Operations management

PAN African eNetwork ProjectMFC Operations Management Semester - II Shraddha Sharma Copyright © Amity University 1 Objective of the Class • • • • • • Maintenance Management Quality Management Cost of quality Concept of TQM Supply chain management ERP Copyright © Amity University Maintenance Management Copyright © Amity University What is Maintenance? • The function of production management that is concerned with the day to day problem of keeping the physical plant in good operating condition. • It is an essential activity in every manufacturing firm, because it is necessary to ensure the availability of the machines, buildings & services needed by other parts of the organization for the performance of their function at an optimum return on investment in machines, materials & employees. Copyright © Amity University • Maintenance operations include all efforts to keep production facilities & equipments in acceptable operating condition. Copyright © Amity University . organizing & directing the resources in order to control the availability & performance of the industrial plants to some specified level.Maintenance Management • It is concerned with planning. New installations of equipments & buildings. Equipment inspection & lubrication 4. Utilities generation & distribution 5. 6. Maintenance of existing plant buildings & grounds 3. Alterations to existing equipments & buildings. Copyright © Amity University . Maintenance of existing plant & equipments 2.Scope of Maintenance Primary functions 1. theft etc.Scope of Maintenance Secondary functions • Storekeeping • Plant protection including fire protection • Waste disposal • Salvage • Insurance administration (against fire. Copyright © Amity University .) • Janitorial services • Property accounting • Pollution & noise abatement or control • Any other service delegated to maintenance by plant management. Impact of Poor Maintenance • • • • • Production capacity Production costs Production & service quality Employee or customer safety Customer satisfaction Copyright © Amity University Objectives of Maintenance Management • • • • • • • • • • Minimizing the loss of productive time because of equipment failure Minimizing the repair time & repair cost Minimizing the loss due to production stoppages Efficient use of maintenance personnel and equipments Prolonging the life of capital assets by minimizing the rate of wear & tear. To keep all productive assets in good working condition. To maximize efficiency & economy in production through optimum use of facilities. To minimize accidents through regular inspection & repair of safety devices. To minimize the total maintenance cost which includes the cost of repair, cost of preventive maintenance & inventory carrying cost due to spare parts inventory. To improve the quality of products and to improve productivity. Copyright © Amity University Areas of Maintenance • Civil Maintenance: building construction & maintenance service facilities such as water, gas, steam, compressed air. • Mechanical Maintenance: Maintaining machines & equipments, transport vehicles, material handling equipments. Lubricating the machines is also part of mechanical maintenance work. • Electrical Maintenance: Maintaining electrical equipments such as generators, transformers, switch gears, etc. Copyright © Amity University Types of Maintenance • • • • • Break down Maintenance Preventive Maintenance Predictive Maintenance Routine Maintenance Planned Maintenance Copyright © Amity University Copyright © Amity University .Break down Maintenance • Also known as corrective or remedial maintenance. In this. maintenance become repair work – an electric motor will not start. or a shaft has broken. a conveyor belt is ripped. • Corrective maintenance occurs when there is a work stoppage because of machine breakdown. including regular time & overtime labour costs. • To control the investment in replacement spare machines which are also called standup or backup machines. • To perform the appropriate amount of repairs at each malfunction. • To control the cost of the operation of repair shops. • To control the cost of repair crews. Copyright © Amity University . • To control the investment in replacement spare parts that are used when machines are repaired.Break down Maintenance • To get equipment back into operation as quickly as possible in order to minimise interruption to production. It consists of: Proper design & installation of equipment. cleaning & painting of buildings & equipment. upkeep & overhaul of equipment Adequate lubrication. 4. 3.Preventive Maintenance • • • 1. 2. Copyright © Amity University . Maintenance activities under taken before the machines or equipments fail. Periodic inspection of plant & equipment to prevent break downs before they occur Repetitive servicing. Aims to minimize the possibility of unanticipated or major breakdowns. decreased production downtime. identification of items with high maintenance costs.Benefits of Preventive Maintenance Preventive maintenance offers several benefits to the users. better spare parts control. Copyright © Amity University . They include greater safety for workers. fewer large scale & repetitive repairs. less standby equipment required. and lower unit cost of manufacture. less cost for simple repairs made before breakdown. • Condition can be measured periodically or on a continuous basis & this enables the maintenance people to plan for overhaul. • This will allow an extension to the service life without fear of failure. Copyright © Amity University .) to predict anticipated failure of machines & equipments. amplitude meters. audio gauges. vibration analyzers. optical tooling etc.Predictive Maintenance • Modern approach to preventive maintenance using sensitive instruments (e..g. 2. Copyright © Amity University . greasing or lubricating the bearings while the machine is running.g.. after shutting down the machine or equipment e. Shut down maintenance in which the maintenance work is carried out when the machine or equipment is out of service i.Routine Maintenance • This includes activities such as periodic inspection. Running maintenance in which the maintenance work is carried out while the equipment is in the operating condition (i..e. lubrication & repair of production equipments after their service life.e. performing some operation) e.g. • It may be classified as: 1. repairing boiler tubes of a boiler.. cleaning. building in order to service. machinery.Planned Maintenance • Maintenance activities that are carried out according to a predetermined schedule. Copyright © Amity University . overhaul. lubricate or repair before actual break down or deterioration in service occurs. • It involves inspection of all plant & equipments. • Planned approach to maintenance reduces the machine or equipment down time. • Also known as scheduled or productive maintenance. reduces the cost of maintenance & increases productivity as compared to haphazard or unplanned maintenance. available technique for maintenance & the facilities available to carry out maintenance work. Prepare a list of maintenance materials & spare parts required. Copyright © Amity University . b. g. Know the equipment to be maintained. Prepare a list of special tools & special facilities such as material handling equipments required. Investigate the maintenance work to be done at the workstation to ascertain physical access & space limitations etc. e. Develop the repair plan on the basis of Recommendation of original equipment manufacturing Technical experience Equipment history Management decision for a new technique of maintenance work. f. Establish the priorities of maintenance activities by categorizing the activities as emergency work. priority work & non priority work. Estimate the time required to do the maintenance work Provide for necessary safety devices & safety instructions.Planning & Scheduling of maintenance • • • • a. d. h. c. Total Quality Management Copyright © Amity University . A customer’s perception of the degree to which the product/service meets his/her expectations. Conformance to requirements. Fitness for use of a product /service by the intended customer. Value for money. Copyright © Amity University . The ability of a product to meet customer’s needs. What the customer thinks it is. features & design. Combination of aesthetics. Measure of the conformance of the product/service to the customer’s needs.What is Quality? •            Quality is: Conformance to specifications. Totality of features & characteristics of a product/service that bears on its ability to satisfy a stated or implied need. Meeting or exceeding customer requirements now & in the future. About organization Strategic For everyone Led by Management The appropriate grade About improvement Copyright © Amity University .New thinking about Quality Old quality is “small q” New quality is “Big Q” About products Technical For inspectors Led by experts High grade About control. 5. 6. 3. 2. 8. 7. Performance Features Reliability Serviceability Aesthetics (appearance) Durability Customer service safety Copyright © Amity University .Dimensions of product quality 1. 4. Dimensions of service quality • • • • • • • • • • Reliability Responsiveness Competence Access Courtesy Communication Credibility Understanding Security/safety Tangibles Copyright © Amity University . Benefits of Quality • • • • • • • Gives positive company image Improves competitive ability Increases market share & net profits Reduce costs Reduces product liability problems Improves employee morale Improves productivity Copyright © Amity University . meeting the needs of internal customers • Performer level .Three levels of Quality • Organization level .meeting the requirements of accuracy. Copyright © Amity University . completeness innovation. timeliness & cost.meeting external customer requirements • Process level . 6. 4. A philosophy that involves everyone in an organization in a continual effort to improve quality & achieve customer satisfaction. Top management commitment & support Focus on both internal & external customers. 5. 3. Employee involvement & empowerment Continuous improvement Partnership with suppliers Establishing performance measures for processes. 2.What is Total Quality Management? • 1. Copyright © Amity University . Copyright © Amity University .Essentials of TQM focus • • • • • • • • Customer satisfaction Leadership Quality policy Organization structure Employee involvement Quality costs Supplier selection & development Recognition & reward. instead of only focusing on technical specifications. • Juran is also credited with developing the concept of cost of quality.Modern Quality Management Quality Gurus & their Philosophies Joseph Juran (USA) • One of Juran’s significant contributions is his focus on the definition of quality and the cost of quality. Copyright © Amity University . which allows us to measure quality in dollar terms rather than on the basis of subjective evaluations. • Defining quality as fitness for use takes into account customer intentions for use of the product. Juran is credited with defining quality as fitness for use rather than simply conformance to specifications. 8. End the practice of awarding business on price alone. a set of management practices to help points. Eliminate slogans. and eliminate the annual rating or merit system. 6. Adopt and institute leadership. Eliminate numerical quotas for the workforce and numerical goals for management. Adopt the new philosophy. 12. Put everybody in the company to work accomplishing the transformation. Edwards Deming A core concept in implementing TQM is Deming’s 14 points. 9. production and service. Cease dependence on inspection to achieve quality. Copyright © Amity University . 7. 14. instead. 11. Improve constantly and forever every process for planning. Institute a vigorous program of education and self-improvement for everyone. exhortations and targets for the workforce. a set of management practices to help companies increase their quality and productivity: 1. 13. Break down barriers between staff areas. Institute training on the job. 5. 2. minimize total cost by working with a single supplier. 4. Create constancy of purpose for improving products and services. Remove barriers that rob people of pride of workmanship. 3.W. 10. Drive out fear. Deming Wheel (PDCA cycle) Copyright © Amity University . Copyright © Amity University .check how closely result meets goals A – Act – use the improved process as standard practice.plan (process) the improvement D – Do.do implement the plan C – Check.Deming Cycle P – Plan. which are small • teams of employees that volunteer to solve quality problems. • Dr. He stressed that quality initiatives should be pursued at every level of the organization and that all employees should be involved. These diagrams are used for quality problem solving. Ishikawa was a proponent of implementation of quality circles.Kaoru Ishikawa • Kaoru Ishikawa is best known for the development of quality tools called cause-and-effect diagrams. Ishikawa believed that everyone in the company needed to be united with a shared vision and a common goal. He was also one of the first to stress the importance of total company quality control. also called fishbone or Ishikawa diagrams. rather than just focusing • on products and services. He was the first quality guru to emphasize the importance of the “internal customer.” the next person in the production process. Copyright © Amity University . Dr. Copyright © Amity University . • Taguchi is known for applying a concept called design of experiment to product design. Genichi Taguchi • Dr. He estimates that as much as 80 percent of all defective items are caused by poor product design. a design that results in products that can perform over a wide range of conditions.Dr. Genichi Taguchi is a Japanese quality expert known for his work in the area of product design. Taguchi stresses that companies should focus their quality efforts on the design stage. • This method is an engineering approach that is based on developing robust design. as it is much cheaper and easier to make changes during the product design stage than later during the production process. 3. 6. Success comes from people. 4. Copyright © Amity University . Constant sense of urgency.need for change. 5. 3.Kaizen • 1.employee participation & team work. Kaizen enhances quality through: Improvement in supplier relations New product planning & development Improvement in employee satisfaction Reduction in cost Meeting delivery schedules Employer skill development Three guiding principles of Kaizen 1. Process view of the system – analysis of design & production process 2. 2. The goal for customer satisfaction Copyright © Amity University . Involvement of every employee in the organization 3.Total Quality Management • TQM is a process that underlines three philosophies: 1. Continuous improvement 2. order entry. strategies & implementation. 3. Process benchmarking – work processes such as billing. technical quality.Benchmarking • • 1. Copyright © Amity University . 2. product performance & features & services. employee training etc. Measuring a company’s performance against that of best –in-class achieve those performance levels & using the information as a basis for the company’s targets. Strategic benchmarking – how firms complete & seek winning strategies that have led to competitive advantage & market success. 3 types of benchmarking are: Performance benchmarking – pricing. Decide what to benchmark Select companies to benchmark Obtain data & collect information Analyze data & form action plans Recalibrate & start the process again Copyright © Amity University .Benchmarking Process 1. 5. 2. 4. 3. Business Process Reengineering (BPR) • The fundamental rethinking & radical redesign of business processes to achieve dramatic improvements in critical. Creative thinking to break away from old traditions & assumptions. contemporary measures of performance such as cost. Fundamental understanding of the process. 3. Copyright © Amity University . • Requirements of successful BPR Process 1. Effective use of information technology. quality. service & speed. 2. Business Process Reengineering (BPR) • Steps in BPR process 1.Implement the reengineered process.e.State a case for action (i.Create a new process design 6. need for change) 2.Evaluate enablers for reengineering 4.Identify the process for reengineering 3. Copyright © Amity University .Understanding the current process 5. all by using quality control concepts. Copyright © Amity University . & QC members have easy access to what other people are doing in other industries. • The QC activities are4 interconnected in a nationwide network. super mutual self-development & to advance the company.Quality Circles (QC) • A small group of employees who meet regularly to undertake work related projects designed to improve working conditions. retest. downtime. 2. down grading. External failure costs: costs of warranty. Costs of quality can be reduced by revising the production system including technology. Copyright © Amity University . process inspection. 3. attitudes and training.Cost of Quality 1. new product review. quality data & improvement projects. Internal failure costs: costs of scrap. finished goods inspection. quality laboratories & calibration of instruments. customer complaints. training. returned goods. 4. allowance to customers for substandard quality products. Appraisal costs: costs of incoming inspection. rework. Preventive costs: costs of quality planning. management. process planning. Supply Chain Management Copyright © Amity University . operations and retail outlets. • A supply chain refers to the way that materials flow through different organizations.Supply Chain Management • Integration of various activities encompassed by the supply chain through improved supply chain relationships to achieve a sustainable competitive advantage. warehouse. starting with raw materials & ending with finished products delivered to the ultimate consumer. Copyright © Amity University . • A supply chain is a sequence of suppliers. To maximize the overall value generated. Copyright © Amity University . To achieve maximum supply chain profitability 3. To reduce the supply chain costs to the minimum possible level. 2.Supply chains A typical supply chain may involve the following stages: • Customers • Retailers • Wholesalers/distributors • Manufacturers • Components/raw material suppliers Objectives of a supply chain 1. Supply chain for a Manufacturing Organization Copyright © Amity University . Supply chain for a Service Organization Copyright © Amity University . Activities involved in supply chain management Four major activities involved in supply chain management are: 1. Warehousing 4. Logistics 3. Expediting Copyright © Amity University . Purchasing 2. Few suppliers 3. Keiretsu network 5.Supply chain strategies Supply chain strategies include: 1. Vertical integration 4. Multiple suppliers 2. Virtual companies Copyright © Amity University . the objective of purchasing & materials management has always been to have two or more suppliers. The thinking was that competition would drive down price & reduce the risk of suppliers being cut off.Multiple suppliers Historically. Copyright © Amity University . Long term partnering relationships are not the goal. This strategy plays one supplier against another & places the burden of meeting the buyer’s demand on the supplier. • It can foster both formal & informal contact. that may contribute to the alignment of organizational culture of the two firms. Copyright © Amity University . • Using few suppliers can create value by allowing suppliers to have economies of scale & a learning curve that yields both lower transaction costs & lower production costs. a buyer is better off developing a long term relationship with a few dedicated suppliers. further strengthening the partnership.Few suppliers • This is a strategy of few suppliers which implies that rather than looking for short term attributes such as low cost. Vertical Integration • Developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor. a manufacturer of a computer memory chip also manufactures computer hardware. • Backward integration suggests a firm purchase its suppliers. Copyright © Amity University . For example. • Forward integration suggests that a manufacturer of components make the finished product. an automobile manufacturing company deciding to manufacture its own batteries or tyres. For example. Copyright © Amity University .Keiretsu Network • Many Japanese manufacturers have found a trade-off between purchasing from few suppliers & vertical integration. • Members of the keiretsu are assumed long term relationships & are therefore expected to function as partners. The supplier then becomes part of a company coalition known “keiretsu”. providing technical expertise & stable quality production to the manufacturer. These manufacturers are often financial supporters of suppliers through ownership or loans. low capital investment. • A traditional example of virtual organization is an apparel or readymade garments business in which the designers of cloths seldom manufacturer.Virtual companies • Virtual companies are companies that rely on a variety of supplier relationships to provide services on demand. rather they license the manufacture. These are also known as hollow corporations or network companies. flexibility & speed. Copyright © Amity University . • The advantage of virtual companies include specialized management expertise. 3. 4. 2.Measuring supply chain performance • 1. Four measures of supply chain performance are: Delivery: on-time-delivery Quality: customer satisfaction Time: less lead time Cost: total delivered cost & value added or productive cost Copyright © Amity University . Enterprise Resources Planning Copyright © Amity University . which has certain resources at its disposal to achieve that goal. manpower. materials & all other things that are required to run the enterprise. • Resources include money. Copyright © Amity University . • Planning is done to ensure that all necessary functions are performed in the right manner at the right time.Enterprise Resource Planning • Integration of financial. manufacturing & human resources on a single computer system. • An enterprise is a group of people with a common goal. • ERP includes the techniques & concepts employed for an integrated management of a business as a whole. • ERP is a software package that organizes & manages a company’s business processes by sharing information across all functional areas in the organization. from the view point of the effective use of resources. to improve the efficiency & effectiveness of an enterprise.Enterprise Resource Planning • ERP is a method of effective planning of all the resources in an enterprise. Copyright © Amity University . order management & HRM. a company chooses to buy only a subset of these modules from a particular vendor & mix them with modules from other vendors & with the company’s existing applications. MRP. accounts receivables.An ERP system • An ERP system is a set of integrated business applications or modules which carryout common business functions such as general ledger accounting. Copyright © Amity University . accounts payable. • In some cases. An ERP system Copyright © Amity University . say from manufacturing.Advantages of ERP system • ERP systems help companies manage their resources efficiently & at the same time. Copyright © Amity University . need not be reconciled with accounting or warehouse records because the records are all the same. • Data entered once into an ERP system. better serve their customers. • ERP simplifies customer interaction & speed production with its configure-to-order capabilities. • ERP systems encourage flatter organizational structures & more decentralized decision making. Copyright © Amity University . customer satisfaction etc. improved customer good-will. faster response time to customer queries etc. • The indirect benefits include better corporate image. integration of information for better decision making.Advantages of ERP system • ERP systems also centralize control over information & standardize processes. • ERP include improved efficiency. Copyright © Amity University . internal business mangers & external consultants. challenging task that needs the best mind & careful attention of internal information system specialist. • ERP systems are very expansive.Disadvantages of ERP systems • Implementation of an ERP system is extremely difficult because the company must change its way of doing business. • For multi-division firms. • Choosing the right ERP software is a difficult task. implementing an ERP system is a very complex. discrete manufacturing 2. Oracle Corporation Large enterprise. discrete manufacturing & services 3. Siebel systems management Customer relationship Copyright © Amity University . SAP America Large enterprise.Selected Enterprise software vendors & their Area of Expertise Vendor Specialty 1. Invensys software Systems Electronics industry 4. QAD Multinational mid-market manufacturing Copyright © Amity University . i2 Technologies Supply chain management 7.Selected Enterprise software vendors & their Area of Expertise Vendor 5. People soft Inc. Specialty Employees & customer relationship management 6. J D Edwards Mid-market manufacturing 8. Multiple Choice Questions Copyright © Amity University . MCQ 1 A measure of the success of an operation in producing outputs that satisfy customers is a. Profitability Copyright © Amity University . Efficiency b. Effectiveness c. Quality d. Effectiveness c. Profitability Copyright © Amity University .MCQ 2 A measure of the success of an operation in converting inputs to outputs is a. Quality d. Efficiency b. MCQ 3 ____ is the reintroduction of an intermediary in a supply chain. a. Disintermediation b. Channel assembly d. Re-intermediation c. Warehousing Copyright © Amity University . Theoretical capacity d. Sustainable capacity b. Effective capacity c.MCQ 4 A measure of capacity that generally does not include adjustments for preventive maintenance or unplanned downtime is called a. Safety capacity Copyright © Amity University . Products with short life cycles that change frequently. Low contribution margins d. c.MCQ 5 Which of the following does not fit with an efficient supply chain? a. Highly predictable demand b. Stable product lines Copyright © Amity University . Contribution margins are low. Product life cycles are short and change often because of innovation. c.MCQ 6 Which is true regarding a responsive supply chain? a. d. Customers require standardization. b. Demand is stable and predictable. Copyright © Amity University . Six Sigma Copyright © Amity University . Participation and team work d. A focus on the customers & stakeholders b.MCQ 7 Which of the following is not considered part of Total Quality? a. A process focus c. Appraisal c.MCQ 8 Machine down time is an example of which type of quality cost? a. Internal-failure d. External-failure Copyright © Amity University . Prevention b. The inspection and testing of the outputs from a transformation process. A proactive approach towards quality management by seeking to prevent defects ever being produced. An expression of an organization’s performance in quality in financial terms b. The difference between customers’ expectations of a product or service and their perceptions of their experience of it. c.MCQ 9 The cost of quality is a. Copyright © Amity University . d. MCQ 10 Continuous improvement is synonymous with a. BPR c. Kaizen d. The performance-importance matrix Copyright © Amity University . Step changes b. eliminating. automating d.MCQ 11 Which of the following order of activities is most appropriate for BPR? a. simplifying. integrating. simplifying. integrating c. Automating. automating b. automating. integrating. simplifying. Integrating. Eliminating. eliminating. Simplifying. eliminating Copyright © Amity University . Controlling quality b. Removal of defects Copyright © Amity University . Managing quality c. Inspection d.MCQ 12 Quality assurance is a function responsible for a. To improve processes b.MCQ 13 The objective of TQM is a. To improve profitability c. None Copyright © Amity University . All of the above d. Processes will be improved by a lot of small improvement c. Processes will be improved through a few large improvements d. None Copyright © Amity University .MCQ 14 The concept of continuous improvement as applied to quality means: a. Employees will continue to get better results b. A 14. B 6. C 2. C 5. B 12. A 3. B 4. C 9. C Copyright © Amity University 11. B . B 13. C 7.Answers 1. B 10. D 8. [email protected] You Please forward your query To: [email protected] 82 .edu CC: manoj.