Operations Management Concepts and Techniques
1. Principles of Quality Management
1.1. Focus on Customer Needs
Constancy of Purpose: Maintain a commitment to improving products and services to stay competitive, remain in business, and provide jobs.
1.2. Embrace Change
Adopt a New Philosophy: Management must be open to the opportunities and challenges presented by new economic stages.
1.3. Build Quality In
Cease Dependence on Inspection: Eliminate mass inspection by building quality into the product from the start.
1.4. Long-Term Supplier Relationships
End Awarding Business on Price Alone: Build lasting relationships with suppliers based on trust and loyalty.
1.5. Continuous Improvement
Continuous Improvement: Continuously improve production and service processes to enhance quality and productivity.
1.6. Invest in Training
Training on the Job: Employee training and development are crucial for organizational survival.
1.7. Effective Leadership
Institute Leadership: Managers should guide and supervise employees to optimize performance.
1.8. Create a Safe Environment
Drive Out Fear: Foster a safe and supportive work environment where employees can work effectively and take risks.
1.9. Collaboration and Communication
Break Down Barriers Between Departments: Enhance cooperation and understanding among different teams.
1.10. Focus on Intrinsic Motivation
Eliminate Quotas and Slogans: Avoid using quotas and slogans that create adversarial relationships.
1.11. Empower Professionals
Eliminate Management by Objectives: Allow professionals to perform their work effectively without rigid targets.
1.12. Promote Pride in Workmanship
Give People Pride in Their Jobs: Empower employees to take pride in their work by removing obstacles.
1.13. Continuous Learning
Institute Education and Improvement Processes: Encourage employee self-improvement and development.
1.14. Collective Effort
Put Everyone to Work to Accomplish It: Implement concrete actions to drive transformation and change throughout the organization.
2. Inventory Management: Economic Order Quantity (EOQ)
Economic Order Quantity (EOQ): The optimal order quantity to minimize inventory costs (holding, shortage, and order costs).
2.1. Limitations of EOQ
- Assumes constant consumer demand.
- Assumes constant ordering and holding costs.
- Doesn’t account for changing demand, seasonal variations, lost sales due to shortages, etc.
2.2. EOQ Formula
EOQ = √(2 * D * S) / H
- D: Annual demand
- S: Ordering cost per order
- H: Holding cost per unit per year
2.3. Inventory Costs
2.3.1. Holding Costs
- Storage, insurance, investment, pilferage, etc.
- Annual holding cost = (Order quantity / 2) * Holding cost per unit per year
2.3.2. Ordering Costs
- Cost of placing an order or setting up production.
- Annual ordering cost = (Annual demand / Order quantity) * Cost per order
2.4. ABC Analysis
- A: Close control, regular review
- B: Moderate control, periodic review
- C: Infrequent review
3. Scheduling Techniques
3.1. Sequencing Rules
- FCFS (First Come, First Served): Processes jobs in the order they arrive.
- SPT (Shortest Processing Time): Processes jobs with the shortest processing time first.
- EDD (Earliest Due Date): Processes jobs with the earliest due date first.
- LPT (Longest Processing Time): Processes jobs with the longest processing time first.
3.2. Performance Measures
- Processing Time: Time required to complete a job.
- Flow Time: Total time a job spends in the system.
- Due Date/Promise Date: Date when a job is expected to be completed.
- Job Lateness: Flow time – Due date
- Average Completion Time: Total flow time / Number of jobs
- Utilization: Total processing time / Total flow time
- Average Number of Jobs in the System: Refer to previous calculations.
- Average Job Lateness: Total lateness / Number of jobs
3.3. Critical Ratio
Critical Ratio: Due date / Processing time
Helps prioritize jobs based on their urgency.
3.4. Johnson’s Rule
Minimizes makespan when scheduling jobs on two workstations. Assumes a known set of jobs with known processing times.
4. Aggregate Planning Strategies
4.1. Chase Strategy
- Adjusts workforce levels to match demand.
- No inventory or backorders.
4.2. Level Strategy
- Maintains a constant workforce level.
- May result in inventory or backorders.
4.3. Mixed Strategy
- Combines elements of chase and level strategies.
- Allows for workforce adjustments and inventory management.
4.4. Critical Ratio Technique
- Helps determine the status of specific jobs.
- Establishes relative priorities among jobs.