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INTRO TO
BUSINESS NOTES
Contents


1 – Introduction
2 – Product design
5 - Product classification, process types and layouts
9 – Operations control
14 - Scheduling capacity and its management
22 – Lean operations
26 – Service design
35 – Queuing and handling product variety
40 – Supply chain management
49 – Quality management


Introduction to Business Operations - N12814

Introduction

- An operation is where you take an input and transforming it
into an output, to be a successful operation is where you add
extra value during the operation
...
Materials
- These can be transformed either physically, by location, by
ownership or by storage
...
Information
- This can be transformed by property (e
...
accountants
analysing details), by possession (e
...
market research), by
storage (e
...
libraries), or by location
...
Customers
- They can be transformed physically e
...
hairdressers
...
g
...
g
...


The Transformation Process

Inputs Materials,
information ,
customers
...
Consumer Services
- Services aimed at the final consumers and these have risen in line with
peoples increasing disposable income in developed countries
...
g
...


2
...



Operations can be an important tool for
- Improving profits
- Increasing market share
- Developing new markets

Operations strategy can be seen from two different perspectives…

1
...

- This market position is then translated into a list of criteria or objectives,
which define what kind of performance is required in order to
successfully, compete in the markets chosen
...
Resource based
- Works from the inside out of the firm, rather than the outside in
perspective of the market based approach
...



- Sometimes trade-offs have to be made e
...
A business owner may have to pay
more money so that he can employ more staff and have a better customer
service, the trade off is the extra cost for the better service
...
Idea Generation
- Research and development
- Look into competitors

2
...
Preliminary Design
- Converting the concept to the technical specification

4
...



Feasibility of Design

Market Analysis
- Evaluate the design concept with potential customers through
use of focus groups and surveys
...


Economic Analysis

Product Design

The two types of design are…

Concurrent design - When contributors to the stages of design all
provide their expertise together throughout the design process as a
team
...


Design for manufacture – Views product design as the first step in the
manufacturing process
...




Product Classification, Process Types and Layouts

Product classification

There are 4 ways to manage order fulfilment

1
...


2
...


3
...


4
...


ETO

Design

ATO

MTO

Fabrication

Assembly

Pack

Customer












MTS

5

Process Types

The 5 manufacturing process types are…

1
...

- Used to make a one off product to a customer specification
...

- Use project management techniques to define, organise and coordinate tasks
...


2
...

- Used to make a one off product to a customer’s specification
...

- Makes product difficult to track
...

- Generally high skilled
...

- Automation is low
...


3
...

- Can range from one to hundreds
...

- Scheduling and prioritisation, as well as tracking can be very
difficult
...

- Work can be repetitive and low skilled
...
Mass
- Low variety and high volume
...

- Because of high volumes it is cost effective to invest in
specialised labour and specialised equipment
...



6

5
...

- Products produced by a continuous operation usually have a
continuous flow such as oil and gas
...

- To make this large investment in equipment cost effective it
usually operated 24 hours a day
...

- It is hard for newcomers to invest
...
For example, Economies of Scale vs Flexibility
...


There are 4 layout types…

1
...

- All resources needed to create the product, such as resources
and labour, must move to the site of the product or service
...

- Used for projects
...
Process/ Functional
- One in which resources that have similar functions are grouped
together
...

- Allows product or customers to move to each resources in turn,
based on their individual requirements
...

- Machinists may interpret drawings, problem solve, and make
their own decisions
...


3
...

- Assembly line puts components together
...

- An example would be pie production
...


4
...

- Combines the efficiency of a product layout with the flexibility
of a process layout
...



Group Technology

Group technology has 3 aspects
...
Grouping parts into families
- Grouping parts or customers into families has the objective of
reducing the changeover time between batches, allowing
smaller batch sizes, and thus improving flexibility
...
Group physical facilities into cells to reduce transportation
time between processes
...



8


3
...



Operation Planning

There are 2 types of demand…

1
...
g
...
Independent demand
- Not known in advance
- E
...
number of cars in demand

Planning policies

There are 3 types of planning policies…

1
...
g
...

- The demand is dependent, predictable and low
...


2
...

- The transformed resources may be acquired on the receipt of a
customer’s order
...

- Risk of a stock-out (Where an item is out of stock)
...
Make to stock
- Both the transforming and the transformed resources are
required before
...

- Orders are small compared to total system capacity
...

- Company may choose to ramp up production at certain times
of the year
...


Throughput time is the total time of operation including…
- Purchase stage (acquiring resources)
- Make stage (Processing resources)
- Deliver stage (packaging and distribution to consumer)

There is risk and speculation with P: D ratio…
- Risk increases with P: D ratio
...

- Reducing the P: D ratio reduces some of the risk
...
Loading
2
...
Scheduling


Loading
- Loading is the amount of work that is allocated to a part of an
operation
...


Available capacity is calculated taking into account…
- Planned factors e
...
machine maintenance
...
g
...


Finite loading…
- Agreed fixed, finite upper limit
...
g
...

- Upper limit can be fixed using an appointment system
...


Infinite loading…
- No limit on the work loaded onto a stage e
...
A&E in a hospital
...
e
...


Sequencing
- Sequential assignment of tasks or jobs to individual processes
...


Priority rules…
- Based on performance objectives such as dependability, speed
and cost
...
(dependability)
- Minimising the time the job spends in the process, also known
as ‘flow time’
...
(an element of cost)
- Minimising idle time of work centres
...

- FCFS (First come, first served) is when you serve the customers
in the exactly the sequence they arrived in
...

- LPT (Longest process time) is when the jobs with the longest
process time among waiting jobs are completed first
...



Critical ratio…
𝐶𝑅 =

(𝐷𝑢𝑒 𝑑𝑎𝑡𝑒 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑑𝑎𝑡𝑒)

𝐷𝑎𝑦𝑠 𝑟𝑒𝑞𝑢𝑖𝑟𝑒𝑑 𝑡𝑜 𝑐𝑜𝑚𝑝𝑙𝑒𝑡𝑒 𝑗𝑜𝑏


- If CR<1 then the job is behind schedule so you must increase
the jobs priority
...


The types of scheduling are…
- Mass process type
- Batch process type
- Jobbing process type

The scheduling techniques are…

1
...

- Ensures that the stages of the process are coordinated and
bottlenecks are avoided
...
This means a reduction in process time at a
non-bottleneck will have no effect on the overall output rate
...


𝐶𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒 =


1

𝑂𝑢𝑡𝑜𝑢𝑡 𝑟𝑎𝑡𝑒

2
...

- The method that measures the actual flow of work into a work
centre and the actual flow of work from that work station
...


- By monitoring these figures using input/output reports,
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
...

- Provides optimal solution to minimise overall lead time
...

- First activity for each job must be the same
- First activity must be finished before second activity is started
...

- The job with the shortest processing time in the second
sequence goes last

The steps are…

1
...
For unscheduled jobs, select the job with the shortest
processing time in either stage
3
...

4
...
If the time on the first stage for one job equals the time of the
second stage for some other job, 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 of time for the
second stage
...
If both jobs have same time for both stages, place them at
either end
7
...
Repeat steps with other jobs










14

Scheduling

- The allocation of a start and finish time for each task
...


Mass process type systems
- High volume, low variety
- Cost efficiency is important
- High levels of labour and equipment utilisation is important
- Smoot flow of products/customers through system
- Maintain production at an equal rate for each stage of
production
...

- Output rate is the number of units produced per hour per
stage
...


1
𝐶𝑦𝑐𝑙𝑒 𝑡𝑖𝑚𝑒 =

𝑂𝑢𝑡𝑝𝑢𝑡 𝑟𝑎𝑡𝑒






15

- If the stage doesn’t take very long, then you are able to merge
them to save time
...

















Capacity Management

- Capacity management is about reconciling demand with
capacity
...
g
...

- Capacity could be talking about time processing capacity e
...
a
car park can only process 1000 cars per day
...
Costs
- If capacity is more than demand, this means there is
underutilisation of resources which means higher unit costs
...
Revenue
- If capacity is less than demand, then that is a loss of potential
revenue
...
Speed-up
- If there’s excess capacity, then that means there should be a
speedy satisfaction of customers demands as there should be
an avoidance of queues
...
Dependability
- If demand is very close to capacity, then there would be a
difficulty coping with unexpected disruptions
...
Flexibility
- If demand is very close to capacity, then there is difficulty
responding to unexpected increases in demand
...

- Fluctuations and uncertainty make forecasting demand
challenging
...
Input measure
- This is usually the amount of goods or services that can be
provided e
...
the number of seats in a theatre or number of
seats on an airline
...
Output measure



17

- This is the measure of the amount of goods and services that
were provided e
...
number of customers per show or number
of customers on a flight
...
Design capacity
- Maximum theoretical output of a system in a given period
under ideal conditions
...
Effective capacity
- Capacity a firm expects to achieve given the current operating
constraints
...
Actual capacity
- The capacity remaining after loss of output due to both planned
factors and unplanned factors include equipment breakdown,
worker illness and variability
...

- Capacity and production rate are set at uniform level
irrespective of demand fluctuations
- Inventory us used to deal with fluctuations in demand
...
g
...

- Fashions may change and goods are no longer wanted
...


Strategies include…
- Promotions during low season
- Varying the price

Often used in service industry as…
- Capacity cannot be stored
- Demand is stochastic (Flexible)

Chase Demand


- Match output to demand pattern
...

- Overtime working
- Changing equipment levels


20

The advantages are…
- Avoids excessive resources
- Satisfies customer demand

Concerns are…
- Workers keep changing and equipment
- Can be expensive renting equipment rather than using the
same equipment all year
...
g
...

- Aim is to get maximum profit
...


Used when…
- Relatively fixed capacity
- Service can’t be stored
- Services re sold in advance
- Market can be easily segmented (different customers in the
market which are willing to make trade-offs for different
benefits e
...
one customer may be more interested in flexibility
of service while other is more interested in the price
...














21

Lean Operations

The main objectives of lean operations are…
- Eliminating waste
- Continuous improvement

This should lead to…
- Reduced costs
- Increased productivity
- Reduced defects
- Reduced lean times
- Improved reliability
Identiy
value

The 5 principles of lean thinking are…
1
...
Mapping value stream
perfection
3
...
Responding to customer pull
5
...
g
...
g
...

- Maps products or services from start to finish
- The goal is to identify waste and eliminate/reduce it
...
Transportation
- Unnecessary movement of material or people, e
...
moving
forms between departments
...
Waiting
- Goods or services are not moving or being worked
...
g
...
Over-production
- Producing more than is needed
- E
...
Making extra copies

4
...
Inventory
- Work in process, holding stock
- Inventory costs, difficulty to identify problems when you have
too much inventory
- May be perishable

6
...
g
...
Excess processing
- Overly complex processes
- E
...
Bureaucracy

Just in Time (JIT)

The element to JIT are…
- Pull production
- Simplicity
- Visibility (should be able to see everything)
- Flexibility (Working for forecasted demand)
- Continuous improvement
- Autonomation
- Preventive maintenance (Prevent machines from breaking
down)


23




- JIT focuses on eliminating the buffer in-between and
overproduction
...


The benefits of JIT are…
- Reduces work in progress and inventory
- Improves quality improves customer focus
- Exposes waste

The problems are…
- Sometimes a buffer is needed
...

- Employer everyday needs to think of new innovation, a lot of
pressure and stress needs to be handled
...
Sometimes wasteful
activities lead to innovation
...

- Kanbans authorize the production and movement of material
through the pull system
...


Kaizen

- Continuous incremental improvements
- Everyone is involved
- Continuously seeking perfection
































25

Service Design

CHARACTERISTICS OF SERVICES

The characteristics of services are split into 4…

1
...
Simultaneity
- Services are produced and consumed simultaneously (can
perish)

3
...


4
...




Service design

The service concept is the overall set of expected benefits that the
customer is buying is termed
...
Explicit services
- Those that are readily observable by the sense and consist of
the essential features of the service
...
Implicit services
- Those that relate to psychological benefits that the customer
may sense only vaguely, but can still be very important
...
Supporting facility
- The physical resources that must be in place before a service
can be offered
...
Facilitating goods
- The material purchased or consumed by the buyer or items
provided by the customer
...

- What is being processed? Customers, products etc
...

- OWC = A characteristic that will win the bid or customer’s
purchase
...
g
...
g
...














27

PRELIMINARY SERVICE DESIGN

- This is where the specification of the service concept is turned
into a specification of the components and structure of the
service package
...

- The stages of process have a direct immediate effect on
customer
...

- Orders can’t be stored, so smoothing production flow will
result in a loss of business
...

- The quality standards are often in the eye of the beholder
...

- To avoid lost sales, capacity must be set to match peak demand
...

- The facility should focus on production efficiency
...

- The customer is not involved in the majority of processing
steps
...

- Both back logging and production smoothing are possible
...

- Quality standards are generally measurable
...

- Storable output permits capacity at some average demand
level
...

- Front office focuses on customer interaction
- Back-office focus on efficiency
...
Identify whether some service activities can be undertaken
away from the customer
- Some services are inherently front office requiring direct
customer contact
...
Once away from the customer, should activities go to the back
office or stay at front
...
Where should the service activities to be split to be most
effective?

Service process types











29

The relationship between process type and layout type




PROCESS DESIGN

Service operations process design
...


Customer interaction process design…
- The detailed interactions between the customer and the
service provider
...


- It may consist of activities undertaken as part or whole of the
service operation
...
It can be viewed at different levels
...


If a process already exists and needs to be improved, the steps
involved can be described as…

1
...


Customer service activities tend to get overlooked in process design
because they are measured by attributes such as responsiveness and
friendliness which are attributes of people and thus more difficult to
measure
- The key here is to design procedures around this customer and
service provider interactions that maximise the reliability of
the quality of service
...
Identifying processes for improvement

There is a need to prioritise the
process elements which will be
allocated resources for
improvement
...
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
...
Generate new designs through brainstorming
- This approach offers the greatest scope for radical
improvements to the process design but represents a risk in
the implementation of a totally new approach
...
Modify existing designs
- This approach is less risky than a blue skies approach but may
mean the opportunity for a radical improvement in process
design is missed
...
Use an established ‘benchmark’ design
- This approach applies the idea of identifying the best-in-class
performer for the particular process in question and adopting
that design
...





32

Process mapping

- Uses a flowchart to document the process incorporating
process activities and decision points e
...
road traffic accident
reporting
...





33

Business process simulation (BPS)

- This is the use of computer software, in the context of a
process-based change, that allows operation of a business to be
simulated
...
e
...
There are
two aspects of dynamic systems which need to be addressed
...
Variability
- Most business systems contain variability in both the demand
on the system (e
...
customer arrivals) and the durations (e
...

customer service times) of activities within the system
...
Interdependence
- Most systems contain a number of decision points that affect
the overall performance of the system
...


It includes aspects such as…
- Modelling techniques such as business process simulation
...

- Implementation of information technologies such as workflow
systems
...

- Core problem in operations management
- The provision of adequate service levels to satisfy demands
that may be highly variable over time
...


How to manage queues

Variability of demand and service content leads to queuing
...

















35

Single server queue



- Traffic intensity is a measure of the demand for a service
against the availability
- Traffic intensity is an important concept for all queuing
situations

Consider t a parameter where t is traffic intensity…
- If t>1 then queue length increases exponentially
- If t<1 the system exhibits predictable behaviour


Economic aspects

1
...
Tangible costs
- Lost business, deterioration of goods, deterioration of hospital
patients

3
...
Intangible costs
- Loss of custom
- Loss of goodwill
- Poor public perception

5
...



The Psychology of Queues

- In service design you need to understand the customer’s
perspective & design the service appropriately

For queuing…
- Unoccupied time feels longer than occupied time
- Process waits feel longer than in-process waits
...


Mass customisation
- Attempts to combine high variety and high volume in order to
provide products at a relatively low price using DFM principles
can be categorised into 3 forms…

1
...

2
...
Customer-contact customisation
- Tailor to individual need, difficult to standardise

The volume and variety multiplier

- Building blocks can be made at relatively high volume as they
are incorporated into a range of products, it is their
combination that provides variety
...






- Replicated many times for the product range
- Uses info flow, recognises the demand from the next stage to
know how much to produce


Types of supply chain

- Think of your suppliers, and their suppliers (2 stages before
and after)
...

- Whilst minimising system wide costs and satisfying service
level requirements

- It is the management of the flow of materials through the entire
supply chain


SCM encompasses…

1
...
Co-ordination
- Planning and management across the network

3
...


4
...
g
...
)
- Shift in supply chain priorities, may change from costs to
quality to speed
...
If it is a
good customer, they must produce quickly
- Businesses may not want their suppliers to know what they are
doing due to leaked information
...




44

Supply chain integration

- Organisations in a supply chain can have varying degrees of
cooperation and integration

In order of increasing integration, the options are…
1
...
Strategic partnership and alliances
- A long term relationship in which organisations work together
and share information
...

- The idea of a partnership or alliance is to combine the
advantages of a marketplace relationship, which encourages
flexibility and innovation, with the advantages of vertical
integration, which allows close coordination and control of
such aspects as quality
...


3
...

- The middle man can more easily be cut out
...
Vertical integration
- Become one when a supplier purchases a retailer or vice versa
...

- If one supplier goes out of business or is unable to provide the
good/service, it is a simple matter to use another
...
ECR = Efficient Consumer Response
- Aims to make the grocery sector as a whole, more responsive
to consumer demand and promote the removal of unnecessary
costs from SCs
...

- These form the basis of the ECR global scorecard

2
...


3
...
, materials handling integration,
handling of priorities
...


Garvin’s quality dimensions

- Depend on product and customer

1
...
Features
- Added touches
- ‘Bells and whistles’
- what additional benefits will be added to the benefits
- E
...
Guarantees on products

3
...
Serviceability
- Easier it is to repair, the higher the quality

5
...
Perceived quality
- What sort of quality perception does the marketing team want
to convey in their message?
- Will the price charged reflect the quality of the product?

7
...
g
...
g
...
Prevention costs
- Designing products with quality control characteristics
- Designing processes which conform to quality specification
- Staff training programmes

2
...
Internal failure costs
- Scrap of poor quality parts that must be discarded
- Rework to fix defective products
- Machine downtime due to fixing equipment or replacing a
defective product

2
...

- Positive attitude to addressing all quality problems at source
- Adopt continuous improvement strategies (Kaizen)
- Extend the principles to the supplier



51

TQM in practice…
- Principles are easy to state but much more difficult to achieve
- Very successful in some enterprises such as Motorola, much
less success with others
- The critical elements of a successful TQM program include
leadership, employee involvement, culture of excellence in
products or processes, and customer focus
- Many problems in implementing the concepts in large
bureaucratic organisations and in the public sector
...

- An aggressive/radical approach to TQM
- GE claim many benefits, particularly in business processes

Sigma capability

2
...

To do this the root causes of problems need to be understood









53

Techniques to investigate root causes include…
1
...
Cause-and-effect diagrams





3
...

- Having a predefined quality standard reduces the complexity of
managing a number of different quality standards when a
customer has many suppliers
...

- A facility must document its procedures for every element of
the standard to achieve certification
...
This makes
errors easier to find and fix

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