Operation Management - Research Paper Example

Operation Management (Word count 3033 excluding References and Bibliography) (Executive Summary: I am John Smith. I have joined M/s Jason Machineries Inc. as operation manager. Jason Machineries manufactures special Purpose machines and caters to the needs of local market. The shop floor consists of machining, welding, grinding, assembly of sub-parts, final assembly and testing. I have investigated the operations of this organization as it happening presently. This report gives the details of my investigation of the operations and my observations including the areas I feel needs to be improved upon. There was serious problem in the shop floor. I felt that there is a need of Business Process Re-engineering in the shop floor. I made the necessary changes and implemented them, which significantly made dramatic change in the operation. I have gone through the theoretical aspects of operation Management and analyzed the operations here according to the theoretical aspects. This report deals with all the aspects of operation Management like; operation strategy, the importance of operation strategy, the steps of operation strategy, product planning, quality, Total quality management, Forecasting, Process, Facility layout, Measurement, Productivity, Benchmarking, importance of change, Kaizen, PDCA, Business Process Re-engineering, scheduling, just in time operation and maintenance. I have tried to define these terminologies and find their importance of these aspects in operation management. I have given the steps and processes involved in some of the important aspects of operation management mentioned above. Basing on the definitions and my observations, I have given some suggestions, which I believe will improve the operations of the organization. While analyzing I have used a few tools of operation management. ) Introduction: The definition of Operation Management can be given as Management of all the activities that are directly concerned with the products of an organization. Here the products can be tangible or intangible. For example for an automobile manufacturing unit the products are car or Light Commercial Vehicle or heavy vehicle whatever it may be, whereas for an Insurance company the products are its policies or for a utility distribution company the products are their services. But what is common in all those examples is that they get some input, either in materials, or in services, they process it with the help of manpower and machineries, they provide customers with some tangible benefit. This whole process is operation Management. As seen from the above examples, the roles of operational management can be widely varied. In the smallest example of manpower handling, the operations manager of a mining organization where he handles unskilled workers and the operations manager of software company, where the operations manager handles highly skilled manpower. The strategy of handling manpower in these two cases will be entirely different. The total gamut of operations management includes: During Product Design stage: Matching Product Design with demand, perceptible and implied, production feasibility in terms of cost, competition etc. Product Planning stage: lifecycle, Costs, Revenue and Profit during life cycles, Entry and exit strategies, Produce range, Quality, cost of quality, Total quality management, Forecasting of supply demand availability or input sources Process Planning, Capacity Planning, Short time schedule, long term schedule, Material requirement Planning, Just-in-time operations approach Maintenance and Replacement of Plant and Machinery In the following chapters we will look into all the above aspects of operation Management in detail. Operation Strategy: The first aspect of operation management is operation strategy. The operation strategy of an organization includes its range of products, the processes involved, its employees, its location, its infrastructure facilities, and its relation with customers. The main thrust of operation strategy is its direction by which it is going to meet the customers demand and satisfaction. The operations strategy is framed in general terms without specifics and describes the features of the products and processes rather than details. The steps to a operations strategy includes: 1. Analysis of business strategy of the organization, 2. Using this analysis goals are set which the operation strategy must meet. 3. Analysis of environment like market, customer, competition, location availability of manpower, products, change environment 4. Identifying the factors of the process like capacity, quality, technology, which will give distinctive advantages 5. Designing of organizational structure, controls and functions to support the process 6. Defining of monitoring systems for measuring performance. 7. Continual improvement The success of a company depends on its well-defined operation strategy and implementation of the strategy. The failure of the strategy generally are attributed to Badly designed, unrealistic, not implemented properly, not elated to actual operations, ignores the key factors, lack of support from the people who are supposed to implement them. Once the operation strategy is made then the next important aspect is product design. There is a conflict of interest here, whereas the customers want products with high feature and high quality but priced lowly, the organization would like to make general product with high profitability thus higher cost. Therefore matching product design with demand is a crucial factor. The features of the design of a product should be Functional Attractive to customers Easy to make Product Planning: Product planning is concerned with introduction of new products, changes in the existing product and withdrawal of old product. Analysis of product life cycle is very important. There are five phases of a product life. 1) Introduction, 2) Growth, 3) Maturity, 4) Decline and 5) withdrawal. Planning the exit strategy is very important, as there is a clear-cut relation between Cost, Revenue and Profit during the life cycle of a product. Another important aspect of product planning is Product mix. Product mix is dependent on various factors like life of the product, customer's requirement, organizations cash flow requirement etc. Stages of Development of New Product: 1. Generation of Ideas 2. Initial screening of ideas 3. Technical evaluation, initial design, prototype development and testing 4. Commercial evaluation - market and financial analysis. 5. Final product development 6. Establishment of production process 7. Product launch Quality: Quality has two aspects Internal and External. The internal aspect deals with the product meeting its design criteria and meeting its specifications for which it is designed. Whereas its acceptance by the customer is its external aspect, which include the service values, customer relation value. Quality depends on product's innate excellence, usefulness to its intend use, performance, reliability, durability, conformance to designed specifications, perceived high quality, convenience to use, external appearance and style, value for money, on time delivery and service to customer, before and after sales. Cost of Quality: The biggest factor in decision-making in quality is the cost of quality. The highest level of quality means highest level of cost. There needs a trade off between the cots and the level of quality provided. This is the decision to be taken on cost of quality. Forecasting: All the planning of operation management is made for operations to be effected in future. Hence the decisions to be taken anticipating the future which is called forecasting. Forecasting should be integrated in decision-making. Forecasting is a continuous process. Forecasting should be Unbiased, Unaffected by the odd unusual figure, in time for its purpose, cost effective and easy to understand. Forecasting are two types: Judgmental or Qualitative and Statistical or Quantitative. Quantitative forecasting is sub-divided into Projective a causal forecasting. Process: Judgmental Forecasting: There are five widely used methods of judgmental forecasting used by the operation managers: 1) Personal Insight where a single person using his qualification and experience forecasts, 2) Panel consensus or focus group panel formed with group of experts forecast, 3) Market survey collects data from market, analyze them and forecast, 40 Historical analogy where historical success of a similar product is considered for forecasting and 5) Delphi method, where a number of experts are contacted by post with a same set of questionnaires, their suggestions are analyzed and a summary is prepared. The summary is again sent to the experts for their modified responses. A similar exercise is done on the modified responses received. This process is repeated a few times till a consensus is arrived at. Causal Forecasting: Where a cause is used in forecasting For example a product and it accepted pricing could be decided by the causal forecasting. Projective Forecasting: Where historical values are used for forecasting demand. Process: The process is the combination of activities that converts an input to an output. The process block diagram gives the details of all the activities to be carries out to accomplish the output. The designing of process planning is very important and the details of the process are; the types of operation involved, how the operations are organized, details of the task involved in the operations, type of equipment and other resources involved, manpower for the job and their job description and the material movement through the process. Facility layout: Facility layout is the layout of the infrastructure. The layout should be designed as per the process flow chart for smooth movement of materials and easy operation throughout the process. For example in a workshop where after welding, next process is grinding the machinery and other facilities should be physically placed accordingly. Measuring performance: The only way to find out how the operations are working is measurement. There are many possible measures of performance. To name a few; quality, stock turnover, conformance to the standards, innovation, lead time, amount of scrap, throughput time, return on value added usage of equipment, production rate, machine breakdown, absenteeism, staff moral and many more. Measuring the operation Designed Capacity is the capacity of production for a specified time as designed. Effective capacity is the actual output obtained for a specified period of time. The ratio of effective capacity to designed capacity is called capacity utilization. The performance of an operation is reflected by the capacity utilization of the plant. Productivity: Productivity is another important measurement tools for operation manager to measure their performance. Productivity is measured in various ways like equipment productivity, labour productivity, capital productivity, and energy productivity. The measurement of productivity should relate to the work of the organization. A reasonable measure must; relate tot he organizations objectives, be measurable, focus on significant factors, understandable by the people involved, be agreed b all the people concerned, use consistent units and be difficult to manipulate' Benchmarking: Benchmarking is tool of comparative measurement of an organizations performance. It may be in comparison to the best organization in the competition or it may be designed by the organization itself setting some goals for themselves. The process of Bench marking follows: 1. Identify the process for benchmarking and appropriate measures of performance 2. Find data from the best of the competitors 3. Compare an analyze the differences 4. Find reasons for differences and ways to overcome them. Re-design process based on findings and establish new goals. 5. Implement, monitor and continue benchmarking. Importance of Change: Change is a natural phenomenon; Organization must be flexible to change. However there is inertia in any organization, which opposes change. Any positive looking organization should be adaptable to change. The positive attitude toward change would have following signs: 1. The organization must have commitment towards change, it must accept that continual change is inevitable, necessary and beneficial for the organization; 2. The culture and environment of the organization should be friendly to change; 3. It should have experimental approach encouraging new ideas, products and operations based on new innovations, 4. It should keep abreast with the latest development in the field. 5. It must not be rigid and should accept that all new ideas may not be feasible and should accept failure occasionally. 6. There should be proper communication and open discussion. 7. People most affected by the changes should be reassured of their positions. Kaizen - Continuous Improvement: Kaizen is a Japanese word which means improvement When the improvements are small, can be implemented without process disruption, and causes no major problem, if they go wrong, but their accumulated effects gives dramatic improvements in performance are called kaizan effect PDCA One of the processes of improvement is PDCA Plan: Look at the current operations, collect data and design necessary improvement Do: Implement the designed development Check: Check whether the new design actually brings improvement or not Act: Adopt the change if they are successful, otherwise make adjustments for further. Business Process Re-Engineering: The changes in Kaizen type improvement are slow and no radical changes are found by this type of improvement. For dramatic and breakthrough changes organizations use Business Process Re-engineering. Michael Hammer defines Business Process Re-engineering as the process, which is achieved by fundamental re-thinking and radical redesign of business processes to achieve dramatic improvement in critical contemporary measures of performance such as cost, quality, service and speed. BPR is an approach to change rather than a formal procedure; hence there is no hard and fast rule for BPR. Some organizations find spectacular successes implementing BPR and some organizations fail to achieve expected results. Some of the main principles of BPR are: 1. The focus should be on the whole process rather than individual processes; 2. The process design should ensure work to flow naturally through the processes; 3. Strive for dramatic improvements in performance by radically rethinking and redesigning the processes; 4. Effort should be made where it makes more sense; 5. Use of information technology as it helps radical new solutions to problems 6. Decisions are made by the people who work in the field and at the field Whatever the method may be applied but any organization has to adopt the philosophy of change. Scheduling: A schedule gives a detail timetable for production. There are two types of scheduling: Master Schedule and Short term scheduling. The master schedule shows the number of individual products to be manufactured during a specific period of time. Master schedules are derived from the aggregate plan, which makes the overall production levels largely fixed. Master schedules are meant to meet the demands of the production specified by the aggregate plan, adjustments required for more recent forecasts and actual customer order for the period. Short-term schedules give detailed timetables for jobs, manpower, materials, machine time and other resources used in the process. The aim of short term scheduling to achieve the master schedule. Scheduling is very difficult job as it has a number of variables. The simple rules of job scheduling are; first come first serve, most urgent job first, shortest ob first, earliest due date first etc. Simple rules are good but they do not give optimum results. There are some softwares available like Optimum Production Technology, which is used in scheduling. Scheduling should be monitored and controlled. Materials requirement planning: Using the master schedule materials requirement plan is prepared which ensure smooth availability of raw materials. In efficient organizations MRP is extended to Manufacturing Resource planning which is a closed loop systems and there are monitoring processes involved. Just-in-time operation: The basic idea of JIT is to use minimum amount of materials, minimum amount of machine time, and minimum no. of man-hours to eliminate waste and to reduce inventory. JIT has wider impact and involves a change in the way an organization looks at its operation. To illustrate JIT we try to find its impact in various inputs; Stocks: JIT assumes that inventory does not solve any problem but only hides inefficiency; the ideal way should be remove the differences between supply and demand and eliminate stocks. Quality: The JIT results in disruption of production process if defects occur in any stage. Hence greater emphasis is placed to eliminate defect Suppliers: The JIT system depends of supply of right materials and right time, hence supplier inefficiency comes out. Employees: JIT looks all employees equally Production: Process change causes disruption in the process, so JIT insists of stable environment where process changes are minimum. There are lots of benefits in JIT systems, but equally there are lots of drawbacks in it. Hence a judicial approach is needed while applying JIT. Maintenance: Maintenance is another important aspect of operation management; the dependence on plant machinery requires them to work un-interrupted for getting optimum result. Regular preventive maintenance schedule is very much essential. Frequency of maintenance schedule needs to be judicially prepared. All machines have their own life span. Hence scheduling of replacement of new machinery with latest technology is also very important for an operation manager. Case Study: Now I have analyzed the operation process of my new company. I found that the company is facing serious problem in their production house. The shop floor consists of Machining section, welding section, grinding section, assembly section and final testing section. I found that in the welding and grinding section people are working overtime and 7 days a week but the delay in production is piling up. While investigating I found that their is low moral among the employees; they are tired of overwork in overtime, they complain about regular failure of machineries and blame the maintenance staff, whereas maintenance staff blames that they are not getting the machineries for regular maintenance, they are also overworked in fire fighting mode like attending regular breakdowns. I decided that in this case some serious action is needed. I have used the Business Processing Re-engineering system. I found out that one of the main problems was overworking of the people. I found the process is not smooth. I observed that welding section and grinding section is having mismatch. The welding section is always found to be over piled with work whereas the grinding section waiting for materials. I planned for increasing manpower and machinery in the welding section. I have fully changed the scheduling of the shop floor. As the processes of increasing machinery for welding section was a time taking job, I rescheduled the process. I staggered the lunchtime of the welding section and grinding section. So by the time grinding section came back from lunch, while the welding section was working during that period, they found work available for them, reducing their idle time. Increasing manpower in the welding section created a balance in the working of the two sections. As the overtime reduced, the worker fatigue also reduced, thus increasing efficiency. This way by introducing BPR I have increased the efficiency of the operation process. References: A note in case study of operation Management, http://www.greatbrook.com/E135/id44.htm Armstrong Michael, The handbook of Management Techniques, Third edition (P 135-291), Kognana Page, Bonvik M. Asbjoem M, Couch Christopher, Gershwin Stanely B. A comparison of Production Line Mechanism http://cell1.mit.edu/papers/Bonvik-Couch-Gershwin.pdf Ward Michael, 50 essential management Techniques 1996 (P 7-26), Gower Publishing Ltd. Bibliography Armistead, C and Roland P, Managing Business Processes, BPR and Beyond, John Wiley, Chichester 1996 Baxter M, Product Design, Chapman & Hall, London, 1995 Crawford, C. M., New Product Management (5th Edition)Irwin, Chicago, 1997. Ho, S. Operations and Quality Management, International Thomson Business Press, London, 1999 Jerret J, Business forecasting Methods, Blackwell, Oxford 1991. Jerret J, Business forecasting Methods, Blackwell, Oxford 1991. Johnson, G and Scholes, K, Exploring Corporate Strategy (4th edition) Prentice Hall, London. Stacey R. D. Strategic Management and Organizational Dynamics (2nd Edition), Pitman, London 1996 Appendix A The working of Welding and grinding section of the said company: On an average the man-machine-hour required for completion of 1 job is = 5 hours No. of jobs undertaken per day = 30 Total man-machine-hour requirement for completion of daily job = 30 X 5 = 150 No of man-machine employed = 20 No of working hours per day = 8 Total no of man-machine-hour available = 160 Actual working hours per worker on an average = 6 hours Actual no. of man-machine-hour output = 20 X 6 = 120 hours. Hence they could complete only 24 jobs per day instead of installed capacity of machinery for 32 jobs per day. Here I have introduced 20% increase of manpower, while retaining the same no. of machines with the assumptions that machineries give 100% efficiency whereas the manpower efficiency is 75%. I have introduced a system of giving rest of 1 hour to every machinist after he completes his job of 5 hours (whish is the average time of completion of a single job). It required an increase of manpower of 20%. But output has improved from 24 to 32 jobs per day. There were three achievements from the change 1. The output has increased by 25% 2. Employee morals have improved. Efficiency has improved. Now after giving one-hour rest also each employee output was 7 hours, whereas earlier it used to be only 6 hours. 3. The utilization of machinery has increase to 100%. The grinding work takes 2 hours per job. Hence to complete 30 nos. of job per day, required man-machine-hour was = 2 X 30 = 60 Similar way here the installed capacity considering 8 hours working = 8 However with similar efficiency of 75% actual work done = 6/2 X 8 = 24. As the grinders had to wait for welder to finish their job, there was on an average delay of another 1 hour, thus reducing the out put to = 20 nos, compounding the problem. By reducing the lunchtime staggering by one hour I have increased the output and here also by increasing manpower by 20% I have achieved the total output of 32 nos. of jobs. Read More