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Study guide compiled by:
Dr CC Wessels
Page layout by Marietjie Verster, Graphics Services
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Printed by The Platinum Press (018) 294 8879 / (016) 981 9401
Copyright 2006 edition. Date of revision 2007
North-West University, Potchefstroom Campus
All rights reserved. No part of this book, may be reproduced in any form or by any means without written permission from the publisher. It includes the making of photocopies of the whole or parts of this book.
Dr. Barbara Withers is an Associate Professor of Operations Management at the University of San Diego. Dr. Withers has over 15 years of private and public sector work experience, including 8 years in project management at the Prudhoe Bay oilfield in Alaska and 3 years as the Regional Economist for the Municipality of Anchorage. Her research has appeared in publications such as European Management Journal, International Journal of Manufacturing Technology Management, International Journal of Production Research, IEEE Transactions on Engineering Management, International Journal of Production Economics, International Journal of Quality and Reliability Management, Journal of Business Logistics, Industrial Marketing Management, and the European Journal of Marketing. Dr. Withers has presented her research at numerous national and international conferences. In additional, Dr. Withers has taught USD courses in Italy and Brazil. She is the recipient of the national SHINGO PRIZE for Excellence in Manufacturing Research and has received a USD University Professorship Award.
Dr. Withers received both her Ph.D. and M.B.A. in Management Science from the University of Colorado in Boulder, Colorado. Her bachelors degree, a B.S. in Experimental Psychology, was earned at Eckerd College in St. Petersburg, Florida. She grew up in New Orleans, Louisiana.
Hobbies & Interests
Archaeology is Dr. Withers' avocation. She has participated in summer-long digs in Sardinia, Italy and Tel Dor, Israel. She is also an active participate in the local chapter of the Explorers Club and with an educational branch of the San Diego Zoo.
Presentation format xii
AIM OF THE MODULE xii
PRESCRIBED TEXTBOOK xiii
ADDITIONAL LITERATURE / SOURCES xiii
STUDY PLAN xiv
Suggested study strategies xv
STUDY ICONS xviii
Study schedule xxii
Action Verbs xxiii
1.Nature and Context of Operations Management 1
1.1Why Study Operations Management? 5
1.1.2Production Management Process 6
1.1.3Operations strategy 9
1.1.4Management of Services 17
1.1.5Historical Developments of Operations Management 18
1.2Operations Strategy and Competitiveness 25
1.2.2Operations Strategy Issues 27
1.2.4Strategic and tactical Decisions of Production operations Management 29
1.2.5Developing a Production Operations Management Strategy 33
1.2.6Productions Operations Management Strategy Considerations 34
1.2.7A Framework for Operations Strategy in Manufacturing 36
1.2.8Operations Strategy in Services 37
1.2.9International issues in Production Operation Management 37
1.2.10Attacking through operations 39
1.2.11Productivity Measurements 39
Solutions: Study Unit 1 43
2.Process analysis, Product Design and Process Selection 54
2.1PROCESS ANALYSIS 58
2.1.2Process Analysis 59
2.1.3Process Flowcharting 59
2.1.4Types of processes 60
2.1.5Measuring Process Performance 61
2.1.6Process throughput time reduction 61
2.2Product Design and Process Selection – Manufacturing 63
2.2.1Product Selection 65
2.2.2Identifying New Product Opportunities 65
2.2.3Product Life Cycles 66
2.2.4Life cycle and strategy 69
2.2.5Product Design 71
2.2.6Product Development 74
2.2.7Linking Design and Manufacturing 78
2.2.8Concurrent Engineering 79
2.2.9Preparing for Production 80
2.2.10Defining the Product 83
2.2.11Process Selection 85
2.3Product Design and Process Selection – Services 87
2.3.1The Nature of Services 88
2.3.2The Design of Service Organisations 89
2.3.3Service Blueprinting 90
2.3.4Service Fail Safing Using Poka-Yokes 91
2.3.5Three Contrasting Service Designs 92
2.3.6Service Guarantee Design Drivers 94
2.3.7Waiting Line Management 95
Solutions: Study Unit 2 96
3.Identifying Customer Needs 107
3.1Total Quality Management 112
3.1.2Defining Quality 114
3.1.3Total Quality Management 116
3.1.5Quality through Just-in-Time 118
3.1.6Tools for TQM 119
3.1.7Quality Specifications & Quality Gurus 127
3.1.8Costs of Quality 130
3.1.9Continuous Improvement 131
3.1.10International Quality Standards & Awards 132
3.1.11Total Quality Management in Services 135
3.2Statistical Quality Control 140
3.2.2The Importance of Statistical Quality Control 141
3.2.3Acceptance Sampling 142
3.2.4Process Control Procedures 143
3.2.5Variation around Us – Genichi Taguchi 145
3.3.2Forecasting Time Horizons 150
3.3.3Product Life-Cycle 151
3.3.4Type of Forecasts 151
3.3.5Components of Demand 152
3.3.6Qualitative Technique in Forecasting 153
3.3.7Quantitative Methods 154
Solutions Study Unit 3 166
4.Strategic Decisions to meet customer needs 183
4.1Strategic Capacity management 187
4.1.2Nature of Capacity Relative to Operations Management 189
4.1.3Important Capacity Planning Concepts 189
4.1.4Capacity Planning 191
4.1.5Decision Trees 193
4.1.6Planning Service Capacity 194
4.2Facility Location 199
4.2.2Issues in Facility Location 201
4.2.3The Objective of Location Strategy 201
4.2.4Plant Location Methods 202
4.2.5Locating Service Facilities 205
4.3Facility Layout 209
4.3.2Types of Layout 211
4.3.3Process Orientated Layout 212
4.3.4Product Orientated Layout 213
4.3.5Group Technology (Cellular Layout) 215
4.3.6Fixed-Position Layout 216
4.3.7Retail Service Layout 217
4.4Job Design, Work Measurement and Learning Curves 222
4.4.1Human Resource Strategy 223
4.4.2Objective of Human Resource Strategy 223
4.4.3Behavioural Considerations in Job Design 224
4.4.4Work Methods 225
4.4.5Financial Incentive Plans 226
Solutions: Study Unit 4 232
5.Tactical Decisions in Meeting Customer Needs 255
5.1Operations Scheduling 258
5.1.2Scheduling and Control in a Job-shop 260
5.1.3Priority Rules and Techniques 261
5.1.4Shop-Floor Control 262
5.1.5Personnel Scheduling in Services 263
5.2Just-in-time Production Systems 267
5.2.2The Japanese & American Approach to JIT 269
5.2.3Kanban Production System 271
5.2.4JIT Implementation Requirements 273
5.2.5JIT in Services 274
5.3Synchronous Manufacturing 279
5.3.2The Goal of the Firm & Performance Measurements 281
5.3.3Capacity and Bottleneck Issues 282
5.3.4Comparing Synchronous Manufacturing with JIT and MRP 283
5.3.5Relationship with Other Functional Areas 284
Solutions: Study Unit 5 288
6.Value Chain Management 305
6.1Aggregate Planning 309
6.1.2Aggregate Production Planning 310
6.1.3Aggregate Planning Techniques 312
6.2Inventory Systems management 317
6.2.2Purpose of Inventory 318
6.2.3Inventory Costs 319
6.2.4Inventory Systems 320
6.2.5ABC Inventory Planning 321
6.3Material Requirements Planning 326
6.3.2Dependent Inventory Model Requirements 327
6.3.3Master Production Schedule 328
6.3.4MRP Systems 329
6.3.5Manufacturing Resources Planning (MRP II) 331
6.3.6Embedding JIT into MRP 332
6.4Supply Chain Strategy 336
6.4.2Supply Chain Strategy 337
6.4.3Measuring Supply Chain Performance 338
6.4.4Supply Chain Design Strategy 338
6.4.6Value Density 341
6.4.7Global Sourcing 341
6.4.8Mass Customisation 342
Solutions: Study Unit 6 345
7.Improving the System 364
7.1Project Management 367
7.1.2Project Planning 368
7.1.3Project Control 370
7.1.4Structuring Projects 371
7.1.5Network-planning schedules 371
7.1.6Time-cost Models 373
7.1.7Cautions on Critical Path Analysis 374
7.2Operations consulting and reengineering 378
7.2.2The nature of the management consulting industry 379
7.2.3The operations consulting process and tools 380
7.2.4The Nature of Business Process Reengineering 381
7.2.5The Principles of Reengineering 382
7.2.6Guidelines for Implementation 383
Solutions: Study Unit 7 387
QUESTION 1 400
Question 2 Read the following case study and answer the question.  400
Welcome to the MBA Phase 3 Module of Management of Operations and Services. This Module is designed to give students a managerial perspective of Operations and Service Management. In the past the production function was operated as an entity and it was separated from the other functions within the organisation. With the tremendous changes in the environment, it became more and more important that the production function should be managed as part of the whole system. It is also extremely important that you should know what production and service operations entail, and how they fit in with the rest of the organisation. Most of you will become or already are managers in organisations or small businesses. It is important that you should study the different aspects of Production/Operations Management and know how to use this information to create an environment that would produce products or services that would satisfy the client at the end of the day.
This Module focuses on helping you to obtain a basic literacy of Operations and Service Management. The aim of this Module is to create a basic understanding of the values and issues of Operations and Service systems and to familiarise you with the theoretical background to the management of these services. It is not designed to make you a fully fledged Production or Operations Manager, although the theory and practice discussed in this Module could be of tremendous help to any person interested in the field. The Module is also designed to aid a Production Manager in managing operations more efficiently. Emphasis is placed on the management aspects of the Module and not so much on the mathematical and statistical operations that are required to maximise certain production functions. The aim of the Module is to make sure that you will be able to make a difference in your organisation by applying the techniques and practices of world renowned companies in the service and operations field. I trust that you will find this Module interesting and informative, and that it will also serve to satisfy your personal development goals.
Assignments are printed at the end of this study guide..
The presentation format of the Module is designed to accommodate effective distance learning and to optimise your learning experience. The presentation format offers you different media options for participation, that range from a conventional hard copy study guide to electronic media information sources. Whatever options you choose, the facilities to your disposal will provide you with all the information and support your need to become a successful student. The study guide will be your learning foundation. It will guide you through the learning process, give you the necessary background information, provide you with a framework to apply the theoretical principals of your organisation and highlight important information. It will also be a tool to help you integrate the use of whatever media option you choose.
A Module is not only designed for you to give you a theoretical understanding of production and service systems in an organisation, but also give you the knowledge and tools to apply the knowledge in your work environment. You will be familiarised with a practical application of theoretical knowledge by means of case studies and real business problems. Your responsibility as a manager with relation to operations and services will be highlighted in the study guide.
Mr Henry Lotz
Tel: (018 299 1635)
E – Mail: email@example.com
AIM OF THE MODULE
Production/Operations management has to do with the effective management of converting inputs into outputs within an organisation. Knowledge about this field will enable the student to make knowledgeable decisions relating to the design and operation of manufacturing and service processes.
This module’s aim is to expose the students to a managerial view of such aspects as productivity, profitability, quality and scheduling. The module will also strive to give the student direction in managing these aspects. The module's aim is to provide theoretical and practical cases for both the manufacturing and service environments. The focus on products and services will enable the student to find this subject useful, regardless of the organisation the student finds him or herself in.
After you have completed the module, you should be able to:
CHASE,R.B., AQUILANO, N.J. & JACOBS, F.R.. 2004. Production and Operations Management for Competitive Advantage. 10th edition. Boston: Irwin/McGraw-Hill.
ADDITIONAL LITERATURE / SOURCES
Dilworth, J.B. 2000. Operations Management: Providing value in goods and services. 3ed edition. New York: Dryden Press
Hanna, M.D. & Newman, W.R. 2001. Integrated Operations Management: Adding value for customers. New Jersey: Prentice Hall.
Goldratt, E. M. 1982. The Goal. New York: North River Press.
Goldratt, E. M. 1990. The Haystack Syndrome. New York: North River Press.
Goldratt, E. M. & FOX, R.E. 1986. The Race. New York: North River Press.
Goldratt, E. M. 1990. Theory of Constraints. New York: North River Press.
Knod, E.M. & Schonberger, R.J. 2001. Operations Management: Meeting customers’ demands. New York: McGraw-Hill/Irwin
Martinich, J.S. 1997. Production and Operations Managemen: An applied approach. New York: John Wiley & Sons, Inc.
SCHONBERGER, R.J. & KNOD, E.M. 1994. Operations management: Continuous improvement. Homewood: McGraw-Hill/Irwin.
Slack, N. Chambers, S & Johnston, R. 2001. Operations Management. 3d edition. Essex: Prentice Hall.
Heizer,J & Render B. 2004. Operations Management. New Jersey Prentice Hall
1. Production and operational management strategy
2. Product Design & Process Selection – Manufacturing and Services
3. Total Quality Management
4. Forecasting techniques
5. Strategic capacity planning / Facility Location / Facility Layout
6. Job design and work measurement
7. Operations scheduling, Just-in-Time production and Theory of Constraints
8. Aggregate planning, Inventory Management and Material Requirement Planning
9. Project management and business process reengineering
Suggested study strategies
The main aim of this Module is to enable you to use the theoretical knowledge that you obtained in the Module in a practical sense. This means that the knowledge that will be applied to your organisation would be beneficial to either the bottom or top line of the company as these aspects are implemented. The Study Unit will go through a specific process in order to impart the knowledge to you the student. First of all the contents will be discussed in the study guide and important aspects will be highlighted in the chapter. Through this exercise you should keep the objectives that was set at the beginning of the Module in mind to make sure that the optimum use is made of this study guide unit. After each section you will be asked to evaluate yourself by means of evaluation exercises.
There are different levels of evaluation that you will find in each Study Unit to make sure that you understand the concepts and know how to apply it in a practical sense.
One level of evaluation is discussion and review questions. It is required that the students think through the question and give an appropriate answer. The answer might vary from student to student as organisations differ. These questions can be found throughout each respective Study Unit, or at the end of each chapter in the prescribed textbook Chase, Aquilano & Jacobs.
Another level of evaluation is the practical application of the theoretical knowledge that was imparted in the Module. This is also the most important of the evaluation techniques. This is incidentally the final objective of the Module. The correct application of theoretical knowledge in practical, real life scenarios. A case study will be given either within the Study Unit, or at the end of it. The application of theoretical knowledge, common sense and ingenuity will be the measures that will be required in order to answer these case studies successfully. As no single correct answer exists, you should focus on an in depth analysis of each case study. Your recommendations for future action should then be based on the correct analysis of the case study, and the knowledge that you have obtained from the Module. The analysis of the case study is critical, as the theoretical background will provide the student with enough information to make a successful evaluation. Your evaluation at the end of the Module and in real life will centre around the evaluation of real world problems.
The study guide will facilitate the learning process, but the textbook will be your main source of information. Where applicable, I will enrich the learning process with additional information.
The study guide that accompanies the textbook will indicate the focus and importance of the various aspects. Let the Study Guide guide you through the learning process. Study the Study Units with the student objectives as your guidelines. Focus on the real world cases and problems. It is recommended that you do some of the assignments at an organisation in your city or town, that utilises the aspects that I mentioned in the Module. Take note that in marking the assignments and exam, the focus is on the evaluation on your line of argument and your insight into the specific topic.
It is recommended that you refer to the glossary for Management of Operations and Services that is given at the end of each Study Unit on a regular basis. You can also discuss the terms with other MBA students or colleagues in the workplace.
It is recommended that you make an appointment with a Production or Operations Manager at work and discuss the various aspects that is important in his work. It would greatly enrich your knowledge of the topic.
Suggested additional readings
If you are not already doing so, I would recommend that you subscribe to and read some informative magazines on the subject. Magazines such as Productivity, and business magazines such as the Harvard Business Review, and Sloan Management Review, will help you greatly in obtaining the relevant information to the newest developments in the field.
LIBRARY WEB SITE. The following web site could be used to find articles related to OPERATIONS MANAGEMENT.
Recommended international databases are Business Source Premier and Emerald Library.
Identify keywords to be searcehd on the chosen database
Phrase searching can be done eg. operational management
Keywords can be combined with AND (all of the terms in the article) eg.. operational management AND engineering
Synonyms are combined with OR (any of the terms) eg. personnel OR staff OR employee* OR worker*
Truncation symbol is usually * (asterisk), unless otherwise specified in database help screen
Field searching can be done eg. AB Abstract or Author – Supplied Abstract
These action verbs are included, in order to provide clarity of what is expected of you as a student. Please study them and make sure that you understand the meaning of each.
Identify parts or elements of a concept and describe them one by one.
EXAMPLE: Analyse a typical lesson structure and describe each aspect in detail.
Point out the similarities (things that are the same) and the differences between objects, ideas or points of view. The word “contrast” can also be used. When you compare two or more objects, you should do so systematically - completing one aspect at a time. It is always better to do this in your own words.
EXAMPLE: Compare philosophical and empirical knowledge. Compare the views of Piaget and Ausubel about the nature of learning.
This means that you should indicate whether you agree or disagree about a certain statement or view. You should then describe what you agree/disagree about and give reasons for your view.
EXAMPLE: Write critical comments about the progressive liberal view of education.
Give the precise meaning of something, very often definitions have to be learnt word for word.
EXAMPLE: Define the concept curriculum.
Include and discuss examples. You have to prove that you understand how a process works or how a concept is applied in real-life situations.
EXAMPLE: Give a written demonstration of the application of the procedural moments of a lesson.
Say exactly what something is like; give an account of the characteristics or nature of something; explain how something works. No opinion or argument is needed.
EXAMPLE: Describe the characteristics of philosophical thought.
Comment on something in your own words. Often requires debating two viewpoints or two different possibilities.
EXAMPLE: Discuss the differences between objectives and goals.
Point out the differences between objects, different ideas, or points of view. Usually requires you to use your own words.
EXAMPLE: Distinguish between a positivistic and a hermeneutic view of science.
An extensive description of a topic is required.
EXAMPLE: Write an essay about the value of Psychological Education for the teacher.
A practical illustration of a concept is required.
EXAMPLE: See our examples after every definition of a taskword.
Clarify or give reasons for something, usually in your own words. You must prove that you understand the content. It may be useful to use examples or illustrations.
EXAMPLE: Briefly explain the following research methods:
(a) The experiment
(b) Correlational studies
Give the essential characteristics or aspects of a phenomenon e.g. a good research design.
EXAMPLE: Identify the characteristics in a text about the research process which is indicative a good research design.
Draw a diagram or sketch that represent a phenomenon or idea.
EXAMPLE: Explain the life cycle of a butterfly. Write a short essay and illustrate this model.
Simply provide a list of names, facts or items asked for. A particular category or order may be specified.
EXAMPLE: List ten psycho-social problems associated with alcohol abuse in high school pupils.
You should give an explanation of the reasons for your statements or views. You should try to convince the reader of your view.
EXAMPLE: Write an essay about your own philosophical education. Motivate your views
Briefly describe without giving details.
EXAMPLE: Name three research methods in Nursing
Name the two major schools of thought (paradigms) on education.
Emphasize the major features, structures or general principles of a topic, omitting minor details. Slightly more detail than in the case of naming, listing or stating of information is required.
EXAMPLE: Outline the major features of a lesson structure.
Supply the required information without discussing it.
EXAMPLE: State three functions of a computer.
Give a structured overview of the key (most important) aspects of a topic; must always be done in your own words.
EXAMPLE: Give a summary of the core characteristics of the conservative-normative oriented school of thought on education.
To set forth systematically.