Managing Production and Service Operations

• Organizations are designed mainly to produce products or services. If these organizations must survive and grow, the operations function must be undertaken in the most economical manner possible.
• As most companies are expected to make profits, any activity, including those for operations must be managed to contribute to the accomplishment of such objectives.
• Operation is an activity that needs to be managed by competent persons. Aldag and Stearns accurately defined operations management as “the process of planning, organizing, and controlling operations to reach objectives efficiently and effectively.” As terms “planning”, “organizing”, and “controlling “have already been discussed in the previous chapters, elaborations on the terms “efficiency” and effectiveness” will be made.
• Efficiency is related to “the cost of doing something, or the resource utilization involved.” When a person performs a job at lesser cost than when another person performs the same job, he is more efficient than the other person.
• Effectiveness refers to goal accomplishment. When one is able to reach his objectives, say produced 10,000 units in one month, he is said to be effective.
• Operations management must be performed in coordination with the other functions like those for marketing and finance. Although the specific activities of the operations divisions of firms slightly differ from one another, the basic function remain the same, i.e., to produce products or services.
• The engineer manager is expected to produce some output at whatever management level he is. If he is assigned as the manufacturing engineer, his function is “to determine and define the equipment, tools, and processes required to convert the design of the desired product into reality in an efficient manner.”
• The engineer in charge of operations in a construction firm is responsible for the actual construction of whatever bridge or road his company has agreed to put up. He is required to do it using the least-expensive and the easiest methods.
• The engineer, as operations managers, must find ways to contribute to the production of quality goods or services and the reduction of costs in his department. The typical operations manager is one with several years of experience in the operations division and possesses an academic background in engineering.
• Manufacturing processes are those that refer to the making of product by hand or with machinery.
• Manufacturing Processes

  (1) Job Shop

  (2) Batch Flow

  (3) Worker - Paced Assembly Line

  (4) Machine - Paced Assembly Line

  (5) Continuous Flow

  (6) Batch/Continuous Flow Hybrid
• A job shop is one whose production is “based on sales orders for a variety of small lots.” Job shops are very useful components of the entire production effort, since they manufacture productions in small lots that are needed by, but cannot be produced emotionally by many companies. Depending upon the customer’s needs, a job shop may produce a lot consisting of 20 to 200 or more similar parts.
• Job shops produce custom products, in general. Products may be manufactured within a short notice. The equipment used are of the general purpose type.
• The type of layout used by job shops is the process layout, where similar machines are grouped together. The typical size of operation is generally small. Job shops are labor intensive and machines are frequently idle.
• The batch flow process is where lots of generally own designed products are

  manufactures.

  It is further characterized by the following:

  1. There is flexibility to produce either low or high volumes.
  2. Not all procedures are performed on all products.
  3. The types of equipment used are mostly for general purpose.
  4. The process layout is used.
  5. The operation is labor intensive, although there is less machine idleness.
  6. The size of operation is generally medium-sized.

  Examples of factories using the large batch flow are wineries, scrap-metal

  reduction plants, and road-repair contractors.
• An assembly line refers to a production layout arranged in a sequence to accommodate processing of large volumes of standardized products or services. The quality and quantity of output in a worker-paced assembly line depends to a great extent to the skill of the labor utilized. Examples of worker paced assembly lines are food marts like McDonald and Shakeys.
• The worker-paced assembly line is characterized by the following:

  1. The products manufactured are mostly standardized.
  2. There is a clear process pattern.
  3. Specialized equipment is used.
  4. The size of operation is variable.
  5. The process is worker-paced.
  6. The type of layout used in the line flow.
  7. Labor is still a big cost item.
• Machine-Paced Assembly Line.

  This type of production process produces mostly standard products with machines playing a significant role. Among its other features are as follows:

  1. The process is of clear, rigid pattern.
  2. Specialized type of equipment is used.
  3. The line flow layout is used.
  4. Capital equipment is bigger cost item than labor.
  5. Operation is large.
  6. The process is machine-paced.

  Examples of machine-paced assembly line are automobile manufacturers like General Motors and Ford Motors are example of a machine-paced assembly line process.
• The continuous flow processing is characterized by “the rapid rate which items move through the system.” This process method is very appropriate for producing highly standardized products like calculator, typewriters, automobiles, televisions, cellular phones, etc.

  Its other characteristics are as follows:

  1. There is economy scale in production, resulting to low per unit cost of production.
  2. The process is clear and very rigid.
  3. Specialized equipment are used.
  4. The line flow is used.
  5. Operation are highly capital intensive.
  6. The size of the operations is very large.
  7. Processing is fast.
• Batch/Continuous Flow Hybrid.

  This method of processing is a combination of the batch and the continuous flow. Two district layouts are used, one for batch and one for continuous flow. The typical size of the operation is also very large giving opportunities for economies of scale.

  Examples of companies using the batch/continuous flow hybrid are \ breweries, gelatin producers and tobacco manufacturers.
• Service processes are those that refer to the provision of services to persons by hand with machinery.
• Service Processes

  1. Service factory
  2. Service shop
  3. Mass service
  4. Professional services
• A service factory offers a limited mix of services which results to some economies of scale in operations. This also affords the company to compete in terms of price and speed of producing the service. The process layout preferred by the service factory is the rigid pattern of line flow processing. McDonalds and Shakeys are also examples of service factories.
• A service shop provides a diverse mix of services. The layouts used are those for job shops or fixed position and are adaptable to various requirements. Service shops abound throughout the Philippines. Examples are Servitek and Megashell.
• A mass service company provides services to a large number of people simultaneously. A unique processing method is, therefore, necessary to satisfy this requirement. To be able to serve many people, mass services companies offer limited mix of services.

  The process layout used is typically fixed position where customers move through the layout.
• These are companies that provide specialized services to other firms of individuals. Examples of such firms are as follows.

  1. Engineering or management consulting service which help in improving the plant layout or the efficiency of a company.
  2. Design services which supply designs for a physical plant, products, and promotion materials.
  3. Advertising agencies which help promote a firm’s products.
  4. Accounting service.
  5. Legal services.
  6. Data processing services.
  7. Health services.
• Professional service firms offer a diverse mix of services. There is lower utilization of capital equipment compared to the service factory and the service shop. The process pattern used is very loose. The process layout used is identical to the job shop. Professional services firms are, oftentimes, faced with delivery problems brought about by no uniform demand.
• Strategies that may be used depending on the situation are as follows:

  1. The use of staggered work-shift schedules.
  2. The hiring of part-time staff.
  3. Providing the customer with opportunity to select the level of service.
  4. Installing auxiliary capacity or hiring subcontractors.
  5. Using multi-skilled floating staff.
  6. Installing customer self-service.
• IMPORTANT PARTS OF PRODUCTIVE SYSTEMS

  1. Product design
  2. Production Planning and Scheduling
  3. Purchasing and Materials Management
  4. Inventory Control
  5. Work-Flow Layout
  6. Quality Control
• Product Design

  Customers expect that the products they buy would perform according to assigned functions. A good product design assures that this will be so. Customers avoid buying products with poor product design. An example is that certain brand of ballpen which fails to write after one or two days of actual use. This happens because of poor product design.
• Product design refers to “the process of creating a set of product specifications appropriate to the demands of the situation.” Companies wanting to maintain or improve its market share keep a product design team composed of engineers, manufacturing, and marketing specialists.
• Production planning may be defined as “forecasting the future sales of a given product, translating this forecast into the demand it generate for various production facilities, and arranging for the procurement of these facilities.”

  Production planning is very important activity because it helps management to make decisions regarding capacity. When the right decisions are made, there will be less opportunities for wastage.
• Scheduling is the “phase of production control involved in developing timetables that specify how long each operation in the production process takes.” Efficient scheduling assures the optimization of the use of human and nonhuman resources.
• Firms need to purchase supplies and materials required in the various production activities. The management of purchasing and materials must be undertaken with a high degree of efficiency and effectiveness specially in firms engaged in high volume production. The wider variety of supplies and materials needed adds to the necessity of proper managing and purchasing of materials.

  Materials management refers to “the approach that seeks efficiency of operation through integration of all material acquisition, movement, and storage activities in the firm.”
• Inventory control is the process of establishing and maintaining appropriate levels of reserve stocks of goods. As supplies and materials are required by firms in the production process, these must be kept available when they are needed. Too much reserves of stocks will penalize the firm in terms of high storage costs and other related risks like obsolescence and theft. Too little reserves, on the other hand, may mean lost income opportunities if production activities are hampered. A balance between the two extremes must be determined.
• There are ways of achieving proper inventory control. They are as follows:

  1. determining reorder point and reorder quantity
  2. determining economic order quantity
  3. the use of just-in-time (JIT) method of inventory control
  4. the use of the material requirement planning (MRP) method of planning and controlling inventories.
• Work-flow layout is the process of determining the physical arrangement of the production system. In the transformation process, the flow of work may be done either haphazardly or orderly.
• The job of the operations manager is to assure that a cost-effective work-flow layout is installed. A good work-flow layout will have the following benefits:

  1. Minimize investment in equipment
  2. Minimize overall production time.
  3. Use existing space most effectively
  4. Provide for employee convenience, safety and comfort.
  5. Maintain flexibility of arrangement and operations
  6. Minimize material handling cost
  7. Minimize variation in types of material-handling equipment.
  8. Facilitate the manufacturing (or service) process.
  9. Facilitate the organizational structure.
• Quality control refers to the measurement of products or services against standards set by the company. Certain standard requirements are maintained by the management to facilitate production and to keep customers satisfied.

  Poor quality control breeds customer complaints, returned merchandise, expensive law suits, and huge promotional expenditures.