Operations Management Assessment Topics covered Introduction to the Module Unit 1: Introduction to Operations Management Introduction Objectives What is operations management? A bit of history The fickle hand of fashion The transformation process Products and services What evidence is there that operations management works? Corporate social responsibility The structure of the module Unit 2: Designing the Transformation Process Introduction Objectives What exactly do we need to deliver? Who is the customer? The complexity of design Stages in design Measuring customer satisfaction The impact of customer demand Impact on the triple bottom line Unit 3: Capacity Management, Planning and Control Introduction Objectives Impact of variation in demand and variety Forecasting Managing demand fluctuation Process flow Loading, sequencing, scheduling and control Operations research Segmenting the transformation process Impact on the triple bottom line Unit 4: Managing Variation – Quality Management 79 Introduction Objectives The 4Vs model The history of variation The nature of variation Specification and capability Reducing variation Problem solving Total quality management (TQM) Impact on the triple bottom line Summary Unit 5: Inventory Management Introduction Objectives What is inventory? Inventory control Batches and flexibility Other types of inventory Impact on the triple bottom line Summary Unit 6: Process Analysis and Improvement Introduction Objectives There is always a better way The sandcone model for improvement Lean thinking Flexibility and agile Automation Impact on the triple bottom line Summary Unit 7: Design and Variety Introduction Objectives High variety, low volume processes Continuous improvement Impact on the triple bottom line Summary Unit 8: Operations Strategy and Supply Chain Management Introduction Objectives Operations strategy The need for operational change Vertical integration What is a supply chain? Who does what? Supply chain management The rise of the purchasing function Impact on the triple bottom line The main topics The material within the operations management topic is valuable for all managers – even those in fields like finance and marketing, which are not classed as ‘operations’. We all have to manage resources – time, people, materials, information – to generate some sort of output. In Unit 1 we looked at the long history of operations and saw that it has been most heavily influenced by the manufacturing sector. Innovators such as F.W. Taylor with his ‘scientific management’ have changed society immensely through facilitating mass production, not only in factories but in fast-food restaurants and call centres. We looked at the evidence that the techniques taught actually bring economic benefit and set up a discussion on sustainability that runs through the module. We looked at the increasingly blurred line between products and services. Finally we looked at the idea of the transformation process – converting inputs into outputs – one of the core ideas within operations. Unit 2 covered the link between operations and customers. We considered who exactly our customers are, and what they want from a business. Operations management has developed the concepts of quality and value to provide a vehicle for customer needs to drive the design of operations. A number of dimensions of operational performance are specified within this: quality, cost, speed, dependability and flexibility. The SERVQUAL model recognises reliability, responsiveness, assurance, empathy and tangibles. We then looked at the complexity of the design process and its stages, emphasising the importance of the early stages in delivering stepchange performance and the importance of building in customer feedback and the measurement of customer satisfaction. Service blueprinting was considered as a design approach to link the customer proposition and operations. Finally we raised the challenge of delivering a consistent customer proposition when demand for it varies – a topic that lads us into the next unit. Learning points • There are numerous definitions of quality – be careful to understand what is meant when people use the word. • You need to be specific about what the customer proposition is, in terms of each of the aspects of quality mentioned. • The concepts of quality and value are closely aligned. • You need to be clear about exactly who your customer is. • If you want to make a step-change in performance of your service or product, the place to focus your efforts is concept creation through to preliminary design. • Detail matters. • Building processes to assess customer satisfaction and feedback on how customers use the proposition is vital to success. • You need to design a process to efficiently deliver the customer proposition taking into account variation in demand. Unit 3 covered the topics of capacity management, planning and control. Demand from customers will vary over time – this may be daily, weekly or annually and may depend on factors such as the weather or festivals. In order to maintain effective and efficient operations we have to plan carefully to be able to deliver consistently to the required standard despite this variable demand. This involves planning how much process capacity we have in the long, medium and short term, which in turn requires forecasting. Accepting that forecasting is never totally accurate, we looked at various strategies for managing fluctuations in demand. We explored some of the tools available for loading, sequencing, scheduling and control of an operation, including MRP and ERP systems, and the tools of operations research. Finally we looked at the idea of segmenting the transformation process using the 4Vs model to make the planning and control activity simpler. Learning points • Capacity decisions are often strategic in nature. • There are only two types of forecast – a wrong one and a lucky one. • It is easier to forecast demand from consumers, and over short time • horizons. • Actual capacity is always less then designed capacity due to variation. • It is vital to know where you bottlenecks are. • Bottleneck locations change depending on the variety mix. • Sometimes you have to resort to complex mathematics to resolve scheduling problems – operations research. • You can simplify all of these problems by segmenting the transformation process using the 4Vs. • Avoid mixing different 4V profiles in the same transformation process. • Planning, scheduling and control is much easier without variation and variety. Unit 4 addressed the challenges of managing and reducing variation. The tools for doing so are primarily from a topic area known as quality management. We started off exploring the history of variation and attempts to eliminate its impact both through standardisation and control. We identified two types of variation: common causes which are an inherent part of the process itself, and special causes which are the result of something going wrong. We also explored the ideas of specification – what is required – and capability – our ability to meet the specification consistently, and how these are measured using statistics. Then we considered approaches that have been used to reduce variation, including inspection, work study and job design. These techniques all look to reduce common causes of variation through standardisation. The more modern approaches also use tools like job enlargement and ergonomics to reduce special causes of variation such as injury, boredom and staff turnover. We also considered the challenges of standardising processes in knowledge and information biased processes. Finally we looked at a number of techniques that can be used to identify and solve special causes of variation, including Fishbone diagrams, Pareto, 5 whys analysis and statistics. Learning points • You have to treat common causes of variation and special causes of variation differently. • Work to eliminate special causes (or mitigate their impact). • Work to reduce the range of variation of common causes. • There will always be at least a small amount of common cause variation. • For a process to be in control, it has to be both to specification andcapable (i.e. consistent). • Human inspection is waste and is inconsistent. • Standardising work through great job design reduces variation and improves efficiency. • Standardising information and knowledge work is challenging and can lead to excessive bureaucracy. • Some of the best problem solving tools are the simplest. If you want to know the reason, ask ‘why’ five times. In Unit 5 we covered the topic of inventory. The most common form of inventory is physical goods, something that almost all organisations have in some shape or form. The concept can also be applied to customers or information within a queue waiting to be processed. Inventory often exists to act as a buffer for variation and variety. For example if there is a problem on one part of a process, inventory stops the effects being realised elsewhere in the process and keeps the organisation running while the problem is resolved. We saw how inventory is directly related to the lead-time for an item, and how the costs of inventory have many constituent parts. These include the cost of capital to finance it, management costs, storage costs and obsolescence. We also showed how inventory results from the optimisation of batch-driven processes. This included a look at EBQ and EOQ calculations. Learning points • Inventory buffers processes to compensate for variation and risk. • Inventory costs a lot of money to finance, manage and store. • Unused inventory becomes obsolete quickly. • It is not the cost per item to produce, it’s the cost per item SOLD that • matters. • Batch driven processes increase the amount of inventory in the system. • The concept of inventory can be applied to information and customers. In Unit 6 we considered the idea of process analysis and improvement. We started off by considering the sandcone model, which shows how a reduction in variation underpins process simplification. We saw how lean thinking identifies waste through value stream analysis and realise how waste relates to inventory and the techniques of work study. Simplifying a process means removing inventory which means that first we must reduce the variation and risk that the inventory buffers against. We explored the lean principles, process layout and the concepts of push and pull flow. We then moved on to see how applying these sort of techniques to the processes that change a business process – changeovers, purchasing, product development – can make the process more responsive to changes in demand and longer term changes in the market. Finally we looked at automation, both production technology like robotics, and IT systems. We saw how they struggle to cope with ambiguity and how in time, artificial intelligence will overcome that challenge. Learning points • From the perspective of an item being processed, over 90% of their elapsed time is waste. • Remember TIMWOOD. • Removing waste means removing inventory – physical, information or queuing customers. • You have to remove process variation and risk before you can remove inventory. • It is expensive to automate waste – simplify a process before you automate. • You cannot automate an out-of-control process (at least not until artificial intelligence improves). • Required lead-time and process lead-time determine our ability to make to order (i.e. pull). • Removing waste form processes that change the core transformation process increases responsiveness and remove batch-related inventory • from the core transformation process. • Lean = efficient processes. • Agile = responsive processes. In Unit 7 we looked at the challenges of managing and improving high variety, low volume processes such as those found in professional services and construction. We drew on a number of sources for inspiration – job shops, approaches for improving product development and approaches for managing software development. We saw how high utilisation makes process throughput very vulnerable to any process variation, and how to optimise throughput an assumption of lower utilisation (80%) is more effective. We also saw how despite this, many organisations suffer from project overload. We looked at how to break large pieces of work into smaller ones to make them easier to schedule using techniques like modular architectures. We looked at the advantages of smaller projects including quicker payback and faster learning. We then explored agile software development to see how the software industry has adapted processes to deliver reliable software efficiently and with rapid learning cycles. Finally we looked how continuous improvement activity uses small projects and rapid learning cycles to improve existing processes quickly and rigorously. Learning points • Target high variety processes at 80% utilisation – use the other 20% imaginatively. • Prioritise the project portfolio and match to the available resources. Focus is key to rapid delivery. • Architect the process/product/service to allow for many small projects rather than a few big ones. • Many small projects are easy to schedule and deliver. • Involve the staff who work on the process – they are the experts. • Decide which bits of the process need discipline and standardisation, and which bits are best with discretion for those involved. • Human centric processes can be very efficient and effective. In Unit 8 we returned to the bigger picture, having spent the previous five units exploring the challenges of managing operations in response to the customer proposition discussed in Unit 2. We considered the questions of strategy – specifically what is important to our organisation to be excellent at. Key to this was the idea that ‘operational effectiveness is not strategy’. We discussed how sometimes the operations function is not fully aligned with corporate strategy and the customer proposition and how we can migrate to improve that situation, ultimately with operations being a key part of the overall strategic position. We considered the idea of vertical integration and the option to outsource non-core activities to other organisations, leading us into the concepts of the supply network and supply chain. We explored some of the key factors involved in designing our supply network and some of the purchasing processes involved in managing it. Learning points • Operational effectiveness is not strategy. • Be clear about what your unique capabilities/core competencies are. Make sure you carry these out internally. • Operations may not be aligned with strategy for historical reasons, or political ones. • When operations are not aligned, there may be a separate ‘operations strategy’. • Young industries start off being vertically integrated. • In general it is better to outsource to organisations that specialise in a task. • Supply chains have flows of materials, information, finance and commercial terms. • These flows do not always follow the same physical route, allowing some effective tax reduction schemes and other process optimisations. • Purchasing is a complex subject, with many choices based on balancing and exploiting power differentials with customers and suppliers. The triple bottom line Throughout the module we have considered the impact of each unit on the triple bottom line. Read: Slack (2016), Chapter 12. The economic bottom line Being asked to reduce cost in operations is a common request. If you want to reduce cost, the question to consider is, ‘over what period?’. The easiest ways to reduce cost quickly are to press a reduction on suppliers or make staff redundant. Inevitably these will eventually (once any real slack has been removed) lead to poorer quality products and services as a) staff get upset, and b) everyone cuts corners to save cost. Costs rise again as the business has to invest more time and effort firefighting to save its reputation. Cost cutting invariably impacts the social and environmental bottom lines, which are often seen as only ‘nice to have’ rather than ‘essential’. If we assume a longer-term view, then the way to reduce cost is to: • reduce variation and variety • remove waste from the process • consider automation • increase volume. It can be cost effective to outsource activities. Equally, done badly it can add more cost. To get a step-change in economic performance the best approach is to look at the overall product/service concept and architecture. For example, if your assembly labour costs are high, a new product with far fewer parts will most likely have a bigger benefit in cost terms that a lean improvement exercise. The environmental bottom line In operations we have a strong emphasis on removing waste. Waste reduction of all kinds is aligned with improving environmental performance. Again, it is the design of our product/service concept that is key to a step change in performance. A product that is easy to repair and recycle is environmentally friendly. A product with minimal packaging reduces waste. One major area of focus is the supply chain. It is possible for even the best intentioned businesses to contract with a supplier that whilst outwardly ‘green’ is in reality subcontracting to someone exploiting the rainforest. Effective compliance and audit activities in the supply chain are very important to improve the environmental bottom line. The social bottom line Operations have a massive effect in this area. We have talked at length about scientific management and its tendency to treat human beings as automatons. We have also looked at an alternative view that sees people as key assets of the business, giving the benefits of intelligent continuous improvement and flexibility to an organisation. In our discussion of high variety, low volume processes we covered how human centric processes can be both effective and efficient. To enhance the social bottom line we need to follow this second path. We’ve also discussed the issue of supply chains. As with the environmental bottom line, contracting with less scrupulous organisations is a risk. There is also the challenge of dealing with corruption. Outsourcing can affect our existing staff, and the communities they live in, yet open up opportunities for others. Finally… As the senior managers of the future, it is our responsibility to balance the three bottom lines, and operations is one of the key areas where influence can be exerted. The future of operations management is liable to be dominated by the move to more and more automation, particularly as the capabilities of artificial intelligence improve. This will be balanced out by organisations using more human centric approaches – particularly since most organisations seem fundamentally incapable of implementing IT systems effectively. In the longer term other technological shifts such as 3D printing and virtual worlds may well change society fundamentally, and operations will need to change in response to those customer needs just as it has done since its inception. Aim of the assignment The aim of the assignment is to allow you to show and develop your understanding of a topic that has been covered in the module. Operations management has a very broad base of knowledge and the intention of the assignment is to take advantage of that broad base, allowing you to focus on an area that concerns you or is of interest to you in some other way. The assignment will therefore emphasise the role that operations management plays in an organisation. Assignment task The assignment is a 2,000-word essay or report focusing on an aspect of the module. The assignment appendices must not exceed 10 pages and the assignment must be submitted electronically as a single file. The Operations Management module is assessed by an individual written report that deals with the application of one or more aspects of the theory taught on the course in the context of an organisation you are familiar with or of your own choice OR to discuss any of the operations management topics as it applies today. Thus your options are: Question 1 To apply material covered in ONE of the operations management topics in the Enrolment Process of the at a UK University or Question 2 Evaluate the utility and relevance of any ONE of the operations management topics to the Enrolment Process of the at a UK University Question 1 offers the opportunity (if this is available to you within your organisation) to carry out research into the way a particular aspect of the module material works or does not work in your own sphere of influence – within your organisation. As an example, your organisation could be introducing quality management or lean management techniques. Thus giving you the opportunity to discuss the theory and how well this applies in practice from your own experience, comparing and contrasting the two. Question 2 offers the opportunity to further develop your knowledge in an area that is of interest to you. For example, should you have developed an interest in approaches to organising suppliers and wish to extend your knowledge, it is acceptable within the assignment requirements to research into the topic and to present your research as your assignment. This work does not need to be related to your organisation – it can relate to any organisation(s) currently in existence, i.e. the contemporary business environment. The word count for the assignment is very small, hence the emphasis on ONE topic. There is inevitably some overlap between concepts, so please use your intelligence when scoping your response. It is very difficult to treat a very broad subject like ‘supply chain management’ with sufficient insight to score high marks. If a broad topic interests you, we advise you to pick a specific aspect of it to focus on. Other information of use Your work may be in report format or in essay format. Always follow the basic rules for either style. Recommendations are not required; however it is always good practice to include a conclusion to your work. Appendices, diagrams, tables and figures are not included in the 2,000-word count. Exceeding the limit will mean that your work is subjected to a penalty. There is often a rumour about a ±10% tolerance – this is incorrect!! The limit is a maximum. Your work must be typed and submitted in an electronic format. It should have a title page which includes a word count and a signed statement of authenticity from you stating the work being submitted is your own (for example: I certify that this assignment is the result of my own work and does not exceed the word count noted below, signed.......) Please include your student identification number and page numbers (e.g. 2 of 5 pages) as a footer in any assignment submitted in case pages become loose. Appendices should contain specific types of analyses (such as financial, breakeven, capacity, cost, etc.) and information that supports and is relevant, but would be too detailed for the body of the report. Appendices must not exceed 10 pages. Written analysis should be of the same quality that you would provide to the management of a business, albeit in an academic style. Describing the theory does not demonstrate that you understand it – we are looking for something that shows that you can apply the theory to a new situation. All work must be adequately supported by academic/published material and correctly attributed to the source using the Harvard system. A link to the School of Management’s guidelines for this can be found on Blackboard under ‘Assessment’.