CONTENTS

1. INTRODUCTION 1.2 INTRODUCTION TO THE ORGANIZATION 2. COMPETITIVE PRIORITIES OF OPERATIONS 3. ACHIEVEMENT RECORDS OF PERFORMANCE OBJECTIVES 4. OPERATIONS MANAGEMENT PRINCIPLES, TOOLS AND TECHNIQUES IN USE AND HOW THEY HELPED TO ACHIEVE THE OBJECTIVES 5. OTHER POSSIBLE OPERATIONS MANAGEMENT TOOLS APPLICABLE 6. REFERENCES

1 1 2 3-4

4-7 7-8 9

1. INTRODUCTION Consider some of todays most successful companies, such as Wal-Mart, General Electric, Toyota and Procter & Gamble. These companies have achieved world-class status mainly due to strong focus on operations management and innovations. Operations management is responsible for coordinating all the resources needed to produce the final product. This includes all aspects of the process of transforming inputs to out puts such as designing the product; deciding what resources are needed; arranging schedules, equipment, and facilities; managing inventory; controlling quality; designing the job to make the product; and designing work methods etc. In todays highly competitive and changing environment, electricity distribution utilities also have to focus on managing operations effectively and efficiently to be competitive in the market. Their main competitive priorities in this environment are timeliness of providing services; selection of appropriate technology; equipment replacement decisions; outsourcing decisions; taking decisions considering cost and quality; facility location decisions; assisting creativity and innovation process; and forecasting decisions etc. 1.2 INTRODUCTION TO THE ORGANIZATION Ceylon Electricity Board has been established by a parliamentary act in 1969. It was responsible for generation, transmission and distribution of electricity in Sri Lanka until 2009. After new electricity act was enacted in 2009 it was divided into seven strategic business units (SBUs). Distribution division 4 is one of thouse SBUs responsible for Electricity distribution in the geographical area of Dehiwala to kataragama Coastal belt except Kalutara to Galle narrow coastal strip of which electricity distribution is handled by Lanka Electricity Company. Medium voltage electricity distribution network of southern province of Sri Lanka comes under the business area of distribution division 4 and is managed by a Deputy General Manager under whom I am working. Competitive priorities under various perspectives are formulated in the Balanced Scorecard of distribution division 4. There are 1091 employees working in this province including Deputy General Manager as CEO and 6 chief Engineers, 14 Electrical Engineers, 2 Accountants, 1Human Resource Officer and 1067 employees of other non executive categories including Electrical superintendents, Clerical, semiskilled,

skilled and unskilled labours. Total number of customers in the province is about 600,000 and total annual energy demand is about 1000 Million Kwhr. 2. COMPETITIVE PRIORITIES OF OPERATIONS Ceylon Electricity Board has several competitive priorities about cost, quality, speed and reliability in providing services to customers. Balanced Scorecard of the distribution division4 had formulated following performance targets for Southern province in year 2010. 1. Operation and maintenance cost per unit of electricity distributed to customers without depreciation should be limited to 1.66 Rs. /KWh. 2. Revenue receivable position should be maintained at 1 month arrears or less for Bulk supply customers and 2 months or less for ordinary supply customers. 3. Following time targets had been given to provide relevant services to prospective customer. a. Time to issue an estimate for a bulk supply customer should limited to 1 month b. Time to issue an estimate for an ordinary supply customer should limited to two weeks c. Time to provide a new bulk supply connection should be limited to 1 month d. Time to provide a new ordinary supply connection should be limited to two weeks 4. Reducing the number of break downs per year by 20% 5. Limitation of maximum stock level to three months requirement 6. To improve the accuracy of cash forecast to 10% 7. Reducing non technical and technical energy in the electricity distribution system to 12.5% of total energy purchased. 8. To maintain the death of employees, public and accidents to employees and public at Zero level. Among the above mention objectives 1 and 2 are related to financial perspective, 3 and 4 are related to customer perspective, 5, 6 and 7 are related to internal process perspective and 8 is related to innovation & learning perspective.

3. ACHIEVEMENT RECORDS OF PERFORMANCE OBJECTIVES Table 3.1 Achievement records of performance objectives, Source: Progress Reports of CEB (2009, 2010) Performance objective Actual for year 2009 1 Operation and maintenance cost per unit of electricity distributed to customers without depreciation 2 Revenue receivable position for ordinary supply customers Revenue receivable position for Bulk supply customers 3a Time to issue an estimate for a bulk supply customer 3b Time to issue an estimate for an ordinary supply customer 3c Time to provide a new bulk supply connection 1.62 Months 1.02 Months More than 01 Month More than 02 Weeks More than 03 Months 3d Time to provide a new ordinary supply connection 4 Reducing the number of break downs More than 02 Weeks MV 774 LV - 4465 5 6 7 Limitation of maximum stock level To improve the accuracy of cash forecast Reducing non technical and technical energy in the electricity distribution system 8 To maintain the death of employees, public and accidents to employees and public at Zero level.
Employees Accidents Deaths Public Employees Public

Target for year 2010 1.66 (Rs./KWh)

Actual for year 2010 1.68 (Rs./KWh)

1.69 (Rs./KWh)

1.25 Months 1.00 Months Within 01 Month Within 02 Weeks Within 03 Months Within 02 Weeks 20% less than 2009 3 Months 10%

1.58 Months 0.98 Months Less than 01 Month Less than 02 Weeks Less than 03 Months Less than 02 Weeks MV 757 LV - 4081 3.7 Months

5.5 Months

16.8%

12.5%

12%

0 2 1 2

0 0 0 0

1 2 1 1

Table 3.1 shows that achievement records during 2009 and 2010. This indicates that some objectives are achieved and some are not or partly achieved. By further inquiring about the practices adopted by various branches of Ceylon Electricity Board, it could be seen that some of the operations management techniques and tools are in use. Therefore it is important to investigate what are these practices and how these practices affect the achievement of performance objectives. 4. OPERATIONS MANAGEMENT PRINCIPLES, TOOLS AND TECHNIQUES IN USE AND HOW THEY HELPED TO ACHIEVE THE OBJECTIVES Operations of electricity distribution system mainly requires capacity planning and location of facilities to cope with future demand increase as a result of consumption increase due to new electricity customers and increased consumption of existing customers. To do this efficiently and effectively CEB is using forecasting, capacity planning and facility location techniques. Construction of new electricity network facilities and maintenance of existing electricity network facilities require inventory of materials to be maintained. To handle this function effectively and efficiently CEB is using material requirement planning and inventory management techniques. Maintenance of electricity distribution network components and construction of new facilities involve lot of skilled and unskilled labour works. CEB use work measurements tools like time study to calculate work norms to be used in setting performance standards and calculation of construction rates for contractor payments. CEB promote 5S and quality circle concept as a means of assisting creativity and innovation process among its employees. Next part of this report discuss how these tools and techniques are used and their impact on achieving performance objectives. Forecasting techniques used Forecasting techniques are used in several areas of organizational activities. Electricity demand forecasting is a major area where this is applied. Ten year demand forecast is prepared on two year rolling basis. Time trend analysis is carried out on the past 10 year historical demand data. Accuracy of this has lot of impact on future capacity expansion decisions. Wrong forecast will lead to increase operation and maintenance cost. One other area of application is preparation of weekly cash forecast. Here every branch prepare this document and the technique used is generally the panel consensus technique. Accuracy of this also affect greatly to efficiency and effectiveness of cash handling.

Capacity planning and facility location Capacity planning and facility location is the major task in network development to cope with future demand growth. This include locating new consumer service centers, area engineers offices, grid substations, primary substations, switching facilities and distribution substations etc. capacity planning of some of these items also play a major role in decision making. Basic inputs required for this is the accurate demand forecast for the planning horizon. CEB uses 10 year planning horizon for medium voltage network and 5 year for low voltage network. They generally use one step expansion strategy for most network expansions due to the fact that the time and cost involved with incremental expansion strategy is much higher than that of one step strategy. These plans specify the timing and the capacity of new additional facilities required to cope with demand growth. In case of facility location, criteria for locating consumer service centers and area engineers offices is the proximity to customers and for other network components mention above it is mainly based on reliability requirements, closeness to load centres and operating flexibilities. Material requirement planning (MRP) and inventory management Accuracy of MRP will be reflected in the progress of provision of new service connections and completion of new construction works. Inaccurate MRP will result in shortage of material or excess material leading to delay of works or unnecessary holding cost of materials. This hinders the achievement of performance objectives 3a, 3b, 3c and 3d given in the table 3.1 above. Procedure adopted by CEB in preparing MRP could be represented by Figure 4.1. Once the annual provincial material requirement is prepared by Chief Engineer (Planning & Development) of the province, purchasing of material is carried out in quantity of six months requirement. Calculation of economic order quantity (EOQ) is not done as holding cost of material has not been assessed properly and it is considered to be a small value. But Re order levels (ROL) are considered as stock of four months requirement. All these efforts lead to achieve the performance objective to a significant level by maintaining average stock level of 3.7 months compared to target level of 3 months according to year 2010 data.

Provincial level MRP

Branch level MRP

Catagory level MRP

MRP for new construction works prepared by Chief Engineer Construction

MR for new construction work relavent to decentralized budgetMR for special projects and third party jobs

Schemes plan prepared by Commercial Engineer of the province

MR for system augmentation works

System augmentation plan prepared by system planning Engineer.

MRP for the province prepared by Chief Engineer Planning & Development MRP for six areas prepared by six area Engineers. MRP for medium voltage maintenace works prepared by Chief Engineer distribution maintenance

Material requirements for maintenace works of areas

Material requirement for new service connections of six areas.

Figure 4.1: MRP process in CEB, Source: CEB operating manuals Work measurements Time studies are carried out to evaluate time taken each activity of jobs. Jobs are broken in to separable activities and average time taken by an employee to carry out each of these activities is evaluated. These time values are considered as work norms for thouse activities and use in estimating labour hours required for various jobs. These norms are important in evaluating bids in outsourcing distribution line construction works. This ultimately helps in achieving better economy in construction activity outsourcing.

5S and Quality circle concept Recent introduction of above concepts in to the organization has created an environment which support productivity improvement and innovation. 5S competitions organized by ministry of power and Energy help improve quality of services provided by CEB. Some branches of the province have won national level awards for practicing 5S concepts in their workplace. 5. OTHER POSSIBLE OPERATIONS MANAGEMENT TOOLS APPLICABLE Total Quality Management Though quality improvement techniques like 5S concept and quality circles has been adopted by CEB it is in the initial stage of implementation. They could adopt more comprehensive quality tools like total quality management (TQM) concept which involves customer driven quality, leadership and commitment of top management, continuous improvement, fast response, actions based on facts, employee participation and TQM culture. It is important to start collecting data related to customer requirements and their satisfaction levels of services provided and analyze them to quantify the levels of satisfaction. Having assessed the customer needs top management should understand that participation of employees in improving processes of service delivery in continuous basis is an important factor in continuous improvement or Kaizen. Popularization of Kaizen techniques among employees has to be done on regular basis until quality culture is created in the whole organization. Employees have to be trained to identify and correct quality problems. They should have an understanding on how to assess quality by using a variety of quality tools. Following quality tools can be used either by one at a time or combination of several tools. Cause-and-Effect Diagrams Flowcharts Checklists Control Charts Scatter Diagrams Pareto Analysis Histograms

In case of service delivery process of Ceylon Electricity Board, these techniques could be used to identify quality problems in power supply, quality problems in Electricity distribution line construction, quality problems in concrete pole manufacturing and other areas where quality may be a important factor in service delivery. Operational Innovations To achieve performance objectives in an efficient and effective way CEB could just introduce operations management tools and techniques which have not been introduced up to now and also refine the techniques already applied to enhance the performance. But in a service organization it is important reimagining the processes and try to remove the bottlenecks which disturb the strategic goal achievement. In other words create an environment which stimulate innovation. This should have a support from the top management by understanding importance of operations in goal achievement. As an example CEB could use multi skilling of employees as an innovative approach. One area where this could be applied is giving responsibility of a driver to a skilled labour who has a valid driving license. The other area where multi skilling applicable is deployment of meter reading personnel for handling customer complains other than billing complains. But these changes must be implemented carefully giving attention to possible trade union pressures. Tammi Greswell in a paper on typology of creative tools and techniques for Operations Managers in 2007 presents a typology of creative thinking tools at three levels within an organization: namely day to day action, process improvement and strategic change within business operations. The above proposed changes could be considered as process improvements. Support processes also has to be developed to encourage grass root movements for innovations which should be the part of organizations strategy. Brainstorming in quality circles would help this in one way and other avenues have to be created by the management to stimulate this.

6. REFERENCES 1. Chandana Perera, 2011. Operations Management concepts & applications. 2nd ed. Ethul Kotte. Institute of Operations management (Pvt) Ltd, Sri Lanka 2. Operating manuals of CEB, 1987, Colombo, Ceylon Electricity Board. 3. Progress reports of Southern province, 2009, 2010. Galle, Ceylon Electricity Board. 4. Silva, M.W.S.S., 2011. Lecture notes on Operations Management. PDBA/MBA 108. University of Ruhuna, unpublished.