Assignment on operation management

Topic:
Chapters summary, interview from H N Textiles Company and
recommendations

Submitted to:
Prof. Zia ur Rehman
Submitted by:
Umer farooq BC10- 262
Hamza sabir Bc10- 267
Wasim arshad BC10 - 274
Amin shehzad BC10- 279
Iqbal sabar BC10- 282

B.com (Hons) 8th semester
Section D morning

Hailey College of commerce
University of the Punjab
Lahore.




Summary of chapter no. 01

INTRODUCTION TO OPERATION MANAGEMENT

Operations is that part of a business organization that is responsible for producing
goods and/ or services.
Goodsare physical items that include raw materials, parts, and subassemblies such as
Motherboards that go into computers, and final products such as cell phones and
automobiles.
Servicesare activities that provide some combination of time, location, form, or
psychological value.
Operations function is responsible for producing products and/or delivering services, it
needs the support and input from other areas of the organization. Business
organizations have three basic functional areas.
Finance
Marketing
Operations.
Operations Management
Operations management is the management of systems or processes that create
goods and/or provide services.
A supply chain is the sequence of organizationstheir facilities,functions, and
activitiesthat are involved in producing and delivering a product or service. The
sequence begins with basic suppliers of raw materials and extends all the way to
thefinal customer. The essence of the operations function is to add value during the
transformation process:
Value-added is the term used to describe the difference between the cost of inputs and
the valueor price of outputs.
Manufacturing and service are often different in terms of what is done but quite similar
in terms of how it is done.Consider these points of comparison:
Degree of customer contact. Many services involve a high degree of customer
contact,although services such as Internet providers, utilities, and mail service do not.
When there is a high degree of contact, the interaction between server and customer
becomes amoment of truth that will be judged by the customer every time the service
occurs.
Labor content of jobs. Services often have a higher degree of labor content than
manufacturingjobs do, although automated services are an exception.
Uniformity of inputs. Service operations are often subject to a higher degree of
variabilityof inputs.
Measurement of productivity. Measurement of productivity can be more difficultfor
service jobs due largely to the high variations of inputs.
Quality assurance. Qualityassurance is usuallymore challenging for servicesdue to the
highervariation in input, andbecause delivery andconsumption occur at thesame time.
Inventory. Many services tend to involve less use of inventory than manufacturing
operations,so the costs of having inventory on hand are lower than they are for
manufacturing.
Wages. Manufacturing jobs are often well paid, and have less wage variation than
service jobs, which can range from highly paid professional services to minimum-
wageworkers.
Ability to patent. Product designs are often easier to patent than service designs, and
some services cannot be patented, making them easier for competitors to copy.

Managing a Process to Meet Demand
Ideally, the capacity of a process will be such that its output just matches demand.
Excess capacity is wasteful and costly; too little capacity means dissatisfied customers
and lost revenue.Having the right capacity requires having accurate forecasts of
demand, the abilityto translate forecasts into capacity requirements, and a process in
place capable of meeting expected demand.



THE SCOPE OF OPERATIONS MANAGEMENT
The scope of operations management ranges across the organization. Operations
managementpeople are involved in product and service design, process selection,
selection and managementof technology, design of work systems, location planning,
facilities planning, and qualityimprovement of the organizations products or services.
The activities include:
Forecasting, Capacity planning, Facilities and layout, Scheduling,
ManagingAssuring quality, Motivating and training employees in all phases of
operations.Locating facilities according to managers decisions on which cities to
provide servicefor, where to locate maintenance facilities, and where to locate major
and minor hubs.
Decision Making

Summary of chapter no. 02
Competitiveness, Strategy,
and Productivity
Competitiveness:
How effectively an organization meets the wants and needs of customers relative to
others that offer similar goods or services
Businesses Compete Using Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion
Product and service design
Cost
Location
Quality
Quick response
Flexibility
Inventory management
Supply chain management
Service
Why Some Organizations Fail
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Failing to recognize competitive threats
Neglecting operations strategy
Too much emphasis in product and service design and not enough on
improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications
Failing to consider customer wants and needs

Mission/Strategy/Tactics


How does mission, strategies and tactics relate to decision making and distinctive
competencies?
Strategy
Strategies
Plans for achieving organizational goals
Mission
The reason for existence for an organization
Mission Statement
Answers the question What business are we in?
Goals
Provide detail and scope of mission
Tactics
The methods and actions taken to accomplish strategies

Strategy and Tactics
Strateg
y
Tactics Missio
n
Distinctive Competencies: The special attributes or abilities that give an
organization a competitive edge.
Price, Quality, Time, Flexibility, Service, Location

Strategy Formulation
Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners

Productivity
A measure of the effective use of resources, usually expressed as the ratio
of output to input. Productivity ratios are used for planning workforce
requirements, scheduling equipment and Financial analysis.
Partial measures = output/(single input)
Multi-factor measures = output/(multiple inputs)
Total measure = output/(total inputs)

Factors Affecting Productivity
Capital, Quality, Technology and Management

Improving Productivity
Develop productivity measures
Determine critical (bottleneck) operations
Develop methods for productivity improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Dont confuse productivity with efficiency




Summary of chapter no. 03
FORECASTING
Forecast:
A statement about the future value of a variable of interest such as
demand.Forecasts affect decisions and activities throughout an
organization
Accounting, finance, Human resources, Marketing, MIS, Operations,
Product / service design

Elements of a Good Forecast
Timely, Reliable, Accurate, Meaningful, Written, Easy to use

Types of Forecasts
J udgmental - uses subjective inputs
Time series - uses historical data assuming the future will be like the
past
Associative models - uses explanatory variables to predict the
future
Judgmental Forecasts
Executive opinions
Sales force opinions
Consumer surveys
Outside opinion
Delphi method
Opinions of managers and staff
Achieves a consensus forecast

Time Series Forecasts
Trend - long-term movement in data
Seasonality - short-term regular variations in data
Cycle wavelike variations of more than one years duration
Irregular variations - caused by unusual circumstances
Random variations - caused by chance


Associative Forecasting
Predictor variables - used to predict values of variable interest
Regression - technique for fitting a line to a set of points
Least squares line - minimizes sum of squared deviations around
the line

Choosing a Forecasting Technique
No single technique works in every situation
Two most important factors
Cost
Accuracy
Other factors include the availability of:
Historical data
Computers
Time needed to gather and analyze the data
Forecast horizon


Capacity Planning
For Products and Services, capacity is the upper limit or ceiling on the load that an operating
unit can handle. The basic questions in capacity handling are:
What kind of capacity is needed?
How much is needed?
When is it needed?
Impacts ability to meet future demands
Affects operating costs
Major determinant of initial costs
Involves long-term commitment
Affects competitiveness
Affects ease of management
Globalization adds complexity
Impacts long range planning
Capacity
Design capacity
maximum output rate or service capacity an operation, process, or facility is designed for
Effective capacity
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output
rate of output actually achieved--cannot
exceed effective capacity.
Efficiency and Utilization









Design capacity = 50 trucks/day
Effective capacity = 40 trucks/day
Actual output = 36 units/day








Determinants of Effective Capacity
Facilities
Actual output
Efficiency =
Effective capacity

Actual output
Utilization =
Design capacity
Actual output = 36 units/day
Efficiency = = 90%
Effective capacity 40 units/ day


Utilization = Actual output = 36 units/day
= 72% Design
capacity 50 units/day
Product and service factors
Process factors
Human factors
Operational factors
Supply chain factors
External factors
Key Decisions of Capacity Planning
Amount of capacity needed
Timing of changes
Need to maintain balance
Extent of flexibility of facilities
Economies of Scale
Economies of scale
If the output rate is less than the optimal level, increasing output rate results in decreasing
average unit costs
Diseconomies of scale
If the output rate is more than the optimal level, increasing the output rate results in increasing
average unit costs
Material requirements planning (MRP): Computer-based information system that translates
master schedule requirements for end items into time-phased requirements for subassemblies,
components, and raw materials.
Master Schedule
Master schedule: One of three primary inputs in MRP; states which end items are to be
produced, when these are needed, and in what quantities.
Cumulative lead time: The sum of the lead times that sequential phases of a process require,
from ordering of parts or raw materials to completion of final assembly.
Bill-of-Materials
Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the raw
materials, parts, subassemblies, and assemblies needed to produce one unit of a product.
Product structure tree: Visual depiction of the requirements in a bill of materials, where all
components are listed by levels.
Inventory Records
One of the three primary inputs in MRP
Includes information on the status of each item by time period
Gross requirements
Scheduled receipts
Chapter no: 4
Reliability summary
Reliability: The ability of a product, part, or system to perform its intended function under
a prescribed set of conditions
Failure: Situation in which a product, part, or system does not perform as intended
Normal operating conditions: The set of conditions under which an items reliability is
specified
Probability that the product or system will: Function when activated.
Function for a given length of time
Rules : lamp 1 lamp2
Availability the fraction of time a piece of equipment is expected to be available for
operation
How we can improve the reliability?
There are following points to improve the reliability
Component design
Production /assembly techniques
Testing
Redundancy/backups
Preventive maintenance procedures
User education
System design





Chapter #5
Capacity planning for products and services
Capacity is the upper limit or ceiling on the load that an operating unit can handle.
Importance of Capacity Decisions:
Impacts ability to meet future demands, Affects operating costs, Major determinant of
initial costs, Involves long-term commitment and Affects competitiveness.
Capacity
Design capacity:
Maximum output rate or service capacity an operation, process, or facility is designed
for
Effective capacity:
Design capacity minus allowances such as personal time, maintenance, and scrap
Actual output:
rate of output actually achieved--cannot
exceed effective capacity.
Efficiency/Utilization:
How a product give an output in effective manner. And utilization is that how much a
product can be used.
Determinants of Effective Capacity: Facilities, Product and service factors, Process
factors, Human factors, Operational factors, Supply chain factors.,
Key Decisions of Capacity Planning: Amount of capacity needed, Timing of changes,
Need to maintain balance, Extent of flexibility of facilities.
Steps for Capacity Planning
Estimate future capacity requirements, Evaluate existing capacity
Identify alternatives Conduct financial analysis, Assess key qualitative issues
Select one alternative, Implement alternative chosen

Economies of scale
If the output rate is less than the optimal level, increasing output rate results in
decreasing average unit costs
Diseconomies of scale
If the output rate is more than the optimal level, increasing the output rate results in
increasing average unit costs
Assumptions of Cost-Volume Analysis
One product is involved, Everything produced can be sold
Variable cost per unit is the same regardless of volume, Fixed costs do not change with
volume, Revenue per unit constant with volume
Financial Analysis
Cash Flow - the difference between cash received from sales and other sources
Present Value - the sum, in current value
Chapter # 06
Process Selection and Facility Layout summary
Process selection: Deciding on the way production of goods or services will be
organized
Major implications: Capacity planning, Layout of facilities, Equipment, Design of work
systems
Process Strategy:
Capital intensive, equipment/labor, Process flexibility, Adjust to changes
Process Selection:
Variety: how much variety it has and at what degree and what is its output.
Process Types: job shop , batch , repetitive / assembly line and continuous.
Automation: Machinery that has sensing and control devices that enables it to operate.
Facility layout: The configuration of departments, work centers, and equipment, with
particular emphasis on movement of work (customers or materials) through the system.
Basic Layout Types: Product layouts, Process layouts, Fixed-Position layout and
Combination layouts.
Advantages of Product Layout:
High rate of output, Low unit cost, Labor specialization and Low material handling cost.
Disadvantages of Product Layout:
Creates dull, repetitive jobs, Poorly skilled workers may not maintain equipment or
quality of output and Fairly inflexible to changes in volume.

Questions related to these chapters and their answers which are
asked to H N textile by me.
A medium size trading company
Interview which I have conducted from the operation manager Mr.Naveed Vaince of a H
N Textile mill.
Q: What is the nature of job of the firm or what is the working of the firm?
Basically it is an trading firm. It receives the orders from customers and then give it the
other manufacturing concern and purchase the products for their customers.
Q: How many departments are in the firm?
There are three departments in this firm
Marketing, Accounts and administration
Q: What is the vision and mission statement of your company?
Our vision is to become more famous. And our mission is to provide good quality
products and services to our customers.
Q: What are your demands for jobs?
We prefer marketing and accounting for jobs in our firm. Because our main focus is to
build or generate new and more customers by marketing.
Our total investment in the business is 2 billion rupees. And it is totally equity based.
Q: What are the qualities of your products?
Our products are low priced, good quality and water proof, air proof and fire proof.
Q: How do you check the quality of the product?
They hire the quality controller to check the quality of the product.
Q: How do you forecast?
They do forecasting on their own.



Q: what are the extra characters in your product?
In our organization we give our customers services after purchase and it changeable
product if any defect and other services
Q on what basis you you select the organization location on what priority
On the market basis and where is competitors and the cost and other factors

Summary of chapter no. 07
Design of work system

Job design involves specifying the content and methods of job in this include the
job description what will be done how will be done method and other things.
Job design success Carried out by experienced personnel with the necessary training
and backgroundConsistent with the goals of the organization
Advantages anddisadvantages of specialization for management and for labor
Job EnlargementGiving a worker a larger portion of the total task by horizontal loading
Job RotationWorkers periodically exchange jobs
Job EnrichmentIncreasing responsibility for planning and coordination tasks, by vertical
loading
MotivationInfluences quality and productivityContributes to work environment
TrustInfluences productivity and employee-management relations
Teams Benefits of teamsHigher quality,Higher productivity, Greater worker satisfaction
Self-directed teamsGroups of empowered to make certain changes in their work
process
Method analysis Changes in tools and equipment ,Changes in product design
or new products, Changes in materials or procedures and other factors
Method analysis procedure Identify the operation to be studied ,Get employee input
Study and document current method, Analyze the job, Propose new methods
Analysis the job Flow process chartChart used to examine the overall sequence
Worker-machine chart Chart used to determine portions of a work cycle during which an
operator busy or idle
Motion study is the systematic study of the human motions used to perform an
operation
Working conditions temperature and ventilation noise voice heat color safety work
breaks
Work measurement Standard time, Stopwatch time study, Historical times,
Predetermined data
Compensation Time-based systemCompensation based on time an employee has
worked during a pay period .Output-based (incentive) systemCompensation based on
the amount of output an employee produces during a pay period.

Chapter No 08
Location planning and analysis summary
Need for location decisions is based one of the basic factor that is Marketing Strategy
Cost of Doing Business, Growth, Depletion of Resources
Nature of stratig locations
Strategic Importance, Long term commitment, costs ,Impact on investments, revenues,
and operations
Objective of selecting a location Profit potential ,No single location may be better than
others
Identify several locations from which to choose, On what basis the locations are
selected Decide on the criteria, Identify the important factors, Develop location
alternatives

Evaluate the alternatives
Factors that influence to select the location for business purpose
Regional Factors multiple factors regional factors international factors factory factors
and other factors
Business corporate social responsibility
Quality of lifeto the society better Servicessoft AttitudesTaxes relief for the community
Environmental regulationsUtilities provide to the society, Developer support
Methods through which locations are evaluated
Transportation ModelDecision based on movement costs of raw materials or finished
goods
Factor RatingDecision based on quantitative and qualitative inputs
Center of Gravity MethodDecision based on minimum distribution costs


Chapter No 09
Management of quality summary
Quality mean: Quality is the ability of a product or service to consistently meet or
exceed customer expectations.
Evaluation stages of quality standard
1924 - Statistical process control charts1930 - Tables for acceptance sampling
1940s - Statistical sampling techniques1950s - Quality assurance/TQC
1960s - Zero defects1970s - Quality assurance in services
Approaches of quality. Quality assurance v/s strategic approach
Quality assurance Emphasis on finding and correcting defects before reaching market
Strategic approach Proactive, focusing on preventing mistakes from occurring
Quality gurus: whose laid the foundation of quality
Dimensions of quality
Performance primary funton of the product Aesthetics abstract factors of the
product
Special Features extra features of the product Conformance concistency of the
product standard Reliability customer trust on the product
Durability life spain of the product
Perceived Quality customer perception of the quality
Serviceability service after the purchase of the product to the customer
Service quality features
TangiblesConvenience east getable by the customer
ReliabilityResponsivenessspeedly response to the customer
Time during the reasonable time
Assurance assure the good service
Courtesy good behavior by the representative to the customer
Determinants of quality
Quality of designQuality of conformance
The effects of poor quality
Loss of business, Liability Productivity Costs
Who is responsible in the organization for the quality of the product
Top managementDesignProcurement
Production operationsQuality assurance
Costs which bear by the management for quality
Failure Costscosts incurred by defective parts/products or faulty services.
Internal Failure CostsCosts incurred to fix problems that are detected before the
product/service is delivered to the customer.
External Failure Costs All costs incurred to fix problems that are detected after the
product/service is delivered to the customer.
Malcolm Baldrige National Quality Award
Quality certification
ISO 9000Set of international standards on quality management and quality assurance,
critical to international business
ISO 14000A set of international standards for assessing a companys environmental
performance
Total quality management approaches alements and six sigma approach
Obstacles and difficulties for implementing TQM approaches









Questions related to these cahapters and their answers that are asked
H N textile company
A medium size trading company
Q.what is the nature of your job
It s a trading concern we deal with both the customers and with suppliers in this we
place a order to a factory and then give delivery to the brands and other manufacturing
concerns and in this we need a person who is good communication skills and marketing
skills and mostly the field work and in it chek the order place the order market survey
market conditions and then delivery to the customers
Q if any onewant to get a job In your organization what are the requirements on
your side
A the person should bechlor degree in markeing and have good communication skills to
influence the customer
Q mostly work in your organization is related to team work or individual
Mostly in our organization work done on collective and team manner basis
Q what are the timings of your job
There is no hard and fast rule and timings in our organization because its a trading
concern and give order and place order on time and quick so the almost 18 hours
avalibility of employees
Q on what basis you give a compensation to your employees
In our organization give a compensation on commission basis how much a employee
take a order for the business then give commission
Q on what basis you you select the organization location on what priority
On the market basis and where is competitors and the cost and other factors
Q what are the important factors on which you consider while selecting the
location
Important factors are where the customers comes in easy way and where is low cost of
land and better infrastructure and the technology available

Q corporate social responsibility what you have done for your community
In our organization the pension plan for our employess and a insurance and education
brilliant student of our employees and environment friendly
Q what do you understand the word quality in your product
In our product the meet the demand of the customer according to the perception and
consistent and the error free product
Q what are the approaches you use for better quality
In our organization we belief that there is no chance of error or mistake in our product
and the consistent improvement in the product
Q how much important for you the customer satisfaction
As you know customer is always right. Our organization is totally based on the
customers satisfaction because when the customer satisfies then it place again an order
and work with him and our business grow up
Q in your product what are the extra characters
In our organization we give our customers services after purchase and it changeable
product if any defect and other services


Q is that your product quality same through the time or its change due to
different reasons
Almost the same quality but changes according to the situation and the customers
requirements and the market conditions
Q the usefull average life of your product
Usefull depends on the customer way of use of our product and the quality it get from us
and place an order to us
Q when the negative impact on your product quality then what you perceive that
what basis changes has come and what negative impact on the customer
When quality changes in negative sense then as usual the customers are not feeling
good and they leave us the the business going down
Q responsibility on what person to maintain the quality of your product
The responsibility in our organization the higher management and the other officers who
related to the quality product
Q what standard you have follow for the quality
We follow the national standard and also the international standards ISO 9006 and
other ISO standards.
Recommendations
The organization which we have selected for the interview is small or medium
size trading concern total investment in the business is approx 20000000
In this organization they have limited resources and the organization should
focus on the customer relationship and invest on the marketing strategy because on this
basis there improvement in their business
And the business should reduce the operations and place an order and delivery
cost and the business invest more in the business and so that boost in the business
And the organization should hire the skilled people who reduce the irrelevant cost
And the organization should reduce the wasting resources and the organization
should find new customers to remain in the competition and make a loyal customers
who already have a customers by giving hin a good quality and in reasonable prices.
Inspection
How Much/How Often
Where/When
Centralized vs. On-site
Where to Inspect in the Process
Raw materials and purchased parts
Finished products
Before a costly operation
Before an irreversible process
Before a covering process
Where to Inspect in the Process
Raw materials and purchased parts
Finished products
Before a costly operation
Before an irreversible process
Before a covering process
Statistical Process Control:
Statistical evaluation of the output of a process during production
Quality of Conformance:
A product or service conforms to specifications
Control Chart
Purpose: to monitor process output to see if it is random
Statistical Process Control
The essence of statistical process control is to assure that the output of a process is random so
that future output will be random

Process Capability
Tolerances or specifications
Range of acceptable values established by engineering design or customer
requirements
Process variability
Natural variability in a process
Process capability
Process variability relative to specification
Sampling Plans
Acceptance sampling: Form of inspection applied to lots or batches of items before or
after a process, to judge conformance with predetermined standards
Sampling plans: Plans that specify lot size, sample size, number of samples, and
acceptance/rejection criteria
Single-sampling
Double-sampling
Multiple-sampling
Sampling Terms
Acceptance quality level (AQL): the percentage of defects at which consumers are
willing to accept lots as good
Lot tolerance percent defective (LTPD): the upper limit on the percentage of defects that
a consumer is willing to accept
Consumers risk: the probability that a lot contained defectives exceeding the LTPD will
be accepted
Producers risk: the probability that a lot containing the acceptable quality level will be
rejected
Types of Inventories
Raw materials & purchased parts
Partially completed goods called
work in progress
Finished-goods inventories
(manufacturing firms)
or merchandise
(retail stores)
Replacement parts, tools, & supplies
Goods-in-transit to warehouses or customers
Functions of Inventory
To meet anticipated demand
To smooth production requirements
To decouple operations
To protect against stock-outs
Objective of Inventory Control
To achieve satisfactory levels of customer service while keeping inventory costs within
reasonable bounds
Level of customer service
Costs of ordering and carrying inventory
Inventory Counting Systems
Periodic System
Physical count of items made at periodic intervals
Perpetual Inventory System
System that keeps track
of removals from inventory
continuously, thus
monitoring
current levels of
each item
Two-Bin System - Two containers of inventory; reorder when the first is empty
Universal Bar Code - Bar code
printed on a label that has
information about the item
to which it is attached
Key Inventory Terms
Lead time: time interval between ordering and receiving the order
Holding (carrying) costs: cost to carry an item in inventory for a length of time, usually a
year
Ordering costs: costs of ordering and receiving inventory
Shortage costs: costs when demand exceeds supply
ABC Classification System
Classifying inventory according to some measure of importance and allocating control efforts
accordingly.
A - very important
B - mod. important
C - least important
Cycle Counting
A physical count of items in inventory
Cycle counting management
How much accuracy is needed?
When should cycle counting be performed?
Who should do it?
Economic Order Quantity Models
Economic order quantity model
Economic production model
Quantity discount model
Assumptions of EOQ Model
Only one product is involved
Annual demand requirements known
Demand is even throughout the year
Lead time does not vary
Each order is received in a single delivery
There are no quantity discounts
Economic Production Quantity (EPQ)
Production done in batches or lots
Capacity to produce a part exceeds the parts usage or demand rate
Assumptions of EPQ are similar to EOQ except orders are received incrementally during
production
Aggregate Planning Strategies
Proactive
Alter demand to match capacity
Reactive
Alter capacity to match demand
Mixed
Some of each
Capacity Options
Hire and layoff workers
Overtime/slack time
Part-time workers
Inventories
Subcontracting
Basic Strategies
Level capacity strategy:
Maintaining a steady rate of regular-time output while meeting variations in
demand by a combination of options.
Chase demand strategy:
Matching capacity to demand; the planned output for a period is set at the
expected demand for that period.
Ques: When you purchasing item how to inspect it?
Ans: Company says to send the sample of your product and if the order in large size then
sometimes company inspection people go and inspect the vendor products and then receive the
order then also inspect the product by the store manager. Store Manager check that the order is
according to our sale order and also check any defect in the product.
Ques: what inspection system they use?
Ans: Company use the periodic system and two bin system.