Course: Operations Management

Internal Assignment Applicable for April 2019 Examination

Ans 1.

The theory of constraints (TOC) refers to a general philosophy put together by Dr. Eliyahu
M. Goldratt that is used by a large number of organizations to improve their operations. TOC
includes management/decision-making and problem-solving tools known as the Thinking
Processes (TP). TOC asserts that organizations, processes, and so on are sensitive and
vulnerable because the most fragile part or individual can often break or harm them,
negatively impacting their outcomes. Eliyahu M. Goldratt introduced the theory of
constraints as part of his 1984 book named "The Goal".

The theory of constraints is used to practically and methodically answer the following three
questions, which are vital for any strategy of constant improvement:
● What to improve?
● How much improvement is required?
● How to produce the improvement?

There are also five focusing steps put forward by TOC to achieve the goal:
● Recognize the system’s constraints
● Make a decision on how to make use of the system’s constraints
● Subordinate everything else to the previously mentioned decision
● Elevate the system’s constraints; that is, make other significant modifications required
to break the constraints
● If the constraints have been broken in the prior steps, return to step one

The automobile repair & service centers are increasing rapidly in sync with with number of
automobiles produced & purchased. The usage of automobiles is getting increased
substantially. The theory of constraints says that every business system, regardless of the
industry, has at least one limiting factor affecting optimal performance. It goes on to include
a process that helps a business identify and eliminate its most significant bottleneck by
restructuring work flow processes and procedures. Although in the past the theory of
constraints was mainly applied in the manufacturing industry, it can be applied just as
effectively in automobile repair & service centers.

Before the theory of constraints can identify and work to correct a serious bottleneck, the
organization must first define high service quality. This can, for some service organizations,
be a difficult task, as many agree it’s the customer rather than the organization that ultimately
makes this rather subjective determination. Some organizations might define service quality
as a judgment the customer makes when comparing expectations to a perception of the
service or services the customer received. A similar definition might be to define service
quality as the degree to which the organization’s services meet or exceed customer
expectations.

After defining service quality, the next step is to measure how well a service organization is
doing at meeting service quality expectations. Customer surveys, focus groups and personal
interviews commonly are used to measure service quality tangibles, such as whether the
organization’s facilities and equipment are up-to-date, as well as customer perception relating
to reliability, responsiveness, assurance and empathy. Flowcharts, process analysis via
storyboarding and team-oriented brainstorming sessions can then be used to identify and
prioritize bottlenecks such as outdated technology, faulty customer service training or
inefficiencies procedures that cause delays in fulfilling customer expectations.

The theory of constraints allows for working on only one constraint at a time. Prioritization
will determine the most serious constraint, allowing the business to then begin developing
ways to unblock the bottleneck and solve its most serious service problem. Solutions for
managing a constraint vary depending on the underlying issues behind the problem.
Examples include reorganizing work flow procedures, implementing a formal customer
service or customer relationship management training program, replacing manual systems
with electronic versions or updating the business’s computer system.

It’s essential to allow enough time to fully evaluate whether implemented solutions are
working before moving on to dealing with another service constraint. The evaluation period
will vary depending on the implemented solution. If an evaluation determine the solution
isn’t sufficient and still is negatively affecting overall service performance, go back and
brainstorm an alternative solution. If the solution is effective and has solved the problem,
begin the process once again with another service constraint.

The five focusing steps of the Theory of Constraints should be intact in automobile repair &
service centers:

The first of the five steps is identifying the constraint that is limiting your profits. This is
usually not difficult to do, unless there’s a lot of daily chaos in the service center. Often the
constraint is the repair & paint booth.
The second step is to get the most out of your constraint. Exploiting the constraint requires
understanding TOC. You have to help the constraint do more. If the constraint is identified as
the repair booth, the second step in action might be to have someone work in the rapir booth
during lunch and breaks so it doesn’t stop or slow up.
The third step is subordinating everything else to helping improve the performance of the
area where the constraint is. This is a little stickier because it requires everyone to recognize
that the constraint has priority over everything else. So in the paint booth scenario, you, your
techs and your painters need to focus on getting the right parts ready for painting at the right
time.
Make sure everyone knows the constraint, in this example, the repair & service booth, must
not be blocked or starved. If it stops working, your output just stopped so your cash flow just
stopped.
The fourth step is to get more constraint capacity. This means you might buy another
machine or hire a new person. In the repair booth example, you may need to hire another
engineer, or add a second shift. This is the first step in TOC that requires spending money.
Fifth, once one constraint is identified and improved upon, begin at step one again to see if
there is a new constraint. More improvements can be made.

Daily meetings are essential to address questions that will come up and to ensure that
everyone understands what needs to be done to fix the constraint. Meetings will go back to a
less intensive schedule after everyone is doing what is expected of them. Meetings are there
to resolve situations quickly and help everyone understand why the shop is doing things this
way.
Some service centers may be capable of applying TOC on their own, but it is not nearly as
effective as seeking expert help. The decision of whether to hire a consultant comes down to
how fast a shop wants the positive effects of TOC to start, and how successful a repair center
has been in the past in implementing changes that actually stay in place long-term. If a shop
has made improvements in the past that didn’t stick, a consultant should come on board to
help implement TOC.

Ans 2.

It has become an indispensable part of a business and the ABC analysis is widely used for
unfinished good, manufactured products, spare parts, components, finished items and
assembly items.

This method of management divides the items into three categories A, B and C; where A is
the most important item and C the least valuable.

The ABC analysis is widely used in supply chain management and stock checking and
inventory system and is implemented as a cycle counting system. It is most important for
companies that seek to bring down their working capital and carrying costs.

This done by analysing the inventory that is in excess stock and those that are obsolete by
making way for items that are readily sold. This helps avoid keeping the working capital
available for use rather than keeping it tied up in unhealthy inventory.
When a company is better able to check its stock and maintain control over the high-value
goods it helps them to keep track of the value of the assets that are being held at a time. It
also brings order to the reordering process and ensures that those items are in stock to meet
the demands.

Below is ABC inventory classification for the data:

Item Code Annual Demand Unit Cost Total Usage % in Total usage
M1 680 400 272000 18.74%
K5 5000 50 250000 17.22%
C3 450 500 225000 15.50%
F1 520 400 208000 14.33%
B3 4000 45 180000 12.40%
D2 3000 35 105000 7.23%
A1 3000 20 60000 4.13%
C2 2000 30 60000 4.13%
A5 500 50 25000 1.72%
D3 1000 20 20000 1.38%
D1 460 40 18400 1.27%
N2 900 20 18000 1.24%
C9 680 15 10200 0.70%
1451600

Percentage of Percentage of
Category Items Items Usage
M1, K5, C3, F1,
A B3 78.19% Close Control
B D2, A1, C2 15.50% Regular Review
A5, D3, D1, N2,
C C9 6.31% Infrequent Review

The products M1, K5, C3, F1, B3 should have tightest close control.
Thus, The ABC model works in a manner as to get prime attention to the important items or
the critical few and not have unnecessary attention be spent on the not so important items or
the trivial many. Each category has a differing management control in place.
This prioritization of attention and focus is vital to keep the costs in check and under control
in the supply chain system. To get the best results it is important that items that involve a lot
of costs are given the due management attention.

Ans 3 (a)

Major part of the research work contribution shows that soft TQM practices comprise
of people related factors which are specifically directed toward employees enhancement for
example reward and recognition, teamwork and empowerment. There has been general
consensus that Total Quality Management comprise of soft and hard dimensions, hard TQM
involves tools and techniques, whereas soft TQM comprise of HR related factors like
commitment, empowerment, team and involvement. Majority of TQM gurus ag. Soft TQM
is about the social and people based issues related to management of quality . Butler (1996)
finds that, organizations which adopt TQM practices, progress better in organizational issues
like attendance, turnover, safety, employee satisfaction, and health. Forsyth (1995) mentions
that factors like Supportive working conditions, equitable rewards and helping colleagues
lead to job satisfaction. The soft nature of TQM is supposed to contribute in promoting
organizational culture that stress on continuous improvement and is most related to
motivating human resource related factors (Samson and Terziovski, 1999). Organization’s
success and growth is determined by the extent to which employees are satisfied with their
organization’s system and culture where the level of commitment is the key indicator of
success and growth. Lam (1995) concludes that adaptation of TQM practices does not
necessary enhances all the aspects of employees satisfaction. They perceive it as sort of
controlling environment after introducing TQM practices. Employees feel less freedom while
it has not any effect on pay, job security, and promotion activities; moreover it has not any
significant role in personal effectiveness.

Three TQM soft practices (Teamwork, Rewards & Recognition and Education & Training)
have direct and indirect significant effect on job satisfaction. Soft practices are long term
factors that are related to management issues and aspects and must be considered and targeted
in a company's TQM strategy and subsequent implementation plan. Soft practices generally
deal with human resource management and concentrates on behavioral sides including
training for employees, management leadership, teamwork, supplier relationship and
management, creating value to customers, and achieving customer satisfaction. In order to
maximize the effect of soft practices, they should be enhanced by the hard TQM practices .
Soft practices are harder to quantify and, therefore, the measurement and assessment of them
is a challenging issue for management.Powell (1995) asserted that organizations that have
implemented soft TQM practices can perform better than competitors without the associated
TQM philosophy.

On the basis of the literature review, let’s discuss these 2 dimensions to measure soft TQM
practices were introduced:

1) Customer focus: the belief of all organizational members that customers are the best source
to identify their wants and needs, customer satisfaction is essential to achieve superior
performance, and that the organization should satisfy or exceed requirements and
expectations of the customers.

2) Training: provision of training and education on quality techniques and tools to most of
employees and the allocation of necessary resources for such training activities.

TPM represents a company-wide methodology to machine management that involves all the
employees in the company, from upper management to operators, and production personnel
to suppliers, resulting in minimizing machine downtime, accidents, and defect rates. They
also stated that the objectives of TPM require strong management support, small group
activities, and continuous use of work teams to achieve incremental improvements. For
successful implementation of TPM program, barriers between maintenance and production
departments should be broken down; moreover, TPM requires an enhanced problem solving
skills and cross-functional learning and cooperation.

Ans 3.b

Generally TQM is both a philosophy and a set of guiding principles that represent the
foundation of a continuously improving organization. It encompasses mobilizing the entire
organization to satisfy the demands of its customers. TQM is focused on routing involvement
and participation of everyone in the organization in the systematic improvement of quality of
products and services offered by them. It involves each individual and the group within all
parts of the organization. Lets discuss about two tools & techniques for continuous
improvement:

Kaizen
Kaizen means simply continuous improvement. In Japanese language, Kai means “to take
part” and Zen means “to make good”. Together these two rods mean to take something apart
in order to make it better. Kaizen is based on the fundamentals of scientific analysis in which
you analyze the elements of a process or system to understand how it work, and then discover
how to influence or improve. This concept was invented by Mazaki Imai.

Kaizen activity focuses on each process and every operation in order to add value and
eliminate waste. Waste is any operation that adds cost or time but does not add value. The
key to lean production is the total elimination of waste. Continuous improvement is the
cornerstone of Kaizen. In teams the co-workers can help each other to identify each other’s
problem in their work area. The team together works and discover the better ways to solve
the problems. The kaizen is mainly divided into two types. They are idea Kaizen and problem
solving kaizen or corrective action kaizens. Idea Kaizen is one which done by the employees
to improve the present situation of work, product and process attribute from the existing
non-problematic situation to the improved situation. These types of Kaizen in many cases
follow Preventive action methodology. In the case of Problem solving kaizen, there is a gap
between the current situation and ideal situation. The kaizen requires the use of techniques
like Why-Why analysis, 5W-1H techniques or PM Analysis to find the root cause of the
problems and identify the improvement actions. The kaizen can be performed either by an
individual employee or by a team of employees who are working in the same work area.

Lean Manufacturing

Lean manufacturing is the concept of improving the manufacturing process using the
methods to produce only the customer demanded products which will meet the needs and
expectations of the customers at lowest cost and highest efficiency. The ideal situation in any
organizations would be No wastes in the organizational processes, no lead time and the
orders received from the customers are shipped on the same day. However, it is very difficult
achieve this level performance on continuous basis.

The adoption of lean manufacturing techniques by the organization creates a pull system and
produces only what customer demands with lower wastes and provides an opportunity for
continuous improvement. In the process of identifying and eliminating the waste in the value
chain, the organization identifies the activities that their customer is unwilling to pay. These
types of activities are called as Non-value adding (NVA) activities. The NVA are classified
under making defective parts, Extra processes, Inventory at different stages, unnecessary
movement of men, over production than the required quantity, Transportation, Waiting and
Underutilized resources. Using appropriate tools like Kanban, SMED, Group technology,
Teamwork etc., the organization could achieve better throughput time, lesser inventory and
enhanced production.

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