates, arrivals
into the U.S., airline specials, Wall Street trends, and school vacation schedules.
6. Make the forecast.
7. Validate and implement the results: At Disney, forecasts are reviewed daily at the highest
levels to make sure that the model, assumptions, and data are valid. Error measures are applied;
then the forecasts are used to schedule personnel down to 15-minute intervals.

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Forecasting Approaches
1. Jury of executive opinion : Under this method, the opinions of a group of high-level experts or
managers, often in combination with statistical models, are pooled to arrive at a group estimate
of demand. Bristol-Myers Squibb Company, for example, uses 220 well-known research
scientists as its jury of executive opinion to get a grasp on future trends in the world of medical
research.
2. Delphi method: There are three different types of participants in the Delphi method: decision-
makers staff personnel, and respondents. Decision makers usually consist of a group of 5
to 10 experts who will be making the actual forecast. Staff personnel assists decision makers by
preparing, distributing, collecting, and summarizing a series of questionnaires and survey results.
The respondents are a group of people, often located in different places, whose judgments are
valued. This group provides inputs to the decision-makers before the forecast is made. The state
of Alaska, for example, has used the Delphi method to develop its long-range economic forecast.
A large part of the state’s budget is derived from the million-plus barrels of oil pumped daily
through a pipeline at Prudhoe Bay. The large Delphi panel of experts had to represent all groups
and opinions in the state and all geographic areas.
3. Sales force composite: In this approach, each salesperson estimates what sales will be in his or
her region. These forecasts are then reviewed to ensure that they are realistic. Then they are
combined at the district and national levels to reach an overall forecast. A variation of this
approach occurs at Lexus, where every quarter Lexus dealers have a “make meeting.” At this
meeting, they talk about what is selling, in what colors, and with what options, so the factory
knows what to build.
4. Market survey: This method solicits input from customers or potential customers regarding
future purchasing plans. It can help not only in preparing a forecast but also in improving
product design and planning for new products. The consumer market survey and sales force
composite methods can, however, suffer from overly optimistic forecasts that arise from
customer input.

Overview of Quantitative Methods

Five quantitative forecasting methods, all of which use historical data, are described in this
chapter. They fall into two categories:

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1. Naive approach
2. Moving averages Time-series models
3. Exponential smoothing
4. Trend projection
5. Linear regression - Associative model

Time-Series Models - Time-series models predict on the assumption that the future is a function
of the past. In other words, they look at what has happened over a period of time and use a series
of past data to make a forecast. If we are predicting sales of lawnmowers, we use the past sales
for lawnmowers to make the forecasts.
Associative Models - Associative models, such as linear regression, incorporate the variables or
factors that might influence the quantity being forecast. For example, an associative model for
lawn mower sales might use factors such as new housing starts, advertising budget, and
competitors’ prices.

Decomposition of a Time Series

Analyzing time series means breaking down past data into components and then projecting
them forward. A time series has four components:
1. Trend is the gradual upward or downward movement of the data over time. Changes in
income, population, age distribution, or cultural views may account for movement in trend.
2. Seasonality is a data pattern that repeats itself after a period of days, weeks, months, or
quarters.
3. Cycles are patterns in the data that occur every several years. They are usually tied into the
business cycle and are of major importance in short-term business analysis and planning.
Predicting business cycles is difficult because they may be affected by political events or by
international turmoil.
4. Random variations are “blips” in the data caused by chance and unusual situations. They
follow no discernible pattern, so they cannot be predicted.

Naive Approach

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The simplest way to forecast is to assume that demand in the next period will be equal to demand
in the most recent period. In other words, if sales of a product—say, Nokia cell phones—were 68
units in January, we can forecast that February’s sales will also be 68 phones.

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Associative Forecasting Methods:
Regression and Correlation Analysis

Linear-regression analysis
A straight-line mathematical model to describe the functional relationships between independent
and dependent variables.
Simple Linear Regression:

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Simple linear regression involves two variables: one dependent variable and one independent
variable.
It aims to find a linear relationship between them, represented as a straight line equation: Y = a +
bX, where Y is the dependent variable, X is the independent variable, a is the intercept, and b is
the slope.
Example: Predicting a student's test score based on the number of hours they studied.

2. Multiple Linear Regression:

In multiple linear regression, there are two or more independent variables.
The goal is to find a linear relationship between the dependent variable and multiple independent
variables: Y = a + b1X1 + b2X2 + ... + bnXn.
Example: Predicting a house's price based on its size, number of bedrooms, and location.

3. Logistic Regression:
Logistic regression is used when the dependent variable is binary (yes/no, 1/0).
It estimates the probability of an event occurring as a function of independent variables.
Example: Predicting whether a customer will buy a product (yes/no) based on their age and
income.

Coefficient of correlation
A measure of the strength of the relationship between two variables.

Coefficient of determination
A measure of the amount of variation in the dependent variable about its mean that is explained
by the regression equation.

Multiple regression
An associative forecasting method with more than one independent variable.

Tracking signal
A measurement of how well a forecast is predicting actual values.

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Bias
A forecast that is consistently higher or consistently lower than actual values of a time series.

Adaptive smoothing
An approach to exponential smoothing forecasting in which the smoothing constant is
automatically changed to keep errors to a minimum.

Focus forecasting
Forecasting that tries a variety of computer models and selects the best one for a particular
application.

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Academic Sources:

Slack, N., & Lewis, M. (2019). "Operations Strategy." In Operations Strategy (pp. 5-18). Wiley.
This source provides an overview of the challenges in aligning operations with business strategy.

Akkerman, R., Farahani, P., & Grunow, M. (2010). "Quality, Safety and Sustainability in Food
Distribution: A Review of Quantitative Operations Management Approaches and Challenges."
OR Spectrum, 32(4), 863-904. This academic paper discusses challenges related to quality,
safety, and sustainability in food distribution operations.
Academic Sources:

Hayes, R. H., & Wheelwright, S. C. (1984). Restoring Our Competitive Edge: Competing
Through Manufacturing. Wiley. This seminal work discusses the importance of manufacturing
strategies for achieving competitive advantage.

Zsidisin, G. A., & Ritchie, B. (Eds.). (2019). "Supply Chain Risk: A Handbook of Assessment,
Management, and Performance." Springer. This handbook delves into various aspects of supply
chain risk management and mitigation strategies.

Cagliano, R., Caniato, F., & Spina, G. (2003). "Integrating lean production and supplier-managed
inventory: A theoretical framework and empirical evidence." International Journal of Production
Economics, 85(2), 235-248. This paper explores challenges in integrating lean production with
supplier-managed inventory systems.

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