MBA607_Operations Management (1)

UNIT 10: OPERATIONS THEORIES 200 Structure 10.0 Learning Objectives 10.1 Introduction 10.2 Understanding Operations Management Theory 10.3 Historic Operations Management vs. Modern Operations Management 10.4 Process Analysis 10.5 Objectives of Process analysis 10.6 Steps Involved in Process Analysis 10.7 Waiting time 10.8 Queuing Theory 10.9 How Queuing Theory Works 10.10 Benefits of Queuing Theory 10.11 Just in Time 10.11.1 Just-in-Time (JIT) Inventory System Advantages 10.11.2 Disadvantages of the Just-in-Time System 10.11.3 Special Considerations: Kanban Scheduling for Just-in-Time (JIT) 10.12 Scheduling 10.13 TQM 10.13.1 TQM process 10.14 Summary 10.15 Keywords CU IDOL SELF LEARNING MATERIAL (SLM)

10.16 Learning Activity 10.17 Unit end questions 10.18 References 10.0 LEARNING OBJECTIVES After studying this unit, you will be able:  List About the operations theory  Explain Objectives and steps and meaning of process analysis  List about the Waiting time and Just in time as well as scheduling  State about TQM and its process 10.1 INTRODUCTION Operations management theory is the set practices companies use to increase efficiency in production. Operations management is concerned with controlling the production process and business operations in the most efficient manner possible. 10.2 UNDERSTANDING OPERATIONS MANAGEMENT THEORY Operations management involves certain responsibilities. One of those responsibilities is ensuring that the business operates efficiently, both in terms of using the least amount of resources necessary and in meeting customers' requirements to the highest standard economically viable. Operations management involves managing the process by which raw materials, labor, and energy are converted into goods and services. People skills, creativity, rational analysis, and technological knowledge are all important for success in operations management. 10.3 HISTORIC OPERATIONS MANAGEMENT VS. MODERN OPERATIONS MANAGEMENT In the history of business and manufacturing operations, division of labor and technological advancements have benefited company productivity. Systematically measuring performance and calculating with formulas was a somewhat unexplored science before Frederick Taylor’s early work in the field. 201 CU IDOL SELF LEARNING MATERIAL (SLM)

In 1911, Taylor published his principles of scientific operations management, characterized by four specific elements: developing a true science of management, scientific selection of an effective and efficient worker, education and development of workers, and intimate cooperation between management and staff. Modern operations management revolves around four theories: business process redesign (BPR), reconfigurable manufacturing systems, six sigma, and lean manufacturing. BPR was formulated in 1993 and is a business management strategy that focuses on analyzing and designing workflow and business processes within a company. The goal of BPR is to help companies dramatically restructure the organization by designing the business process from the ground up. Reconfigurable manufacturing systems are production systems designed to incorporate accelerated change in structure, hardware, and software components. This allows systems to adjust rapidly to the capacity to which they can continue production and how efficiently they function in response to market or intrinsic system changes. Six sigmas’ is an approach that focuses on quality. It was primarily developed from 1985 to 1987 at Motorola. The word \"six\" references the control limits, which are placed at six standard deviations from the normal distribution mean. Jack Welch of General Electric started an initiative to adopt the six sigma method in 1995, which brought the approach a great deal of popularity. Every six sigma project within a company has a defined step sequence and financial targets, such as increasing profits or reducing costs. Tools used within the six sigma process include trending charts, potential defect calculations, and other ratios. Lean manufacturing is a systematic method of eliminating waste within the manufacturing process. The lean theory accounts for waste that is created through overburdening or uneven workloads. This theory sees resource use for any reason other than value creation for customers as wasteful and seeks to eliminate wasteful resource expenditures as much as possible. 10.4 PROCESS ANALYSIS Process Analysis can be understood as the rational breakdown of the production process into different phases, that turns input into output. It refers to the full-fledged analysis of the business process, which incorporates a series of logically linked routine activities that uses the resources of the organization, to transform an object, with the aim of achieving and maintaining the process excellence. Process Analysis is nothing but a review of the entire process flow of an organization to arrive at a thorough understanding of the process. Further, it is also helpful to set up targets 202 CU IDOL SELF LEARNING MATERIAL (SLM)

for the purpose of process improvement, which is possible by eliminating unnecessary activities, reduce wastage and increasing efficiency. Thus, it ultimately ends up improving the overall performance of the business activities. 10.5 OBJECTIVES OF PROCESS ANALYSIS  Identify the factors that make it difficult to understand the process.  Ascertain completeness of the process.  Remove bottlenecks  Find redundancies  Ascertain the allocation of resources  Check out process time Understanding, Quality and Efficiency are the three-basic criterion, through which one can analyse the process and determine the areas that require change. 10.6 STEPS INVOLVED IN PROCESS ANALYSIS Step 1 – Interview major participants of the process: Discuss the participants about what they do, why they do and how they do it. Identify the information and inputs required by the workers to perform the task assigned to them. Research about the source of input and outputs of each task. Step 2 – Carry out group discussion: Group interview and brainstorming session are conducted, with the aim of generating ideas, validating and refining the information collected, at the first step. Step 3 – Identify bottlenecks and redundancies: Find out the bottlenecks in each task that causes delay and various measures to remove it. Further, identify the unnecessary activities, whose elimination can ease the process. Step 4 – Create Sketch: Make a sketch right from the scratch of the entire process, depending upon the business process requirements, which came into light after interviews and discussions. Step 5 – Compare: At the end, compare the latest process flow with the previous one, and mark the areas that require changes, as per the research conducted. 203 CU IDOL SELF LEARNING MATERIAL (SLM)

Process Analysis is a methodical approach to enhance the understanding and redesigning of the workflow of the organization. It acts as a tool to maintain and improve the business processes and also help in attaining the incremental to transformational benefits, such as cost reduction, optimum utilisation of resources, effective human resource allocation and process efficiency. 10.7 WAITING TIME Waiting time is the time interval for which one has to wait after placing a request for an action or service and before the action/service actually occurs. In operations, it is the time between the actual processes. The main aim of a company is to minimize the waiting time between the processes. At times, waiting time depends on how important a process is. This will tell how fast the request will be serviced or which request will be serviced first in case of multiple requests. The customer behaviour varies depending on the waiting time for a service. Eg – There maybe balking customers who may not join a queue due to its length. Or customers maybe reneging, leaving the queue after some time without taking the service. Figure 10.1 Waiting time Eg – Jobs waiting for their turn to be processes in a CNC machine. Here waiting time for a job in queue is the time taken for the job in front to be loaded, machined and removed from a CNC machine Vehicles waiting at the toll plaza to get a toll receipt. Here waiting time for a vehicle in queue is the time for the vehicle in front to reach the poll booth, obtain the receipt and leave. 10.8 QUEUING THEORY Queuing theory is the mathematical study of the congestion and delays of waiting in line. Queuing theory (or \"queueing theory\") examines every component of waiting in line to be served, including the arrival process, service process, number of servers, number of system places, and the number of customers—which might be people, data packets, cars, etc. 204 CU IDOL SELF LEARNING MATERIAL (SLM)

As a branch of operations research, queuing theory can help users make informed business decisions on how to build efficient and cost-effective workflow systems. Real-life applications of queuing theory cover a wide range of applications, such as how to provide faster customer service, improve traffic flow, efficiently ship orders from a warehouse, and design of telecommunications systems, from data networks to call centers. 10.9 HOW QUEUING THEORY WORKS Queues happen when resources are limited. In fact, queues make economic sense; no queues would equate to costly overcapacity. Queuing theory helps in the design of balanced systems that serve customers quickly and efficiently but do not cost too much to be sustainable. All queuing systems are broken down into the entities queuing for an activity. At its most elementary level, queuing theory involves the analysis of arrivals at a facility, such as a bank or fast food restaurant, then the service requirements of that facility, e.g., tellers or attendants. The origin of queuing theory can be traced back to the early 1900s, found in a study of the Copenhagen telephone exchange by Agner Krarup Erlang, a Danish engineer, statistician and, mathematician. His work led to the Erlang theory of efficient networks and the field of telephone network analysis. 10.10 BENEFITS OF QUEUING THEORY By applying queuing theory, a business can develop more efficient queuing systems, processes, pricing mechanisms, staffing solutions, and arrival management strategies to reduce customer wait times and increase the number of customers that can be served. Queuing theory as an operations management technique is commonly used to determine and streamline staffing needs, scheduling, and inventory, which helps improve overall customer service. It is often used by Six Sigma practitioners to improve processes. 10.11 JUST IN TIME The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules. Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process, which reduces inventory costs. This method requires producers to forecast demand accurately. The JIT inventory system contrasts with just-in-case strategies, wherein producers hold 205 CU IDOL SELF LEARNING MATERIAL (SLM)

sufficient inventories to have enough product to absorb maximum market demand. One example of a JIT inventory system is a car manufacturer that operates with low inventory levels but heavily relies on its supply chain to deliver the parts it requires to build cars, on an as-needed basis. Consequently, the manufacturer orders the parts required to assemble the cars, only after an order is received. For JIT manufacturing to succeed, companies must have steady production, high-quality workmanship, glitch-free plant machinery, and reliable suppliers. 10.11.1 Just-in-Time (JIT) Inventory System Advantages JIT inventory systems have several advantages over traditional models. Production runs are short, which means that manufacturers can quickly move from one product to another. Furthermore, this method reduces costs by minimizing warehouse needs. Companies also spend less money on raw materials because they buy just enough resources to make the ordered products and no more. 10.11.2 Disadvantages of the Just-in-Time System The disadvantages of JIT inventory systems involve potential disruptions in the supply chain. If a raw materials supplier has a breakdown and cannot deliver the goods in a timely manner, this could conceivably stall the entire production process. A sudden unexpected order for goods may delay the delivery of finished products to end clients. 10.11.3 Special Considerations: Kanban Scheduling for Just-in-Time (JIT) Kanban is a Japanese scheduling system that's often used in conjunction with lean manufacturing and JIT. Taiichi Ohno, an industrial engineer at Toyota, developed Kanban in an effort to improve manufacturing efficiency. The system highlights problem areas by measuring lead and cycle times across the production process, which helps identify upper limits for work-in-process inventory, in order to avoid overcapacity. 10.12 SCHEDULING Scheduling can be defined as “prescribing of when and where each operation necessary to manufacture the product is to be performed.” It is also defined as “establishing of times at which to begin and complete each event or operation comprising a procedure”. The principle aim of scheduling is to plan the sequence of work so that production can be systematically arranged towards the end of completion of all products by due date. Principles of Scheduling 206 CU IDOL SELF LEARNING MATERIAL (SLM)

1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency when the task sizes are small, and all tasks of same order of magnitude. 2. Principle of optimum production plan: The planning should be such that it imposes an equal load on all plants. 3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency when the work is planned so that work hours are normally used in the same sequence. Inputs to Scheduling 1. Performance standards: The information regarding the performance standards (standard times for operations) helps to know the capacity in order to assign required machine hours to the facility. 2. Units in which loading and scheduling is to be expressed. 3. Effective capacity of the work centre. 4. Demand pattern and extent of flexibility to be provided for rush orders. 5. Overlapping of operations. 6. Individual job schedules. Scheduling Strategies Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very sophisticated approaches. These strategies are grouped into four classes: 1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from customers is impracticable in actual manufacturing situation. Changes in orders, equipment breakdown, and unforeseen events deviate the plans. 2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially for long range planning of capacity needs. This may load the current period excessively and under load future periods. It has some means to control the jobs. 3. Cumulative detailed: Cumulative detailed combination is both feasible and practical approach. If master schedule has fixed and flexible portions. 4. Priority decision rules: Priority decision rules are scheduling guides that are used independently and in conjunction with one of the above strategies, i.e., first come first 207 CU IDOL SELF LEARNING MATERIAL (SLM)

serve. These are useful in reducing Work-In-Process (WIP) inventory. Types of Scheduling Types of scheduling can be categorized as forward scheduling and backward scheduling. 1. Forward scheduling Is commonly used in job shops where customers place their orders on “needed as soon as possible” basis. Forward scheduling determines start and finish times of next priority job by assigning it the earliest available time slot and from that time, determines when the job will be finished in that work centre. Since the job and its components start as early as possible, they will typically be completed before they are due at the subsequent work centers in the routing. The forward method generates in the process inventory that are needed at subsequent work centers and higher inventory cost. Forward scheduling is simple to use and it gets jobs done in shorter lead times, compared to backward scheduling. 2. Backward scheduling Is often used in assembly type industries and commit in advance to specific delivery dates. Backward scheduling determines the start and finish times for waiting jobs by assigning them to the latest available time slot that will enable each job to be completed just when it is due, but done before. By assigning jobs as late as possible, backward scheduling minimizes inventories since a job is not completed until it must go directly to the next work centre on its routing. 10.13 TQM TQM is known by various names, such as total quality improvement (TQI) or total quality control (TQC), or simply as total quality or as Strategic Quality Management (SQM), and so on. Notwithstanding, all these nomenclatures mean the same, i.e., continuous improvement in all parts of an organisation with a view to satisfy customer needs as much as possible. According to V. Daniel Hunt, “Total quality management is both a comprehensive managerial philosophy and a tool kit for its implementation.” British Quality Association defined TQM as “management philosophy and company practices that aim to harness the human and material resources of an organisation in the most effective way to achieve the objectives of the organisation”. Confederation of Indian Industry (CII) defined TQM as follows: “Meeting the requirements of the internal and external customers consistently by continuous 208 CU IDOL SELF LEARNING MATERIAL (SLM)

improvement in the quality of work of all employees.” 10.13.1 TQM process 1. Quality Process: It is for understanding who are the customers, what are their needs and taking steps to completely satisfy the needs of these customers. 2. Management Process for Continuous Improvement: The term management refers to managing continuous improvement and does not address any specific organisational level. The process comprises the PDCA cycle and its continuously evolving policies, objectives and methods to achieve goals, education and training, implementation, checking causes, checking effects, taking appropriate actions, and preventing recurrence. Management process addresses continuous improvement to keep pace with the: (i) Changing requirements (ii) Competitive environments, and (iii) Technological advances. 3. People Process: It is initiating and maintaining the TQM. It is carried out through involvement of all employees on the basis of all the three values, namely, intellectual honesty, self-control, and respect for others. Now that we have understood the meaning of TQM given by different experts, now we can profitably define TQM as long-term effort to transform all parts of the organisation in order to produce the best product and service possible to meet customer needs. 10.14 SUMMARY  Operations management involves certain responsibilities. One of those responsibilities is ensuring that the business operates efficiently, both in terms of using the least amount of resources necessary and in meeting customers' requirements to the highest standard economically viable.  Process Analysis can be understood as the rational breakdown of the production process into different phases that turns input into output. It refers to the full-fledged analysis of the business process, which incorporates a series of logically linked routine activities that uses the resources of the organization, to transform an object, with the aim of achieving and maintaining the process excellence.  Waiting time is the time interval for which one has to wait after placing a request for 209 CU IDOL SELF LEARNING MATERIAL (SLM)

an action or service and before the action/service actually occurs.  Scheduling can be defined as “prescribing of when and where each operation necessary to manufacture the product is to be performed.” It is also defined as “establishing of times at which to begin and complete each event or operation comprising a procedure”.  Scheduling pertains to establishing both the timing and use of resources within an organization. Under the operations function (both manufacturing and services), scheduling relates to use of equipment and facilities, the scheduling of human activities, and receipt of materials.  While issues relating to facility location and plant and equipment acquisition are considered long-term and aggregate planning is considered intermediate term, operations scheduling is considered to be a short-term issue. As such, in the decision- making hierarchy, scheduling is usually the final step in the transformation process before the actual output (e.g., finished goods) is produced. Consequently, scheduling decisions are made within the constraints established by these longer-term decisions. Generally, scheduling objectives deals with tradeoffs among conflicting goals for efficient utilization of labor and equipment, lead time, inventory levels, and processing times. 10.15 KEYWORDS  Capacity planning: is the process of determining the production capacity needed by an organization to meet changing demands for its products.  Total quality management (TQM): consists of organization-wide efforts to \"install and make permanent climate where employees continuously improve their ability to provide on demand products and services that customers will find of particular value.\"  Flow Shop: An operation that produces products at volume in a continuous flow or by a well-defined, connected sequence of activities or processes.  Flow Time: The average (actual) time for a unit of production to flow through a process unit or activity including input and output inventories. Theoretical Flow Time is the flow time without inventories.  Flow Time Efficiency: The ratio of theoretical flow time to the actual flow time through a process. 210 CU IDOL SELF LEARNING MATERIAL (SLM)

10.16 LEARNING ACTIVITY 1. Discuss the process analysis of your organization, and check out its JIT theory and waiting time theory ___________________________________________________________________________ __________________________________________________________ 2. Draw the Queuing Thoey for two organizations and study the flow of operations. ___________________________________________________________________________ __________________________________________________________ 10.17 UNIT END QUESTIONS A. Short Descriptive Type Questions 1. Explain the operational theory? Explain it. 2. Explain process analysis and how it works in operations management. 3. Explain the steps involved in Process analysis? 4. Explain: 1. JIT 2. Waiting Time 5. Explain Queuing theory and how it is beneficial? B. Long Descriptive Type Questions 6. Define TQM. Explain the process of TQM. 7. Explain scheduling and its types, and principles. 8. Discuss in detail Acceptance sampling? How it is under gone in Quality management? 9. Discuss Total quality management? What are its key components? 10. Explain briefly ISO? C. Multiple Choice Questions 1. …….. Prescribing of when and where each operation necessary to manufacture the product is to be performed. a. Scheduling 211 CU IDOL SELF LEARNING MATERIAL (SLM)

b. JIT c. Waiting time d. Queuing theory 2. In operations, it is the time between the actual ………….. . a. Processes b. Technology c. Scheduling d. Waiting 3. ………… is nothing but a review of the entire process flow of an organization to arrive at a thorough understanding of the process. a. Process Analysis b. Scheduling c. Waiting d. Quality process 4. Inadequate production capacity ultimately leads to a. Poor quality b. Poor Customer Service c. Poor inventory control d. All of the above 5. What do you understand by the inspection conducted on all non reworkable jobs prior 212 CU IDOL SELF LEARNING MATERIAL (SLM)

to their movement to the scrap yard? a. Final inspection b. Endurance inspection c. Functional inspection d. Salvage inspections 6. A three-step repair service with one server at each step would be an example of a: a. multiple-phase, single-server. b. multiple-phase, multiple-server. c. single-phase, multiple-server. d. single-phase, single-server. 7 Which of the following statements is true? a. If the average time between customer arrivals is five minutes, the average arrival rate is twenty per hour. b. One of the assumptions of a queuing model is FIFO (first in, first out). c. For a multiple-server system, the mean arrival rate must be less than the mean service rate. d. 100% utilization in a queuing model is a realistic goal. 8 The utilization factor for a system is defined as: 213 a. the average time a customer spends in the system. b. the percent idle time. c. the average time a customer spends waiting in the queue. CU IDOL SELF LEARNING MATERIAL (SLM)

d. the mean number of arrivals per period divided by the mean number of customers served per period. 9 If everything else remains constant, but the service time become constant instead of exponential, then: a. the average waiting time in the queue will double. b. the average waiting time in the queue will decrease by 33%. c. the average queue length will be halved. d. the average queue length will triple. 10 Customers enter a waiting line on a first-come, first-served basis. The arrival rate follows a Poisson distribution, while service times follow an exponential distribution. If the average number of arrivals is six per minute and the average service rate of a single-server is ten per minute, what is the average number of customers in the system? a. 1.25 b. 1.50 c. 0.6 d. 0.9 Answers 1. a 2. b 3. a 4. b 5. d 6. a 7. b 8. d 9. c 10. b 10.18 REFERENCES  Stevenson W.J. (2018). Operations Management. New Delhi: Tata McGraw Hills.  Chase, Jacobs, Aquilano & Aggarwal. (2005). Operations Management. New Delhi: Tata McGraw Hills.  John O. McClain and L. Joseph Thomas. (1986). Operations Management. New Delhi: Prentice Hall of India. 214 CU IDOL SELF LEARNING MATERIAL (SLM)

 Daniel Wren, The Evolution of Management Thought, 3rd edition, New York Wiley 1987.  W. Hopp, M. Spearman, Factory Physics, 3rd ed. Waveland Press, 2011 online (Part 1 contains both description and critical evaluation of the historical development of the field).  R. B. Chase, F. R. Jacobs, N. J.Aquilano, Operations Management for Competitive Advantage, 11th edition, McGraw-Hill, 2007.  Askin, R. G., C.R. Standridge, Modeling & Analysis of Manufacturing Systems, John Wiley and Sons, New York 1993. 215 CU IDOL SELF LEARNING MATERIAL (SLM)