Operations Management Exam - Essay Example

Operations Management Operations management aims at managing the processes to produce and distribute products and services. Overall activities often include product creation, development, production and distribution. (These activities are also associated with Product and Service Management. However product management is usually in regard to one or more closely related product -- that is, a product line. Operations management is in regard to all operations within the organization.) Related activities include managing purchases, inventory control, quality control, storage, logistics and evaluations. A great deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial measurement and analysis of internal processes. Ultimately, the nature of how operations management is carried out in an organization depends very much on the nature of products or services in the organization, for example, retail, manufacturing, wholesale, etc.It is about the transformation of production and operational inputs into "outputs" that, when distributed, meet the needs of customers. Operations Management deals with the design and management of products, processes, services and supply chains. It considers the acquisition, development, and utilization of resources that firms need to deliver the goods and services their clients want. Operation Management ranges from strategic to tactical and operational levels. Representative strategic issues include determining the size and location of manufacturing plants, deciding the structure of service or telecommunications networks, and designing technology supply chains. Tactical issues include plant layout and structure, project management methods, and equipment selection and replacement. Operational issues include production scheduling and control, inventory management, quality control and inspection, traffic and materials handling, and equipment maintenance policies. Capacity management In a production unit (e.g. machine, factory) the capacity Management refers to the ability to produce or do what customer requires. Capacity management (CM) is one of several services, which is suitable for a pilot implementation. Most of the companies perform CM in some form or another and may just need to consolidate and refine processes to migrate to the new paradigm. Capacity management is responsible for ensuring that infrastructure resources are well geared up to satisfy planned business needs effectively. The desired goal for capacity management is to provide a service that is proactive rather than reactive in nature. Measuring capacity Capacity, being the ability to produce work in a given time, must be measured in the unit of work. For example, consider a domestic air conditioning units factory that has a capacity of 10,000 " machine hours" in each 40 hour week. This factory should be capable of producing 10,000 "standard hours of work" during a 40-hour week. The actual volume of product that the factory can produce will depend on: -The amount of work involved in production (e.g. does a product require 1, 5, 10 standard hours -Any additional time required in production (e.g. machine set-up, maintenance) -The productivity or effectiveness of the factory. The major work components of capacity management are: Performance management is a continuous improvement process that examines application and system performance and analyze them for possible improvements, analyzes the costs and requirements, commissions the corrective work, then measures and reports the results. An effective performance management team can reclaim infrastructure capacity by finding ways to improve the way applications consume resources. Workload management uses data from performance monitoring tools to separate resource usage by business process rather than individual increments of usage on a particular infrastructure component. The goal is to address capacity needs on a business process basis. Since some business processes have downstream effects on other processes, this is a more efficient and more effective method of performing capacity planning. For example, selling a certain quantity of merchandise will have an immediate affect on infrastructure resources at the time of the sale, but will also have a future affect on resources as the sales will generate a certain number of customer inquiry calls after the sale. Knowing these business relationships, a capacity planner can make a much more accurate prediction of future needs. In production three types of capacity are often referred to: Potential Capacity The capacity that has a decisive influence in the planning. Usually senior management takes this kind of capacity into account during planning, helping them to make decisions about overall business growth, investment etc. This is essentially a long-term decision that does not influence day-to-day production management Immediate Capacity The volume/amount of production capacity that can be made available in the short-term. This is the maximum potential capacity - assuming that it is used productively Effective Capacity Most often all productive capacity may not be used or usable. It is more crucial for production managers to understand what capacity is actually achievable. Some of the immediate benefits are: Lower costs Higher precision tools and more effective best practices permit existing technology assets to be driven closer to the edge, getting ROI (Returns on Investment) out of existing resources and improving IT cost per service unit positions. Continuous improvement processes fine-tune applications and infrastructure components, thus reducing consumption and delaying expensive capacity upgrades. Central performance and capacity data stores eliminate redundant work across IT units and ensure consistent reporting, resulting in improved staff productivity, lower software expenses and lower online data storage requirements. Improved quality Predictive modeling increases provision capacity and provide more timely capacity and related cost information to the business for more informed decisions. More comprehensive input to Total Cost of Ownership improves accuracy so more informed decisions could be made regarding proposed new and/or major IT-related upgrade initiatives. Proactive analyses aid in discovering the future growth levels and discover bottlenecks with sufficient warning to correct before business services are adversely affected. Inventory Management Inventory management (also referred to as inventory control) is the activity that organizes the availability of items. Inventory is collection physical items that are stored for future use. There are 2 kinds of inventory; depend demand inventory and independent demand inventory. Dependent demand inventory are inventory items that are used to complete a finished product, like raw materials, supplies, work-in process-items (WIP) items. Independent demand inventory are the finished products that the customers will consume. It is definitely a balancing act between the conflicting requirements of the organization. The primary reason for the development of inventory management is to resolve this conflict in the best interest of the business. Inventory Management involves the tasks that are involved in managing inventory by planning and controlling inventory effectively. They include decision-making on when inventory should be ordered and how much. These activities include related decision-making on storing, order filling or picking, material handling, and inbound and outbound logistics of inventory. The role of inventory manager is primary operations management. The main reasons why an organization undertakes are: (1) to increase the customer service (2) to minimize the operations cost. Having inventory and maintaining it effectively in the organization gives an advantage of quantity discounts by purchasing large order quantities. It also reduces operation costs that can occur, such as line stoppage that would occur in an inventory stock out situation. Having inventory helps by smoothing manufacturing .With a an inventory in place inventory production managers can plan level quantity production rates and avoid demand ups and downs and subsequent hiring and laying off of production labor that would otherwise have to incur to meet shifting customer demand patterns. For example, a conventional supply organization will have many departments including sales, purchasing, or finance. Sales dept considers that good stock control enables the organization to have available any item which will meet immediate sales for as large a quantity as demanded. This requires a large quantity of inventory on shelf at all times. Purchasing considers that stock control provides the opportunity for goods to be purchased so that optimum prices can be obtained. Buying items in bulk often reduces the purchase price and it also improves the efficiency within the purchasing department. Finance departments have a problem with stock because it consumes vast amounts of working capital and upsets the cash flow. The responsibility of maintaining the correct balance is normally left to inventory management. In inventory management the prime requisite is to determine (1) how much to order and (2) when to order One such Analysis is ABC Analysis -- classify inventory into 3 groups according to its annual dollar volume/usage. Annual dollar volume = annual demand x cost Example: A Top 80% of total dollar volume B Next 15% C Next 5% Item# Annual Demand Cost Demand x Cost % of total cost Class 234 50 200 10000 10% B 170 10 200 2000 2% C 222 100 800 80000 80% A 410 50 100 5000 5% B 160 15 200 3000 3% C Total 100000 Main advantages of Inventory Smooth-out variations in operation performances Avoid stock out or shortage Safeguard against price changes and inflation Take advantage of quantity discounts Project Management A Project can be defined as a 'non-repetitive activity'. This needs to be augmented by other characteristics; It is goal oriented-It is being pursued with a particular end or goal in mind It has a particular set of constraints-usually centered around time and resource The output of project is measurable The project management includes planning, organizing, directing and controlling activities in addition to motivating what is usually most expensive resource on the project-the people. Planning involves deciding what has to be done when and by whom. The resources then need to be organized through activities such a procurement and recruitment. Directing their activities towards a coherent objective is a major management role. The activities also need controlling to ensure that they fit within the limits (financial) set for them. The project management describes three phases(Deming 1986): Design it-Identify the need that the project will serve, construct models to show how the needs will be developed, evaluate these to determine the optimum process for the task and minimize risk. Do it-Carry out the project in line with the models or plans generated above. Develop it- Improve the models and processes in the light of the experience gained from the project, incorporating the check/study and act parts of the Deming cycle. 7-s framework describes the project management. The 7s are strategy, structure, systems, staff, skills, style/culture, and stakeholders. There is only one consistent feature of modern business and that is change. Organizations are constantly required to change what they do and how they do it. The most successful organizations are those that have become best at changing. World -class performance is seen to be possible through the development of excellent management. References Bicheno, J & Brian, EBR, 2002, Operations Management, Blackwell Publishers Ltd, Cowley Road, Oxford, UK. Deming, W. E. 1986, Out of the crisis-Quality Productivity and Competitive Position, MIT Centre for Advanced Engineering study, Cambridge, MA. Marc, SJ & Qing, C 2002, E-Commerce Operations Management, 2nd edn,World Scientific Publishing Co.Pvt.Ltd,Toh Tuck Link, Singapore. Implementing Capacity Management Teamquest and ITIL A Series of White Papers on Enterprise IT Best Practices Read More