Managing Production Operations

Managing Production Operations
Atiqur Rahman Mohamed 200921010
For: Dr. Ahmed Obaid Production and Operations Management Due: 27th May 2012
Table of Contents
1. 2. Introduction .......................................................................................................................................... 3 Concept ................................................................................................................................................. 4 2.1. 2.2. 3. Product .......................................................................................................................................... 4 Production..................................................................................................................................... 5
Types of production systems ................................................................................................................ 5 3.1. 3.2. 3.3. Job production .............................................................................................................................. 5 Batch production .......................................................................................................................... 6 Flow Production ............................................................................................................................ 8
4.
Production Management ...................................................................................................................... 9 4.1. Criteria of performance .............................................................................................................. 10
5.
Lean production .................................................................................................................................. 10 5.1. 5.2. 5.3. 5.4. Just in time Production (JIT) ........................................................................................................ 12 Kaizen (Continuous improvement) ............................................................................................. 12 Time based management ........................................................................................................... 13 Simultaneous engineering .......................................................................................................... 14
6. 7.
Case study ........................................................................................................................................... 15 Conclusion ........................................................................................................................................... 17
1. Introduction
Production and operations management is the process that transforms recourses into products that are delivered for customer satisfaction. It is the set of management activities that are involved in the production of a product. Companies these days are looking for methods and ways to improve their production techniques to better satisfy their customers by providing quality products with a smaller price tag in a short time as many today agree on the well known phrase that time is money. This can only be done through proper management techniques. It can be understood from this report that the Japanese are pioneers in this aspect. In this report, different aspects of production management are discussed briefly. It gives an overview of the types of production systems, Criteria for production, and goes into detail about lean production and its tools and techniques. The later part of this report includes a case study of the Boeing Company and its application of the lean production system used to improve its market value and increase profit margins.
2. Concept
2.1.Product
The definition of product coming from the dictionaries is something of an item or a substance that is built or manufactured which may or may not be for sale (Oxford ). A product may refer to different things when viewed from different points. For instance, from an economic point of view a product is usually referred to a wider category of goods. When looking at it from a marketing point of view, it is something that can be offered to the consumers upon demand. In the retail business, the products are not manufactured; they are usually referred to as merchandise. Whereas in the manufacturing industry, the products are the raw materials purchased. Now for the same product that is manufactured in a company, the kind of product that is relevant to this paper is also viewed from different perspectives. To mention a few, the different points of view come from a: Consumer: consumers are usually only interested in the final product that becomes available to them after it goes through all the production operations in the manufacturing company. They are usually interested the different functions that the product can perform, or what features it has. It can be anything from soap to a washing machine. Production Manager: For a production manager the things that come to mind when he thinks of a product is the materials and processes that go in the making or manufacturing of the product so he can change different parameters like the composition of the different kinds of materials used in producing the product to make it more competent in the market. Financial Manager: A financial manager has only money on his mind. To him, a product is the outcome of an investment that was made to manufacture the product. He is responsible for making the product profitable.
Personnel Manager: A personnel manager sees the product as an outcome of all the different skills of the labors or employees that worked to make the product. (Production and operations management)
All in all, a product is manufactured keeping in mind the satisfaction of the customers.
2.2.Production
Production, as it is clear from the term itself, is the application of all the processes involved in developing a product. To be more specific it is the processes involved in converting inputs into outputs with the use of resources. A few methods of production are widely known and applied depending on which method better suits the business in terms of efficiency, time, profit etc. they are namely, job production, batch production, flow production etc. The methods chosen depend on the type of product being manufactured and/or the quantity in which they are being manufactured.
3. Types of production systems
3.1.Job production
Job production is the kind of production that is one of a kind and unique. One item is produced at a time and they are made to meet specific requirements and specifications of the customer. Production of such products usually takes longer and requires a lot of skills. Job production makes custom-made products of high quality that are not available in the market that are manufactured in bulk in a factory. Job production can be classified into three types based on the time intervals between productions of two products of the same kind. They are: (Introduction to POM) One time production (produced once only): In this case, the customer comes to the production firm and places his order with his own requirements and specifications. The firm cannot prepare 5
itself in advance unless the order has fully been placed and understood by the firm. Only then can the firm go ahead and estimate cost of production and prepare to purchase the raw materials required and prepare labor to get the job done.
Production at irregular intervals: In this case, the order first order is placed and a second order is expected but not certain. It this case, the firm cannot prepare for the next project in advance either. They need to wait for the customer to come in and place the order upon his will and get started with the work.
Production at regular intervals (periodic): In this case, the firm knows when the next order is going to be placed and they can prepare for the job in advance and save a lot of time and money.
A few examples of job production are: Luxury cars A sandwich at caf Designer goods Landscape gardening Hair dressing
3.2.Batch production
Batch production as it is clear from the name itself is production of identical items in batches to meet demand. It is as they call it manufacturing in bulk. Once the first batch of products is produced and delivered, the plant can be used to produce similar products in batches easily at a lower cost. Like job production, batch production can also be categorized into three based on the time interval of orders placed. The three categories are described as follows: (Introduction to POM) One time production (produced once only): In this case, the customer places his order with his own specifications and requirements. The only different here is that the order is in a larger quantity than that of a job production where only one unit is produced at a time. 6
After the customer places his order, the firm can go ahead and plan and arrange the recourses. And the batch is produced only once and the customer is not going to place another order.
Production at irregular intervals: Here the order is placed the first time and the batch is produced. There is a good chance the customer is going to come back to place another order but the firm is not sure when the order is going to be placed. So they cant prepare for the production in advance. The frequency is not regular, but the firm can file the first order and record the details of the first order in order to be better prepared if there is a second order and start production for the next batch.
Production at regular intervals (periodic): If the firm knows at what intervals they need to produce the next batch to meet demands, they can maintain detailed records of materials required and instructions and prepare for the next batch for production. With the increase in frequency of production, batch production then becomes bigger and is then called mass production. With the end of demand of a product, the firm can modify the product slightly and use the same plant and machinery to manufacture products in demand. Therefore, this type of production is useful for manufacturing different variations of similar products. (Methods of production)
A few examples of batch production are: Newspapers Clothing Automobile spare parts Books Bread
3.3.Flow Production
There is another kind of production called Flow production. It is very similar to mass production, except that in mass production, if demand ceases, the product can be modified and different products can be produced. In flow production, plant and machinery is set up to produce a particular kind of product and is produced in large numbers. The work is repetitive and thus the employees dont need to be very skilled. They sit at their places and do their jobs as the product flows along the line. It requires strategies like rotation of jobs to keep the workers motivated. If demand ceases, the plant and machinery becomes useless and the plant cannot be used to make different products. (Methods of production ) Some examples of flow production are: Automobiles Televisions Toys
Figure 1 Classification of production systems
4. Production Management
Production operations management can be explained as the management activities that are performed in areas such as selection, design, operation and control of a production system. It basically means that production and operations management is accountable for the turning of the raw materials of a product into the actual final product that is ready to be delivered. Therefore, it is the transformation of inputs into outputs which meets customer requirements when delivered.
Figure 2 Schematic production system
Production management is a part of management that has to do with planning and controlling the resources and raw materials required to produce a specific product by known detailed methods and by the maximum utilization of resources. Management operations are carried out in such a way as to ensure making the most out of plant, capital and labor for the best output of the company. On the whole, it is common for most production processes to be carried out in a manner that they are underutilized. And the use of technical and mathematical knowledge unlocks the hidden capacity to make the best out of it, which makes a great deal of a difference. There are three criteria for performance of production and operations management. They are namely, Effectiveness, customer satisfaction and efficiency.
4.1.Criteria of performance
The main objectives of production and operations management system are a) Efficiency, b) Effectiveness and c) Customer satisfaction
Efficiency, which is the proper and optimum use of resources, is desired by everyone whether the organization is in the public or private sector, profit or a no profit organization.
Effectiveness though, is multi dimensional. It is the accomplishment of multiple objectives which are prioritized based on requirements and need.
Customer satisfaction becomes more and more imported as modernization takes place. Modern production and operations management targets customer satisfaction and the people working for the company and for the country or society they are operating in. But the highest priority is to attract more and more customers in order to sustain in the competitive market.
Effectiveness and efficiency are measured in a few ways. They are quality, cost and consistency. These factors make the organization competitive even internationally. Use of robotics, automation and/ or computer softwares like CAD, help in achieving optimal results in terms of cost and quality.
5.
Lean production
Lean production is a group of production/ manufacturing techniques that are very very efficient. They were developed by Japanese in the early 80 s. The affect of lean production is known to be the most fundamental change in the industry since Henry ford fully developed mass production in the 20th century. Lean productivity combines two things that are desired by the production companies as well as the customers and the two things are quality craftsmanship and low manufacturing costs in mass production. It basically aims at cost cutting with the help of efficiency and meeting customer needs and
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satisfaction. This method of production tends to cut out any activity that does not tend to add any kind of value to the final product pr the production process. (Lean production)
Lean production is different from classic assembly line production. In a lean production system, when a fault in a product along the line is discovered, the workers are requested to stop the production work and attend the faulty product rather than putting it aside for later inspection. In a classic assembly line production, the workers are not encouraged to stop work as it costs them a fortune when they do so. They place the damaged products aside and replace them with spare products that they produce in advance in case of any damages or faults. In this way the workers dont learn how to rectify the problem and in most cases do not even know what went wrong. When lean production is introduced in the beginning, there might be quite a few stoppages. But as work progresses, the workers learn how to correct the problems that they face to an extent that at one point in time the products produced are near perfection and the company does not need to manufacture spare products. This in turn saves them quite a lot of money. (Introduction to lean production )
A few of the important aspects of lean production are:
Just in time production (JIT) Cell production Kaizen (Continuous improvement) Quality Circles Total Quality Management (TQM) and zero defect production Time based management Simultaneous engineering
Few of these aspects are briefly explained in this report.
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5.1.Just in time Production (JIT)
Just in time production is the method of production in which the customer gives a hint as to when exactly the products would need to be produced and delivered. This lets the firm produce the exact number of products at the right time. This method is thought of as a stock control method originally originated in Japan. (Just in Time production) Just in time method helps keeps the stock levels a minimum. Stock includes raw materials, and finished good and everything in between. The firm also uses JIT method for placing orders for raw materials in order to avoid large unnecessary stock of raw materials. As soon are the products are manufactured, they are ready to be sold or delivered. That prevents large stocks of products that are ready to be distributed. After a few such orders, the firm can use a high end scheduling software to estimate when and how much of these products need to be manufactured. Data and info is shared between the two parties (customer and manufacturer) through electronic data interchange (EDI) to ensure maximum precision.
5.2.Kaizen (Continuous improvement)
Kaizen was introduced by Japan after the World War II. It literally means continuous improvement. This system encourages employees at every level starting from the top managerial positions right down to the cleaning crew to come up with ideas of improvement on a regular basis. These suggestion are not taken and implemented annually, it is done on a daily basis. The changes are usually very small and helps continuously improve productivity and helps reduce waste. A general western philosophy is If it aint broke, dont fix it. Kaizen though comes with a philosophy that can be summarized as saying do it better, make it better, and improve it even if it isn't broken, because if we don't, we can't compete with those who do." (Kaizen). In Japan, kaizen is an improvement system that is applied in every aspect of the human life, starting from business to household and social activities. Kaizen is focused on continuously improving already set standards. Kaizen involves different many other systems like quality circles, just in time delivery (JIT) and the 5 S (seiri, seiton, seiso, seiketsu, and shitsuke ). (Kaizen) 12
Managing Production Operations Some of the key features of the Kaizen theory are:
The development is based on minor changes that are easy to implement rather than big changes that take long Since the improvement ideas originate from the employees themselves, they are more comfortable and willing to adapt to the changes These small changes usually do not need big capital investments, they usually dont cost anything at all It motivates the employees and boosts their self esteem by making them feel their job is important for the company and improvement in their job can affect the company in a good way
It benefits the employees as well as the company as the company rewards the employee for coming up with ideas of improvement
5.3.Time based management
Time based management is a part of lean production. It focuses on saving time by trying to reduce the time spent on unproductive tasks. For a firm to exercise this technique, they need to have a flexible working system in which changes can be made easily. It helps in shortening response times to meet market and customer demands, quicker production of a new product, reduction in wasted products thereby increasing efficiency. This technique uses a few activities like planning and setting goals, delegating work, organizing and scheduling. Effective time management can be done by organizing paper work, protecting time by isolating oneself and delegating work, set goals, prioritize work, use tools that make the most out of the time in hand. (Time-Based Management vs. ROWE)
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5.4.Simultaneous engineering
Simultaneous engineering, also known as concurrent engineering, is derived from time based management. It helps developing and manufacturing new products quicker than usual. The approach is team based. A group of people from different sectors work hand in hand (in parallel) in the development of a new product hence saving a great deal of time. It eliminates the lag time between transfer in sectors or from one phase of product development to another. This helps launch the product in the market earlier giving them an advantage over their competitors and allowing them to keep higher profit margins. This method helps keep the quality of the product up to mark and keeps the production cost a minimum. (Valentino, 1975) (Ribvens, 2000)
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6. Case study
The Boeing Company, an American aerospace corporation that was founded in 1916, applied methods of lean production in their manufacturing of commercial planes division in 1996. And the efforts of lean production have spread throughout the entire Boeing company ever since (Pursuing perfection, 2000). The application of lean production in its entire works has allowed the Boeing Company to deliver value and quality to their customers which increased their competitiveness in the market. The Boeing Company started applying lean production strategies from eliminating all kinds of waste in the manufacturing process that included reduction of costs, and defects in products. By using these tools Boeing Co. was able to improve their overall production efficiency and achieved standard operations by making sure that their employees were doing the right work, in a precise way, at the right time. The Boeing Company was greatly influenced by the Toyota production system (TPS) as Toyota was a pioneer in the application of lean production tools. The Boeing Company used the following principles to apply the lean production method: Identifying the actions linked to the transformation of raw materials in to the finished product Ensuring that the flow of production was continuous by eliminating any extra work and unnecessary steps Using Just in Time methods of manufacturing that allowed them to produce the exact quantities to be delivered to their customers Eliminating all unnecessary works from the production that did not add any value to the final product Reaching perfection by setting standards and continually trying to improve them
Boeing applied the above mentioned techniques to all their processes throughout their company. Boeing believes this has produced significant results. To ensure the execution of lean production methods, they added a few processes like conducting lean production assessment. The assessment made sure that every phase of the production facility is examined and the performance of that sector is evaluated. They allowed the staff to implement lean production tools and techniques to improve their work area. Employee participation is essential to exercise lean production methods. So Boeing Co. developed Accelerated Improvement Workshops (AIWs). AIWs help the employees and workers in organizing their work and reducing cost and saving time. AIWs are five days long and train the 15
employees to improve production in the factory floor. The Boeing Companys main focus was to reduce and eventually eliminate waste that costs them a fortune. In order to do so, they implemented the following changes: Reduction in complexity of a solution to a problem as they are more time consuming, produce waste and are difficult to manage Elimination unnecessary motion of labor that creates chaos Controlling over production by producing the exact amount of products required by the customer Arranging machineries and storage to improve spacing Limiting the excessive use of man power and using equipments for non productive operations Eliminating defects in production to avoid rework Avoiding excess raw materials and making use of the scrap materials in the production Managing time by eliminating delays and downtime of machines or people Eliminating transportation of materials and people that do not add value to the product
After seeing the effects of lean manufacturing in the company in 1996, Boeing realized that this was different than their earlier initiatives. And that these techniques were critical for improving competitiveness of the company. Boeing Co. knew that increasing market share is important but realized that reducing aircraft production cost and increasing margins of profit is the key. Boeing applied methods of lean manufacturing throughout the whole of Boeing Company and established a lean manufacturing group at a corporate level to support assembly operations. These findings show that lean production operations will continue spreading rapidly among all American manufacturing companies. As competitiveness increases, more and more companies will convert to apply these lean production principles.
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7. Conclusion
Production and operations management plays a huge role in the manufacturing or production companies. It has been underestimated by corporations for a good number of years until Toyota came up with their own management system called the Toyota Production System. This was among one of the first most significant revolutionary methods of managing production operations after Henry ford fully developed mass production in the 20th century. These management techniques have been learnt and developed and applied over the years and have proved to be fruitful. Applying management techniques like Just in time production, kaizen (continuous improvement), simultaneous engineering, time based management to the production processes unlocks the hidden potential that lies within the processes of production by delivering products of optimal quality at a low cost in a very short time meeting consumer demands and keeping them satisfied. The application of these management tools and techniques has increased competition in the market. By eliminating waste during the production process, the companies are able to make higher margins of profits while at the same time delivering the products at a lower price to their customers. These techniques have been in use for over two decades now and continuous improvement in companies seems never ending. They keep getting better and better at what they do and produce. More and more new and old companies these days are influenced by the companies that apply these techniques to achieve success. Almost every major production company follows these rules of management and are achieving near perfection that only amazes the consumers as to how much better could they possibly get?
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References
Introduction to lean production . (n.d.). Retrieved from Tutor2U: http://tutor2u.net/business/production/introduction-to-lean-production.html Introduction to POM. (n.d.). Retrieved from New age publisher: http://www.newagepublishers.com/samplechapter/001233.pdf Just in Time production. (n.d.). Retrieved from Tutor2U: http://tutor2u.net/business/production/just-intime.html Kaizen. (n.d.). Retrieved from Value based management : http://www.valuebasedmanagement.net/methods_kaizen.html Kaizen. (n.d.). Retrieved from Graphic Products: http://www.graphicproducts.com/tutorials/kaizen/index.php Lean production. (n.d.). Retrieved from Economist: http://www.economist.com/node/14299730 Methods of production. (n.d.). Retrieved from Tutor2U: http://tutor2u.net/business/production/methods-of-production.htm Methods of production . (n.d.). Retrieved from Hodder sample pages: http://www.hoddersamplepages.co.uk/pdfs/cceabus5.pdf Oxford . (n.d.). Retrieved from Oxford dictionaries- The worlds most trusted dictionaries: http://oxforddictionaries.com/definition/product Production and operations management. (n.d.). Retrieved from New age publishers: http://www.newagepublishers.com/samplechapter/000975.pdf Pursuing perfection. (2000). Retrieved from http://www.epa.gov/lean/environment/pdf/perfection.pdf Ribvens, J. A. (2000). Manufacturing Applications. In Simultaneous Engineering for New Product Development . John Wiley & Sons. Time-Based Management vs. ROWE. (n.d.). Retrieved from Plumbersurplus: http://www.plumbersurplus.com/Blog/post/2009/10/08/Time-Based-Management-vs-Results-onlyWork-Environment.aspx (1975). Time based mnagement. In D. Valentino, Strategy and Leadership. MCB UP Ltd.
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Atiqur Rahman Mohamed 200921010

Atiqur Rahman Mohamed 200921010