OPERATIONS MANAGEMENT IN THE - Diversification plan for products

HOSPITALITY INDUSTRY - Changing sources of raw materials

- Other relevant factors
Operations Management (OM) F. Purpose of the Study
- Administration of business practices - Find the optimal location that offers the greatest
- Achieve the highest level of efficiency advantage to the organization
- Convert materials and labor into goods and I.Plant Layout
services efficiently. A. Definition
- Maximize the organization’s profit. - Refers to the physical arrangement of facilities
- Balancing costs with revenue. - Involves configuration of departments, work
- Achieve the highest possible net operating centers, and equipment in the conversion
profit. process
B. Overall Objective
Scope of Operations Management - Design a physical arrangement that meets the
- Focuses on converting inputs into outputs required output quality and quantity most
economically
- Utilizes physical resources in the conversion
process C. Components of Plant Layout (According to
James More)
- Provide desired utilities to customers
- Optimum arrangement of facilities.
- Achieving the intended results
- Includes personnel.
- Minimizing resource use and maximizing
output - Operating equipment.
- Ability to adjust to changes - Storage space.
- OM differs from the other functions like - Material handling equipment.
personnel, marketing, and finance - All other supporting services.
- Conversion process using physical resources - Design of the best structure to contain all these
facilities.
Following are the activities, which are listed under
Productions and Operations Management Material Handling
functions: A. Definition
- Moving materials from the store room to
1. Location of facilities machines and between machines during
2. Plan layouts and Material handling manufacturing.
3. Product Design - Art and science of moving, packing, and storing
products in any form.
4. Process Design
B. Significance
5. Production Planning and Control
- Specialized activity in modern manufacturing.
6. Quality Control
- Accounts for 50% to 75% of production costs.
7. Materials Management
C. Impact on Production
8. Maintenance Management
- Cost reduction through proper selection,
operations, and maintenance of material
Locations of Facilities handling devices.
A. Nature of Decision - Benefits include:
- Long-term capacity decision • Increased output
- Involves long-term commitment regarding • Improved quality
geographically static factors
• Faster deliveries
B. Importance
• Decreased production costs
- Strategic level decision-making
- Key decision due to large investments in plant D. Consideration in Plant Design
and machinery
- Material handling is crucial in designing new
C. Key Questions plants and revising existing plants.
- Where should the main operations be based?
D. Impact of Improper Location Product Design
- Potential waste of investments in plant and A. Definition
machinery
- Conversion of ideas into reality.
E. Factors to Consider
B. Importance of Business Organizations
- Company’s expansion plan and policy
 - Essential for survival and growth. - Selecting the appropriate workstation for each
- Involves designing, developing, and step in the workflow
introducing new products.
C. Challenges Production Planning and Control
- Developing new products. A. Definition
- Launching products in the market. - Planning production in advance.
- Setting routes, starting, and finishing dates for
II. Process of Product Design each item.
A. Need Identification to Physical - Issuing production orders to shops and tracking
Manufacture product progress.
Involves three main functions: B. Principle
- Design and marketing - “First Plan Your Work and then Work on Your
- Product development Plan”
- Manufacturing
B. Product Development II. Main Functions of Production and Planning
and Control
- Translates customer needs provided by
marketing into technical specifications. A. Planning
- Design various features into the product - Deciding in advance what to do, how to do it,
according to specifications. when to do it, and who will do it.
C. Manufacturing - Bridges the gap between the current state and
the desired goal.
- Selects processes by which the product can
be manufactured. B. Routing
- determining the exact route for each item the
production process.
III. Role of Product Design and Development
C. Scheduling
A. Linkage
- Fixing the start and finish dates for each task.
- Provides a link between marketing, customer
needs and expectations, and manufacturing D. Dispatching
activities. - Issuing orders to initiate production.
E. Follow-up
Process Design - Monitoring and tracking progress to ensure
A. Definition adherence to the plan.
- Macroscopic decision-making of an overall
process route. II. Role of Planning
- Focuses on converting raw materials into A. Purpose
finished goods. - Ensures that tasks occur as intended and fill the
gap between current and future goals.
II. Key Decisions in Process Design B. Importance
A. Selection of Process - Makes things happen that would otherwise not
- Choosing the most appropriate process for occur.
production.
B. Choice of Technology Routing
- Determining the technology to be used in the A. Definition
process. - Selection of the path each part of the production
C. Process Flow Analysis will follow from raw materials to finished product.
- Analyzing the workflow for converting raw B. Objective
materials into finished products. - Determine the most advantageous path for the
D. Layout of Facilities transformation process.
- Designing the layout for facilities involved in C. Path Determination
the process - Path includes department-to-department and
machine-to-machine transitions.
III. Workflow Analysis D. Outcome
A. Objective - Ensures raw material is effectively transformed
- To ensure efficient conversion of raw into the final product.
materials into finished products.
B. Workstation Selection Scheduling
A. Definition
 - Fixation of time and date for each operation products.
B. Purpose Corrective Actions
- Determines the program and sequence of - Implementing solutions to address and rectify
operations defects.
C. Operation Sequence
- Establishes the order in which operations Components of Quality Control
should be performed. Quality Standards
D. Outcome - Establishing benchmarks and criteria for quality.
- Ensures operations are completed in a timely Quality Assurance
and orderly manner. - Ongoing activities to ensure quality standards
are met.
Dispatching Quality Control Processes
A. Definition - Monitoring and testing to ensure product meets
- Concerned with starting the processes in quality standards.
production.
B. Authority Techniques and Tools
- Provides the necessary authority to start a Statistical Process Control (SPC)
particular work. - Using statistical methods to monitor and control
C. Relation to Routing and Scheduling processes.
- Work that has been planned under Routing Inspection and Testing
and Scheduling is initiated. - Regular chec moks and evaluations to identify
D. Function defects.
- Release of orders and instructions for the Process Improvement
start of production. - Continuous improvement methods like Six
- Ensures production aligns with the Route Sigma or Lean.
sheet and Schedule charts.
Follow-up Quality Control in Industrial Management
A. Definition Role in Manufacturing
- Monitoring and reporting daily progress of - Ensuring uniform quality in products.
work in each shop.
Cost Efficiency
B. Reporting
- Balancing quality with cost-effectiveness.
- Progress is reported using a prescribed
Productivity and Efficiency
proforma.
- Enhancing overall productivity while maintaining
C. Investigation
quality.
- Investigates causes of deviations from
planned performance.
Benefits of Quality Control
D. Objective
Customer Satisfaction
- Ensure that production is on track and aligns
with the planned performance. - Meeting or exceeding customer expectations.
Reduced Waste
Quality Control - Minimizing defects and rework.
Introduction Regulatory Compliance
Definition of Quality Control - Meeting industry and legal standards.
- Maintaining a desired level of quality in a
product or service. Challenges in Quality Control
- Systematic control of factors affecting product Maintaining Consistency
quality. - Ensuring uniform quality across all products.
- Prevention of defects, effective feedback, and Adapting to Changes
corrective actions. - Handling evolving standards and technologies.
Resource Allocation
Objectives of Quality Control - Balancing quality control efforts with available
Prevention of Defects resources.
- Addressing issues before they impact the final
product. The main objectives of Quality Control are:
Feedback System 1. To improve the companies' income by making
- Utilizing feedback to improve processes and the production more acceptable to the
 customers i.e. by providing long life, greater • Ensuring materials meet required standards.
usefulness, maintainability, etc.
2. To reduce companies' cost through reduction
of losses due to defects. V. Techniques and Tools
3. To achieve interchangeability of manufacture Inventory Control Systems
in large-scale production. • Techniques like Just-in-Time (JIT) and
4. To produce optimal quality at reduced price. Economic Order Quantity (EOQ).
5. To ensure satisfaction of customers with Material Requirements Planning (MRP)
productions or services or high quality level, • Systems for planning material needs based on
to build customer good will, confidence and production schedules.
reputation of manufacturer.
Enterprise Resource Planning (ERP)
6. To make inspection prompt to ensure quality
• Integrated systems to manage materials and
control.
resources.
7. To check the variation during manufacturing.

Material Management VI. Importance of Materials Management

I.Definition of Materials Management Cost Efficiency
- Management of acquisition, control, and use • Reducing costs through effective material
of materials. management.
- Focus on the flow of goods and services in Production Continuity
the production process.
• Ensuring materials are available to avoid
production delays.
Quality Improvement
II. Objectives of Materials Management
• Maintaining quality through proper material
Efficient Acquisition handling and control.
- Sourcing and procuring materials effectively.
Optimal Control
- Managing inventory levels and material VII. Challenges in Materials Management
usage. Supply Chain Disruptions
- Effective Use • Managing risks and uncertainties in the supply
- Ensuring materials are utilized efficiently in chain.
production. Inventory Management
• Balancing inventory levels to avoid overstocking
or stockouts.
III. Components of Materials Management Coordination with Other Functions
Procurement • Aligning materials management with production,
• Sourcing, purchasing, and receiving finance, and logistics.
materials.
Inventory Management
• Tracking and managing stock levels. VIII. Future Trends in Materials Management
Storage and Warehousing Technological Advancements
• Storing materials securely and efficiently. • Use of AI, IoT, and automation in materials
Logistics management.
• Managing the movement and distribution of Sustainability
materials. • Incorporating sustainable practices in materials
sourcing and use.
Globalization
IV. Processes in Materials Management • Managing materials in a global supply chain
Demand Forecasting context.
• Predicting material needs based on
production schedules. The main objectives of Material Management are
Supplier Management 1. To minimize material cost.
• Evaluating and selecting suppliers. 2. To purchase, receive, transport and store
Order Processing materials efficiently and to reduce the related
• Handling orders from placement to delivery. cost.
Quality Control 3. To cut down costs through simplification,
 standardization, value analysis, import Resources - in the form of:
substitution, etc. 1. Land acquired
4. To trace new sources of supply and to 2. Salaries paid to employees
develop cordial relations with them in order to 3. Amount paid to purchase material
ensure continuous supply at reasonable rates. 4. Amount spent in infrastructures
5. To reduce investment tied in the inventories Example:
for use in other productive purposes and to
develop high inventory turnover ratios.
6. To achieve minimum breakdown and to keep
the plant in good working condition at the
lowest possible cost..
7. To keep the machines and other facilities in
such a condition that permits them to be used
at their optimal capacity without interruption.
8. To ensure the availability of the machines,
buildings and services required by other
sections of the factory for the performance of TYPES OF PRODUCTIVITY
their functions at optimal return on investment
1. Partial Productivity
- resources of productivity when
OPERATIONS MANAGEMENT measured separately

PRODUCTIVITY IN OPERATIONS - “Apple to Apple” comparison

MANAGEMENT PRODUCTIVITY
- output of any production process, per unit of
input

- to increase productivity, produce more with less

2. Total Productivity
- in factories: productivity is a measure of the
- innovated by David J. Sumanth
ability to create goods and services from a given
amount of labour, capital, materials, land,
resources, knowledge, time or any combination - method of calculating productivity
of those. considering all the resources

- systematic and qualitative approach to

- increase productivity on the part of capital and
compete in quality, price, and time
labour
- provides systematic framework and
MEASUREMENT OF PRODUCTIVITY structure to an organization and increase
- the amount of output per unit of input profitability

- in factories: might be measured based on the

number of hours it takes to produce a good

- in service industry: might be measured based

on the income generated by an employee divided
by his/her salary PRODUCTIVITY BENEFITS
⚫ increase in income/profitability
⚫ lowers running costs or operational costs
DEFINITION AND EQUATION ⚫ maximizes the use of all of the company’s
Productivity - the ratio of output and input in any resources
organization ⚫ gaining greater share of the market
⚫ more cash flows mean more opportunity for
Productivity = Output company’s
Input expansion & growth

Output - form of product quantity TOTAL QUALITY MANAGEMENT (TQM)

- an approach that seeks to improve quality and
Input - form of resources performance which will meet or exceed customer
expectations ⚫ increased flexibility and responsiveness
⚫ simplified processes
- looks at overall quality measures used by a ⚫ Improved communications
company ⚫ Less frustrations & more satisfaction among
workforce
BENEFITS OF TQM
⚫ ability to be more competitive Kaizen
⚫ increased market share - means gradual and orderly, continuous
⚫ cost Reduction improvement

- this business strategy involves everyone in an

organization working together to make
improvements without large capital investment
Poka Yoke - discipline
- aka mistake proofing - practice 5’s daily, make it a way of life; also
means
- a simple method to prevent defects from commitment
occurring in your business processes
SIX SIGMA
- in English: to avoid (yokeru) errors (poka)
⚫ Champions and sponsors
- result is a business that wastes less energy, time, ⚫ Master black belt
resources doing things wrong in the future ⚫ Black belt
⚫ Green belt
⚫ Staffing levels and expected returns
Housekeeping
- systematic approach for better workplace
Business Process Re-engineering (BPR)
- assigns place for everything and ensures - analysis and design of work flows and
everything is in its place processes within an organization

- follows certain principles like cleanliness, - set of logically related tasks performed to
organization, discipline, and orderliness. achieve defined business outcome

SINGLE DIGIT MINUTE EXCHANGE (SMED)

“Reduce your setup and adjustment

time from hours to minutes.”

- Single Minute Exchange of Dies (SMED)

- approach to reduce output and quality

losses due to changeovers

- method strength: systematic approach to

analyse what is actually done and how time is CONSTRAINTS/PROBLEMS IN INCREASING
spent during the changeover activity PRODUCTIVITY
5’s or 5’s Process 1. Government Regulations
- structured program to systematically - various taxation
achieve total organization, cleanliness, and - environment laws
standardization in the workplace
2. Registrations & Approvals
⚫ Seiri - registrations
- tidiness - licensing
- throwing away all rubbish and unrelated
materials in the workplace 3. Union Rules
- trade union plays constructive role
⚫ Seiton - sometimes this rules are misused.
- orderliness
- set everything in proper place for quick 4. Management Limitation
retrieval and storage - changing environment
- certain disasters - natural & accidental
⚫ Seiso
- cleanliness 5. Employee related issues
- clean the workplace; everyone should be - human limitations
a janitor - unskilled employees
- employee attitudes
⚫ Seiketsu
- standardization
- standardize the way of maintaining
cleanliness

⚫ Shitsuke
DESIGN OF GOODS & SERVICES

GOODS AND SERVICES SELECTION

- organizations exist to provide goods or services
to society

- customers buy satisfaction, not just a

physical good or particular service

- limited and predicable life cycles requires

constantly looking for, designing, and developing
new products
PRODUCT-BY-VALUE ANALYSIS
- new products generate substantial revenue
- lists products in descending order of their
PRODUCT DECISION individual dollar contribution to the firm
- objective: to develop and implement a product
strategy that meets the demands of the - lists the total annual profit contribution of the
marketplace with a competitive advantage product

PRODUCT LIFE CYCLES - helps management evaluate alternative

- may be any length from a few days to decades strategies

GENERATING NEW PRODUCTS

- the operations function must be able to
introduce new products successfully
1) Understanding the customer
• Introduction 2) Economic change
• Growth 3) Sociological and demographic change
4) Technological change
• Maturity
5) Political and legal change
• Decline
6) Market practice, professional
standards, suppliers, distributors
Life Cycle and Strategy
PRODUCT DEVELOPMENT
• Introductory Phase
- creation of products; new or different
➢ Fine tuning may warrant unusual
characteristics
expenses for
1. Research
- involve modification of an existing
2. Product Development
product/presentation/formulation of an entirely
3. Process modification and
enhancement new product that satisfies a newly defined
4. Supplier development
customer want or market niche

• Growth Phase Issues for Product Development

➢ Product design begins to stabilize
➢ Effective forecasting of capacity • Robust Design
becomes necessary - Products are designed;
➢ Adding or enhancing capacity may be manufactured uniformly and
necessary consistently
- Despite adverse manufacturing and
• Maturity Phase environmental conditions
➢ Competitors now established
➢ High volume, innovative production • Time-based Competition
may be needed - Product life cycle are becoming
➢ Improved cost control, reduction in
shorter
options, paring down of product line - Faster developers of new products;
gain on slower developers and
• Decline Phase obtain a competitive advantage
➢ Unless product makes a special
contribution to the organization, must • Modular Design
plan to terminate offering - Products designed in easily
segmented components
- Adds flexibility to both production
and marketing
 Example:
o Airbus – wings TOTAL QUALITY MANAGEMENT
- Fast food – buns, vegetables, etCo Introduction
Computers • Total - made up of the whole
• Quality - degree of excellence a product or
• Computer-aided Design service provides
- Designing products at a computer terminal • Management -act,art ormanner of
or planning,controlling, directing,….
work station • Therefore, TQM is the art of managing the
- Design engineer; develops rough sketch of whole to achieve excellence.
product
- Often used with CAM (Computer Aided The concept of TQM
Manufacturing) • Produce quality work the first time.
• Focus on the customer.
CAD & CAM • Have a strategic approach to improvement.
➢ Benefits of CAD • Improve continuously.
- Shorter design time
• Encourage mutual respect and teamwork.
- Database availability
- New capabilities
- Improved product quality Various Definitions
- Reduced production costs ➢ Total quality management (TQM) has
been defined as an integrated
➢ Extensions organizational effort designed to improve
- Design for Manufacturing and quality at every level.
- Assembly (DFMA) ➢ The process to produce a perfect product by
- 3-D Object Modeling a series of measures require an organized
- CAD info is translated into machine
effort by the entire company to prevent or
- control instructions (CAM)
eliminate errors at every stage in
Virtual Reality production is called total quality
- Computer technology used to develop an management.
interactive, 3-D model of a product ➢ According to international organization for
- Especially helpful in design of layouts (e.g. standards defined tqm as, “TQM is a
factory, store, home, office, etc.) management approach for an organization,
centered on quality, based on the
• Value Analysis
- Focuses on design improvement during participation of all its members and aiming
production at long-term success through customer
- Seeks improvements leading either to a satisfaction and benefits to all members of
better the organization and to the society
product or a product which can be more
economically produced
Characteristics of TQM
➢ Committed management.
• Environmentally Friendly Design
Benefits ➢ Adopting and communicating about total
- Safe and environmentally sound products quality management.
- Minimum raw material and energy waste ➢ Closer customer relations.
- Product differentiation ➢ Closer provider relations.
- Environmental liability reduction ➢ Benchmarking.
- Cost-effective compliance with ➢ Increased training.
environmental
➢ Open organization
regulations
- Recognition as good corporate citizen ➢ Employee empowerment.
➢ Flexible production.
• “Green” Manufacturing ➢ Process improvements.
- Make products recyclable ➢ Process measuring
- Use recycled materials
- Use less harmful ingredients Traditional approach and TQM
- Use lighter components 1. The traditional approach is product oriented
- Use less energy
where TQM is customer-oriented
- Use less material
 2. Priorities fo traditional approach is second to external customers and thus can
service and cost whereas TQM is first make the most valuable
among equals of service and cost contribution to quality.
3. Decisions for traditional approach is short • Therefore, employees must have the
term whereas long term for TQM authority to innovate and improve
4. Emphasis for traditional approach is quality.
detection whereas prevention for TQM
5. Errors for the traditional approach is in its 3. Continuous improvement
operations whereas as errors for TQM is in • The quest for quality is a never-ending
the system process in which people are continuously
6. Responsibility for traditional approach is in working to improve the performance, speed
quality control where everyone is and number of features of the product or
responsible in TQM service.
7. Managers in traditional approach are • Continuous improvement means that
involved in problem solving whereas teams small, incremental improvement that
are involved in TQM occurs on a regular basis will eventually add
8. Manager’s role in traditional approach is to up to vast improvement in quality.
plan, assign, control and enforce whereas in • TQM is the management process used
TQM,managers delegate, coach, facilitate to make continuous improvements to all
and mentor functions.
• TQM represents an ongoing,
The three aspects of TQM continuous commitment to improvement.
1. Counting - Tools, techniques, and training • The foundation of total quality is a
in their use for analyzing, management philosophy that supports
understanding, and solving quality problems meeting customer requirements through
2. Customers - Quality for the customer as a continuous improvement.
driving force and central concern.
3. Culture - Shared values and beliefs,
expressed by leaders, that define and Continuous Process Improvement
support quality. ▪ View all work as process – production and
business.
Principles of tqm ▪ Process – purchasing, design, invoicing,
1. Produce quality work the first time and every etc.
time. ▪ Inputs – process – outputs.
2. Focus on the customer. ▪ Process improvement – increased customer
3. Have a strategic approach to improvement. satisfaction.
4. Improve continuously. ▪ Improvement – 5 ways:
5. Encourage mutual respect and teamwork ▪ reduce resources, reduce errors, meet
expectations of downstream customers,
The key elements of the TQM make process safer, make process more
1. Focus on the customer. satisfying to the person doing
• It is important to identify the BENEFITS OF TQM:
organization’s customers. • Improved quality.
• External customers consume the • Employee participation.
organization’s product or service. • Team work.
• Internal customers are employees • Working relationships.
who receive the output of other • Customer satisfaction.
employees. • Employee satisfaction.
2. Employee Involvement • Productivity.
• Since the quality is considered the • Communication.
job of all employees, employees • Profitability.
should be involved in quality • Market share.
initiatives Advantages of tqm
• Front line employees are likely to • Improves reputation- faults and problems
have the closest contact with are spotted and sorted quicker.
 • Higher employee morale- workers any saving.
motivated by extra responsibility ,team - Firm can take advantage of a particular
work and involvement indecisions of tqm. favorable exchange rate by locating to
foreign country.
• Lower cost.
- Operational hedging defines the
• Decrease waste as fewer defective products situation where the firm have excess
and no need for separate. capacity in multiple countries.
2. Political Risk, values ,and culture
Disadvantages of tqm - Current situation of democracy in the
• Initial introduction cost. country.
• Benefits may not be seen for several years. - Products that are inhibited by the
• Workers may be resistant to change. culture.
- Government policies
A model for organization management. - Culture variation in different areas.
Starts with customer focus to planning process, 3. Proximity to markets
process management, process improvement , total - Locates near to customer
participation then back to customer focus - Specially service organization like
BENEFITS OF TOTAL QUALITY MANAGEMENT restaurants, post offices, barbers find
• Financial benefits include lower costs, demographic.
higher returns on sales and investment, - Prime objective is proximity to market.
and the ability to charge higher rather - Manufacturing firms find it useful to
close to customer when transporting
than competitive prices.
finished goods.
• Improved access to global markets, 4. Costs
higher customer retention levels, less - Tangible cost: readily identifiable and
• Time required to develop new innovations, precisely measured (utilities, labor,
and a reputation as a quality firm. material, taxes, depreciation, and etc.)
• Total quality management (tqm) is one such - Intangible costs: Quality of education,
approach that seeks to improve quality and public transportation facility, community
Performance which will meet or exceed customer attitudes towards company and industry.
expectations. 5. Proximity to supplier
- Locate near raw material
For following reasons:
LOCATION STRATEGY - Perishability: bakeries, dairy, plants, and
Location Strategy: a plan for obtaining optimal frozen seafood processor.
location for a company and identifies company - Transportation costs, Steel product and
needs and objectives. heavy machinery
- Location may determine up to 50% of 6. Proximity to competitors
operating expanse. - Locate near somewhat surprisingly
- Right location is a key ingredient in a competitors.
business's success. - Clustering: the location of competing
companies near each other, often
Strategic Importance of Location: because of a critical mass of
- Location has a major impact on overall information, talent, venture capital, or
risk and profit of the company natural resources.
- Objective of location strategy is to
maximize profit benefit. Method of evaluating location alternatives
1. Factor rating
Factors that Affect on location strategy • Develop a list of relevant FACTORS
- Labor productivity measures the hourly • Assigning WEIGHT to each factor (0-1)
productive output for • Develop SCALE for each factor i.e. (1-
country's economy during a period of time. 10), (1-100)
Management tempted by an area’s low wages • Management score for each location for
rates. each factor using scale
The formula for labor productivity is: • Multiply the score by its weightage and
Labor Productivity = labor cost per day/unit total the score for each location
produce per day • Select the location with maximum total
score.
1. Exchange rates and currency risk 2. Cost volume analysis
- Unfavorable exchange rate may negate
 • Determine the fixed and variable cost for Location or arrangement of everything within &
each location. around buildings
• Find breakeven point. Objectives are to maximize
• Customer satisfaction
• Plot cost for each location.
• Utilization of space, equipment, & people
• Select the location with lowest total cost
• Efficient flow of information, material, &
for expected production volume.
people
• Must Be above Break even.
• Emorale & safety
3. Transportation model
• Determine the best pattern of shipment
from several points of supply (sources) Strategic Importance of Layout
Proper layout enables:
to several points of demand
• Higher utilization of space, equipment,and
(destination). So, as to minimize the total
people
production and transportation cost.
• Improved flow of information, materials, or
people
Service Location strategies
Focus on Revenue and volume of business, • Improved employee morale and safer
which are determined by: working conditions
• Purchasing power and demographics of • Improved customer/client interaction
customer drawing area. • Flexibility
• Competition in the area (amount and
quality). Requirements of a Good Layout
• Relative attractiveness of the firm’s and ● An understanding of capacity and space
competitor’s locations. requirements
● Selection of appropriate material handling
Service Location strategies equipment
• Uniqueness of location and offerings. ● Decisions regarding environment and
• Physical qualities of facilities and aesthetics
neighboring businesses. ● Identification and understanding of the
• Operating policies and quality of requirements for information flow
management. ● Identification of the cost of moving between
the various work areas
Geographic Information Systems - GIS
• New tool to help in location analysis. Constraints on Layout Objectives
• Combines spatial (location) data and • Product design & volume
attribute data (for example, • Process equipment & capacity
demographics). • Quality of work life
• Uses spatial analyses to identify best or • Building and site
satisfactory locations.
• Allows intuitive graphical display using Six Layout Strategies
maps. • Fixed-position layout
- large bulky projects such as ships
LAYOUT STRATEGY andbuildings
Objectives of the Layout Strategy - Design is for stationary project
Develop an economical layout which will meet the - Workers and equipment come to site
requirements of:
- Complicating factors
• product design and volume (product
- Limited space at site
strategy)
- Changing material needs
• process equipment and capacity (process
- There is limited space at virtually all sites
strategy)
- At different stages in the construction
• quality of work life (human resource
process, different materials are needed –
strategy)
therefore, different items become critical as
• building and site constraints (location the project develops
strategy) - The volume of materials needed is dynamic

What is Facility Layout? • Process-oriented layout

- deals with low-volume, high-variety product-oriented facility Example: a plant to
production (“job shop”, intermittent produce window mechanisms for
production) automobiles
- Design places departments with large flows
• Office layout
of material or people together
• Design positions people, equipment, &
- Department areas having similar processes offices for maximum information flow
located in close proximity • Arranged by process or product
- e.g., All x-ray machines in same area • Example: Payroll dept. is by process
- Used with process-focused processes • Relationship chart used
• Examples
• Cellular Layout - Work Cells • Insurance company
- Special case of product-oriented layout - • Software company
in what is ordinarily a process-oriented
facility • Retail/service layout
- allocates shelf space and responds to
- Consists of different machines brought
customer behavior
together to make a product
- Design maximizes product exposure to
- Temporary arrangement only
customers
- Example: Assembly line set up to
- Decision variables
produce 3000 identical parts in a job
- Store flow pattern
shop
- Allocation of (shelf) space to products
- Reduced work-in-process inventory
- Types
- Less floor space required
- Grid design
- Reduced raw material and finished
- Free-flow design
goods inventories required
- Locate high-draw items around the
- Reduced direct labor costs
periphery of the store
- Heightened sense of employee
- Use prominent locations such as the first
participation
or last aisle for high-impulse and high
- Increased utilization of equipment
margin items
machinery
- Remove crossover aisles that allow
- Reduced investment in machinery and
customers the opportunity to move
equipment
between aisles
- Distribute what are known in the trade
• Requirements for Cellular Production
as “power items” (items that may
- Identification of families of products -
dominate a shopping trip) to both sides
group technology codes
of an aisle, and disperse them to
- High level of training and flexibility on
increase the viewing of other items
the part of the employees
- Use end aisle locations because they
- Either staff support or flexible,
have a very high exposure rate
imaginative employees to establish the
work cells initially
A Good Service Layout (Servicescape)
- Test (poka-yoke) at each station in the
Considers
cell • Ambient conditions - background
Work Cell - A temporary assembly-line- characteristics such as lighting, sound,
oriented arrangement of machines and
personnel in what is ordinarily a process- smell, and temperature.
oriented facility Example: job shop with • Spatial layout and functionality - which
rearranged machinery and personnel to involve customer circulation path planning
produce 30 unique control panels • Signs, Symbols, and Artifacts -
Focused Work Center - A permanent characteristics of building design that carry
assembly-line-oriented arrangement of
social significance
machines and personnel in what is ordinarily
a process- oriented facility Example:
manufacturing of pipe brackets at a shipyard • Warehouse layout
Focused Factory – A permanent facility to - addresses trade-offs between space and
produce a product or component in a material handling
 - Design balances space (cube) utilization - Calculate the theoretical minimum number
& handling cost of work stations by dividing total task time
- Similar to process layout by cycle time
- Items moved between dock & various - Perform the line balance and assign specific
storage areas assembly tasks to each work station
- Optimum layout depends on
- Variety of items stored Assembly Line Balancing Steps
- Number of items picked 1. Determine tasks (operations)
2. Determine sequence
• Product-oriented layout 3. Draw precedence diagram
- seeks the best personnel and machine 4. Estimate task times
use in repetitive or continuous 5. Calculate cycle time
production 6. Calculate number of work stations
- Facility organized around product 7. Assign tasks
- Design minimizes line imbalance 8. Calculate efficiency
- Delay between work stations Assembly Line Balancing Jargon
- Types: Fabrication line; assembly line • Task – an element of work on the product
line
• Product-Oriented Requirements • Workstation – a physical location where a
- Standardized product particular set of tasks is performed
- High production volume • Product Line – much like a moving
- Stable production quantities conveyor that passes a series of
- Uniform quality of raw materials & workstations in a uniform time interval:
components • Cycle Time – the time between successive
- Product-Oriented Layout – Assumptions units coming off the end of the line
- Volume is adequate for high equipment
utilization
- Product demand is stable enough to justify Forecasting in Hospitality Management
high investment in specialized equipment • Forecast is a prediction of what will occur in
- Product is standardized or approaching a the future.
phase of its life cycle that justifies • Meteorologists forecast the weather,
investment in specialized equipment sportscasters and gamblers predict the
- Supplies of raw materials and components winners of football games, and
are adequate and of uniform quality to companies attempt to predict how much of
ensure they will work with specialized their product will be sold in the future.
equipment • A forecast of product demand is the basis
for most important planning decisions.
• Product Layout Advantages • Planning decisions regarding
- Lower variable cost per unit scheduling, inventory, production, facility
- Lower material handling costs layout and design, workforce, distribution,
- Lower work-in-process inventories purchasing, and so on, are functions of
- Easier training & supervision customer demand.
- Rapid throughput • Long-range, strategic plans by top
- Product Layout Disadvantages management are based on forecasts of the
- Higher capital investment type of products consumers will demand in
o Special equipment the future and the size and location of
- Any work stoppage stops whole process product markets.
- Lack of flexibility
o Volume Importance of Forecasting in Hopitality
o Product Management
• Optimizing Revenue: Effective forecasting
Assembly Line helps hotels and other hospitality
- Determine cycle time by taking the demand businesses maximize their revenue. By
(or production rate) per day and dividing it accurately predicting future demand and
into the productive time available per day occupancy rates, they can adjust their
 pricing strategies to optimize room rates and obligations to fulfill, such as accommodating
occupancy levels. group bookings or hosting events. Accurate
forecasting is essential to meet these
• Resource Allocation: Hospitality obligations without overbooking or under-
businesses have limited resources, such as delivering.
staff and supplies. Forecasting allows them
to allocate these resources efficiently. For In summary, forecasting is vital in hospitality
management because it helps businesses make
example, they can schedule the right informed decisions, optimize their resources, and
number of employees for peak and off-peak respond effectively to market dynamics. It can lead
periods or order the right amount of to increased revenue, cost savings, improved
inventory to meet demand. customer satisfaction, and a competitive advantage
in a highly dynamic and competitive industry.
• Competitive Advantage: Hospitality
businesses can gain a competitive edge by
Key Terms Fundamental in Forcasting in
accurately forecasting and pricing their Hopitality Management
services. By staying ahead of the • Occupancy Rate: The occupancy rate,
competition and adapting to market often expressed as a percentage,
changes, they can attract more customers represents the portion of available rooms or
and increase market share. units that are occupied by guests during a
specific time period, typically a day, week,
• Marketing and Promotions: Forecasts month, or year. It is a critical metric in
help businesses plan marketing campaigns hospitality because it directly impacts a
property's revenue and profitability. A high
and promotions effectively. They can target
occupancy rate indicates that the property is
specific customer segments during periods effectively utilizing its resources, while a low
of low demand or create special packages rate may signal underutilization.
during peak seasons.
• ADR (Average Daily Rate): ADR, also
• Inventory Management: For restaurants known as Average Room Rate or Average
and catering services, forecasting is Seat Rate, represents the average price at
essential for managing food and beverage which a hotel room or a restaurant seat is
inventory. It helps reduce waste, ensure sold during a specific period, usually a day.
ADR is calculated by dividing the total room
freshness, and minimize costs associated
revenue by the number of rooms or seats
with excess inventory. sold. ADR is a key performance indicator
because it provides insights into a property's
• Strategic Planning: Long-term forecasts pricing strategy and revenue potential.
are vital for strategic planning. They assist Increasing the ADR can lead to higher
in making decisions about property revenue and profitability without necessarily
expansion, renovations, and other major increasing the number of rooms sold.
investments based on expected future
demand. Forecasting Elements
• The forecast should be accurate, and the
• Risk Mitigation: By forecasting potential degree of accuracy should be stated.
challenges or downturns in the market, • The forecast should be reliable; it should
businesses can prepare strategies to work consistently.
mitigate risks. This could include setting • The forecast should be expressed in
aside financial reserves or having meaningful units.
contingency plans in place. • The forecast should be in writing.
• The forecasting technique should be simple
• Data-Driven Decisions: In today's data- to understand and use.
driven world, forecasting is essential for • The forecast should be cost-effective. The
evidence-based decision-making. It enables benefits should outweigh the costs.
managers to make informed choices rather • The forecast should be timely.
than relying on intuition or guesswork.
Steps in Forecasting
• Meeting Contractual Obligations: Some
hotels and venues have contractual • Determine the purpose / use of the forecast.
 - The level of detail required in the • When your forecasts are close to reality,
forecast (what is needed? when will you can make better decisions about
it be needed?; how will it be used?) staffing, supplies, and pricing.
- The amount of resources (personnel,
• Accurate forecasting helps your business
computer time, money) that can be
justified, and the level of accuracy run smoothly, saves money, and keeps
necessary. customers happy.
• In simple terms, it's about making good
• Establish the time horizon of the forecast. guesses to help your business plan and
- It is the length of time in the future operate efficiently.
for which the forecast is to be
prepared. Overall, forecasting plays a pivotal role in
- The forecast must indicate a time optimizing operations in the hospitality industry by
interval. enabling businesses to efficiently manage their
- Accuracy of forecast decreases as resources, enhance customer satisfaction, and
the time horizon increases. remain competitive in a dynamic and customer-
driven marketplace.
• Obtain, clean, and analyze appropriate data
Statistical data and Accumulated expertise
who collect the data.
- The data may need to be “cleaned” INVENTORY MANAGEMENT
to get rid of outliers and obviously Inventory Definition
incorrect data before analysis. A stock of items held to meet future demand
- Obtaining the data can involve Inventory is a list for goods and materials, or those
significant effort. goods and materials themselves, held available in
stock by a business.
• Select the forecasting technique / model(s).
Qualitative and Quantitative Introduction
1. Qualitative or Subjective Forecasting • Constitute significant part of current assets
Methods • On an average approximately 60% of
Based on judgments, opinions, current assets in Public Limited Companies
intuition, emotions, or personal experiences. in India
They do not rely on any rigorous • A considerable amount of fund is required
mathematical computations.
• Effective and efficient management is
2. Quantitative or Objective Forecasting
imperative to avoid unnecessary investment
Methods
• Improper inventory management affects
o Based on mathematical
(quantitative) models, and are long term profitability and may fail ultimately
objective in nature. They rely • 10 to 20% of inventory can be reduced
heavily on mathematical without any adverse effect on production
computations and sales by using simple inventory
planning and control techniques
o Make the forecast
o Implement results and Monitor
Types of Inventory
forecasts errors to adjust when
Nature of Inventories
needed.
• Raw Materials – Basic inputs that are
Forecast Accuracy converted into finished product through the
• A forecast is never completely accurate; manufacturing process
forecasts will always deviate from the • Work-in-progress – Semi-manufactured
actual demand. products need some more works before
• Forecast accuracy in hospitality they become finished goods for sale
management is like predicting the weather: • Finished Goods – Completely
you want your predictions to match reality. manufactured products ready for sale
• Just as an inaccurate weather forecast can • Supplies – Office and plant cleaning
be frustrating, inaccurate predictions in materials not directly enter production but
hospitality can cause problems. are necessary for production process and
• In hospitality, you predict things like how do not involve significant investment.
many guests will come, what they'll pay, and
how busy your business will be. Reasons To Hold Inventory
 • Meet variations in customer demand • Loss of sale
o Meet unexpected demand • Failure to meet delivery commitments
o Smooth seasonal or cyclical demand
• Pricing related
o Temporary price discounts Carrying costs:-
o Hedge against price increases
• Warehousing or storage Handling
o Take advantage of quantity
• Clerical and staff Insurance
discounts
• Interest Deterioration, shrinkage,
• Process & supply surprises • evaporation and obsolescence
• Taxes
o Internal – upsets in parts of or our • Cost of capital
own processes
o External – delays in incoming goods Dangers of Over investment
• Unnecessary tie-up of firm’s fund and loss
of profit – involves opportunity cost
Objective of Inventory Management • Excessive carrying cost
• To maintain a optimum size of inventory for
• Risk of liquidity- difficult to convert into cash
efficient and smooth production and sales
• Physical deterioration of inventories while in
operations
storage due to mishandling and improper
• To maintain a minimum investment in
storage facilities
inventories to maximize the profitability
• Effort should be made to place an order at Dangers of under-investment
the right time with right source to acquire the • Production hold-ups – loss of labor
right quantity at the right price and right hours
quality • Failure to meet delivery commitments
• Customers may shift to competitors
An effective inventory management should
which will amount to a permanent loss to
• Ensure a continuous supply of raw
the firm
materials to facilitate uninterrupted
• May affect the goodwill and image of the
production
firm
• Maintain sufficient stocks of raw
materials in periods of short supply and
Functions of Inventory Management
anticipate price changes - -Track inventory
• Maintain sufficient finished goods - –
How much to order
–
inventory for smooth sales operation, - When to order
and efficient customer service
• Minimize the carrying cost and time Classification of inventory
1. ABC Classification
• Control investment in inventories and
In most of the cases 10 to 20 % of the inventory
keep it at an optimum level account for 70 to 80% of the annual activity.

An optimum inventory level involves three types of 2. XYZ Classification

costs On the basis of value of inventory stored
Ordering costs: Whereas ABC was on the basis of value of
consumption to value.
• Quotation or tendering X – High Value
• Requisitioning Y – Medium value
• Order placing Z – Least value
• Transportation Aimed to identify items which are extensively
stocked.
• Receiving, inspecting and storing
• Quality control 3. HML Classification
• Clerical and staff • On the basis of unit value of item
• There is 1000 unit of Q @ Rs. 10 and
10,000 units of W @ Rs. 5.
Stock-out cost
Aimed to control the purchase of raw materials.
H – High, M- Medium, L - Low Uncertain variables and risk are addressed
simultaneously
4. VED Classification
Mainly for spare parts because their consumption • Deterministic approach
pattern is different from raw materials • Probabilistic approach
Raw materials on market demand
Spare parts on performance of plant and machinery Basic EOQ Model
V – Vital, E – Essential, D – Desirable • Seasonal fluctuation in demand are
Therefore V items has to be stocked more and D
ruled out
has to be less stocked
• Zero lead time – Time lapsed between
5. FSN Classification purchase order and inventory usage
• According to the consumption pattern • Cost of placing an order and receiving
• To combat obsolete items are same and independent of the units
• F – Fast moving ordered
• S – Slow moving • Annual cost of carrying the inventory is
• N – Non Moving constant
◼ • Total inventory cost = Ordering cost +
6. SDF & GOLF Classification carrying cost
• Based on source of procurement
EOQ – Three Approaches
• S – Scarce, D- Difficult, E- Easy.
• Trial and Error method
• GOLF
• Order-formula approach
• G – Government, O – Ordinary, L –
• Graphical approach
Local, F – Foreign.
EOQ & Re-order point
7. SOS Classification • EOQ – gives answer to question “How
• Raw materials especially for much to Order”
agriculture units • Re-order point – gives answer to
• S – Seasonal question “when to order”
• OS – Off seasonal
Inventory control responsibility
Deciding on the inventory model
• Assume an analyst applies an inventory • Purchasing naturally has vest interest in
model that does not allow for spoilage to inventories, even to the extend that in some
a grocery chain’s ordering policy for companies the purchasing and stores
lettuce and formulates the strategy of functions are combined.
ordering lettuce in large amounts every • Production looks after the work in progress
Logistics plays a major role in inventory
14 days. A little thought will show that
contro
this is obliviously foolish. This strategy • Inventories are economic importance to
implies that lettuce will be spoiled. finance department
However it is not a failure of inventory, it • The fact that materials must be moved from
is a failure to apply the correct model. one place to another is of importance to
materials department
Different approaches • In effect the responsibility cannot be kept on
• Certainty approach one head since inventory management is a
integrated effort
Uncertain variables and risk are addressed
separately
• Uncertainty approach