CHAPTER-THREE

DESIGN OF THE OPERATION SYSTEM

3.1. Product and Service Design

Design of the product involves materials,
measurements, dimensions, and blueprints.
Product design brings together marketing analysts,
art directors, sales forecasters, engineers, finance
experts, and other members of a company to think
and plan strategically.

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is unique in that both the service and the entire service concept
are being designed.
As with a tangible product, the service concept is based on
meeting customer needs.

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The service design, however, adds the aesthetic and
psychological benefits of the product.
These are the service elements of the operation, such as
promptness and friendliness.
They also include the atmospheres, image, and “feel-good”
elements of the service.
Certain steps are common to the development of most
product designs: idea generation, product screening,
preliminary design and testing, and final design.
Product designs are never finished, but are always updated with
new ideas.

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Idea Development
All product designs begin with an idea. The idea might come
from a product manager who spends time with customers and has
a sense of what customers want, from an engineer with a flair for
inventions, or from anyone else in the company.
To remain competitive, companies must be innovative and bring
out new products regularly.
In some industries, the cycle of new product development is
predictable.

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Ideas from Customers, Competitors, and Suppliers: The
first source of ideas is customers, the driving force in the
design of goods and services.
Marketing is a vital link between customers and product
design.
Market researchers collect customer information by studying
customer buying patterns and using tools such as customer
surveys and focus groups.
Analyzing customer preferences is an ongoing process;
customer preferences next year may be quite different from
what they are today.
For this reason, the related process of forecasting future
5consumer preferences is important.
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Competitors are another source of ideas: A company learns by
observing its competitors’ products and their success rate.
This includes looking at product design, pricing strategy, and
other aspects of the operation.
Studying the practices of companies considered best-in-class and
comparing the performance of one’s own company against theirs
is called benchmarking.
We can benchmark against a company in a completely different
line of business and still learn from some aspect of that
company’s operation.

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Reverse Engineering: Another way of using competitors’ ideas
is to buy a competitor’s new product and study its design
features.
Using a process called reverse engineering; a company’s
engineers carefully disassemble the product and analyze its parts
and features.
Product design ideas are also generated by a company’s R&D
department, whose role is to develop product and process
innovation.

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Suppliers are another source of product design ideas.
To remain competitive, more companies are developing
partnering relationships with their suppliers to jointly satisfy the
end customer.
Suppliers participate in a program called early supplier
involvement (ESI), which involves them in the early stages of
product design.

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Product Screening
The company’s product screening team evaluates the product
design idea according to the needs of the major business
functions.
In their evaluation, executives from each functional area may
explore issues such as the following:
Operations: What are the production needs of the proposed new
product, and how do they match our existing resources? Will we
need new facilities and equipment? Do we have the labor skills
to make the product? Can the material for production be readily
obtained or available?

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Marketing: What is the potential size of the market for the
proposed new product? How much effort will be needed to
develop a market for the product, and what is the long-term
product potential?
Finance: The production of a new product is a financial
investment like any other.
What is the proposed new product’s financial potential cost, and
return on investment?
Companies generate new product ideas all the time, whether for a
new brand of cereal or a new design for a car door.

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Break-Even Analysis: Break-even analysis is a technique that
can be useful when evaluating a new product.
It computes the quantity of goods a company needs to sell just to
cover its costs, or break even, called the “break-even” point.
When evaluating an idea for a new product, it is helpful to
compute its break-even quantity.
An assessment can then be made as to how difficult or easy it
will be to cover costs and make a profit.

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The total cost of producing a product or service is the sum of its
fixed and variable costs.
For example, a company must pay for overhead even if it
produces nothing.
Variable costs, on the other hand, are costs that vary directly with
the amount of units produced and include items such as direct
materials and labor. Together, fixed and variable costs add up to
total cost:
QBE=

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Break-even analysis is useful for more than just deciding
between different products.
It can be used to make other decisions, such as evaluating
different processes or deciding whether the company should
make or buy a product.
For example; Fred Boulder, owner of Sports Feet Manufacturing,
is considering whether to produce a new line of footwear.
He has also estimated that the variable cost for each product
manufactured and sold is $9 and the fixed cost per year is
$52,000.

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If Fred offers the footwear at a selling price of $25, how many
pairs must he sell to break even?
If Fred sells 4000 pairs at the $25 price, what will be the
contribution to profit?
Solution
To compute the break-even quantity:
QBE= , = , = , = 3,250 pairs.
 The break-even quantity is 3250 pairs.
 This is how much Fred would have to sell to cover costs.

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 Cont'd
To compute the contribution to profit with sales of 4000 pairs, we
can go back to the relationship between cost and revenue:
Profit = Total Revenue - Total Cost = SP (Q) – [FC + (VC) Q] =
25(4000) – [52,000+ (9(4000)]
Profit = $100,000 – $52,000 - $36,000 = $100,000 - $88,000 =
$12,000.
The contribution to profit is $12,000 if Fred can sell 4000 pairs
from his new line of footwear.

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Figure
16 3-1: Graphical Approach to Break-Even Analysis
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Preliminary Design and Test
Once a product idea has passed the screening stage, it is time to
begin preliminary design and testing.
At this stage design engineers translate general performance
specifications into technical specifications. Prototypes are built
and tested.
Changes are made based on test results, and the process of
studying, rebuilding a prototype, and testing continues.
For service companies this may entail testing the offering on a
small scale and working with customers to refine the service
offering.

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Fast-food restaurants are known for this type of testing, where a
new menu item may be tested in only one particular geographic
area.
Product refinement can be time-consuming, and the company
may want to hurry through this phase to rush the product to
market.
However, rushing creates the risk that all the “bugs” have not
been worked out, which can prove very costly for the
organization.

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Final Design
Following extensive design testing, the product moves to the
final design stage.
This is where final product specifications are drawn up.
The final specifications are then translated into specific
processing instructions to manufacture the product, which
include selecting equipment, outlining jobs that need to be
performed, identifying specific materials needed and suppliers
that will be used, and all the other aspects of organizing the
process of product production.

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Figure
20 3-2: Steps in the Product Design Process
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Factors Impacting Product Design
Here are some additional factors that need to be considered
during the product design stage.
Design for Manufacturing
When we think of product design, we generally first think of how
to please the customer.
However, we also need to consider how easy or difficult it is to
manufacture the product.
Design for manufacture (DFM) is a series of guidelines that we
should follow to produce a product easily and profitably.

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DFM guidelines focus on two issues:
1. Design simplification means reducing the number of parts and
features of the product whenever possible. A simpler product is
easier to make, costs less, and gives higher quality.
2. Design standardization refers to the use of common and
interchangeable parts.
By using interchangeable parts, we can make a greater variety of
products with less inventory and significantly lower cost and
provide greater flexibility.

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Product Lifecycle
Another factor in product design is the stage of the life cycle of
the product.
Most products go through a series of stages of changing product
demand called the product life cycle.
There are typically four stages of the product life cycle:
introduction, growth, maturity, and decline.
Products in the introductory stage are not well defined, and
neither is their market.

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In the growth stage, the product takes hold and both product and
market continue to be refined.
The third stage is that of maturity, where demand levels off and
there are usually no design changes: the product is predictable at
this stage and so is its market.
Many products, such as toothpaste, can stay in this stage for
many years.
Finally, there is a decline in demand because of new technology,
better product design, or market saturation.

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Figure
25 3-3: Stage of Product Life Cycle
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The first two stages of the life cycle can collectively be
called the early stages because the product is still being
improved and refined and the market is still in the process of
being developed.
The last two stages of the life cycle can be referred to as the
later stages because here both the product and market are
well defined.
Understanding the stages of the product life cycle is
important for product design purposes, such as knowing at
which stage to focus on design changes.

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Also, when considering a new product, the expected length
of the life cycle is critical in order to estimate future
profitability relative to the initial investment.
The product life cycle can be quite short for certain
products, as seen in the computer industry.
For other products it can be extremely long, as in the aircraft
industry.
A few products, such as paper, pencils, nails, milk, sugar,
and flour, do not go through a life cycle.
However, almost all products do, and some may spend a
long time in one stage.

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Concurrent Engineering
Concurrent engineering is an approach that brings many people
together in the early phase of product design in order to
simultaneously design the product and the process.
This type of approach has been found to achieve a smooth
transition from the design stage to actual production in a shorter
amount of development time with improved quality results.
The old approach to product and process design was to first have
the designers of the idea come up with the exact product
characteristics.

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Once their design was complete they would pass it on to
operations, who would then design the production process
needed to produce the product.
This was called the “over-the-wall” approach because the
designers would throw their design “over-the-wall” to operations,
which then had to decide how to produce the product.
There are many problems with the old approach. First, it is very
inefficient and costly.

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Since manufacturing does not understand which features are not
critical, it may develop an unnecessarily costly production
process with costs passed down to the customers.
Concurrent engineering allows everyone to work together so
these problems do not occur.
A second problem is that the “over-the-wall” approach takes a
longer amount of time than when product and process design are
performed concurrently.

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Product and process design are done together, much of the work
is done in parallel rather than in sequence.
In today’s markets, new product introductions are expected to
occur faster than ever.
Companies do not have the luxury of enough time to follow a
sequential approach and then work the “bugs” out.
The third problem is that the old approach does not create a team
atmosphere, which is important in today’s work environment.

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Rather, it creates an atmosphere where each function views its
role separately in a type of “us versus them” mentality.
With the old approach, when the designers were finished with the
designs, they considered their job done.
If there were problems, each group blamed the other.
With concurrent engineering, the team is responsible for
designing and getting the product to market.
Team members continue working together to resolve problems
with the product and improve the process.

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Remanufacturing
Remanufacturing is a concept that has been gaining increasing
importance as our society becomes more environmentally
conscious and focuses on recycling and eliminating waste.
Remanufacturing uses components of old products in the
production of new ones.
In addition to the environmental benefits, there are significant
cost benefits because remanufactured products can be half the
price of their new counterparts.

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3.2. Process Selection
So far we have discussed issues involved in product design.
Though product design is important for a company, it cannot be
considered separately from the selection of the process.
In this section we will look at issues involved in process design.
Then we will see how product design and process selection
issues are linked together.

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Types of Process
When you look at different types of companies, ranging from a
small coffee shop to International Business Machine(IBM), it
may seem like there are hundreds of different types of processes.
Some locations are small, and some are very large, some produce
standardized products, some work with customers to customize
their product.
Though there seem to be large differences between the processes
of companies, many have certain processing characteristics in
common.

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In this section we will divide these processes into groups with
similar characteristics, allowing us to understand problems
inherent with each type of process.
All processes can be grouped into two broad categories:
intermittent operations and repetitive operations.
Once we understand these differences, we can easily identify
organizations based on the category of process they use and
implemented in their operation.

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Intermittent Operations: Intermittent operations are used to
produce a variety of products with different processing
requirements in lower volumes.
Examples are an auto body shop, a tool and die shop, or a
healthcare facility.
Because different products have different processing needs,
there is no standard route that all products take through the
facility.
Instead, resources are grouped by function and the product is
routed to each resource as needed.
Think about a healthcare facility. Each patient, “the
product,” is routed to different departments as needed.
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One patient may need to get an X-ray, go to the lab for blood
work, and then go to the examining room.
Another patient may need to go to the examining room and
then to physical therapy.
To be able to produce products with different processing
requirements, intermittent operations tend to be labor
intensive rather than capital intensive.
Workers need to be able to perform different tasks,
depending on the processing needs of the products produced.
Often we see skilled and semiskilled workers in this
environment, with a fair amount of worker discretion in
performing their jobs.
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Workers need to be flexible and able to perform different tasks as
needed for the different products.
Equipment in this type of environment is more general-purpose
to satisfy different processing requirements.
Automation tends to be less common because automation is
typically product-specific.
Given that many products are being produced with different
processing requirements, it is usually not cost efficient.
Finally, the volume of goods produced is directly tied to the
number of customer orders.

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Repetitive Operations: Repetitive operations are used to produce
one or a few standardized products in high volume.
Resources are organized in a line flow to efficiently
accommodate production of the product.
Note that in this environment it is possible to arrange resources
in a line because there is only one type of product.
This is directly the opposite of what we find with intermittent
operations.

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To efficiently produce a large volume of one type of product,
these operations tend to be capital intensive rather than labor
intensive.
An example is “mass-production” operations, which usually have
much invested in their facilities and equipment to provide a high
degree of product consistency.
Often these facilities rely on automation and technology to
improve efficiency and increase output rather than on labor skill.

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Differences between Intermittent and Repetitive Operations
Decision Intermittent Operations Repetitive Operations

Productivity Great Small

Degree of Standardization Low High

Organization of Resources Grouped by Function Line flow to Accommodate Processing

Needs

  In a Variable Pattern, Depending on Product  

Pass of Products through Facility needs Line Flow

Factors Driving Production Customer Orders Forecast of Future Demand

  Labor-Intensive Operation (Worker Skill Capital-Intensive Operation (Equipment

Critical Resource Important) Automation, Technology Important)

Types of Equipment General Purpose Specialized

Degree of Automation Low High

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Throughout Time Longer Shorter
 Cont’d
The volume produced is usually based on a forecast of
future demands rather than on direct customer orders.
The most common differences between intermittent and
repetitive operations relate to two dimensions: (1) the
amount of product volume produced, and (2) the degree
of product standardization.
Product volume can range from making a unique
product one at a time to producing a large number of
products at the same time.
Product standardization refers to a lack of variety in a
particular product.
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The Continuum of Process Types: Dividing processes into two
fundamental categories of operations is helpful in our
understanding of their general characteristics.
To be more detailed, we can further divide each category
according to product volume and degree of product
standardization, as follows.
Intermittent operations can be divided into project processes and
batch processes.
Repetitive operations can be divided into line processes and
continuous processes.

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Project processes: are used to make one-of-a-kind products
exactly to customer specifications.
These processes are used when there is high customization and
low product volume, because each product is different.
Examples can be seen in construction, shipbuilding, medical
procedures, and creation of artwork, custom tailoring, and
interior design.
With project processes the customer is usually involved in
deciding on the design of the product.

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Batch processes: are used to produce small quantities of
products in groups or batches based on customer orders or
product specifications.
They are also known as job shops. The volumes of each product
produced are still small, and there can still be a high degree of
customization.
Examples can be seen in bakeries, education, and printing shops.
The classes you are taking at the university use a batch process.

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Line processes: are designed to produce a large volume of a
standardized product for mass production.
They are also known as flow shops, flow lines, or assembly lines.
With line processes the product that is produced is made in high
volume with little or no customization.
Think of a typical assembly line that produces everything from
cars, computers, television sets, shoes, candy bars, even food
items.

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Continuous processes: operate continually to produce a very
high volume of a fully standardized product.
Examples include oil refineries, water treatment plants, and
certain paint facilities.
The products produced by continuous processes are usually in
continual rather than discrete units, such as liquid or gas.
They usually have a single input and a limited number of
outputs.
Also, these facilities are usually highly capital intensive and
automated.
 

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3.3. Strategic Capacity Planning
Capacity can be defined as the maximum output rate that can
be achieved by a facility.
The facility may be an entire organization, a division, or
only one machine.
Planning for capacity in a company is usually performed at
two levels, each corresponding to either strategic or tactical
decisions.
The first level of capacity decisions is strategic and long-
term in nature.

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This is where a company decides what investments in new
facilities and equipment it should make.
Because these decisions are strategic in nature, the
company will have to live with them for a long time.
Also, they require large capital expenditures and will have
a great impact on the company’s ability to conduct
business.
The second level of capacity decisions is more tactical in
nature, focusing on short-term issues that include planning
of workforce, inventories, and day-to-day use of
machines.
In this chapter we focus on long-term, strategic capacity
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decisions.
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Why Is Capacity Planning Important?
Capacity planning is the process of establishing the output
rate that can be achieved by a facility.
If a company does not plan its capacity correctly, it may
find that it either does not have enough output capability to
meet customer demands nor has too much capacity sitting
idle.
In our university example, that would mean either not being
able to offer enough courses to accommodate all students or
having too few students in the classrooms.
Not having enough capacity would mean not being able to
produce enough baked goods to meet sales.
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The bakery would often run out of stock, and customers
might start going somewhere else. Also, the bakery would
not be able to take advantage of the true demand available.
On the other hand, if there is too much capacity, the bakery
would incur the cost of an unnecessarily large facility that is
not being used, as well as much higher operating costs than
necessary.
Planning for capacity is important if a company wants to
grow and take full advantage of demand.
At the same time, capacity decisions are complicated
because they require long-term commitments of expensive
resources, such as large facilities.
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Once these commitments have been made, it is costly to
change them.
Think about a business that purchases a larger facility in
anticipation of an increase in demand, only to find that the
demand increase does not occur.
It is then left with a huge expense, no return on its
investment, and the need to decide how to use a partially
empty facility.
Forecasting future demands entails a great deal of
uncertainty and risk; this makes long-term facility purchases
inherently risky.

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Another issue that complicates capacity planning is the fact
that capacity is usually purchased in “chunks” rather than in
smooth increments.
Facilities, such as buildings and equipment, are acquired in
large sizes, and it is virtually impossible to achieve an exact
match between current needs and needs based on future
demand.
You can see this in the classroom example. If a university
anticipates a large demand for a particular course, it may
offer multiple sections.
Each additional section adds capacity in chunks equal to one
class size.
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If one class can hold a maximum of 45 students, opening
up another class means adding capacity for up to an
additional 45 students.
The university must consider its forecast of the additional
demand for the course.
If the forecast for additional demand is only 4 additional
students, the university will probably not open up another
section.
The reason is that the cost for each section takes the form
of chunks that include the room, the instructor, and
utilities.
This cost is the same whether 1 student or 45 students
attend.
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Measuring Capacity
Although our definition of capacity seems simple, there
is no one way to measure it.
Note that each business can measure capacity in
different ways and that capacity can be measured using
either inputs or outputs.
Output measures, such as the number of cars per shift,
are easier to understand.
However, they do not work well when a company
produces many different kinds of products. For example,
if we operate a bakery that bakes only pumpkin pies,
then a measure such as pies per day would work well.
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However, if we made many different kinds of pies and
varied the combination from one day to the next, then
simply using pies per day as our measure would not work as
well, especially if some pies took longer to make than
others.
Suppose that pecan pies take twice as long to make as
pumpkin pies.
If one day we made 20 pumpkin pies and the next day we
made 10 pecan pies, using pies per day as our measure
would make it seem as if our capacity was underutilized on
the second day, even though it was equally utilized on both
days.
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When a company produces many different kinds of
products, inputs measures work better.
When discussing the capacity of a facility, we need two
types of information.
The first is the amount of available capacity, which will help
us understand how much capacity our facility has.
The second is effectiveness of capacity use, which will tell
us how effectively we are using our available capacity.
Next we look at how to quantify and interpret this
information in appropriate manner.

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Measuring Available Capacity: Let us return to our bakery
example for a moment. Suppose that on the average we can
make 20 pies per day.
However, if we are really pushed, such as during holidays,
maybe we can make 30 pies per day.
Which of these is our true capacity? We can make 30 pies
per day at a maximum, but we cannot keep up that pace for
long.
Saying that 30 per day is our capacity would be misleading.

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On the other hand, saying that 20 pies per day is our
capacity does not reflect the fact that we can, if necessary,
push our production to 30 pies.
Through this example you can see that different measures of
capacity are useful because they provide different kinds of
information.
Following are two of the most common measures of
capacity:

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Design capacity: is the maximum output rate that can be
achieved by a facility under ideal conditions.
In our example, this is 30 pies per day. Design capacity can
be sustained only for a relatively short period of time.
A company achieves this output rate by using many
temporary measures, such as overtime, overstaffing,
maximum use of equipment, and subcontracting.
Effective capacity: is the maximum output rate that can be
sustained under normal conditions.
These conditions include realistic work schedules and
breaks, regular staff levels, scheduled machine maintenance,
and none of the temporary measures that are used to achieve
design capacity.
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Measuring Effectiveness of Capacity Use: Regardless of
how much capacity we have, we also need to measure how
well we are utilizing it.
Capacity utilization simply tells us how much of our
capacity we are actually using.
Certainly there would be a big difference if we were using
50 percent of our capacity, meaning our facilities, space,
labor, and equipment, rather than 90 percent.
Capacity utilization can simply be computed as the ratio of
actual output over capacity utilized.

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Utilization = x 100%. However, since we have two capacity
measures, we can measure utilization relative to either
design or effective capacity
UtilizationEffective= x 100%, and
UtilizationDesign= x 100%
Example
In the bakery example, we have established that design
capacity is 30 pies per day and effective capacity is 20 pies
per day. Currently, the bakery is producing 27 pies per day.
What is the bakery’s capacity utilization relative to both
design and effective capacity?
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Solution
To compute capacity utilization, you need to calculate
the ratio of actual output (27 pies per day) over capacity.
UtilizationEffective= x 100% = x 100% = 135% and
UtilizationDesign= x 100% = 90%. The utilization rates
show that the bakery’s current output is only slightly
below its design capacity and output is considerably
higher than its effective capacity.
The bakery can probably operate at this level for only a
short time.

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 Cont’d
Capacity Considerations
We have seen that changing capacity is not as simple as
acquiring the right amount of capacity to exactly match our
needs.
The reason is that capacity is purchased in discrete chunks.
Also, capacity decisions are long term and strategic in
nature.
Acquiring anticipated capacity ahead of time can save cost
and disruption in the long run.
Later, when demand increases, output can be increased
without incurring additional fixed cost.
Extra capacity can also serve to intimidate and preempt
competitors from entering the market.
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 Cont’d
Important implications of capacity that a company needs to
consider when changing its capacity are discussed in this
section.
Economies of Scale: Every production facility has a
volume of output that results in the lowest average unit cost.
You can see that as the number of units produced is
increased, the average cost per unit drops.
The reason is that when a large amount of goods is
produced, the costs of production are spread over that large
volume.
These costs include the fixed costs of buildings and
facilities, the costs of materials, and processing costs.
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The more units are produced, the larger the number of units
over which costs can be spread that is, the greater the
economies of scale.
The concept of economies of scale is very well known. It
basically states that the average cost of a unit produced is
reduced when the amount of output is increased.
You use the concept of economies of scale in your daily life,
whether or not you are aware of it.

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Suppose you decide to make cookies in your kitchen. Think
about the cost per cookie if you make only five cookies.
There would be a great deal of effort, getting the ingredients,
mixing the cash, and shaping the cookies, all for only five
cookies.
If you had everything set up, making five additional cookies
would not cost much more.
Perhaps making even ten more cookies would cost only
slightly more because you had already set up all the
materials.
This lower cost is due to economies of scale.

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Diseconomies of Scale: Diseconomies of scale occur at a
point beyond the best operating level, when the cost of each
additional unit made increases.
Operating a facility close to its best operating level is clearly
important because of the impact on costs.
However, we have to keep in mind that different facility
sizes have different best operating levels.
In our cookie example, we can see that the number of
cookies comfortably produced by one person in a small
kitchen would be much lower than the number produced by
three friends in a large kitchen.

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You can see that each facility experiences both economies
and diseconomies of scale.
However, their best operating levels are different. This is a
very important consideration when changing capacity levels.
The capacity of a business can be changed by either
expanding or reducing the amount of capacity.
Although both decisions are important, expansion is
typically a costlier and more critical event.
When expanding capacity, management has to choose
between one of the following two alternatives: Alternative-1:
Purchase one large facility, requiring one large initial
investment and Alternative-2: Add capacity incrementally in
smaller chunks as needed.
70
 Cont’d
The first alternative means that we would have a large
amount of excess capacity in the beginning and that our
initial costs would be high.
We would also run the risk that demand might not
materialize and we would be left with unused overcapacity.
On the other hand, this alternative allows us to be prepared
for higher demand in the future.
Our best operating level is much higher with this alternative,
enabling us to operate more efficiently when meeting higher
demand.

71
 Cont’d
Our costs would be lower in the long run, since one large
construction project typically costs more than many smaller
construction projects due to startup costs.
Thus, alternative-1 provides greater rewards but is more
risky.
Alternative-2 is less risky but does not offer the same
opportunities and flexibility.
It is up to management to weigh the risks versus the rewards
in selecting an alternative.

72
 Cont’d
Focused Factories: Facilities can respond more efficiently
to demand if they are small, specialized, and focused on a
narrow set of objectives; this concept is referred to as
focused factories.
Today’s facilities must succeed in a business environment
that has short product and technology life cycles and in
which flexibility is more important than ever before.
Large facilities tend to be less flexible because they
generally contain larger machines or process technology that
is costly to change in order to make other goods and
services.

73
 Cont’d
Even a large facility can benefit from the concept of the
focused factory by creating what is known as a plant within
a plant, or PWP.
A PWP is a large facility divided into smaller, more
specialized facilities that have separate operations,
competitive priorities, technology, and workforce.
They can be physically separated with a wall or barrier and
kept independent from one another.
In this manner, unnecessary layers of bureaucracy are
eliminated, and each “plant” is free to focus on its own
objectives.

74
 Cont’d
Subcontractor Networks: Another alternative to having a
large production facility is to develop a large network of
subcontractors and suppliers who perform a number of tasks.
This is one of the fastest-growing trends today. Companies
are realizing that to be successful in today’s market, they
need to focus on their core capabilities, for example, by
hiring third parties or subcontractors to take over tasks that
the company does not need to perform itself.
Companies such as American Airlines and Procter and
Gamble have hired outside firms to manage noncritical
inventories.

75
 Cont’d
Today, suppliers and manufacturers work together to
achieve the same quality standards, and much of the
quality checking of incoming materials is performed at
the supplier’s site.
Another example can be seen in the auto industry, where
manufacturers are placing more responsibility on
suppliers to perform tasks such as design of packaging
and transportation of goods.
By placing more responsibility on subcontractors and
suppliers, a manufacturer can focus on tasks that are
critical to its success, such as product development and
design.
76
 Cont’d
Making Capacity Planning Decisions
The three-step procedure for making capacity planning
decisions is as follows:
Step 1 Identify Capacity Requirements: The first step is to
identify the levels of capacity needed by the company now,
as well as in the future.
A company cannot decide whether to purchase a new facility
without knowing exactly how much capacity it will need in
the future.
It also needs to identify the gap between available capacity
and future requirements.

77
 Cont’d
Step 2 Develop Capacity Alternatives: Once capacity
requirements have been identified, the company needs to
develop a set of alternatives that would enable it to meet
future capacity needs.
Step 3 Evaluate Capacity Alternatives: The last step in the
procedure is to evaluate the capacity alternatives and select
the one alternative that will best meet the company’s
requirements.

78
 Cont’d
Identify Capacity Requirements
Long-term capacity requirements are identified on the basis
of forecasts of future demand.
However, long-term patterns are not enough at this stage.
Planning, building, and starting up a new facility can take
well over five years.
Much can happen during that time. When the facilities are
operational, they are expected to be utilized for many years
into the future.
During this time frame numerous changes can occur in the
economy, consumer base, competition, technology, and
demographic factors, as well as in government regulation
and political events.
79
 Cont’d
Forecasting Capacity: Capacity requirements are identified
on the basis of forecasts of future demand.
Forecasting at this level is performed using qualitative
forecasting methods.
Qualitative forecasting methods, such as executive opinion
and the Delphi method, use subjective opinions of experts.
These experts may consider inputs from quantitative
forecasting models that can numerically compute patterns
such as trends.
However, because so many variables can influence demand
at this level, the experts use their judgment to validate the
quantitative forecast or modify it based on their own
knowledge.
80
 Cont’d
One way to proceed with long-range demand forecasting at
this stage is to first forecast overall market demand.
For example, experts might forecast the total market for
overnight delivery to be $30 billion in five years.
Then the company can estimate its market share as a
percentage of the total.
For example, our market share may be 15 percent. From that
we can compute an estimate of demand for our company in
five years by multiplying the overall market demand with
the percentage held by our company (0.15 x $30 billion =
$4.5 billion).
That forecast of demand can then be translated into specific
facility requirements.
81
 Cont’d
Capacity Cushions: Companies often add capacity cushions
to their regular capacity requirements.
A capacity cushion is an amount of capacity added to the
needed capacity in order to provide greater flexibility.
Capacity cushions can be helpful if demand is greater than
expected.
Also, cushions can help the ability of a business to respond
to customer needs for different products or different
volumes.
Finally, businesses that operate too close to their maximum
capacity experience many costs due to diseconomies of scale
and may also experience deteriorating quality.
82
 Cont’d
Strategic Implications: Finally, a company needs to
consider how much capacity its competitors are likely to
have.
Capacity is a strategic decision, and the position of a
company in the market relative to its competitors is very
much determined by its capacity.
At the same time, plans by all major competitors to increase
capacity may signal the potential for overcapacity in the
industry.
Therefore, the decision as to how much capacity to add
should be made carefully.

83
 Cont’d
Develop Capacity Alternatives
Once a company has identified its capacity requirements for
the future, the next step is to develop alternative ways to
modify its capacity.
One alternative is to do nothing and reevaluate the situation
in the future.
With this alternative, the company would not be able to meet
any demands that exceed current capacity levels.

84
 Cont’d
Choosing this alternative and the time to reevaluate the
company’s needs is a strategic decision.
The other alternatives require deciding whether to purchase
one large facility now or add capacity incrementally, as
discussed earlier in the chapter.
Capacity Alternatives involves (1) Do nothing, (2) Expand
large now and (3) Expand small now, with option to add
later

85
 Cont’d
Evaluate Capacity Alternatives
There are a number of tools that we can use to evaluate our
capacity alternatives. Recall that these tools are only
decision-support aids.
Ultimately, managers have to use many different inputs, as
well as their judgment, in making the final decision. One of
the most popular of these tools is the decision tree.

86
 Cont’d
3.4. Facility Location and Layout
Facility location is determining the best geographic location for
a company’s facility.
Facility location decisions are particularly important for two
reasons.
First, they require long-term commitments in buildings and
facilities, which means that mistakes can be difficult to correct.
Second, these decisions require sizable financial investment
and can have a large impact on operating costs and revenues.
Poor location can result in high transportation costs, inadequate
supplies of raw materials and labor, loss of competitive
advantage, and financial loss.
87
 Cont’d
Businesses therefore have to think long and hard about
where to locate a new facility.
In most cases, there is no one best location for a facility.
Rather, there are a number of acceptable locations.
One location may satisfy some factors whereas another
location may be better for others.
If a new location is being considered in order to provide
more capacity, the company needs to consider options such
as expanding the current facility if the current location is
satisfactory.
Another option might be to add a new facility but also keep
the current one. As you can see, there is a lot to consider.
88
 Cont’d
Factors Affecting Location Decisions
Many factors can affect location decisions, including
proximity to customers, transportation, source of labor,
community attitude, and proximity to suppliers.
The nature of the firm’s business will determine which
factors should dominate the location decision.
Profit-making and nonprofit organizations will also focus on
different factors.
Profit-making firms tend to locate near the markets they
serve, whereas nonprofit organizations generally focus on
other criteria.

89
 Cont’d
It is important to identify factors that have a critical impact
on the company’s strategic goals.
Also, while profit-making firms might locate near the
markets they serve, nonprofit firms might choose to be near
their major benefactors.
Managers should also eliminate factors that are not satisfied
by every location alternative.
Next we look more closely at some factors that affect
location decisions.

90
 Cont’d
Proximity to Sources of Supply: Many firms need to locate
close to sources of supply.
The reasons for this can vary. In some cases, the firm has no
choice, such as in farming, forestry, or mining operations,
where proximity to natural resources is necessary.
In other cases, the location may be determined by the
perishable nature of goods, such as in preparing and
processing perishable food items.

91
 Cont’d
Another reason to locate close to sources of supply is to
avoid high transportation costs, for example, if a firm’s raw
materials are much bulkier and costlier to move than the
finished product.
Transporting the finished product outbound is less costly
than transporting the raw materials inbound, and the firm
should locate closer to the source of supply.
A paper mill is an example. Transporting lumber would be
much more costly than transporting the paper produced.

92
 Cont’d
Proximity to Customers: Locating near the market they
serve is often critical for many organizations, particularly
service firms.
To capture their share of the business, service firms need to
be accessible to their customers.
For this reason, service firms typically locate in high-
population areas that offer convenient access.
Examples include retail stores, fast-food restaurants, gas
stations, grocery stores, dry cleaners, and flower shops.
Large retail firms often locate in a central area of the market
they serve.

93
 Cont’d
Smaller service firms usually follow the larger retailers
because of the large number of the customers they attract.
Other reasons for locating close to customers may include
the perishable nature of the company’s products or high
costs of transportation to the customer site.
Food items such as groceries and baked goods, fresh
flowers, and medications are perishable and need to be
offered close to the market.
Also, items such as heavy metal sheets, pipes, and cement
need to be produced close to the market because the costs of
transporting these materials are high.

94
 Cont’d
Proximity to Source of Labor: Proximity to an ample
supply of qualified labor is important in many businesses,
especially those that are labor intensive.
The company needs to consider the availability of a
particular type of labor and whether special skills are
required.
Some companies, such as those looking for assembly-line
workers, want to be near a supply of blue-collar labor.
Other companies may be looking for computer or technical
skills and should consider locating in areas with a
concentration of those types of workers.
Attitudes toward factors such as absenteeism, tardiness, and
turnover can greatly affect a company’s productivity.
95
 Cont’d
Community Considerations: The success of a company at a
particular location can be affected by the extent to which it is
accepted by the local community.
Many communities welcome new businesses, viewing them
as providing sources of tax revenues and opportunities for
jobs, and as contributing to the overall well-being of the
community.
However, communities do not want businesses that bring
pollution, noise, and traffic and that lower the quality of life.
Site Considerations for a particular location include factors
such as utility costs, taxes, zoning restrictions, soil
conditions, and even climate.
96
 Cont’d
These factors are not too different from those one would
consider when purchasing a home or a lot to build on.
Just as most homeowners consider their purchase to be an
investment, so does a business.
Inspectors should be hired to perform a thorough evaluation
of the grounds, such as checking for adequate drainage.
Site-related factors can also limit access roads for trucks and
make it difficult for customers to reach the site.

97
 Cont’d
Quality-of-Life Issues: Another important factor in location
decisions is the quality of life a particular location offers the
company’s employees.
This factor can also become important in the future when the
business is recruiting high-caliber employees.
Quality of life includes factors such as climate, a desirable
lifestyle, good schools, and a low crime rate.
Certainly, quality of life would not be considered the most
critical factor in selecting a location.

98
 Cont’d
Other Considerations: In addition to the factors discussed
so far, there are others that companies need to consider.
They include room for customer parking, visibility, customer
and transportation access, as well as room for expansion.
Room for expansion may be particularly important if the
company has decided to expand now and possibly expand
further at a later date.
Other factors include construction costs, insurance, local
competition, local traffic and road bottleneck, and local
ordinances.

99
 Cont’d
Globalization
In addition to considering the specific factors affecting site
location in the a state, companies need to consider how they
will be affected by a major trend in business today:
globalization.
Globalization is the process of locating facilities around the
world. Over the past decade it has become not only a trend
but a matter-of-fact way of conducting business.
Technology such as faxes, e-mails, video conferencing, and
overnight delivery have made distance less relevant than
ever before.

100
 Cont’d
To compete effectively based on cost, many companies have
had to expand their operations to include global sources of
supply.
Factors other than mere distance have become critical in
selecting a geographic location.
Deciding to expand an operation globally is not a simple
decision.
There are many things to consider, and the problems must be
weighed along with the benefits.
We also look at some additional implications of global
operations that managers need to consider.

101
 Cont’d
Advantages of Globalization: There are many reasons why
companies choose to expand their operations globally.
The main one, is to take advantage of foreign markets. The
demand for imported goods has grown tremendously, and
these markets offer a new arena for competition.
Also, locating production facilities in foreign countries
reduces the stigma (shame) associated with buying imports.
Another advantage of global locations is reduction of trade
barriers. By producing goods in the country where
customers are located, a company can avoid import quotas.

102
 Cont’d
Cheap labor in countries such as Korea, Taiwan, and China
has also attracted firms to locate there.
Often it is cheaper to send raw materials to these countries
for fabrication and assembly and then ship them elsewhere
for final consumption than it is to keep the process in this
country.
The cost of labor can be so low that it more than offsets the
additional transportation costs.
An area that has further encouraged globalization is the
growth of JIT manufacturing, which encourages suppliers
and manufacturers to be in close proximity to one another.

103
 Cont’d
Disadvantages of Globalization: Although there are
advantages to globalization, there are also a number of
disadvantages that companies should consider.
Political risks can be large, particularly in countries with
unstable governments.
Foreign governments may also impose restrictions, tariffs on
particular industries, and local ordinances that must be
obeyed.
Using offshore (great) suppliers might mean that a company
may need to share some of its proprietary technology.

104
 Cont’d
Another issue is whether to use local employees. Companies
are often attracted to cheap foreign labor.
Also, worker skills and productivity may be considerably
lower, offsetting the benefits of lower wages.
The local infrastructure is another important issue. Many
foreign countries do not have the developed infrastructure
necessary for companies to operate in the manner that they
do in their home country.
Infrastructure includes everything from roads to utilities as
well as other support services.

105
 Cont’d
Issues to Consider in Locating Globally: Firms are attracted
to foreign locations in order to take advantage of foreign
markets; cheaper suppliers or labor; and natural resources
such as copper, aluminum, and timber. However, there are
many issues to consider when locating globally.
One such issue is the effect of a different culture. Each
culture has a different set of values, norms, ethics, and
standards.
In some country it is considered polite to be slightly late for
an appointment, and such lateness is quite customary.
In other country, on the other hand, consider punctuality
highly important and tardiness very rude (impolite).
106
 Cont’d
You can see how misunderstandings can develop even
through simple differences like this one. Language barriers
are another potential problem.
Employees need to be able to communicate easily in their
work environment.
Engaging in discussions, following instructions, and
understanding exactly what is being said can become
difficult when employees speak different languages.
Even when one language is translated into another, the
translation may have lost very essential parts of the meaning,
resulting in damaging misunderstanding.

107
 Cont’d
Different laws and regulations, including everything from
pollution regulations to labor laws, may require changes in
business practices.
Also, what is acceptable in one culture may be completely
unacceptable or even illegal in another.
For example, in some countries offering a incentive may be
an acceptable part of doing business, whereas in others it
may land a person in jail.
Although it is important to know the factors affecting
facility location, it is not enough for making good location
decisions.

108
 Cont’d
Procedure for Making Location Decision
As with capacity planning, managers need to follow a three-step
procedure when making facility location decisions. These steps are
as follows:
Step 1 Identify Dominant Location Factors: In this step managers
identify the location factors that are dominant for the business. This
requires managerial judgment and knowledge.
Step 2 Develop Location Alternatives: Once managers know what
factors are dominant, they can identify location alternatives that
satisfy the selected factors.
Step 3 Evaluate Location Alternatives: After a set of location
alternatives have been identified, managers evaluate them and
make a final selection. This is not easy because one location may
be preferred based on one set of factors, whereas another may be
109
better based on a second set of factors.
 Cont’d
Procedures for Evaluating Location Alternatives
A number of procedures can help in evaluating location
alternatives.
These are decision support tools that help structure the
decision-making process.
Some of them help with qualitative factors that are
subjective, such as quality of life.
Others help with quantitative factors that can be measured,
such as distance.
A manager may choose to use multiple procedures to
evaluate alternatives and come up with a final decision.
Remember that the location decision is one that a company
will have to live with for a long time.
110
 Cont’d
Factor Rating: You have seen by now that many of the
factors that managers need to consider when evaluating
location alternatives are qualitative in nature.
Their importance is also highly subjective, based on the
opinion of who is evaluating them.
An excellent procedure that can be used to give structure to
this process is called factor rating.
Factor rating can be used to evaluate multiple alternatives
based on a number of selected factors.
It is valuable because it helps decision maker’s structure
their opinions relative to the factors identified as important.
The following steps are used to develop a factor rating:
111
 Cont’d
Step 1 Identify dominant factors (e.g., proximity to market
access, competition, quality of life).
Step 2 Assign weights to factors reflecting the importance of
each factor relative to the other factors. The sum of these
weights must be 100.
Step 3 Select a scale by which to evaluate each location
relative to each factor.
A commonly used scale is a five-point scale, with 1 being
poor and 5 excellent.

112
 Cont’d
Step 4 Evaluate each alternative relative to each factor, using
the scale selected in Step 3 For example, if you chose to use
a five-point scale, a location that was excellent based on
quality of life might get a 5 for that factor.
Step 5 For each factor and each location, multiply the weight
of the factor by the score for that factor and sum the results
for each alternative.
This will give you a score for each alternative based on how
you have rated the factors and how you have weighted each
of the factors at each location.
Step 6 Select the alternative with the highest score.

113
 Example

114
 Cont’d
The Load–Distance Model: The load–distance model is a
procedure for evaluating location alternatives based on
distance.
The distance to be measured could be proximity to markets,
proximity to suppliers or other resources, or proximity to
any other facility that is considered important.
The objective of the model is to select a location that
minimizes the total amount of loads moved weighted by the
distance traveled.
A load represents the goods moved in or out of a facility or
the number of movements between facilities.
The idea is to reduce the amount of distance between
facilities that have a high load between them.
115
 Cont’d
Relative locations are compared by computing the load–
distance, or LD, score for each location.
The LD score for a particular location is obtained by
multiplying the load (denoted by L) for each location by the
distance traveled (denoted by D) and then summing over all
the locations.
This score is a surrogate (replacement) measure for
movement of goods, material handling, or even
communication. Our goal is to make the LD score as low as
possible by reducing the distance the large loads have to
travel.
Next we look at the steps in developing the load–distance
model.
116
 Cont’d
Step 1 Identify Distances: The first step is to identify the
distances between location sites.
It is certainly possible to use the actual mileage between
locations.
However, it is much quicker, and just as effective, to use
simpler measures of distance.
A frequently used measure of distance is rectilinear distance,
the shortest distance between two points measured by using
only north–south and east–west movements.
To measure rectilinear distance, we place grid coordinates on
a map and use them to measure the distance between two
locations.
117
 Cont’d
The rectilinear distance between two locations, A and B, is
computed by summing the absolute differences between the
x coordinates and the absolute differences between the y
coordinates.
The equation is as follows: dAB = xA - xB + yA - yB
In our example, the coordinates for location A are (30, 40).
The coordinates for location B are (10, 15). Therefore, the
rectilinear distance between these two points is:
dAB = 30 – 10 + 40 – 15 = 45 miles

118
 Cont’d
Step 2 Identify Loads: The next step is to identify the loads
between different locations.
The notation lij is used to indicate the load between locations
i and j.
Step 3 Calculate the Load–Distance Score for Each
Location: Next we calculate the load–distance score for
each location by multiplying the load, lij, by the distance,
dij. We compute the sum of lijdij to get the ld score.
Finally, we select the site with the lowest load–distance
score.

119
 Example
Matrix Manufacturing is considering where to locate its
warehouse in order to service its four Ohio stores located in
Cleveland, Cincinnati, Columbus, Dayton. Two sites are
being considered; Mansfield and Springfield, Ohio. Use the
load-distance model to make the decision.
Calculate the rectilinear distance:

dAB  30  10  40  15  45 miles

120
 Cont’d
Multiply by the number of loads between each site and the
four cities. Calculating the Load-Distance Score for
Springfield vs. Mansfield
Computing the Load-Distance Score for Springfield
City Load Distance ld
Cleveland 15 20.5 307.5
Columbus 10 4.5 45
Cincinnati 12 7.5 90
Dayton 4 3.5 14
Total Load-Distance Score(456.5)

Computing the Load-Distance Score for Mansfield

City Load Distance ld
Cleveland 15 8 120
Columbus 10 8 80
Cincinnati 12 20 240
Dayton 4 16 64
Total Load-Distance Score(504)

The load-distance score for Mansfield is higher than for Springfield. The warehouse
121
should be located in Springfield.
 Cont’d
The Center of Gravity Approach: When we used the load–
distance model, we compared only two location alternatives.
The load–distance was lower for Springfield than for
Mansfield.
However, we can also use the model to find other locations
that may give an even lower load–distance score than
Springfield.
An easy way to do this is to start by testing the location at
the center of gravity of the target area.
The X and Y coordinates that give us the center of gravity for
a particular area are computed in the following way:

122
 Cont’d
The X coordinate for the center of gravity is computed by
taking the X coordinate for each point and multiplying it by
its load.
These are then summed and divided by the sum of the loads.
The same procedure is used to compute the Y coordinate.
The location identified with the center of gravity puts a
larger penalty on long distances.
This can have practical value given that longer distances
impose more costs on the organization.
However, the location identified may not be a feasible site
because of geographic restrictions.
However, the center of gravity provides an excellent starting
point.
123
 Cont’d
Computing the Center of Gravity for Matrix Manufacturing
Coordinates Load
Location (X,Y) (li) lixi liyi
Cleveland (11,22) 15 165 330
Columbus (10,7) 10 165 70
Cincinnati (4,1) 12 165 12
Dayton (3,6) 4 165 24
Total 41 325 436
Computing the Center of Gravity for Matrix Manufacturing

Xc.g. 
 lXi i

325
 7.9 ; Yc.g. 
l Y
i i

436
 10.6
l i 41 l i 41
Is there another possible warehouse location closer to the
C.G. that should be considered?? Why?

124
 Cont’d
Break-Even Analysis: Break-even analysis is a technique
used to compute the amount of goods that must be sold just
to cover costs.
The break-even point is precisely the quantity of goods a
company needs to sell to break even.
Whatever is sold above that point will bring a profit. Below
that point the company will incur a loss.
We discussed break-even analysis in previous chapter as a
technique for evaluating the success of different products.

125
 Cont’d
In this chapter we use break-even analysis to evaluate
different location alternatives.
Remember that break-even analysis works with costs, such
as fixed and variable costs.
It can be an excellent technique when the factors under
consideration can be expressed in terms of costs.
Let’s briefly review the basic break-even equations:
Now let’s look at the basic steps in using break-even
analysis for location selection.

126
 Cont’d
Step 1: For Each Location, Determine Fixed and Variable
Costs:
Recall from previous chapter that fixed costs are incurred
regardless of how many units are produced and include
items such as overhead, taxes, and insurance.
Variable costs are costs that vary directly with the number of
units produced and include items such as materials and
labor.
Total cost is the sum of fixed and variable costs.

127
 Cont’d
Step 2: Plot the Total Costs for Each Location on One
Graph:
To plot any straight line we need two points.
One point is Q = 0, which is the y intercept. Another point
can be selected arbitrarily, but it is best to use the expected
volume of sales in the future.
Step 3: Identify Ranges of Output for Which Each
Location Has the Lowest Total Cost.
Step 4: Solve Algebraically for the Break-Even Points over
the Identified Ranges:
Select the location that gives the lowest cost for the range of
output required by the new facility.
128
 Example
Clean-Clothes Cleaners is considering four possible sites for
its new operation. They expect to clean 10,000 garments.
The table and graph below are used for the analysis.

Example 9.6 Using Break-Even Analysis

Location Fixed Cost Variable Cost Total Cost
A $350,000 $ 5(10,000) $400,000
B $170,000 $25(10,000) $420,000
C $100,000 $40(10,000) $500,000
D $250,000 $20(10,000) $450,000
129
 Cont’d

From the graph you

can see that the two
lowest cost
intersections occur
between C and B
(4667 units) and B
and A (9000 units)
The best alternative
up to 4667 units is C,
between 4667 and
9000 units the best is
B, and above 9000
130 units the best site is
A
 Cont’d
The Transportation Method: The transportation method
of linear programming is a useful technique for solving
specific location problems.
The method relies on a specific algorithm to evaluate the
cost impact of adding potential location sites to the
network of existing facilities.
Our task might be to evaluate adding a new location site to
this network, either a receiving site or a sending site.
We might also wish to evaluate adding multiple new sites
or completely redesigning the network.
The transportation method can efficiently analyze all these
situations and provide the lowest cost for each
131
configuration considered.
 Cont’d
3.5. Job Design and Work Measurement
To say that an organization’s human resources are its
greatest asset is something of a cliché.
Yet it is worth reminding ourselves of the importance of
human resources, especially in the operations function,
where most ‘human resources’ are to be found.
It follows that it is operations managers who are most
involved in the leadership, development and organization of
human resources.
In fact, the influence of operations management on the
organization’s staff is not limited to how their jobs are
designed.
132
 Cont’d
Job design is about how we structure each individual’s job,
the workplace or environment in which they work and their
interface with the technology they use.
Work organization, although used sometimes
interchangeably with job design, is a broader term that
considers the organization of the whole operation, material,
technology and people, to achieve the operations objectives.
In essence job design and work organization defines the way
in which people go about their working lives.

133
 Cont’d
It defines their activities in relation to their work
colleagues and it channels the flow of communication
between different parts of the operation.
But most importantly it helps to develop the culture of
the organization, its shared values, beliefs and
assumptions.
The Elements of Job Design
Job design involves a number of separate yet related
elements which when taken together define the jobs of
the people who work in the operation.
There are six key elements of job design that you will
need to consider.
134
 Cont’d
1. What are the environmental conditions of the workplace?
The conditions under which jobs are performed will
have a significant impact on people’s effectiveness,
comfort and safety. It is concerned with issues such as
noise, heat and light in the workplace.
2. What technology is available and how will it be used?
The vast majority of operational tasks require the use of
technology, even if the technology is not sophisticated.
Not only does the technology need to be appropriate and
designed well so do the interface between the people and
the hardware.
135
 Cont’d
3. What tasks are to be allocated to each person ?
Producing goods and services involves a whole range of
different tasks which need to be divided between the
people who staff the operation.
4. What is the best method of performing each job?
Every job should have an approved method of
completion and this should be the ‘best’ method.
Although there are different ideas of what is ‘best’, it is
generally the most efficient method but that fits the task
and does not unduly interfere with other tasks.

136
 Cont’d
5. How long will it take and how many people will be
needed?
Work measurement helps us calculate the time required to do a
job so that we can then work out how many people we will need.
6. How do we maintain commitment?
Keeping staff motivated is not easy. So understanding how we
can encourage people and maintain their commitment is the most
important of the issues in job design and work organization.
This is concerned with the behavioral approaches to job design
including empowerment, teamwork and flexible working.

137
 Cont’d
Designing Environmental Conditions-Ergonomics
Ergonomics is concerned primarily with the physiological
aspects of job design that is, with the human body and how
it fits into its surroundings.
This involves two aspects. First we must consider how a
person interfaces with environmental conditions in his or her
immediate working area.
By this we mean the temperature, lighting, noise
environment and so on. Second, how the person interfaces
with the physical aspect of his or her workplace, where the
‘workplace’ includes tables, chairs, desks, machines, and
computers.
138
 Cont’d
Ergonomics is sometimes referred to as human factors
engineering or just ‘human factors’. Both of these aspects
are linked by two common ideas:
There must be a fit between people and the jobs they do. To
achieve this fit there are only two alternatives.
Either the job can be made to fit the people who are doing it,
or alternatively, the people can be made (or perhaps less
radically, recruited) to fit the job. Ergonomics addresses the
former alternative.
It is important to take a ‘scientific’ approach to job design,
for example collecting data to indicate how people react
under different job design conditions and trying to find the
best set of conditions for comfort and performance.
139
 Cont’d
Ergonomic Environmental Design
The Giza Quarry operates at the edge of a desert where
temperatures reach 40 degrees at the height of summer.
The immediate environment in which jobs take place will
influence the way they are performed so you will need to
provide shade and shelter and ensure a plentiful supply of
fresh water and food for the workforce.
Working conditions which are too hot or too cold,
insufficiently illuminated or glaringly bright, excessively
noisy or irritatingly silent will all influence the way jobs are
carried out.

140
 Cont’d
Many of these issues are often covered by occupational
health and safety legislation which controls environmental
conditions in workplaces throughout the world.
A thorough understanding of this aspect of ergonomics is
necessary to work within the guidelines of such legislation.
Predicting the reactions of individuals to working
temperature is not straightforward. Individuals vary in the
way their performance and comfort vary with temperature.
Furthermore, most of us judging ‘temperature’ will also be
influenced by other factor such as humidity and air
movement.

141
 Cont’d
Nevertheless, some general points regarding working
temperatures provide guidance to job designers:
Comfortable temperature range will depend on the type of
work being carried out; lighter work requiring higher
temperatures than heavier work.
The effectiveness of people at performing vigilance or care
tasks reduces at temperatures above about 29°C; the
equivalent temperature for people performing light manual
tasks is a little lower.
The chances of accidents occurring increase at temperatures
which are above or below the comfortable range for the
work involved.
142
 Cont’d
Ergonomics in the Office
As the number of people working in offices (or office-like
workplaces) has increased, ergonomic principles have been
applied increasingly to this type of work.
At the same time, legislation has been moving to cover
office technology such as computer screens and keyboards.
For example, European Union directives on working with
display screen equipment require organizations to assess all
workstations to reduce the risks inherent in their use, plan
work times for breaks and changes in activity and provide
information and training for users.

143
 Cont’d
Designing the Human Interface-Ergonomic Workplace
Design
Ergonomic workplace design investigates how people
interface with the physical parts of their jobs and applies as
much to office work as it does to quarries where issues such
as repetitive strain injury (RSI) and impaired vision are not
uncommon for people who make continued use of tools,
including computers.
Understanding how workplaces affect performance, fatigue,
physical strain and injury is all part of the ergonomics
approach to job design.

144
 Cont’d
Anthropometric Aspects
Many ergonomic improvements are primarily concerned
with what are called the anthropometric aspects of jobs that
is, the aspects related to people’s size, shape and other
physical abilities.
The design of an assembly task, for example, should be
governed partly by the size and strength of the operators
who do the job.
The data which ergonomists use when doing this is called
anthropometric data.
Note that because we all vary in our size and capabilities,
ergonomists are particularly interested in our range of
capabilities, usually expressed in percentile terms.
145
 Cont’d
Designing Task Allocation-The Division of Labor
The Giza Quarry must decide whether to employ specialists
or generalists.
Should the stone masons who dress the blocks (a highly
skilled task) also be responsible for sharpening their own
chisels (a semi-skilled task) or should there be separate
people to do each task?
This idea is called the division of labor, dividing the total
task into smaller parts, each of which is accomplished by a
single person or team.

146
 Cont’d
It was first formalized as a concept by the economist Adam
Smith in his Wealth of Nations in 1746.4 Perhaps the
epitome of the division of labor is the assembly line, where
products move along a single path and are built up by
operators continually repeating a single task. This is the
predominant model of job design in most mass-produced
products and in some mass-produced services (fast food, for
example).
There are some real advantages in division-of-labor
principles:

147
 Cont’d
It promotes faster learning: It is obviously easier to learn
how to do a relatively short and simple task than a long and
complex one.
This means that new members of staff can be quickly trained
and assigned to their tasks when they are short and simple.
Automation becomes easier: Dividing a total task into small
parts raises the possibility of automating some of those small
tasks.
Substituting technology for labor is considerably easier for
short and simple tasks than for long and complex ones.
Reduced non-productive work: This is probably the most
important benefit of division of labor.
148
 Cont’d
In large, complex tasks the proportion of time spent picking
up tools and materials, putting them down again and generally
finding, positioning and searching can be very high indeed.
For example, one person assembling a whole motor car engine
would take two or three hours and involve much searching for
parts, positioning and so on.
Around half the person’s time would be spent on these
reaching, positioning, finding tasks (that is known as non-
productive elements of work).
Now consider how a motor car engine is actually made in
practice.
The total job is probably divided into 20 or 30 separate stages,
each staffed by a person who carries out only a proportion
(percentage) of the total.
149
 Cont’d
Specialist equipment and materials-handling devices can be
devised to help them carry out their job more efficiently.
Furthermore, there is relatively little finding, positioning and
reaching involved in this simplified task.
Non-productive work can be considerably reduced, perhaps
to fewer than 10 percent, which would be very significant to
the costs of the operation.
There are also serious drawbacks to highly divided jobs:
Monotony: The shorter the task, the more often operators
will need to repeat it. Repeating the same task, for example
every 30 seconds, eight hours a day and five days a week,
can hardly be called a fulfilling job.
150
 Cont’d
As well as any ethical objections, there are other, more
obviously practical objections to jobs which induce such
boredom.
These include the increased likelihood of absenteeism and
staff turnover, the increased likelihood of error and even the
deliberate sabotage of the job.
Physical injury: The continued repetition of a very narrow
range of movements can, in extreme cases, lead to physical
injury.
The over-use of some parts of the body (especially the arms,
hands and wrists) can result in pain and a reduction in
physical capability. This is sometimes called repetitive strain
injury.
151
 Cont’d
Low flexibility: Dividing a task into many small parts often
gives the job design a rigidity which is difficult to adapt under
changing circumstances.
For example, if an assembly line has been designed to make
one particular product but then has to change to manufacture a
quite different product, the whole line will need to be
redesigned.
This will probably involve changing every operator’s set of
tasks, which can be a long and difficult procedure.
Poor robustness: Highly divided jobs imply materials (or
information) passing between several stages.
If one of these stages is not working correctly, for example
because some equipment is faulty, the whole operation is
152
affected.
 Cont’d
Designing Job Methods-Scientific Management
The term scientific management became established in 1911
with the publication of the book of the same name by
Fredrick Taylor (this whole approach to job design is
sometimes referred to as Taylorism).
In this work he identified what he saw as the basic tenets of
scientific management:
All aspects of work should be investigated on a scientific
basis to establish the laws, rules and formulae governing the
best methods of working.

153
 Cont’d
Such an investigative approach to the study of work is
necessary to establish what constitutes a ‘fair day’s work’.
Workers should be selected, trained and developed
methodically to perform their tasks.
Managers should act as the planners of the work (analyzing
jobs and standardizing the best method of doing the job)
while workers should be responsible for carrying out the
jobs to the standards laid down.
Cooperation should be achieved between management and
workers based on the ‘maximum prosperity’ of both.

154
 Cont’d
Two separate but related fields of study emerged. One,
method study, concentrates on determining the methods and
activities which should be included in jobs.
The other, work measurement, is concerned with measuring
the time that should be taken for performing jobs.
Together, these two fields are often referred to as work
study.
The important thing to remember about scientific
management is that it is not particularly ‘scientific’ as such,
although it certainly does take an ‘investigative’ approach to
improving operations.

155
 Cont’d
For example, a tale is told of Frank Gilbreth (the founder of
method study) addressing a scientific conference with a
paper entitled ‘The Best Way to Get Dressed in a Morning’.
In his presentation, he rather bemused the scientific audience
by analyzing the ‘best’ way of buttoning up one’s waistcoat
in the morning.
Among his conclusions was that waistcoats should always
be buttoned from the bottom upwards.
To make it easier to straighten his tie in the same motion;
buttoning from the top downwards requires the hands to be
raised again.

156
 Cont’d
Think of this example if you want to understand scientific
management and method study in particular.
First of all, he is quite right. Method study and the other
techniques of scientific management may often be without
any intellectual or scientific validation, but by and large they
work in their own terms.
Second, Gilbreth reached his conclusion by a systematic and
critical analysis of what motions were necessary to do the
job.
Again, these are characteristics of scientific management,
detailed analysis and thoroughly systematic examination.

157
 Cont’d
Third (and possibly most important), the results are
relatively trivial.
A great deal of effort was put into reaching a conclusion that
was unlikely to have any earth-shattering consequences.
Although not without its detractors, scientific management
remains a cornerstone of the design of many repetitive jobs.
The responsibility for its application, however, has moved
away from specialist ‘time and motion’ staff to the
employees who can use such principles to improve what
they do and how they do it.

158
 Cont’d
The short case on the NUMMI plant illustrates such an
application.
Further, some of the methods and techniques of scientific
management, as opposed to its philosophy (especially those
which come under the general heading of ‘method study’),
can in practice prove useful in critically re-examining job
designs.
It is the practicality of these techniques which possibly
explains why they are still influential in job design almost a
century after their inception.

159
 Cont’d
Method Study
Method study is a systematic approach to finding the best
method. There are six steps:
Step-1: Selecting the work to be studied
Most operations have many hundreds and possibly
thousands of discrete jobs and activities which could be
subjected to study.
The first stage in method study is to select those jobs to be
studied which will give the most return on the investment of
the time spent studying them.

160
 Cont’d
This means it is unlikely that it will be worth studying
activities which, for example, may soon be discontinued or
are performed only occasionally.
The types of job which should be studied as a matter of
priority are those which, for example, seem to offer the
greatest scope for improvement or which are causing
bottlenecks, delays or problems in the operation.

161
 Cont’d
Step-2: Recording the present method
There are many different recording techniques used in
method study. Most of them:
Record the sequence of activities in the job;
Record the time interrelationship of the activities in the job;
or
Record the path of movement of some part of the job.
Perhaps the most commonly used recording technique in
method study is process mapping.
Note that we are here recording the present method of doing
the job.

162
 Cont’d
It may seem strange to devote so much time and effort to
recording what is currently happening when, after all, the
objective of method study is to devise a better method.
The rationale for this is, first of all, that recording the
present method can give a far greater insight into the job
itself and this can lead to new ways of doing it.
Second, recording the present method is a good starting
point from which to evaluate it critically and therefore
improve it.
In this last point the assumption is that it is easier to improve
the method by starting from the current method and then
criticizing it in detail than by starting with a ‘blank sheet of
paper’.
163
 Cont’d
Step-3: Examining the facts
This is probably the most important stage in method study and
the idea here is to examine the current method thoroughly and
critically.
This is often done by using the so-called ‘questioning technique’.
This technique attempts to detect weaknesses in the rationale for
existing methods so that alternative methods can be developed.
The approach may appear somewhat detailed and tedious, yet it is
fundamental to the method study philosophy.
Understanding the natural tendency to be less than rigorous at
this stage, some organizations use pro forma questionnaires,
asking each of these questions and leaving space for formal
replies and/or justifications, which the job designer is required to
complete.
164
 Cont’d
Step-4: Developing a new method
This step involves taking these ideas further in an attempt to:
eliminate parts of the activity altogether, combine elements,
change the sequence of events so as to improve the
efficiency of the job; or and simplify the activity to reduce
the work content.
A useful aid during this process is a checklist such as the
revised principles of motion economy.

165
 Cont’d
Steps-5 and 6: Installing the new method and regularly
maintaining it
The method study approach to the installation of new work
practices concentrates largely on ‘project managing’ the
installation process.
It also emphasizes the need to monitor regularly the
effectiveness of job designs after they have been installed.
Although not originally intended as some kind of continuous
improvement, it can be used as an opportunity to rethink
and improve methods on a continuous basis.

166
 Cont’d
Work Measurement in Job Design
Work measurement is the process of establishing the time for a
qualified worker, at a defined level of performance, to carry out a
specified job.
Although not a precise definition, generally it is agreed that a
specified job is one for which specifications have been established
to define most aspects of the job.
A qualified worker is ‘one who is accepted as having the necessary
physical attributes, intelligence, skill, education and knowledge to
perform the task to satisfactory standards of safety, quality and
quantity’.
Standard performance is ‘the rate of output which qualified workers
will achieve without over-exertion as an average over the working
day provided they are motivated to apply themselves to their work’.
167
 Cont’d
Basic times
When a qualified worker is working on a specified job at
standard performance, the time he or she takes to perform
the job is called the basic time for the job.
Basic times are useful because they are the ‘building blocks’
of time estimation.
With the basic times for a range of tasks, an operations
manager can construct a time estimate for any longer
activity which is made up of the tasks.
There are several techniques for establishing basic times.
The best known is probably time study.

168
 Cont’d
Time study
Time study is ‘a work measurement technique for recording
the times and rate of working for the elements of a specified
job, carried out under specified conditions, and for analyzing
the data so as to obtain the time necessary for the carrying
out of the job at a defined level of performance’.
The technique takes three steps to derive the basic times for
the elements of the job: observing and measuring the time
taken to perform each element of the job, adjusting, or
‘normalizing’, each observed time and averaging the
adjusted times to derive the basic time for the element.

169
 Cont’d
Step-1: Observing, measuring and rating
A job is observed through several cycles. Each time an
element is performed, it is timed using a stopwatch.
Simultaneously with the observation of time, a rating of the
perceived performance of the person doing the job is
recorded.
Rating is ‘the process of assessing the worker’s rate of
working relative to the observer’s concept of the rate
corresponding to standard performance.

170
 Cont’d
The observer may take into account, separately or in
combination, one or more factors necessary to carrying out
the job, such as speed of movement, effort, dexterity,
consistency, etc.’.
There are several ways of recording the observer’s rating.
The most common is on a scale which uses a rating of 100 to
represent standard performance.
If an observer rates a particular observation of the time to
perform an element at 100, the time observed is the actual
time which anyone working at standard performance would
take.

171
 Cont’d
Step 2 – Adjusting the observed times
The adjustment to normalize the observed time is:, where
standard rating is 100 on the common rating scale we are
using here.
For example, if the observed time is 0.71 minutes and the
observed rating are 90, then: = 0.64 times

172
 Cont’d
Step 3 – Average the basic times
In spite of the adjustments made to the observed times
through the rating mechanism, each separately calculated
basic time will not be the same.
This is not necessarily a function of inaccurate rating or even
the vagueness of the rating procedure itself; it is a natural
phenomenon of the time taken to perform tasks.
Any human activity cannot be repeated in exactly the same
time on every occasion.

173
 Cont’d
Standard times
The standard time for a job is an extension of the basic time and
has a different use.
Whereas the basic time for a job is a piece of information which
can be used as the first step in estimating the time to perform a job
under a wide range of conditions, standard time refers to the time
allowed for the job under specific circumstances.
This is because standard time includes allowances which reflect
the rest and relaxation allowed because of the conditions under
which the job is performed.
So the standard time for each element consists principally of two
parts, the basic time (the time taken by a qualified worker, doing a
specified job at standard performance) and an allowance (this is
added to the basic time to allow for rest, relaxation and personal
174
needs).
 Cont’d
Allowances
Allowances are additions to the basic time intended to
provide the worker with the opportunity to recover from the
physiological and psychological effects of carrying out
specified work under specified conditions and to allow for
personal needs.
The amount of the allowance will depend on the nature of
the job.
The way in which relaxation allowance is calculated, and the
exact allowances given for each of the factors which
determine the extent of the allowance, varies between
different organizations.
175
 Cont’d
Every job has an allowance of 10 percent; the table shows
the further percentage allowances to be applied to each
element of the job.
In addition, other allowances may be applied for such things
as unexpected contingencies, synchronization with other
jobs, unusual working conditions and so on.

176
 Cont’d
Other work measurement techniques
Other techniques are used to estimate standard times. They
include the following:
Synthesis from elemental data: is a work measurement
technique for building up the time for a job at a defined level
of performance by totaling element times obtained previously
from the studies in other jobs containing the elements
concerned or from synthetic data.
Predetermined motion–time systems (PMTS): is a work
measurement technique whereby times established for basic
human motions (classified according to the nature of the
motion and the conditions under which it is made) are used to
build up the time for a job at a defined level of performance.
177
 Cont’d
Analytical estimating: is a work measurement technique
which is a development of estimating whereby the time
required to carry out the elements of a job at a defined level
of performance is estimated from knowledge and experience
of the elements concerned.
Activity sampling: is a technique in which a large number
of instantaneous observations is made over a period of time
of a group of machines, processes or workers.
Each observation records what is happening at that instant
and the percentage of observations recorded for a particular
activity or delay is a measure of the percentage of time
during which that activity or delay occurs.
178
 Cont’d
Not with standing the weak theoretical basis of work
measurement, understanding the relationship between work
and time is clearly an important part of job design.
The advantage of structured and systematic work
measurement is that it gives a common currency for the
evaluation and comparison of all types of work.

179
 Cont’d
Designing for Job Commitment-Behavioral Approaches to Job
Design
There are plenty of tough jobs at the Giza quarry. Work can be
physically hard and repetitive.
Motivating staff under these conditions can be a real problem.
How are you going to maintain commitment of staff who have
to handle 5-ton blocks of stone, day after day after day, year
after year, and still be happy in their work?
This is where motivation theory and its contribution to the
behavioral approach to job design is important.
Jobs which are designed purely on division of labor, scientific
management or even purely ergonomic principles can alienate
the people performing them.
180
 Cont’d
Job design should also take into account the desire of
individuals to fulfill their needs for self-esteem and personal
development.
This achieves two important objectives of job design.
First, it provides jobs which have an intrinsically higher
quality of working life an ethically desirable end in itself.
Second, because of the higher levels of motivation it
produces, it is instrumental in achieving better performance
for the operation, in terms of both the quality and the
quantity of output.

181
 Cont’d
This approach to job design involves two conceptual steps:
first, exploring how the various characteristics of the job
affect people’s motivation; second, exploring how
individuals’ motivation towards the job affects their
performance at that job.
In turn, these are assumed to give certain performance
outcomes.
Some of the ‘techniques’ (which Hackman and Oldham
originally called ‘implementing concepts’) need a little
further explanation:
Combining tasks means increasing the number of separate
elements or activities allocated to individuals.
182
 Cont’d
Forming natural work units means putting together activities
which make a coherent (preferably also a continuing) whole.
Establishing client relationships means that staff makes
contact with their internal customers directly rather than
exclusively through their supervisors.
Vertical loading means including ‘indirect’ activities (such
as the maintenance, scheduling and general management of
the job) in the tasks allocated to the individual.
Opening feedback channels means ensuring not only those
internal customers feedback perceptions of performance
directly to staff but also that staff are provided with
information regarding their overall performance.
183
 Cont’d
Hackman and Oldham also indicate how these techniques of
job design shape the core characteristics of the resulting job,
and further, how the core characteristics influence the
‘mental states’ of the person doing the job.
By ‘mental states’ they mean the attitude of individuals
towards their jobs, specifically, how meaningful they find
the job, how much responsibility and control they feel they
have over the way the job is done, and how much they
understand about the results of their efforts.
High levels of all these mental states, it is held, positively
influence people’s performance at their job in terms of their
motivation, quality of work, satisfaction with their work,
turnover
184
and absenteeism.
 Cont’d
Job rotation
If increasing the number of related tasks in the job is
constrained in some way, for example by the technology of
the process, one approach may be to encourage job rotation.
This means moving individuals periodically between
different sets of tasks to provide some variety in their
activities.
When successful, job rotation can increase skill flexibility
and make a small contribution to reducing monotony.
However, it is not viewed as universally beneficial either by
management (because it can disrupt the smooth flow of
work) or by the people performing the jobs (because it can
interfere with their rhythm of work).
185
 Cont’d
Job enlargement
The most obvious method of achieving at least some of the
objectives of behavioral job design is by allocating a larger
number of tasks to individuals (what Hackman and Oldham
called combining tasks).
If these extra tasks are broadly of the same type as those in
the original job, the change is called job enlargement.
This may not involve more demanding or fulfilling tasks,
but it may provide a more complete and therefore slightly
more meaningful job.
If nothing else, people performing an enlarged job will not
repeat themselves as often, which could make the job
marginally less monotonous.
186
 Cont’d
So, for example, suppose that the manufacture of a product
has traditionally been split up on an assembly-line basis into
ten equal and sequential jobs.
If that job is then redesigned so as to form two parallel
assembly lines of five people, the output from the system as
a whole would be maintained but each operator would have
twice the number of tasks to perform.
Operators repeat themselves less frequently and presumably
the variety of tasks is greater, although no further
responsibility or autonomy is necessarily given to each
operator.

187
 Cont’d
Job enrichment
Job enrichment, like job enlargement, increases the number
of tasks which are allocated to jobs.
However, it means allocating extra tasks which involve more
decision making, greater autonomy and therefore greater
control over the job.
For example, the extra tasks could include the maintenance
of, and adjustments to, any process technology used, the
planning and control of activities within the job or the
monitoring of quality levels.
The effect is both to reduce repetition in the job and to
increase the autonomy and personal development
opportunities in the job.
188
 Cont’d
So, in the assembly-line example, each operator, as well as
being allocated a job which is twice as long as that
previously performed could be allocated responsibility for
carrying out routine maintenance and such tasks as record-
keeping and managing the supply of materials.
As a result, both the autonomy and decision-making
responsibility of the job have been increased.
One way of understanding the difference between job
enlargement and job enrichment is by thinking of changing
jobs on what are sometimes termed horizontal dimensions of
job design and vertical dimensions of job design.
Broadly, horizontal changes are those which extend the
variety of similar tasks assigned to a particular job.
189
 Cont’d
Vertical job changes are those which add responsibilities,
decision making or autonomy to the job.
Job enlargement implies movement only in the horizontal
scale, whereas job enrichment certainly implies movement
on the vertical scale and perhaps on both scales.
Empowerment
Empowerment is an extension of the autonomy job
characteristic prominent in the behavioral approach to job
design. However, it is usually taken to mean more than
autonomy.
Whereas autonomy means giving staff the ability to change
how they do their jobs, empowerment means giving staff the
authority to make changes to the job itself.
190
 Cont’d
Suggestion involvement is not really empowerment in its
true form but does ‘empower’ staff to contribute their
suggestions for how the operation might be improved.
However, staff does not have the autonomy to implement
changes to their jobs.
Job involvement goes much further and empowers staff to
redesign their jobs.
However, again there must be some limits to the way each
individual makes changes which could impact on other staff
and on the performance of the operations as a whole.

191
 Cont’d
High involvement means including all staff in the strategic
direction and performance of the whole organization.
This is the most radical type of empowerment and there are
few examples.
However, the degree to which individual staff of an
operation contribute towards, and take responsibility for,
overall strategy can be seen as a variable of job design.
For example, a professional service such as a group of
consulting engineers (who design large engineering projects)
might very well move in this direction.
It may be partly to motivate all staff. It may be partly to
ensure that the operation can capture everyone’s potentially
useful ideas.
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 Cont’d
The benefits of empowerment are generally seen as
including the following: faster on-line responses to customer
needs, faster on-line responses to dissatisfied customers,
employees feel better about their jobs, employees will
interact with customers with more enthusiasm, empowered
employees can be a useful source of service, and it promotes
‘word-of-mouth’ advertising and customer retention.
However, there are costs associated with empowerment:
larger selection and training costs, slower or inconsistent
training, violation of equity of service and perceived fair
play and ‘give-always’ and bad decisions made by
employees in the organization.
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 Cont’d
A development in job design which is closely linked to the
empowerment concept is that of team-based work organization
(sometimes called self-managed work teams).
This is where staff, often with overlapping skills, collectively
performs a defined task and have a high degree of discretion over
how they actually perform the task.
The team would typically control such things as task allocation
between members, scheduling work, quality measurement and
improvement, and sometimes the hiring of staff.
The concept of teamwork, however, is more prescriptive and
assumes a shared set of objectives and responsibilities.
Groups are described as teams when the virtues of working
together are being emphasized, such as the ability to make use of
the various skills within the team.
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 Cont’d
Teams as an organizational device
Teams may also be used to compensate for other
organizational changes such as the move towards flatter
organizational structures.
When organizations have fewer managerial levels, each
manager will have a wider span of activities to control.
Teams which are capable of autonomous decision making
have a clear advantage in these circumstances.
Effective decision making, however, may require a very
broad mix of skills within the team.
For example, the computer equipment maker brings together
very different specialisms within single teams.
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 Cont’d
These may include marketing managers, engineers, lawyers,
technical writers, purchasing managers and shop-floor
workers.
The benefits of teamwork can be summarized as: improving
productivity through enhanced motivation and flexibility,
improving quality and encouraging innovation, increasing
satisfaction by allowing individuals to contribute more
effectively, making it easier to implement technological
changes in the workplace because teams are willing to share
the challenges this brings.

196
 Cont’d
Flexible working
The nature of most jobs has changed significantly over the
last 25 years.
New technologies, more dynamic marketplaces, more
demanding customers and a changed understanding of how
individuals can contribute to competitive success have all
had their impact.
Alternative forms of organization and alternative attitudes to
work are being sought which allow, and encourage, a degree
of flexibility in working practice which matches the need for
flexibility in the marketplace.

197
 Cont’d
From an operations management perspective, three aspects of
flexible working are significant: skills flexibility, time flexibility
and location flexibility.
Skills flexibility
Given that both the nature and level of demand for many services
and products are uncertain, a flexible workforce that can adapt
itself to several tasks is clearly a major advantage.
If staff can move across several different jobs, they can be
deployed (or deploy themselves) in whatever activity is in
demand at the time.
This may be a short-term issue. So, for example, members of
staff at a supermarket may be moved from warehouse activities
to shelf replenishment in the store to the checkout, depending on
what is needed at the time.
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 Cont’d
In the longer-term sense, multi-skilling means being able to
migrate individuals from one skill to another as longer-term
demand trends become obvious.
So, for example, an engineer who at one time maintained
complex equipment by visiting the sites where such
equipment was installed may now perform most of his or her
activities by using remote computer diagnostics and
‘helpline’ assistance.
This requires the same basic knowledge of the equipment
but a whole new set of diagnostic and customer relationship
skills.

199
 Cont’d
The implication of job flexibility is that greater emphasis
must be placed on training, learning and knowledge
management.
Defining what knowledge and experience are required to
perform particular tasks and translating these into training
activities are clearly prerequisites for effective multiskilling.
Following on from this, the nature of remuneration systems
is changing.
Rather than basing pay on output, payment systems now
often relate pay to the range of skills an individual
possesses.

200
 Cont’d
Time flexibility
Not every individual wants to work full-time. Many people,
often because of family responsibilities, want to work for only
part of their time, sometimes only during specific parts of the
day or week (because of childcare, etc.).
Likewise, employers may not require the same number of staff
at all times, perhaps needing extra staff only at periods of
heavy demand.
To some extent, skills flexibility may allow them to transfer
staff to where demand is occurring; for example, the
supermarket which transfers its staff from shelf replenishment
to checkout work at busy periods.
However, in addition, it may be necessary to vary the absolute
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number of staff on duty at any time.
 Cont’d
Location flexibility-teleworking
Even within the manufacturing sector, the proportion of people with
indirect jobs (those not directly engaged in making products) has also
increased significantly.
One result of all this is that the number of jobs which are not ‘location-
specific’ has increased.
Location-specific means that a job must take place in one fixed location.
So a shop worker must work in a shop and an assembly line worker
must work on the assembly line.
But many jobs could be performed at any location where there are
communication links to the rest of the organization.
The realization of this has given rise to what is known as teleworking,
which is also known as using ‘alternative workplaces’ (AW), ‘flexible
working’, ‘home working’ (misleadingly narrow) and creating the
‘virtual office’.
202
 Cont’d
Degrees of teleworking
Not everyone who has the opportunity to telework will
require, or even want, the same degree of separation from
their work office.
Professors Davenport and Pearlson have identified five
stages on a continuum of alternative work arrangements:
Occasional telecommuting: this is probably still the most
common form, where people have fixed offices but
occasionally work at home.
Information technology workers, academics and designers
may work in this way.

203
 Cont’d
‘Hoteling’: this is an arrangement where individuals often
visit the office, yet because they are not always present, they
do not require fixed office space.
Rather, they can reserve an office cubicle (‘hotel room’) in
which they can work.
Professional service staff, such as consultants, may use this
approach.
Home working: probably have no office as such (although
they may ‘hotel’ occasionally) but they may have a small
office or office space at home.

204
 Cont’d
Much of their work may be performed on the internet or
telephone.
Customer service workers or telemarketing personnel could
fall into this category.
Fully mobile: at the extreme level, staff may not even have
home offices.
Instead they spend their time with customers or suppliers, or
travelling between them.
They rely on mobile communications technology. Field sales
staff and customer service staff may fall into this category.

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THANK YOU VERY MUCH!!!!

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