Operation and Project Management
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Chapter9-Systemusedinoperationmanagement.pptxChapter 9
System used in operation management
Systems used in operations management
A number of manufacturing systems have been developed in an attempt to improve the planning and control of operational capability.
Operations management system
MRP
MRP II
ERP
OPT
Material Requirements Planning (MRP)
A computerised system for planning the requirements for raw materials, work-in-progress and finished items.
Functions include:
Identifying firm orders and forecasting future orders with confidence.
Using orders to determine quantities of material required.
Determining the timing of material requirement.
Calculating purchase orders based on stock levels.
Automatically placing purchase orders.
Scheduling materials for future production.
Benefits of MRP
Improved forecasting
Improved ability to meet orders.
Reduced stock holding.
The MRP schedule can be amended quickly if demand estimates change since the system is computerised.
System can warn of purchasing or production problems due to bottlenecks or delays in the supply chain.
A close relationship tends to be built with suppliers (it is consistent with just-in-time).
* However, MRP will not be suitable if it is not possible to predict sales in advance.
Manufacturing Resource Planning II (MRP II)
An extension of the MRP system, integrating into the MRP system order processes that are related to materials planning. For example:
Financial requirements planning.
Equipment utilisation scheduling.
Labour scheduling- particularly important for service operations.
MRP II provides a central database that all functions will have access to, thus everyone is working from the same information.
Enterprise Resource Planning (ERP)
An extension of MRP II, integrating data from all operations within the organisation, e.g. operations, sales and marketing, human resources, purchasing.
As with MRP II it ensures that everyone is working off the same information.
Software companies like SAP and Oracle have specialised in the provision of ERP systems across many different industries and types of operation, including both production and service types.
Features of ERP systems
Allowing access to the system to any individual with a terminal linked to the system’s central server.
Decision support features, to assist management with decision making.
In many case, extranet links to the major suppliers and customers, with electronic data interchange facilities for the automated transmission of documentation such as purchase orders and invoices.
Pros and cons of ERP
Advantages
Can easily share data between departments and across the organisation.
Better monitoring and forecasting.
Lower costs.
Improved customer service.
Processes can be streamlined.
Disadvantages
Cost may be prohibitive.
May be too rigid to fulfill the needs of the organisation.
Technical support may be inadequate.
Optimised production technology (OPT)
Another approach to production planning. Production scheduling is based on the capacity of the bottleneck, i.e. the constraint within the system, and the pace of throughput that the bottleneck can handle.
Management should focus on removing the constraint. However, having dealt with one constraint there will be another constraint for the OPT system to deal with.
Methods of Managing Operational Capacity
Capacity planning aims to balance customer demand with production capability. There are three possible approaches to capacity planning:
Level capacity plan- maintains production activity at a constant rate. A simple approach but can result in a build up of inventory or in stock outs.
Chase demand plan- matches production with demand. Will require a flexible approach to production and a good forecasting system.
Demand management planning- aims to stabilise demand, e.g. supermarket may offer discounted ice-cream during the winter period in order to keep demand stable.
Methods available to manage operational capability:
Managing operational capacity
Flexible manufacturing systems
Queuing theory
Forecasting
Flexible manufacturing systems
Highly automated manufacturing system, computer controlled and is capable of producing large number of parts in a flexible manner.
Main benefit - dedicated output can be produced quickly in response to specific orders, giving a high level of customer focus and responsiveness.
Main features include:
The ability to change quickly from one job to another.
Fast response times.
Small batch production.
Main disadvantage - cost to the enhanced flexibility.
Traditional production lines are very efficient at making single product cheaply and benefit from economies of scale and specialisation. However, developments in IT/IS have closed the gap in costs between the two approaches, making FMS more feasible.
Queuing theory
A technique designed to optimise the balance between customer waiting time and idle service capacity.
Applies where obvious queues form, e.g. shops and bus stops, but it is also applicable in other areas, e.g. call centres, planes that circle before they land & in computing where web servers and print servers are now common.
The frustrations of getting in a ‘slow line’ are removed because that one slow transaction does not affect the throughput of the remaining customers.
Many banks, airport check-ins and large post office have implemented this system.
Forecasting
A robust forecasting system will be needed in order to predict customer demand and to balance this with the level of production.
Effective forecasting relies on a mixture of the following:
Getting accurate information from customers about future purchases and needs. For example, a components manufacturer in the car industry may have a relationship with a major customer that allows it access to the customer’s planning system to identity in advance when and how many components will be required. Alternatively the customer may have access to a supplier extranet to make the ordering system quicker.
Using past demand to accurately forecast future demand, for example through the use of sophisticated modeling techniques.
Understanding the process well enough to be to translate customer demand into the relevant aspects for production, such as labour scheduling, inventory management, raw materials purchases and so on. It there is a problem acquiring raw materials for example, then it will be difficult to forecast labour requirements.
The importance of Sustainability in Operations Management
Companies are beginning to consider how their operations affect the environment and future generations.
Sustainable development is about meeting the needs of the present without compromising the ability of future generations to meet their own needs.
It is the practice of doing business in a way that balance economic, environmental and social needs.
How sustainability impact operations management
Process design
The process should be designed to minimise waste, reduce energy use an reduce carbon emissions.
Product design
The product design should consider factors such as:
Use of recycled inputs.
Use of sustainable inputs.
Ability to recycle product or dispose of it safely.
Minimising wastage, e.g. unnecessary packaging.
Supply chain management
Purchasing
Only product from a sustainable and ethical source should be purchased, e.g. a furniture manufacturer may purchase timber from sustainable forests only.
Supplier selection
One the key criteria to use when choosing between supplier should be their adoption of sustainable development policies.
Location
The distance between the supplier and the company should be minimised.
Quality management
Higher quality should help to improve efficiency and reduce waste.
Product/Service and Process Design
Companies need to continually look for new or improved product or service, to achieve or maintain competitive advantage in their market.
Operations managers are not responsible for product/service design but will offer advice and assistance in the process.
The design of processes will go hand in hand with the design of new product/service. Processes maybe improve through the operation of method such as TQM, Kaizen, BPR and improvement in supply chain management.
Stages in product/service development
Consider customer’s needs
Concept screening
Design process
Product testing
Time-to-market
Stage 1: Consider customers’ needs
The product/service should satisfy the needs of the customer, e.g. value for money, high quality, cutting edge design.
Stage 2: Concept screening
The new product/service concept should be vetted. It will only pass through to the design and development process if it meets certain criteria. For example, does the company think that the new product/service will be profitable?
Stage 3: The design process
This may include procedures such as:
Building a physical prototype or a virtual prototype (using computer aided design).
Value engineering, i.e. ensuring that all components/features add value.
Stage 4: Time-to-market
A short time-to-market is desirable since:
New product/service may be released ahead of competitors.
Developments costs may be lower.
Stage 5: Product testing
The new product should be tested before it is released to the market.
Does it work properly?
Do customer like it?
END OF CHAPTER 9
