I.

APPLYING TQM PRACTICE IN OPERATIONS MANAGEMENT

Introduction to Total Quality Management (TQM)

Total Quality Management (TQM) is a holistic approach to long-term organizational success through
customer satisfaction. It involves every department and employee, emphasizing continuous
improvement, quality assurance, and meeting or exceeding customer expectations.

Seven Key Elements of TQM

1. Customer Focus
The goal is to understand and meet customer needs, both internal and external. Feedback loops,
satisfaction surveys, and complaint tracking are common tools.

2. Continuous Improvement (Kaizen)

Continuous refinement of processes, products, and services. Methods include PDCA (Plan-Do-
Check-Act) and Six Sigma.

3. Employee Empowerment
Workers are trained, informed, and encouraged to participate in problem-solving and decision-
making. This builds ownership and innovation.

4. Quality Tools
Tools like cause-and-effect diagrams, control charts, histograms, and Pareto charts are used to
analyze and solve quality problems.

5. Product Design
Design should consider quality from the outset. Tools like Quality Function Deployment (QFD)
and Failure Mode Effects Analysis (FMEA) help align product features with customer
requirements.

6. Process Management
Focus is placed on managing and improving key processes through standardization,
benchmarking, and statistical process control (SPC).

7. Supplier Quality
Suppliers are viewed as partners. Organizations ensure supplier alignment through certification,
audits, and performance metrics.

II. QUALITY AWARDS AND STANDARDS

1. Malcolm Baldrige National Quality Award (MBNQA)

• U.S. award recognizing performance excellence.

• Based on seven criteria: leadership, strategy, customers, measurement, workforce, operations,

and results.

• Used more commonly as a self-assessment framework than a competition.

2. ISO Standards

• ISO 9000: Focuses on quality management systems (QMS). Ensures products and services are
consistent and meet customer and regulatory requirements.

• ISO 14000: Addresses environmental management. Encourages sustainable and eco-friendly

practices.

3. Deming Prize

• Japanese award named after W. Edwards Deming.

• Recognizes successful application of TQM in business processes.

• Open to global applicants; emphasizes statistical quality control and continuous improvement.

III. SUPPLY CHAIN MANAGEMENT (SCM)

Definition and Importance

SCM integrates all players in the chain—from suppliers to end consumers. It ensures efficient flow of
materials, information, and finances, ultimately improving competitiveness and customer satisfaction.

Key Functions

• Supplier coordination

• Production scheduling

• Inventory control

• Distribution and logistics

• Information sharing

The Bullwhip Effect

• Refers to increasing demand distortion as information moves upstream in the supply chain.

• Causes:

1. Demand forecast updating

2. Order batching

3. Price fluctuations

4. Rationing and gaming

• Consequences:

o Excess inventory

o Poor service levels

 o Inefficiencies and lost revenues

Counteracting the Bullwhip Effect

• Real-time data sharing

• Smaller and more frequent orders

• Stable pricing strategies

• Transparent allocation policies

IV. RELATIONSHIP BETWEEN OPERATIONS, PRODUCTIVITY, AND COMPETITIVENESS

Key Concepts

• Productivity = Output / Input

• Higher productivity leads to lower costs and higher competitiveness.

• Productivity can be improved through:

1. Technology (automation, software)

2. Employee productivity (training, motivation)

3. Managerial productivity (strategic planning, decision-making)

V. MANAGING LEAN PRODUCTION SYSTEMS

Lean Production / Toyota Production System (TPS)

• Aims to eliminate muda (waste), mura (unevenness), and muri (overburden).

Seven Types of Waste:

1. Transportation

2. Inventory

3. Motion

4. Waiting

5. Over-processing

6. Overproduction

7. Defects

Kanban Systems

• One-Card System: Uses a production order card (POK) between closely located workstations.
 • Two-Card System: Uses Withdrawal Kanban (WK) and Production Order Kanban (POK) for more
complex operations.

Kanban Board Management

• FIFO policy with visual zones (red/yellow/green) for urgency.

• Heijunka Box: Levels production by scheduling tasks over time and preventing workload spikes.

VI. INVENTORY MANAGEMENT TECHNIQUES

Three Inventory Types

1. Raw Materials – Inputs for production.

2. Work-in-Progress (WIP) – Semi-finished goods.

3. Finished Goods – Completed products awaiting sale.

Four Inventory Management Techniques

1. Economic Order Quantity (EOQ)

o Calculates the optimal order quantity to minimize ordering and holding costs.

o Formula:

Where:

▪ D = Demand

▪ S = Ordering Cost

▪ H = Holding Cost

2. Materials Requirement Planning (MRP)

o Schedules materials and components based on demand and production schedules.

3. Just-In-Time (JIT)

o Produces only what is needed, when it is needed. Reduces waste and inventory costs.

4. Manufacturing Resource Planning (MRP II)

o An extension of MRP that integrates finance, HR, and marketing data for better planning.
VII. MANAGING PRODUCTION SYSTEMS

Key Principles

• Focus on Lean to reduce all forms of waste.

• Implement PDCA Cycle for continuous process improvement.

• Use Kanban Systems to visually manage workflow and inventory.

• Balance efficiency, cost control, and quality for competitive advantage.

Summary and Strategic Importance

These principles and practices are interconnected. TQM ensures consistent quality, lean systems
streamline production, supply chains deliver efficiency, and inventory techniques control costs. When
executed together, they enable organizations to become more responsive, cost-effective, and customer-
centric, which is essential in today’s competitive business environment.

Real-Time Data Sharing in operations and supply chain management refers to the instantaneous
exchange of accurate information among stakeholders—such as suppliers, manufacturers, distributors,
and retailers—using digital systems. It plays a critical role in improving coordination, reducing
inefficiencies, and enabling proactive decision-making.

Importance of Real-Time Data Sharing

1. Minimizes the Bullwhip Effect

Real-time visibility into actual demand helps reduce the amplification of orders upstream in the
supply chain.

2. Improves Demand Forecasting and Planning

Up-to-date sales and inventory data allow for more accurate forecasting and agile planning.

3. Enhances Customer Service

Instant access to order status, stock levels, and delivery timelines improves responsiveness to
customer inquiries and satisfaction.

4. Reduces Inventory Costs

With timely data, companies can maintain lean inventories and avoid overstocking or stockouts.

5. Facilitates Quick Response to Disruptions

Alerts on supply delays or quality issues allow for immediate corrective action, reducing
downtime or lost sales.

Smaller and More Frequent Orders in Operations and Supply Chain Management
Definition:
Placing smaller quantities of orders at more regular intervals instead of large, infrequent bulk orders.
This practice supports responsiveness, reduces inventory holding costs, and aligns supply with actual
demand.

Benefits of Smaller and More Frequent Orders

1. Reduces Inventory Holding Costs

Less inventory sitting in storage means lower warehousing, insurance, and obsolescence costs.

2. Improves Cash Flow

Capital is not tied up in large amounts of stock—funds remain available for other uses.

3. Increases Responsiveness
Companies can adjust faster to demand changes, trends, or market shifts.

4. Reduces the Bullwhip Effect

Frequent, consistent ordering based on actual consumption reduces variability and distortion of
demand signals.

5. Enhances Freshness and Quality

Especially important in perishable goods and fast-moving consumer products—less time in
storage means fresher stock.

6. Aligns with Just-in-Time (JIT) Philosophy

Supports lean operations by minimizing waste and only ordering what's needed, when it's
needed.

Challenges and Trade-Offs

• Higher Ordering Costs

More frequent orders can lead to increased administrative and shipping expenses unless
automated systems are used.

• Strain on Suppliers
Suppliers must be capable of fulfilling smaller, more frequent orders without delays.

• More Complex Coordination

Requires better forecasting, supplier communication, and often real-time inventory visibility.

Best Practices to Support Smaller, Frequent Orders

1. Use of Automated Ordering Systems

Integrate with inventory management software to automate reorders when levels reach a preset
threshold.
 2. Vendor-Managed Inventory (VMI)
Suppliers monitor and replenish inventory as needed based on shared usage data.

3. Strategic Location of Warehouses

Locating distribution centers closer to customers or production sites reduces delivery lead times.

4. Improved Forecasting Tools

Use data analytics and real-time sales data to predict demand accurately.

1. Make-or-Buy Decisions and Outsourcing

Definition:
A make-or-buy decision is a strategic choice between manufacturing a product/component in-house
(make) or purchasing it from an external supplier (buy).

Key Considerations:

• Cost: Total cost comparison including labor, materials, overhead, and opportunity cost.

• Core Competency: Focus on producing components that are strategically important or unique to
the organization’s identity.

• Capacity: In-house availability of skilled labor, equipment, and space.

• Flexibility: Outsourcing can provide scalability and faster response to demand fluctuations.

• Quality Control: In-house production may offer more control over quality standards.

• Lead Time and Responsiveness: Evaluate which option supports faster time-to-market.

• Confidentiality and Intellectual Property (IP): Sensitive processes may need to remain internal.

Outsourcing Benefits:

• Focus on core activities

• Cost savings

• Access to specialized skills and technology

Risks of Outsourcing:

• Loss of control

• Quality issues

• Dependency on suppliers

• Supply chain disruptions

2. Ethics in Supply Chain Management

Overview:
Ethical supply chain management ensures that sourcing, production, and distribution are conducted
responsibly.

Key Ethical Issues:

• Labor Practices: Fair wages, safe working conditions, no child or forced labor.

• Environmental Sustainability: Minimizing carbon footprint, waste management, sustainable

sourcing.

• Transparency and Traceability: Clear supply chain visibility to detect unethical practices.

• Fair Trade Practices: Honest dealings and fair treatment of suppliers and vendors.

Benefits of Ethical Practices:

• Enhanced brand image and customer loyalty

• Regulatory compliance

• Reduced legal risks

• Increased investor and consumer trust

Tools for Promoting Ethics:

• Supplier codes of conduct

• Sustainability audits

• Certifications (e.g., Fair Trade, ISO 14001)

• Training programs

3. Selection, Evaluation, and Negotiation

Supplier Selection:

• Evaluate based on cost, quality, reliability, lead time, compliance, and technological capability.

Supplier Evaluation:

• Use scorecards to track:

o Delivery performance

o Defect rates

o Responsiveness

o Innovation contributions

• Regular performance reviews and feedback loops

Negotiation Process:

• Establish clear objectives: price, quality, delivery, and service terms

• Understand the supplier’s position and leverage

• Focus on win-win outcomes

• Document agreements thoroughly (SLAs, KPIs, penalties)

Techniques:

• BATNA (Best Alternative to a Negotiated Agreement)

• Total Cost of Ownership (TCO) analysis

4. Vendor Selection

Importance:
Right vendor selection ensures consistent product/service delivery, operational efficiency, and reduced
risk.

Selection Criteria:

• Quality assurance systems

• Delivery performance and reliability

• Financial health and stability

• Cultural fit and ethical alignment

• Cost competitiveness

• Innovation and technical support

• Scalability and capacity to grow with the business

Vendor Selection Methods:

• Request for Proposal (RFP) or Request for Quotation (RFQ)

• Weighted scoring models

• Site visits and audits

• Trial runs or sample testing

Long-Term Considerations:

• Willingness to engage in continuous improvement

• Alignment with strategic objectives

5. Logistics Management

Definition:
Logistics management involves planning, executing, and monitoring the movement and storage of goods
from origin to consumption.

Key Activities:

• Inbound logistics: Raw materials and components delivery to the manufacturer

• Outbound logistics: Finished goods distribution to customers or retailers

• Transportation: Mode selection (truck, rail, sea, air), route optimization

• Warehousing: Storage efficiency, inventory management, location planning

• Order Fulfillment: Ensuring accurate, timely delivery of customer orders

Objectives:

• Reduce costs

• Enhance customer satisfaction

• Optimize inventory levels

• Improve order cycle time

Key Metrics:

• On-time delivery rate

• Inventory turnover

• Order accuracy rate

• Logistics cost as a percentage of sales

Technologies in Use

Warehouse Management Systems (WMS)

A WMS is software that helps manage warehouse operations such as inventory tracking, picking,
packing, and shipping. It improves accuracy, reduces manual errors, and enhances overall
warehouse efficiency.

Transportation Management Systems (TMS)

TMS software assists in planning, executing, and optimizing the movement of goods. It helps
with carrier selection, route planning, freight auditing, and real-time shipment tracking.

RFID and GPS Tracking

 o RFID (Radio Frequency Identification): Uses tags and scanners to automatically track
inventory and shipments without line-of-sight scanning.

o GPS (Global Positioning System): Provides real-time tracking of vehicles and shipments,
improving route efficiency and delivery visibility.

Automated Picking and Packing Systems

These systems use robotics, conveyors, and scanners to automate the picking and packaging of
products. They reduce labor costs, increase speed, and improve order accuracy.

Key Metrics

On-Time Delivery Rate

The percentage of orders delivered to customers on or before the promised date. High rates indicate
reliable logistics and customer satisfaction.

Inventory Turnover
Measures how often inventory is sold and replaced in a period. A higher turnover means
efficient inventory management and lower holding costs.

Order Accuracy Rate

The percentage of orders fulfilled correctly without errors (e.g., wrong item, wrong quantity).
High accuracy builds customer trust and reduces returns.

Logistics Cost as a Percentage of Sales

This metric compares total logistics expenses (transport, warehousing, handling) to total sales
revenue. A lower percentage indicates more cost-efficient logistics operations.

I. Independent Demand Inventory Systems

What is Independent Demand?

Independent demand is the demand for finished products or end-items, determined by external
market forces (e.g., customer orders). It is not linked to the demand for other items.

Deterministic Models – Continuous Demand

These models assume demand is constant and predictable over time. Inventory is replenished in
fixed quantities at regular intervals.

Economic Order Quantity (EOQ)

EOQ is the optimal order quantity that minimizes total inventory costs (ordering + holding costs).
It balances the trade-off between ordering frequency and inventory carrying costs.

Quantity Discounts and Price Variations

Suppliers may offer lower unit prices for larger orders. Inventory models adjust the EOQ to
consider trade-offs between discount savings and higher holding costs.

Multi-Items – Interaction Constraints, Individual, Joint, and Coordinated

When managing multiple inventory items:
 o Individual: Managed separately.

o Joint: Ordered together to save costs.

o Coordinated: Synchronized to optimize storage or production space.

Economic Batch Quantity (EBQ)

Also known as Production Order Quantity. Used when items are produced rather than ordered. It
considers production rate versus demand rate to minimize setup and holding costs.

Special Items: Decaying, Repairable, and Perishable

o Decaying: Items like chemicals lose value or effectiveness over time.

o Repairable: Broken items are fixed and returned to inventory.

o Perishable: Items like food have a short shelf life and require tight inventory control.

II. Dependent Demand Inventory Systems

Inventory Systems for Dependent Demand

These systems manage items whose demand depends on the demand for other products (e.g.,
components or raw materials).

What is Dependent Demand?

It is the demand for parts or materials that are used in producing finished goods (e.g., car tires
for car production). It is derived from the demand for a parent item.

Why is Dependent Demand Important?

Helps ensure that the right quantity of components is available at the right time to avoid
production delays and excess inventory.

Materials Requirements Planning (MRP) System Features

MRP is a computer-based system that plans material purchases and production schedules. It
calculates what is needed, how much, and when.

MRP Information System Inputs:

o Master Production Schedule (MPS): What to produce and when.

o Bill of Materials (BOM): Lists components needed for each product.

o Inventory Records: Stock levels, lead times, and safety stock.

MRP Information System Outputs:

o Planned Order Releases

o Material Requirement Reports

o Rescheduling Notices
 o Inventory Projections

Lot Sizing in MRP Systems

Determines how much to order or produce. Methods include:

o Lot-for-lot

o EOQ

o Fixed order quantity

o Periodic order quantity

Embedding Just-in-Time (JIT) into MRP

Combines JIT's focus on waste reduction and minimal inventory with MRP's scheduling power.
Results in leaner operations, improved responsiveness, and synchronized production flows.

Manufacturing Execution Systems (MES): Priority Rules and Techniques, Shop Scheduling

Explanation:
MES are software systems that monitor and control production on the factory floor. They
manage tasks, track production data, and enforce schedules.

Priority Rules (used to decide job order):

• First Come, First Served (FCFS)

→ Example: Process jobs in the order they arrive.

• Shortest Processing Time (SPT)

→ Example: Job A takes 2 hours, Job B takes 4; do Job A first.

• Earliest Due Date (EDD)

→ Example: Job A is due tomorrow, Job B in 3 days; do Job A first.

Shop Scheduling:
Planning job order and resource allocation in a shop with multiple machines or workstations.

2. Floor-Control and Personnel Scheduling in Services

Floor Control:
Involves real-time monitoring of operations on the shop floor—tracking job progress, equipment
usage, and delays.

Personnel Scheduling in Services:

Allocating shifts and tasks to employees based on service demand.

Example:
In a hospital, nurse shifts are scheduled to ensure enough staff during peak hours (e.g., 8 a.m. –
4 p.m.) while avoiding overstaffing during quiet hours.
3. Sequencing: Single Machine and Multiple Machines

Single Machine Sequencing:

Deciding the order of jobs on one machine.

Example:
A tailor has 3 garments to sew. Sequencing decides which one to sew first, second, third.

Multiple Machine Sequencing:

Planning the order of jobs across multiple machines or stages.

Example:
In a bakery: Mixing → Baking → Packaging. Scheduling ensures each batch moves smoothly
through all stages without delay.

4. Stochastic Static Analysis and Stochastic Dynamic Analysis

Stochastic Static Analysis:

Considers uncertainty in processing times but assumes fixed job data (e.g., arrival time known).

Example:
Delivery time for parts is uncertain but all jobs are known in advance.

Stochastic Dynamic Analysis:

Considers uncertainty and allows for new jobs or changes over time.

Example:
In a repair shop, job times vary and new repair requests come in continuously.

5. Vehicle Scheduling

Explanation:
Assigning and routing vehicles to deliver goods or services efficiently.

Example:
A courier company schedules delivery vans to cover different routes, ensuring minimal travel
time and meeting delivery deadlines.

6. Assembly Line Balancing

Explanation:
Distributing tasks evenly across workstations in an assembly line to minimize idle time and
maximize output.
 Example:
In a toy factory:

• Station 1: Attach legs (2 mins)

• Station 2: Attach arms (2 mins)

• Station 3: Paint (2 mins)

Each task takes equal time to keep the line balanced.

7. Techniques of Manpower Scheduling

Explanation:
Methods used to plan work shifts, considering workload, labor laws, and employee availability.

Techniques:

• Cyclic Scheduling: Rotating shifts on a fixed pattern.

• Optimization Models: Using software to match staff to demand.

• Heuristics: Rule-of-thumb scheduling when exact optimization is too complex.

Example:
In a call center, staff are scheduled in staggered shifts to handle varying call volumes throughout
the day.