Operations Management...

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 Key Words...
Transformation Process – In-Output – Macro
Operations – Physical Buffering – Operations Strategy
– Process Design – Manufactoring – Supply Chain
Management – Vertical Integration – Assembly
Operations – Capacity Leading Strategy – Product
Technology – CAD – Job Design – Capacity Planning –
Inventory Management – Economic Order Quantity –
Pareto Curve – ABC Analysis – Material Management
– Master Production Schedule – Layouting –
Production Plan – Just-in-Time – Quality Management
– PDCA Cycle – Process Reengineering – Cause
Effect Diagram – Pareto Diagram – Why Why Analysis
– TQM – Operations Network – Buffer Inventory
 Operations Function:
Narrow Definition

Engineering/
technical

Product/service
Marketing
development
Operations
management
Personnel Purchasing

Accounting
and finance

Extent of the operations

function
 Operations Function:
Broad Definition

Engineering/
technical

Product/service
Marketing
development
Operations
management
Personnel Purchasing

Accounting
and finance
Extent of the operations
function
Input-Transformation-Output Processes

Input
transformed
resources
Materials
information
customers Environment

The Goods
Input transformations Output and
process services

Environment
Facilities
staff

Input
transforming
resources
Output: A Mixture of Goods and Services
Pure Goods
Crude oil production

Tangible
Specialist machine tool manufacturer Can be stored
Aluminium smelting

Production precedes consumption

Low customer contact
Can be transported
Quality is evident

Computer systems services

Restaurant

Management consultancy Pure Services

Intangible
Psychotherapy clinic Cannot be stored
Production and consumption
are simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
 Macro and Micro Operations

Information
Market
from customers
forecasts,
Computer Marketing sales
systems and sales proposales
Survey and
and plans
analysis staff

Broadcasting
Wood, steel,
and programme-
plastic, etc. Adapted,
Scenery making
Set and props maintained and
Carpenters
and equipment Engineering repaired
manufacture props Test and repair
equipment
equipment
Machines
Staff
 Micro Operations and Business
Processes
Micro operations
Marketing Set and props Production Finance and
Engineering
and sales manufacture units costing
Preparing quotations

Programme production

Promotional and advertising contracts

Technical support contracts

s dee n r e mot s u C

s ess ec or p ss e ni s u B
delli fl uf s dee n r e mot s u C
Music videos

Size of each micro operation‘s

contribution to each process
 Physical Buffering

The operation
Buffer Buffer
system

e.g. Physical inventories of raw Material e.g. Physical inventories of

materials and components processors finished goods

e.g. Databases in national and Information e.g. On-line subscriber

local government processors services of financial data

e.g. Queues and waiting lists at Customer

Not applicable
hospitals processors
 Organizational Buffering
Staff Funds

Pe

an ng
rs

f in ti
on

ce
d un
ne

an cco
l

A
The
Suppliers Purchasing operation Marketing Customers
function

Pr
o
de duc
er l/

ve t/s
ne ca
g

lo er
gi ni
in

pm vi
en ech

en ces
T

Process Staff
technology
 A Typology of Operations
Implication Implication

Low repetition High repeatability

Each staff member performs Specialization
more of job Low Volume High Systemization
Less systemization Capital intensive
High unit costs Low unit costs

Flexible Well defined

Complex Routine
Match customer needs
Low Volume High Regular
High unit costs Low unit costs

Changing capacity Stable

Anticipation Routine
Flexibility Low Volume High Predictable
In touch with demand High utilization
High unit costs Low unit costs

Short waiting tolerance Time lag between production

Satisfaction governed by and consumption
customer perception Standardized
Customer contact skills Low Volume High Low contact skills
needed High staff utilization
Received variety is high Centralization
High unit costs Low unit costs
Operations Management and Strategy

Environment The operation‘s

Input strategic objectives
transformed
resources Operations
strategy Operations The operation‘s
Materials strategy competitive role
information and position
customers
Operations
strategy
Goods
Input Design Improvement Output and
services

Planning
Facilities and control
staff

Input
transforming Environment
resources
 The Three Roles of the Operations
Function
Operations as effector Operations as follower Operations as leader

Being the „implementer“ Being „appropriate“ Being the „driver“

of strategy for strategy of strategy

Strategy

OPS OPS OPS OPS Strategy Strategy OPS

Operations must support

Operations must „make
strategy by developing Operations must provide
strategy happen“ by trans-
appropriate objectives the means to achieve
lating strategic decisions
and policies for the competitive advantage
into operational reality
resources it manages
 The Role and the Contribution of the
Operations Function

tio ns
a
Give an
fo pe r Redefine the
operations
t io no Externally
industry‘s
advantage i bu supportive
o nt r expectations
n gc
re as i Be clearly the
Link strategy I nc best in the
Internally
with operations supportive
industry

Adopt best Be as good Externally

practise as competitors neutral

Stop holding
Correct the Internally
the organisazion
worst problems neutral
back
Stage 1 Stage 2 Stage 3 Stage 4
The The The
ability ability to ability to
to implement be appropriate drive strategy
 External and Internal Effects on the
Performance Objectives

Low price
high margin,
Short delivery or both
lead time
Cost Dependable
High total delivery

Speed productivity Dependability

Internal effects of
Fast Reliable
the five performance
throughput operation
objective

Error-free Ability to
processes change
Quality Flexibility
Frequent new
On-specification product/services
products/ services Wide product/services range
Volume and
delivery adjustments
The Influences on the Relative
Importance
of Performance Objectives
The influence of the
The influence of the
organization‘s competitors
organization‘s customers
How does the operation
What are order-winning,
react to changes in the
qualifying, and less
way competitors
important factors to them?
behave?

The relative
importance of each
performance objective
to the operation

The stage of the

organization‘s products
and services in their
life cycle
Are products and services
at their introduction, growth,
maturity or decline stage?
 Different Competitive Factors and
Performance Objectives
Performance objectives
Competitive factors
Then, the operation will need to
If the customer value these...
exel at these...

Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (product/service)

Wide range of products and services Flexibility (mix)

The ability to change the timing

Flexibility (volume and/or delivery)
or quantity of products and services
Order-winning and Qualifying Objectives

Order-winnig Qualifying Less important

factors factors factors
Competitive Competitive Competitive
benefit benefit benefit

Performance Performance Performance

 Competitor Activity and the Influence on
Performance Objectives
Original strategy
Order Fast delivery
winner
Qualifiers Range
Price
Performance Speed
Competitor‘s strategy objectives

Order Fast delivery

winners Range

Qualifiers Price

Performance Speed and

objectives flexibility
Alternative strategy 1 Alternative strategy 2 Alternative strategy 3

Order Fast delivery Order Faster Order Price

winners Range winners delivery winners
Qualifiers Range Qualifiers Fast delivery
Qualifiers Price Price Range

Performance Speed
Performance Speed and objectives Performance Cost
objectives flexibility objectives
Effects of the Product/Service Life Cycle
Introductio
Growth Maturity Decline
n

Product/ service Product/ service Markets needs

Market needs
first introduced gains market start to be
largely met
to market acceptance fulfilled
Sales slow
Slow growth Rapid growth
Volume down Sales decline
in sales in sales volume
and level off
Customers Innovators Early adoptors Bulk of market Laggards
Increasingly Stable Declining
Competitors Few/ none
number number number
Possible high
Emerging Possible move
customization Increasingly
Variety of product/service designs dominant to commodity
or frequent standardized
types standardization
design changes
Product/ service Availability
Low price
characteristics of quality
Likely order winners dependable Low price
performance products/
supply
or novelty services

Range
Quality Prince Dependable
Likely qualifiers Quality
Range Range supply

Speed
Dominant operations performance Flexibility Cost
Dependability Cost
objectives Quality Dependability
Quality
Design Activities in Operations
Management
The general principles
of design in operations

The The
design of design of
products and services processes

Concept generation
Network design

Screening
Layout
Preliminary design and flow

Evaluation and improvement Process Job

technology design
Prototyping and final design
 Design Screening

Concept

Large number of design options

Uncertainty
regarding
the
Choice final

Time
and design
evaluation Certainty
screens regarding
the
final
design

Final design
specification
Process Types in Manufacturing
Operations
Low Volume High

High
Project

Jobbing

Batch
Variety

Mass

Continous

Low
Process Types in Service Operations

Low Volume High

High
Professional services

Service shops
Variety

Mass services

Low
Line of Fit of Process to Volume/Variety
Characteristics
Manufacturing Volume Service
operations operations
process types Variety process types

Project Less None

process
Professional
flexibility service
than is
Jobbing needed
so high
cost
Service
Batch
shop

Less
Mass process
flexibility
than is Mass
needed
so high
service
Continuous None cost

The natural line of

process to volume variety
characteristics
 The Customer-Marketing-Design
Feedback Loop

Interpretation
of expectation Expectations
Marketing

Product/service design Operations Customer

Product/ Product/
service service
specification
Stages of Product/Service Design

Concept generation

Screening

Preliminary design

Evaluation and
improvement

Prototyping and
final design

The The The

concept package process
Concept Generation from Internal and
External Sources

Internal External
sources sources

Analysis of Marketing Market

customer needs department surveys

Suggestion from Suggestion from

customer contact customers
staff
Ideas from Actions of
research & development competitors

Concept generation
 From an Idea to a Concept

Idea

From
The overall shape
Adventure holiday Adventure holiday
of the product or service
for young people for young people
Function
The way in which the
product or service operates

Purpose A holiday which is A telefone which is

The need the product or • One week long
• In lower quartile
• Residential
service is intended to satisfy • Multi-activity
price range
• Multi-coloured
• Adventure
• Fashionably styled
• In a safe but
Benefits • Easy to use
• Exciting envirnonment
The advantage the product • Dual position
• For 14 to 16-year-old
• Capable of use
or service will bring • Boys and girls
with two carriers
to customers • Away from their parents

Idea
 Concept Screening

Many concepts

Marketing screen

Operations screen

Financial screen

Acceptable
concepts
 Effect of a Delay in Time to Market
Cash

Sales revenue

Cash flow

Delayed sales revenue

Delayed cash flow

Time
Development costs

Development costs of delayed project

Delay in Delay in
time to financial
market breakeven
 Organization Structures for Design
Activity

F.M.
F.M.
F.M.
F.M.
P.M.
P.M.
P.M.
F.M.
F.M.
F.M.
F.M.

P.M.

F.M.
F.M.
F.M.
F.M.
P.M.
P.M.
P.M.
P.M.
Pure functional organization
Increasing project
P.M. orientation
P.M.

F.M.
F.M.
F.M.
F.M.
P.M.
P.M. P.M.
P.M.
Pure project organization P.M.
P.M.
F.M.
F.M.
F.M.
F.M.

P.M.
P.M.
P.M.
P.M.
F.M. = Functional Manager
P.M. = Project Manager
 Total and Immediate Supply Networks

Second-tier First-tier First-tier Second-tier

suppliers suppliers customers customers

The
Operation

Supply side of Demand side of

the network the network

The immediate supply network The total supply network

 Vertical Integration for an Assembly
Operation
Downstream vertical integration

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Upstream vertical integration

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Stages owned by the organization

 The Extent of Process Span of Vertical
Integration
Narrow process span

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Wide process span

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Stages owned by the organization

 The Balance of Internal/External Trade

Vertically integrated stages deal

only with each other

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Vertically integrated stages also

sell to/buy from other companies

Raw materials Component Assembly

Wholesaler Retailer
supplier maker operation

Stages owned by the organization

 Supply- and Demand-Side Factors in
Location Decisions

Supply-side The Demand-side

factors operation factors

Which vary in Which vary in

such a way as to such a way as to
influence cost as influence customer
location varies services/ revenue as
location varies

•Labour costs •Labour skills

•Land costs •Suitability of site
•Energy costs •Image
•Transportation •Convenience for customer
costs
•Community factors
Capacity-Leading and Capacity-Lagging
Strategies

Volume (units/week)

Demand

Capacity leads demand

Capacity lags demand

Time
Relationship Between Process and Basic
Layout Types

Manufacturing process Basic layout Service process

types types types

Project processes
Fixed-position layout Professional services

Jobbing processes

Process layout

Service shop
Batch processes
Cell layout

Mass processes
Mass service
Product layout
Continous processes
Volume Variety and Layout Type

Flow is Volume
intermittet Low High
High Fixed-position
layout

Regular flow more feasible

Process
layout
Variety

Cell
layout
Product
layout

Low
Flow becomes
continuous
Regular flow more important
 Types of Cell
Amount of
indirect resources included in
the cell

High

e.g. Specialist process e.g. Plant-within-a-plant

manufacturing cell manufacturing operation

Internal audit group Maternity unit

in a bank in a hospital

Proportion of the
direct resources
Low High needed to complete
the transformation
included in
the cell
e.g. Small multi-machine e.g. Complete component-
manufacturing cell manufacturing cell

Joint reference and Lunch and snack

copying room in a produce area in
library supermarket

Low
Relative Rates of Innovation for Product
and Process Technology

Process
technology Unco-ordinated Systemic

Product Performance Product cost

technology maximizing minimizing

High

Process
Rate of innovation

technology

Product
technology

Low
Introduction Growth Maturity

Stage of development
Volume and Variety Characteristics

Volume
Low High
High Stand-alone NC machine tool

NC machining centres
Flexible manufacturing
systems
Variety

Flexible trans-
fer lines

Dedicated systems
Low
 Increasing Integration of Manufacturing
Technologies
Designing Controlling Handling Managing

Computer-aided Automated guided Loading

Computer-aided
manufacturing vehicles (AGVs) Scheduling
design (CAD)
(CAM) Robotics monitoring

INTEGRATED INTEGRATED

The computer-based
CAD/ CAM FMS systems of other
functions, suppliers
and customers

INTEGRATED

CIM

INTEGRATED

CIE
 The Growth in Telecommunication
Services
Network services
Home shopping
Cashless services
Video games
Home banking
Video conference
Multimedia database
Interactive video
Telewriting
Smart card comms
Personal numbering
Videotext
Mobile videotext
Telenewspaper
Intelligent network
Translation
Artificial reality
Voice messaging Virtual reality
Image transmission Hi-Fi telephony
Remote computing Teleworking
Voice conference Mobile videophone
Video conference ATM
Star services Frame relay
Cable TV
Alphanumeric paging Speech fax
Paging
Mobile telephony Archiving
Teletext
Colour fax Centrex
Multimedia
Telemetry SDH
Mobile telephony
Colour TV ISDN X400
EDI
TV Stereo radio LinklineDDSN Telepresence
CCTV
Telegram Telex 999 service Satelite TV
Satelite services
Telegraphie Telephony Radio Private circuit

1850 1880 1930 1970 1980 1990 2000

The Elements of Job Design

What
tasks?
What
Where to sequence?
locate

What Who
skills else?

How How to
much interface
autonomy with the
What facilities?
environmental
conditions
The Chronology of the Differente
Approaches to Job Design

before 1900

Division
of labour 1900

Scientific
management

Operations
job design

Ergonomics

Behavioural 1950
approach

Time Empowerment

1980
1970
Differente Approaches to Job Design

Emphasis on
Emphasis on
commitment and
managerial control
engagement of staff

Staff treated
as a cost
Division of labour

Scientific
management

Ergonomics

Behavioural
approaches

Staff treated Empowerment

as a resource

Self-managed method study

 Causes of Seasonality

Causes of seasonality

Climatic Festive Behavioural Political Financial Social

Some seasonal products and services

•Construction materials •Travel service

•Beverages (beer, cola) •Holidays
•Foods (ice-cream, Christmas cakes) •Tax processing
•Clothing (swimwear, shoes) •Doctors (influenza epidemic)
•Gardening items (seeds, fertilizer) •Sport services
•Fireworks •Education services
 Capacity Planning and Control

Periode t-1 Periode t Periode t+1

Current Current
capacity Updated capacity Updated
estimates forecasts estimates forecasts

Outcome Shortages Decision Outcome Shortages Decision

Capacity Queues Capacity Queues Capacity
level Actual demand inventory How much level Actual demand inventory How much level
and capacity and capacity
actual capacity next period? actual capacity next period?

Costs Costs
Revenues Revenues
Working capital Working capital
Customer satisfaction Customer satisfaction
etc. etc.
 Dynamics of Capacity Planning
Short-term outlook

POOR NORMAL GOOD

Outlook < 1 Outlook = 1 Outlook > 1

Lay-off staff Delay any action Overtime

POOR
Hire temporary
Outlook < 1 staff
Long-term outlook

Short-time Do nothing Overtime

NORMAL Idle time
Hire temporary
Outlook = 1 staff

Make for inventory Hire and make Hire staff

GOOD for inventory

Outlook > 1 Short time Start to recruit

Outlook = Forecast demand / Forecast capacity

The Position of Inventory I

(a) single-stage inventory system

Stock Sales
operations
e.g Local retail store

Suppliers
 The Position of Inventory II

(b) Two-stage inventory system

Central Local dis- Sales

Distribution
depot tribution point operations

e.g. Automotive parts distributor

Suppliers
 The Position of Inventory III

(c) Multi-stage inventory system

Input Stage Stage WIP Stage Finished

stocks WIP
1 2 3 goods stock

e.g. Television manufacturer

Suppliers
 The Position of Inventory IV

(d) Multi-echelon inventory system

Garment
producers
Cloth Regional
producers warehouses
Yarn Retail
producers stores
 Inventory Profile

Steady and
Order predictable Slope = demand rate
quantity demand (D)
Q
Inventory
level

Average inventory = Q / 2

Time
Q/D
Instantaneous deliveries at rate of D / Q per period
 Economic Order Quantity

Total costs
Costs

Holding costs

Order costs
Economic order
quantity (EOQ)

Order quantity
Pareto Curve for Items in a Warehouse
Cumulative % of total value

Class A Class B Class C

items items items

% of total number of items

 Supply Chain Management

Second-tier First-tier First-tier Second-tier

suppliers suppliers customers customers

The
Operation

Supply side Demand side

Purchasing and supply Physical distribution

management management
Logistics

Materials management
Supply chain management
 The Purchasing Function
Suppliers Purchasing function The internal operation

Prepare Request
Suppliers
request for for products
Prepare quotations
quotations and services

Select the Discuss with

Quotations
preferred the operations
supplier

Produce Order Prepare Laise

goods/ services purchase order with operations

Delivery goods/ services Receive

goods/ services

Inform purchasing Input to the

function operation
The Multi-Echelon Physical System I

Garment
manufacturer
Regional
warehouses Retail
stores
Process

Inventory
 Multi-Echelon Physical System II

6 contracts
Factory Factory Factory

18 routes

3 contracts
Customer Customer Customer Customer Customer Customer
 Multi-Echelon Physical System III

Factory Factory Factory 3 contracts

Warehouse Warehouse 12 routes

Customer Customer Customer Customer Customer Customer 1 contracts

 Responsibilities of Supplier and
Purchaser

Ex-works

Free alongside (FAS)

Free on board (FOB)

Purchaser
Supplier

Cost and freight (C & F)

Cost, insurance & freight (CIF)

Delivered

Purchaser‘s responsibility

Supplier‘s responsibility
 Materials Management

Materials Management

Cash Inventory Inventory Inventory Inventory Cash

Customers
out management management management management in
Suppliers

Materials Sub- Physical

Purchasing Assembly
processing assembly distribution
Raw In- Finished
materials process goods
inventory inventory inventory

Materials service flow

Information flow
 Material Requirement Planning

Master productions
Customer orders Forecast demand
schedule

Materials
Bills of materials requirements Inventory records
planning

Purchase orders Materials plans Works orders

 Inputs into the Master Production
Schedule
Known orders

Key capacity
Forecast demand
constraints

Master
Sister plant demand production Inventory level
schedule

R&D demand Spares demand

Exhibition/ promotion Safety stock

requirements requirements
Different Shapes of Product Structure

A-shape T-shape V-shape Hourglass or X-shape

product structure product structure product structure product structure
 Closed-Loop MRP

Materials Capacity
plan plan

Resource
Production
Realistic? requirements
plan
plan

Master Rough-cut
production Realistic? capacity
plan plan

Capacity
Materials
Realistic? requirements
plan
plan
 Traditional Flow

(a) Traditional approach – buffer separate stages

Stage A Buffer In- Stage B Buffer In- Stage C

ventory ventory
 Just-in-time (JIT) Flow

(b) JIT approach – deliveries are made on request

Orders Orders

Stage A Stage B Stage C

Deliveries Deliveries
 A Typology of Projects

High
Multi-nation

Nation
Uncertainty

Multiorganization

Organization

Group

Individual
Low

Low Complexity High

The Process of Project Planning

Identify activities

Estimate times and resources

Optimize
Identify relationships and dependencies

Identify schedule constraints

Fix the schedule

 Effect of Higher Quality on Revenue and
Cost
Quality up

Rework and Inventory Processing

Service scrap costs down time down
Image Inspection
cost down down
up and test
costs down Complaint
and warranty
costs down
Sales
volume
up Scales
economies Capital
Productivity
up cost
up
down
Price
competition
down Revenue
up Operation
costs down

Profits up
 The Customer‘s Views of Quality

Gap Gap
Customer‘s Customer‘s
expectations Customer‘s expectations Customer‘s
concerning perception‘s concerning perception‘s
a product or concerning a product or concerning
service the product or service the product or
service service

Expectation > perceptions Expectation < perceptions

Perceived quality is poor Perceived quality is good

Gap
Customer‘s
expectations Customer‘s
concerning perception‘s
a product or concerning
service the product or
service

Expectation = perceptions
Perceived quality is acceptable
 Gap Analysis Between Customers‘
Perception and Expectation
Previous Word-of-mouth Image of
experiences communications product or service

Gap 4

Customer‘s Customer‘s
The expectations Is there perception‘s
customer‘s concerning a gap? concerning
domain a product or the product or
service service

Customer‘s own
specification
of quality
The actual
Gap 1 product
or service
The Management‘s Organization‘s
operation‘s concept of the specification
product or service of quality
domain
Gap 2 Gap 3
 Change in Customers‘ Needs and the
Operation‘s Performance over Time
Cost Cost

Dependability Dependability
Speed
Speed

Time

Quality Flexibility Quality Flexibility

Performance of the operation

Performance of the market

 The Importance-Performance Matrix
Good

Better Excess
than

Appropriate
Performance

competitors
against

Same cep tability

as b ou n d of ac
Lower

Improve
Worse Urgent action
than
Bad

Less Order
Qualifying
important winning
Importance
Low for High
customer
 Breakthrough Improvement

Intended „breakthrough“ improvements

Performance

Actual improvement pattern

Time
 The PDCA Cycle

Plan

Act Do
Performance

Check

Path of continous improvement

Time
dee n r e mot s u C

t are po orci M s dee n r e mot s u C

Activity 1
Function 1

Activity 2
Function 2
Micro operations
Approach

Activity 3
Function 3

Activity 4
Function 4

or p ss e ni s u B s ess ec or p ss e ni s u B
The Business Process Re-engineering

r e mot s u C delli fl uf s dee n r e mot s u C

 Flow Chart for Customer Query
Customer phones
in with query

Telefonist No Put trough Manager No

understands query to manager understands query
Yes
Put trough to Yes
relevant engineer

Answer query No
over phone

Needs an No
engineer visit
Yes
Arrange for
engineer to visit

Customer Yes
satisfied
No
Engineer reports
back to manager

Important No
Query/ customer
Yes
Request central
engineer support
 Cause-Effect Diagram
Frequency

Wrong Unrecorded Out of Other

prediction modifications stock reasons

Wrong Wrong Wrong

information issue equipment

Causes of unscheduled return

 Time (seconds)

Marketing photocopies

Telefax services

Carrying phone messages

to meeting rooms

Providing glasses for

night drinks

Providing extra linen

Providing extra keys

Providing extra stationery

Locking and unlocking

meeting rooms

Services performed
Providing ashtrays
Pareto Diagram

Providing night drinks

Providing medication
 Why-Why Analysis

Not in budget

Lack of training No time available

Why?
High turnover

Problem Product spec. document-

ation complicated
Cause of
failure wrongly Lack of product knowledge Many new products
predicted
Why?
Why? No analysis of failures

No knowledge of
system modifications

Lack of customer knowledge No customer records

available to engineers
Why?
No analysis of failures
Failure Prevention and Recovery

Failure detection
and analysis

Finding out what is going

wrong and why

Improving system
Recovery
reliability

Stopping things going Coping when things

wrong do go wrong
View of Maintenance Costs I

Total cost
Costs

Cost of
Cost of
providing preventive
breakdowns
maintenance

Optimum level of
preventive maintenance

Amount of preventive maintenance

 View of Maintenance Costs II

Total cost
Costs

Cost of breakdowns

Cost of providing
preventive maintenance

Amount of preventive maintenance

Failure Curves for Two Machines

Machine A
Probability of failure

Machine B

x y
Time
The Stages in Failure Planning
The fact – What?
Discover
Possible consequences – Who?

Inform – Tell
Act Contain – Stopp
Follow up - Check

Find – The root cause?

Learn
Prevention – Engineer out

Failure analysis – Possibilities

Plan
Recovery planning - Procedures
 Total Quality Management

•Whole operation involved

•Quality srategy
•Teamwork
•Staff empowerment
•Involves customers and suppliers

•Quality systems
•Quality costing Inspection
•Problem solving
•Quality planning
Quality control
•Statistical methods
Quality assurance
•Process performance
•Quality standards Total quality management

•Error detection
•Rectification
The Cost of Errors in Different
Development Stages

Costs to rectify error

Concept Design Prototype Pilot Market

production use

Stage in development and launch process

 The TQM Quality Cost Model

Total cost of quality

External failure
Costs of quality

Internal failure

Appraisal

Prevention

Time
 Group-based Improvement
Quality
Quality improvement Task
circle team force

Improvement
task Established by
Group
selection management

Membership Assigned by
Voluntary
of group management

Management Little/ None Total

direction

Urgent of
improvement Low High
task
The Effectiveness of the TQM Initiative

Effectiveness of the TQM initiative

Time
Introduction Growth Leveling off Disillusionment Repackaging

Starting to hit
Attempts to
Learning and Increasing the more difficult Waning
revitalize the
understanding enthusiasm problems enthusiasm
programme
 The European Quality Award Model

People management People satisfaction

9% 9%

Business
Leadership Policy and strategy Processes Customer satisfaction
results
10 % 8% 14 % 20 %
15 %

Resources Impact on society

9% 6%

Enablers Results
50 % 50 %
Sweeney‘s Generic Strategies

Strategic change involves enhancing

The operation‘s structure

Marketer Innovator

Emphasizes Emphasizes
Enhanced

• Quality • Quality

Strategic change involves enhancing

• Dependability • Product/service
• Range • Performance

the operation‘s infrastructure

Customer service criteria

• Speed
• New product/service
• Development

Caretaker Innovator

Emphasizes Emphasizes
• Price/ cost • Quality
Basic

• Dependability • Product/service
• Quality • Performance
• Flexibility
• Speed

Traditional Enhanced
International Operations Network
Configurations

1. Home country operations 2. Regional operations

3. Global co-ordinated operations 4. Combined regional and global

co-ordinated operations
 The Performance Objective Trade-Off

Performance
objective 2
Performance
objective 2
Performance Performance
objective 1 objective 1

In the short term So one aspect of

one performance objective performance can be
can be traded off improved at the
with another expense of others
 Common Forecasting Techniques

Non-causal Causal
techniques techniques

Time series analysis Regression

• Moving-average smoothing Economic models

Objective • Exponential smoothing
techniques

Intuition Individual expert opinion

Group expert opinion

Subjective (e.g. Delphi forecasting)
techniques
Trend-, Seasonality and Random
Variation Analysis

Demand

Time
Demand

Time
Demand

Time
 The Standard Time Approach

Relaxtion
Relaxtion
Relaxtion One standard
minute or
hour of work

Working
Working
Working

Light Medium Heavy

job job job
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