PRODUCTION AND OPERATIONS MANAGEMENT
Introduction to Production and Operations Management
Operations management deals with the production of goods and services that people
buy and use everyday. It is the function that enables organisations to achieve their
goals through efficient acquisition and utilization of resources. Manufacturers of steel,
food, vehicles, computer (i.e. physical goods) need operations management. So do
health care providers, banks, schools, retailers etc.
Every organisation, whether public or private, manufacturing or service, has an operations
function. To some people, the term production conjures up images of factories, machines
and assembly hires. Interestingly enough, the field of production management in the past
focused almost exclusively on manufacturing management, with a heavy emphasis on the
methods and techniques used in operating a factory. In recent years, however, the scope
of production management has broadened considerably. Production concept and
technologies are applied to a wide range of activities and situations; that is, in services such
as health care, food service, recreation, banking, hotel management, retail sales,
education, transportation and government. This broadened scope has given the field
the name production/operations management or more simply operations management – a
term that more closely reflects the diverse nature of activities to which its concepts
and techniques are applied.
Formally stated, therefore, production and operations management (POM) is the
management of an organisation’s production system, which converts inputs into the
organisation’s products and services. (or the direction and control of the processes that
transform inputs into finished goods and services). Production management deals with
decision making related to production process so that the resulting goods and services are
produced according to specification, in the amount and by the schedule demanded at a
minimum cost. (Buffa 2004). This function is essential to systems producing goods and
services in both profit and nonprofit organisations.
The Ms of production management
Manpower
Material
Machinery
Money
Measurement
Methods-
Management
Maintenance
Milieu / mother nature
Toyota Production System’s 6Ms
, Manpower
Material
Machine
Measurement
Milieu
Method
The 5Ps model by Pryor, White and Toombs 1998
Purpose
Principles, processes
People
Performance
The 5PS (Toyota Production System)
Philosophy
Process
People, partners
Problem solving
Principles of the Toyota Way
Liker (2004) expanded on Womack and Jones (1996) principles, which are:
Base your management decisions on a long term philosophy, even at the expense of
short term financial goals.
Create continuous process flow to bring problems to the surface.
Use “pull” systems to avoid overproduction.
Level out the workload (work like the tortoise, not the hare)
Build a culture of stopping to fix problems, to get quality right the first time
Standardised tasks are the foundation for continuous improvement and employee
empowerment
Use visual control so that no problems are hidden 8. Use only reliable, thoroughly
tested technology that serves your people and processes
Grow leaders who thoroughly understand the work, live the philosophy, and teach it
to others
Develop exceptional people and teams who follow your company philosophy
Respect your extended network of partners and suppliers by challenging them and
helping them improve
Go and see for yourself to thoroughly understand the situation
Make decisions slowly by consensus, thoroughly considering all options; implement
decisions rapidly
Become a learning organisation through relentless reflection and continuous
improvement
,According to Liker (2004) an organisation is on its way to sustainable competitive advantage
when they follow the Toyota Production System (TPS) by implementing and practicing the
above set of Toyota Way principles. To fully appreciate this philosophy, value and waste
needs to be understood from a Lean perspective.
The Production System
•Input –A resource required for the manufacture of a product or service.
•Conversion System –A production system that converts inputs (material and human
resources) into outputs (products or services); also the production process or technology.
•Output –A direct outcome (actual product or service) or indirect outcome (taxes, wages,
salaries) of a production system.
WAREHOUSE AND STORAGE DESIGN
Nowadays warehousing became one of the most important and critical part in supply chain
systems due to the fact that it consumes a considerable part of logistic cost. Designing phase
of warehousing system is the most important part in warehousing since most of the strategic
and tactical decisions should be taken in this phase.
Warehouses are one of the most important parts of a logistic system in a company; they
contribute about 20% of logistic costs (Koster et al., 2007). Also as Baker and Canessa
(2009) mentioned in their paper the capital and operating cost of warehouses in USA is about
22% of logistic costs and it is 25% in Europe. It shows that they are significant from cost
perspective and should be well-designed and work with high performance in order to reduce
costs as much as possible and improve the efficiency. Although warehouses are related to
high cost, a well-managed warehouse system is required and it is the key concept of modern
supply chain system and has an important role to lead the company to be successful in these
days business world (Baker and Canessa, 2009). In any warehouse system there is a flow of
material including, unloading incoming goods, identifying them, and sorting in shelves. At
the same time customer orders come to the warehouse that should be picked, shipped and
delivered to the customer (Berg, 1999).
In addition there are missions that should be done such as:
achieving transportation economies,
achieving production economies,
providing customers with a mix of products instead of a single product, providing
temporary storage of material to be disposed or recycled,
providing a buffer location for trans-shipments,
So in almost all manufacturing plants a center is needed to sort raw materials, parts and
products and it plays a critical role in company’s logistic success (Koster et al., 2007). A
well-managed warehouse system should have easy access to market, good located, sufficient
space and reasonable delivery time (Lihui and Hsieh, 2006). It is mandatory to improve the
efficiency of warehouse performance in order to reduce the inventory level as much as
possible. So to fulfill this goal and have a well performance of the warehouse management
there are some key factors in analyzing warehouse performance. Factors like:
, on time shipments,
order picking accuracy,
annual work force turn over,
inventory capacity by dollar/unit,
dock to stock cycle time, and
distribution costs as a percentage of sales,(Berg, 1999).
Ordered components are planned to ship as soon as possible, and they should be on time and
with no damage and of course correct amount (Baker and Canessa, 2009). Between the time,
an order from production line comes to the warehouse and the time that it will be delivered, it
could happen different kind of errors in accuracy and completeness and as a result time will
be lost (Koster et al., 2007).
One of the most important factors that can have direct impact on the performance of the
warehouse is the warehouse design. A perfect design of the warehouse with minimizing the
warehouse area will reduce travelling time and traveling distance with selecting the best route
to pick orders and as a result it will reduce the cost (Lihui and Hsieh, 2006). Because, one of
the most time, labor and money consuming activities in almost every warehouse is order
picking which is estimated to spend 55% of the total warehouse costs, hence with a good
design of the warehouse, this activity will improve, and as a result the performance of the
warehouse will improve respectively (Koster et al., 2007). Designing of a warehouse could
be based on the order picking system, it could be automated or manual, which each one has
its own advantages and disadvantages (Hwang and Cho, 2006). In the process of order
picking factors like quantity and lay out design, combination of the orders in a batch, picking
route, traveling time and distance, and many other factors are important and all of them
depend on the design of the warehouse.
If these activities perform well enough they have direct impact on the warehouse
performance and decreasing the total cost (Lihui and Hsieh, 2006). Furthermore, over
stocking leads to increase inventory and it means money sitting idle. With a well-designed
warehouse over stocking that can make costs like warehouse space, utilities, maintenance,
damage, lost, insurance, taxes, will be reduced (Krar, 2007). Warehouse design plus storage
assignment and picking routing planning directly affect the operation efficiency and space
utilization and reduce costs.
Warehouses should make a balance between four important factors in marketing:
low volume,
high variety,
frequent delivery, and
short response time (Berg and zijm, 1999).
Hence continues improvement in design and performance of warehouse systems help
companies to be competitive in market (Gu et al., 2007). According to Baker and Canessa
(2009) the most important aspect in designing a warehouse is
layout,
order picking policies, and
equipment choice.
Introduction to Production and Operations Management
Operations management deals with the production of goods and services that people
buy and use everyday. It is the function that enables organisations to achieve their
goals through efficient acquisition and utilization of resources. Manufacturers of steel,
food, vehicles, computer (i.e. physical goods) need operations management. So do
health care providers, banks, schools, retailers etc.
Every organisation, whether public or private, manufacturing or service, has an operations
function. To some people, the term production conjures up images of factories, machines
and assembly hires. Interestingly enough, the field of production management in the past
focused almost exclusively on manufacturing management, with a heavy emphasis on the
methods and techniques used in operating a factory. In recent years, however, the scope
of production management has broadened considerably. Production concept and
technologies are applied to a wide range of activities and situations; that is, in services such
as health care, food service, recreation, banking, hotel management, retail sales,
education, transportation and government. This broadened scope has given the field
the name production/operations management or more simply operations management – a
term that more closely reflects the diverse nature of activities to which its concepts
and techniques are applied.
Formally stated, therefore, production and operations management (POM) is the
management of an organisation’s production system, which converts inputs into the
organisation’s products and services. (or the direction and control of the processes that
transform inputs into finished goods and services). Production management deals with
decision making related to production process so that the resulting goods and services are
produced according to specification, in the amount and by the schedule demanded at a
minimum cost. (Buffa 2004). This function is essential to systems producing goods and
services in both profit and nonprofit organisations.
The Ms of production management
Manpower
Material
Machinery
Money
Measurement
Methods-
Management
Maintenance
Milieu / mother nature
Toyota Production System’s 6Ms
, Manpower
Material
Machine
Measurement
Milieu
Method
The 5Ps model by Pryor, White and Toombs 1998
Purpose
Principles, processes
People
Performance
The 5PS (Toyota Production System)
Philosophy
Process
People, partners
Problem solving
Principles of the Toyota Way
Liker (2004) expanded on Womack and Jones (1996) principles, which are:
Base your management decisions on a long term philosophy, even at the expense of
short term financial goals.
Create continuous process flow to bring problems to the surface.
Use “pull” systems to avoid overproduction.
Level out the workload (work like the tortoise, not the hare)
Build a culture of stopping to fix problems, to get quality right the first time
Standardised tasks are the foundation for continuous improvement and employee
empowerment
Use visual control so that no problems are hidden 8. Use only reliable, thoroughly
tested technology that serves your people and processes
Grow leaders who thoroughly understand the work, live the philosophy, and teach it
to others
Develop exceptional people and teams who follow your company philosophy
Respect your extended network of partners and suppliers by challenging them and
helping them improve
Go and see for yourself to thoroughly understand the situation
Make decisions slowly by consensus, thoroughly considering all options; implement
decisions rapidly
Become a learning organisation through relentless reflection and continuous
improvement
,According to Liker (2004) an organisation is on its way to sustainable competitive advantage
when they follow the Toyota Production System (TPS) by implementing and practicing the
above set of Toyota Way principles. To fully appreciate this philosophy, value and waste
needs to be understood from a Lean perspective.
The Production System
•Input –A resource required for the manufacture of a product or service.
•Conversion System –A production system that converts inputs (material and human
resources) into outputs (products or services); also the production process or technology.
•Output –A direct outcome (actual product or service) or indirect outcome (taxes, wages,
salaries) of a production system.
WAREHOUSE AND STORAGE DESIGN
Nowadays warehousing became one of the most important and critical part in supply chain
systems due to the fact that it consumes a considerable part of logistic cost. Designing phase
of warehousing system is the most important part in warehousing since most of the strategic
and tactical decisions should be taken in this phase.
Warehouses are one of the most important parts of a logistic system in a company; they
contribute about 20% of logistic costs (Koster et al., 2007). Also as Baker and Canessa
(2009) mentioned in their paper the capital and operating cost of warehouses in USA is about
22% of logistic costs and it is 25% in Europe. It shows that they are significant from cost
perspective and should be well-designed and work with high performance in order to reduce
costs as much as possible and improve the efficiency. Although warehouses are related to
high cost, a well-managed warehouse system is required and it is the key concept of modern
supply chain system and has an important role to lead the company to be successful in these
days business world (Baker and Canessa, 2009). In any warehouse system there is a flow of
material including, unloading incoming goods, identifying them, and sorting in shelves. At
the same time customer orders come to the warehouse that should be picked, shipped and
delivered to the customer (Berg, 1999).
In addition there are missions that should be done such as:
achieving transportation economies,
achieving production economies,
providing customers with a mix of products instead of a single product, providing
temporary storage of material to be disposed or recycled,
providing a buffer location for trans-shipments,
So in almost all manufacturing plants a center is needed to sort raw materials, parts and
products and it plays a critical role in company’s logistic success (Koster et al., 2007). A
well-managed warehouse system should have easy access to market, good located, sufficient
space and reasonable delivery time (Lihui and Hsieh, 2006). It is mandatory to improve the
efficiency of warehouse performance in order to reduce the inventory level as much as
possible. So to fulfill this goal and have a well performance of the warehouse management
there are some key factors in analyzing warehouse performance. Factors like:
, on time shipments,
order picking accuracy,
annual work force turn over,
inventory capacity by dollar/unit,
dock to stock cycle time, and
distribution costs as a percentage of sales,(Berg, 1999).
Ordered components are planned to ship as soon as possible, and they should be on time and
with no damage and of course correct amount (Baker and Canessa, 2009). Between the time,
an order from production line comes to the warehouse and the time that it will be delivered, it
could happen different kind of errors in accuracy and completeness and as a result time will
be lost (Koster et al., 2007).
One of the most important factors that can have direct impact on the performance of the
warehouse is the warehouse design. A perfect design of the warehouse with minimizing the
warehouse area will reduce travelling time and traveling distance with selecting the best route
to pick orders and as a result it will reduce the cost (Lihui and Hsieh, 2006). Because, one of
the most time, labor and money consuming activities in almost every warehouse is order
picking which is estimated to spend 55% of the total warehouse costs, hence with a good
design of the warehouse, this activity will improve, and as a result the performance of the
warehouse will improve respectively (Koster et al., 2007). Designing of a warehouse could
be based on the order picking system, it could be automated or manual, which each one has
its own advantages and disadvantages (Hwang and Cho, 2006). In the process of order
picking factors like quantity and lay out design, combination of the orders in a batch, picking
route, traveling time and distance, and many other factors are important and all of them
depend on the design of the warehouse.
If these activities perform well enough they have direct impact on the warehouse
performance and decreasing the total cost (Lihui and Hsieh, 2006). Furthermore, over
stocking leads to increase inventory and it means money sitting idle. With a well-designed
warehouse over stocking that can make costs like warehouse space, utilities, maintenance,
damage, lost, insurance, taxes, will be reduced (Krar, 2007). Warehouse design plus storage
assignment and picking routing planning directly affect the operation efficiency and space
utilization and reduce costs.
Warehouses should make a balance between four important factors in marketing:
low volume,
high variety,
frequent delivery, and
short response time (Berg and zijm, 1999).
Hence continues improvement in design and performance of warehouse systems help
companies to be competitive in market (Gu et al., 2007). According to Baker and Canessa
(2009) the most important aspect in designing a warehouse is
layout,
order picking policies, and
equipment choice.
