ENGINEERING

MANAGEMENT
Lesson No. 16 – Operations Management
 Specific Objective of the Lesson
• At the end of the lesson, the student should be able to:
• Define the essential terms of the subject matter.
• Discuss the nature and importance of operations strategy and operations management.
• Discuss the nature and importance of product and service design planning.
• Describe the four main strategies for facility layout.
• Explain the factors in facility location planning and capacity planning
 The Nature of Operations Management
• The featured article, shows how Allen-Bradley is refining and
restructuring its technology to gain the upper hand in the
marketplace.
• The many companies that are making these changes have discovered
that strategic success relates directly to the efficiency and
responsiveness of their production operations.
• In turn, these companies are going on the offensive by using their
operations management strategies (strategies such as Allen-Bradley’s
EMS 1) as competitive weapons to change the way they develop
products and services.
• Innovative managers do not just manage people; they also manage the
technical resources and processes associated with the production of
goods and services.
 Operations Strategy and Management Defined
• Operations Strategy is the part of the strategic plan that defines the role,
capabilities, and expectations for operations.
• Operations management consist of the managerial activities and techniques
used to convert resources (such as raw materials and labor) into products and
services.
• The terms production and operations are commonly applied to manufacturing
processes.
• Every organization produces something. Companies such as
Coca Cola, San Miguel Corporation, Purefoods and Nike
produce physical goods.
• On the other hand, Sheraton Hotels, Philippine Airlines, Saint
Mary’s University produces services.
• Organizations that produce goods and those that produce
services encounter similar operational problems:
• Each is concerned with converting resources into something
saleable.
• Each must acquire materials or supplies to achieve that conversion.
• Each must schedule the process of conversion.
• Each must control processes and ensure quality.
• With these similarities in mind, examine the figure below, which
illustrates the flow of operations. Notice that every organization
takes inputs and transforms them into outputs, either products or
services.

Inputs Outputs
Raw materials
Human resources Transformation oProducts
Land, Buildings Process oServices
Information
Technology
The Importance of Operations Management

• The heart of an organization is its production of saleable goods or

services. Some managers, such as those at Allen-Bradley, have
discovered that the success of their companies is directly related to
the effectiveness of their operations system.
• The figure below, illustrates the pervasive role that
operations management plays in an organization.

Operations
Strategy

Operations
Management

Products, Facilities, Implementation Control Processes

and Processes Structures
Design control
Products or Service Scheduling Purchasing control
Design Relationships Inventory control
Facilities Layout Decentralization Scheduling control
Production Processes Teams Product control
and Tech-nology Productivity Productivity
Facilities Location Quality Quality
Capacity Planning
Productivity
Quality
Operations Planning

• The starting point of any undertaking is planning.

• In the case of an organization’s operations, the planning stage
involves decisions about product or service design, facility layout,
production processes and technology, facilities location, and capacity
planning.
Products or Service Design

• The goals of operations management (competitiveness, response

time, and production efficiency) are well served by a design concept
called design for manufacturability and assembly (DFMA).
• This concept involves designing products for effective performance
while considering how they will be manufactured and assembled.
• DFMA calls for design by teams consisting of designers,
manufacturers, and assemblers.
• Because these specialists have a say in product design,
actual production of the product becomes efficient.
• For example:
General Motors used the DFMA approach to produce the Buick
Le Sabre. The design teams included process and product
engineers, financial experts, marketing people, inside and
outside suppliers, and operators from the assembly center at
Buick City in Flint, Michigan. The result of the teams’ work: The
new Le Sabre contains 40% fewer parts and takes 20% less
time to assemble than the old model.
DFMA product design involves four criteria:

• Producibility is the degree to which the product or

service can be manufactured for the customer within
the organization’s operational capacity.
• The criteria of Cost includes the costs of labor,
materials, design, overhead, and transportation.
• Quality, in the eyes of the producer, is the excellence of
the product or service. In the eyes of the consumer,
quality is serviceability and value gained by purchasing
the product.
• Reliability is the degree to which customers can count
on the product or service to fulfill its intended purpose.
• All these criteria should apply to the design of services as well as to
the design of products.
• In addition, service design calls for another criterion: timing.
• This criterion relates to the customer’s requirement for timeliness.
• At LBC, the customer wants the package the next day, not two days later.
Facilities Layout

• After design, the next step in operations management is to plan the

actual production.
• This involves among other things, determining the facilities layout—
the physical arrangement of equipment at the manufacturing site
and how the work will flow.
• Four main type of layouts:
Process Layout.

• In a process layout, all the equipment or machines that perform a

similar task or function are placed together

Molding Welding Assembly

Receiving Dept.

 Storage
  

 





  

Wiring
Insulating Painting Testing

Product B Product C
Product A
• The major advantage of this layout is its potential for
reducing costs.
• Because all similar work is done in one area, the process
layout requires fewer people and pieces of equipment than
a decentralized arrangement.
• One limitations of the process layout is the need to move
the product through several different processes.
• Each move costs time and money.
• In manufacturing process, process layouts are used in print shops,
settings in which many different products (such as business cards,
color brochures, and bound books) do not require the same
processes.
• A hospital is service-oriented business that uses process layout. The
layout is appropriate because patients receive many different types
of services.
Production Layout.

• In a production layout, machines and tasks are arranged according to

the progressive steps by which the product is made.

Molding Painting Packing

Receiving Receiving
Dept. Molding Welding Painting Packing Dept.

Molding Welding Painting Packing

Product A Product B Product C

• This layout is efficient when the business produces
large volumes of identical products.
• Car manufacturing on an assembly line is perhaps the
best-known example of production layout.
• Other examples include computer manufacturing and
appliance assembly.
• A hospital might use a production layout when doctors
are undertaking a large-scale vaccination effort, for
example, In this case, many patients moved through a
line, each receiving the same treatment.
Cellular Layout
• The cellular layout combines some of the characteristics of
process and production layouts.
• In a cellular arrangement, all the equipments required for a
sequence of operations on the same product is placed
together in a group called a cell.
Wiring

Painting

Welding

Assembly

Testing

Soldering

Product A Product B Product C

• The cellular groupings allow efficient handling of
materials, tools and inventory.
• In addition, the cellular layout facilitates teamwork;
workers are physically close enough to work
together to solve problems.
• In service settings, the cellular layout is used where
many workers as teams, see to the needs of a
group.
• A hospital ward is an example of a cellular layout.
Fixed Position Layout

• It is used when, because of size or bulk, the product remains in one

location. Tools, equipment, and human skills are brought to the
product.

Labor
Supplies
Machines

Equipment Product Materials

• Organizations that build planes and ships use this form of layout.
• The fixed-position approach is sound for bulky products and custom-
ordered goods, but not for high-volume manufacturing.
• This type of layout is used in a hospital operating room, where a
number of specialists gather to work on a single patient.
• Production Process and Technology

• The growing trend today is toward the use of sophisticated

technology in manufacturing.
• This type of manufacturing—associated with the “factory of the
future” – relies increasingly on equipment that works almost unaided
by employees.
• The technologies most responsible for revolutionizing manufacturing
processes include:
Robotics

• The use of programmed machines to handle production

constitutes robotics.
• The machines, or robots, are constructed to do the work of
employees.
• They weld, deliver materials and parts, load and unload, and
more.
• Robots provide greater precision than humans; therefore, they
enhance quality.
• The disadvantages of robots include capital expenditures,
maintenance costs, and malfunctions.
• Apple Computer has been one of the leading organizations in robotics
experimentation and implementation. At the Apple plant in Cupertino,
California, robots place parts into inventory as well as retrieve parts for
use in manufacturing.
 CAD/CAM
• Among the most widely adopted technologies in manufacturing today
are computer-aided design (CAD) and computer-aided manufacturing
(CAM).
• CAD allows engineers to develop new products by using a computer
monitor to display and manipulate three-dimensional drawings.
• The assistance of the computer has helped some engineers cut design
time in half.
• In addition, the CAD system allows the engineers to visualize the
effects of a design change.
• CAM involves the use of computers to guide and control
manufacturing processes.
• The computer is programmed to direct a piece of equipment to
perform a certain action, such as drilling holes or pouring steel.
• Compared with human control, computer control results less waste,
lower costs, higher quality and improved safety.
 Flexible Manufacturing Systems
• A flexible manufacturing systems (FMS) is an automated production line.
• The machinery is coordinated by computers.
• The automated line controls assembly, welding, tightening, and adjusting.
• In addition, an FMS allows rapid adjustment of the assembly process, so the
production line can produce more than one model.
• General motor has installed an FMS at its plant in Lordstown, Ohio. At the plant, GM will
be able to mass-produce four different models of car.
• An FMS automates the entire production line by controlling and providing
instructions to all the machine.
• The greatest advantage of an FMS is that through computer instructions, the system
can be adapted to produce different products.
• (The adaptability of an FMS is the characteristic that distinguished it from CAM.) The
computer instructs the machines to change parts, machine specifications, and tools.
Computer Integrated Manufacturing

• It is a computerized system that orchestrates

people, information, and processes to produce
quality outputs efficiently.
• Allen-Bradley’s EMS 1 program is a CIM operation
that involves automation and team concepts.
• Computers and the Delivery of Services.
• Computers have revolutionized deliver as well as
manufacturing. The widespread access to information
that computers provide has allowed businesses to
improve the quality of customer service.
• At FedEx, with the use of COSMOS, a computerized
monitoring of shipments has allowed the improvement of
delivery time and quality of service.
Facilities Location

• In considering the placement of facilities, managers must ask two

important questions:
• Should the firm have one or two large plants, or several smaller ones?
Where should the facilities be located?
• The decision about the number of plants depends on the company’s
long-range objectives and distribution strategies, financial resources,
and equipment costs.
• The choice about a location depends on a
number of factors:
• The location of the market where the product will be
sold.
• Availability of labor skills.
• Labor costs.
• Proximity to suppliers.
• Tax rates.
• Construction expenses.
• Utility rates.
• Quality of life for employees.
• To make decision, the company must undertake
a cost-benefit analysis.
Capacity Planning

• A critical element in operations management is capacity planning –

determining an organization’s capability to produce the products or
services necessary to meet demand.
• Capacity planning is essentially a matter of trying to convert sales
forecasts into production capabilities.
• Decisions about capacity should be made carefully.
• Too little capacity means that the organization
cannot match demand and that it will lose
customers.
• The reverse—excess capacity—results in facilities
and equipment that sit idle while incurring costs.
• To increase production capacity, companies have a
number of options. They can build new facilities,
create additional shifts and hire new staff, pay
present staff overtime, subcontract work to outside
firms, and refit existing plants.
• Capacity is a dynamic variable in operations management.
• It change form month to month as well as year to year.
• Producers attempt to plan capacity to avoid boom-and-bust cycles
plant expansion followed by layoffs and the reduction of
operations is the demand for goods and services. (Managers can
determine demand by forecasting techniques).
• If a company is operating with stable demand, managers should
provide plant capacity equal to monthly demand.
• Suppose, however, that seasonal fluctuations, uncertain economic
conditions, or other factors result in unstable demand.
• In this situation, managers should build a small plant to meet
normal demand, and add extra shifts or subcontract work during
peak periods.