Business Management 621 (Productions and Operations) Bookmarked

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BCOM_BMN_621

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BUSINESS MANAGEMENT: PRODUCTIONS AND OPERATIONS 621
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FACULTY OF BUSINESS, ECONOMICS &
MANAGEMENT SCIENCES

QUALIFICATION TITLE:
Bachelor of Commerce

LEARNER GUIDE

MODULES:Business Management (Production& Operations
Management) 621 (1
st
Semester)

PREPARED ON BEHALF OF
PC TRAINING & BUSINESS COLLEGE (PTY) LTD

AUTHOR: Miss. Sandhya Maharaj
EDITOR: Prof S. Adam

DEPARTMENT HEAD: Prof. Rosh Maharaj

Copyright 2013
PC Training & Business College (Pty) Ltd
Registration Number: 2000/000757/07
All rights reserved; no part of this publication may be reproduced in any
form or by any means, including photocopying machines, without the
written permission of the Institution.

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TABLE OF CONTENT

Topics Page no.
Section A: Preface
1.Welcome 4
2.Title of Modules 5
3.Purpose of Module 5
4.Learning Outcomes 5-6
5.Method of Study 6
6. Lectures and Tutorials 6
7.Notices 6-7
8.Prescribed & Recommended Material 8-10
9.Assessment & Key Concepts in Assignments and
Examinations
11-12
10.Specimen Assignment Cover Sheet 11-12
11.Work Readiness Programme 13
12.Work Integrated Learning 14
Section B: Business Management (Operations and Production
Management) 622 (1
ST
Semester)

TOPIC1 : FOUNDATIONS OF PRODUCTION & OPERATIONS
MANAGEMENT

1.1 Introduction 17
1.2 Process conversion 18-20
1.3 Scientific Decision Making 20-22
1.4 Operation Policy 22-25
1.5 Operation Strategy 25-29
Assessment Questions

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TOPIC2 : DESIGNING & PLANNING THE PRODUCTION &
OPERATIONS MANAGEMENT SYSTEM

2.1 Introduction 30-33
2.2Competitor capabilities 33
2.3 Performance 33
2.4 Definition of terms 34-35
2.5 Relationship between the different value elements 36-37
2.6 Designing the production/operations management system 37
2.7 Interrelation between process design and product/service 38-40
2.8 Environmentally sensitive design 40-41
2.9 volume variety effect on process design 42-43
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2.10 Planning and controlling the operations process 46
2.11 Operations control 46
2.12Sequencing 47-51
2.13 Scheduling 51

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TOPIC 3: PRODUCT PLANNING, LAYOUT AND DESIGN

3.1 Introduction 53
3.2 Idea generation 56
3.3 Feasibility study 56
3.4 Preliminary design 57
3.5 Final design 57
3.6 Product design 58
3.7 Process design 58
3.8 Tools for process design 61
3.9 Layout design 62-64
3.10 Characteristics of layout types 65
3.11 Detail layout design 66
3.12 Capacity and forecast demand management 67
3.13 Characterising demand 69
3.14 Accuracy and validity of assessments 73

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TOPIC 4 : ADDENDUM 621 (A):
ASSIGNMENT QUESTIONS
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SECTION A: PREFACE

1. WELCOME

Welcome to the Faculty of Business, Economics& Management Sciences at PC
Training & Business College. We trust you will find the contents and learning
outcomes of this module both interesting and insightful as you begin your academic
journey and eventually your career in the business world.
This section of the study guide is intended to orientate you to the module before the
commencement of formal lectures.

Please note that this study guide covers the content ofthe Business Management
(Supply Chain and Total Quality Management) Module at NQF.Your lecturers will
provide further guidance and additional study materials covering parts of the syllabi
that may have been omitted from this study guide. Learners who are undertaking the
The following lectures will focus on the common study units described:

2. TITLE OF MODULE, COURSE, CODE, NQF LEVEL & CREDITS

SECTION A: WELCOME & ORIENTATION
Study unit 1: Orientation Programme
Introducing academic staff to the learners by academic head.
Introduction of institution policies.
Lecture 1
Study unit 2: Orientation of Learners to Library and Students
Facilities
Introducing learners to physical structures
Issuing of foundation learner guides and necessary learning material
Lecture 2
Study unit 3: Distribution and Orientation of Supply Chain
Management 622 Learner Guides, Textbooks and Prescribed
Materials
Lecture 3
Study unit 4: Discussion on the Objectives and Outcomes of
Supply Chain Management 622
Lecture 4
Study unit 5: Orientation and guidelines to completing
Assignments
Review and Recap of Study units 1-4
Lecture 5
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2. TITLE OF MODULES, COURSE, CODE, NQF LEVEL, CREDITS &
MODE OF DELIVERY

1st Semester

BCOM

Title Of Module:

Code:
NQF Level:
Credits:

Mode of Delivery:
Business Management (Supply
Chain Management& Quality
Management)622

BCOM_BMN_621

NQF 6
15

Contact

3. PURPOSE OF MODULE

The purpose of these modules is to introduce students to the concepts of operations
management and provides a comprehensive coverage of the methodology and key
strategic drivers in the different processes involved in operating and designing an
Operations Management system.

4. LEARNING OUTCOMES

On completion of this module the student will be able to:
Understand Operations and Production Management and the materials function
Outline the Production and Planning design
Understanding operation Policy and Strategy
Discuss scientific decision making
Explain the layout design types
Understand Demand Management and Forecasting

5. METHOD OF STUDY

The sections that have to be studied are indicated under each topic. These form the
basis for tests, assignments and examination. To be able to do the activities and
assignments for this module, and to achieve the learning outcomes and ultimately to
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be successful in the tests and examination, you will need an in-depth understanding
of the content of these sections in the learning guide and prescribed book. In order
to master the learning material, you must accept responsibility for your own studies.
Learning is not the same as memorising. You are expected to show that you
understand and are able to apply the information. Use will also be made of
lectures, tutorials, case studies and group discussions to present this module.

6. LECTURES AND TUTORIALS

Learners must refer to the notice boards on their respective campuses for details of
the lecture and tutorial time tables. The lecturer assigned to the module will also
inform you of the number of lecture periods and tutorials allocated to a particular
module. Prior preparation is required for each lecture and tutorial. Learners are
encouraged to actively participate in lectures and tutorials in order to ensure success
in tests, assignments and examinations.

7. NOTICES

All information pertaining to this module such as tests dates, lecture and tutorial
time tables, assignments, examinations etc will be displayed on the notice board
located on your campus. Learners must check the notice board on a daily basis.
Should you require any clarity, please consult your lecturer, or programme manager,
or administrator on your respective campus.

8. PRESCRIBED & RECOMMENDED MATERIAL

8.1 Prescribed Material

Greasly, A. (2009) Operations Management. (2
nd
Edition). John Wiley & Sons Ltd:
England

8.2 Recommended Material

Chase, R.B., Aquilano, N.J &Jocobs, F.R. (1998).Production & Operations
Management. Irvin/McGraw-Hill:Boston

Kachru, U. (2012). Production and Operations Management. Excel Books: New
Delhi

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Pycraft, M., Singh, H., Slack, N.,Chambers,S& Johnston, R. (2010). Operations
Management. (2
nd
Edition)Pearson: Cape Town.

Wild, R. (1993).Productions and Operations Management.(4
th
Edition). The
Management College and Brunel University: UK.

8.3 Library Infrastructure
The following services are available to you:
8.3.1 Each campus keeps a limited quantity of the recommended reading titles and a
larger variety of similar titles which you may borrow. Please note that
learners are required to purchase the prescribed materials.
8.3.2 Arrangements have been made with municipal, state and other libraries to
stock our recommended reading and similar titles. You may use these on
their premises or borrow them if available. It is your responsibility to safe
keeps all library books.
8.3.3 PCT&BC has also allocated one library period per week as to assist you with
your formal research under professional supervision.
8.3.4 PCT&BC has dedicated electronic libraries for use by its learners. The
computers laboratories, when not in use for academic purposes, may also
9. ASSESSMENT

Final Assessment for this module will comprise two Continuous Assessment Tests,
an assignment and an examination. Your lecturer will inform you of the dates,
times and the venues for each of these. You may also refer to the notice board on
your campus or the Academic Calendar which is displayed in all lecture rooms.

9.1 Continuous Assessment Tests
There are two compulsory tests for each module (in each Semester).

9.2 Assignment
There is one compulsory assignment for each module in each semester. Your
lecturer will inform you of the Assignment questions at the commencement of this
module.

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9.3 Examination
There is one two hour examination for each module. Make sure that you diarize the
correct date, time and venue. The examinations department will notify you of your
results once all administrative matters are cleared and fees are paid up.
The examination may consist of multiple choice questions, short questions and
essay type questions. This requires you to be thoroughly prepared as all the content
matter of lectures, tutorials, all references to the prescribed text and any other
additional documentation/reference materials is examinable in both your tests and
the examinations.
The examination department will make available to you the details of the
examination (date, time and venue) in due course. You must be seated in the
examination room 15 minutes before the commencement of the examination. If you
arrive late, you will not be allowed any extra time. Your learner registration card
must be in your possession at all times.

9.4 Final Assessment
The final assessment for this module will be weighted as follows:
Continuous Assessment Test 1
Continuous Assessment Test 2
Assignment 1 40%

Examination 60%
Total 100%

9.5 Key Concepts in Assignments and Examinations
In assignment and examination questions you will notice certain key concepts (i.e.
words/verbs) which tell you what is expected of you. For example, you may be
asked in a question to list, describe, illustrate, demonstrate, compare, construct,
relate, criticize, recommend or design particular information / aspects / factors
/situations. To help you to know exactly what these key concepts or verbs mean so
that you will know exactly what is expected of you, we present the following
taxonomy by Bloom, explaining the concepts and stating the level of cognitive
thinking that theses refer to.

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Competence Skills Demonstrated
Knowledge observation and recall of information
knowledge of dates, events, places
knowledge of major ideas
mastery of subject matter
Question
Cues
list, define, tell, describe, identify, show, label, collect, examine, tabulate,
quote, name, who, when, where, etc.
Comprehension understanding information
grasp meaning
translate knowledge into new context
interpret facts, compare, contrast
order, group, infer causes
predict consequences
Question
Cues
summarize, describe, interpret, contrast, predict, associate, distinguish,
estimate, differentiate, discuss, extend
Application use information
use methods, concepts, theories in new situations
solve problems using required skills or knowledge
Questions
Cues
apply, demonstrate, calculate, complete, illustrate, show, solve, examine,
modify, relate, change, classify, experiment, discover
Analysis seeing patterns
organization of parts
recognition of hidden meanings
identification of components
Question
Cues
analyze, separate, order, explain, connect, classify, arrange, divide, compare,
select, explain, infer
Synthesis use old ideas to create new ones
generalize from given facts
relate knowledge from several areas
predict, draw conclusions
Question
Cues
combine, integrate, modify, rearrange, substitute, plan, create, design, invent,
what if?, compose, formulate, prepare, generalize, rewrite
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Evaluation compare and discriminate between ideas
assess value of theories, presentations
make choices based on reasoned argument
verify value of evidence recognize subjectivity
Question
Cues
assess, decide, rank, grade, test, measure, recommend, convince, select, judge,
explain, discriminate, support, conclude, compare, summarize

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10.SPECIMEN ASSIGNMENT COVER SHEET

NAME OF LEARNER:..SURNAME: ..

ICAS NO:....ID NUMBER: ..

QUALIFICATION: . MODULE: ..

SPECIALISATION: . SEMESTER: .

DATE SUBMITTED: ..

ASSESSMENT RECORDS
Content Mark Allocation Examiners Mark Moderators Marks Remarks
1.
2.
3.
4.
5.
6.
7.
TOTAL 100%
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NAME & SURNAME SIGNATURE/DATE

EXAMINER: ---------------------------- ------------------------

MODERATOR: ---------------------------- ------------------------

VERIFIER: ---------------------------- --------------------------
ASSIGNMENT GUIDELINES
The purpose of an assignment is to ensure that the Learner is able to:
Interpret and evaluate text.
Have a sound understanding of key fields via principles and theories, rules, concepts and awareness.
Solve unfamiliar problems using corrective procedures and actions.
Investigate and critically analyse information and report thereof.
Present and communicate information reliably and coherently.
Use methods of enquiry and research in a disciplined field.

ASSESSMENT CRITERIA
When the final Mark is allocated the above criteria must be taken into account
A. Content- Relevance: Has the learner answered the Question
B. Research (A minimum of TEN SOURCES is recommended) Reference books, Internet,
Newspapers
C. Presentation : Introduction, Body, Conclusion, Paragraphs, Neatness, Integration, Grammar /
Spelling, Page Numbering, Diagrams, Tables, Graphs, Bibliography

NB: All Assignments are compulsory as they form part of continuous assessment that counts towards
the final mark.
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11. WORK READINESS PROGRAMME (WRP)

In order to prepare learners for the world of work, a series of interventions over and
above the formal curriculum, are concurrently implemented to prepare learners.

These include:
Soft skills
Employment skills
Life skills
End User Computing (if not included in your curriculum)

The illustration below outlines some of the key concepts for Work Readiness that
will be included in your timetable.

It is in your interest to attend these workshops, complete the Work Readiness Log
Book and prepare for the Working World.

WORK
READINESS
PROGRAMME
SOFT SKILLS
Time Management
Working in Teams
Problem Solving Skills
Attitude & Goal Setting
Etiquettes & Ethics
Communication Skills

LIFE SKILLS
Manage Personal
Finance
Driving Skills
Basic Life Support & First
Aid
Entrepreneurial skills
Counselling skills

EMPLOYMENT SKILLS
CV Writing
Interview Skills
Presentation Skills
Employer / Employee Relationship
End User Computing
Email & E-Commerce
Spread Sheets
Data base
Presentation
Office Word

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12. WORK INTEGRATED LEARNING (WIL)

Work Integrated Learning forms a core component of the curriculum for the
completion of this programme. All modules making of the Diploma in Business
Administration will be assessed in an integrated manner towards the end of the
programme or after completion of all other modules. Prerequisites for placement
with employers will include:
Completion of all tests & assignment
Success in examination
Payment of all arrear fees
Return of library books, etc.
Completion of the Work Readiness Programme.

Learners will be fully inducted on the Work Integrated Learning Module, the
Workbooks & assessment requirements before placement with employers.

The partners in Work Readiness Programme (WRP) include:

Good luck and success in your studies
Prof. Rosh Maharaj
Senior Director: Faculty of Business, Economics& Management Sciences

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SECTION B

FACULTY OF BUSINESS, ECONOMICS&
MANAGEMENT SCIENCES

QUALIFICATION TITLE:
Bachelor of Commerce

LEARNER GUIDE

MODULE: BUSINESS MANAGEMENT (OPERATIONS AND
PRODUCTION MANAGEMENT) 621

TOPIC 1: FOUNDATIONS OF PRODUCTION AND OPERATIONS
MANAGEMENT

TOPIC 2: DESIGNING AND PLANNING THE PRODUCTION AND

TOPIC 3: PRODUCT PLANNING, LAYOUT AND DESIGN

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TABLE OF CONTENT

BCOM
Section B: Business Management (Operations and Production
Management) 622 (1
ST
Semester)

TOPIC1 : FOUNDATIONS OF PRODUCTION & OPERATIONS
MANAGEMENT

1.2 Introduction Lecture 6
1.2 Process conversion
1.3 Scientific Decision Making Lecture 7
1.4 Operation Policy Lecture 8
1.5 Operation Strategy
Lecture 9-
10

Lecture 11
TOPIC2 : DESIGNING & PLANNING THE PRODUCTION &

2.2Competitor capabilities
2.3 Performance
2.4 Definition of terms Lecture 13
2.5 Relationship between the different value elements
Lecture 14 -
16
2.6 Designing the production/operations management system Lecture 17
2.7 Interrelation between process design and product/service
Lecture 18-
19
2.8 Environmentally sensitive design Lecture 20
2.9 Volume variety effect on process design
Lecture 21-
22
2.10 Planning and controlling the operations process Lecture 23
2.11 Operations control Lecture 24
2.12Sequencing
Lecture25-
26
2.13 Scheduling Lecture 27

Lecture 28
TOPIC 3: PRODUCT PLANNING AND DESIGN

3.2 Idea generation
Lecture 30-
32
3.3 Feasibility study
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3.4 Preliminary design
3.5 Final design
3.6 Product design
3.7 Process design
3.8 Tools for process design Lecture 33
3.9 Layout design
Lecture 34-
35
3.10 Characteristics of layout types Lecture 36
3.11 Detail layout design Lecture 37
3.12 Capacity and forecast demand management Lecture 38
3.13 Characterising demand Lecture 39
3.14 Accuracy and validity of assessments

Lecture 40

TOPIC 4 : ADDENDUM 621 (A):
ASSIGNMENT QUESTIONS

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TOPIC 1
_________________________________________________________________

1. FOUNDATIONS OF PRODUCTION AND OPERATIONS
MANAGEMENT

LEARNING OUTCOMES

After studying this topic, you should be able to:

Define Operations Management
To understand and apply the conversion process
Explain the scientific decision making field
Understand operational policy
Define Operational Strategy
Explain the top- down perspective
Discuss the strategic hierarchy influencing decision making
Explain the five Ps of operations strategy formulation

1.1. Introduction
Operations management (OM) maybe defined as the design, operation and
improvement of the production systems that create the firms primary products or
services (Chase, 1998:5). Like marketing and finance, OM is a functional field of
business with clear line management responsibilities. This point is important
because operations management is frequently confused with operations research
and management science (OR/MS) and industrial engineering (IE). The essential
difference is that OM is a field of management, while OR/MS is the application of
quantitative methods to decision making in all fields, and IE is an engineering
discipline. Thus, while operations managers use the decision making tools of
OR/MS and are concerned with many of the same issues as IE, OM distinct
management role distinguishes it from other disciplines.

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NOTE: Production and Operations Management ("POM") is about the
transformation of production and operational inputs into "outputs" that,
when distributed, meet the needs of customers.

Process Conversion

Input

Source: Bolling. D.1996. Productions and Operations Management Study Guide. Illinois:
Carbondale. P4

1.2 PROCESS CONVERSION
The process in the above diagram is often referred to as the "Conversion Process".
There are several different methods of handling the conversion or production
process - Job, Batch, Flow and Group POM incorporates many tasks that are
interdependent, but which can be grouped under five main headings:

1.2.1 Product
Marketers in a business must ensure that a business sells products that meet
customer needs and wants. The role of Production and Operations is to ensure that
the business actually makes the required products in accordance with the plan.
The role of PRODUCT in POM therefore concerns areas such as:

- Performance
- Aesthetics
- Quality
- Reliability
- Quantity
Input
Output
Transformation
Process
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- Production costs
- Delivery dates
1.2.2 Plant
To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk
of the fixed assets of the business. In determining which PLANT to use,
management must consider areas such as:
- Future demand (volume, timing)
- Design and layout of factory, equipment, offices
- Productivity and reliability of equipment
- Need for (and costs of) maintenance
- Health and safety (particularly the operation of equipment)
- Environmental issues (e.g. creation of waste products)
1.2.3 Processes
There are many different ways of producing a product. Management must choose
the best process, or series of processes. They will consider:
- Available capacity
- Available skills
- Type of production
- Layout of plant and equipment
- Safety
- Production costs
- Maintenance requirements
1.2.4 Programmes
The production PROGRAMME concerns the dates and times of the products that
are to be produced and supplied to customers. The decisions made about
programme will be influenced by factors such as:
- Purchasing patterns (e.g. lead time)
- Cash flow
- Need for / availability of storage
- Transportation

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1.2.5 People
Production depends on PEOPLE, whose skills, experience and motivation vary.
Key people-related decisions will consider the following areas:
- Wages and salaries
- Safety and training
- Work conditions
- Leadership and motivation
- Unionisation
- Communication

1.3 SCIENTIFIC DECISION MAKING
Kachru (2012) states that operations decisions are made in the context of the firm
as a whole. Starting at the top with:
The marketplace (the firms customers for its products or services)
shapes the firms corporate strategy. This strategy is based on the
corporate mission, and in essence, it effects how the firm plans to use
all its resources and functions to gain competitive advantage.
The operations strategy specifies how the firm will employ its
production capabilities to support its corporate strategy.
Within the operations function, management decisions can be divided
into three broad areas:

Strategic (long term) decisions
Tactical (intermediate term) decisions
Operation planning and control (short term) decisions

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Summary Model of the Field

Production System

Source: Chase, Aquilano & Jacobs. 1998. Production & Operations Mangement. P9

The strategic issues are usually very broad in nature, addressing such questions as:
How will we make the product?
Where do we locate the facility?
How much capacity do we need?
When should we add more capacity?

THINK POINT:
Does decision making impact on overall Return on investment?

Marketplace
Corporate Strategy
Operations
strategy
Marketing
strategy
Finance
strategy
Operations
Management
Plants Parts Processes People
Planning control systems
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Operations management decisions at the strategic level impact on the companys
long range effectiveness in terms of how it can address its customers needs. Thus,
for the firm to succeed, these decisions must be in alignment with the firms
strategy. Decisions made at the strategic level become the fixed conditions or
operating constraints under which the firm must operate in both the intermediate
and short term. At the next level in the decision making process, tactical planning
primarily addresses how to efficiently schedule material and labor within the
constraints of previously made strategic decisions (Chase, 1998:6).

1.4 OPERATION POLICY
Wild (1993:43) states that the business policy decision making provides purpose
and direction. Three major operations management decisions are influenced by
prior decisions namely:
Selection/choice of system structure
Selection/formulation of operations management objectives
Selection/formulation of strategies for the management of the operating
system

1.4.1 Key operations management decision areas
Key operations management decisions are concerned with planning. Operations
management must determine system structure and objectives and contribute to the
determination of objectives for anything can be manufactured, supplied,
transported or serviced. They are key decisions since:
Wrong decisions in these areas will inevitably affect the performance of the
system and the organisation.
Together they will determine the nature and character of the operating
system. They are in fact operation management policy decisions.
The choice of operating system structure, the objective of the system and the
strategies which will be employed in the management of the system, and the
strategies which will be employed in the management of the system are the
principle ingredients in the formulation of an operations management policy.

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THINK POINT:
Is institutionalising an operations policy of betterment or detriment to an
organisation?

It is evident that operations management contributes to the business policy
decisions by providing information on:
The existing system structure, objectives and strategy, in order that the
characteristics and capabilities of the system might be considered in the
selection/change of goods or service and demand characteristics.
The implications of proposed or alternative goods or service and demand
characteristics;
The implications of proposed or alternative goods or service and demand
characteristics for system structure, objectives and strategy.
This contribution of operations management to business policy decision making
therefore derives from the three operations management policy decision areas. In
fact, therefore, as would have been expected, it is principally the policy decisions
of operations management which both are influenced by and contribute to business
policy decisions (Wild, 1993:45)

1.4.2 Business Focus
A business policy should give a focus to the activities of the organisation. A clear
focus or concentration of the efforts is now recognised as a pre requisite for
business success, since the pursuit of many goals leads to diffusion of effort,
conflicts and confusion of activities. The existence of such a focus will normally be
evident through the following:
a) A concentration of effort, the pursuit of a fairly narrow range of activities.
b) A long time scale, the commitment to the pursuit of certain objectives over a
long time scale.
c) A broad impact, the involvement of most parts, departments and functions in
the business.
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d) A consistent pattern of decision making, series of decisions over a period of
time, each influenced by the same general objectives and aimed at the same
ends (Wild, 1993:47).
The adoption of a particular focus for the activities of an organisation in effect
positions that organisation in the market place against its competitors. The focus of
an organisation is related to the profile of that organisation as perceived by its
customers.

1.4.2.1 Decision areas for Operations Policy
1. Capacity and facilities: Amount and location of resources
2. Scheduling and control: Methods for planning and controlling flows
3. Inventories: Locations and quantities
4. Technology: Types of processes, degree of automation
5. Workforce: Skills payment
6. Organisation: Structure, roles, authority
7. Integration: Links with suppliers
a)
1.4.2.2 Options for Operations Policy
1. High product/service specification
2. High quality
3. High reliability
4. Customisation of products/services
5. Low cost delivery
6. Delivery dependability
7. Short lead time
8. Flexibility of operations
9. High capacity

Another way of describing the operations policy is in terms operating missions.
Five basic types of mission have been identified and are characterised below:
1. Technological frontiersmen:
2. Technological exploiters
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3. Technological service people
4. Customizers
5. Cost minimisers
Kachru (2012) suggests that given alternatives, operations managers will often
need to choose between different ways of translating the business policy and focus
into an operations policy. It will be necessary therefore to have some means of
evaluating alternatives.

1.5 OPERATIONS STRATEGY
1.5.1 Introduction
Operations strategy concerns the pattern of strategic decisions and actions which
set the role, objectives and activities of the operations. Operations are the
resources that create products and services. Operational is the opposite of
strategic, meaning day-to-day and detailed. So, one can examine both the
operational and the process of operations strategy. The contentof operational
strategy is the specific decisions and actions which set the operations role,
objectives and activities. Theprocessof operations strategy is the method that is
used to make the specific content decisions. Nor is there universal agreement on
how an operations strategy should be described. Different authors have slightly
different views and definitions of the subject (Pycraft, Singh, Chambers &
Johnston, 2010:59-61).
Between them, four perspectives emerge.

Operations strategy is a top-down reflection of what the whole group or
business wants to do,
Operations strategy is a bottom-up activity where operations improvements
cumulatively build strategy,
Operations strategy involves translating market requirements into
operations decisions,
Operations strategy involves exploiting the capabilities of operations
resources in chosen markets.
None of these four perspectives alone gives full picture of what operations strategy
is. But together they provide some idea of the pressures which go to form the
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content of operations strategy. The most popular and practised one that will be
discussed is the top down approach.

1.5.1.2 The top-down perspective
A large corporation will need a strategy to position itself in its global, political and
social environment. This will consist of decisions about what types of business the
group wants to be in, what part of the world wants to operate in, how to allocate its
cash between its various businesses, unit within the corporate group will also need
to put together its own business strategy which sets out its individual mission and
objectives (Kachru, 2012). This business strategy guides the business in relation to
its customers, markets and competitors, and also the strategy of the corporate group
of which it is a part. Similarly, within the business, functional strategies need to
consider what part each function should play in contributing to the strategic
objectives of the business. The operations, marketing, product /service
development and other functions will all need to consider how best they should
organize themselves to support the businesss objectives.
The four perspectives on operations strategy

Pycraft.M. (2010).Operations Management.2
nd
Edition. Pearson: Cape Town. P61
So, one perspective on operations strategy is that it should take its place in this
hierarchy of strategies. Its main influence, therefore, will be whatever the
Top-down perspective
What the business wants
operations to do

Operations
resources
perspective
What operations
Resourcescan do
Market requirements
perspective
What the market
position requires
What day-to-day
experience suggest
operations should
Operations
strategy
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business sees as its strategic direction. The important point here is that different
business objectives would probably result in a very different operations strategy.

NOTE:
The role of operations is therefore largely one of implementing or operational
zing the business strategy.
Strategic hierarchy with influences on the strategic decisions

Pycraft.M. (2010).Operations Management.2
nd
Corporate strategy decisions
What businesses to be in?
Allocation of cash to businesses?
How to manage the relationship between different
businesses?
Business strategy decisions
Defining the mission of the business, e.g.
Growth targets
Return on investment
Profitability targets
Cash generation
Setting competitive objectives
Functional strategy decisions
The role of the function
Translating business objectives into functional objectives
Allocation of resources so as to achieve functional
objectives
Performance improvement

Printing services group strategy
Specializes in packaging businesses
Become a ,major player in all its markets

Consumer packaging business strategy
Rapid volume growth
Fast service
Economies of scale

Operation strategy
Capacity expansion
Tolerate some overcapacity in the short term
New location established
29

1.5.2 Implementation of Operations Strategy
Ken Platts of Cambridge University has written about the nature of the operations
strategy formulation process. His generic description of the process is labelled the
five Ps.
1. Purpose. As with any form of project management, the more clarity that
exists around the ultimate goal, the more likely it is that the goal will be
achieved. In this context, a shared understanding of the motivation,
boundaries and context for developing the operations strategy is crucial.
2. Point of entry. Linked with the above point, any analysis, formulation and
implementation process is potentially politically sensitive and the support
that the process has from within the hierarchy of the organistion is central to
implementation success.
3. Process. Any formulation process must be explicit. It is important that the
managers who are engaged in putting together operations strategies actively
think about the process in which they are participating. Indeed, the final
section of the book describes our conceptualisation of the operations strategy
process. The three levels of analysis that we propose (fit, sustainability and
risk) are intended to provide a relatively comprehensive coverage of the
critical issues.
4. Project management. There is a cost associated with any strategy process.
Indeed one of the reasons why operations have traditionally not had explicit
strategies relates to the difficulty of releasing sufficient managerial time. The
basic disciplines of project management such as resource and timing
planning, controls, communication mechanisms, reviews and so on should be
in place.
5. Participation. Intimately linked with the above points. The selection of staff
to participate in the implementation process is also critical. So, for instance,
the use of external consultants can provide additional specialist expertise, the
use of line managers (and indeed staff) can provide real-world experience
and the inclusion of cross- functional managers (and suppliers, etc.) can help
to integrate the finished strategy. (Pycraft, Singh, Chambers & Johnston,
2010:73).

30

NOTE:
A large number of authors, writing about all forms of strategy, have discussed
the importance of effective implementation. This reflects an acceptance that
no matter how sophisticated the intellectual and analytical underpinnings of a
strategy, it remains only a document until it has been implemented.

ASSESMENT QUESTIONS:
1. With the aid of a diagram briefly discuss the conversion process of
production and operations management. Your answer should include
practical examples.

2. Discuss the key operations of Management Decision Areas. Your response
should incorporate the benefits of Operations Policy.

3. Operations strategy is vital in attaining long term success for any
organisation. Explain how the strategic hierarchy influences strategic
decision making.

31

TOPIC 2
_________________________________________________________________

2. DESIGNING & PLANNING THE PRODUCTION &

LEARNING OUTCOMES


To outline the processes of strategic planning for competitive advantage
To illustrate how best to use the environmental conditions for competitive
advantage
To identify competitive capabilities of world class organisations
Conceptualise the design activity
Explain the relationship between process design and product/service design
Identify process design objectives
Raise awareness on environmentally sensitive design
Differentiating between the process types
Define Operations Planning
Describe the principle approaches to the operations control task of loading
Identify the purpose and use of priority rules for the operations control task
of sequencing
Discuss the operations control task of scheduling
Identify techniques for scheduling in manufacturing and service operations

2.1 WORLD CLASS COMPETITORS
2.1.1 Introduction
The planning process of world class competitors have to start with a clear
definition of the business for which the strategy is to be developed as the strategic
business unit (SBU) is the unit around which decisions are based for world class
competitors. This phase of planning requires the participation of executives from
32

the different functions especially marketing, production, finance logistics and
procurement. The committee focuses on products and markets as well as their
competitors whom they will face. Strategic decisions are taken during such
meetings to ensure world class competitive success (Bolling, 1996: 5)

2.1.2. Main Elements in Organisational Strategic Planning
The three main elements are:
Strategic Analysis
Strategic Choice
Strategy implementation

2.1.2.1 Strategic Analysis
The aim of strategic analysis is to identify the key factors that will impact on the
future well-being of the organisation. It helps the organisation to understand the
potential opportunities and constraints that exist to promote or impede competitive
advantage.

The factors that impact on strategic decision making are:
The external environment
The external environment comprises the macro environment, the political
and regulatory environment, the competitive environment as well as the
competitive position of the firm

Resources and Strategic capabilities
This section focuses on core competencies, comparative analysis and
benchmarking, assessment of organisational balance and identification of
key issues

Stockholders expectations
This section focuses on Corporate governance, stakeholder assessment and
management and analysis of the organisational culture.

33

NOTE:
Constructive and effective strategic decision making can only take place when
all the above factors are carefully examined in the interest of the organisation.

2.1.2.2 Strategic Choice
Strategic choice is the heart of effective management. To ensure that one
formulated informed and better decisions, the following evaluation criteria must be
present:
The corporate culture and purpose
The compatibility between corporate culture and business unit strategies
The internal strategic development options
External strategic development options

It is imperative that the evaluation and selection process consider the 3 criteria of:
Suitability
Acceptability
Feasibility

SELF STUDY:
Write a short paragraph on each of the above selection criteria in the context
of your organisation.

2.1.2.3 Strategy Implementation
Strategy implementation is concerned with the translation of strategy into action.
The strategic decision involves changes in the organisational structure, systems of
control as well as resource planning.

34

THINK POINT:
Does strategy implementation require managing of strategic change?How can
the internal and external environment be used for competitive advantage?

2.2 COMPETITIVE CAPABILITIES
Operation strategies are defined as a set of decisions across the value chain that
supports the implementation of competitive advantage. So let us consider the three
types of business strategies for a manufacturer that will give him world class status:
1. Produce a well-defined set of products in a fairly stable market as a low cost
leader.
2. Provide high product variety and customization in a turbulent market that
requires innovative designs to meet customer specific requirements.
3. Provide rapid response for constantly changing products in an unstable,
uncertain and unpredictable market.

SELF STUDY ACTIVITY
Three types of markets are presented above. As a leading world class
manufacturer, explain the measures you will take to ensure that your
organisation uses the market environment to your organisations advantages.

NOTE:
The ability of the organisation to meet these different requirements depends
on different performance criteria. Performance is defined by the cumulative
benefits that will result if the product is purchased and used as intended.

2.3 Performance:
Performance depends on functionality, quality, speed, timelines, and flexibility of
the product offering, productivity and costs (Kachru, 2012:623-627).
35

2.4 DEFINITION OF TERMS:

2.4.1 Functionality
Functionality is the measure of the extent of the product, when properly used is
able to accomplish the intended use. In some instances there are specific measures
for functionality e.g. a light bulbs performance cam be measured in the number of
lumens it gives off as well as the number of hours it works before burning out.

2.4.2 Quality
Quality is defined as the extent to which the foods or service is delivered consistent
with what the customer has been led to expect. Managers need to work to improve
quality by identifying areas that offer the greatest opportunity for developing
exciting and unexpected quality improvements.

The customers quality appraisal occurs in two stages:
At the purchase decision making process
In the post purchase process.

NOTE:
Organisations build and maintain the quality of a firms products and
product delivery system through TOTAL QUALITY MANAGEMENT
(TQM). TQM programmes are considered the major reasons for cost and
waste reduction.

SELF STUDY ACTIVITY:
Define total quality management. Identify specific industries where TQM is a
critical success factor. Illustrate your answer with specific examples.

2.4.3 Timeliness

36

Timeliness is the ability of the firm to get the right product to the target customers
at the most desirable time (Kachru, 2012:620). It is a factor that individuals use to
evaluate the performance of those offering the product. The important point for the
purchaser is that the product must be available when needed.

THINK POINT:
Will a students willingness to, purchase a text book diminish if the book is not
available at the time it is needed? Why?

NOTE:
Delivery reliability must be considered as an import part of timeliness.
Customers place value on the promises made by manufacturers and retailers.
If the promises are not fulfilled, it diminishes the value of the firms product.

2.4.3 Speed
Speed is an important contributor to an organisations ability to enhance the value
of its products. Speed is measured in two dimensions:
How long must a customer wait for the product once it is requested?
How long it takes to design, develop and introduce new products?

When a firm can get you a product quickly, it is said to be fast to product e.g. KFC.
When a firm can design, develop and introduce new products quickly, it is said to
be fast to market.
Lead time is used to measure a firms responsiveness, quickness and reliability.

THINK POINT:
Why is lead time important for firms?
2.4.4 Productivity
37

Productivity relates output to the quantity of resources to inputs used to produce
them. It is concerned with how efficiently output of goods and services are
produced and the value created by the production process. Productivity is
expressed with this simple equation:
Productivity = Output/Input
The current emphasis on productivity is closely connected with a green
environment.

2.4.5 Cost
A customer may value a firms product because it is selling for less.Than a cost
savvy customers price. It is important that a firm knows what it takes to make,
deliver and service a product (Kachru, 2012:623-624). Operation managers
evaluate cost, measured in money terms for its contributions in two important roles:
Enhancing value
Serving as a performance metric for evaluating business processes.

Costs are often a function of the performance levels required for the product
or service.

THINK POINT
Identify all the cost related activities in the manufacture of a lounge suite.

2. 5 Relationship between the different value elements for competitive world
class advantage
The company must be able to measure its performance and customer satisfaction if
it desires to compete in world class markets. The following elements if used wisely
give rise to firms who have an edge in the marketing environment:
Timeliness
Reliability
Flexibility
Quality
38

All the above factors together with costs and productivity improves the companys
ability to enhance its competitiveness and profitability. This allows the organisation
to engage in:
Expansion of its operations
Investing in advanced technology to improve productivity
Hiring more employees
Paying better salaries thereby raising morale and motivation
Contributing more to improving society by paying more taxes (Kachru,
2012:623).

2.6 DESIGNING THE PRODUCTION /OPERATIONS MANAGEMENT
SYSTEM
2.6.1 Introduction
All operations managers are designers. When they purchase or rearrange the
position of a piece of the equipment, or when they change the way of working
within a process, it is a design decision because it affects the physical shape and
nature of their processes (Pycraft, 2012: 83).
Design Activities in Operations Management

PROCESS DESIGN

Design
Supply network design

Layout and
flow

Product/service
design
Job design Process
Technology
Operation
strategy
Planning
and control
Improvement
39

Source: Pycraft. 2010. Operations Management. 2
nd

2.6.2 Design Activity
To design is to conceive the looks, arrangement and a working of a thing before it
is constructed. In that sense it is a conceptual exercise. Yet it is one which must
deliver a solution that will work in practice. Design is also an activity that can be
approached at different levels of detail. One may envisage the general shape of
something before getting down to defining its details. This is certainly true for
process design (Bolling, 1996; 22).

2.7 Process design and product/ service design are interrelated
Small changes in the design of products and services can be profound implications
for the way the operation eventually has to produce them. Similarly, the design of
the process can constrain the freedom of product and services designers to operate
as they would wish. This holds good whether the operation is producing products
and services. However the overlap between the two design activities is generally
greater in operations which produce service, as far as the customer sees it, cannot
be separated from the process to which to which the customer is subjected.
Overlapping product and process design has implications for the organization of
the design activity (Pycraft, 2010: 85).

2.7.1 Process design objectives
The whole point of process design is to make sure that the performance of the
process is appropriate for whatever it is trying to achieve. For example if an
operation competes primarily on its ability to respond quickly to consumer
requests, its processes need to be designed to give fast throughput times. This
would minimize the time between customers requesting a product or service and
them receiving it.

40

NOTE:
Similarly, if an operation competes on a low price, cost-related objectives are
likely to dominate its process design. Some kind if logic should link what
operation as a whole is attempting to achieve and the performance objectives
of its individual process.
Operations performance objectives translate directly to process design as shown in
Table below. But because processes are managed at a very operational level,
process design also needs to consider a more micro and detailed set of objectives.
These are largely concerned with flow through the process.

The impact of strategic performance objectives on process design and performance
Operations performance
objective
Typical process design
objectives
Some benefits of good
process design
Quality Provide appropriate
resources, capable of
achieving the
specification of product or
services Error-free
processing
Product and services
produced on-
specification Less
recycling and wasted
effort within the process
Speed Minimum throughput
time. Output rate
appropriate for demand
Short customer waiting
time in low process
inventory
Dependability Providing dependable
process resources Reliable
process output timing and
volume
On-time deliveries of
products and services
Less disruption, confusion
and reschedule within the
process
Flexibility Provide resource with an
appropriate range of
capabilities
Change easily between
processing state(what,
how much is being
processed)
Ability to process wide
range of products and
services
Low cost/ fast product
and service change
Low cost/ fast volume and
timing changes
Ability to cope with
41

unexpected events(e.g.
supply of a processing
failure)
Cost Appropriate capacity to
meet demand Eliminate
process waste in terms of
: excess capacity
In-process delays
In-process error
Inappropriate process
inputs
Low processing cost
Low resource costs
Low delay/ inventory
costs
(working capital cost)

nd

The way that units leave the process is unlikely to be exactly the same as the way
they arrive at the process. It is common for more micro performance flow
objectives to be used that describe process flow performance. For example:
Throughput rate (or flow rate) is the rate at which units emerge from
process, i.e. the number of units passing through process per unit of time;

Throughput time is the average elapsed time taken for input to move
through the process and become outputs;

The number of units in the process (also called the work process or in-
process inventory) is an average over period of time;

The utilization of process resources is the proportion of available time that
the resources within the process are performing useful work (Bolling, 1996:
24-26).

2.8 ENVIRONMENTALLY SENSITIVE DESIGN
With the issues of environmental protection becoming more important, both
process and product/service design have to account of green issues. Interest has
focused on some fundamental issues.
42

Pycraft (2010:88) suggests the following:
The source of inputs to a product or service. (Will they damage
rainforests? Will they use up scarce minerals? Will they exploit the
poor or use child labour?)
Quantities and sources of energy consumed in the process. (do plastic
bottles use more energy than glass ones? Should waste heat be
recovered and used in fish farming?
The amount and type of waste material can be created in the
manufacturing process. (can this waste be recycled efficiently or must
it be burned and buried in landfill sites? Will the waste have long term
impact on the environment as it decomposes and escapes?)
The life of the product itself. Is argued that if a product has a useful
life,say,20 years, it will consume fewer resources than the one that
only lasts five years , which must be therefore replaced and may prove
to be inefficient in the latter of its part of its use, when latest products
less energy or maintenance to run.
The end-of-life of a product. (will the redundant product be difficult to
dispose of in an environmentally friendly way? Could it be recycled or
used as a source of energy? Could it still be used to benefit the
environment, such as old cars being used to make artificial reefs for
sea life?)

Designers are faced with complex trade-offs between these factors, although it is
not always easy to obtain all the information that is needed to make the best
choices. For example, it is relatively straightforward to design a long-life product,
using strong materials, overdesigned components, and ample corrosion protection
and so on. But production might use more materials and energy and it could create
more waste on disposal. To help make more rational decisions in the design the
product inputs, the life-cycle use of the product and its final disposal, in terms of
total energy used (and, more recently, of all the emitted wastes such as carbon
dioxide, sulphurous and nitrous gases, organic solvents and solid waste).

43

2. 9. PROCESS TYPES & VOLUME VARIETY EFFECT ON PROCESS
DESIGN
Different operations even those in the same operation, may adopt different types of
processes. Many manufacturing plants will have a large area, organized on a mass-
production basis, in which they make high-volume best-selling products. In
another part of the plant they must have an area where they make a wide variety of
products in much smaller volumes. The design of each of these processes is likely
to be different.

NOTE:
These differences go well beyond their differing technologies or the processing
requirements of their services products or services. The differences are
explained largely by the different volume-variety positions of the operations.

2.9.1 Process types
The position of a process on the volume variety continuum shapes its overall
design and the general approach to managing its activities. These general
approaches to designing and managing processes are called process types.
Different terms are sometimes used to identify process type depending on whether
they are predominantly manufacturing or service processes, and there is some
variation in the terms used (Bolling, 1996: 26-27).

2.9.1.2 Project Processes
Project processes are those which deal with discrete, usually highly customized
products. Often the timescale of making the product or service is relatively long, as
is the interval between the completion of each product or service. So low volume
and high variety is characteristics of project processes. The activities involved in
making the product can be ill-defined and uncertain, sometimes changing during
the production process itself. Examples of project process include shipbuilding,
most construction companies, movie production companies, large fabrication
operations as those manufacturing turbo generators, and installing a computer
system.
44

Different process types imply different volume-variety characteristics
High Variety Low High Variety Low High
Low Volume High Low Volume High

Diverse

Process
Tasks

Repeated Manufacturing process types Service process types
nd

The diagram above shows a typical project process map in which indicates the
activities in one small part of the process.

2.9.1.3 Jobbing Processes
Jobbing processing also deal with very high variety and low volumes. Whereas in
projects processes each product has resources devoted more or less exclusively to
it, now in jobbing process each product has to share the operations resources with
many others. The resources of the operation will process a series of products but,
although all the products will require the same kind of attention, each will differ in
its exact needs. Examples of jobbing processes include many precision engineers
such as specialist toolmakers, furniture restorers bespoke tailors, and the printer
who produces tickets for local social events.

Project processes
Job processing
Batch processes
Mass processes
Continuous processes
Professional services
Services shop
Mass service
45

NOTE:
Any process map for a jobbing process could be relatively complex for similar
reasons to project processes. However, jobbing processes usually produce
physically smaller products and although sometimes entailing considerable
skill, such processes often involve fewer unpredictable circumstances.

2.9.1.4 Batch process
Pycraft (2010) states that batch process can often look like jobbing processes, but
batch does not have quite the degree of variety associated with jobbing. As the
name implies, each time batch processes produce a product they produce more than
one. So each part of the operation has periods when it is repeating itself, at least
while the other batch is being processed.

NOTE:
Conversely, if the batches are large, and especially if the products are familiar
to the operation, batch processes can be fairly repetitive. Because of this, the
batch type of processes can be found over a range of volume and variety levels.

2.9.1.5 Mass processes
Mass processes are those which produce goods in high volume and relatively
narrow variety-narrow, that is, in terms of the fundamentals of the product design.
A vehicle assembly plant, for example, might produce several thousand variants of
car if every option of engine size, colour and extra equipment is taken into account.
Yet essentially it is a mass operation because the different variants of its product do
not affect the basic process of production. The activities in the vehicle assembly
plant, like all mass operations, are essentially repetitive and largely predictable.
Examples of mass processes include the vehicle assembly plant, a television
factory, most food processes and DVD production.

46

2.10 PLANNING & CONTROLLING THE PRODUCTIONS/OPERATIONS
PROCESS
2.10.1 Introduction
Planning and control is about matching customer demand to the operation capacity.
In the long term this can be considered as a design issue. This chapter is concerned
with short-term planning and control in order to meet estimated demand. In
organizations with international operations there is a further difficulty in
coordinating planning and control activities across different locations. One way of
dealing with unstable demand is to produce the product or services (or elements of
the product or service) in advance (Greasely, 2009:257).

2.10.1.1. Operation Planning
Operations planning is concerned with taking action, such as ensuring resources
are in place, in anticipation of future events. The nature of the planning task is
determined by how accurately future events can be predicted. The predictability of
demand for goods and services can range from situation of what is essentially
dependent demand (demand can be predicted to high level of unpredictability
(independent demand). Planning policies to meet this continuum are shown in the
table below.
Planning Policies for Demand Types

Demand Type Planning policy Resources required in stock
Dependent
Independent (low variability)
Independent (high variability)

Resource-to-order
Make-to-order
Make-to-stock
None
Transforming
Transforming Transformed

Thus in a dependant, demand type situation it is not necessary to active a planning
system and acquire resources until a delivery date for an order is received. Both
transforming resources (for example, bricks for a house) may be acquired as the
appropriate time for delivery. This is termed as a resource-to-order planning policy.
In an independent demand situation when demand is relatively predictable the
transforming resources such as staff and machinery may be in place on a permanent
basis. However, the transformed resources raw material that is used to construct
47

the product may be acquired on the receipt of a customer order. This is termed a
make-to-order planning policy. Finally demand is unpredictable; the organization
will use a make-to stock planning policy which produces to a forecast of demand
for the product (Greasly, 2009: 263).

Two implications arise from the planning policy used by the organization.
In a make-to-stock system each order must be small compared to totalling
capacity or the risk of making to stock, and not finding a customer for the
order, will be too high.
The other implication is that of a customer delivery time for stock to make in
a make-to-stock system, in a make-to-order system the delivery cycle will
include the purchase, make and delivery stages.

2.11 Operations Control
2.11.1 Loading
Loading involves determining the available capacity for each stage in a process and
allocating a work task to that stage. The calculations of available capacity must
take for account of both planned factors such as machine maintenance and
unplanned factors such as machine breakdowns and worker absenteeism. There are
two principal approaches to loading.
Finite Loading
Finite loading allocates work up to an agreed fixed (finite) upper limit. This maybe
because:
The upper limit of capacity is fixed, for example seats on a aircraft
(although this does not rule out the policy of overbooking to ensure that
all capacity is actually utilized!)
The upper limit can be fixed through a policy such as appointment system
There is a policy of limiting availability to the market (a limited edition of
an expensive watch may enhance demand.)

48

Infinite Loading
Infinite loading does not place a limit on the work load onto a stage. This may be
because:
It is not possible to limit demand. For example emergency hospital treatment
should not be refused.
It is acceptable to have a drop of performance. In manufacturing or services
if demand exceeds capacity a queue will form. This may be acceptable in
some instances, for example shopping outlets, when the customer
understands the cost of always providing instant service is too high (Greasly.
2009:264).

2.12 Sequencing
Sequencing (also known as dispatching) is the sequential assignment of tasks or job
individual processes. In order to attempt to control the progress of a job through a
process determines the order in which they are processed. The difficulty lies in
determining an appropriate priority rule to obtain the best performance. Priority
rules include:
DDS (customer due date) job with nearest customer due date to the current
date
FCFS( first come, first serve) job arriving first at a process (in order of
arrival)
SPT/SOT( shortest process time/ shortest operating time) job with the
shortest process/ operating time among awaiting jobs
LPT (longest process time) job with longest process time among waiting jobs (Bolling,
1996:30)
All rules have different advantages and disadvantages. The SPT rule ensures that
all jobs with the shortest process time progress rapidly, thus the number of jobs
processed should be high. This rule will generally give the best performance.
However, a disadvantage of the SPT rule is that when the demand on the process is
high this may mean a job with a longer process time may mean a job with a longer
process time may have an unacceptably long wait and is always at the end of the
queue.
49

Rules can also use a combination of factors to determine the sequence, such as the
critical ration (CR) which is ratio of the time left until the jobs due date to the
expected elapsed time for the job to be processed through the remaining processes
to its completion. If the ration is less than 1 the job is behind schedule and should
receive priority.
Critical Ratio (CR) = (due date current date)/ days required to complete job
Gantt charts can be employed to show the effect of different job sequencing
strategies on the performance of the process.

2.12.1 PRIORITY RULE
Johnsons Rule
An optimal solution to the job sequencing problem has been found for the special
case in which all jobs flow through two work centres or processes in the same
order.
Johnsons rule (Johnson 1954) minimizes the overall lead time (start of first job to
end of last job) in this case, assuming other costs (such as machine setup casts
moving from one product to another) are not dependant on the job sequence
chosen. Setup times are included in job process time.

Greasly (2009) suggests the following steps should be followed:
1. List the processing time for all jobs for both stages of production.
2. For unscheduled jobs select the job with the shortest time in either stage.
3. If the shortest is for the first processing stage, put the job as early as possible
in the job sequence. If the time on the first stage for one job equals the time
on the second stage for some other job than fill the earliest slot with the job
having this amount of time for the first stage and fill the latest slot with the
job having this amount time for the second stage. If both jobs have the same
time for both stages they can be placed at either end of the sequences.
4. Delete the job selected and repeat the steps until all jobs have been
sequenced.

50

2.13 Scheduling
Scheduling is the allocation of a start and finish time to each other while taking into
account the loading and sequencing policies employed. The scheduling process is
usually driven by the need to manage a number of jobs or customers in the system
and ensure they are completed or receive their order to ensure they are completed
or receive their order by a target due date. In theory expediting should not be
necessary if planning and control activities have been undertaken correctly.
However, in reality due to the complexity of the task and unexpected events (for
example poor quality materials in the process leading to rework or machine
breakdown events) expediting on a day-to-day basis may be needed (Bolling,
1996:27).

2.13.1 Scheduling in Services
What makes scheduling particularly challenging in service system is that services
are generally produced and delivered by people, whose performance may be less
predictable and more variable than manufacturing processes.
Major factors in scheduling in services include:
Varying the size of the workforce to meet variations in demand.
Not only delivered by people but are also consumed by people.
Or require the services on request.
The combination of the difficulty in predicting when demand will occur (when
people will arrive at a bank for example) and the shortest lead time between
requesting the service and requiring its delivery ( a few minutes for bank services
for example) bring challenges to scheduling in services. In practice a trade-off is
made between providing enough capacity (staff) to provide customer satisfaction
(no wait for service) and the cost of providing that capacity when it is not needed.

2.13.2 Scheduling Manufacturing
In manufacturing systems the issue of scheduling is about ensuring that the
capacity available is directed towards activities that will ensure that performance
targets for delivery and lead times are met. The approach to scheduling in
manufacturing is largely dependent on the volume and variety mix of the
51

manufacturing system itself and so scheduling approaches will be considered under
the heading of line, batch and jobbing process types.

2.13.3 Workforce Scheduling
Workforce Scheduling aims to ensure that available staffs are deployed to
maximize the quality of service delivery to the customer. The amount of staff
available will have been determined by long term and more strategic decisions
taken on the amount of staff required, often termed and more strategic decisions
taken on the amount of staff required, often termed manpower planning policies.
For day to-day operations, however, the problem is how to deploy the staff
available to best effect. This may be done with the use of a workforce schedule,
which determines the daily workload for each member of staff (Greasly, 2009:262-
263).
As mentioned earlier, the need to provide a service for immediate consumption by
the customer and the inability to store a service delivery as inventory means that
the capacity provided in the schedule needs to meet customer demands closely.
NOTE:
If sufficient capacity is not provided in the schedule, this can lead to
overworked staff and delays in service provision, both leading to a fall in the
quality of service.

2.13.4 Line Balancing
The issue of line balancing is important in a line flow process in a service or
manufacturing operation that is broken down into a number of stages. Line
balancing involves ensuring that the stages of the process are coordinated and
bottlenecks are avoided. Because of the line-flow configuration the output of the
whole line is determined by the slowest or bottleneck stage. This means a reduction
in process time at a non-bottleneck will have no effect on the overall rate. The
actual design of the line is guided by the tasks that are involved in producing the
product or delivering the service and the required output rate required to meet
demand. This provides information that determines the number of stages and the
output rate of each stage.
52

NOTE:
The output rate is usually expressed in terms of the cycle time, which is the
time taken to produce or deliver one unit of output.

2.13.5 Input/Output Control
Input/output control helps to control the length of queues in front of processes and
thus the process lead time (process time + queue time is the most variable and
usually the largest factor in determining process lead time). Typical values for the
breakdown of process lead times in small batch manufacturing are:
Transportation Time
Transportation
Time
20 %
Setup Time 10%
Process Time 15%
Queue Time 55%

12.13.6 Input/output
Control attempts to control the size of the queues at processes in order that queues
at processes in order that queue time are more consistent and predictable. The
method measures the actual flow of work into a work centre and the actual flow of
work from that work station. The difference is the amount of work-in-progress
(WIP) at that process. By monitoring these figures using input/output, capacity is
adjusted in order to ensure queues do not become too large and average actual lead
time equals planned lead time as closely as possible.

12.13.7 Priority Control
Priority control also takes an overall view of the production process so that if an
assembly is waiting for one delayed part this part will get priority over jobs
arriving earlier at that work station. The priority rule is implemented at each work
station by issuing a dispatch list (schedule) for that work station, listing jobs for
that operation in order of completion date. Thus jobs further over completion date
will get priority. Each time a component leaves a work station it will be added to
the dispatch list for the next work station.
53

ASSESMENT QUESTIONS:

1. Define the term green environment .

2. Identify the implications for organisations going green.

3. Discuss how process design and product services are interrelated.

4. Explain the mass process.

5. Discuss the forms of operations control. Your answer should include
practical examples.

54

TOPIC 3
_________________________________________________________________

3. PRODUCT PLANNING, LAYOUT & DESIGN

LEARNING OUTCOMES

Understand issues involved in the design services
Describe the main steps in the design process
Discuss the challenges experienced during design
Understand process design steps and levels
Describe tools for process design
Describe the basic layout types
Evaluate the appropriateness of a layout type for a manufacturing or service
process type
Know the fundamental concepts of forecasting and demand management
Understand the different concepts behind forecasting
Define forecasting operations
Differentiate between forecast and prediction
Develop a demand model
Applying accuracy and validation

3.1 Introduction
Good design of products and services is an essential element in satisfying customer
needs and therefore ensuring the long term success of the organization. Due to
competitive pressures most organizations will need to generate new products and
services to remain successful. In addition organizations operating in
internationalmarkets will need to consider the differing requirements of customers
in different countries during the design stage. An important issue is the connection
between product and services design and the design of the process that deliver
these products and services to customers (Kachru, 2010:58).

55

3.1.1 THE DESIGN PROCESS
The design process involves the following steps shown in the diagram.
Traditionally the design process is undertaken as a number of sequential steps.

Steps in Product and Service Design

Greasley, A. (2009). Operations Management.(2
nd
Edition). John Wiley & Sons Ltd: England. P164

3.1.2 Challenges in design
In some business sectors (such as information technology) shrinking product
life cycles have meant that new products or improvement to existing
products are required in an ever shorter timescale.
Another problem with the traditional approach to design is the lack of
communication between functional specialists involved in the different
stages of design. This can lead to an attitude of passing the design to the next
department without any consideration of problems that may be encountered
at later design stages.
Research &
Development

7

7

Competitors

7

7

IDEA GENERATION
FEASIBILITY STUDY
PRELIMINARY DESIGN
FINAL DESIGN

56

Alternative approaches to design called, concurrent design, or, simultaneous
engineering, involve contributors to the stages of the design effort providing
their expertise throughout the design process, as a team.
Concurrent design reduces the time wasted when each stage in the design
process waits for the previous stage to finish completely before it can
commence. By facilitating communication between established of a project
team the problem of lack of communication between function can be
reduced. The steps involved in the design process are now outlined in detail.

NOTE:
The major source of new ideas or innovations will be dependent largely on the
organizations strategy.

3.1.2.1 The Research and Development Function (R&D)
For an organization that has a strategy of being first to the market with a new
product or service, ideas will be devised principally from the organizations own
R&D department. For an organization with a similar product their competitors,
innovation maybe primarily in the design and manufacturing stages to attain lower
production costs. Successful product innovation comes from understanding the
customer and identifying their needs. Various data collection methods such as
questionnaires focus and interviews should be used to gain sufficient understanding
of customer requirements.
Research and development can take on the following forms:
Pure research knowledge-orientated research to develop new ideas with no
specified product in mind.
Applied research problem-orientated research to discover new ideas with
specific commercial applications
Development product-orientated research concerned with turning research
ideas into products (Greasly, 2009:201-207).

57

3.1.2.2 Competitors
Competitors can provide a good source of ideas and it is important that the
organization analyses any new products or service as they are introduction to the
market and makes an appropriate response. Reverse engineering is a systematic
approach to dismantling and inspecting a competitors product to look for aspect of
design that could be incorporated into organizations own product (Greasly,
2009:201-207). Benchmarking compares or service against what is considered the
best in that market segment and then makes recommendations on how the products
or service can be improved to meet that standard. Although a reactive strategy,
bench-marketing can useful to organizations that have lost ground to innovative
competitors.

3.2 Idea Generation
Ideas for new products and services can come from a variety of sources, including
The organizations research and development (R&D) department,
Suggestions from customers,
Market research data,
Salespeople,
Competitor actions or
Developments in new technology.

3.3 Feasibility Study
The marketing function will take the ideas created in the idea generation stage and
form a series of alternative concepts on which feasibility study is undertaken. The
concept refers not to the physical product or specification of the service that the
person is buying but the overall set expected benefits that a customer is receiving.
For instance a restaurant meal consists not only of the meal itself but the level of
attention and the general surroundings. Thus the concept is referring to the
combination of physical product and service, referred as the package, which
delivers a set of expected benefits to the customer. Once a concept has been
formulated it must then be submitted to market, economic and technical analysis in
order to assess its feasibility(Greasly, 2009:201-207).
58

3.4 Preliminary Design
Design concepts that pass the feasibility stage enter preliminary design. The
specification of the concept- what the product or service should do to satisfy
customer needs is translated into a technical specification of the components of
the package (the product and service components that satisfy the customer needs
defined in the concept) and the process by which the package is created. The
specification of the components of the package requires a product and a service
stricter which describes the relationship between the components and a bill of
materials (BOM) or list of components quantities derived from the product
structure. The process by which the package is created is considered under process
design.

3.5 Final Design
The final design stage involves refining the preliminary design through the use of a
prototype until a viable final design can be made.
The final design will be assessed in three main areas of functional design, form
design and production design.

3.5.1 Functional design
Functional design is ensuring that the design meets the performance characteristics
that are specified in the product concept. Two aspects of functional design are
reliability and maintainability.

3.5.2 Form Design
Form design refers to the product aesthetics such as look, feel and sound if
applicable. This is particularly important for consumer durables but even industrial
appliances should at least project an image of quality. In services the design of the
supporting facility, such as the room dcor, lighting and music in a restaurant
provide an important element of the service design (Greasly, 2009:201-207).

59

3.6 Production Design
Production design involves ensuring that the design takes into consideration the
ease and cost of manufacture of a product. Good design will take into consideration
the present manufacturing capabilities in terms of material supplies, equipment and
personnel skills available.
The cost of production can be reduced by the following methods:
Simplification reducing the number of assemblies
Standardization enabling the use of components for different products and
modules
Modularization combining standard building blocks in different ways to
create a range of products (Greasly, 2009:201-207).

3.7 PROCESS DESIGN
As stated in the introduction, processes are present in all parts of the organization
and across organizations in the supply chain, so operations management is relevant
in all these areas. Figure below shows processes at level three in a textile-plant
operation. Individual processes (knit, preparation and dye) make up part of the
manufacturing process, which in turn with other areas such as engineering and
warehousing makes up part of the organizational process.

60

Process design at all the Three Levels of Process, Organization and Supply Chain for a
Textile Manufacturing Plant.
Supplier Supply chain

Organization
Engineering Warehousing
Manufacturing

Customer

nd
England. P202

This organizational process is in turn part of a process that spans across the supply
chain. Thus personnel in all the areas shown in the figure are operations managers
in the sense that they are involved:
With the design and management of the processes in their area
Design and measure of the performance of a process.
Understanding of the whole process across the supply chain in terms of
delivering customer satisfaction to the end user,
Ensuring that organizational processes link together across functional areas
and finally measuring individual performance.

3.7.1 Steps in process design
The task of designing processes should be undertaken in a structured manner and
the steps involved can be described as:
1. Identifying and documenting the process activities.
2. Identifying processes for improvement.
3. Evaluating process design alternatives.
DISTRIBUTE
YARN
PRODUCT
DESIGN
KNIT
PREPARATION
DYE DESPATCH
MANUFACTURER
CLOTHES
61

1. Identifying and Documenting the process Activities
The identification of activities in a current process design is a data-collection
exercise using methods such as examination of current documentation,
interviews and observation. For the design of new processes, techniques such
as functional analysis exist. This technique for mapping service processes
starts by defining a high-level description of the service and then
successively breaking down that description into a number of functions.
Processes are then created by arranging the functions in the sequence in
which the activities defined by the functions are performed.

2. Identifying Processes for Improvement
The indication of the relevant business processes for improvement can be
undertaken using a scoring system such as the performance/importance
matrix (Martilla and James, 1977) on which processes can be plotted in
terms of how well the organization performs them and how important they
are. The system consists of a two-dimensional marking guide based on the
impact of the process on the critical success factors determined in a balanced
scorecard review and an assessment of the scope for innovation.

3. Evaluating Process Design Alternatives
There are many ways in which a process can be designed to meet particular
objectives and so it is necessary to generate a range of innovative solutions
for evaluation. Three approaches can be used to generate new ideas are:
Generating new designs through brainstorming.
Modifying existing designs.
Using an established benchmark design .

The process map or service blueprint provides an overall view of the current or
expected process design and this should be used in order that an overall view is
taken when process design options are generated. This helps to ensure that design
solutions proposed in a specific area do not have a detrimental effect in other areas
of the process and thus affect overall process performance.
62

3.8 TOOLS FOR PROCESS DESIGN
A number of tools are available to assist in the task of redesigning processes. These
tools can help in all stages of the design process including documentation of
processes, identifications of processes for redesign and for evaluating design
alternatives.
3.8.1 Process Activity Charts
A process activity chart (also called a process chart) is often used to analyse the
steps of a job or how a set of jobs fit together into the overall flow of a process.
There are five main symbols in a process activity chart, shown in Figure below.

Symbols for a Process Activity Chart

OPERATION
(An activity directly contributing to the product or service)

INSPECTION
(Moving the product or service from one
location to another)

TRANSPORTATION
(Moving the Product/service from one area
to another)
PROCESS ACTIVITY CHART
THIS IS A CHARTING DEVICE THAT IS OFTEN USED TO
ANALYSE THE STEPS OF A JOB OR HOW A SET OF JOBS
FIT TOGETHER INTO THE OVERALL FLOE OF A
PROCESS.
63

DELAY
(Process waiting for a time period)

STORAGE
(Storage of products or services)

nd
Edition). John Wiley & Sons Ltd: England. P208

The process activity chart performs a number of functions including identifying the
task sequence, task relationships, task delays (by including average task times),
task movements and worker assignment to tasks. The charts can be used in
conjunction with a written job description to form a detailed outline of a job. The
charts can also be useful in the first stage of a job improvement scheme. There are,
however, a number of limitations to the charts including:
Processes with decision points and parallel processes cannot be shown on a
process activity chart.
Process mapping cannot be used to incorporate these aspects.
Only average task times are used to calculate the process time and variability
in task times is not taken into account.

3.9 LAYOUT DESIGN
3.9.1 Introduction
Layout design concerns the physical placement of resources such as equipment and
storage facilities. The layout is designed to facilitate the efficient flow of customers
or materials through the manufacturing or service system. Layout design is
important because it can have significant effect on the cost and efficiency of an
operation and can entail substantial investment in time and money. Layout design
is important when designing manufacturing facilities but is also relevant to
64

administrative activities such as the design of office layouts which can facilitate
teamwork amongst groups of people (Greasly, 2009:92-102).

3.9.2 Layout Design
Following the selection of the operations process type it is necessary to select the
layout (arrangement of facilities) of the operation. Figure below shows the
relationship between manufacturing and services process layout types.
As can be seen from Figure below, these are four basic layout types:
Fixed position
Process
Cell
Product layout.

The relationship between Process Type and Layout Type

Layout types: Fixed Position Process Cell Product

nd
England. P93

Manufacturing
process types
Project
Jobbing
Batch
Mass
Continuous
Service process
types
Professional services
Service shops
Mass services
65

3.9.2.1 Fixed-Position Layout
This layout design is used when the product or service cannot be moved and so the
transforming process must take place at the location of product creation or service
delivery. In a fixed-position layout all resources for producing the product, such as
equipment and labour must move to the site of the product or service. The
emphasis when using a fixed-position layout is on the scheduling and coordination
of resources to ensure that they are available in the required amounts at the
required time. Examples of fixed-position layouts include construction sites such as
for buildings or large ships, aircraft manufacture and full service restaurants.

3.9.2.2 Process/Functional Layout
A process layout, also termed a functional layout, is one which resources (such as
equipment and people) which have similar processes or functions are grouped
together. Process layouts are used when there is a large variety in a products or
services being delivered and it may not feasible to dedicate facilities to each
individual product or service. A process layout allows the products or customers to
move to each group of resources in turn, based on their individual
requirements.Examples of process layouts include supermarkets, hospitals
department stores and component manufacturers.

3.9.2.3 Cell Layout
A cell layout attempts to combine the efficiency of a product layout with flexibility
of a process layout. Cells are created from placing together resources which a
service a subset of the total range of products or services. When grouping products
or services together in this way the grouping is termed a family. The process of
grouping products or services to create a family is termed group technology.
Group Technology three aspects:
1. Grouping parts into families. Grouping parts or customers into families has
the objective of reducing the change over time between batches, allowing
smaller batch sizes and thus improving flexibility. Parts family formation is
66

based on the idea of grouping parts or customers together according to
factors such as processing similarity.

Grouping physical facilities into cells to reduce transportation time between
processes assists with overall running of the system. Physical facilities are grouped
into cells with intentions of reducingtimelines(Greasly, 2009:92-102).

3.10 Characteristics of Layout Types
Below summarizes the main characteristics of operations systems using each of the
four main layout types.Although the main layout types can be adapted to meet the
needs of a particular manufacturing or service system, it may be the case that a mix
of layout types is required within a single operation. For example, hospitals are
basically a process layout with people similar needs (for example, intensive care
grouped together. However, the layout also shows characteristics of a fixed
position layout in that staff, medicines and equipment are brought to the location of
the customer.
3.10.1 Characteristics of operations that use layout

Fixed position

Very high product and mix flexibility, but very high unit cost.
Products or customers do not move, the resource are arrange
around them.
There can be a high variety of tasks for staff.
A major issue for operation is the scheduling and coordination
of activities over time.

Process High product and mix flexibility.
Complex flow can lead to high levels of work-in-progress and
high throughput times.
Low utilization of resource.
Flexibility in terms of handling additions to the product/
service mix.
Robust in that nonavailability of resource remain.

Cell Can provide flexibility of process layout and efficiency
67

product layout.
Resource can be matched to product or service demand so
work-in-progress and thus throughput times are much lower
than for process layout.
Variety of tasks offers opportunity for automation and more
variation in duties for personnel.
Can be costly to move and purchase additional plant
necessary to rearrange existing layout.

Product or line Standard product or service in high volumes at low unit cost.
Can specialize equipment to product or service needs.
Allows relatively little variety in product or service.
Line configuration leads to danger of failure of one process
stage effectively stopping output from the whole line.
Work can be repetitive if personnel are always based at one
process stage

3.11 DETAILED LAYOUT DESIGN
Once the layout type has been chosen, its detailed configuration must be designed
to meet of particular implementation. In fixed-position layout there will be a
relatively low number of elements and there are no widely used techniques to help
locate resources. The relative positioning of equipment and departments in process
layout can be analyzed in terms of minimizing transportation costs or distances
using an activity matrix.
NOTE:
When a number of factors need to be taken into account, including qualitative
aspects, relationship charts maybe used.

3.12 CAPACITY & FORECASTING DEMAND MANAGEMENT

3.12.1 Introduction
Forecasts are needed throughout an organization and forecasting is a continuous
process. Decisions are based on forecasts of future conditions as they become
68

operational in future. As time moves on, the impact of the forecasts on actual
performance is measured; original forecasts are updated; and decisions are
modified. Forecasting tools help in the analysis of the environment and provide
inputs on how the organization can use its resources for maximum leverage.
3.12.2 Forecasting in Operations
In business and economics, forecasting has various meanings. There are two
distinct quantities involved in forecasting, a forecast and a prediction.
A prediction is a broader concept. It is an estimate of a future event achieved
through subjective considerations other than just past data; this subjective
consideration need not occur in any predetermined way.
A forecast is an estimate of a future event achieved by systematically combining
and casting forward, in a predetermined way, data about the past(Kachru,
2012:225-234).
Difference between Forecasting and Prediction
No. Forecasting Prediction
1 Forecasting involves the projection
of the past into the future.
Prediction reflects managements
judgment after taking all available
information into account
2 The forecast involves estimating
the level of demand on the basis of
factors that generate the demand.
Prediction involves anticipated
changes in the future that may or may
not have generated that demand.
3 Forecasting is based on a
theoretical model
Prediction may be based on intuition

4 Forecasting is objective Prediction can be biased
5 The concept used in forecasting is
the throw ahead technique.
Requires a pattern in data.
The concept used in prediction is the
saying ahead technique. Can be
used to predict from random data
also.
6 Error analysis is possible No error analysis
7 Forecasting results are replicable. Prediction is based on unique
representation

Kachru, U. (2012). Productions and Operations Management. Excel Books: New Dehli. P228
69

The forecast should be able to help create a model for measuring success and
setting goals from financial and operational viewpoints. The resulting model should
tell if have met our goals with respect to the following four parameters.
1. Goals: what do we need to achieve to become successful?
2. Measures: what parameters will we use to know if we are successful?
3. Targets: what quantitative value will we use to determine success of the
measure?
4. Initiatives: what will we do to meet our goals?

In figure below different types of planning decisions and information with their
forecasting time horizons, or the future times which are derived by forecasting are
depicted.
Short-term is normally considered as covering up to three months into the
future. Short-term forecasts are used for current operations and supplier
schedules, etc.
Medium term is considered to compass forecasts that cover a period between
three months and two years. These types of forecasts are necessary to plan
for capacities of personnel, materials and equipment required satisfying the
annual plans.
Long-term forecasts exceed a time horizon of two years. And, long-term
forecasts relate to the need to create new capacity, locations, changing
product and service mix, and the development of new products and services.
Forecasting Requirements in Operations

TYPE OF REPRESENTATIVE INFORMATION
DECISION NEEDS

Short-runSpecific item Demands
Planning
Decisions

Aggregate demands

Long-run Strategies and facilities
Planning
Decisions

70

0 1 4
Forecasting Horizon in years

Kachru, U. (2012). Productions and Operations Management. Excel Books: New Dehli.P229

3.13 CHARACTERISING DEMAND
At the root of all business decision is the challenge of forecasting and managing
customer demand. Demand is one of the critical drivers for making decisions of
how to deploy resources, for success in utilizing production capacities, success of
the supply chain, inventory planning, etc.Demand management is used to
coordinate and control all sources of demand with the objective that the productive
system is used efficiently and the product is delivered on time.

The factors that impact demand can be divided into two main categories:
a) External factors are those factors that are beyond the control of the
organization but affect the demand of the product or service. For example,
certain economic activities such as changes in interest rates, government
regulations, budgetary allocations, rate of unemployment, etc.
b) Internal factors are those factors that the organization controls. These may be
decisions about the product and services, price, after-sales, advertising and
promotions, publicity, packaging design or incentives, etc.

Past history may also be a determinant of future demand. Historical data may have
different patterns. There are five basic patterns that have been identified:
Horizontal: The demand fluctuates around a constant mean.
Trend: There is a systematic increase or decrease in the mean of
the series over a period of time.
Seasonal: There is a pattern of increase or decrease for the product
or service, depending on the season or time of day, week or month.
Cyclical: There is a gradual increase or decrease in demand with a
change in direction after a period of time. Cycles are normally of
long duration.
Random: There is no discernible pattern in the change in demand.
71

NOTE:
The first four patterns of demand either independently or in different
combinations-horizontal, trend, seasonal and cyclical-define the demand
characteristics for most products and services. However, the last pattern, i.e.,
random variation is due to fortuitous causes and cannot be predicted using an
underlying time pattern for demand.
3.13.1 Demand Management
Internal factors are controlled by management through demand management.
Demand management describes the process of influencing the volume or
consumption of the product or service through management decision. Demand
management helps organizations to use their resources and production capacity
more effectively. As the demand for a particular product is high during the peak
time, the costs are also high. Many organizations avoid this situation by offering
price incentives or use promotional strategies so that customers make purchases
before or after traditional periods of peak demand.
NOTE:
The idea is to shift demand without losing the custom.

3.13.1.1 Developing a Model
The uncertainty of the future and unpredictability of the course of environmental
forces that determine events impacts on all organizations. This lack of precision
whether we realize it exists or not, needs to be resolved. In order to reduce the
uncertainty, the organization has to realize that these environmental forces exist
and also find means to understand how these forces will impact on the business.
Analysis of the environmental forces has three goals:
Forecasting
Modelling
Characterization
The logical order in which these goals are to be tackled depends on the objective
of the organization. Often, modelling and forecasting proceed in an iterative way;
72

however, there is no logical order in the broadest sense. The process of
forecasting and decision-making is shown below.

Forecasting and Decision Making

Kachru, U. (2012). Productions and Operations Management. Excel Books: New
Dehli.P231

The model establishes a link between planning, controlling systems and the
forecasts necessary for planning, scheduling, and controlling the system for an
efficient output. Models reflect the realization of the uncertainty in forecasting and
reflect the level of sophistication and accuracy required for effective decision-
making.
NOTE:
Forecasting is the start of any planning activity. The main purpose of
forecasting is to estimate the occurrence, timing or magnitude of future events.

Therefore, in building a model, it is essential that the model provides satisfaction
on these critical questions:

The
Decision
Maker
Forecasts
3
Interaction
5
Resources
2
Decisions
4
Action
6
Performance
1
73

1. Is the model adequate?
2. Is the model stable?
This also means that the model should reflect the objectives of the Operations
Management. For example, the type of model that will be adequate for short-term
forecasts may not be adequate for long-term forecasts. In order that the model
forecasts are stable, it will have to reflect and compensate for the actual
performance. This is done by developing a model so that the forecast is an iterative
process, which means the forecasts are updated so as to form a feedback loop to
correct the original forecast.

Modelling and Forecasting

Kachru, U. (2012). Productions and Operations Management. Excel Books: New Dehli.P232

-
-
No

Modelling Building
----------------------------------------------------------------------------------------------------------------------------------
Forecasting

-

No

Model specification Past Data &
Managerial
Judgements
Model Estimation
Is the model
adequate?
Forecast Generation
New Observations
Forecast Operating
Is the
model
Stable
74

Figure above highlights the systematic development and the relationship between
the modelling and forecasting and the highlights the relationship between the
model and the forecast.
So far, we have only looked at the present day environment and seen the
complexity of factors that can have an influence on the growth and profitability of
an organization. Over the period, the importance of different components of
environmental forces can change. As the pace of change is increasing, an
organization will need to look to the future with a greater amount of forethought.

3.14 Accuracy and Validation Assessments
All models need to be validated and verified. Validation is concerned with the
question Are we building the system right?
Since validation is used for the purpose of establishing a modes credibility, it is
important that the method used for the validation is, itself, credible. Features of
time series, which might be revealed by examining its graph, with the forecasting
values, and the residuals behavior, condition forecasting modelling.
An effective approach to modelling forecasting validation is to hold out a specific
number of data points for estimation validation ( i.e., estimation period) , and a
specific number of data points for forecasting accuracy (i.e., validation period). The
data, which are not held out, are used to estimate the parameters of the model, the
model is the tested on data in the validation period, if the results are satisfactory,
then the forecasts are generated beyond the end of the estimation and validation
periods.
NOTE:
A good model should have small error measures in both the estimation and
validation periods and its validation period statistics should be similar to its
own estimation period statistics.

75

ASSESMENT QUESTIONS

1. There are numerous challenges faced during the design process. Discuss
interventions to eradicate this problem.

2. Discuss the advantages of fixed position layout design.

3. Explain characteristics of operations that use layout type.

4. Tabulate the difference between forecasting and prediction.

5. Develop a model for demand management and forecasting.

76

TOPIC 4
_________________________________________________________________

11. ADDENDUM 621 (A): ASSIGNMENT QUESTION
_________________________________________________________________

1. Organisations may be viewed as systems. The systems view is important to
operations managers seeing that the production/operation is a part of the firm or
organisation and within the productions/operation there are sub systems.
Explain. (30 Marks)

2. Capacity will be modified in response to demand. Response will be modified in
response to capacity. Which of the above statement is correct, your answer
should include an explanation. (25 Marks)

3. What are the advantages of product layout and process layout? Your answer
should include when to use product layout versus process layout (25 Marks)

4. Explain why quality should be better by following the TQM concept than ina
system that depends on final inspection. (20 Marks)

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