BMG2212 OPERATIONS MANAGEMENT

Since all companies have operations, i.e. certain ways to create an optimal output
from various input sources, whether it be manufacturing physical products or
offering services, it is good to be familiar with the basics of managing these
operations. Especially as mastering these basics can directly support your business
goals.

Operations management is a business discipline that implements practices ensuring

the conversion of inputs into goods and services with maximum efficiency. The
goal is to increase an organization’s income by improving its operations and
maximizing the use of existing resources. It also includes the provision and
delivery of excellent customer service.

Management of the operations department is essential to achieve optimal

utilization of resources. It ensures that goods or services of appropriate
specification and cost are produced within the stipulated period of time. As a
result, an organization will achieve good rates of profit and adequate levels of
customer satisfaction when all these coincide.

This unit, we will introduce you to the concept, historical background of operation
management its guiding principles, and the everyday activities that are the responsibility
of an operation manager. It will also give you an outlook on some of the recent
trends that have an impact on this discipline.

1.0 INTRODUCTION TO OPERATIONS MANAGEMENT

Operations management is a field of business that involves managing the

operations of a business to ensure efficiency in the execution of projects.
Operations management may also be refer to all those activities involving
planning, organizing, and supervising processes, and making necessary
improvements for higher profitability. The adjustments in the everyday operations
have to support the company’s strategic goals, so they are preceded by deep
analysis and measurement of the current processes.

Operations management in business involves converting input such as capital,

labor, raw materials, and information into outputs such as goods, services and
profits to achieve desired results.

The creation of goods or services involves many transformational processes such

as design, manufacturing, storage, transportation, etc. In other words, it aims to
improve profits by achieving customer satisfaction. This is done by fulfilling
customer requirements and realizing the organization’s management objectives.
Operations management is, therefore, a vast field and can involve product and
process designs, plant layouts, material management, maintenance, quality control,
production plan, and control, etc.

1.1 Nature of operations management

Operations management involves planning, organizing, and supervising processes,

and make necessary improvements for higher profitability. The adjustments in the
everyday operations have to support the company’s strategic goals, so they are
preceded by deep analysis and measurement of the current processes. The above
definitions imply that:

 A transformational Process: Operations management is concerned with

converting materials and labor (inputs) into goods and services(outputs) as
efficiently as possible.
  Balancing costs and revenue: Corporate operations management
professionals try to balance costs with revenue to maximize net operating
profit.

 Dynamic- Operations management is dynamic in nature. It keeps on

changing as per market trends and demands.
 Continuous Process– Operation management is a continuous process. It is
employed by organizations for managing its activities as long as they
continue their operations.
 Coordination of departmental activities; It involves active coordination
from various other departments such as production, sales, accounting, and
customer service.

 Wide managerial scope: Operation management involve the performance

of various functions which may include: supply chain management, product
design, forecasting, quality control and delivery management.

 Utilizes all required organizational resources: Operations management

involves utilizing resources from staff’s expertise, materials, equipment,
and technology to acquire, develop, and deliver goods to clients based on
their/client needs and the abilities of the company.

 Emphasizes on production processes; Operations management

responsibilities include giving attention to production and process design,
layout design, control of inventory and raw materials, distribution, proper
sales and marketing, delivery of customer service, etc.
1.2 Scope/functions of operations management

Operations Management concern with the conversion of inputs into outputs, using
physical resources, so as to provide the desired utilities to the customer while
meeting the other organizational objectives of effectiveness, efficiency and
adaptability. It distinguishes itself from other functions such as personnel,
marketing, finance, etc. by its primary concern for ‘conversion by using physical
resources’. Following are the main functional areas that form the scope of
Operations Management:

1. Location of facilities.
2. Plant layouts
3. Product Design.
4. Process Design.
5. Production Planning and Control.
6. Quality Control.
7. Materials Management.
8. material handling
9. Maintenance Management

1 Location of facilities

Location of facilities for operations is a long-term decision, which involves a

long-term commitment about the geographically static factors that affect a business
organization. It is an important strategic level decision-making for an organization.
It deals with the questions such as ‘where the main operations should be based.
The selection of location is a key-decision as large investment is made in building,
plant and machinery. An improper location of plant may lead to waste of all the
investments made in plant and machinery equipment. Hence, location of plant
should be based on the company’s expansion plan and policy, diversification plan
for the products, changing sources of raw materials and many other factors. The
purpose of the location study is to find the optimal location that will results in the
greatest advantage to the organization.

2 Plant layout

Plant layout refers to the physical arrangement of facilities: As the name signifies,
plant layout is the grouping and arrangement of the personnel, machines,
equipment, storage space, and other facilities, which are used in the production
process, to economically produce the desired output. The overall objective of the
plant layout is to design a physical arrangement that meets the required output in
terms of quality, quantity and cost. According to James More ‘Plant layout is a
plan of an optimum arrangement of facilities including personnel, operating
equipment, storage space, material handling equipment and all other supporting
services along with the design of best structure to contain all these facilities.

3 Product design

Product design deals with conversion of ideas into reality. Every business
organization have to design, develop and introduce new products as a survival and
growth strategy. Developing the new products and launching them in the market is
the biggest challenge faced by the organizations. Product design is all about an in-
depth analysis of the customer’s requirements and giving a proper shape to the
idea, which thoroughly fulfils those requirements. It is a complete process of
identification of needs of the consumers to the final creation of a product which
involves designing and marketing, product development the entire process of need
identification to physical manufacture of product involves three functions;

i. Identification of needs of the consumers

ii. Design and Marketing,
iii. Product, Development and
iv. Producing/manufacturing.

Product Development translates the needs of customers given by marketing into

technical specifications and designing the various features into the product to these
specifications. Manufacturing has the responsibility of selecting the processes by
which the product can be manufactured. Product design and development provides
link between marketing, customer needs and expectations and the activities
required to manufacture the product.

4 Process design

Process design is a macroscopic decision-making of an overall process route for

converting the raw material into finished goods. It is the planning and decision
making of the entire workflow for transforming the raw material into finished
goods,

These decisions encompass the selection of a process, choice of technology,

process flow analysis and layout of the facilities. Hence, the important decisions in
process design are to analyze the workflow for converting raw material into
finished product and to select the workstation for each included in the workflow.

5 Production planning and control (PP&C)

Production planning and control can be defined as the process of planning the
production in advance, setting the exact route of each item, fixing the starting and
finishing dates for each item, to give production orders to shops and to follow-up
the progress of products according to orders. The principle of production planning
and control lies in the statement ‘First Plan Your Work and then Work on Your
Plan’. Main functions of production planning and control include Planning,
Routing, Scheduling, Dispatching and Follow-up.

 Planning is deciding in advance what to do, how to do it, when to do it

and who is to do it. Planning bridges the gap from where we are, to
where we want to go. It makes it possible for things to occur which
would not otherwise happen.
 Routing may be defined as the selection of path, which each part of the
product which being transformed will follow from raw material to
finished products. Routing determines the most advantageous path to be
followed for department to department and machine to machine till raw
material gets its final shape.
 Scheduling determines the program for the operations. Scheduling may
be defined as 'the fixation of time and date for each operation' as well as
it determines the sequence of operations to be followed.
 Dispatching is concerned with the starting the processes. It gives
necessary authority so as to start a particular work, which has already
been planned under ‘Routing’ and ‘Scheduling’. Therefore, dispatching is
‘Release of orders and instruction for the starting of production for any
item in acceptance with the Route sheet and Schedule Charts’.
 The function of Follow-up is to report daily or as often as possible the
progress of work in each /stage in a prescribed proforma and to
 investigate the causes of deviations (if any) from the planned
performance.

The main objective of production planning and control is to ensure that the
production process runs smoothly and efficiently. A number of factors need to be
considered when planning and controlling production, such as demand forecasting,
capacity planning, inventory management, scheduling, and quality control.

Production planning and control are vital in operations management, ensuring that
all resources are used optimally to meet customer demand. By carefully planning
and controlling production, businesses can minimize waste, reduce costs, and
improve quality.

6 Quality control (QC)

Quality Control may be defined as ‘a system that is used to maintain a desired

level of quality in a product or service’. It is a systematic control of various factors
that affect the quality of the product. Quality Control aims at prevention of defects
at the source. It relies on effective feedback system and corrective action
procedure. Quality Control can also be defined as ‘that Industrial Management
technique by means of which product of uniform acceptable quality is
manufactured’. It is the entire collection of activities, which ensures that the
operation will produce the optimum quality products at minimum cost. The main
objectives of Quality Control are:

 To improve the companies' income by making the production more

acceptable to the customers i.e. by providing longlife, greater usefulness,
maintainability, etc.
  To reduce companies cost through reduction of losses due to defects.
 To achieve interchangeability of manufacture in large-scale production.
 To produce optimal quality at reduced price. Production Planning and
Control
 To ensure satisfaction of customers with productions or services or high-
quality level, to build customer good will, confidence and reputation of
manufacturer.
 To make inspection prompt to ensure quality control. 7. To check the
variation during manufacturing.
7 Materials management

Materials Management is that aspect of management function, which is primarily

concerned with the acquisition, control, and use of materials needed and flow of
goods and services connected with the production process having some
predetermined objectives in view. Its aim is to acquire, transport and store the
material in such a way to minimize the related cost. It tends to find out new sources
of supply and develop a good relationship with the suppliers to ensure an ongoing
supply of material.

Thus, the main objectives of Material Management may include:

 To minimize material cost.

 To purchase, receive, transport and store materials efficiently and to reduce
the related cost.
 To cut down costs through simplification, standardization, value analysis,
import substitution, etc.
 To trace new sources of supply and to develop cordial relations with them in
order to ensure continuous supply at reasonable rates.
  To reduce investment tied in the inventories for use in other productive
purposes and to develop high inventory turnover ratios.
8 Material Handling

Material Handling is all about holding and treatment of material within and
outside the organization. It is concerned with the movement of material from one
warehouse to another, from warehouse to machine and from one process to
another, along with the packing and storing of the product. The key objectives of
material handling are:

 Cost Reduction.
 Increasing Warehouse Capacity
 Improving Layout to Reduce Waste.
 Optimal Equipment Utilization
 Increasing Safety ...
9 Maintenance management

In modern industry, equipment and machinery are a very important part of the total
productive effort. They play a crucial role in the process of production. So, if they
are not available at the time of need, due to any reason like downtime or breakage
etc. then the entire process will suffer.

Hence, it is the responsibility of the operations manager to keep the plant in good
condition, as well as keeping the machines and other equipment in the right state,
so that the firm can use them to their optimal capacity.

The main objectives of Maintenance Management are:

 To achieve minimum breakdown and to keep the plant in good working

condition at the lowest possible cost.
  To keep the machines and other facilities in such a condition that permits
them to be used at their optimal capacity without interruption.
 To ensure the availability of the machines, buildings and services required
by other sections of the factory for the performance of their functions at
optimal return on investment

1.3 Historical background

Operations management was previously called production management, clearly

showing its origins in manufacturing. Historically, it all began with the division of
production, starting as early as the times of ancient craftsmen, but spreading more
widely only by adding the concept of interchangeability of parts in the eighteenth
century, ultimately sparking the industrial revolution.

Still, it was not until Henry Ford took a twist on manufacturing with his famous
assembly line concept, otherwise known as “bring work to men,” that the
management of production for improving productivity became a hot topic. From
the 1950’s and 1960’s, it formed a separate discipline, besides bringing other
concepts, such as Taylorism, production planning, or inventory control, to life.

As the economies in the developed world were gradually shifting to be service-

based, all the corporate functions, including product management, started to
integrate them. The service side also began its approach by applying product
management principles to the planning and organizing of processes, to the point
where it made more sense to call it operations management.

1.4 Multidisciplinary nature

Operations management is now a multidisciplinary functional area in a company,

along with finance and marketing. It makes sure the materials and labor, or any
other input, is used in the most effective and efficient way possible within an
organization – thus maximizing the output.

Operations management requires being familiar with a wide range of disciplines. It

incorporates general management, factory- and equipment maintenance
management by tradition. The operations manager has to know about the common
strategic policies, basic material planning, manufacturing and production systems,
and their analysis. Production and cost control principles are also of importance.
And last, but not least, it has to be someone’s who is able to navigate industrial
labor relations.

1.5 Importance of operations management

In smaller companies, operations are very simple and straightforward. Everyone

takes part in managing the processes, and more or less, things go smoothly.

The same, however, doesn’t apply to companies with 20+ employees. That’s when
things start getting complicated. You can’t just rely on your employees to do work
right – you need to have standardized procedures to ensure that everything as
efficient as possible.

If done right, operations management can lead to;

1. Increase Productivity: The operations manager design production plans for

carrying out the operations and ensure that all inputs used by organizations
are efficiently transformed into outputs/ products or services that are to the
satisfaction of the customers.
Thus, operation management plays an important role in increasing the
productivity of business.
2. Raise the company Revenue: Operational management directly influences
the profitability of the business, by increasing efficiency and reducing the
cost of operations.
3. Maintenance of quality Ensures that production and delivery of
products/services are consistently to the customer expectation. When
effectively done it helps establish loyal customers while attracting more new
ones which increase the overall revenue of business.
4. Achievement of Organization Goals: Proper management of production
activities helps business to properly implement their strategic plans in their
operation and ensures that all operations of business are going in desired
direction by regularly monitoring every activity and taking all corrective
measures if required. Proper functioning of business as per strategic plans
helps in achievement of desired goals.
5. Motivates Employees: Operation managers guide all peoples in performing
their respective roles and provide them with better work atmosphere which
include recognizing their contributions and rewarding them appropriately.
6. Improves Employee productivity: Operation management organizes and
coordinates in such a way that every worker knows what is expected of
him/her in terms of; what to do, where, when and why. With adequate
training and motivation this obviously improves the productivity of
employees.
7. Optimum utilization of resources: Operation management focuses on
optimum utilization of all resources of the organization It frames proper
policies and strategies and ensures that they are executed accordingly in all
operations of the organization. They keep track of all activities and ensure
that all resources are utilized on only useful means and are not wasted.
 8. Reduce Investment Need: Operation management reduces the additional
capital requirements of the business by ensuring that all capital employed in
the business are efficiently used. It ensures that all production activities go
uninterrupted without any shortage of capital. By increasing the efficiency
and avoiding the wastage of employed resources minimizes the need for
more investment in capital.
9. Enhance Goodwill of the company: Maintaining proper goodwill in the
market is the goal of every business. Operation management focuses on
improving the position of the organization by delivering high-quality
products that provide better satisfaction to users. Customers thereby gain
confidence in the company’s products and thus enhancing image in the
market
10.Ensures Continuous Improvement and Innovation: Operation management
helps in implementing innovative changes in organizational activities. All
decision regarding production planning is taken by operation managers by
doing research and analysis of prevailing market situations. It considers all
technological changes and builds a strong base of knowledge and operations.
This helps in bringing various innovations in operations of the business.

2.0 MANAGING OPERATIONS

There are various process management theories and operations management
philosophies that can help to better manage a business’ doings. Let’s take a look at
what these include:
2.1 PRODUCTION FORECASTING

Forecasting to determine how to allocate the budgets or plan for anticipated

expenses for an upcoming period of time. This is typically based on the projected
demand for the goods and services that are to be offered.

Production forecasting can be understood to be a process of estimating future

demand for products, as well as the resources required to manufacture those
products, It involves subjective judgement of the production manager and the
success or failure of an organization depends upon the accuracy of its production
forecasts.
Production Forecasting estimates the resources which are required to produce those
goods and services. These resources may include human, financial and
material. Thus, production forecasting is an estimation of a wide range of future
events, which affect the production of the organization.

Production forecasting is defined as the process of estimating future production

levels for a company or organization, based on past production data and
information about current and future demand for the product or service.

Production forecasting can also be understood to refer to a systematic analysis of

past and present conditions with the aim of drawing inferences about the future
course of events.

Louis Allen defines forecasting, as a systematic attempt to probe the future by

inference from known facts.
Features of Forecasting:
Based on the above definitions the following features of forecasting are explained
below:
1. Involves Future Events:
Forecasting relates to future events and trends although much of it is calculated
estimations or guesswork.

2. Forecasting is the essence of planning

Planning uses forecast information to decide what is to be done so as to achieve the

anticipated goals.

3. Depends upon Past and Present Event:

Actually, forecasting is made by analyzing the past and present relevant data. It
takes all the factors into account, which affect the functioning of the enterprise.

4. Happening of Future Events:

Forecasting defines the probability of happening of future events. Therefore,
happening of future events can be precise only to a certain extent.

5. Makes use of Forecasting Techniques:

Forecasting is a systematic attempt to probe the future with a view to drawing
certain useful projections. Such a probing obviously demands a proper and full
analysis of known facts with the help of various qualitative and quantitative
forecasting techniques.
2.1.1 Benefits of Production Forecasting

Aside from meeting demand, accurate production forecasting offers businesses

several benefits, including-

 Effective Production Planning

However, with new forecasting tools, companies can prepare their systems and
produce high-demand items ahead of time to streamline sales and promote profits.
Production managers can create schedules that organize vendor deliveries,
operations, and shipments to avoid supply chain disruptions.

 Improved Inventory Management

With accurate forecasts, companies can optimize their inventory levels to reduce
excessive fees and promote profits. Forecasting tools can alert manufacturers when
demand decreases, allowing them to slow production and minimize stock levels.

It can also detect emerging demand surges so companies can begin stocking up
goods to fulfill future orders. By enhancing inventory management, organizations
can optimize the usage of the warehouse, storage, and workspaces.

 Cost Reduction

Aside from reducing inventory costs, an accurate forecast can help companies
reduce operational expenses and material waste. For example, a company that over
orders materials when demand is slowing will drive costs high and receive a
surplus of merchandise, resulting in excessive storage expenses or wasted
resources.
With better estimation, the business could have limited production and invested
funds in another supply chain operation.

 Optimized Logistics

By collaborating the demand of all product lines, businesses can consolidate

shipments to save on delivery and handling costs. Preparing systems ahead of time
enables companies to avoid expedited shipping fees. This gives organizations a
competitive advantage over companies that are unable to anticipate demand trends.

 Increased Customer Satisfaction

Without proper inventory management and logistical planning, businesses can

experience shipment delays, resulting in late customer deliveries. This can
negatively impact customer satisfaction, loyalty, and advocacy. However, utilizing
forecasts enables companies to streamline production to fulfill requests and
promote sales.

2.1.2 Methods Techniques of Production Forecasting

The models or techniques of production forecasting you may adopt depending on

the need and prevailing circumstances may include some of the following:

 Brainstorming technique.
 Goal oriented forecast technique.
 Graphic charting technique.
 Matrix technique.
 Nominal group technique (NGT).
 Delphi technique.
  Simple average technique.

1. Brainstorming technique
Brainstorming technique is used to forecast demand, especially for new products.
In this method, many experts sit together and each expert gives his own idea
(forecast) and reason for it. One idea leads to many more ideas. The group of
experts will develop much more ideas than one person. Based on these ideas,
demand can be forecasted.
2. Goal oriented forecast technique
In this technique, a goal is first set. Then the technological developments which are
required for achieving that goal is identified. Later, a forecast is made about when
these technological developments would take place in the future So, an estimate is
made about the timing of these technological developments in an upcoming future.
This method is used by large companies, which have their own research and
development departments.
3. Graphic charting technique
Graphic charting technique is used to forecast future production activities by
plotting past productions on a logarithmic scale. This technique assumes that
production expands. This technique estimates, when the next major (big)
production is likely to take place.
4. Matrix technique
Matrix is a combination based on the relationship of two or more matters relating
to the production process. A matrix is prepared with technological developments,
product functions and time factor. Matrix technique is comprehensive and flexible
and so it can adjust with the changing times. When one factor changes obviously
there will be an effect on one or more other factors. This technique is used only by
large companies.
5. Nominal group technique (NGT)
In nominal group technique (NGT), the group members think independently. Each
group member contributes his own ideas. This technique does not allow interaction
between the group members at an early stage. Interaction takes place only when
the ideas are presented by every single member of the group. Voting is then done
for each idea to arrive at the best and hence the forecast.
6. Delphi technique
Delphi technique is very much similar to the brainstorming technique. The only
difference between brainstorming and Delphi technique is that in a Delphi method,
group members don't interact personally. Here, such personal interaction is
impossible because group members are physically present at different places. The
forecast is arrived at when consensus of the individual members is reached.

7. Simple average technique

In simple average technique, forecasts are based on the average value for a given
period of time. For example a simple average (SA) is the average of demand
(sales) for all previous periods. The demands of all periods are equally weighted.
Simple average equals 'Sum of Demands/sales for all periods' divided by 'Number
of periods.'
Average calculations are made at different intervals in order to reduce error due to
seasonal variations. Instead of taking the simple average of the full year's sales,
quarterly averages or monthly averages are taken. This gives realistic trends.
Averaging reduces the chances of being misled by gross fluctuations that may take
place in any single period. However, if the underlying pattern changes over time,
simple averaging will not detect the change.
2.2 PRODUCTION PLANNING
Production planning is the act of developing a guide for the design and production
of a given product or service. Production planning helps organizations make the
production process as efficient as possible.

Production planning is a process that involves scheduling and organizing the

manufacturing processes in a plant. Effective production planning allows a
company to monitor its production, identify issues, deliver products on time and
avoid problem escalation. At the end of the production planning process, the
company has detailed information on the inventory, process and staff required,
usually laid out in spreadsheets or formal reports.

Production planning can also be understood to mean the fixing of the production
goals and to estimate the resources which are required to achieve these goals. It
prepares a detailed plan for achieving the production goals economically,
efficiently timely. It forecasts for each step in the production process, the
problems which may arise in that process so as to remove them.

According to Ray Wild, production planning is defined as "a planning process

concerned with the determination, acquisition and arrangement of all facilities
necessary for future operations."

Good production planning can save especially manufacturers money, time and
effort, by setting out in advance how many items are planned for production, what
raw materials are needed and the number of people will be needed to make them.
.2.1 Objectives of Production Planning

The main objectives of production planning are as follows:

1. Effective utilization of resources; Production planning results in

effective utilization of resources, plant capacity and equipment which
results in low-cost and high returns for the organization.
2. Steady flow of production; It ensures a regular and steady flow of
production by availing all material, tools, equipment and other
resources required and that are all put to maximum use. This results in
a regular production and indeed supply to customers.
3. Estimate the resources; Production planning estimates the resources
like men, materials, money etc. required to meet the need of
production.
4. Ensures optimum inventory; It balances inventory requirements
between carrying costs and stockouts, hence the maintenance of
optimum inventory by preventing over-stocking or under-stocking.
5. Coordinates activities of departments; Helps to coordinate the
activities of different departments. Such as the marketing department
coordinated with production department to produce and sell the goods.
6. Improves the labour productivity; Improves the labour productivity
by ensuring that the organization employs people with the right skills
and of the right numbers, who are also adequately compensated in
order to motivate them to improve their performance.
7. Facilitates quality improvement; Facilitates quality improvement
through regular monitoring and control and also by developing quality
consciousness among the employees through training, suggestion
schemes, quality circles, etc.
 8. Customer satisfaction; Consistent production and flow of quality
goods and services to the customers at fair prices results in consumer
satisfaction.

2.2.2 Production planning process

The production planning process involves the following steps:

I. Estimating product demand. Doing so produces a rough outline of the

number of products that should be produced in a given time period. This
estimate is generated by combining analysis of historical production
trends with new, potentially relevant trends in the market.
II. Weighing production options. This process involves accounting for the
resources on hand and exploring ways to most effectively use them based
on projected demand estimates.
III. Choosing the most efficient option. Companies should select the use of
resources that is the least costly and most time-efficient.
IV. Monitoring and evaluation. As the plan is carried out, companies
monitor what is happening compared to what should be happening
according to the plan and evaluate any differences.
V. Adjusting the plan. Companies may need to alter the plan so future
production plans meet customer goals more efficiently and are more
successful in their execution.

2.2.3 Types of production methods

The following section defines five types of production and planning methods:

1) Job-Based Planning
Job-Based or Project-Based production planning focuses on manufacturing a single
product and is either handled by a single worker or by a group of people. The type
of jobs that fall under this type of production planning can be on a small scale,
such as creating a customized piece of jewelry. Larger, more complex production
projects, such as building customized houses, also fall into this category.

Production planning for small-scale jobs that require very little specialized
equipment is relatively easy to execute. This allows products to be made according
to their customer’s requests and can usually be included at any time during the
production process without altering its progress.

2) Batch Method

Batch production is used when items are produced in groups, rather than
individually or through continuous production. For example, cookies are produced
in batches which means that each production step occurs at the same time on the
batch of cookies. You will start by measuring the ingredients for the entire batch,
then mix them together, and finally bake them together so that the entire
production process for the batch of cookies starts and ends at the same time.

The challenge that can occur when using Batch Production planning is accounting
for the constraints at each operation step to ensure that you maximize your
resource capacity without going over the maximum limit allowed. For example, if
your dough mixer can fit a batch of 100 cookies, but you can only bake 300 at a
time, you may encounter bottlenecks in production.
3) Flow Method

Flow manufacturing is a demand-driven method that is characterized by the

continuous flow of units through the production line. This technique is commonly
used in the production of televisions and household appliances where the product
is manufactured by a number of collective operations in which materials move
from one stage to another without time lags or interruptions.

The benefits of the flow method of production are that manufacturers can minimize
the number of work-in-process and finished goods items they hold in inventory,
reduce costs, and reduce manufacturing lead times.

4) Mass Production Method

Mass Production is very similar to Flow Production. This technique is highly

beneficial when producing a large number of the same items in a short period of
time.

This type of production is usually automated, which reduces the costs of labor
required for production. Some manufacturing facilities have assembly lines
dedicated to a specific type of item which reduces the changeover time required
and increases the overall production output. This allows manufacturers to increase
their profits as the cost of production is greatly reduced.

With this method, operations are scheduled based on the available resource
capacity and the production time required at each operation.
5) Process Manufacturing Method

Process Production is a type of continuous process similar to Mass Production and

Flow Production but is characterized by the continuous flow of materials through
the production line. Usually, the finished goods produced in this type of production
are not counted as discrete units. For example, the production and processing of
liquids, gases, or chemicals where the product is being produced in a uniform and
standardized sequence.

The Process Method uses specific and sophisticated machinery to process materials
at each operation step. There is little room for error in this type of manufacturing
as changing from one item type to another will require a long changeover period. It
is also common to have by-products or waste that result from this type of
manufacturing.

2.3 CAPACITY PLANNING

Capacity is defined as the ability to achieve, store or produce. For an organization,

capacity would be the ability of a given system to produce output within the
specific time period. In operations, management capacity is referred as an amount
of the input resources available to produce relative output over period of time.

In general, terms capacity is referred as maximum production capacity, which can

be attained within a normal working schedule. Other concepts of capacity involved
in capacity planning include;

o Design Capacity: It refers to the maximum output that can possibly be

produced in a given period of time. It is the ideal situation.
 o Effective Capacity: Refers to the maximum possible output, given the
changes in product mix, machine maintenance, scheduling and operating
problems, labour problems, etc. It is usually less than the design capacity.
o Actual Output: It is the rate of output actually achieved. It cannot exceed
effective capacity due to machine breakdowns, labour absenteeism, irregular
supply of raw materials, unusual delay in supply of equipment, power
breakdown, etc.

Capacity planning is essential to be determining optimum utilization of resources

and plays an important role decision-making process, for example, extension of
existing operations, modification to product lines, starting new products, etc.

A capacity planning is defined as process of determining how much production

capacity is required to meet changing demand for products. Design capacity thus,
refers to an organization's maximum capacity to accomplish work over a given
time period in capacity planning.

Capacity planning process is used by organizations to determine their production

capacity in order to meet the changing needs of their products. A design capacity is
an organization's maximum ability to complete a specified amount of work in a
given time period, in the context of capacity planning.

Capacity planning is the act of balancing available resources to satisfy customer

demand or project capacity needs. In project management and production, capacity
refers to the amount of work that can get completed in a given amount of time.
2.3.1 Classification of Capacity Planning

Capacity planning based on the timeline is classified into three main categories
long range, medium range and short range.

1. Long Term Capacity: Long range capacity of an organization is dependent on

various other capacities like design capacity, production capacity, sustainable
capacity and effective capacity. Design capacity is the maximum output
possible as indicated by equipment manufacturer under ideal working
condition.

Production capacity is the maximum output possible from equipment under

normal working condition or day.

Sustainable capacity is the maximum production level achievable in realistic

work condition and considering normal machine breakdown, maintenance, etc.

Effective capacity is the optimum production level under pre-defined job and
work-schedules, normal machine breakdown, maintenance, etc.

2. Medium Term Capacity: The strategic capacity planning undertaken by

organization for 2 to 3 years of a time frame is referred to as medium term
capacity planning.
3. Short Term Capacity: The strategic planning undertaken by organization for a
daily weekly or quarterly time frame is referred to as short term capacity
planning.

2.1.2 Types of Capacity Planning

Capacity planning itself can be split into three types: workforce, product, and tool.
The three different types of capacity planning ensure that you have sufficient
amounts of three key resources for both the short- and long-term. You should
make plans several weeks, months, or even a year in advance:

1 Workforce Capacity Planning

This capacity planning strategy ensures that you have the workforce needed to
meet demand. It’s all about having the right number of workers with the right skills
and hours available to not just complete jobs but complete them well.
Additionally, this planning will show you when to acquire more people and help
you establish how far in advance you need to start employing based on the length
of your orientation process. It’ll also assist you in communicating overall
business, resource, and personnel needs to pertinent stakeholders.

There is always need to align the number of workers with the work available in
specific times. An efficient use of capacity means that you have just enough of
each kind of worker at any scheduled time so that everyone is busy and there are
no lulls in the process.

2 Product Capacity Planning

This capacity strategy ensures that your business is equipped with the right number
of products or resources needed to fulfill deliverables. For example, a pet store
needs things like food, pet toys, and equipment like carriers, leashes, and cages.
These are all things which are required to fulfill demand.

3 Tool Capacity Planning

Finally, this type of capacity planning strategy ensures that your business is
equipped with the necessary tools to finish the job. Such tools may include
machinery, vehicles, assembly line parts, and anything else needed to create and
deliver your product or service in a timely manner.

Planning for tool capacity ensures you have adequate equipment to finish jobs.
This includes any trucks, equipment for an assembly line, or machinery required
to produce and distribute your product.

2.1.4 Importance of capacity planning

Capacity planning is important due to the following reasons:

1. Capacity planning keeps production/projects on track while making

the most of your team’s time.
2. It ensures that you’re matching what you need with what you have
before your project kicks off, and helps you deliver work on time, on
budget, and on scope.
3. Capacity planning determines the ability of an enterprise to meet
future demand for its products and services.
4. Capacity influences the operating costs. Capacity planning aligns
demand and supply to minimizes on excesses or deficit.
5. Capacity decisions have a direct impact on the amount of fixed
investment made initially.
6. Capacity decisions result in long-term commitment of funds. Such
long-term decisions cannot be reversed except at major costs.
2.1.3 Capacity planning process

Capacity Planning is a method of management that features the efficient use of

resources through a projection of production needs. This type of planning can
apply to a company’s computer network, storage, workforce maintenance, and
product manufacturing.

Planning for capacity breaks down into three steps: determining capacity
requirements, analyzing current capacity, and planning for the future. To gain a
better grasp on how each applies to the planning process, let us take a closer look
at each one individually.

1. Determine Capacity Requirements

The first step of capacity planning is to determine how much capacity you need to
meet demand. Capacity requirements are dictated by the production plan, master
production schedule, or detailed materials plan. These demand signals will indicate
how many items must be produced and this can be used to determine how much
capacity will be required to produce the items.

In this step, businesses can organize the workload by identifying which resources
are needed to accomplish the work, and how much of each resource’s capacity will
be used. In the next steps, this will be compared to the available capacity of the
production facility to determine whether it can successfully meet the demand.

2. Analyze Current Capacity

Capacity of a unit can be measured in terms of output or inputs. Output measure is
appropriate in case of manufacturing concerns, while Service concerns can
measure capacity in terms of inputs.

Businesses take an in-depth look at their current production schedule to evaluate

capacity. They analyze each workload and system as a whole, following these
steps:

 Analyze the performance of resources by comparing predicted versus actual

outputs.
 Check the usage of the various resources of the system.
 Take a look at the resource utilization for each job or item type and decipher
which ones are the major users of each resource.
 Determine where each workload spends its time. This provides insight into
which resources take the greatest portion of response time for each
workload.

Analyzing your current capacity is essential to have a realistic understanding of the

capacity you can utilize. This will allow you to generate accurate and feasible
production plans and identify potential areas of improvement.

3. Plan for the Future

Finally, after analyzing your current capacity, it’s time to plan for the future.
Creating a capacity plan for the future will allow you to identify potential capacity
bottlenecks to prevent overwhelming the production system. Capacity forecast
helps to determine the gap between the existing capacity and estimated capacity so
that necessary adjustments may be made. The use of ‘What-If’ scenarios can be
used to combine demand forecasts with actual demand to create the most optimal
production plan and schedule and have enough time to resolve issues before they
arise.

If your available capacity is consistently lower than the capacity required to meet
your demand, you may want to look at ways to increase your capacity to meet
demand. Depending on the facility and capacity requirement, this can include
adding overtime, additional shifts, improving production processes, or even
investing in additional machines.

These three steps in capacity planning

 help your organization prepare for future growth.

 An optimal capacity configuration ensures you meet your promised
delivery dates
 Helps to purchasing what you need, to get the work completed.
 Facilitates your manufacturing processes
 Offers your company an opportunity to optimize its production process and
ready itself for the future.
2.1.4 Strategies for creating capacity plans

Strategic planning is the proactive approach to capacity planning to ensure that the
company has the resources necessary to achieve its long-term objectives. Here are
four strategies businesses can use to plan for capacity:

1. Lead strategy

Lead capacity plans require a business to increase capacity ahead of future

demand. That way, it can meet the increased demand quickly. There are two ways
to implement a lead strategy. You can add resources to your current production
system or expand it. Many companies add resources to their existing production
processes, such as increasing the workforce, adding more shifts and buying more
resources. Expansion is capital intensive and takes more time, which makes it less
ideal for quickly meeting a sudden increase in demand.

2. Lag strategy

A lag strategy involves delaying adding or expanding production capacity until

after demand rises. This strategy isn't the most ideal because it can make it difficult
for a business to increase production capacity if demand surges. A lag strategy is
suitable for companies that have competing responsibilities and a low budget. If a
business doesn't expect customer demand to rise in the foreseeable future, it might
not be prudent to increase production capacity.

3. Match strategy

A match strategy involves adding capacity when the existing capacity matches
current consumer demand. Using this strategy to plan capacity simplifies the
budgeting process and provides clarity when planning for resources, work
schedules and workforce requirements. This is because the company is only
investing in the capacity required to meet current demand. This makes it ideal for
companies operating in a predictable environment where they can estimate demand
over a long period with a high level of confidence.

For businesses that operate in markets with dynamic demand, a match strategy can
be a disadvantage because it doesn't plan for sudden fluctuations in demand. If
there's a sudden rise in customer preference for the company's goods, they might
not have adequate capacity to meet buyers' expectations.

4. Adjustment strategy
An adjustment strategy involves making gradual changes to production capacity or
making demands based on previous performances. This strategy is ideal for
companies that use medium or long-term capacity plans, as they can track the
amount of production required to meet demand at different times of the year. For
example, a company's record can show that demand peaks during a two-month
period. It can adjust its operations to meet the expected rise in demand accordingly.
An adjustment strategy can prevent waste while also ensuring that a business has
the capacity to meet customer expectations.

2.1.5 Benefits of Capacity Planning

By planning for future production requirements, businesses may ensure they

have the necessary resources to meet demand. Below are some of the key
benefits of capacity planning:

1. Reduces Stock-outs: Customers don't like to wait, and the fact that you
are "out" of a product or service will simply cause them to go on to
another company that can meet their needs. Fortunately, capacity planning
has the added benefit of helping you minimize or even completely avoid
stock-outs.

2. Increase Capacity Delivery: When good capacity plans are in place,

(showing who does what, at what time, using what resources and to
achieve what) and implemented in the right way efficiency of delivery of
products or service increases

3. Identifies Process and individual Inefficiencies: Capacity plans are

used to evaluate not only the progress of the project, but also individual
performance. Therefore, inefficiencies can easily be identified and
corrective measures taken.

4. Facilitates Risk Management: Planning your capacity will also help you
become more adept at overcoming challenges. It makes you be ready to act
swiftly when unforeseen obstacles arise.

5. Eliminates Excess Capacity: An organization can successfully fulfill

future resource requirements by using capacity planning. You can view
how much time, effort, and utilization each team member put into
completing a task.

6. Confirms Availability: The scope of your job/project is clearly defined

in light of your capacity planning including all the required resources. It
enables you to confidently say yes or no to the work by knowing if you have
the people/teams and resources to deliver the work.

7. Gives you data to understand staffing gaps: To achieve balance, you

need to fully understand the teams and resources you have, including the
skills everyone brings to the table. Companies can waste significant dollars
hiring people they don’t need if they do not even need.

8. Ensures you stay on track: The goal of capacity planning is to become

increasingly efficient, organizing teams capable of consistently delivering on
commitments within budget and timelines.
2.4 FACILITY LAYOUT

The next step in production planning is deciding on plant layout; how equipment,
machinery, and people will be arranged to make the production process as efficient as
possible.

Facility Layouts refers to the physical arrangement of equipment and different

components of a factory at site location whether, the factory or any other
production center is small or large scale

Simply to put, it is about how an industry will arrange the different equipment, raw
materials, storage location, tool rooms, maintenance rooms, worker amenities etc.
at the work place. Facility layout considers available space, final product, safety of
users and facility convenience of operations.

The above definition implies that;

 Facility Layouts refers to represent the physical arrangement of a Equipment

and different components of a factory at site location

 Simply to say, it is about how an industry will arrange different equipment,

raw materials storage location, inventory storage, tool rooms, maintenance
rooms, worker amenities etc. a factory location

 Such arrangement layouts are called as “Facility Layout” or “Plants

Layouts”

 There are various types of layouts

An effective facility layout ensures that there is a smooth and steady flow of
production material, equipment and manpower at minimum cost. Facility layout
looks at physical allocation of space for economic activity in the plant. Therefore,
main objective of the facility layout planning is to design effective workflow as to
make equipment and workers more productive.

2.4.1 Objectives of Facility Layout

A model facility layout should be able to provide an ideal relationship between raw
material, equipment, manpower and final product at minimal cost under safe and
comfortable environment. An efficient and effective facility layout can cover
following objectives;

 To provide optimum space to organize equipment and facilitate movement

of goods and to create safe and comfortable work environment.
 To provide synergy in production towards a single objective
 To reduce unnecessary movement of workers, raw material and equipment
 To ensure provide for the installation of machinery, equipment and other
resources in such way and a place that should not cause any harm to the
workforce.
 To facilitate extension or change in the layout to accommodate new product
line or technology upgrade.
 To increase production capacity of the organization

An organization can achieve the above-mentioned objective by ensuring the

following:

 Better training of the workers and supervisors.

 Creating awareness about of health hazard and safety standards
 Optimum utilization of workforce and equipment
 Encouraging empowerment and
 Reducing administrative and other indirect work
2.4.2 Factors affecting Facility Layout

Facility layout designing and implementation is influenced by various factors.

These factors vary from industry to industry but they however tend to include some
of the following:

Objective of the organization: The design of the facility layout should consider
overall objectives set by the organization.

Communication: The layout should support ease of communication and

supervision.

Employee wellbeing: The design should improve employee morale and enhance
motivation levels.

Process flow: Materials should flow as smoothly without less or no bottlenecks.

Safety: operations must follow local requirements and government guidelines from
O.S.H.A.

Space: Facility layout design should provide sufficient space for storage and
staging, while allowing for adequate movement of employees and equipment.

Policies and strategies of the company: Overall management policies and future
direction of the organization

Nature of the product: Nature of the commodity or article to be produced greatly

affects the type of layout to be adopted. In case of process industries, where the
production is carried in a sequence, product layout is suitable.

Method/volume of production: Plant layout is generally determined by taking into

consideration the method (job, batch, or mass production) and quantum of
production to be produced. There are three systems of production viz.,
2.4.3 Design of Facility Layout

Effective facility designs and plant layouts make for efficient work and maximized
production output.

Principles which drive design of the facility layout need to take into the
consideration objective of facility layout, factors influencing facility layout and
constraints of facility layout. These principles are as follows:

1. Principle of Minimal Movement; Movement, whether of people or

machinery or both, takes time and yields no output. If people need to
move back and forth, or outputs need to be forklifted to a separate
area, you can gain efficiency by minimizing or eliminating such
movement as much as possible.
2. Principle of Flexibility; The facility must also be able to expand or
contract productions as needed, and be amenable to quick
adjustments. The Flexibility principle says changes should be made
with minimal interruptions to production.
3. Principle of Space Utilization; The principle of effective space
utilization applies to floor, wall, and ceiling space and everything in
between must creatively utilize to the maximum.
4. Principle of Integration; To the extent it will be possible, effective
facility design means integrating as many processes as logically
possible.
5. Principle of Smooth Workflow; The facility should be designed to
allow for smooth flow of work and avoid bottlenecks and
interruptions
 6. Principle of Capital Investment; Capital investment should be
minimal when finalizing different models of facility layout.
7. Principle of Safety; Safety equipment must be accessible and visible,
as with emergency shutdowns and other fail safes built in at key
points and exit points clearly indicated
8. Principle of Supervision; The layout should enable engineers, plant
managers, shift supervisors, and others to supervise the operations.
They need to be able to see and inspect all parts of the process and
thus the facility should have good lighting and foot access.
9. Principle of Satisfaction; A good layout will give employees the
satisfaction of smooth production and high output, and is a morale
booster!

2.4.4 Types of Facility Layout

There are various types of layouts in different in industries and the most common
are the 5 layouts explained below that are widely in usage by industries.

1. Plant Layout

2. Process Layout

3. Product Layout

4. Fixed Position Layout

5. Combination Layout

1. Plant Layout

Plant Layout refers to arrangement of the various facilities and services of the plant
within the area of the site selected previously. It starts along with factory building
and proceeds inwards to facilities like equipment, raw materials, machinery,
tools, , workers, etc. allocated appropriate places.

In deciding the place for equipment, the supervisors and workers are consulted
and their due consideration are considered before they put into plant location.
However, consultation may not be mandatory but it will help organization to have
co-operation of employees while in production as it will create a multiplier effect
on production. Placing the equipment where it is not convenient for employees
while being in production will impact on the production levels.

Objectives of Good Plant Layout:

● Minimizes hurdles in transportation of equipment or materials of

production

●provides adequate space for production and services

● Ensures safe working conditions for employees

● Ensures optimum use of available space

● Design should not hinder the process of production

● Design should be flexible enough for future expansion

● Design should focus on to minimize the movements of employees from

one equipment to another equipment otherwise, it will create a loss of
production hours

Principles of Plant Layout:

For the guidance of Plant Layout engineers have developed to guide in the design
of ideal plant layout. Some of the important principles include the following:
(a) Principles of integration- integration of production centres facilities like
workers, machinery, raw material etc., in a logical and balanced manner.
(b) Principles of minimum movements and material handling- movements of
workers and materials should be minimized.
(c) Principles of smooth and continuous flow- bottlenecks, congestion points and
back tracking should be removed by proper line balancing techniques.
(d) principles of cubic space utilization- besides using the floor space of a room, if
the ceiling height is also utilized, more materials can be accommodated in the same
room.
(e) principles of safe and healthy environments- well maintained workplace;
ventilated, free from dust, noise, fumes, odours, and other hazardous conditions.
(f) Principles of flexibility- machinery arranged in such a way that the changes of
the production process can be achieved at the least time, cost or disturbance.

2. Process Layout/Function

The layout process groups together workers or departments that perform similar
tasks. At each position, workers use specialized equipment to perform a particular
step in the production process.

Also referred as functional layout, process Layout focuses on keeping similar

machines or similar operations at one place in the layout. Thus, machines of a
similar type or performing same function are arranged together at one place. For
example, machines performing drilling operations are arranged in the drilling
department, machines performing casting operations be grouped in the casting
department. Therefore, the machines are installed in the plants, according to
various processes in the factory layout. Hence, such layouts typically have drilling
department, milling department, welding department, heating department and
painting department etc.

Process Layouts are more suitable for manufacturing industries, where goods are
produced based on a logical series of activities or process.

This type of Layout is most preferable when –

● Several types of products need to be produced

● If volume of production of individual products is low

● When production of products needs continuous handling by mechanical

methods

● If need of any intermittent production

Advantages of Process Layout –

 Lower initial capital investment is required

 There is optimum machine utilization, as a machine is not limited to a single
product.
 Minimize movements of employees from one equipment to another.
 The overhead costs are relatively low
 Breakdown of one machine does not disturb the production process
 Supervision can be more effective and specialized.
 Helps an organization to evaluate easily an employee at production levels, as
employee works a more or less at constant location

Disadvantages of Process Layout –

 Material handling costs are high due to backtracking

 More skilled labour is required resulting in higher cost
  More floor space is required to keep all equipment together
 Work in progress inventory is high needing greater storage space
 More frequent inspection is needed which results in costly supervision
 Automatic material Handling becomes difficult
 Process Layout takes more time to finish or complete the product production
at its stage
 More effective cooperation and coordination is required at production site
among employees

3. Product Layout

In a product layout, high-volume goods are produced efficiently by people,

equipment, or departments arranged in an assembly lines, thus, a series of
workstations at which already-made parts are assembled. Product Layout refers to
sequential arrangement of machines and components parts in one line based on
sequence rules of production. In simple terms, we can say that it is layout where a
raw material moves in straight line from one equipment to another equipment in
order to complete it as finished good Machine ‘A’ → Machine ‘B’ → Machine
B…. → Finished Product. Product layout is also called as Line Layout and is of
most preferable in cases such as :

 When production is of continuous nature in mechanical methods

 If product layout needs a standardize process for one or few products
 When production is in large volumes.
 Inspection on series of operations is less.

Advantages of Product Layout –

 Low cost of material handling, due to straight and short route and absence of
backtracking
  Smooth and continuous flow of operations
 Lesser inventory and work in progress
 Optimum use of floor space
 Simple and effective inspection of work and simplified production control
 Lower manufacturing cost per unit and hence has economies of scale
elements.
 Workers movement completely low.
 Better utilization of the equipment that is available, with greater flexibility

Disadvantages of Product layout

 Higher initial capital investment in special purpose machine (SPM)
 Lack of Flexibility in production operations
 Supervisory on operations are bit low
 Less Scope for expansion of this layout
 High overhead charges
 Breakdown of one machine will disturb the production process.

4. Fixed position or location layout

In producing large items, manufacturers use fixed-position layout in which the

product stays in one place and the workers and equipment go to the product. Fixed
position layout or Static Layout involves the movement of manpower and
machines to the product which remains stationary. The movement of men and
machines is advisable as the cost of moving them would be lesser. This type of
layout is preferred where the size of the job is bulky and heavy. Example of such
type of layout is locomotives, ships, boilers, generators, wagon building, aircraft
manufacturing, etc.

This type of layout is suitable;

● in heavy industry like in manufacturing of Locomotives, ships, aircrafts

etc.

● In the manufacture of few pieces of items

● Where transfer of bulk volume of material is required

Advantages of Fixed position layout

 The investment on fixed layout is relatively low.

 The layout is flexible as change in job design and operation sequence can be
easily incorporated.
 Adjustments can be made to meet shortage of materials or absence of
workers by changing the sequence of operations.
 Helps to produce differentiated products ( ex- Aircrafts produced in various
models)
 Very Flexible in nature as the workers get easily associated with it
 Production centers work can be designed in independent manner

Disadvantages of Fixed position layout

 As the production period being very long so the capital investment is very
high.
 Very large space is required for storage of material and equipment near the
product.
 As several operations are often carried out simultaneously so there is
possibility of confusion and conflicts among different workgroups.
  Transfer of machines from one place of another takes time and attracts more
costs
 These types of Layout need very expensive equipment for its operations
 High Skilled Professional are needed to operate the machines in layout

5. Combined Layout

Generally, a combination of the product and process layout or other combination

are found, in practice, e.g. for industries involving the fabrication of parts and
assembly, fabrication tends to employ the process layout, while the assembly areas
often employ the product layout.
This is a hybrid type of layout which combines product layout and process layout.
It is also called as “ Group Technology Layout” , or “ Hybrid Layout”

Most of organizations use this type of layout in their production units under certain
circumstances such as;

●When production of products is in various shapes and sizes

● The Equipment in layouts are arranged as per requirements of design of

product and its final outcome

● When several items of products are produced but not in bulk

Advantages and Disadvantages;

● This type of layout inherits the advantages and disadvantages from

Product and process Layouts

● However, its usage in organizations purely based on its products produced

for market and its business
3.0 PRODUCTION SCHEDULING

Planning and scheduling is the process of determining how, what and who
whereas, Scheduling determines When and Why.
Schedule can also be defined as detailed plan of the project work tasks with respect
to time.
Scheduling Production serves as catalyst to communications i.e., scope, work
definition, sequencing & logic, resource allocation and what if analysis.
Production schedule therefore is a detailed form of a production plan which is done
at various levels op production process. Hence the components of production
scheduling
Production scheduling refers to the detailed planning of the production process in
order to optimize workflow for a specific time-period. It is an integral part
of production management and a key tool for ensuring the timely and optimal
execution of production plans.

Production scheduling is defined as the process of arranging, controlling and

optimizing work and workloads in a production process.
It can also be defined as the process of maximizing the efficiency of production by
the detailed planning of production operations in the short-term.

3.1 Need for production scheduling

Companies often develop production schedules before they begin their
manufacturing processes. This is important because it helps companies:
 Determine the cost of producing a particular product, including production
and labor costs
  Allocate enough financial resources to each stage of production
 Ensure that a product reaches the consumer market quickly and efficiently
 Determine how much time they may require to complete production and
transport their product to distributors
 Ensure the production of the correct amount of a resource

3.2 Stages of production scheduling

Production and manufacturing run on timelines. You receive orders, sometimes

concurrently, and you plan the steps in your production schedule to ensure parts of
the process are completed in proper sequence as efficiently as possible.

Unlike the production plan which identifies what resources would be consumed at
what stage of production, and according to the estimates, a schedule is made so
that the company doesn’t fall short of resources at the time of production.
In production scheduling the process usually starts with the identification of the
deadline and then moved backward to the current date and in the process the
bottleneck processes are identified.

Production schedules help companies organize many complex processes, and

implementing them successfully often through the following stages which are also
the components of a production plan:

1. Planning

The first stage of creating a production schedule is planning, which is often the
most important step. In this stage, production schedulers define a production goal
and analyze the necessary resources and budget to achieve it. There are often two
types of planning that professionals consider:
Static planning: Static planning assumes that all stages of production adhere to the
schedule without changes.

Dynamic planning: This type of planning assumes that changes to the schedule are
likely to occur before reaching a production goal.

Before creating your production schedule, consider which type of planning is

optimal for your business's processes.

2. Routing

In the second stage of production scheduling, professionals often develop clear

steps that outline how their company might transport its finished product to the
consumer market. They analyze what the best ways to transition raw materials into
a final product. The goal of this step is to discover the most cost-effective path
from procurement to production completion.

3. Scheduling

Scheduling establishes the time frame for the completion of each stage of
production. It also clearly states a final deadline for completing the entire project.
Scheduling can fall into three types:

Master production schedule: A master schedule is a plan for manufacturing a

product within a specific time frame. It includes elements such as personnel,
budget, routing processes and resources.

Manufacturing schedule: This type of schedule is a plan for production that only
includes the steps required to turn raw materials into a finished product.
Retail operations schedule: These schedules are similar to master production
schedules, but concern products designed for retailers instead of direct sale to
customers.

4. Dispatching

Dispatching entails implementing the processes schedulers have prepared. In this

stage, production schedulers ensure that all resources are available and ready to
begin production. They also issue instructions to personnel involved in production
so they understand their distinct roles within the production schedule.

5. Execution

The final step of the production scheduling process is the realization of the
schedule's plans. Schedulers ensure the following:

 All processes operate efficiently

 Production finishes within the established time frame
 Each customer receives their order in a timely and efficient manner.

6. Maintenance

There may be changes throughout the production process that affect the original
schedule and make it necessary for production schedulers to alter the plan.
Monitoring and updating the schedule throughout the process can help production
managers ensure the plan is continuously up-to-date. As they update the schedule,
it's also important to share the new schedule with everyone involved to ensure all
team members are aware of the new expectations and plan.
3.3 Benefits of a production schedule

Companies who create production schedules may experience several benefits,

including:

Decreased costs: Production schedules can lower the costs a manufacturer incurs
by identifying the least expensive ways to transition raw materials into finished
products. It can also help companies identify the most cost-effective methods for
labor and product transport.

Fewer shortages: An effective production schedule can ensure a company accounts

for the proper amount of material and obtains it efficiently. This can prevent
shortages that lead to delayed order fulfillment.

Minimized lead times: These schedules can also help a company minimize its lead
times, or the time between a customer placing an order and the time in which they
receive it.

Increased customer satisfaction: Production schedules can also help companies

fulfill their customers' orders in a timely manner, which can maintain and increase
customer satisfaction.

Improve company reputation: Companies with reputations for quick and efficient
production and supply may benefit from an improved attitude from customers.

3.4 Elements to consider for production scheduling

It's important for professionals who create production schedules to consider several
parts of the manufacturing process before developing their schedules, which may
include:

Time: A production schedule's primary task is usually to establish a timeline in

association with customer expectations.
Procurement: This is the process of acquiring project materials. Professionals
creating a production schedule often consider procurement, as too many or too few
materials can result in cost and efficiency issues.

Personnel: An effective production scheduler often ensures that there is sufficient

personnel available and that there are an appropriate number of staff members
working on each stage of the production process.

Machinery: A production schedule generally ensures that necessary machinery is

available and that each piece of equipment performs as intended.

Expenditure: A production scheduler may also plan for the costs that a project
might incur to ensure that funding is available for each part of the manufacturing
process and that the company achieves its goals without unnecessary spending.

3.5 The Types of Scheduling in Production Planning and Control

1) Master Production Scheduling

Master Production Scheduling (MPS) is a scheduling strategy that dictates when
and how much of each product is going to be produced based on criteria such as
demand, capacity, and inventory availability.

This type of scheduling focuses on a planning horizon that is divided into equal
time period (called ‘time buckets’). It includes a plan for the production of certain
products and defines resources, staffing, inventory, etc required for the allotted
time period.

MPS aids in decision making by generating a set of output data based on inputs
such as;

o Forecasted demand
o Production costs
o Inventory costs
o Customer needs
o Production lead time
o Capacity

The resulting output information may include;

 The amounts to produce

 Staffing requirements
 Quantity of products Available to Promise
 Projected available funds for production

It also sets the expectations of the revenue that the business is likely to generate.
These outputs can then be used to create a Material Requirements Planning (MRP)
schedule.
2) Manufacturing and Operation Scheduling

Manufacturing Scheduling (also called ‘Detailed Scheduling’ or ‘Production

Scheduling’) focuses on a shorter horizon than MPS.

This type of scheduling fixes a time and a date to each operation in a continuous
timeline rather than in time buckets. Each process can then be visualized in terms
of its start time and completion time-frame. The subsequent stages of production
planning and control depend on this timeline.

Scheduling looks to optimize the use of time in each step of the production
process, from raw or intermediate materials to the delivery of the finished good to
the customer.

The goal is to maximize throughput (output) and on-time delivery within the
constraints of equipment, labor, storage, and inventory capacity. This usually
involves maximizing the utilization of critical bottleneck resources by;

 Minimizing changeovers
 Minimizing cleanout intervals
 Avoiding material starvation

In order to schedule more efficiently, there are a variety of methodologies ans tools
that planners can apply.

Master Scheduling and Production Scheduling work in concert to create capacity

and inventory plans that maximize a business’s resources to serve its customers
efficiently. Proper use of scheduling methods results in enormous benefits for a
manufacturing business.
4.0 MANUFACTURING PLANNING

A manufacturing Planning and Control (MPC) system plans and controls the
manufacturing process (including materials, machines, people and suppliers).
Basically, the MPC system provides information to efficiently manage the flow of
materials, effectively utilize people and equipment, coordinate internal activities
with those of suppliers, and communicate with customers about market
requirements.

4.1 Steps to execute Manufacturing Planning & Control (MPC)

A well-executed Manufacturing Planning and Control (MPC) system can deliver

competitive advantage and often differentiate leading manufacturers from the rest.
The more the system is automated, the more it enables informed decisions that in
turn speed response times. Each stage of the system has a purpose and varies by
the level of details that are considered in it as well as by the planning horizon in
attempting to answer three questions:

 How much needs to be produced?

 When is it to be produced?
 What is the available capacity?
 How can differences between priorities and capacity be resolved?

Figure 1 shows a simplified schematic of a modern MPC system:

The stages of manufacturing planning and control include the following:

4.1.1 Stage 1: Strategic Business Plan

The strategic business plan is a statement of strategic and forward-looking

company goals and objectives and focuses on profitability, productivity, customer
lead times, and other key areas for the business.

These overall goals focus on various areas such as profitability, lead time,
productivity, and other areas of the business. These goals are incredibly important
in terms of driving the company and focusing efforts within the right areas. Thus,
the plan gives general direction about how the company hopes to achieve those
objectives. It also provides direction and coordination among various functions of the
company. The level of detail in the strategic plan is not high as it contains general
market and productions requirements and not sales of individual items.

The role of the strategic business plan can be summarized as follows:

  It is an organization's process of defining its strategy or direction, and making
decisions on allocating its resources to pursue th strategy.
 It may also extend to control mechanisms for guiding the implementation of the
strategy.
 Also outlines an organization's overall direction, philosophy, and purpose,
 It examines its current status in terms of its strengths, weakness, opportunities, and
threats (see SWOT Analysis),
 It sets long-term objectives, and formulates short-term tactics to reach them
A well laid out strategic business plan drives everything in the business. It is also
an input to the Sales and Operations Planning process.

4.1.2 Stage 2: Sales and Operations Plan (S&OP)

S&OP is a cross-functional, coordinated plan that involves sales, marketing,

product development, operations, and senior management. Actual demand is
repeatedly compared with the sales plan. Market potential is assessed and future
demand is forecasted. The updated marketing plan is communicated with
manufacturing, engineering, and finance.

The S&OP therefore is;

 About turning strategy into revenue and is critical to the success of any
supply chain.
 A process that binds together the various functions that support the effective
planning and delivery of products and services to your customers.
 Provides a positive impact on every key performance indicator in the
business.
 To ensure that every part of the process is done well so as to avoid
decoupling the entire supply chain, negatively affecting the voice of the
customer and financial performance.
During this process, decisions related to trade-offs between volume and product
mix are made so that demand and supply are in balance. S&OP feeds into the
Master Production Schedule.

4.1.3 Stage 3: Master Production Schedule (MPS)

MPS is a purchasing and production plan at an individual end product level, by

time period. The planning horizon depends on the production and purchasing lead
times, but is generally smaller units of time. MPS delivers a master schedule with
an anticipated build schedule by specific product configurations, quantities and
dates. Put simply;

 MPS is the process that helps manufacturers plan which products and related
quantities to produce during certain periods.
 MPS is proactive in that it actually drives the production process in terms of
what is manufactured and what materials are procured.
 MPS also serves a bridge to sales as it informs them about what is
available to promise to customers and when deliveries can be made.

The Benefits of master production schedule (MPS)may include;

 Ability to adjust fluctuations in demand and still minimize waste

 Helps prevent shortages and scheduling mishaps
 Improves efficiency in the location of production resources
 Provides more effective cost controls and more accurate estimates of
material requirements and delivery dates.
 Reduces lead times throughout the year
 Provides an effective communication conduit with the sales team for
planning purposes.
MPS needs validity through the rough-cut capacity planning and the output of
MPS is the input to the Material Requirements Planning stage.

4.1.4 Stage 4: Material Requirements Planning (MRP)

MRP uses bill of materials data, inventory data, and master production schedule
(MPS) to calculate requirements for materials. It makes recommendations to
release replenishment orders for material. And since it is a time-phased output,
MRP makes recommendations to reschedule open orders. It establishes when the
components and parts are needed, to make each end product.

The planning horizon depends on the leads times for manufacturing and
purchasing. Time-phased MRP is achieved by exploding the bill of materials,
adjusting for quantity on hand or on order and offsetting the net requirements for
lead times. MRP, being at the detailed level, also considers finite capacity through
capacity requirements planning. Thus:

Material requirements planning (MRP) is an inventory management system that is

completely operated digitally through a wide variety of computer-based platforms.
It is exclusively designed to improve the inventory efficiency of a business by
estimating quantities of raw material and scheduling timely deliveries.

The three primary objectives MRP is intended to achieve as a result include:

1. To ensure that raw materials are readily available for production and
products are readily available for delivery to consumers.
2. To sustain the lowest raw materials and finished product levels in store.
3. To organize manufacturing, delivery schedules, and activities. purchasing

Advantages of MRP
When considering using an MRP inventory system within an organization, it is
crucial to know the advantages and disadvantages associated with implementation.
The advantages include:

 Maintains low inventory level

 Reduction of associated costs through material planning
 Ensure capacity utilization
 Extensively tracks every piece of inventory that comes in and goes out
 Reduces cost of warehousing product
 Increased organization throughout the business
 Scheduled shipment and delivery of the product

Disadvantages of MRP

The disadvantages when using a material requirement planning inventory system

include:

 Reliance on the precise input information

 There are possibilities of scheduling delays, wrong order quantities, and
inefficient tracking if the information is inputted inaccurately within the
system
 Requires extensive maintenance of robust databases
 In order to use the system, proper training is required
 The system is not cheap as it requires a substantial capital investment

The output of MRP goes into the Purchasing and Production Activity Control
stage.

4.1.5 Stage 5: Purchasing and Production Activity Control (PAC)

Purchasing is responsible for establishing and controlling the flow of raw materials
into the factory. The level of detail is high since it involved individual components,
work centers, and orders; including reviewing plans and revising them as needed
daily. PAC manages routing and dispatching at production facility and performing
supplier control. PAC also schedules, controls, measures, and evaluates the
effectiveness of production operations. Additional activities performed by PAC
include:

 Assigning priority to orders for each shop.

 Maintaining work in process (WIP) information.
 Conveying shop order status.
 Providing actual output data.
 Providing quantity by location, by work center, and by shop order for
accounting.
 Measuring the efficiency, utilization, and productivity of workforce and
machines.
A Manufacturing Execution System (MES) is a subset of PAC capabilities. The
output of a well-managed PAC is a manufactured product with full visibility and
high quality across the supply chain.
5.0 DISTRIBUTION REQUIREMENTS PLANNING (DRP)

Distribution requirements planning (DRP) is a systematic process to make the

delivery of goods more efficient by determining which goods, in what quantities,
and at what location are required to meet anticipated demand. The goal is to
minimize shortages and reduce the costs of ordering, transporting, and holding
goods.

Also known as distribution replenishment planning, DRP can also refer to a time-
based approach that determines when inventory is likely to be depleted and plans
for replenishment to avoid shortages.
DRP uses a tree-like structure where a central facility, such as a warehouse,
supplies regional facilities which then supply other facilities in the tree. This
structure can contain any number of layers.

A key element of DRP is the DRP table, which usually includes elements that are
important in the process, including:

 forecast demands

 current inventory levels

 target safety stock

 recommended replenishment quantities

 replenishment lead times

DRP distribution works by either a pull or push method. The pull method has
goods move up through the network by fulfilling customer orders. This provides
more availability for consumers because local management controls the availability
of the goods. However, managing distribution inventory can be difficult because
every order is new to the supplying location as demand flows up the network. This
is called the "bullwhip effect:" small changes in consumer demand that generate
large swings in demand higher up the network.

In contrast, the push method sends goods down through the network. It generally
has lower costs because shipments are planned globally and stored centrally.
However, service levels can suffer if central planning is too far removed from the
actual demand.
DRP ideally combines the service levels of pull with the efficiency of push, but
this depends on accurate forecasts and stable processes to be successful. If both of
these exist, DRP produces high fulfillment performance with minimal inventory.
Companies usually try to hedge their bets by using safety stock, but that can reduce
the overall effectiveness of the DRP strategy, resulting in higher inventory levels
or shortages.

The distribution requirements planning

process
We can summarize it into the following steps:

1. Establish delivery centers and supply locations

2. Identify market demand and distribution planning parameters
3. Plan for specific inventory control parameters
4. Determine allocation requirements and resource requirements
5. Generate a disbursement plan
6. Evaluate results and make necessary adjustments

 Distribution Requirement Planning (DRP) can be used for

determining inventory required to be maintained at different
stocking locations.
 It also makes sure that various supply sources are adequate
for meeting the demand.
 DRP is essential for implementing Just-in-Time Production
(JIT) and logistics system.
 It is helpful in the scheduling of production resources as is a
meaningful expansion of Manufacturing Requirements
Planning (MRP).
 It is helpful in the scheduling of production resources.
 It is also helpful in resolving various capacity related issues
such as raw material constraints.
Process of Distribution Requirement
Planning
Distribution Requirement Planning is a planning approach that
considers multiple distribution stages and the characteristics
associated with each stage.

This process is used for coordinating the level of inventory, its

receipt, disbursal and re-scheduling. The schedule is very
important for DRP planning process. It helps in coordinating the
requirements occurring throughout the planning period.
We can summarize it into the following steps:

1. Establish delivery centers and supply locations

2. Identify market demand and distribution planning parameters
3. Plan for specific inventory control parameters
4. Determine allocation requirements and resource requirements
5. Generate a disbursement plan
6. Evaluate results and make necessary adjustments

DC is a facility that receives, stores, and distributes finished goods to

retailers and other businesses. It is the backbone of the logistics network,
and it is essential to have one or more delivery centers to serve consumers
effectively.

Many factors go into choosing the optimal locations for centers. Some of the
most important factors include:

 The distribution network map includes the distribution centers,

suppliers, and buyers. Therefore, it should be easy to identify where each
entity is located and connected.
 The customer base is essential to consider where most of your
customers are located. This will help you determine how many locations
for holding goods you need and how far apart they should be.
  The distribution network topology – This is how the locations are
connected. There are three main topologies: radial, star, and mesh. It can
also be a tree-like structure.
 The distribution requirements include the number of products, the
weight and dimensions of products, and the delivery time.
 The transportation network includes the modes of transportation (road,
rail, water, and air), the distance between warehouses, and the delivery
time.
 Labor availability – It is vital to ensure enough workers are available at
the allocation center when it opens.
 Cost – The warehouse should be located where the price is the lowest.

Benefits of Distribution Requirement

Planning

DRP system offers many benefits as it helps with logistics and

marketing.

Following are the major marketing related benefits of this system:

 DRP helps in offering timely delivery of goods to its customers

by integrating distribution centres.
 The on-time delivery helps in reducing the amount of
customer issues.
 This system is useful for predicting future requirements to
avoid over or under stocking.
 It facilitates better coordination with other functions including
MRP
Difference between MRP and DRP
1. Material Requirement Planning (MRP) :
Developed in 1970s, raw material whenever required by any
organization is managed i.e, which materials are required by company
gets stored in a database. Also, it tells about shortage of any material.
Material Requirement Planning is widely used approach for production
planning and scheduling in industry. It is the approach embedded in
many commercially available software applications. Function of MRP is
to provide material availability i.e, it is used to produce requirement
quantities on time. This process involves monitoring of stocks and
demand, leading to automatic creation of procurement proposals for
purchasing or production. Main objective of MRP is to determine which
material is required, quantity required and by when it is required. It is
Factor material inventory and emphasis on physical assets.

2. Distribution Requirement Planning (DRP) :

It is extension of Material Requirement Planning (MRP). It is a
process to make delivery of goods efficient by determining its quantity
and location where it is more required. It is utilized by firms to ensure
availability of right amount of materials at right time and right place. It
uses time phased schedule so that it can ensure timely production of
end product. The key elements in DRP is: Demands, current Inventory
levels, target safety stock, quantities, and replenishment lead times.

Difference between MRP and DRP :

MRP DRP

Stands for Material Requirement Stands for Distribution Requirement

Planning. Planning.

It is under the control of the firms. It is not under the control of the firms.

It controls inventory until manufacturing It controls manufacturing after the

is complete. manufacturing is complete.

It is guided by production schedules. It is guided by customer demands.

 MRP DRP

It operates in dependent demand It operates in independent demand

situation. situation.

It coordinates the scheduling and It coordinates the demands between

integration of the materials. outlets and supply sources.

What Is Demand Management?

Demand management is a planning methodology companies use to forecast
and plan on how to meet the anticipated demand for goods and services.
Demand management improves connections between operations and
marketing. The result is tighter coordination of strategy, capacity and
customer needs.

Demand management identifies and captures all potential demands, interprets

them and communicates them to relevant departments within the
organization. An example of external demand is an assessment based on
customer inquiries or booked orders, while an internal demand assessment
may calculate the raw materials needed to produce a new product and the
promotional activities required to support the launch of that same product.

Demand management formulates an action plan to meet current and

anticipated conditions in target markets. The process provides data and
insights to marketing, demand planning. production and sales forecasting
teams to help them achieve company goals.

Objectives of Demand Management

Successful demand management teams today are customer-centric — it’s all

about the ability to predict and fulfill demand with the right products and
services. Specific areas of focus include improved customer service, more
accurate forecasting and lower costs.

Specific objectives of customer-centric demand management include:

I. Improved customer service: Understanding client needs and

behaviors increases customer satisfaction and improves service.
II. Forecasting with greater accuracy: Predictive analytics efforts
optimize decisions by business leaders and improve supply chain
management.
III. Reduced costs: Improved forecasting optimizes inventory investments
and can minimize safety stock levels.
IV. Enhance existing products and excel at new product
introductions: Create a line of customer-appropriate new products and
refine them based on feedback.
V. More efficient planning: Strike the right balance of demand to supply
and minimize surpluses with reliable data.

Activities in Demand Management

Demand management activities help teams dive deeper and develop plans to support a
more efficient supply chain. Activities include demand capacity, chain,
communication, modeling, shaping, sensing and prioritizing.

 Demand capacity: Demand management helps you coordinate capacity

demands, such as production time, inventory and resources. Capacity
planning is critical because it directly impacts cost centers. Operating expenses
 are impacted when demand and capacity are out of sync, so coordination is
essential to achieve alignment.
 Demand chain: The demand chain relates to the customer demanding
products or services as and when required, referred to as pull. In the internet
economy, the demand chain-based e-fulfillment model condenses time, is
pull-oriented from the customer and is based on real-time event monitoring,
inventory and information for forecasting and planning — in other words, the
end consumer is king.
 Demand communication: In the collaborative demand management model,
you communicate forecast demand to all stakeholders, business areas and
teams affected by the forecast. Everyone then works in a spirit of
transparency to a common goal.
 Demand modeling: Demand modeling works from the bottom up. This activity
breaks demand components into external and internal factors and the
demand stream, and it examines how each factor influences purchases to
ascertain future demand.
 Demand shaping: Demand shaping is an operational supply chain
management strategy where a company uses price drops, incentives and
other tactics to induce customers to purchase specific items. Demand shaping
helps the business match demand for a specific product to the planned supply.
 Demand sensing: This predictive tool is a game-changer in high-demand
ecommerce scenarios. Demand sensing depends on data sent in near-real-
time. New mathematical techniques to sense demand make it possible to
quickly understand what is selling, who is buying and how the product or
service impacts market demand.
 Demand prioritizing: Identifying and prioritizing projects is the basis of
demand management. By examining potential risk factors, organizational
capacity, financial value and implications, you can form policies based on
priority items.

Activities in demand management require leaders and their departments to take a

holistic view, work together and make informed decisions based on data.

Material flow control

Material flow control is under the responsibility of warehouse managers.
Engineering an optimal flow will enable manufacturers in waste reduction and
can increase production capabilities as per the 3 connected principles:
 1. Planning
The engineered material flow needs a certain specific and intentional outline
of the material movement, including accurate data on various components
and materials and also identification of each step of the production process.

2. Communication in material flow control

The seamless operation will need communication and signals. Signals may be
in many forms, which include arrows on the floor, barcodes, overhead lighting,
colored boxes, and numbered signs.

3. Tools
Your tool choice will depend on the manufacturing environment. Processes
must be examined first and then the equipment should be selected to suit the
needs.

QUALITY ASSURANCE &

QUALITY CONTROL
Quality Glossary Definition: Quality assurance/quality control (QA/QC)

Quality assurance (QA) and quality control (QC) are two terms that are often used interchangeably.
albeit distinct differences between the two concepts.

Quality assurance

Quality assurance can be defined as that part of quality management focused on

providing confidence that quality requirements will be fulfilled. The confidence
provided by quality assurance is twofold; internally to management and externally
to customers, government agencies, regulators, certifiers, and third parties.
It can also be defined as all the planned and systematic activities implemented
within the quality system to demonste and provide confidence that a product or
service will fulfill requirements for quality.

Quality Control
Quality control involves process by which products/services are tested and
measured to ensure they meet a specific standard. Through this process, a business
can evaluate, maintain, and improve product quality and achieve two crucial goals;
1) to ensure that products are as uniform as possible and
2) to minimize errors and inconsistencies within them.

Quality control can be defined as that part of quality management focused on

fulfilling quality requirements through rigorous inspection. It can also refer to the
operational techniques and activities used to fulfill requirements for quality.

Normally, quality testing is part of every stage of especially a manufacturing or

business process. Employees frequently begin testing using samples collected from
the production line, finished products, and raw materials. Testing during various
production phases can help identify the cause of a production problem and the
necessary corrective actions to prevent it from happening again.

Types of Quality Control

Just as quality is a relative word with many interpretations, quality control itself
doesn’t have a uniform, universal process. Some methods depend on the industry.
Take food and drug products, for instance, where errors can put people at risk and
create significant liability. These industries may rely more heavily on scientific
measures, whereas others (such as education or coaching) may require a more
holistic, qualitative method.
At its core, quality control requires attention to detail and research methodology.
So, what is quality control?
There are a wide range of quality control methods, including:

Control Charts: A graph or chart is used to study how processes are changing over
time. Using statistics, the business and manufacturing processes are analyzed for
being “in control.”

Process Control: Processes are monitored and adjusted to ensure quality and
improve performance. This is typically a technical process using feedback loops,
industrial-level controls, and chemical processes to achieve consistency.

Acceptance Sampling: A statistical measure is used to determine if a batch or

sample of products meets the overall manufacturing standard.

Process Protocol: A mapping methodology that improves the design and

implementation processes by creating evaluative indicators for each step.
There are other quality control factors to consider when selecting a method in
addition to types of processes.

Some companies establish internal quality control divisions when defining what is
quality control. They do this to monitor products and services, while others rely on
external bodies to track products and performance. These controls may be largely
dependent on the industry of the business. Due to the strict nature of food
inspections, for example, it may be in a company’s best interest to sample products
internally and verify these results in a third-party lab.

Benefits of Quality Control

Some of the importance or benefits of quality control are: 1.

Encourages quality consciousness 2. Satisfaction of
consumers 3. Reduction in production cost 4. Most effective
utilization of resources.

1. Encourages quality consciousness: Quality control

develops and encourages quality consciousness among the
workers in the factory which is greatly helpful in achieving
desired level of quality in the product.

2. Satisfaction of consumers: Consumers greatly benefit

as they get better quality products on account of quality
control. It gives them satisfaction.

3. Reduction in production cost: By undertaking effective

inspection and control over production processes and
operations, production costs are considerably reduced.
Quality control further checks the production of inferior
products and wastages thereby bringing down the cost of
production considerably.

4. Most effective utilization of resources: Quality control

ensures maximum utilization of available resources thereby
minimizing wastage and inefficiency of every kind.
5. Reduction in inspection costs: Quality control brings
about economies in inspection and considerably reduces cost
of inspection.

6. Increased goodwill: By producing better quality

products and satisfying customer’s needs, quality control
raises the goodwill of the concern in the minds of people. A
reputed concern can easily raise finances from the market.

7. Higher morale of employees: An effective system of

quality control is greatly helpful in increasing the morale of
employees, and they feel that they are working in the
concern producing better and higher quality products.

8. Improved techniques and methods of production: By

supplying technical and engineering data for the product
and manufacturing processes, improved methods and
designs of production are ensured by quality control.

9. Public confidence: They win the public confidence by

being supplied consistently with quality products or services
as promised.

10. Increased sales:

Quality control ensures production of quality products which

is immensely helpful not only in attracting more customers
for the product but also retaining them thereby increasing
sales.
 10 Reasons Why Quality Assurance Is Important
3. October 2020 by Emmaline Soken-Huberty

Quality assurance is a process all organizations should undertake to

ensure their products and/or services are up to high standards. The
process prevents mistakes, addresses any problems that do arise,
and ensures consistency. Quality assurance depends on auditors,
who could be with the company or independent. They evaluate the
various methods and provide guidance. Why is quality assurance so
important? Why is it a worthy investment? Here are ten reasons:

#1. Quality assurance saves time

While it takes time at the beginning of the process to create
systems that catch errors, it takes more time to fix the errors if
they’re allowed to happen or get out of control. Software
development is a good example. One analysis showed that fixing an
error in the production stage took up to 150 times longer than
repairing it earlier in the requirements design stage.

#2. Quality assurance also saves money

Some businesses might be a bit unsure about quality assurance
because of its cost, but the fact is it actually saves money in the
long run. Paying to prevent problems is cheaper than paying to fix
them. Quality assurance systems also save money on materials
because nothing goes to waste. As an example, if a business makes
a toy and doesn’t have quality assurance in place, a low-quality toy
won’t sell as well or people will complain and return them. The
business then needs to make more toys to replace the low-quality
ones, which costs them more money.

#3. Quality assurance boosts customer

confidence
Companies known for their quality and consistency always do better
with customers. People want to spend money on products and
services, but only if they believe they’re getting something that’s
worth the price. When businesses use quality assurance processes,
they’re letting customers know that they care about them and their
priorities. With many industries, like the food industry, quality
assurance is also an essential part of safety. Customers want to
be confident that the food they’re eating is safe and won’t make
them sick.

#4. Quality assurance is good for a business’

reputation
In the business world, a good reputation is vital. As discussed in the
point above, a good reputation boosts customer confidence. That
translates into loyalty, so even if another product or service comes
along, customers will want to stick with a business they already
trust. Reputation is important for all stakeholders, as well, such as
investors and suppliers. Stakeholders only want to support and work
with a business that has a great reputation. Quality assurance is an
important part of building that great reputation.

#5. Quality assurance leads to more long-term

profit
Quality assurance can boost profit in a few ways. The first is through
saving more money by not wasting time or materials. The second is
that quality makes a business more competitive in the marketplace.
Many businesses are also able to raise the cost of their products
because customers are willing to pay more for better quality. Loyal
stakeholders will hype up a business, which translates into more
sales and long-term profit.

#6. Quality assurance ensures

products/services keep improving
The quality assurance process is all about consistently maintaining
high standards. Many of those standards depend on what customers
ask for. As customers engage with a product or service, they will
have suggestions on how to improve them. Businesses committed to
quality will listen and use those suggestions to perfect and upgrade
their offering. This keeps customers happy and loyal to the business.

#7. Quality assurance ensures consistent

results
With services and products, consistency is very important. Even if a
business doesn’t produce “the best” offerings in the marketplace,
being consistent with the standards it does have makes a huge
difference. A fancy restaurant that only nails ¾ of its dishes is
probably not going to have as good of a reputation as the family-
style diner that produces consistently-good meals 100% of the time.
Quality assurance ensures every product/service bearing the
company’s name is the same. No customer is going to get
something worse or better than another customer.

#8. Quality assurance creates clear

expectations for everyone
There are many people involved in the creation of a high-quality
service or product. A quality assurance process sets clear
expectations and standards from the start. There’s less room for
error or misunderstandings when people know what they’re
expected to do.

#9. Quality assurance has a positive impact on

employee morale
When employees understand what’s expected of them, they are less
stressed and better able to focus on meeting established standards.
The positive impact of quality assurance also extends to their faith
in their employer. Enacting quality assurance processes proves to
employees that “quality” isn’t just an empty buzzword. There are
systems in place to back up the business’ promises.

#10. Quality assurance is the foundation of a

business’ work culture
When quality assurance is a priority for a company, it sets the tone
for the whole business. The drive for quality infuses every part of an
organization and everyone has a role to play. Anything that seems
to be inhibiting the organization’s ability to provide quality to their
customers is addressed. A work culture focused on meeting certain
standards is good for everyone – stakeholders, employees, and the
business itself.

Types of Quality Assurance Tools

Quality Assurance tools are utilized by many organizations to assist in

monitoring and managing their quality initiatives. There are a total of seven

different QA tools that are used and are enlisted below.

1. Flowchart
 A flowchart could be a diagram representing a workflow method, or a step by

step method to connect by arrows and lines in several directions.

 Flowcharts are accustomed to showing changes in an exceeding method once

enhancements are created or to indicate a new replaced workflow process.

 They permit identifying the particular flow of events in the system.

 In the flowchart, each step is an associate action and result of which

produces an output which is again used as an input to the succeeding step.

 The method will then offer information or picture of what it looks like and will

facilitate in identification of the issues related to quality. The straightforward

structure of the flowchart is given below.

2. Histogram
 A histogram is a graphical illustration of a bar chart that shows pattern falls

with totally different and typical method conditions.

  The histogram is an ordinarily used graph for frequency distributions, or how

often each different values in an exceedingly set of data occurs.

 In order to construct a histogram, it is necessary to divide the range of values

into specific intervals of five, ten, fifteen, etc. These intervals are known as

bins which are consecutive and adjacent.

 The examples to measure data in the histogram can be a number of new

students joined, the number of new patients registered, etc. The basic

structure of the histogram is given below.

3. Check Sheet
 A check sheet is a structured quality tool that is used to collect data. It is a

type of prepared form for analyzing data and it can be adapted for a variety

of purposes.

 Check sheet can also be called a tally sheet when the information collected is

quantitative in nature.

 With a checklist, you can list down the important checkpoints or events in a

tabular or metrics format.

 The Check Sheet is typically a list of questions or problems, in a document or

spreadsheet.

 It is also used during the review process, to ensure that all the required steps

and necessary pre-requisites have been completed.

4. Cause-Effect Diagram
 A Cause- and – Effect diagram, also known as the fish-bone diagram shows

the many possible causes of a problem.

  Cause and Effect also sort ideas into useful categories until we are able to

identify the root cause of the problem.

 Fish-bone captures all causes, ideas, and uses a brainstorming method to

identify the strongest root cause. It also records the cause of specific

problems to the processor system.

 To use this tool, you first need to identify and state the problem as a

question. This will help in brainstorming as each question should have an

answer. You can also simply start by writing it in the first headbox of the fish.

 Next, you will list the major causes of the problem on the spine, that consists

of one line across the page horizontally and a vertical line drawn as branches

or bone.

5. Pareto Chart
 A Pareto Chart is a bar graph of data that shows which factors are more

significant.

 The main purpose of the Pareto chart is to highlight the most important

factors that are the reason for the major cause of problem or failure.

 To construct a Pareto Chart, a different range of data is divided into groups

and are called segment or categories.

 In Pareto Chart, bars in a graph represent the values in descending order

where the left axis represents the frequency and right axis represents the

percentage of the total number of occurrences.

6. Control Chart
 Control charts are used to plot data points over time and give a picture of the

movement of that data.

 Control charts are used to compare current data to control limits which leads

to conclusions on the consistency of process variation.

 The main purpose of the control chart is to determine whether the process is

stable within the current conditions.

 The control chart is a type of graph that is used to plot the process data in a

timely sequence.

7. Scatter Diagram
 Scatter diagrams are the type of graphs that shows the relationship between

the variables in which variables represent the causes and effect.

 The main purpose of the scatter diagram is to establish a relationship

between the overall effect of the problem and the causes that are affecting it.

 A Scatter diagram conjointly helps within the identification of the correlation

between these two variables. If the variables are correlative, then the points

will fall on a line or very tiny curve.

 The variables may be positively or negatively related and are outlined on the

slope of the equation derived from the scatter graph.

Conclusion
All the above Quality Assurance tools have their own distinctive

characteristics and edges for a selected scenario and these tools may be

used for problem-solving supporting matters of the situation. Additionally,

using these tools properly and for a long time will make you proficient and a

good convergent thinker.

Total Quality Management

In business, manufacturing, and engineering, the term has a pragmatic
interpretation as the superiority or non-inferiority of something. It also refers to a
product as ‘fit for purpose,’ while at the same time satisfying consumer
expectations.

Definition by ISO: The totality of features and characteristics of product or service

that bear on its ability to satisfy stated or implied needs revolving around the
customer.
You may have a very good test management process and tool to ensure the
effectiveness of your testing. However, test management alone will not ensure
customer satisfaction. Total Quality Management is a way to not only deliver
high-quality products and services but to achieve higher customer satisfaction
levels.
In this post, we have covered the definition of quality management, its
importance, the concept of total quality management, quality management
principles, quality management example and the tool for comprehensive quality
management.
What is total quality management or TQM?
Total Quality Management is a process to ensure that all work aims toward the
common goal of improving product quality or service. TQM also enhances the
production process or process of delivering service. However, in TQM the
emphasis lies on fact-based decision making which uses performance matrices to
monitor progress.

 Total quality management (TQM) is an ongoing process of detecting and

reducing or eliminating errors.
 It is used to streamline supply chain management, improve customer
service, and ensure that employees are trained.
 The focus is to improve the quality of an organization's outputs, including
goods and services, through the continual improvement of internal
practices.
 Total quality management aims to hold all parties involved in the
production process accountable for the overall quality of the final product or
service.
 There are often eight guiding principles to TQM that range from focusing
on customers, continually improving, and adhering to processes.

Total Quality Management Principles:

Here are the fundamental principles of total quality management:

1. Customer Focus
Quality management process aims to meet customer requirements and deliver
beyond expected levels of product or service.
2. Commitment from the leadership
The leaders at all the levels of hierarchy help to establish a unity of purpose and
direction. The leadership is responsible to create a conducive environment so as to
achieve the quality objectives of the organization.
3. People engagement
This principle states that all the people in the organization must be competent,
empowered and engaged in delivering value. This also enhances the capability to
create value.
4. Process Approach
All the activities should be managed as interrelated processes to create consistent
and predictable results. These interrelated activities function as a coherent system.
5. Continuous improvements
An ongoing focus on improvement is a fundamental principle for the success of an
organization.
6. Evidence-based decision making
The decisions are based on the insights gained from analyzing and evaluating data.
This will help to produce desired results.
7. Relationship Management
Organizations should manage their relationships with interested parties such as
suppliers very well. This will help to sustain the levels of success achieved.
Conclusion
Total quality management drives customer satisfaction by ensuring that consistent
delivery of high-quality product or services is in place. For achieving results
beyond customer expectations, you need to implement an effective quality
management process for your testing team.

Quality Management Tools

Quality Management tools help organization collect and analyze data for
employees to easily understand and interpret information. Quality Management
models require extensive planning and collecting relevant information about end-
users. Customer feedbacks and expectations need to be carefully monitored and
evaluated to deliver superior quality products.

Quality Management tools help employees identify the common problems

which are occurring repeatedly and also their root causes. Quality Management
tools play a crucial role in improving the quality of products and services. With the
help of Quality Management tools employees can easily collect the data as well as
organize the collected data which would further help in analyzing the same and
eventually come to concrete solutions for better quality products.

Quality Management tools make the data easy to understand and enable employees
to identify processes to rectify defects and find solutions to specific problems.

Following are the quality management tools:

 Check List - Check lists are useful in collecting data and information easily.
Check list also helps employees to identify problems which prevent an
organization to deliver quality products which would meet and exceed
customer expectations. Check lists are nothing but a long list of identified
problems which need to be addressed. Once you find a solution to a particular
problem, tick it immediately. Employees refer to check list to understand
whether the changes incorporated in the system have brought permanent
improvement in the organization or not?
 Pareto Chart - The credit for Pareto Chart goes to Italian Economist -
Wilfredo Pareto. Pareto Chart helps employees to identify the problems,
prioritize them and also determine their frequency in the system. Pareto Chart
often represented by both bars and a line graph identifies the most common
causes of problems and the most frequently occurring defects. Pareto Chart
 records the reasons which lead to maximum customer complaints and
eventually enables employees to formulate relevant strategies to rectify the
most common defects.
 The Cause and Effect Diagram - Also referred to as “Fishbone Chart”
(because of its shape which resembles the side view of a fish skeleton)and
Ishikawa diagrams after its creator Kaoru Ishikawa, Cause and Effect
Diagram records causes of a particular and specific problem. The cause and
effect diagram plays a crucial role in identifying the root cause of a particular
problem and also potential factors which give rise to a common problem at
the workplace.
 Histogram - Histogram, introduced by Karl Pearson is nothing but a
graphical representation showing intensity of a particular problem. Histogram
helps identify the cause of problems in the system by the shape as well as
width of the distribution.
 Scatter Diagram - Scatter Diagram is a quality management tool which
helps to analyze relationship between two variables. In a scatter chart, data is
represented as points, where each point denotes a value on the horizontal axis
and vertical axis.

Scatter Diagram shows many points which show a relation between two
variables.

 Graphs - Graphs are the simplest and most commonly used quality
management tools. Graphs help to identify whether processes and systems are
as per the expected level or not and if not also record the level of deviation
from the standard specifications.

2. Total Quality Management Tools Total Quality Management - Melsa, J. L.

There are a wide range of TQM tools. However, the following are some of the
widely used tools.

Process maps: One of the important keys to understanding how to improve a

process is to map the process. While there are several different approaches to

process mapping, the key is to determine who does what at each step of the
process.

Often, the simple drawing of a process map is sufficient to solve many quality

problems because the map makes it so obvious where defects can be introduced.

“Poke-A-Yoke”: This concept of the Japanese management philosophy is to make

a process foolproof. The idea is to design the process in such a way that it is self-
checking or incorporates process steps that cause immediate detection and possible

correction of any defect. Simple examples include color-coding and special keying

of parts to ensure that they are assembled the correct way.

Statistical Tools: One of Deming’s major contributions to the quality movement

was the introduction of statistically grounded approaches to the analysis of defects.

Without the use of these tool, one can often make incorrect decisions regarding the
cause of a problem. This can often lead to exactly the opposite effect of that being

sought. Included in this set of tools are

 statistical process control (SPC) charts,

 Pareto Charts, and histograms.
 Force Field Analysis:
This tool asks one to diagram the forces (policies, culture,

and so forth) that are resisting a desired change and the forces that support the

change. This assists one in clearly determining the degree of difficulty of making

change and exactly where effort will be needed. The supporting forces are places
where assistance can be expected.

Root Cause Analysis (Five Whys): popularized by the Japanese this tool consists

of asking a series of questions (whys) until one uncovers the root cause of a

defective product. The objective is to determine why a defective product was

produced, which is to be contrasted with the usual approach of just fixing the
defective product or replacing it.

Fishbone Diagram (Ishakawa Diagram): This tool is also called a cause-and

effect diagram. It is used in a brainstorming session to examine factors that may

influence a given situation or outcome. The causes are often grouped into
categories such as people, material, method or process, and equipment. The
resulting diagram takes the shape of a fishbone, hence the name.

Loss Functions: In many manufacturing situations, one creates tolerance limits for

a product. Products that fall outside of the limits are defective and those that are

inside the limits are deemed good. Several difficulties arise with this approach.

o First, there is always the temptation to reclassify products that are just
outside the limits into the acceptable category, especially if there is a great
push for quantity.
 o Second, and perhaps more important, the accumulative effect of several
parts which are all on the extreme limits of acceptability, may lead to
defective performance.

The loss function tool is used to recognize that there is a cost associated with any

deviation from the ideal value.

The Plan-Do-Check-Act (PDCA) Cycle: This tool is also known as the Shewhart

Cycle. Deming popularized it in Japan; as a result, the Japanese refer to it as the

Deming Cycle. The tool emphasizes a new plan for change. It carries out tests to

make the change on a small scale, observes the effects, and finally, studies the

results to determine what has been learned. The cycle is repeated as needed.

Brainstorming: This process has become a staple of the TQM movement. The

concept is to invite participants to suggest “solutions” to a problem without any

evaluation of the usefulness or correctness of their ideas. Several approaches are

possible, including open suggestions, rotating suggestions, or blind suggestions.

There are several computer tools that have been developed to assist in this process.

After a fixed period of time, or after all suggestions have been made, there is

discussion of the “value” of the suggestions.

Affinity Diagram: The affinity diagram tool is used to organize large amounts of

non-quantitative (ideas, opinions, issues, etc.) information into groupings based on

natural relationships between the items. It is largely a creative rather than a logical

process. In a very loose sense, the affinity diagram does for ideas what statistics
does for numbers, viz. extract meaning from raw data. The affinity diagram
process is often used with the results of a brainstorming session to organize the
resulting ideas.

Interrelation Digraph: This tool takes complex, multi-variable problems, or

desired outcomes, and explores and displays all of the interrelated factors involved.

It graphically shows the logical and often causal relationship between factors. It is

often used in conjunction with the results of an affinity diagram exercise to seek

causes and effects in order to determine why corrective action needs to be applied.
Tree Diagram: This tool is used to systematically map out, in increasing detail, the

full range of paths and tasks that need to be accomplished to achieve a primary
goal and every related sub goal. Graphically, it resembles an organization chart or
family tree.

Prioritization Matrices: Prioritization matrices are one of a group of decision-

making tools that help to prioritize tasks, issues, or possible actions on the basis of

agreed upon criteria. While these tools cannot make decisions, they can help to

ensure that all factors are evaluated and that logical decisions are reached.

Activity Network Diagram: This class of tools includes a wide range of project

management tools used to plan the most appropriate schedule for a complex
project.

Typical examples are Gantt Charts and PERT charts. These tools project likely

completion time and associated effects and provide a method for judging

compliance with a plan. Several excellent computer programs exist for automating
the work associated with this class of tools.

Process Improvement
Process improvement is the proactive task of identifying, analyzing and improving upon existing
business processes within an organization, with the goal of improving process efficiency.

Continuous improvement is the ongoing practice of process improvement; it’s a process

improvement that is woven into the fabric of daily work, as opposed to process improvement
that happens once a quarter (or less frequently) with no follow-up. Continuous improvement can
be viewed as a formal practice or an informal set of guidelines.

Poor process improvement leads to higher costs, fragile infrastructure, and frustrated teams that
are unable to reach their full potential. Follow these 9 process improvement steps to guide your
teams to success.

Process improvement is a process in itself – so

understanding each of these process
improvement steps can help to improve your
process improvement efforts.
When implemented successfully, the results of following effective process improvement steps
can be measured in the enhancement of product quality, customer satisfaction, customer loyalty,
increased productivity, development of the skills of employees, efficiency, and increased profit
resulting in higher and faster return on investment (ROI).

Why Is Process Improvement Important?

Operate efficiently
Every business relies on many processes, or a set of activities to accomplish an objective. These
processes help maintain order and consistency and should also increase efficiency.

However, processes often become unwieldy over time. When that happens, they end up creating
delays and eating up costs. Process improvement helps teams keep process top of mind, so they
can operate efficiently, consistently.

Maintain a competitive edge

Another reason to focus your energy on process improvement steps: Your competitor probably
will. Put another way: If an organization is not continuously improving the way it performs
processes, it will likely fall behind in the market. That’s because at least some if not all its
competitors will be making such improvements.

Succeeding in today’s business environment

means constantly looking for ways to do things
better.
“Unhappy customers, stressed colleagues, missed deadlines, and increased costs are just some of
the problems that dysfunctional processes can create,” according to Mind Tools, a provider of
on-demand career and management learning solutions. That’s why it is so important to regularly
revisit your process improvement steps when your processes are not working well.

Improve business agility

As the pace of change gets faster and faster in nearly every industry, adaptability, often discussed
as business agility, has become the most important business competency.

Processes that do not work lead to numerous problems:

 Customers complain about poor product quality or bad service

 Team members get frustrated

 Work is duplicated or not completed at all

 Costs increase

 Resources are wasted

 Bottlenecks develop, causing teams to miss deadlines

By making a commitment to following the right process improvement steps, companies can save
money, boost innovation, improve talent retention, and create more value for their customers.

9 Process Improvement Steps

Map the current process

The first step in process improvement is to clearly define and visualize your current process.
Consider: How do we do things now?

Visual process improvement relies on using visual elements (like cards on a digital Kanban
board) to represent your workflow (as opposed to text-based methods, such as to-do lists).

Many teams use Kanban boards to map their current process when they implement process
improvement steps.

Text-based methods of process management don’t translate well into process improvement
because they don’t connect the dots between what work is done and how it is completed.
 Most teams don’t spend a lot of time discussing how work is being completed, but the process
we use can directly affect the quality of the work.

The only way to achieve a true, accurate understanding of our processes is through process
visualization: Creating a flow chart or process / workflow map of how work moves from “‘to do”
to “done.”

Visualizing your process can be immensely

helpful in illuminating areas where you can
improve.
Clearly defined process improvement steps can identify some of the most common sources of
inefficiencies in teams so they can be eliminated. For example, having a clearly defined “Quality
Assurance” step (with criteria for whether a work item passes QA) can help to reduce defects and
errors that might have otherwise gone unnoticed.

Getting started with visualizing your process starts with:

 Defining the various steps involved in your process

 Determining the time it takes to complete each step

 Outlining who typically works on each step, and where handoffs occur

Define the business challenges

Define the business challenges you are trying to solve with these process improvement steps.
What are your big-picture goals?

Albert Einstein is quoted as saying, “If I had one hour to save the world, I would spend fifty-five
minutes defining the problem and only five minutes finding the solution.”

If your team or organization has been using Kanban boards to manage your workflow (and even
if it hasn’t), everybody probably has ideas for how to improve your existing processes. Once you
decide to start practicing continuous improvement, it can be tempting to spend your theoretical
hour brainstorming ways to improve your current workflow.

But there’s a difference between practicing continuous improvement and going down rabbit
holes. You’ll have far better results if you follow process improvement steps can first define the
problems you’re trying to solve, then brainstorm solutions to help you solve them.

1. Start with organizational goals.

What organizational goals is your team working towards right now? Are you trying to build
better quality products, or improve your service offerings? Do you want to achieve faster
delivery cycles or billing cycles? If you’re practicing Lean / Agile, you might call these
Objectives and Key Results, or OKRs.

“OKRs” is a term that refers to the framework that Lean / Agile organizations use
to collaboratively set and track objectives and their outcomes. Looking at these can be a great
start when you’re working your way through process improvement steps.

Look at each organizational goal and determine how well your process helps you achieve it. For
example, if your larger organizational goal is to amplify the voice of the customer, think about
your team’s current workflow and how well it is working to amplify the voice of the customer.

If you see opportunities to improve your process to better help your team achieve that goal, then
you’ve defined your challenge: We need to improve our process to help us better amplify the
voice of the customer.

2. Consider team and personal goals.

You probably also have team goals that you’d like your process to help you meet. You might
want to improve documentation, use tools more efficiently, or reduce the time you spend in
meetings.

Brainstorm a list of these goals as a team and then develop a system for voting on which goals
you’d like to focus on in your process improvement steps.
Perhaps the entire team agrees that reducing time spent in meetings is a worthy goal to
incorporate into your continuous improvement efforts. Toward this goal, the team decides to
replace several standing meetings with regular update emails. You all commit to making better
use of meeting time by requiring agendas for all meetings and only inviting people who need to
attend.

This type of improvement activity might not directly impact the customer, but it can greatly
increase team efficiency, which can then have a positive impact on the customer.

Analyze what needs to change

The next action in your list of process improvement steps is critical: Getting to the heart of what
needs to change.

Nearly every process has some form of waste hidden within it. We’re defining waste in the
Lean sense here, as anything that does not add value to the customer. If you identify and
eliminate areas of waste within your processes, you will save time and produce higher quality
results.

Type of Waste Description Example

Defects Errors due to A new feature that

incomplete or doesn’t function as
inaccurate promised by a sales
information rep

Excess processing Additional steps Requiring teams to

that are document their work
unnecessary to in multiple tools
deliver the final (instead of using an
result integration to share
 Type of Waste Description Example

information between
tools)

Overproduction Producing more A designer creates 10-

than is necessary 15 customer
illustrations for a blog
post that only requires
1-2

Non-utilized Team members Copywriter unable to

talent sitting idle due to start work because
process inefficiency creative brief has not
been written for new
campaign

Sitting inventory Any bits of value Features that were

that are completed 90% developed during
(or close to a hackathon but never
complete) but have delivered
not been deliveredn
 Type of Waste Description Example

Products waiting Work items that are Product tutorial videos

for the next step unable to move that are waiting to be
forward due to reviewed by a busy PM
excess WIP
downstream

Unnecessary In knowledge work, Status meetings where

motion any activity that no new information is
doesn’t move a shared
piece of work
forward

Inefficient Any activity that Including the entire

motion of people (physically or team in a meeting that
mentally) moves is only relevant to a
people away from few members
more valuable work

As with all these process improvement steps, it’s critical to involve your entire team in this
analysis phase. As you think about your team’s process, answer the following questions:

 What issues frustrate team members and / or customers?

 Which steps are creating bottlenecks?

 What is causing costs to rise or quality to decline?

 Which steps require the most time to complete or cause the most delays?
 Again, speak to people who are most affected by the process and ask them what they think is
wrong with it and what improvements they suggest.

Redesign the process

Once you have mapped your current process, defined the business challenges, and analyzed what
needs to change in order to meet those challenges, it’s time to start “solutionizing:”
Brainstorming ways to resolve these pain points.

Take a look at each of the pain points you have identified in previous process improvement
steps. For each of these pain points, discuss potential solutions to resolve the pain. Be careful not
to simply accept the first or most obvious solution – as the saying goes, there are many ways to
skin a cat, and some of these ways might yield better results than others.

If a step in your process is taking too long, you might investigate:

 Dedicating more resources to that step

 Breaking that step into two or more steps

 Creating tools to expedite parts of the step

If you are experiencing quality issues, you might consider:

 Creating tools to standardize the step

 Adding detailed instructions to the lane (as a process policy) to increase

 Adding a quality control step between this step and the next step in your process

If the issue is that your team is often waiting on external blockers, you could look into:

 Adding someone to your team to do that work

 Training someone internal to do that work

 Offloading that particular process to a different team

 No process happens in a vacuum – so it’s
important to always consider the upstream and
downstream impact of any changes you might
make to your process.
Does the change you are suggesting improve both your process and the other processes that are
being affected? If the changes you are making are affecting other people or teams, are they being
included in this conversation? (If not, be sure to consult with them before implementing any
changes.)

Finally, before moving onto the next of these process improvement steps, you’ll want to talk
through your anticipated outcomes for each of the changes you are looking to make. Ask
questions like:

 How will we know it is working?

 What will we use to measure its effectiveness?

 When will we decide whether to keep the change, reverse it, or iterate upon it?

Discuss this for each of the changes before you make them, to ensure that you have a plan in
place for assessing the impact of your changes.

Implement changes
Finally, you’ve reached what is arguably the most exciting of these process improvement steps:
Actually implementing the changes!

Now that you have a plan for how to improve each of the pain points you have identified, it
might be tempting to implement all of the changes at once. However, it’s difficult to measure the
impact of a single change when you have too many variables at play, so you’ll want to take a
more measured approach.
 As a team, you’ll want to discuss how to prioritize the implementation of your improvements so
that you can effectively tackle the most pressing problems first. Implementing your
improvements one at a time will allow you to measure the impact of each change, and allow your
team time to adjust to each of the changes so that they are not distracting or overwhelming.

Create open streams of communication

Improving communication and collaboration requires you to eliminate boundaries so team
members can easily participate in process improvement by sharing (and finding) feedback and
ideas on a regular basis. Ideally, this helps people communicate clearly and fully the first time
around to reduce the amount of back-and-forth communications.

Kanban enables teams to create opportunities for implementing process improvement steps as they
discuss capacity constraints and other bottlenecks.

Software improves communication and collaboration by connecting people more closely (even
when they work in two entirely different locations) and putting all relevant communications in a
single place. Ultimately, it leads to fewer emails, which means team members spend less time
digging through their inboxes trying to find answers and more time getting work done.

Identify KPIs: how will you measure impact?

How will you measure the impact of these process improvement steps you are taking? What kind
of impact are you trying to make?

Do you want to:

 Increase team productivity?

 Boost efficiency?

 Speed time to market?

 Increase customer satisfaction?

 Improve employee morale?

 Gain competitive advantage?

Peter Drucker is quoted as saying, “You can’t manage what you can’t measure.” To achieve any
of the goals on this list, you must have a plan in place for measuring progress you’ve made by
implementing these process improvement steps. Whatever your goal, ask yourself what you’ll
need to know in order to measure progress.

 To increase team productivity or efficiency, you might want to measure work in process, cycle time, and
lead times.

 To speed time to market, you might track cycle time on new feature development or the lead time of a
new marketing campaign.

 To increase customer satisfaction, you might track sentiment ratings on support tickets or set up a way
to ask customers to give you a Net Promoter Score (NPS).

 Employee morale might be measured through an anonymous survey sent a few times per year.

1. Set up a system to gather metrics

Whatever you need to measure to assess how process improvement steps help you reach your
goals, set up a system for it. If you’re using Kanban boards to manage work, you can build a
board to track metrics to fuel your improvement activity.

An important element of process improvement steps is gathering metrics, such as cycle time.

When used in conjunction with a well-designed Kanban system, Lean metrics provide actionable
insights that help teams answer important questions like:

 How long does it take to complete a piece of work once we begin?

 What’s the average cycle time for each type of work?

 Where does work get stuck? How long does it wait between active steps?

 Are we underestimating how much time it takes to complete a request?

 Are we overloading any particular team member? How can we relieve this burden?

2. Practice clean data collection

Before you begin analyzing metrics, ensure the quality of your data. Make sure your team is
using the board in a consistent way. Before drawing any conclusions, ask yourself two questions:

 What does this metric truly measure?

 What insights am I trying to learn from this data?

The answers should be fairly similar. Data is only useful when it is analyzed accurately, in
context.

Continually monitor process improvement efforts

Process improvement is always a worthy use of time, but without a regular cadence to review the
impact of your process improvement steps, it’s easy to let them fall by the wayside.

Whether or not your organization formally practices continuous improvement in the Lean sense,
you can establish a system that allows you to practice process improvement in a consistent,
sustainable, and effective way.

In general, process improvement activity gets less

attention than project and break-fix work.
It’s natural to let urgent work take priority over important (but not pressing) work. This is why
it’s critical for teams to find ways to keep them top-of-mind and dedicate time to improvement
activity.

Some teams review process improvement steps at every standup, while others dedicate a monthly
or quarterly meeting – typically called a retrospective – to align around improvement efforts.
Establishing a regular cadence for both standups and retrospectives, and making sure you know
how to run them effectively, is the key, even when more urgent work is looming. Visualizing
process improvement activities on the team’s Kanban board alongside other work is a great way
to give improvement efforts the space they deserve.

Leaders can reinforce the importance of process improvement by encouraging team members to
block off time to devote to it. Similar to Google’s “20% time” policy, which is meant to
encourage employees to spend time on innovation, dedicating time to improvement activity is an
investment into the future of your company. You might find success with dedicating a few
afternoons a month to process improvement steps, or adding a few questions to your daily
standup to keep improvement efforts top-of-mind.

Whatever cadence works for your team, stick to it! While the impact might not be immediate,
you’ll certainly see the impact of the work over the long-term.

Measure the impact of process improvement efforts

By following these process improvement steps, you did the work to track your performance
metrics. Don’t forget to put them to use!

Before you begin work on any process improvement activities, determine success criteria: How
will you know if it’s working? Then, during your regular meetings to review performance
activity, be sure to discuss the performance of current or recently completed improvement
projects.

Types of Processes to Improve

These process improvement steps can be used to improve any type of business process, from the
most strategically important to the most mundane. Processes can be formal or informal.

Formal processes (protocol)

Formal processes are especially important when they involve anything having to do with
employee or customer safety, legal issues, financial considerations, and other criteria or sensitive
functions. In these cases, it’s important to follow particular steps.

Informal processes (habits)

Informal processes, on the other hand, are those more likely to be created by individuals or
groups within organizations to complete certain tasks. They might not involve written
instructions but are nevertheless important for achieving goals.

Processes considered formal, which are also known as procedures, are documented and have
well-established steps. For instance, a company might have procedures in place for receiving and
submitting invoices, or for establishing relationships with new clients.

Different kinds of processes have one thing in

common: They are all designed to streamline the
way individuals and teams work.
“When everyone follows a well-tested set of steps, there are fewer errors and delays, there is less
duplicated effort, and staff and customers feel more satisfied,” MindTools says.

The Value of Process Improvement

If process improvement has so many benefits, then why do so many companies neglect these
important process improvement steps?

Often, it’s a matter of cost – more specifically, sunk costs. If your entire company uses (albeit
mediocre) software, you’ve already made a significant investment of time, energy, and resources
into using that tool. The cost of switching to another tool might seem too much to bear.

But the reality is, companies save money by identifying inefficiencies in project teams with
many layers of management or manufacturing teams whose motions equate to money. In order to
fully make a commitment to process improvement, businesses have to accept that the risk of not
evolving is far greater than the risk of changing the status quo.

Respond to Complexity with Process

Improvement
As our world grows in complexity and the pace of innovation continues to hasten, every
company needs a methodical, sustainable approach to maintain a competitive edge. Effective
process improvement steps can help organizations operate more efficiently, reduce risk, deliver
more value, and realize greater returns on their investments.

No industry, no organization, is safe from disruption: But by committing to process

improvement, companies strengthen the muscles they’ll need to compete.

Workforce Scheduling

What Is Workforce Scheduling? Definition, Features,

Benefits, and Optimization Tips
Any business that heavily relies on hourly workers uses workforce
scheduling to optimize labor supply. Here’s an introduction to
workforce scheduling.

Workforce scheduling is defined as the process of

establishing the schedules of hourly workers to meet the
current and future demands in a workplace, such as a
restaurant, a hospital, or a retail store. It also involves
defining schedules so that the transition from one shift to the
other is seamless and work remains uninterrupted.

In any industry that relies on hourly workers, workforce

scheduling forms the foundation of smooth business
functioning. And this scheduling needs to be efficient to take
care of last-minute changes such as delays in reporting for
the job and sudden leave of absence, among other things.
But with scheduling automation on the rise and the growth in
the number of apps available to manage scheduling large
workforces, workforce scheduling can be made simpler.

What Is Workforce Scheduling?

Workforce scheduling entails establishing the schedule of

your current hourly workforce to manage the predicted
amount of work in your business.

Several factors affect the process of workforce scheduling.

These factors include increased footfall in the retail or
restaurant industry, increased tendency of accidents and
therefore hospital visits during certain holidays, sudden
emergencies in manufacturing or construction, and increased
requirements in call or contact centers.

Also, employee availability, employee skills, and employee

productivity also determine the process of scheduling.
Workforce scheduling is an integral component of workforce
Opens a new window

management, which involves taking into account predicted

workloads and then the number of resources needed to
complete the job. With dynamic industries (as are most
industries that hire hourly workers), the workload changes
frequently, and having an automated scheduling process in
place to handle these changes is imperative.

Workforce scheduling has gone way beyond the traditional

spreadsheet. The suite of workforce scheduling software now
available ensures that you, for all practical purposes, never
have to struggle with planning schedules on spreadsheets
again.

From cross-device functionality to mobility for a cross-country

workforce, these software can help the struggling manager to
streamline workforce scheduling.

Industries That Require Workforce

Scheduling
“In 2018, 81.9 million workers age 16 and older in the United
States were paid at hourly rates, representing 58.5 percent of
all wage and salary workers,” says a March 2019 Bureau of
Labor Statistics (BLS) report . More than half of the U.S.
Opens a new window

workforce is paid at an hourly rate.

So, there’s that much of the workforce to reckon with,

optimize for maximum productivity, and retain,
as unemployment numbers continue to remain low . This Opens a new window

means that there are more jobs than people to fill them, and
turnover in the hourly worker industry is high.
The industries that hire hourly workers and require workforce
scheduling are:

o Retail

o Healthcare
o Hospitality

o Contact centers

o Manufacturing

o Construction

o Transportation and Logistics

What Are the Features of Workforce

Scheduling Software?

Workforce scheduling technology and workforce

management software have evolved to the point where they
can automate the operational issues that managers face in
optimizing workforce management. AI-powered solutions are
also available to handle large workloads, predict the needs
with changing seasons, and optimally create schedules for
shift workers. In addition, it can also help employees take
control of their schedules and switch shifts with other
employees directly in case the need arises.

1. Labor forecasting

The first step in any optimized scheduling solution is to

predict the amount of business demand on a given day.
AI-powered workforce management software offers insights
into the number of the workforce required based on real-time
and historical data on the trends in high-traffic periods and
availability of manpower. It then uses this data to predict the
number of people needed at any given time in a particular
industry.

This simplifies decision-making for managers, who can then

use their time for more strategic work.

Any workforce scheduling software should be able to help

Opens a new window

you plan months in advance and allow you to make tweaks in

schedules easily. It should also be able to send automated
notifications to employees about changes in shifts or
cancellations. Always choose a scheduling software that has
cross-device functionality, i.e., it serves users on the desktop
as well as mobile devices.

For larger organizations, the solution should be able to help

you prepare schedules in advance for multiple locations and
offer the same functionality of shift swap and automated
notifications about changes.

AI is known for personalization, and it can do so even in the

case of employee schedules, based on the availability and
work patterns of employees.

2. Time tracking
A workforce scheduling software tracks the number of hours
an employee is putting into the job. So, you can track
overtime and better identify situations that result
in understaffing or overstaffing.

This is essential in case overtime or non-adherence to shift

worker regulations leads to compliance risk. “The full
employment economy we are experiencing requires a very
sound labor management strategy that assures the most
optimized labor force in perfect alignment with local and
national labor laws,” says Sasha Poljak, CEO of Nimble
Software Systems, Inc (Ximble) , a popular employee
Opens a new window

scheduling software, in an interview with HR Technologist.

3. Shift swapping

The software can give employees visibility into their

schedules and help them swap with other shift workers
should the need arise – for example, in case of emergencies.
This means there are fewer chances of employees losing pay
and fewer chances of absenteeism, so the work does not
suffer.

4. Customizable Reports

Any workforce manager who has had to prepare a worker’s

schedule or a report on a spreadsheet will know the relief an
automated, customizable report can offer. You can choose
the metrics you want to identify, such as the number of
absences per quarter, number of shift swaps by a particular
employee in a given week, or the pattern of increased footfall
at your business in a particular season through a good
workforce management software. This can help you make
better scheduling decisions in the future.

How to Optimize Workforce Scheduling

Optimal workforce scheduling is almost a science. There are
far too many variables, but the key is to use the technology
available to manage these variables.

1. Assess the demands of the business

Any industry that hires hourly workers knows that everyone

does not bring the same set of skills to the business. A new
crane may be operable only by one or two people at the
most, or only one or two employees may have the skills
necessary to handle an unprecedented rush at a restaurant.
It is essential to keep these employees’ skills in mind to
schedule their work accordingly.

Also, keep in mind predicted rush hours, predicted busy

seasons, and a backup of employees you can mobilize when
work gets busy.

2. Assess employee availability and employee

trends/patterns

Workforce crunches are real, but they can be dealt with if you
keep an eye on the trends your employees tend to show. For
instance, the number of accidents during Thanksgiving tends
to increase, and your employees could very well be the
casualties.

If some employees tend to have more sick days, then

consider that and keep backup ready in case they can’t make
it. If some employees prefer a day shift over a night shift,
schedule accordingly to avoid burnout and unnecessary
absences.

3. Let the scheduling begin

Once you have considered these two key factors, begin

planning and arrive at a solution that is best suited for your
business. As mentioned earlier, with automation, you can
experiment with the most optimal schedule and then share it
with your employees.

4. Make the schedule available to employees

Employees should be able to view their schedules for

transparency and to be able to change or swap them with co-
workers if necessary.

Benefits of Workforce Scheduling Automation

The number of possibilities when planning employee shifts is

tremendous. Each employee may work a different number of
hours a day, there must be a fixed duration gap between
each shift an employee works, and there could be a lot of
unforeseen incidents that prevent easy scheduling.

This is why AI-powered workforce scheduling solutions such

as ORQUEST and Kronos , and automated workforce
Opens a new window Opens a new window

scheduling solutions such as Shiftboard are here to simplify

Opens a new window

your life just that little bit. And what are the benefits of
moving from spreadsheet to specific software?
1. Test different schedule combinations to see which
one works the best. Because workforce scheduling
solutions allow you to set schedules in a click, you can spend
the time determining what the most optimal schedule will be
for employees, considering their requirements as well.
2. Manage costs by optimizing staffing. Don’t just
assume you will need more people during Halloween. Instead,
use an automated scheduler to show you how many people
you will need.

3. Define the quality of service you provide to your

customers. Optimum scheduling defines the quality of
service you provide to your customers because employees
are there on time and at their best to serve your customers.

4. Maximize productivity. Automated workforce scheduling

reduces overstaffing or understaffing, which maximizes
productivity and overall costs.

5. Reduce unnecessary overtime. Most workforce

scheduling solutions are armed with compliance risk solutions
to help you identify issues such as unnecessary overtime.

6. Increase workforce flexibility and reduce

burnout. Optimal scheduling enables flexibility and thus
improves employee satisfaction. Burnout in the hourly
workforce is high , and this kind of flexibility can reduce it
Opens a new window

significantly. Workforce scheduling solutions can, in fact, help

you predict burnout by identifying employee patterns such as
late logins and increased absences.

7. Enable lower turnover. Any workforce that managed

efficiently, and which has the freedom to swap shifts and
change schedules in emergencies, is more likely to stay
with a company than one that is haphazardly
managed. AI-based workforce scheduling solutions canOpens a new window
 help you manage a tardy workforce and predict flight
risks and help you prepare for such instances.
Automate So You Can Strategize
Technology is overtaking several repetitive and time-
consuming functions, and workforce scheduling is one of
them. As the workforce becomes multigenerational and
continues to grow, as businesses become more competitive
to remain relevant, and as employees demand greater
flexibility in their work, strategizing on maximizing the value
of a workforce will become more critical for businesses that
rely entirely on hourly workers.
Environmentnoun
The surroundings of, and influences on, a particular item of interest.
Naturenoun
(uncountable) The natural world; that which consists of all things
unaffected by or predating human technology, production, and
design. E.G. the ecosystem, the natural environment, virgin ground,
unmodified species, laws of nature.

‘Nature never lies (i.e. tells untruths).’;

Environmentnoun
The natural world or ecosystem.
Naturenoun
The innate characteristics of a thing. What something will tend by its
own constitution, to be or do. Distinct from what might be expected
or intended.
Environmentnoun
All the elements that affect a system or its inputs and outputs.
Naturenoun
The summary of everything that has to do with biological, chemical
and physical states and events in the physical universe.
ADVERTISEMENT
Environmentnoun
A particular political or social setting, arena or condition.
Naturenoun
Conformity to that which is natural, as distinguished from that which
is artificial, or forced, or remote from actual experience.
Environmentnoun
(computing) The software and/or hardware existing on any
particular computer system.

‘That program uses the Microsoft Windows environment.’;

Naturenoun
Kind, sort; character; quality.
Environmentnoun
(programming) The environment of a function at a point during the
execution of a program is the set of identifiers in the function's
scope and their bindings at that point.
Naturenoun
(obsolete) Physical constitution or existence; the vital powers; the
natural life.
ADVERTISEMENT
Environmentnoun
(computing) The set of variables and their values in a namespace
that an operating system associates with a process.
Naturenoun
(obsolete) Natural affection or reverence.
Environmentnoun
Act of environing; state of being environed.
Natureverb
(obsolete) To endow with natural qualities.
Environmentnoun
That which environs or surrounds; surrounding conditions,
influences, or forces, by which living forms are influenced and
modified in their growth and development.

‘It is no friendly environment, this of thine.’;

Naturenoun
The existing system of things; the universe of matter, energy, time
and space; the physical world; all of creation. Contrasted with the
world of mankind, with its mental and social phenomena.

‘But looks through nature up to nature's God.’; ‘When, in the course of human
Events, it becomes necessary for one People to dissolve the Political Bonds which
have connected them with another, ans to assume among the powers of the earth the
separate and equal Station which the Laws of Nature and of Nature's God entitle
them, a decent Respect to the Opinions of Mankind requires that they should declare
the causes that impel them to the Separation.’; ‘Nature has caprices which art can
not imitate.’;
ADVERTISEMENT
Environmentnoun
the totality of surrounding conditions;

‘he longed for the comfortable environment of his livingroom’;

Naturenoun
The personified sum and order of causes and effects; the powers
which produce existing phenomena, whether in the total or in detail;
the agencies which carry on the processes of creation or of being; -
often conceived of as a single and separate entity, embodying the
total of all finite agencies and forces as disconnected from a
creating or ordering intelligence; as, produced by nature; the forces
of nature.

‘I oft admireHow Nature, wise and frugal, could commitSuch disproportions.’;

Environmentnoun
the area in which something exists or lives;

‘the country--the flat agricultural surround’;

Naturenoun
The established or regular course of things; usual order of events;
connection of cause and effect.
Environmentnoun
the surroundings or conditions in which a person, animal, or plant
lives or operates

‘survival in an often hostile environment’;

Naturenoun
Conformity to that which is natural, as distinguished from that which
is artificial, or forced, or remote from actual experience.

‘One touch of nature makes the whole world kin.’;

Environmentnoun
the setting or conditions in which a particular activity is carried on

‘a good learning environment’;

Naturenoun
The sum of qualities and attributes which make a person or thing
what it is, as distinct from others; native character; inherent or
essential qualities or attributes; peculiar constitution or quality of
being.

‘Thou, therefore, whom thou only canst redeem,Their nature also to thy nature
join,And be thyself man among men on earth.’;
Environmentnoun
the overall structure within which a user, computer, or program
operates

‘a desktop development environment’;

Naturenoun
Kind, sort; character; quality.

‘A dispute of this nature caused mischief.’;

Environmentnoun
the natural world, as a whole or in a particular geographical area,
especially as affected by human activity
‘the impact of pesticides on the environment’; ‘a parliamentary environment
committee’;
Naturenoun
Physical constitution or existence; the vital powers; the natural life.

‘Oppressed nature sleeps.’;

Naturenoun
Natural affection or reverence.

‘Have we not seenThe murdering son ascend his parent's bed,Through violated
nature force his way?’;
Naturenoun
Constitution or quality of mind or character.

‘A born devil, on whose natureNurture can never stick.’; ‘That reverence which is due
to a superior nature.’;
Natureverb
To endow with natural qualities.

‘He [God] which natureth every kind.’;

Naturenoun
the essential qualities or characteristics by which something is
recognized;

‘it is the nature of fire to burn’; ‘the true nature of jealousy’;

Naturenoun
a causal agent creating and controlling things in the universe;

‘the laws of nature’; ‘nature has seen to it that men are stronger than women’;
Naturenoun
the natural physical world including plants and animals and
landscapes etc.;

‘they tried to preserve nature as they found it’;

Naturenoun
the complex of emotional and intellectual attributes that determine
a person's characteristic actions and reactions;
‘it is his nature to help others’;
Naturenoun
a particular type of thing;

‘problems of this type are very difficult to solve’; ‘he's interested in trains and things
of that nature’; ‘matters of a personal nature’;
Naturenoun
the phenomena of the physical world collectively, including plants,
animals, the landscape, and other features and products of the
earth, as opposed to humans or human creations

‘the breathtaking beauty of nature’;

Naturenoun
the physical force regarded as causing and regulating the
phenomena of the world

‘it is impossible to change the laws of nature’;

Naturenoun
the basic or inherent features, character, or qualities of something

‘helping them to realize the nature of their problems’; ‘there are a lot of other
documents of that nature’;
Naturenoun
the innate or essential qualities or character of a person or animal

‘it's not in her nature to listen to advice’; ‘I'm not violent by nature’;
Naturenoun
inborn or hereditary characteristics as an influence on or
determinant of personality.
Naturenoun
a person of a specified character

‘Emerson was so much more luminous a nature’;

Nature
Nature, in the broadest sense, is the natural, physical, material
world or universe. can refer to the phenomena of the physical world,
and also to life in general.
Supply and Demand: Is defined as the amount of a
commodity, product, or service available and the desire of buyers for it,
considered as factors regulating its price and quality:

What is Supply and Demand Balancing

Allison Champion

5 min read

August 6, 2020

Modified: October 24, 2022

One of the largest (and oldest) challenges facing any retailer is the difficulty
of effectively balancing supply with demand. Though it may be hard to find,
there is a balance that satisfies the need to both sell as much as possible
without incurring the costs of excess stock. In this guide to supply and
demand balancing, you’ll find practical insights on how to manage supply
and demand, as well as demand planning tactics to maximize customer
satisfaction and company profitability.

Understanding Supply and Demand

Supply and demand are key factors that impact businesses. Having a basic
knowledge of economic theory will allow a retailer to successfully recognize
changes to consumption. The definitions of supply and demand are quite
straightforward. Supply is the amount of a good or service that a supplier is
willing or able to produce at a given price. Demand is the amount of a good
or service that a consumer is willing or able to purchase at a given price.

Understanding supply and demand can help companies predict the reaction
of the consumer to a price change. For example, when the price increases
the consumer demand for a product is expected to decrease. Furthermore,
using the concept of supply and demand aids business people in determining
how to price their goods. The ideal price of a product is the market
equilibrium price. This occurs when the quantity suppliers produce of a
product is equal to the quantity consumers demand of that product. It is
critical to balance supply and demand in order to make the most of your
product.

What is Supply and Demand Balancing

In the least amount of words possible, supply and demand balancing is the
process of making products available at the right place and time for the
customer. This balance is achieved when the sales rate (Time/Unit of Sale)
for a given product equals the throughput (Time/ Unit production and
delivery) of your supply.

Though supply and demand balancing can be expressed in a simple equation

(Time/Unit of Sale = Time/ Unit production and delivery), it’s harder to
achieve than it might seem.

Challenges of Supply and Demand Balancing For Retailers

Brick-and-mortar retail locations come with their own unique set of
challenges, to be certain. But nowhere are the obstacles to supply and
demand balancing more evident than the e-commerce channels.

Hard to Identify Customers

Unlike brick-and-mortar retail, where demand is linked to a specific customer

or location, the e-commerce customer is not as clearly defined. Online
ordering masks the customer’s identity and location, which can make it
difficult to determine exactly how your products are perceived in the market
where the sales are actually coming from.

Volatile Demand
In the world of e-commerce, changes in how items are managed and
promoted often cause demand to fluctuate wildly. There’s also the issue
of product hoarding, in which customers buy large quantities of a product to
restrict availability and control pricing.
Limited Historical Data

One of the most significant challenges to supply-demand balancing for

retailers in any category is the limited historical data available to assist with
planning and forecasting, especially for new products.

Unreliable Forecasts

With limited historical data, comes limited ability to forecast demand. What
forecasting is available often does not clearly reflect the impact of past
historical events such as promotions or new listings and delistings.
Supply Challenges

Though many of the challenges in the way of a demand and supply balance
fall on the demand side of the aisle, there are also challenges for the supply
side of the business, like long lead times, breaks in the supply chain and the
difficulty of calculating minimum stocking quantities and safety stocks.

There are a lot of factors that can upset the balance of your supply
and demand forecasting. Fortunately, there are also laws to help you keep
the balance in check.

What are the Four Basic Laws of Supply and Demand

In a perfect world, managing supply and demand would be as simple as
forecasting demand and ordering (and/or manufacturing) products
accordingly. Since the world is not perfect, eRetailers balance supply and
demand by remembering four key laws:

 First Law of Supply and Demand – If demand increases but supply

remains unchanged, then it leads to higher price and quantity.
 Second Law of Supply and Demand – If demand decreases and supply
remains unchanged, then it leads to lower price and quantity.
 Third Law of Supply and Demand – If supply increases and demand
remains unchanged, then it leads to lower price and higher quantity.
 Fourth Law of Supply and Demand – If supply decreases and demand
remains unchanged, then it leads to higher price and lower quantity.

How Do You Manage Supply and Demand

Now that you know the laws of supply and demand, we can apply them to
help us answer the four key questions of supply and demand planning:

1. What goods will be demanded?

2. How much of each item will be demanded?
3. When will the goods be demanded?
4. Where do the items need to be at the time they are demanded?
By answering these questions, you’ll have the information you need to adjust
for supply or demand, set inventory policies, allocate available products and
resources, and ultimately avoid stockouts and overstocking.

How To Find The Balance Between Supply and

Demand
As an e-commerce brand, finding the right balance between supply and
demand is critical to the success of your business strategy, but it also plays a
significant role in the various functions of your business as a whole.

● From the point of view of your sales team, a miscalculation in supply

could lead to understocked items, lost sales, missed sales targets, penalties
to contractual retailers, and, most importantly, poor customer service.
● From the point of view of your supply chain department, a
miscalculation in demand could lead to overstocked items, which take up
extra space in the warehouse and leads to higher inventory carrying costs,
increased cost of rent, increased risk of product obsolescence and higher
labor costs to manage the extra stock.
● From the point of view of your managers, Ultimately, for your
managers to do their jobs effectively, they need your stock levels to be
balanced between supply and demand. Achieving that balance is a daunting
challenge, but it can be done.
Above all, supply and demand balancing for e-commerce brands require you
to think differently about your business and how you support your
customers, wherever they happen to be. With a nationwide network of
1000+ warehouses and fulfillment centers, Flowspace is the best choice you
can make for your new e-commerce store.

Different from traditional 3PLs, we enable online retailers with the flexibility
they need to gain a strategic advantage over their competition and ensure
their customers get what they want when they want it.

Written By:

Allison Champion
Allison Champion leads marketing communication at Flowspace, where she
works to develop content that addresses the unique challenges facing
modern brands in omnichannel eCommerce. She has more than a decade of
experience in content development and marketing.

Before joining Muscat University as senior lecturer in the Faculty of Transport & Logistics, Can
worked as a consultant (Middle East & Africa) for a Netherlands-based inventory optimization
company. Before that, he worked for one of the biggest distribution and 3PL organizations in the
 Middle East, Transmed Overseas, directly managing supply chain operations for companies such as
P&G, Clorox, Danone, Kellogg’s and Duracell. He has also held positions as head of sales and
marketing for Gloria Jean’s Coffees and Domino’s Pizza for the Cyprus market. He holds a PhD in
forecasting and supply chain management and has is widely published in many industry and
academic journals.

Alignment of demand and supply has been the subject of extensive research but is still
a pain point for many organizations, causing either lost sales on the one hand or holding
excess inventory on the other. Unfortunately, under or overstocking is often viewed as
binary choice that has to be made, but there is another solution – balancing supply and
demand.

Let’s take a look at what under and overstocking means for different functions in the
business.

From the point of view of Sales, understocking means:

o Missing sales targets

o Not being able to earn bonuses
o Empty shelves at retailer store meaning lost sales
o Risk of paying penalties to contractual retailers
o Poor customer service which can cause customers to go elsewhere

From the point of view of Supply Chain, overstocking means:

o Limited space in warehouse, causing higher inventory holding costs

o Increased cost of rent if space is not enough to hold stock
o Increased risk of product obsolesce if shelf-life is limited
o Having to offer discounts to clear excess stock, impacting profitability
o Higher labor costs to manage the stock on a regular basis.

Thus, none of the managers on the supply side want to be overstocked but salespeople
do so they can take advantage of all opportunities in the market. But it doesn’t have to
be either/or. Instead we can find a balance that satisfies the need to both sell as much
as possible without incurring the costs of holding excess stock.

How To Find The Balance

Between Over & Understocking
1 -Understand Consumer Demand
The first thing is to understand demand, i.e., what consumers want and where. To do
so, companies need to learn what shoppers can afford, what products they prefer and
why, and environmental and cultural factors that have an impact on consumer behavior.
For instance, if the consumer demands high-end premium products in your store or
region, there is no reason to overstock brands that are cheaply made or packaged in
boxes with unreadable labels. This calls for historical data to ensure that sales trends,
seasonality, and validity in the market can be scanned periodically. With statistical
modeling we can take this sales data and extrapolate future demand. Depending on the
industry, companies need to review historical sales and update forecasts daily, weekly,
monthly and quarterly, depending on the product type.

This approach is also same for suppliers who need to analyze the demand coming from
each retailer and store and consumer characteristics. Overall, these actions enable a
much clearer picture of what consumers want and what they don’t. When we know this,
we have a foundation to start meeting this demand with the necessary supply.

2 – Invest In Your Demand/Supply Planners

A good understanding of demand cannot be achieved with historical data alone. You
need good demand and/or supply planners, who are knowledgeable about product
groups and categories and aware of external factors that may affect consumption, and
who are equipped with knowledge of demand management and forecasting
methodologies. Not everything cannot be found in the data. The impact of a
competitor’s in-store promotion, cultural impacts forming shopping habits, background
of expatriates in the city/region etc. are only some of the factors that planners should
consider when generating forecasts, planning supply, and setting stock levels.

Demand management is a specific area that includes many techniques, methodologies

and nuances unique to the role, thus making education and training crucial. Planners
should know which forecasting techniques to use for which data set, how to aggregate
forecasts with factors affecting demand, and when to adjust forecasts with qualitative
judgment. Being knowledgeable about a particular product category is a competitive
advantage for planners because it allows us to understand the likely impact of
promotions and competitor activities. It also enables better communication with the
sales team, who we rely on for input into the forecasts and customer information.

3 – Forecasts Feed The Supply Plan

Let me ask you the following question: Does your company look to just hit monthly sales
targets or to enhance profitability in the long-run?

If the goal is to just close the month with sales targets achieved, let the sales team
create and approve the forecast. This is how it works at most suppliers and distributors.
Don’t get me wrong, the contribution of the sales team to any business is incredibly
important but they do not have the expertise to create forecasts that represent true
demand. Salespeople have the unconscious habit of being optimistic on sales targets,
which must be tempered by data-focused demand planners.
When generating forecasts we need input from our colleagues in Sales and Marketing,
Finance, Supply Chain, and perhaps Customer Service, and the optimal way to
collaborate is through a Sales and Operations Planning process. This is the forum that
allows us to align on aggregated forecast numbers. Supply Chain plays a key role here.
Let’s take the example of the Tesco, the biggest retail chain in the UK: when Tesco
handed the responsibility of order replenishment to their Supply Chain directors, it
dramatically increased product availability and reduced inventory. This approach
enabled both Supply Chain and category management teams to manage shelf space,
promotions and new launch item in a more efficient way.

4 – Integrate Pareto Analysis Into Your Target Stock

Level
Pareto analysis, also known as the 80/20 rule, is a statistical method used for decision
making which identifies which 20% of inputs leads to 80% of the desired output. In
demand planning, we’re looking to identify the 20% of products that contribute to 80% of
profitability.

Pareto analysis should be the best friend of planners when it comes to managing
inventory. To illustrate further, when I was working for Transmed Overseas, a full
service distributor in the Middle East and Africa, we had one single number of DOS
(days of stock) target per brand. This was causing massive fluctuations in stock levels
and was triggering not only out of stock (OOS) but also excess inventory and obsolete
stock. With Pareto analysis, we first categorized the SKUs of each brand from best to
worst performing. Then we categorized SKUs that generated 75% of sales as class A
and the SKUs that generated 15% of sales as class B. The final group, C, were the
SKUs that generated only 5% of sales. This approach identified our most important
products and the safety stock levels for each product were determined according to
their category.

Using Pareto analysis, we not only reduced excess stock by 15 to 20%, but also
ensured availability of class A SKUs, which improved customer service by 3%. As
valuable as Pareto analysis, is, you must also consider lead time, contractual
agreements, forecast accuracy, and other factors.

5 – Optimize Order & Replenishment Frequency

If we get our inventory replenishment frequency right, we reap the rewards of lower
inventory. It is easy to write but difficult to apply! Of course, there are many factors
affecting the right order frequency such as long-lead times, seasonality, forecast
accuracy, containerization, promotions, and PIPO (Phase in Phase out) practices, but it
is doable.

Your starting point is to check whether your lead times are accurate or not. Without a
high level of lead time accuracy, any attempt to increase order frequency is shot in the
dark that risks failure and cost. Thus, the supply chain team should work meticulously to
track OTIF (On time, in full) performance of every purchase from each supplier. Once
there is a reliable history on lead time with accuracy performance, then the team should
check forecast accuracy at the SKU level and forecast misses, which is one of the
invisible inventory costs incurred by companies. Improvement in lead time and forecast
accuracy will increase the confidence in replenishing products on time and in full at DCs
and stores. Following this, containerization should be analyzed which has a direct
impact on logistics and transportation costs. This responsibility lies with the Supply
Chain team, who should compare the cost of inventory holding, forecast misses, and
obsolesce versus savings from logistics and transportation. This cost/savings
ratio should inform your ordering frequency.

Amending your order frequency should consider marketing or category management

teams because they run promotions that can impact the amount of inventory you need.
If promotions are not factored into the lead times and not communicated to the Supply
Chain and Procurement teams, plans will not include the promotional volume. This not
only gives rise to missed sales/understocking, but also poor customer service, and even
penalties at the downstream level depending on your agreements with retailers.

CAPCITY MANAGEMENT
Capacity management refers to the act of ensuring a business maximizes its
potential activities and production output, at all times, under all conditions.
The capacity of a business measures how much companies can achieve,
produce, or sell within a given time period. Consider the following
Capacity management is also defined as the act of ensuring
maximum potential activity of businesses. It focuses on greater
production output all the time, under each and every condition. It is
basically defined as the business benefits a company can achieve,
produce, or sell within a given time period.

The process of capacity management includes a wide variety of

planning actions. These actions ensure that a business
infrastructure has adequate resources to maximize its potential
activities. It also focuses on guarantee production in any
organization under any condition.
The above definitions implies that;

 Capacity management refers to the act of ensuring a business

maximizes its potential activities and production output at all times,
under all conditions.
 Companies must remain nimble enough to constantly meet
expectations in a cost-effective manner.
 Companies that poorly execute capacity management may experience
diminished revenues due to unfulfilled orders, customer attrition, and
decreased market share
 Capacity management also means calculating the portion of special
capacity that is actually being used over a certain time period.

Understanding Capacity Manage

The procedure of capacity management primarily deals with the

performance, memory, physical space, operational, and
development environment. It includes the development of all
aspects of businesses for example, human resources, hardware,
networking equipment, software and peripherals.

The capacity management helps to compare the available resources

within the time deadline. It analyzes the capacity and gives you an
overview of your business. Such as if the composition of human
capital in a company matches with the actual needs of the
organization or not.

Capacity management helps in analyzing resource availability and

make it easier for the companies to check their availability and skills
for the upcoming projects. This analysis also assists the project
managers and directors to take effective decisions for hiring new
people and projects. It also helps in managing the demand and
supply of the resources.

Objectives of Capacity Management

Capacity management is the art of capacity management that

emphasizes well utilization of resources. The objective of capacity
management is to maximize the profits for businesses within the
given limits.

Capacity management planning differs from organization to

organization. It is different as per the business types. The common
and shared objective of capacity management are as follows:

1. Capacity management planning helps to identify the capacity

requirements.

2. The planning helps to meet current and future projected

workloads.

3. Capacity management helps in the development and

maintaining of businesses.

4. Capacity management ensures that the performance goals of

an organization are met on time.
 5. Capacity management ensures the process of business within
the budget.

6. Capacity management monitors the capacity continuously to

bind the service level management.

7. Capacity management assists in diagnosing and resolving

incidents occurred during business procedures.

8. Capacity management helps in analyzing the impact of

variances on capacity.

9. Capacity management takes proactive measures to improve

performance.

10. Capacity management helps in cost optimization during

the whole process.

Examples of Capacity Management

Different organizations have different criteria for capacity

management. The capacity of a business depends on the type of the
products, services, and duties delivered by the organization. The
examples of capacity management may include the following cases.

1. A coffee café that can produce 500 cups of coffee per day.
 2. A call center that can handle 5000 calls per week.

3. A pharmaceutical production line that can assemble 30 lakhs

capsules per month.

4. A restaurant that can accommodate 100 family dinners per

night.

5. A car service system that can repair 10 cars per hour.

Let us consider a broad example of a television manufacturer. A TV

producing company always needs to make sure that it is able to
meet the demand of the market. Now the company will hire a
special team to read and realize the market requirements.

The special team analysis that IPL is going to begin in the coming
month, so the demand for television in the market will be apparently
higher than usual. It also released data that HD television with prime
quality will be more than the usual televisions.

Now, the next step of the organization is to check its capacity, if it is

sufficient enough to meet the market requirements or not. The
organization analyzes that it doesn’t have sufficient requirements to
handle the demand. Also, the fact that the market demanded is
expected to go down as soon as the IPL season ends.
So, now applying the principles and procedures of capacity
management the company would think of leasing employees and
machines rather than purchasing or buying for permanent.

Once the company leases machines and employs manpower for the
purpose. It will start producing fresh new HDR television sets for the
market. This is how the process of capacity management works in
real life, and the way by which industries and organizations manage
their capacity to meet the supply and demand chain of the market.

Also Read | Business Process Notation

Process and Procedure of Capacity Management

Capacity management tools help in measuring the volumes, speeds
and efficiencies of the movement of data. Data journey helps in the
data’s journey through the IT infrastructure. Capacity
management helps in the process of organization of applications.

Capacity management enables the organization to examine the

operations of all hardware and software in the environment. It also
captures the critical information related to data flow. The capacity
management program has measurement and analysis tools that
must enable it to observe the individual performances of IT assets.

The capacity management includes the elements such as servers,

end-user devices, storage systems, storage network devices, cloud
services, and network communication devices. The capacity
management can be achieved via software, hardware or by manual
means. Capacity management relies on the interception of data
movement metrics.

The first step of capacity management is the emulation programs.

Emulsion programs are effective tools for capacity management.
The programs mimic the application programs like database
management. It ensures its own sets of test data to ensure accurate

and consistent results.

The second approach of capacity management involves the

employment of hardware-based monitoring devices. The capacity
management focuses on the network performance and provides
comprehensive information.

A capacity management process is three step procedure that

involves following steps:

1. Capacity Calculator

The first step of capacity management is to estimate a clear

detail of the current resource capacity. The organization first
needs to prepare a utilization report. The utilization report helps
to understand the expected shortages of the business. Thus,
helping in maintaining the capacity management strategy for
upcoming processes.
 2. Determining the Resource Needs

Based on the purpose or scope of the project. It is essential to

make a list of present resources and missing resources. This will
help you to determine the kind of team you need to hire for the
purpose.

3. Prioritizing the work

Hiring and assigning the team task isn’t the only task to do. It is
essential to do some smart projects and task prioritization. If
you don’t make your list first, this might make you miss your
capacity.

Components of Capacity Management

Capacity management provides high-level information on a variety

of business components. It assists to gather as much possible
information that attempts to correlate the measurements into an
application-centric picture.

The major categories include processing power, memory, storage

capacity and speed for all the intermediate processes for the
businesses. Here is the brief introduction to all the components of
capacity management:
 1. Performance: Performance is the key metric factor in
capacity management. It is essential for an organization to
detect its bottlenecks. It affects the overall efficiency of
businesses. Best performance helps in the upgradation of
businesses.

2. Memory: Memory is the other important factor in capacity

management. If the memory of the company system isn’t
stabilized it will slow down the overall process. Insufficient
memory is itself the biggest bottleneck for the organization.

3. Physical space: Physical space is commonly associated with

the focus to generate storage space for application and data.

Factors that weaken the Capacity Management

and Project Delivery

There are several factors that affect the organization performance

and play a vital role in defining the capacity management of the
network or basically, website business. The primary list includes:

1. Delay: Sometimes the delivery of a project or network takes

too long to deliver. It takes a whole time for data transmission
as several factors are responsible for this.
 A simple data is broken into several parts such as frames,
pockets and segments. While reliable protocols allow receivers
to get a notification after delivery of each data. Thus, making it
possible to measure the round-trip time.

2. Reception order: Some real-time protocols, for

consideration voice and mp4 require packets to arrive in the
correct order to be processed. If packets arrive out-of-order, it
may drop the data transmission.

3. Packet loss: Packet loss may occur due to errors in

overloading of the intermediate network. Packet loss can also
occur due to intentional discarding of the traffic to enforce a
particular service level.

4. Retransmission: Retransmission occurs when packets are

lost in a reliable network. Retransmission faces two delays, the
first arises from re-sending the data and the second is the result
of data waiting.

5. Throughput: Throughput is the amount of traffic, network

can carry. It affects the project delivery of the businesses.

Also Read | Business Process Mapping

Types of Capacity Management Planning

There exist three types of capacity management planning, which
serve the different needs of different organizations. It is beneficial
for both short-term and long-term resources management:

1. Product Capacity Planning

Product capacity planning ensures the adequate product and

services ready for the serving and delivery proposes.

2. Workforce Capacity Planning

Workforce capacity planning helps in estimating the efficient

number of team members and hours required to complete the
task. Workforce capacity also helps in identifying the ideal time
to start recruiting new employees and onboarding process
details.

3. Tool Capacity Planning

Tool capacity planning ensures the supply of adequate

equipment to complete the jobs, assembly line components,
and other requirements for the delivery of the products.

Advantages of Capacity Management

The advantages of capacity management are as follows:

 1. Improvement of performance.

2. Reduction of consumption.

3. Fine tuning of applications and other components of

businesses.

4. Elimination of reductant work.

5. Consistent monitoring of business plans.

6. Improvement of organizational and IT services.

Also Read | Examples of Information Technology

There are several providers available in the market and on the

internet that provide capacity management plans and processes to
the organization. All you need is to identify the goals and needs of
your company, and then work in the required direction to implement
full capacity management.

Supply and demand are key concepts used by economists to explain the way a market
operates and how a price is determined. Demand reflects a consumer's willingness to
pay, and supply reflects a producer's willingness to sell.
Table of Contents
relationship of price to supply and demand

Read a brief summary of this topic

supply and demand, in economics, relationship between the quantity of a
commodity that producers wish to sell at various prices and the quantity
that consumers wish to buy. It is the main model of price determination
used in economic theory. The price of a commodity is determined by the
interaction of supply and demand in a market. The resulting price is
referred to as the equilibrium price and represents an agreement between
producers and consumers of the good. In equilibrium the quantity of a good
supplied by producers equals the quantity demanded by consumers.

Demand curve
increase in demand

The quantity of a commodity demanded depends on the price of that

commodity and potentially on many other factors, such as the prices of
other commodities, the incomes and preferences of consumers, and
seasonal effects. In basic economic analysis, all factors except the price of
the commodity are often held constant; the analysis then involves examining
the relationship between various price levels and the maximum quantity
that would potentially be purchased by consumers at each of those prices.
The price-quantity combinations may be plotted on a curve, known as
a demand curve, with price represented on the vertical axis and quantity
represented on the horizontal axis. A demand curve is almost always
downward-sloping, reflecting the willingness of consumers to purchase
more of the commodity at lower price levels. Any change in non-price
factors would cause a shift in the demand curve, whereas changes in the
price of the commodity can be traced along a fixed demand curve.
Supply curve
decrease in supply

The quantity of a commodity that is supplied in the market depends not only
on the price obtainable for the commodity but also on potentially many
other factors, such as the prices of substitute products, the production
technology, and the availability and cost of labour and other factors of
production. In basic economic analysis, analyzing supply involves looking at
the relationship between various prices and the quantity potentially offered
by producers at each price, again holding constant all other factors that
could influence the price. Those price-quantity combinations may be plotted
on a curve, known as a supply curve, with price represented on the vertical
axis and quantity represented on the horizontal axis. A supply curve is
usually upward-sloping, reflecting the willingness of producers to sell more
of the commodity they produce in a market with higher prices. Any change
in non-price factors would cause a shift in the supply curve, whereas
changes in the price of the commodity can be traced along a fixed supply
curve.
Market equilibrium, or balance between supply and
demand
Supply and demand are equated in a free market through
the price mechanism. If buyers wish to purchase more of a good than is
available at the prevailing price, they will tend to bid the price up. If they
wish to purchase less than is available at the prevailing price, suppliers will
bid prices down. The price mechanism thus determines what quantities of
goods are to be produced. The price mechanism also determines which
goods are to be produced, how the goods are to be produced, and who will
get the goods—i.e., how the goods will be distributed. Goods so produced
and distributed may be consumer items, services, labour, or other salable
commodities. In each case, an increase in demand will lead to the price
being bid up, which will induce producers to supply more; a decrease in
demand will lead to the price being bid down, which will induce producers
to supply less. The price system thus provides a simple scale by which
competing demands may be weighed by every consumer or producer.

The tendency to move toward the equilibrium price is known as the market
mechanism, and the resulting balance between supply and demand is called
a market equilibrium.

As the price of a good rises, the quantity offered usually increases, and the
willingness of consumers to buy the good normally declines, but those
changes are not necessarily proportional. The measure of the
responsiveness of supply and demand to changes in price is called the
price elasticity of supply or demand, calculated as the ratio of the
percentage change in quantity supplied or demanded to the percentage
change in price. Thus, if the price of a commodity decreases by 10 percent
and sales of the commodity consequently increase by 20 percent, then the
price elasticity of demand for that commodity is said to be 2.

In algebraic form, elasticity (E) is defined as E = %Δy/%Δx; y is elastic with

respect to x if E is greater than 1, inelastic with respect to x if E is less than
1, and “unit elastic” with respect to x if E is equal to 1. Several other types
of elasticities are frequently used to describe well-known economic
variables. These include, but are not limited to, the income elasticity of
demand, the cross-price elasticity (the elasticity of the price of a good with
respect to the price of another good), the elasticity of substitution between
different factors of production (for example, between capital and labour),
and the elasticity of intertemporal substitution (for example, the elasticity
of consumption in the future relative to consumption in the present).

Several other types of elasticities that are frequently used to describe well-
known economic variables have acquired their own special names over
time. These include, but are not limited to, the income elasticity of demand,
the cross-price elasticity (the elasticity of the price of a good with respect to
the price of another good), the elasticity of substitution between different
factors of production (for example, between capital and labour), and the
elasticity of intertemporal substitution (for example, the elasticity of
consumption in the future relative to consumption in the present).

The demand for products that have readily available substitutes is likely to
be elastic, which means that it will be more responsive to changes in the
price of the product. That is because consumers can easily replace the good
with another if its price rises. The demand for a product may be inelastic if
there are no close substitutes and if expenditures on the
product constitute only a small part of the consumer’s income. Firms faced
with relatively inelastic demands for their products may increase their total
revenue by raising prices; those facing elastic demands cannot.
Supply-and-demand analysis may be applied to markets for final goods and
services or to markets for labour, capital, and other factors of production. It
can be applied at the level of the firm or the industry or at
the aggregate level for the entire economy.

Franchising Defined

Many people feel as though they have an understanding of the concept of franchising.
However, do you really know what franchising is? Can you define it? (And no, saying
fast food chains doesn’t count.)

As it relates to business, Merriam-Webster defines a franchise as: “the right or license

granted to an individual or group to market a company's goods or services in a
particular territory.” While a good definition, it doesn’t exactly touch on many of the
nuances involved in franchising.

The definition for franchising given by the International Franchise Association (IFA)
gives more detail, stating that a franchise is:

“A contractual relationship between the franchisor and the franchisee in which the
franchisor offers or is obliged to maintain a continuing interest in the business of the
franchisee in such areas as know-how and training; wherein the franchisee operates
under a common trade name, format or procedure owned by or controlled by the
franchisor, and in which the franchisee has made or will make a substantial capital
investment in his business from his own resources.”

Individual franchises are part of a brand’s ecosystem, a network that is a pooling

of resources and capabilities.

In a franchise business setup, the franchisees of a brand gain access to the franchisor’s
know-how and experience of its business system in exchange for their money and
personal labor. This way, franchisees who want to own a business can shorten the
learning curve that comes with starting a business. It’s also a way for franchisees to
avoid spending a significant portion of the time and money that typically comes along
with developing a business idea.

On the other end of the deal, by licensing out its business methods and pledging
support to franchisees, the franchisor allows itself the opportunity to expand into areas it
may have had difficulty expanding to without the extra money and manpower
There are three main types of franchises.

• Most franchises fall under the business format type where the franchisor licenses a
business format, operating system, and trademark rights to its franchisees.

• The second type of franchise is product distribution, which is more of a supplier-dealer

setup. The franchisor grants the franchisee permission to sell or distribute a product
using their logo, trademarks and trade name, but typically does not provide an operating
system to run the business with.

• The third is manufacturing, where the franchisor permits the franchisee to manufacture
their products (e.g. clothing) and sell them under its trademarks.

When the purchase of a franchise is made, the franchisee is required to comply with
strict guidelines and rules regarding the operation of the business. These guidelines are
in place to maintain brand consistency.

In addition, fees are collected regularly for as long as the franchisee owns the franchise.
In exchange for these payments, the franchisee will receive continued support such as
marketing assistance and ongoing training opportunities.
Choosing the right location for your franchise

An appropriate location for your business can make it or break it. One of the
major decisions in your life as an entreprenuer is deciding on which type of
business to run, how many locations to set up your business, and lastly, the
location of each of your business sites.

There are two types of location analysis: figuring out a broad region where you
want to operate in such as names of counties, towns, zipcodes that seem
interesting to you based on the profile of your customers, market research and
compile a demographic breakdown of the geographical area.

Once you have a list of zipcodes that seem interesting, you have to consider a
street and property level analysis and that is what we will discuss in this article.

Key points for location selection

In addition to looking at the bigger picture when selecting the location for your
business, you’ll need to analyze a wide range of additional factors, which include
the following.

Costs and fees

In addition to monthly rent, as a franchisee, you’ll have an assortment of other

real estate-related fees that must be calculated into your overall budget.

In addition to the base rent which is calculated based on square footage, you may
be responsible for common area maintenance fees, real estate taxes, and
merchant association dues, or you may have to pay the landlord a percentage of
your sales.

All of these fees should be spelled out in your lease and reviewed by your
franchisor, financial advisor, and attorney before you sign the lease. Hidden costs
that are not

calculated into your budget can throw off your financial projections dramatically.

Ease of access and convenience for customers

How easy is it for customers to reach your location, park their cars, and gain
access to your business?

Is the location you’ve selected truly convenient to your customers?

Will customers have to travel out of their way to do business with you?

Keeping in mind that customers are rather lazy and not inherently loyal, will the
location you select attract your target customers and keep them coming back?
As people drive by your location, will they be able to slow down and turn into
your parking lot or driveway?

High visibility

One of your biggest and best marketing tools as a franchisee is the location itself.
Between the size of the building you’re in and the signage you put up, you want
your location to have as much visibility as possible and to fully utilize the brand
recognition of your franchisor.

Ingress and egress

These terms refer to the entrance and exit of the location itself, in terms of
convenience, ease of use, and functionality.

Nearby competition

How much competition is located within a short distance of your proposed

location? How will this competition impact your sales and traffic? Does your
competition have a better location that’s easier and more convenient to reach?

Other draws to the location

What anchor stores, for example, can you count on to generate a constant flow of
traffic to your location? Do these draws attract your target customers? How can
you benefit from the draws?

Parking

Parking is a huge issue that can greatly impact the convenience (or
inconvenience) a customer experi- ences when visiting your location.
Can customers park directly in front of your store, or will they have to park their
cars and walk in order to reach you?

Is there ample parking nearby, or will customers have to circle around waiting for
parking spots to open up?

Security

Does the location offer a safe environment for your employees and customers? If
the area is perceived to be dangerous, this could keep customers away from your
location.

Signage

How much signage will you be able to utilize to promote your business? What size
signs? Where can they be located? Can the signage be seen from all directions?
From what distance will the signs be seen? Will the signage have to conform to
specific guidelines from the landlord?

Size

Even if the location is ideal, the size of the space must also be suitable for the
type of business you’ll be operating. If it’s too small, you could lose out on
revenue or may not be able to operate efficiently.

If it’s too large, you might wind up spending too much on rent and may not be
able to fully utilize the space. Follow the guidelines from your fran- chisor in terms
of space requirements—and stick to them.

Tenant mix If your business will be located in a mall,

shopping center, or strip center, for example, who are the other tenants? Are any
of them your competition?

Conversely, will any other tenants help your business attract its target customers?

Traffic

Traffic is a calculation of how many people walk or drive past your location on a
daily basis.

Keep in mind that even if the general traffic is in the thousands of people, not all
of these people are considered part of your tar- geted customer base.

Zoning

Based on local laws and zoning, will your business be allowed to operate from the
location? Will you be able to acquire local licenses, permits, and so on? This is an
area where your Realtor and attorney will be helpful.

Checking Franchisor restrictions in UFOC

One of the first decisions you and your franchisor will need to make related to
location is what type of site is most suited for the business you’ll soon be
operating.

You also need to define how much space you’ll need, plus determine some of
your other requirements that relate to the location. This information should be
provided by your franchisor, including within the Uniform Franchise Offering
Circular (UFOC).

Non-traditional sites
A non-traditional site refers to franchise-based business operated from places like
an airport, train station, stadium/arena, or school campus, or near a tourist
attraction.

These sites tend to be small, sometimes kiosk-based, and often allow you to reach
a captive audience of customers (such as airline travelers navigat- ing their way
through a busy airport).

Downtown retail area

A downtown retail area is a retail-based location in the heart of a city, town, or

community that is not part of an indoor mall or strip center. For example, it can
be a store found along Main Street,broad st etc. in Any town in US.

Because your site is in a busy part of town, it’s regularly exposed to a high volume
of driveby and pedestrian traffic, and it benefits from high visibility.

From a franchisee’s standpoint, one drawback to this type of retail location is the
potentially high rent.

As with any loca- tion, you also need to concern yourself with whether the local
traffic (driveby and pedestrian) includes your target cus- tomers, and whether
there’s easy access to your store and nearby ample parking.

Busy downtown areas are often con- gested and have inadequate or inconvenient
parking for customers.

Retail mall

Malls are indoor, fully enclosed, and centrally located shopping areas that contain
dozens, perhaps hundreds, of individual retail stores and one or two major
department stores (called anchor stores), as well as restaurants and, typically, a
food court.

Malls also often contain several kiosk-based businesses.

Indoor malls are typically filled with franchise-based busi- nesses, as well as with
popular chain stores. A successful mall draws a steady flow of traffic throughout
the week, offers plenty of convenient parking, and hosts ongoing special events to
draw additional traffic to the mall.

From a franchisee’s standpoint, malls can be very attractive sites because of the
steady flow of traffic.

The potential draw- backs include not just the potentially high rent, but the addi-
tional fees that mall tenants are required to pay, including a common-area
maintenance fee, a mall-wide advertising/mar- keting fee, merchant’s association
dues, and perhaps even a per- centage of profits.

Businesses that operate within malls are also typically required to remain open
during all hours the mall is open, which can mean operating from 10:00am until
9:00pm or 10:00pm Monday through Saturday, a partial day on Sunday, and
extended hours during the holiday shopping season.

Another drawback to locating your business in a mall is that you may encounter
significant competition within that mall, unless you negotiate an exclusivity deal
with the landlord, which, as a franchisee, may be difficult.

Many malls across the country are dying a a slow death as the anchor stores are
shutting down. You need to keep this in mind if you are thinking about signing a
multi year lease at a mall. Carefully look at the financial health of the anchor store
at the mall you are interested in and than decide if its right for you or not.

You can also ask a data analytics company like Specrom Analytics (Specrom.com)
to generate a report on % of your franchisor’s stores located in malls vs in other
locations. We can also help you look into types of store closures happening in
your geographical area.

Retail shopping center or a strip mall

A retail shopping center (also referred to as a strip center or strip mall) is a string
of attached stores located outdoors that share a common parking lot.

They’re typically anchored by a large supermarket, pharmacy, movie theater, or

mass-market retailer (such as Target or Wal-Mart) that attracts a regular flow of
traffic to that center.

Depending on the population density of the area, these types of retail centers
tend to attract mainly local customers (people willing to travel only a short
distance—say, less than five miles).

The advantage for franchisees is that rents are often afford- able, plus there’s
usually space to display high-visibility signage.

From a convenience standpoint, it’s important that your location have ample
parking directly in front of your store, in order to cater to your customers.

Ideally, your business should attract customers on their way to or from the
supermarket or anchor store, for example.

Stand-alone retail location

This type of retail location is not part of a mall, shopping cen- ter, or downtown
area.

It’s truly a stand-alone location that may or may not be located along a major
street or busy thorough- fare.

As a franchisee, this type of location can provide its own set of challenges,
because your business must become a destination for your customers.

In other words, your customers need to make a point to drive or walk out of their
way to visit your business.

Hairstylists, oil change companies, automotive repair shops, pet service shops,
and convenience stores are examples of businesses that are typically housed in
these stand- alone locations.

Warehouse

Warehouse facilities are typically vary large, hollow buildings with few interior
rooms.

They’re often located out of the way in not-so-busy, more industrial areas and
have little or no commercial traffic.

This type of site is suitable for franchise-based businesses that have a lot of
inventory, need an exceptionally large amount of space in which to operate, or
are considered destination businesses, meaning that customers are willing to
drive out of their way to visit them.

The benefit to franchisees is that warehouse real estate is typically inexpensive.

The drawback is that you’ll need to invest a lot into advertising and marketing to
make people aware that your business exists.

A doggy daycare/boarding facility or furniture showroom is an example of a

franchise-based business that might operate from warehouse space.

Single-unit franchises

A single-unit or direct-unit franchise is just what it says it is: As a franchisee, you

obtain the right to own and operate one franchised business from a franchisor.

Most franchise systems have grown one franchise at a time. It is the classic
method and, until the past few decades, was the most common type of
relationship in franchising.

In a single-unit franchise, the franchisee (often along with family members)

generally manages and supervises the business on a day-to-day basis. It is how
their family makes a living.

Although a single-unit franchise is the classic method for franchise system growth,
it does have some weaknesses for franchisors:

Franchisors generally experience slower growth with a single-unit strategy than

with a multi-unit approach, and the growth can be more costly on a unit basis
because franchisors have to locate a new franchisee for each location.

The franchisor has many franchisees to work with, and those franchisees may be
less sophisticated and less interested in taking business risks than larger, multi-
unit franchisees.
Because each location is individually owned and operated, single-unit franchises
tend to be more expensive to support than when one franchisee owns and
operates multiple locations.

In some markets that may be attractive to a multi-unit franchisee, the presence of

single-unit franchisees in the market may make the opportunity less attractive to
multi-unit operators who don’t want to compete for customers or locations.

Although there may be some disadvantages to franchisors, there are more single-
unit franchisees looking for opportunities than there are multi-unit investors.

Many franchisor organizations provide incentives that encourage single franchise

operators to turn into multiple operators. On the flip side, many successful
franchisors have also stopped giving out new franchisees to single location
operator expect when they meet special requirements like women owned,
veteran etc.

Also, because the locations are managed directly by the franchisee and generally
are a significant part of the franchisee’s family income, single-unit operators tend
to be better focused on operating their locations to brand standards and
contributing to the neighborhoods in which their businesses are located.

That’s because they usually live in the community, their children go to the same
schools, they attend the same churches, and their customers are their neighbors.

Organically growing single unit franchise into multiple locations

Many single-unit franchisees eventually acquire another franchise from the same
franchisor.
After all, they have an understanding of the business, have a relationship with the
franchisor, can project the return that an additional unit can generate, and know
the types of locations that work best.

There is definately economy of scale when you open multiple locations; for
example, initial training likely won’t be needed, and some of the key employees
they already have may be perfect managers in their second and third locations.

You can leverage off of the prior locations by sharing staff, inventory, storage, and
back-of-house resources like bookkeeping and payroll processing.

Investing in additional franchises is a terrific way to grow, because with

experience their risk is generally lower than when they made their initial franchise
decision, and even though they have more franchises, the relationship between
the franchisor and franchisee is substantially the same.

However, growing one location at a time is different from agreeing to operate

multiple locations from the beginning, because you don’t usually obtain a
reduction in initial or continuing fees and you’ll continue to share the market with
other franchisees.

It’s important to understand that franchisors will periodically update their

franchise agreements, and franchisees who acquire additional franchises are likely
to find variations between their original contract with the franchisor and the new
franchise agreement for later units.

Your franchisor may also include cross defaults in the agreements, meaning that if
you can be terminated at one location, the franchisor reserves the right to
terminate all of your franchises at the same time — even if every other location is
operating perfectly.

Multi-unit development agreement

You can choose to become multi-unit franchisees by entering into a multi-unit

development agreement.

You will obtain the right and the obligation to open a specific number of locations
during a defined period of time and usually within a specified contiguous
geographic area.

A multi-unit developer will typically pay the franchisor a fee for the right to enter
into a multi-unit development agreement.

As you sign a franchise agreement for each new location, generally a portion of
the multi-unit development fee is credited by the franchisor against your initial
franchise fee. (More on this shortly.)

Expect that your development obligations will be specific. For example, instead of
simply agreeing to ten units over five years, your agreement will usually have
precise dates that you must meet, such as requiring that you have your locations
open and operating on January 1, July 1, and so on during the term.

These opening dates are important to the franchisor, so if you think the time
provided for development is too restrictive or ambitious, this is something you
and your attorney should discuss with the franchisor before you sign the
development agreement.

Frequently, the initial franchise fee for locations developed after the initial
franchise in a development agreement will be reduced from the franchisor’s
standard initial fee. However, how the franchisor applies your development fee to
the initial franchise fees you will owe varies from company to company.

In most franchise systems, as the franchisee signs a new single-unit franchise

agreement and pays the initial fee, a pro-rata portion of the development fee
paid will be applied to the initial franchise fee due. In other situations, you will
receive no credit and you may pay the full initial franchise fee for each location.

The franchisor may offer a reduced royalty after a certain number of locations
have been developed, and reduction in in training, site selection, and
development fees are common.

You can also expect your franchisor to require you to have a general manager
overseeing your units, and they may require you to have someone on staff to
conduct the training of your staff.

Master Franchisee

When you become a master franchisee, you become a franchisor in an area and
are authorized to offer subfranchises through your master franchise license.

In most master franchise relationships, the first thing you will likely be required to
do is open and operate a few locations of your own.

Once that has been accomplished, you will then be allowed to offer franchise
rights to other franchisees (called subfranchises) to open and operate franchises
in your market.
Professional services: Types, challenges, and how to

manage projects successfully

Professional service projects are different animals than “normal” projects. While
both offer challenges, professional service firms must meet their internal goals
AND the client’s expectations. More companies and more people involved usually
equates to greater risk.
This article is your ultimate guide for understanding professional services, why
companies use them, and the challenges professional service firms have in
common. As a bonus, we’re including a game plan for managing your professional
services projects more efficiently. Let’s get started.

What are professional services?

Some companies sell finite products (laptops, office furniture, etc.), while others
sell services or expertise. These services may be industry-specific or broadly
needed across multiple industries. The professional services industry consists of
startups, small businesses with just a few employees, and large, publicly traded
corporations.
Professional services providers are a multi-billion dollar market and are growing
globally. According to the 2022 Professional Services Global Market Report, the
global professional services market grew from $5,452.96 billion in 2021 to
$5,964.79 billion in 2022. Similarly, a recent survey finds that roughly a third of
small businesses currently use at least one professional service provider, and 52%
are planning to do so.

Why do businesses use professional services?

 Sometimes it’s more advantageous for a company to purchase these service
offerings from a company that specializes in them instead of trying to handle them
in-house. A few examples of situations where a business would need professional
services are:
 Project management services: Companies that don’t have the employees or
bandwidth to handle multiple projects may hire a company to set up the timeline,
manage the project, and return the deliverable on deadline and budget.
 Legal services: Many companies must follow regulatory rules that can get
confusing and seem vague. These organizations may hire a law firm to help them
navigate the muddy waters to ensure they operate legally and within compliance.
 Accounting services: Accounting firms may be able to make quick work of a
company’s taxes, even finding tax savings that wouldn’t have been possible
otherwise. Small businesses that lack an accounting department may hire a firm
instead of onboarding an entire accounting department.

Types of professional services

Many types of companies in the services industry offer knowledge and expertise
that help organizations optimize their operations. Let’s look at a few of the most
common types of professional service providers.

Information technology (IT) support

Technology is a pivotal part of almost every company, and issues can grind
business to a screeching halt. Smaller businesses especially benefit from a
 professional IT support provider, as they may not be able to afford an IT
department on staff.
IT professional services may include:
 Installing new software
 Troubleshooting technical issues
 Setting up an API
 Providing user support
 Performing system/application updates
In some cases, companies may consult with IT service providers about improving
efficiencies and automation within their company.

Software and web development

Creating a seamless customer journey that leads to conversions (and, ultimately,

revenue) is essential. This is why many companies hire software and web
development services to make sure their websites are top-notch and make it easy
for customers to navigate. Tasks usually focus on keeping the website aligned with
the company’s brand and facilitating positive, seamless user experiences:
 Coding
 Designing the website's structure
 Creating a completely new design
 Implementing software-as-a-service (SaaS) products
 Maintaining applications
 Testing programs

Marketing and social media

 Marketing is a broad umbrella covering numerous services available via
professional providers. Social media, while not as broad, is a crucial part of a
digital marketing strategy for many organizations.
Companies can hire marketing and social media companies to:
 Build and maintain their brand pages
 Write, post, and monitor their social media profiles
 Build and implement content marketing plans
 Handle public relations announcements
 Design ads
 Purchase advertising

Finance and accounting

This type of professional services team has been around for decades and continues
to grow in importance. Finance and accounting (noted as critical factors in a
business’s success) are best left to the trained professionals — and that's exactly
the belief that drives this industry. These disciplines are just too costly to risk
handling on your own.
Some needs finance and accounting services firms can fill include:
 Handling taxes (and staying on top of ever-changing tax laws)
 Offering wealth management advice
 Creating financial plans
 Guiding investment portfolios
 Performing financial evaluations

Legal
 “Consult your attorney.” Business owners hear this all the time, and with good
reason: One legal misstep can derail an otherwise successful company, making
them liable for damages, open to lawsuits, and out of compliance. This is why legal
outsourcing is critical.
 Businesses may need a wide variety of legal services over their lifetime:
 Setting up the company’s structure (initially)
 Handling copyrights and patents on products and services
 Advising on interpersonal issues between employees
 Dealing with lawsuits from vendors, clients, and former employees
Teamwork was built specifically for professional services providers, offering a
central hub for client project management. Learn more here.

Challenges in professional services

Like any business, professional service agencies come with their share of
challenges. Below, we'll explore a few of their greatest challenges.

Resource management

Since business is based on knowledge and skill, the human element is vital to
serving customers. This can translate into a big challenge for professional services.
Overestimating resources or underestimating the number of resources a project
needs can put the company in a deficit. This issue can clog up the workflow and
cause projects to miss deadlines and come in over budget.
Realistic resource planning and helpful project management software can alleviate
this pain point in many situations.
Manage your team's resources more effectively and proactively with Teamwork.
Client satisfaction and retention

Professional services firms aren’t completing projects solely for their company’s
benefit — they’re doing it for their clients. The client will take their business
elsewhere if the deliverable is inaccurate, late, or low quality. Keeping the client
satisfied is the top priority for every professional services firm. Otherwise,
bringing on new clients and having them leave will be a constant grind.
Service firms can increase client satisfaction by benchmarking results and
through client satisfaction surveys and interviews. It’s also helpful to use
automation and templates to provide a consistent customer experience across every
client relationship and project instead of starting from scratch every time.

Personalizing services and managing workload

Every client wants to feel like they are the top priority. But what if the firm has
dozens — or even hundreds — of clients? It can be challenging to make them all
feel like the solution is tailored specifically to them.
With project management tools, you can invite clients into select conversations
about the project and the updates as it progresses. Additional communication like
this keeps clients in the loop, keeping their worries and misgivings at bay.

Managing clients’ billable hours

Billable hours are the time professional services companies charge their clients for
their work. Managing these can be difficult, and scope creep is the biggest culprit.
When projects start growing, adding an element here and a new idea there can eat
up billable hours and increase pricing.
And trust us: Nothing irritates a client more than a higher bill than they expected.
Some project management tools offer time tracking to keep billable hours in line
and projects on budget. Stay focused, deliver work on time, and get better
insights with Teamwork.

Key ingredients for top-notch project management in professional services

Professional services firms need strong project management initiatives that

maximize their resources, mitigate bottlenecks, protect the profit margin, and
exceed client expectations. Otherwise, projects can fail. Here are five elements
every professional services firm should include in their project management
initiatives.

Project planning for each client

Starting on the right foot is essential for setting the timelines and assigning the
tasks that will push the project forward effectively. Decide who will be involved
and accountable, what they will do, and how (and when) they’ll do it. Use the
information the client has provided to guide decisions during this step.
Actionable tip: Lay out the entire plan in your project management software and
assign stakeholders and timelines.

Team and client communication

There should be multiple communication channels for team members to check in
with each other, their project manager, and the client. The client should be able to
ask questions, too. Communication is key in identifying issues before they damage
the project timeline. For example, if one team member is overloaded, the project
manager should reassign some of their tasks to team members with more
bandwidth.
Actionable tip: Talking, emailing, Slacking, and sharing information and updates
in real time or asynchronously can decrease the chances of something falling
through the cracks.

Resource and capacity planning

Professional services firms must plan out their resources effectively: Your internal
project teams and clients depend on it.
Underusing and overusing team members are both detrimental to the project.
Project managers must stay on top of the project and have a way to watch all areas
of it unfold.
Actionable tip: Use resource forecasting to plan for future projects, ensuring that
you always have the staff you need available. To further address any potential
workload capacity concerns, use Teamwork’s workload planning tools to manage
and reallocate tasks as needed to keep the project on track — without burning out
your team members.
Find out more about Teamwork’s advanced resource management capabilities.

Clear project visibility

As we mentioned above, seeing the project from a high level is a powerful tool for
success. Visuals that let the project manager and team members see the different
aspects of a project and how it connects with the others provide insight that assists
everyone in doing their jobs better.
Actionable tip: Use the simple, flexible, and transparent team collaboration
feature in Teamwork to increase projects’ visibility.

Mitigating risks and identifying roadblocks

Mitigating risks and identifying roadblocks as early as possible help minimize the
damage they do to the project and the ability to deliver it on time and within
budget. One of the project manager’s most relevant tasks is identifying problems
and addressing them effectively. Staying on top of the project and every
stakeholder’s progress is key to seeing problems coming early.
Actionable tip:Project management software like Teamwork that provides a big-
picture view of the project can help managers pinpoint potential pitfalls and
address them before they derail the project.

Manage your professional services projects with Teamwork

Professional services firms have the potential to build your business and serve their
clients well. They just must put tools in place that help them deliver their projects
in a manner that meets and exceeds the client's expectations. By understanding
project planning and how professional services software can keep projects on
track, these companies can strengthen client relationships and deliver what they
promise.
 For professional service providers that need a complete project management
solution, check out Teamwork. We offer a seamless, scalable tool that helps you
stay on top of projects, collaborate with your team, and gain insight into tasks and
deadlines.

Resources to build high-performance teams

1. Business Process Management (BPM)

BPM is something every operations manager should have a good hang of.
Chances are, you’ve heard the term before – and no, it’s not just another
buzzword.

Business process management is the methodology of constantly analyzing,

improving and automating processes. It’s not something you do just once,
though – you need to be on a constant lookout for potential improvements.

Putting that into practice, you should have a general idea of what the BPM
lifecycle consists of. i.e, the exact steps you need to take to work on any
given process.

The steps are…

 Design – Every company has processes. Not all of them, however, are
really outlined. More often than not, they’re implicit. The “design” part
means identifying a process and figuring out where it starts, what it consists
of, and where it ends. To learn more about business process design, check
out our guide.
 Modeling – Once you’ve identified a process, you need to put it down on
paper. Without something to look at, the analysis part can be quite hard.
Usually, you’d go for a workflow diagram if the process is simple, or one of
 the many business process mapping techniques, if it’s not. To learn more
about business process modeling, check out our guide.
 Analysis – Now that you have a workflow diagram ready, you can start
analyzing it. Are there any steps within the process that don’t really add
value? Are there any ways to remove them? Are there any steps you could
just automate using software? To learn more about business process
analysis, check out our guide.
 Monitoring – You can’t improve a process without knowing how well it’s
performing as-is. Plus, you should also be able to figure out whether the
changes you’re making have a positive impact or not. So, gather the
benchmark data for the process as-is and compare it to the data you get
post-improvements.
 Improving or Automating – Use the insights you’ve identified in the
“analysis” step to make changes to the process. You can either improve it by
working with the process steps or automate certain steps using software or
hardware. To learn more about business process
improvement or automation, check out our guides.

2. Business Process Reengineering

Sometimes, improving processes isn’t the most efficient thing you can do.
Instead, you want to re-engineer it (not just a business buzzword, we
promise!). Meaning, instead of improving a process, you re-create it from
scratch.

In most cases, this is done with the help of technology. After all, you can’t
really change something fundamentally just like that.

To give you a better idea of how this works, we’ll look into an example of
how Ford completely re-engineered their accounts payable department.

The major problem was that the department was significantly overstaffed.
They employed 500 people, as opposed to 5 in the same department at
Mazda (a partner company).

Ford launched a BPR initiative to figure out why they were underperforming.
The old process worked as follows…

 The purchasing department receives a purchase order. The copy is

forwarded to the accounts payable
 Material control receives the goods & send a copy of the delivery document
to accounts payable
 The vendor sends a receipt to accounts payable
 The accounts payable matches the three separate documents, and only then
is the payment issued
Or, as it would look like in a graph…

As you’ve probably already guessed, this makes the whole thing extremely
time-consuming. Hence, you’d need a lot of employees to keep doing this on
the go.

Realizing this, Ford completely re-engineered the process. Instead of doing

everything manually, they created an online database which was used to
match the different documents.

Accordingly, an operations manager can use business process reengineering

to make significant improvements to company processes.
 3. Six Sigma
The two methodologies we’ve mentioned until now dealt with business
processes.

Six Sigma, on the other hand, focuses on manufacturing processes. The main
idea behind it is minimizing defect rates – for every million opportunities, you
shouldn’t have more than 3.4 inefficiencies.

While there are a lot of Six Sigma tools out there, DMAIC is one of the most
popular ones. The methodology helps perfect your manufacturing processes
& consists of 5 steps…

1. Define – Outline what the issue with any given manufacturing process is.
Decide on the improvement goal & which tools or resources you’re going
to use
2. Measure – Look at the process as-is and measure its performance. Once
you know what the metrics are, you’ll have a better idea on how to
improve them.
3. Analysis – Find the root cause of the issue. Why is the process
underperforming?
4. Improvement – Once you’ve identified the problem, try finding potential
solutions.
5. Control – Implement the new process on a small scale and benchmark the
new results to the old.

4. Supply Chain Management

Another major aspect of modern operations management is supply chain
management.

As organizations have become more complex and much more international

in their scope, the strategic process by which materials, goods and
information flow between suppliers, businesses and consumers has become
an industry in itself.

Keeping the supply chain healthy and moving is in the interests of everyone
involved, but there are many factors that can slow things down.

Compared to some of the other aspects of operations management

mentioned so far, supply chain management is relatively recent, with the
term only originating in 1982 and not becoming commonly used until the
1990s.
Supply chain management oversees each touch point of a company’s
product or service, from its creation to the sale, and this makes it an
important aspect to manage as getting it right or wrong affects efficiency,
costs, and profits.

Necessary skills of an operations

manager
Operations managers are involved in coordinating and developing new
processes while reevaluating current structures. Organization
and productivity are two key drivers of being an operations manager, and the
work often requires versatility and innovation. As part of their daily
responsibilities, operations managers must possess a variety of skill sets,
including:

deal Skills of an Operations Manager

Unlike the marketing or finance departments, where managers are

responsible for their departments, operations management is a
cross-department role where the manager assumes an array of
responsibilities across multiple disciplines. To be successful, an
operations manager must possess the following skills:

1. Organizational Abilities

Organizational ability and attention to detail to include keeping track of

project files, employee reports, budgets, schedules, and other details related
to company processes.

Thus, to focus on different projects without getting distracted by the

many processes. The operations manager should be able to plan,
execute, and monitor each project to the end without losing focus.

If a manager is not organized, uncompleted tasks will pile up,

important documents will get lost in the process, and a majority of
the time will be spent finding lost documents that could be easily
accessible had the manager been organized. Good organization
skills can increase production efficiency and help the manager save
time.
2. Coordination

An operations manager needs to have good coordination by knowing

how to integrate resources, activities, and time to ensure proper use
of the resources toward the achievement of the organization’s goals.
Coordination involves carrying out specific activities simultaneously
and switching between the activities with ease. It also involves
dealing with interruptions, obstacles, and crises, and efficiently
going back to the normal routine functions to prevent further
interruptions.

3. Interpersonal Skills

Most of the responsibilities of an operations manager involve

dealing with people. This means that they must know how to relate
with the employees, outside stakeholders, and other members of
senior management. An operations manager should know how to
manage the fine lines with other colleagues by knowing how to
communicate, listen, and relate to them on professional and
personal levels.

Since workplaces are made up of people from diverse cultures, the

operations manager needs to show tolerance and understanding to
other people. Also, the manager should be able to resolve conflicts
and mediate disputes between employees and members of the
senior staff.

4. Tech-savvy

Technical expertise in areas such as production automation, data entry,

budget tracking, and design.

In this age of rapidly advancing technologies, an operations

manager needs to have an affinity for technology in order to be in a
position to design processes that are both efficient and tech-
compliant.

Modern organizations are becoming increasingly tech-dependent in

order to gain a competitive advantage in the market.
This means that most of the processes conducted manually, such as
procurement, must transition to more efficient automated
processes. When an operations manager is familiar with the latest
innovations in the tech industry, they can use the innovations to
improve internal processes.

5. Leadership skills- Able to provide direction and influence others to

willingly expend t the operations manager must inspire, motivate and
guide staff while also providing the expertise and ideas to foster a
supportive and diverse team.

6. Analytical aptitude, including skill in risk analysis and mitigation when

initiating new projects. Operations managers also must analyze
processes to identify challenges and offer solutions in the event that
negative situations develop.
7. Decision-making proficiency, especially under stress when there is
very little time to assess all factors.
8. Ability to maintain quality standards, including as they relate to raw
materials, machinery, manufacturing procedures, packaging, delivery
processes, and the finished product.

Roles & Responsibilities of

Operations Management
The various functions of operations management may be
outlined as follows:
#1 – Forecasting

Forecasting is an attempt at predicting the future with the

help of systematic analysis and scientific methods. It is an
essential part of operations management as it assesses the
controllable and uncontrollable factors and makes predictions
for the organization. It may also involve provisions or
suggestions for dealing with those predicted scenarios.
#2 – Capacity Planning

Capacity measures the rate of the production capability of a

facility. One of the most important operations management
responsibilities is finding out the kind and quantity of
capacity needed and the time by which it needs to be
produced. It involves assessing the facility’s current capacity,
forecasting future needs, identifying and analyzing possible
resources to fulfill those needs, evaluating alternative
resources, and selecting the best among them.

#3 – Location Facility

It is important to determine a location facility of the plant that

can ensure maximum operating efficiency. For example, a
coal plant is best located near a water source with the
availability of coal near; it provides efficiency, cost control,
and profit. But the selection of facilities is based on the easy
and regular supply of labor, resources, and raw materials.
Factors like nearness to the market, power availability,
transportation facilities, climate suitability, and government
rules are also considered. An ideal location contributes to an
organization’s smooth working, the opposite of which will
hinder its growth.
#4 – Layout

A good plant layout plans for placement of machines, pieces

of equipment, utilities, service areas, storage areas, and
arrangement of other facilities. In addition, it ensures a safe
workspace, ease of maintenance, fulfillment of requirements,
and long-run efficiency in its operations with minimal
investment.

#5 – Integration of Activities

Successful execution of an organization’s operations includes

cordial and efficient workflow between various departments
such as sales, production, and accounting. The Operations
management system ensures the allocation of financial
resources for purchases from the accounting department,
receiving products from the production department, making
the product reach the sales department, and effective
delivery of goods or services from the customer service
department. In addition, it ensures there is uninterrupted
functioning of the organization through back and forth
communications, continuous coordination, and feedback.

Operations management is a field of business that involves

managing the operations of a business to ensure efficiency in the
execution of projects. It means that the individual in charge of the
department will be required to perform various strategic functions.
Some of the functions include:

1. Product Design

Product design involves creating a product that will be sold to the

end consumer. It involves generating new ideas or expanding on
current ideas in a process that will lead to the production of new
products. The operations manager’s responsibility is to ensure that
the products sold to consumers meet their needs, as well as match
current market trends.

Consumers are more interested in the quality of the product more

than the quantity, and the organization should create systems that
ensure the products produced meet the needs of the consumer.

2. Forecasting

Forecasting involving making predictions of events that will occur in

the future based on past data. One of the events that the operations
manager is required to predict is the consumer demand for the
company’s products.

The manager relies on past and present data on the uptake of the
company’s products to determine future trends in consumption. The
forecasts help the company know the volume of products needed to
meet the market demand.
3. Supply Chain Management

Supply chain management involves managing the production

process from raw materials to the finished product. It controls
everything from production, shipping, distribution, to delivery of
products.

The operations manager manages the supply chain process by

maintaining control of inventory management, the production
process, distribution, sales, and sourcing of suppliers to supply
required goods at reasonable prices. A properly managed supply
chain process will result in an efficient production process,
low overhead costs, and timely delivery of products to consumers.

4. Delivery Management

The operations manager is in charge of delivery management. The

manager ensures that the goods are delivered to the consumer in a
timely manner. They must follow up with consumers to ensure that
the goods delivered are what the consumers ordered and that they
meet their functionality needs.

If the customer is unsatisfied with the product or is complaining

about certain features of the product, the operations manager
receives the feedback and forwards it to the relevant departments.