OPERATION STRATEGY

4
paper
 Operations decision
Strategic operations decisions include:
• expanding or reducing capacity
• locating a business or relocating it
• offshoring or reshoring
• outsourcing
• changing operations (production) methods
• application of IT and AI
 Operations decision
The influence of human, marketing and finance
resource availability on operations decisions :
all department involve !

For example, decisions to:

• Expand capacity will require long-term sales
forecasts from the marketing department, a
revised workforce plan from human resources
and financial resources to pay for it. If these
resources
-
are not available, the decision to
expand
-
might have to be abandoned.
 Operations decision
The influence of human, marketing and finance
resource availability on operations decisions :

For example, decisions to:

•Relocate operations will require a suitable

supply of labour in the new location, an
efficient distribution system to customers from
the proposed site, and financial resources to
pay for the costs of buying and developing the
site. If these resources are not available or are
inadequate, then an alternative site will be
needed, or the decision could even be made to
remain on the existing site.
 Operations decision
The changing role of Information Technology (IT) and Artificial
Intelligence (AI) in operations management
1. COMPUTER AIDED DESIGN (CAD)
- the use of computer programs to create two or three
dimensional (2D or 3D) graphical representations of
physical objects.
- developed for specific applications, such as architectural
designs
- widely used for computer animation and special effects in
movies, advertising and other applications where the
graphic design itself is the finished product
- is used mainly for the creation of detailed 3D models.
 Operations decision
The benefits of CAD include:
• lower product development costs
• increased productivity
• improved product quality
• quicker development of new products and reduced time to bring
them to market -
so
get
that cust
idea of the
an
can

visual of the product

• good visualisation of the final product and its major components

• great accuracy, so errors in production are reduced.
The limitations of CAD include:
• complexity and cost of the programs
• need for extensive employee training
• it requires large amounts of computer processing power, which can
be expensive.
 Operations decision
2. COMPUTER AIDED MANUFACTURING (CAM) >
-
system will
the entire
control
manufacturing

- the use of computer software to control machine tools and

related equipment in the manufacturing of components or
complete products.
- factory can be highly automated.> use
- machines

- usually seeks to control the production process through

automation.
- These processes are carried out by robotic tools, such as
lathes, milling machines and welding machines.
 Operations decision
The benefits of CAM include:
reduce faulty

• Precise manufacturing and reduced quality problems.

>
-
and defect

• Faster production and increased labour productivity.

• More flexible production operations, which allow quick
>
-
if labour then
need another

skill > training needed -

changeover from one product to another.

-

cost &

• Integrating with CAD and CAM allows more design variants of a

Y
mass
product to be produced. This means that niche products can be
customisation

produced as well as mainstream mass-market products, often on

the same production line. This form of mass customization
increases the competitiveness of businesses in both small and
large market segments.
 Operations decision
The limitations of CAM include:
• Costs of hardware, programs and employee training. These
costs may mean that smaller businesses cannot access the
benefits of CAM, although technology is becoming cheaper.
• Hardware failure and breakdowns can occur, which can be
complex and time-consuming to solve.
• Quality assurance is still needed. Errors in programs can
produce faults that have to be spotted and rectified before
being passed on to the next stage of production.
S need group of workers
to inspect the quality
of products
 for 14
important
Flexibility and innovation
Operational flexibility :
- the ability of a business to vary both the level of production and
the range of products following changes in customer demand.

Process innovation :
- the use of new or much – improved production methods or
service delivery methods.
 Flexibility and innovation eg . buy from
> send
-
by
PRIME
drone
or

in
AMAZON
an hour

This flexibility can improve business efficiency by: robot mamak

eg .

• adapting the volume of output to changes in market demand

• changing delivery time schedules to meet changes in the
timing of customer requirements
• responding to the demand from customers for unique or
unusual product specifications.
 Flexibility and innovation
Operational flexibility can be improved in a number of ways :
• Increasing capacity by extending buildings and buying more
equipment.
• Outsourcing some production so that output can be varied
rapidly.
• Holding high inventories just in case consumer demand
increases in unpredictable ways.
• Employing a flexible and adaptable labour force.
• Investing in production systems that allow for mass
customisation.
 Flexibility and innovation
Process innovation :
- the use of new or much – improved production methods or
service delivery methods.
can track parcel
eg .
 Flexibility and innovation
Some recent examples help to show the extent and importance
of some of these new methods of process innovation:
• robots in manufacturing
• faster machines to manufacture microchips for computers
• computer tracking of inventories (e.g. by using bar codes and
scanners) to reduce the chances of customers finding
businesses out of stock u

• internet tracking of the exact location of parcels being delivered

worldwide to improve the speed of delivery.
 Enterprise resource planning (ERP)
- the use of a single computer application to plan the purchase
and use of resources in an organization in order to improve
operations efficiency.
- ERP links all business functions, such as manufacturing,
marketing, human resources and finance, through one software
platform.
a
database
 Enterprise resource planning (ERP)
BENEFITS:

 Supply only according to demand

 Just in time ordering of stocks
 Reduces costs at all stages of the supply chain
 Improved delivery times and better customer service
 Department linked more closely together by single
database – better coordination
 Management information increased
 More accurate costing and pricing of products
 More effective utilization of capacity and quicker
response to change.
 Enterprise resource planning (ERP)
LIMITATIONS:

 The costs of the database and computer systems have to be

considered, although these costs are falling with technological
advances in computing power.

 Employee training costs have to be incurred as a badly

implemented ERP system could make operations less efficient.

 The different ways in which different departments can operate

now have to be reduced to one common system. This may
cause resentment as departments are forced to give up tried-
and-tested ways of operating.

 In most businesses the full implementation of ERP can take one to

three years. Technological advances over this period could
make the chosen software obsolete. Financing further investment
in the most up-to-date ERP system might require other projects to
be abandoned.
 LEAN PRODUCTION
- Producing goods and services with the minimum of
waste resources while maintaining high quality.
- started as a Japanese production concept but is now
widely adopted throughout global industry.
- approaches :
1. Kaizen
2. Quality circles
3. Simultaneous engineering
4. Cell production
5. Waste management
 LEAN PRODUCTION
AIMS & PURPOSES :
- to produce quality output with fewer resources.
- less waste, less duplication and elimination of unnecessary non
added-value activities

The main sources of wasted resources in industry are:

• excessive transportation of components and products
• excessive inventory holding
• unnecessary movement by employees (e.g. to get supplies of
components from the storeroom)
• waiting time (delays in the production process)
• over-production (producing in excess of demand)
• over-processing (making goods that are too complex although
they could have been designed more simply)
• defects (products that do not come up to quality standards and
have to be rejected or corrected)
• underutilised talent (not giving employees the opportunity to use
all of their abilities).
 KAIZEN
- Japanese term meaning continuous improvement
- All workers have something to contribute to improving the way
their business operates
- Suggests that workers actually know more than managers about a
job should be done or how productivity might be improved.
- Improvements in productivity do not just result from massive one –
off investments in new technology. A series of small
improvements, suggested by staff teams, can , over time, amount
to as big an improvement in efficiency as a major new investment
KAIZEN VS “ONE OFF” INVESTMENT
 Conditions:
 Management culture must be directed towards
involving staff and giving their views and ideas
importance
 Team working – suggesting and discussing new ideas to
improve quality – management need to provide time
and necessary training
 Empowerment – giving the power to take decisions
regarding workplace improvements – will motivate the
staff
 Limitations :
 Some changes cannot be introduced gradually and may need a
radical and expensive solution such as an AI-based operations
system.

 There may be resistance from senior managers to such a

programme due to their existing culture. Kaizen will only work
effectively if there is real empowerment of the groups involved.
Authoritarian managers find this impossible to accept.

 In the short term, there may be tangible costs to the business of

such a scheme, such as employee training and lost output as a
result of group meeting times.

 The most important advances tend to be made early on during

the kaizen programme. Later changes can be less significant.
Some business analysts believe there could be diminishing returns
from kaizen.
QUALITY CIRCLES
- This is a Japanese-originated approach to quality. It is
based on worker involvement in improving quality, using
small groups of employees to discuss quality issues.
- Teamworking and participation can both
improve quality and increase worker participation
- To investigate quality problems and present solutions to
management – or, if a group is fully empowered, to put
the improvements into effect itself.
SIMULTANEOUS ENGINEERING
- product development organized so that different
stages are done at the same time instead of in
sequence
- This is a method of developing new products which
saves time.
- The stages of design, market research, costing and
engineering tasks are all done at the same time as
each other (simultaneously), not one after the other
(sequentially).
- The advantage of simultaneous engineering is that new
products can be in the marketplace months or
even years earlier than would have been the case with
sequential methods
CELL PRODUCTION
- flow production split into self – contained groups that
are responsible for a complete unit of work.
- is a form of flow production.
- the production line is split into several self-contained
mini-production units known as cells.
- each individual cell produces a complete unit of work
(for example, a complete washing machine motor), not
just one small part of it.
- each cell has a team leader and below that a single
level of hierarchy made up of multi-skilled workers.
- the performance of each cell is measured against pre
set targets
CELL PRODUCTION
The cell production system has led to:
• significant improvements in worker commitment and
motivation
• increased teamwork and a sense of ownership of the
complete unit of work
• job rotation within the cell
• increased productivity.
JUST IN TIME INVENTORY CONTROL
Refers to AS

-
can deliver on time
 word
WASTE MANAGEMENT
came- Lean production approach is about reducing the
causes of waste in business organisation.
- Specifically, the waste of physical resources, resulting
from damage in inventory or defective products
that have to be rejected, can be reduced by:
• JIT to reduce inventory holdings and the risk of
damage before materials and components are
needed in production.
total quality management
• Adopting TQM and zero-defect principles. These
-
~

reduce the cost of resources which have to be

rejected for failure to reach quality assurance
standards.
• The use of production methods that allow for the use of
recycled materials. This will also improve
the sustainability of the operations of the business.
 ADVANTAGES OF LEAN PRODUCTION
 Waste of time and resources is substantially
reduced or eliminated
 Unit costs are reduced, leading to higher
profits
 Working area is less crowded and easier to
operate in
 There is less risk of damage to stocks and
equipment
 New products launched more quickly
 Quality is improved
 Employee’s jobs are enriched, their roles
enhanced and motivation improved.
 Limitations of operational strategies to
achieve lean production
• Businesses may have difficulty in forecasting
demand.
• Some businesses depend on customer service as
their unique selling point. A less lean approach
with higher inventories is more appropriate in
such circumstances.
• Lean production can result in job losses and not
appropriate for social enterprises.
• The cost of new technology and retraining might
be too high
 Links between lean production and inventory
control, quality, employees roles, capacity
management and efficiency
1. Inventory control (JIT)
2. Employees’ roles >
-
flexible employment contract

3. Capacity management >

- effective use of
avail capacity or resources

4. Efficiency >
-
less waste >
-
copt

5. Quality>
-
no" detect less waste
 OPERATION PLANNING
The need for operation planning:

• Operations decisions need to be planned carefully to minimise resource use, including

the time taken to complete the chosen project.
• Projects are specific tasks that result from the need for an organisation to change.
• All these projects involve the use of resources. Labour, buildings, machines,
management time, and factory or office space will all, to varying degrees, need to be
used for a new project.
• Resources are expensive. The most expensive resource is one that is not used or
underused.
• Unused inventories take up space and working capital, machinery left idle wastes
capital and can require protective maintenance, and labour left waiting for supplies to
arrive will add unnecessarily to the wages bill.
• Efficient firms always aim to use their resources as intensively as possible and avoid
wasted time and idle assets.
 OPERATION PLANNING
Network diagrams as tools to plan operations
 Diagram used in critical path analysis that show logical
sequence of activities and the logical dependencies
between them and the critical path can be identified.
 Critical path analysis (CPA)
 A planning technique that identifies all tasks in a
project, puts them in the correct sequence and allows
for the identification of the critical path

 Critical path – the sequence of activities that must be

completed on time for the whole project to be
completed by the agreed date
minimum duration
↓
 It indicates the shortest possible time in which a project
can be completed
 Critical path analysis (CPA)
 Involves following steps:
a. Identify the objective of the project, eg. Building a factory within 6
months

b. Put the tasks that make up the project into the right sequence and
draw a network diagram

c. Add the durations of each of the activities

d. Identify the critical path – those activities that must be finished on

time for the project to be finished in the shortest time

e. Use the network as a control tool when problems occur during the
project
 Main elements of a network diagram: activities,
dummy activities, nodes

1.NODE
start time
number · -> earliest
5 3
of [ EST A EST B EST
activity I > &
2
LFT 3
LFT LFT
& G
↓
latest finish time duration 5

-------

2.ACTIVITIES ↓
not an

(to show the

activity
connectivity

3. DUMMY ACTIVITIES
Construction of a network

(after (

can just start

can just start

can start aft A

after BB (
network diagram .

976738
J
> O
22

322 T & 53 38
4

El 7
7
14
D
H
6 14
C
A
288 12
3 420
2/
G
7 1) Minimum duration : 42 days (actual =
80 days
z
I
2) Critical path/activities
:
G

B
Cimportant activity that needs
to be done A S A P without
. . .

6
no delay (
critical path
y
a)A + E + F + G + 1 + j =
42 days
+ c + D + G + 1 + 3 41 day
b)A
=

+ c + H + 1 + j =
41 days
c)A
D + G + 1 + 7 = 22 days
a)b +

+
H 1 + 7 =
27 days
e) B
+

3) Non-critical path :

(can be delayed
=
B , C ,
D ,
It (all that are not in critical

LFT-duration -
EST EST (next activity
-

duration -
EST (these activity (
Total float Free float
0 = 15
B21 -
6 -

- 6 -
0 = 14
20

1
8 =
0
8
=
12
-

1
-

(21
-

20

6 20 = 6 = 6
6 2
-

D 32 3
- -

-o
-

just a -
count of value total
EST· highest 20 = 1
no des
35 14 1 35
-
14 -

H 20 =
- -

(don't
matter the LFT
count
position (
4 .

R to L
·
minus
· lowest value total
 B 18 D 22 F 25
A 4 >
5 2 H 28
> 2
j3 18
12
22
3 6 7 7
4 4 25 3 28

1
& 7
I
&

C Il E
7 4
7 13 9

16

Free float
Total float EST (now
duration
-

EST EST (next) -

LFT-duration -

2 7 - 4 = 0
4 =
I
-

13 7-
C
-

2
9 11 =

1 = 2 -

22
-

a
E
-

22
= 5
Minimum duration : 5 -
4
= 16
4 25
-

25 16
-
-

=
28 days E

Critical path :

A + B + D + F + H =
28

Non critical path :

C ,
E
, a
 2

18

g 3 14 16

j 3 14 16

18

18
 critical :
5. < ESSAY GUIDE
5

non
critical path :

F H 11 B C E F 1) It is a planning tool for the manager

9) + = ,
A c +
holding cost
,
+ ,

when to order stocks > minimise stock

may know
-
-

H 16
4
=
+
+ D +
b)n 2) Can be a control tool for the manager
-

can see when to start and finish - > avoid delays

T Float
.

F float
.
-
if don't have this - all delay > cost for the project ↑
-

IFT D EST EST(next) D EST (now

(need
-

to pay
- -
-

compensation to

B 6 2 0 = 4
-

however ,
pandemic is beyond customers it delay
0
-

2 -0
-

2 =

-
-

control

C 10 -
2 -
3
=
55 -
2 -
3 =
0 3) allow business to give accurate
delivery date
-
inform cust
E 14 -
8 -
2 =
4/14
-
8 -
2
=
4
F 14 -

4 -
5 =
5 14 -
4
- 5
=
5
4
. x ESSAY GUIDE <S
-

recognise the activity

* D is a critical activity

* any delay incomplesion would delay the launch

unless the manager is able to speed up activities GH
* if activity D is delay by a week
the launch,

will be delayed by a week a well

to focus on the
* the marketing manager will have remaining
critical activity such as G H , manager would have
to divert resources from the non-critical activities
to speed
up 23 H activities
Ev =
the success of this will depend on wether resources can be
diverted to a different use
 Calculating EST AND LFT
Est =
-left to right
-add
-take the highest value

Lft =
-right to left
-subtract
-take the lowest value
 Calculating critical path
- class discussion
 Calculating float times for non – critical
activities
Total float
-is the amount of time an activity can be delayed
without delaying the whole project duration
- LFT – DURATION - EST

Free float
-is the amount of time an activity can be delayed
without delaying the start of the following activity
-EST(next activity)-DURATION-EST(these activity)
 ADVANTAGES
• Using a network diagram to calculate the total project
duration allows businesses to give accurate delivery dates.
• Calculating an EST for each activity allows the operations
manager to order special equipment or materials needed
for that task at the correct time.
• Knowing the critical path is important. If there is a delay on
a critical activity, as there is no float time, this will put back
the timing of the whole project. This could lead to expensive
damage claims from customers.
• The additional resources for speeding up a critical activity
could come from the non-critical ones.
• The sequential and logical structure of the diagram lends
itself well to computer applications and nearly all business
applications of network analysis are now run on computer.
• The need to put all activities into sequence in order to
structure the diagram each project carefully by putting
activities in the correct order.
• Network analysis gives design and engineering departments
an advantage by showing them the tasks that can be
undertaken simultaneously in developing a new product.
eg GBH can be done tot > save time
-
.
 DISADVANTAGES
• Network analysis will only be helpful if the data used to
construct diagrams is reliable.
• Construction of network alone will not guarantee the
smooth completion of a project. factors) >
- eg . Covid >
-

beyond control (external

Mainly focus on time and not cost > When profit is the main objective
•
-

• It will not help managers to solve human relations

problems
delay the network
>
- . demotivated
eg workers could

workers/workers
eg . not
enough
sick >
-
no extra workers

• When using CPA for a completely new project, there

may be considerable guesswork involved in estimating
the durations for each activity. Y
just estimation , and not accurate
 G
B 3
2
4 v
12
I 14
6 E
9 2
S
A 2
> 2
> > 12 14
3 9
2 2 6
1
D ↑ H a
j
2
2
8

G
>
·