Chapter 7 – Optimising Operations
Students will learn about strategies to optimise
operations:
Facilities design & layout
Materials Management
Management of Quality
Extent of the use of Technology
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
The physical layout of the plant has a significant impact on the efficiency of
the opganisations operations.
There are a number of critical factors that influence location and design
including:
•
•
•
•
•
Product / service being produced or supplied
Volume of output required
The amount of physical space required
The process to be undertaken
Appropriate type of layout.
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Optimising the use of physical space
Adequate workspace must be provided to all areas. Insufficient workspace
will often result in bottlenecks and subsequent blockages in workflows. The
workspace, however, must not be too large, as it may hinder productivity if
workers have to move around or walk long distances during completion of
tasks.
Optimising the use of equipment
Extracting maximum productivity from equipment is a key to operational
optimisation. Equipment must be easily accessible, reliable and operational
to maximise its throughput. It is vital that each piece is located so that it is
easily accessible to those who require it.
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Regular maintenance program
A regular maintenance program is essential to keeping equipment and
facilities operational. Easy accessibility to these for maintenance is crucial
in order to minimise downtime. Multi- skilling of workers is necessary to
ensure maximum utilisation of equipment. While regular maintenance will
be a cost in time, labour and component parts, it will avert costly downtime.
Any piece of equipment lying idle results in lost output and thus, lost
revenue.
Location of raw materials stocks and finished products
The location of raw materials stocks and finished products is another
determinant of operational efficiency and effectiveness. These must be
readily accessible during the production process. Time wasted in locating
and moving required inputs must be minimised in order to optimise
productivity.
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Layout of plant and equipment
The layout of plant and equipment must allow for an efficient flow of
production. This involves linking the processes and the different stages of
production so that production needs are met.
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Types of layout
The facility layout must be planned with a view to streamlining the
production process. The best layout to adopt depends on the type of
organisation and the nature of its activities.
fixed position layout
the product remains in a fixed position with the required
resources taken to the product
process layout
production layout where pieces of equipment with like function are
grouped together
functional layout
pieces of equipment with like function are grouped together;
the
product being produced is taken to each piece of equipment
product layout
equipment is used for a single purpose along a production
flow line; the product progresses along the line in a
continuous
flow; suitable for mass production
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Types of layout
The facility layout must be planned with a view to streamlining the
production process. The best layout to adopt depends on the type of
organisation and the nature of its activities.
fixed position layout
the product remains in a fixed position with the required
resources taken to the product
process layout (batch production)
production layout where pieces of equipment with like function are
grouped together
functional layout (batch production)
pieces of equipment with like function are grouped together;
the
product being produced is taken to each piece of equipment
product layout (mass production)
equipment is used for a single purpose along a production
flow line; the product progresses along the line in a
continuous
flow; suitable for mass production
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Chapter 7 – Optimising Operations
Facilities design and layout (floor Plan)
Other associated words to the factory layout include:
Assembly line - used in manufacturing organisations when machines pass a product
past workers who perform a small specialised task
Customisation - made or altered to meet an individual order
Mass customisation - large-scale production of customised products
Cell production - the production line is split into a number of self-contained cells or units;
each cell produces the whole of one unit or a significant subassembly of a unit
Lean manufacturing - efficient management of the production process with the aim of
achieving minimum use of resources (streamlined production)
Closed factory - model of production where all production is carried out within the four
walls of a factory site
Virtual factory - the decentralisation of productive activities so that production does not
occur at one worksite; also referred to as decentralisation
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Chapter 7 – Optimising Operations
Improving operations through technology
The introduction of new technology as it becomes available to
organisational operations can offer significant efficiency savings as well as
improvements in the quality of product. Organisations that fail to keep pace
with the latest technological advancements tend to rapidly lose
competitiveness. Following are several examples of the technological
innovations developed in recent years that have added significantly to
operational productivity. All are examples of automation.
Automation
the techniques and equipment used to achieve automatic, as opposed to
human, operation or control of a process, equipment or a system
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Chapter 7 – Optimising Operations
Improving operations through technology
Computer Numerical Control
Computer Numerical Control (CNC), also referred to as Computer Aided
Manufacturing (CAM), involves the control of machinery, tools and
equipment through a computer.
Computer aided Design (CaD) - a computer program that facilitates
the creation and modification of product design
Computer Integrated Manufacturing - Computer Integrated
Manufacturing (CIM) is the combination of CAD and CNC. CIM is a
computer program that controls and directs production from start to finish.
Robotics - the use of computer- controlled robots
to perform manual tasks, especially on an assembly line, replacing
functions previously performed by human labour
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Chapter 7 – Optimising Operations
Improving operations through technology
Flexible Manufacturing Systems (FMS)
This is a complete system involving total computer control of the operations system using
CNC-based equipment and automated transport systems that deliver component parts and
raw materials in the correct quantities just as they are required. FMS creates total
computer control of all aspects of the operations system involving the integration of CAD,
engineering and manufacturing.
Service industries
In recent years, service industries have had access to considerable productivity
improvements via technological development. Specific examples of these include the
following:
- E-commerce allows business transactions to occur using the internet.
-
Computerisation has reduced operating costs and made significant time economies.
-
The development of mobile phone technology through the 3G network has opened up
many possibilities for businesses.
-
The ability to communicate via the inter- net has enabled significant cost savings.
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Chapter 7 – Optimising Operations
Materials and Supply chain management
Supply chain management is the process of integrating and planning,
implementing and controlling the system of organisations, people,
technology, activities, information and resources that transforms inputs into
finished outputs. Aspects of supply chain management include:
- Inventory management,
- The procurement of supplies, and
- Distribution of finished products to customers (logistics).
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Chapter 7 – Optimising Operations
Materials and Supply chain management
In recent years, the Just In Time (JIT) system of inventory management
from Japan has been growing in popularity with Australian businesses. This
system involves the reduction/ minimisation of inventory levels in the supply
chain, thereby reducing inventory costs. Inherent to JIT is the availability of
products in the required amounts at the right time at every stage in the
production process, while at the same time minimising the use of materials,
equipment, labour and space.
Just in time (Jit)
An inventory management system that aims to avoid holding any stocks
(either as inputs
or finished goods); supplies arrive just as needed for production, and
finished products are immediately dispatched or sold to customers
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Chapter 7 – Optimising Operations
Materials and Supply chain management
Inventory management,
Inventory is the storage of:
• raw materials and component parts
• unfinished production
• finished goods ready for distribution.
The inventory of a business takes up storage space and is therefore a cost.
The aim of inventory management is to ensure that the right in what
quantities. The key to success is to maintain a level of inventory that allows
production to continue without any delays, while avoiding the cost of excess
stock.
A system of inventory control that deter- mines how and when to store
items, and is capable of tracking the movement of raw materials,
components and partly completed units while protecting against loss due to
theft or damage.
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Chapter 7 – Optimising Operations
Materials and Supply chain management
Procurement of inputs / Supplies
Locating and acquiring a regular and reliable supply of high-quality inputs is
a vital aspect of efficient operations management. Contracts need to be
established with reliable suppliers of high-quality inputs.
• Supplier lead-in time must also be taken into account. Some suppliers will require
prior warning of requirements.
• Planning must occur in order to ascertain the exact amounts of materials that will
be required. This may give the opportunity to purchase in bulk and therefore obtain
an input at a lower cost per unit.
• The operations manager must also factor in an attempt to anticipate the possibility
of future price rises or falls caused by seasonal variations, world market conditions,
changes in the value of the Australian dollar or potential industrial action at a
supplier’s production facility.
• A system must also be established, such as JIT, to keep inventory at the required
levels to avert theft and loss of materials while in storage.
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Chapter 7 – Optimising Operations
Materials and Supply chain management
Distribution of finished products to customers (logistics).
An efficient system of transporting finished products to the customer must
also be developed. This may involve contracts with transport specialists
such as couriers. The frequency of deliveries must be established, as must
the routes taken.
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Chapter 7 – Optimising Operations
Management of Quality
Quality describes the degree of excellence in a product or service and its
ability to satisfy client/customer needs and wants. Consumers generally
base their purchasing decisions on the quality and price of a product as
they look for the best possible quality at the lowest price.
Quality management in a large-scale organisation may take one or a
combination of:
quality control,
quality assurance and
Total Quality Management (TQM), as discussed later.
Quality management programs aim to:
minimise waste and defect rates in production, thereby maximising
operational efficiency and productivity obtain consistently high standards of
product and service at every stage of production achieve set quality
standards or benchmarks.
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Chapter 7 – Optimising Operations
Management of Quality
Quality control
Quality control involves the use of a series of physical checks at different
stages of the production process to ensure that products and services meet
designated standards and errors are eliminated post-production. Defective
products are usually rejected and may be sold as ‘seconds’.
Quality control is reactive and aims to detect defects after they have
occurred. Once detected, operations management will decide whether
production needs to be halted to fix the cause of the problem or that this
was a one-off case. In some instances, a product recall becomes
necessary to rectify problems on units already sold.
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Chapter 7 – Optimising Operations
Management of Quality
Quality assurance
A quality assurance system aims to build quality into work processes, thereby
avoiding errors before they occur. It is a proactive process that may involve the
use of an external organisation called a ‘certification body’, which audits against
published national or international standards.
Achievement of certification entitles an organisation to display certification
marks. SAI Global is the best-known Australian certification body that issues
certification against published International Organization for Standardization
(ISO) standards.
While different quality standards apply to different types of organisations,
standards usually cover aspects such as:
• specific processes to be adopted in regard to customer satisfaction,
continuous improvement, the production process
• training of staff
• documentation of processes • controls
• corrective action
• auditing of processes.
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Chapter 7 – Optimising Operations
Management of Quality
Quality assurance
While different quality standards apply to different types of organisations,
standards usually cover aspects such as:
• specific processes to be adopted in regard to customer satisfaction,
continuous improvement, the production process
• training of staff
• documentation of processes • controls
• corrective action
• auditing of processes.
Quality certification is growing at a rapid rate among Australian
organisations as globalisation increases international competition and the
quality expectations of Australian consumers.
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Chapter 7 – Optimising Operations
Management of Quality
Total Quality Management (TQM)
TQM is a holistic approach to quality where all members of an organisation
aim to participate in ongoing improvement of organisational culture and
production processes. All organisational members are required to have a
commitment to ongoing, incremental quality improvements in everything
they do. Employees are placed into a work group known as a quality circle
and are required to work together to achieve quality improvements on an
ongoing basis.
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Chapter 7 – Optimising Operations
Management of Quality
Core TQM concepts
1 continuous process improvement – everyone is always looking for
improvement
2 customer focus –
Everyone has a customer:
External customer – the person who purchases the product or service.
Internal customer – those who use what another group in the workplace
provides.
Every work group must think about provid- ing value to the people who use their
product.
3 defect prevention - TQM tries to prevent defects in products or services
before they arise rather than relying on inspection to find them after they occur.
4 universal responsibility - With TQM, quality is not just the responsibility of
the inspection department: it is everybody’s responsibility.
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Chapter 7 – Optimising Operations
Ethical and Socially responsible management of
operations
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