OPERATIONS MANAGEMENT/TOTAL

QUALITY MANAGEMENT (TQM)

MODULE 1 - OPERATIONS MANAGEMENT

1.1 What is Operations Management?

Operations management (OM) is a

discipline that applies to restaurants. The
techniques of OM apply throughout the
world to virtually all productive enterprises.
It doesn’t matter if the application is in an
office, a hospital, a restaurant, or a
department store.

Production is the creation of goods 1.2 The Supply Chain

and services. Operations management
(OM) is the set of activities that create Through the three
value in the form of goods and services functions—marketing, operations, and
by transforming inputs into outputs. finance—value for the customer is
Activities creating goods and services take created. However, firms seldom create
place in all organizations. this value by themselves. Instead, they
rely on a variety of suppliers who provide
1.2 Organizing to Produce Goods and everything from raw materials to
Services accounting services. These suppliers,
when taken together, can be thought of as
To create goods and services, all a supply chain.
organizations perform three functions. A supply chain is a global network
These functions are necessary ingredients of organizations and activities that supply
not only for production but also for an a firm with goods and services.
organization’s survival. They are:
1.4 Why study OM?
1. Marketing, which generates the
demand, or at least takes the order for a We study OM for four reasons:
product or service (nothing happens until
there is a sale). 1. OM is one of the three major functions
2. Production/operations, which creates, of any organization, and it is integrally
produces, and delivers the product. related to all the other business functions.
3. Finance/accounting, which tracks how All organizations market (sell), finance
well the organization is doing, pay the (account), and produce (operate), and it is
bills, and collects the money. important to know how the OM activity
functions. Therefore, we study how people
organize themselves for productive
enterprise.

2. We study OM because we want to know

how goods and services are produced.
The production function is the segment of
our society that creates the products and
services we use.

3. We study OM to understand what

operations managers do. Regardless of
your job in an organization, you can
perform better if you understand what
operations managers do. In addition,
understanding OM will help you explore
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 the numerous and lucrative career The following professional organizations
opportunities in the field. provide various certifications that may
enhance your education and be of help in
4. We study OM because it is such a your career:
costly part of an organization. A large
percentage of the revenue of most firms is ◆ APICS, the Association for Operations
spent in the OM function. Indeed, OM Management ( www.apics.org )
provides a major opportunity for an ◆ American Society for Quality (ASQ)
organization to improve profitability and (www.asq.org )
enhance its service to society. Example 1 ◆ Institute for Supply Management (ISM)
considers how a firm might increase its ( www.ism.ws )
profitability via the production function. ◆ Project Management Institute (PMI) (
www.pmi.org )
◆ Council of Supply Chain Management
1.5 What Operations Managers Do Professionals ( www.cscmp.org )

All good managers perform the basic

functions of the management process. 1.6 The heritage of Operations Management
The management process consists of
planning, organizing, staffing, leading, and The field of OM is relatively young, but its
controlling. Operations managers apply history is rich and interesting. Our lives
this management process to the decisions and the OM discipline have been
they make in the OM function. enhanced by the innovations and
Successfully addressing each of these contributions of numerous individuals.
decisions requires planning, organizing,
staffing, leading, and controlling. Eli Whitney (1800) is credited with the
early popularization of interchangeable
parts, which was achieved through
standardization and quality control.

Frederick W. Taylor (1881), known as the

father of scientific management,
contributed to personnel selection,
planning and scheduling, motion study,
and the now popular field of ergonomics.
One of his major contributions was his
belief that management should be much
more resourceful and aggressive in
improving work methods.

Another of Taylor’s contributions was the

belief that management should assume
more responsibility for:

1. Matching employees to the right job

2. Providing the proper training
3. Providing proper work methods and
tools
4. Establishing legitimate incentives for
work to be accomplished

1.7 Operations for Goods and Services

Manufacturers produce tangible products,

while service products are often intangible. But
many products are a combination of a good and a
service, which complicates the definition of a
service.

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1.8 The Productivity Challenge MODULE 2 - GOODS AND SERVICES
SELECTION
The creation of goods and services
requires changing resources into goods and 2.1 Goods and Services Selection
services. The more efficiently we make this
change, the more productive we are, and the ● Organizations exist to provide goods or
more value is added to the good or service services to society
provided. Productivity is the ratio of outputs ● Great products are the key to success
(goods and services) divided by the inputs ● Top organizations typically focus on core
(resources, such as labor and capital) products
● Customers buy satisfaction, not just a
This improvement can be achieved in two ways: physical good or particular service
reducing inputs while keeping output ● Fundamental to an organization's strategy
constant, or increasing output while keeping with implications throughout the
inputs constant. operations function
● Goods or services are the basis for an
In an economic sense, inputs are labor, capital, organization's existence
and management, which are integrated into a ● Limited and predictable life cycles require
production system. Management creates this constantly looking for, designing, and
production system, which provides the conversion developing new products
of inputs to outputs. Outputs are goods and ● New products generate substantial
services, including such diverse items as guns, revenue
butter, education, improved judicial systems, and
ski resorts. 2.2 Product Decision

The objective of the product decision is

to develop and implement a product strategy that
meets the demands of the marketplace with a
competitive advantage.

Product Life Cycles

- May be any length from a few days to decades

- The operations function must be able to
introduce new products successfully

Life Cycle and Strategy

➢ Introductory Phase
- Fine-tuning may warrant unusual
expenses for research
- Product development
- Process modification and
enhancement
- Supplier development

➢ Growth Phase
- Product design begins to stabilize
- Effective forecasting of capacity
becomes necessary
- Adding or enhancing capacity may
be necessary
➢ Maturity Phase
- Competitors now established
- High-volume, innovative products
may be needed
- Improved cost control, reduction in
options, paring down of product
line

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 ➢ Decline Phase - International data exchange through
- Unless the product makes a STEP
special contribution to the
organization, must plan to Computer-Aided Manufacturing (CAM)
terminate the offering - Utilizing specialized computers and
programs to control manufacturing
Generating New Products equipment
- Understanding the customer - Often driven by the CAD system
- Economic change (CAD/CAM)
- Sociological and demographic change
- Technological change Benefits of CAD/Cam
- Political and legal change - Product Quality
- Market practice, professional standards, - Shorter design time
suppliers, distributors - Production cost reductions
- Database availability
Quality Function Deployment - New range of capabilities
- Identify customer wants
- Identify how the good/service will satisfy
customer wants Virtual Reality Technology
- Relate customer wants to product hows - Computer technology is used to develop
- Identify relationships between the firm’s an interactive, 3-D model of a product
hows from the basic CAD data
- Develop customer importance ratings - Allows people to ‘see’ the finished design
- Evaluate competing products before a physical model is built
- Compare performance to desirable - Very effective in large-scale designs such
technical attributes as plant layout

Robust Design Value Analysis

- The product is designed so that small - Focuses on design improvement during
variations in production or assembly do production
not adversely affect the product - Seeks improvements leading either to a
- Typically results in lower cost and higher better product or a product which can be
quality produced more economically with less
environmental impact
Modular Design
- Products designed in easily segmented Sustainability and Life Cycle Assessment
components (LCA)
- Adds flexibility to both production and - Sustainability means meeting the needs of
marketing the present without compromising the
- Improved ability to satisfy customer ability of future generations to meet their
requirements needs.
- LCA is a formal evaluation of the
Computer-Aided Design (CAD) environmental impact of a product
- Using computers to design products and
prepare engineering documentation
- Shorter development cycles, improved Product Development Continuum
accuracy, lower cost ➢ Product life cycles are becoming shorter
- Information and designs can be deployed and the rate of technological change is
worldwide increasing
➢ Developing new products faster can result
Extensions of CAD in a competitive advantage
- Design for Manufacturing and Assembly ➢ Time-Based Competition
(DFMA) ➢ Purchasing technology by acquiring
- Solve manufacturing problems during the a firm
design stage - Speeds development
- 3-D Object Modeling - Issues concern the fit between the
- Small prototype development acquired organization and product
- CAD through the internet and the host

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 ➢ Joint Ventures MODULE 4 - WORK STUDY (TIME AND
- Both organizations learn MOTION STUDY)
- Risks are shared
Productivity
➢ Through Alliances
- Cooperative agreements between - The quantitative relation between what we
independent organizations produce and we use as a resource to
- Useful when technology is produce them
developing
- Reduces risks - refers to the efficiency of the production
system. It is the concept that guides the
Defining a Product management of the production system. It
- The first definition is in terms of functions is an indicator of how well the factors of
- Rigorous specifications are developed production (land, capital, labor, and
during the design phase energy) are utilized.
- Manufactured products will have an
engineering drawing Productivity can be expressed as
- The Bill of material (BOM) lists the
components of a product Productivity = Output / Input

Product Life-Cycle Management (PLM) Factors Influencing Productivity

- Integrated software that brings together
most, if not all, elements of product design ➢ CONTROLLABLE (OR INTERNAL)
and manufacture FACTORS
- Product design 1. Product factor
- CAD/CAM, DFMA 2. Plant and equipment
- Product routing 3. Technology
- Materials 4. Material and energy
- Assembly 5. Human factors
- Environmental 6. Work methods
7. Management style
Service Design
- Service typically includes direct interaction ➢ UNCONTROLLABLE (OR EXTERNAL)
with the customer FACTORS
- Process–chain–network (PCN) analysis 1. Structural adjustments
focuses on the ways in which processes 2. Natural resources
can be designed to optimize the 3. Government and infrastructure
interaction between firms and their
customers Work Study
is a generic term for those techniques,
method study, and work measurements which
are used in the examination of human work in all
its contexts.

Advantages of Work Study

1. It helps to achieve a smooth production
flow with minimum interruptions.
2. It helps to reduce the cost of the product
by eliminating waste and unnecessary
operations.
3. Better worker-management relations.
4. Meets the delivery commitment.
5. Reduction in rejections and scrap and
higher utilization of organization
resources.
6. Helps to achieve better working
conditions.
7. Better workplace layout.

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 8. Improves upon the existing process or 3. To develop the best answer possible under
methods and helps in standardization and given circumstances based on a critical
simplification. examination of facts.
9. Helps to establish the standard time for an
operation or job which has got 4.6 Scope of Method Study
applications in manpower planning and
production planning. The scope of the method study is not
restricted to only manufacturing industries.
Method Study Method study techniques can be applied
effectively in the service sector as well. It can be
Method study enables the industrial applied in offices, hospitals, banks, and other
engineer to subject each operation to systematic service organizations.
analysis. The main purpose of the method study
is to eliminate unnecessary operations and to The areas to which method study can be
achieve the best method of performing the applied successfully in manufacturing are:
operation. 1. To improve work methods and
procedures.
The method study man should have: 2. To determine the best sequence of
1. The desire and determination to produce doing work.
results. 3. To smoothen material flow with a
2. Ability to achieve results. minimum of backtracking and to improve
3. An understanding of the human factors the layout.
involved. 4. To improve the working conditions and
hence to improve labor efficiency.
The method study scope lies in improving work 5. To reduce monotony in the work.
methods through process and operation analysis, 6. To improve plant utilization and material
such as utilization.
1. Manufacturing operations and their 7. Elimination of waste and unproductive
sequence. operations.
2. Workmen. 8. To reduce manufacturing costs by
3. Materials, tools, and gauges. reducing the cycle time of operations.
4. Layout of physical facilities and
workstation design. 4.7 Eight (8) Steps or Procedures Involved in
5. Movement of men and material Methods Study
handling. The basic approach to method study consists of
6. Work environment the following eight steps.

4.5 Objectives of Method Study 1. SELECT the work to be studied and

are essentially concerned with finding define its boundaries.
better ways of doing things. It adds value and
increases efficiency by eliminating unnecessary 2. RECORD the relevant facts about the
operations, avoidable delays, and other forms job by direct observation and collect such
of waste. additional data as may be needed from
appropriate sources.
The improvement in efficiency is achieved
through 3. EXAMINE the way the job is being
1. Improved layout and design of the performed and challenge its purpose,
workplace. place sequence, and method of
2. Improved and efficient work procedures. performance.
3. Effective utilization of men, machines,
and materials. 4. DEVELOP the most practical,
4. Improved design or specification of the economic, and effective method, drawing
final product. on the contributions of those concerned.

The objectives of method study techniques 5. EVALUATE different alternatives to

are: developing a new improved method
1. Present and analyze true facts concerning the comparing the cost-effectiveness of the
situation. selected new method with the current
2. To examine those facts critically. method of performance.

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 MODULE 5 - MANAGING QUALITY
6. DEFINE the new method, as a result, in
a clear manner and present it to those 5.1 Quality Strategy
concerned, i.e., management, supervisors,
and workers. ● Quality is a wonderful tonic for improving
operations. Managing quality helps build
7. INSTALL the new method as a successful strategies of differentiation, low
standard practice and train the persons cost, and response.
involved in applying it. ● Improvements in quality help firms
increase sales and reduce costs, both of
8. MAINTAIN the new method and which can increase profitability. Increases
introduce control procedures to prevent a in sales often occur as firms speed
drifting back to the previous method of response, increase or lower selling prices,
work. Note: Only the first two steps have and improve their reputation for quality
been dealt with in detail. products.
● Improved quality allows costs to drop as
firms increase productivity and lower
4.8 Introduction to Production Plan rework, scrap, and warranty costs.

Depending on the product being manufactured,

operations planning needs to decide where the
facility will be located, how the facility will be
organized, and the materials needed for
production.

Format and coverage

Manufacturing businesses use production

planning to determine the number of items
they can produce during a specific period,
balanced against the orders or demand for their
products. The planning process includes ensuring
that you procure enough raw materials, labor
resources, and items such as packaging to
achieve the required production.

❖ List the activities

❖ Chart check-up
❖ Analyze the schedule
❖ Monitor the process

Monthly Scheduling
Production planning is the function of
establishing an overall level of output. The
process also includes any other activities needed
to satisfy current planned levels of sales, while
meeting the firm's general objectives regarding
profit, productivity, lead times, and customer
satisfaction, as expressed in the overall business 5.2 Defining Quality
plan.
● The operations manager’s objective is to
build a total quality management system
that identifies and satisfies customer
needs.
● Total quality management takes care of
the customer.
● “The totality of features and characteristics
of a product or service that bears on its
ability to satisfy stated or implied needs.”

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Implications of Quality Cost of Quality (COQ)

In addition to being a critical element in Four major categories of costs are associated
operations, quality has other implications. with quality. Called the cost of quality (COQ) they
are
1. Company reputation: An organization can ◆ Prevention costs: costs associated with
expect its reputation for quality—be it good or reducing the potential for defective parts or
bad—to follow it. Quality will show up in services (e.g., training, quality improvement
perceptions about the firm’s new products, programs).
employment practices, and supplier relations. ◆ Appraisal costs: costs related to evaluating
Self-promotion is not a substitute for quality products, processes, parts, and services (e.g.,
products. testing, labs, inspectors).
◆ Internal failure costs: costs that result from
2. Product liability: The courts increasingly hold the production of defective parts or services
organizations that design, produce, or distribute before delivery to customers (e.g., rework, scrap,
faulty products or services liable for damages or downtime).
injuries resulting from their use. Legislation such ◆ External failure costs: costs that occur after
as the Consumer Product Safety Act sets and delivery of defective parts or services (e.g.,
enforces product standards by banning products rework, returned goods, liabilities, lost goodwill,
that do not reach those standards. costs to society).

3. Global implications: In this technological age, The first three costs can be reasonably
quality is an international, as well as OM, estimated, but external costs are very hard to
concern. For both a company and a country to quantify. Observers of quality management
compete effectively in the global economy, believe that, on balance, the cost of quality
products must meet global quality, design, and products is only a fraction of the benefits.
price expectations.
Ethics and Quality Management
ISO 9000 International Quality Standards ● For operations managers, one of the
most important jobs is to deliver
● The move toward global supply chains has healthy, safe, and quality products and
placed so much emphasis on quality that services to customers.
the world has united around a single ● The development of poor-quality
quality standard, ISO 9000. products, because of inadequate design
● Its focus is to enhance success through and production processes, not only
eight quality management principles: results in higher production costs but also
(1) top management leadership leads to injuries, lawsuits, and increased
(2) customer satisfaction government regulation.
(3) continual improvement
(4) involvement of people 5.3 Total Quality Management
(5) process analysis
(6) use of data-driven decision making (TQM) refers to a quality emphasis that
(7) a systems approach to management encompasses the entire organization, from
(8) mutually beneficial supplier supplier to customer. TQM stresses a
relationships commitment by management to have a continuing
companywide drive toward excellence in all
ISO 14000 - Environmental Standard aspects of products and services that are
important to the customer.
Core Elements:
● Environmental management Seven Concepts of TQM
● Auditing
● Performance evaluation ● Continuous improvement
● Labeling ● Six Sigma
● Life cycle assessment ● Employee empowerment
● Benchmarking
● Just-in-time (JIT)
● Taguchi concepts
● Knowledge of TQM tools

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Six Sigma - Inventory costs money and hides
process and material problems
Two meanings: ● Encourages improved process and
● Statistical definition of a process that is product quality
99.9997% capable, 3.4 defects per million
opportunities (DPMO) Taguchi Concepts
● A program designed to reduce defects,
lower costs, and improve customer ● Engineering and experimental design
satisfaction methods to improve product and process
design
SIX SIGMA - DMAIC APPROACH ● Identify key component and process
● Define critical outputs and identify gaps variables affecting product variation
for improvement ● Taguchi Concepts
● Measure the work and collect process ● Quality robustness
data ● Quality loss function
● Analyze the data ● Target-oriented quality
● Improve the process
● Control the new process to make sure Quality Robustness
new performance is maintained ● Ability to produce products uniformly in
adverse manufacturing and environmental
Six Sigma Implementation conditions
● Emphasize defects per million ● Remove the effects of adverse conditions
opportunities as a standard metric ● Small variations in materials and process
● Provide extensive training do not destroy product quality
● Focus on corporate sponsor support
(Champions) Quality Loss Function
● Create qualified process improvement ● Shows that costs increase as the product
experts (Black Belts, Green Belts, etc.) moves away from what the customer
● Set stretch objectives wants
( Note: This cannot be accomplished without a ● Costs include customer dissatisfaction,
major commitment from top-level management ) warranty and service, internal scrap and
repair, and costs to society
Benchmarking ● Traditional conformance specifications are
too simplistic
● Selecting best practices to use as a ● Target-oriented quality
standard for performance
● Determine what to benchmark
● Form a benchmark team Tools of TQM
● Identify benchmarking partners ● Tools for Generating Idea
● Collect and analyze benchmarking ● Check sheets
information ● Scatter diagrams
● Take action to match or exceed the ● Cause-and-effect diagrams
benchmark ● Tools to Organize the Data
Note: Use internal benchmarking if you’re big ● Pareto charts
enough. ● Flowcharts
● Tools for Identifying Problems
● Histogram
Just-in-Time (JIT) ● Statistical process control chart

Relationship to quality: The tools of TQM

● JIT cuts the cost of quality
● JIT improves quality a. Check Sheets
● Better quality means less inventory and A check sheet is any kind of form that is
better, easier-to-employ JIT system designed for recording data. Check sheets help
● ‘Pull’ system of production scheduling analysts find the facts or patterns that may aid
including supply management subsequent analysis.
- Production only when signaled
● Allows reduced inventory levels

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 b. Scatter Diagrams MODULE 6 - MATERIALS HANDLING
Scatter diagrams show the relationship
between two measurements. An example is the 6.1 Introduction
positive relationship between the length of a Material handling embraces the basic
service call and the number of trips a repair operations in connection with the movement of
person makes back to the truck for parts. bulk, packaged, and individual products in a
semi-solid or solid state by means of gravity
c. Cause-and-Effect Diagrams manually or power-actuated equipment and within
A tool that identifies process elements the limits of individual producing, fabricating,
(causes) that might affect an outcome. Another processing or service establishment.
tool for identifying quality issues and inspection
points is the cause-and-effect diagram, also 6.2 Objectives of Material Handling
known as an Ishikawa diagram or a fishbone
chart. Following are the objectives of material handling:

d. Pareto Charts 1. Minimize the cost of material handling.

A graph to identify and plot problems or 2. Minimize delays and interruptions by
defects in descending order of frequency. Pareto making available the materials at the point
charts are a method of organizing errors, of use at the right quantity and at right
problems, or defects to help focus on time.
problem-solving efforts. 3. Increase the productive capacity of the
production facilities by effective utilization
e. Flowcharts of capacity and enhancing productivity.
A chart that describes the steps in a 4. Safety in material handling through
process. It graphically presents a process or improvement in working conditions.
system using annotated boxes and 5. Maximum utilization of material handling
interconnected lines. They are a simple but great equipment.
tool for trying to make sense of a process or 6. Prevention of damages to materials.
explain a process. 7. Lower investment in process inventory.

f. Histograms 6.3 Principles of Materials handling

A distribution showing the frequency of
occurrences of a variable. It shows the range of Following are the principles of material handling:
values of measurement and the frequency with
which each value occurs. They show the most 1. Planning principle: All handling
frequently occurring readings as well as the activities should be planned.
variations in the measurements. 2. Systems principle: Plan a system
integrating as many handling activities as
g. Statistical Process Control (SPC) possible and coordinating the full scope of
A chart with time on the horizontal axis to operations (receiving, storage, production,
plot values of a statistic. Statistical process inspection, packing, warehousing, supply,
control (SPC) monitors standards, makes and transportation).
measurements, and takes corrective action as a 3. Space utilization principle: Make
product or service is being produced. Samples of optimum use of cubic space.
process outputs are examined; if they are within 4. Unit load principle: Increase quantity,
acceptable limits, the process is permitted to size, and weight of load handled.
continue. 5. Gravity principle: Utilize gravity to
move a material wherever practicable.
6. Material flow principle: Plan an
operation sequence and equipment
arrangement to optimize material flow.
7. Simplification principle: Reduce
combine or eliminate unnecessary
movement and/or equipment.
8. Safety principle: Provide safe handling
methods and equipment.
9. Mechanization principle: Use
mechanical or automated material
handling equipment.

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 10. Standardization principle: can limit the size of the material-handling
Standardize the method, types, and size equipment.
of material handling equipment.
11. Flexibility principle: Use methods 3. Production Flow
and equipment that can perform a variety If the flow is fairly constant
of tasks and applications. between two fixed positions that are not
12. Equipment selection principle: likely to change, fixed equipment such as
Consider all aspects of material, move, conveyors or chutes can be successfully
and method to be utilized. used.
13. Dead weight principle: Reduce the
ratio of dead weight to the payload in 4. Cost Consideration
mobile equipment. This is one of the most important
14. Motion principle: Equipment considerations. The above factors can
designed to transport material should be help to narrow the range of suitable
kept in motion. equipment, while costing can help in
15. Idle time principle: Reduce idle taking a final decision.
time/unproductive time of both MH
equipment and manpower. 5. Nature of Operations
16. Maintenance principle: Plan for Selection of equipment also
preventive maintenance or scheduled depends on the nature of operations
repair of all handling equipment. whether handling is temporary or
17. Obsolescence principle: Replace permanent, whether the flow is continuous
obsolete handling methods/equipment or intermittent and material flow
when more efficient methods/equipment pattern-vertical or horizontal.
will improve operation.
18. Capacity principle: Use handling 6. Engineering Factors
equipment to help achieve its full capacity. Selection of equipment also
19. Control principle: Use material depends on engineering factors like door
handling equipment to improve production and ceiling dimensions, floor space, floor
control, inventory control, and other conditions, and structural strength.
handling.
20. Performance principle: Determine 7. Equipment Reliability
the efficiency of handling performance in Reliability of the equipment and
terms of cost per unit handled which is the supplier reputation and the after-sale
primary criterion. service also plays an important role in
selecting material handling equipment.
6.4 Selection of Materials Handling Equipment
Selection of Material Handling equipment Evaluation of Material Handling System
is an important decision as it affects both the cost The cost factors include investment cost,
and efficiency of the handling system. The labor cost, anticipated service hours per year,
following factors are to be taken into account utilization, unit load carrying ability, loading and
while selecting material handling equipment. unloading characteristics, operating costs, and
size requirements are the factors for the evolution
1. Properties of the Materials of material handling equipment.
Whether it is solid, liquid, or gas,
and in what size, shape, and weight it is to Equipment Utilization Ratio
be moved, are important considerations It is an important indicator for judging the
and can already lead to a preliminary materials handling system. This ratio can be
elimination from the range of available computed and compared with similar firms or in
equipment under review. the same over a period of time. In order to know
the total effort needed for moving materials.
2. Layout and characteristics of the
Building
Another restricting factor is the
availability of space for handling. The
low-level ceiling may preclude the use of
hoists or cranes, and the presence of
supporting columns in awkward places

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