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Study of Operations HAMDARD UNIVERSITY KARACHI

HAMDARD UNIVERSITY KARACHI

TERM REPORT OPERATION MANAGEMENT

STUDY OF OPERATIONS IN RETAIL INDUSTRY

SUBMITTED TO: SUBMITTED BY:

ASIF REHMAN AMIR HUMZA HAJI HAROON PGDN-0250

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Acknowledgement
A task or project cannot be completed alone. It requires the effort of many individuals. I take this opportunity to thank all those who helped me complete this project. I express my sincere gratitude to Sir. Asif-ur-Rehman for give us the opportunity to under go this project. I further thank his for lending a helping hand when it came to solving my problems related to the project. This project would not have been possible without his valuable time and support.

I also thank Hamdard University for an opportunity to undertake a Soft skills project at the start of our MBA course which helped us to understand deeply for those topics which are untouched.

Any suggestions to improve are always welcome.

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Executive Summary
Demographics continue to show a positive report to spur retailing growth. Consumers aged 20-45 years is emerging as the fastest growing consumer group and the mean age of Pakistan is now pegged at 27, a mean age that reinforces spending across all the retailing channels of grocery, non-grocery and non-store. The government stance of protecting local retailers and prohibiting 100% foreign direct investment in retailing continued in 2000, restraining international retailers' entry. However, there was gradual economic reform, giving way to easier and faster franchising agreements as well as the loosening of zonal regulations on retail expansion, thus stimulating retailing. Non-store retailing is expected to continue its fast-paced growth from a miniscule base. Across all channels, growth in retailing is expected to be boosted heightened competition during the forecast period due to the growing.

INTRODUCTION

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Pakistan retail market which is seen as THE GOLDMINE by global players has grabbed attention of the most developed nations. This is no wonder to the one who knows that the total Pak retail market is US $50bn. (160 crore approx.) of which organized retailing is only around 3 percent i.e. US $ 3 bn (3600 crore approx). Retailing includes all activities involved in selling goods or services directly to final consumers for personal, non-business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. accounting for over 3% per cent of the country's GDP and around eight per cent of the employment. Retail industry in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. The presence of 5 million stores brings into light the very fact that the Pak retail industry is highly fragmented/ unorganized. Retailing in Pakistan is gradually inching its way toward becoming the next boom industry, organized retailing in particular. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centers, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof. The future of Pakistan retailing may even witness the concept of 24 hour retailing. Even though this concept has been in existence in few retail segments like pharmaceuticals and fuel, it still remains to be a challenge for other segments like food and groceries, apparel etc to adopt this trend.

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Although the organized retailing in India is coming up in a big way, it cannot simply ignore the competition from the conventional stores because of various factors like reach, extending credit facility and other intangible factors like the human touch which are provided only by the conventional stores.

INTRODUCTION TO OPERATION MANAGEMENT

Operations management is an area of business that is concerned with the production of good quality goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It is the management of resources, the distribution of goods and services to customers. APICS The Association for Operations Management also defines operations management as "the field of study that focuses on the effectively planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organization". Additionally, The Operations Management Body of Knowledge (OMBOK)

Framework defines the scope of operations management and the activities and techniques that are a part of the operations management profession. Operations also refer to the production of goods and services, the set of valueadded activities that transform inputs into many outputs. Fundamentally, these value-adding creative activities should be aligned with market opportunity for optimal enterprise performance.

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OPERATIONS AS A TRANSFORMATION PROCESS

Inputs Transformation Output Operations management is about the way organizations produce goods and services. Everything you wear, eat, sit on, use, read or knock about on the sports field comes to you courtesy of the operations managers who organized its production. Every book you borrow from the library, every treatment you receive at the hospital, every service you expect in the shops and every lecture you attend at university all have been produced.

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This definition reflects the essential nature of Operations Management; it is a central activity in organizing things. Another way of looking at an operation is to consider it as a transformation process.

Operations are a transformation process; they convert a set of resources (INPUTS) into services and goods (OUTPUTS). These resources may be raw materials, information, or the customer itself. These resources are transformed into the final goods or services by way of other 'transforming' resources - the facilities and staff of the operation.  Raw Materials An obvious example is a cabinet maker, who takes some wood, cuts and planes it, and then polishes it until a piece of furniture is produced.  Information A tourist office gathers and provides information to holiday makers, and assists in advising on places to stay or visit.  Customers At an airport, you are one of the many resources being processed. The operation you are involved in is about processing your ticket and baggage, moving from ticket desk through the customs and duty-free areas, to deliver you to the awaiting plane.

Extending the process...

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If we add a few more parts to the transformation process, we can see the key elements that operations managers need to consider. Operations is about designing services, products and delivery systems; 1. Managing and controlling the operations system. 2. Finding ways to improve operations.

Operations Management is all about providing customers with products and services. You survive by giving customers with what they want  Every Product or Service is really a bundle of different attributes.  Product, place, price, performance, quality, timing, service, etc.  Customers are looking for a bundle of characteristics  Total bundle provides the level of value customers deem appropriate

 Buying products with the attributes they want at the lowest price possible

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y y y y y y y y

Attributes Price Quality Image Performance Safety Place distribution Time delivery, availability

 How do you decide which product to produce?  How do you find out what attributes your product should have?  How do you get those attributes into your product? y y y What process? What resources do you need? Where do you get those resources?

Examples of Operations Decisions Operations managers must make decisions on three levels  Strategic  Tactical  Operating

STRATEGIC DECISIONS:

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 Longer term decisions  Usually made at the senior management level  Product and service strategy  Competitive priorities  Positioning strategy  Location, capacity  Long term partnerships  Quality system and overall approach to quality TACTICAL DECISIONS  Medium term decisions  Tactical in nature  Made by middle and senior managers  Process design  Technology management  Job design and workforce management  Capacity management  Facility location  Facility layout

OPERATING DECISIONS

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 Shorter term decisions  Made at middle and lower management levels  Forecasting  Materials management  Inventory management  Aggregate planning  Master production scheduling  Production control  Scheduling

Make or Buy?

Available capacity, excess capacity Expertise, knowledge, know-how exists? Quality Consideration, specialized firms, control over quality if inhouse The nature of demand, aggregation Cost Make some components buy remaining Process selection Deciding on the way production of goods or services will be organized

Major implications Capacity planning Layout of facilities Equipment, Capital-equipment or labor intensive Design of work systems New product and service, technological changes, and competitive pressures

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PROCESS SELECTION AND SYSTEM DESIGN

Forecastin g Product and Service Design Technologica l Change

Capacity Plannin g

Facilities and Equipment Layou t

Process Selectio n

Work Design

PROCESS TYPES

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Job Shops: Small lots, low volume, general equipment, skilled workers, high-variety. Ex: tool and die shop, veterinarians office Batch Processing: Moderate volume and variety. Variety among batches but not inside. Ex:paint production , BA3352 sections Repetitive/Assembly: Semi continuous, high volume of standardized items, limited variety. Ex: auto plants, cafeteria Continuous Processing: Very high volume an no variety. Ex: steel mill, chemical plants Projects: Nonroutine jobs. Ex: preparing BA3352 midterm

QUESTIONS BEFORE SELECTING A PROCESS

Variety of products and services How much Flexibility of the process; volume, mix, technology and design What type and degree Volume Expected output

Batch

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Job Shop

Continuous Repetitive

PRODUCT PROCESS MATRIX

Dimension Job variety Process flexibility Job Shop Very High Very High Batch Moderate Moderate Repetitive Low Low Continuous Very low Very low

Unit cost Volume of output

Very High Very low

Moderate Low

Low High

Very low Very high

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VARIETY, FLEXIBILITY, & VOLUME

Product Variety Equipment Flexibility Low Volume Moderate Volume High Volume Very High Volume High Moderate Low Very Low Very Low

High Job Shop

Moderate

Low

Batch Repetitive assembly Continuous Flow

PRODUCT PROCESS MATRIX

Process Type High variety Low variety

Job Shop

Appliance repair Emergency room Commercial bakery Classroom Lecture

Batch

Repetitive

Automotive assembly Automatic carwash

Continuous (flow)

Oil refinery Water purification

PRODUCT-PROCESS MATRIX

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Low Volume One of a Kind Job Shop Batch Assembly Line Continuous Flow Book Writin g

Few High Multiple Major Volume, Products Products High Higher Standard Low Volume Volume ization FlexibilityQuality

Movie Theater s Automobile Assembly Sugar Refinery DependabilityCost Dependability-Cost

Flexibility-Quality
AUTOMATION:

Machinery that has sensing and control devices that enables it to operate Fixed automation: Low production cost and high volume but with minimal variety and high changes cost Assembly line Programmable automation: Economically producing a wide variety of low volume products in small batches Computer-aided design and manufacturing systems (CAD/CAM) Numerically controlled (NC) machines / CNC Industrial robots (arms)

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Flexible automation: Require less changeover time and allow continuous operation of equipment and product variety Manufacturing cell Flexible manufacturing systems: Use of high automation to achieve repetitive process efficiency with job shop process Automated retrieval and storage Automated guided vehicles Computer-integrated manufacturing (CIM)

ROBOT

Show wafer_handler_web

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FLEXIBLE MANUFACTURING SYSTEM

Group of machines that include supervisory computer control, automatic material handling, robots and other processing equipment Advantage: reduce labor costs and more consistent quality lower capital investment and higher flexibility than hard automation relative quick changeover time Disadvantage used for a family of products and require longer planning and development times

COMPUTER-INTEGRATED MANUFACTURING
Use integrating computer system to link a broad range of manufacturing activities, including engineering design, purchasing, order processing and production planning and control Advantage: rapid response to customer order and product change, reduce direct labor cost, high quality

SERVICE BLUEPRINT
Service blueprint: A method used in service design to describe and analyze a proposed service.

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FLOWCHART:
Begin Turn on laptop Yes A View on No Begin Lecture Connect to LCD A

SERVICE PROCESS DESIGN

Establish boundaries Identify steps involved Prepare a flowchart Identify potential failure points Establish a time frame for operations Analyze profitability

LAYOUT
LAYOUT: the configuration of departments, work centers, and equipment, Whose design involves particular emphasis on movement of work (customers or materials) through the system

IMPORTANCE OF LAYOUT Requires substantial investments of money and effort Involves long-term commitments Has significant impact on cost and efficiency of short-term operations

THE NEED FOR LAYOUT DECISIONS

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Inefficient operations For Example: High Cost Bottleneck s

The introduction of new products or services

Changes in the design of products or services

Accidents

Safety hazards
THE NEED FOR LAYOUT DESIGN (CONTD)

Changes in environmental or other legal requirements

Changes in volume of output or mix of products Morale problems

Changes in methods and equipment

BASIC LAYOUT TYPES

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Product Layout Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow Auto plants, cafeterias

Process Layout Layout that can handle varied processing requirements Tool and die shops, university departments Fixed Position Layout Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed Building projects, disabled patients at hospitals

A FLOW LINE FOR PRODUCTION OR SERVICE

Flow Shop or Assembly Line Work Flow

Raw materials or customer

Station 1 Material and/or labor

Station 2 Material and/or labor

Station 3 Material and/or labor

Station 4

Material and/or labor

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Advantage: more compact, increased communication facilitating team work, minimize the material handling

PROCESS LAYOUT

PROCESS LAYOUT (Functional)

Dept. A Dept. B Dept. C Dept. D Dept. E Dept. F

USED FOR INTERMITTENT PROCESSING

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Millin g Assembl y & Test Grindin g

Drillin g

Process Layout - work travels to dedicated process centers

Platin g

LAYOUT TYPES: Product or Process Make Your Pick

A B B

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PROCESS V/S LAYOUT TYPES

Job Shop Project Repetitive

Match?

Product Process Fixed-Point

PRODUCT LAYOUT
ADVANTAGES DISADVANTAGES

High volume Low unit cost Low labor skill needed Low material handling High efficiency and utilization Simple routing and scheduling Simple to track and control

Lacks flexibility

Volume, design, mix

Boring for labor Low motivation Low worker enrichment

Can not accommodate partial shut downs/breakdowns Individual incentive plans are not possible

CELLULAR LAYOUTS
Cellular Manufacturing Layout in which machines are grouped into a cell that can process items that have similar processing requirements. A product layout is visible inside each cell. Group Technology The grouping into part families of items with similar design or manufacturing characteristics. Each cell is assigned a family for production. This limits the production variability inside cells, hence allowing for a product layout.

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Similar manufacturing characters

PROCESS V/S CELLULAR LAYOUTS

Dimension Number of moves between departments Travel distances Travel paths Job waiting times Amount of work in process Supervision difficulty Scheduling complexity Equipment utilization

Process many longer variable greater higher higher higher Lower?

Cellular few shorter fixed shorter lower lower lower Higher?

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PROCESS LAYOUT
222 444

1111 2222

222 2

Mill

222 111 444

222

Drill

Grind

3333

3 3 33 33 33 33 33 33

111 333

333 3

33

111 333

Assembly
111 444

4 44 44 4 44

Lathes

Heat treat

111

Gear cutting

-1111

Lathe

Mill

Drill

Heat treat Heat treat Heat treat Drill

Gear cut -1111 Grind - 2222

222222222

Mill

Drill

3333333333

Lathe Mill

Grind - 3333

A S S E M B L Y

44444444444444

Mill

Gear - 4444 cut

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BASIC LAYOUT FORMATS

Group Technology Layout Similar to cellular layout

Part Family W

Part Family X

Part Family Z

Assemble Y, W

Assemble X, Z

Part Family Y

Final Product

Fixed Position Layout o E.g. ShipBuilding

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FIXED-POSITION AND COMBINATION LAYOUT

Fixed-Position Layout: item being worked on remains stationary, and workers, materials and equipment are moved as needed. Example: buildings, dams, power plants Combination Layouts: combination of three pure types. Example: hospital: process and fixed position.

SERVICE LAYOUTS
Warehouse and storage layouts Issue: Frequency of orders Retail layouts Issue: Traffic patterns and traffic flows Office layouts Issue: Information transfer, openness

DESIGN PRODUCT LAYOUTS: LINE BALANCING

Line balancing is the process of assigning tasks to workstations in such a way that the workstations have approximately the same processing time requirements. This results in the minimized idle time along the line and high utilization of labor and equipment.

4 tasks

2 tasks

Worker 1

Worker 2

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Each task takes 1 minute, how to balance? Cycle time is the maximum time allowed at each workstation to complete its set of tasks on a single unit What is the cycle time for the system above?

1 min.

30/hr.

1 min.

30/hr.

2 min.

30/hr.

1 min.

30/hr.

Bottleneck
30/hr. 1 min. 60/hr. 1 min. 30/hr. 2 min. 30/hr. 2 min. 30/hr. 1 min. 60/hr.

Parallel Workstations THE OBSTACLE

The difficulty to forming task bundles that have the same duration. The difference among the elemental task lengths can not be overcome by grouping task. Ex: Can you split the tasks with task times {1, 2, 3, 4} into two groups such that total task time in each group is the same? Ex: Try the above question with {1,2,2,4} A required technological sequence prohibit the desirable task combinations

Ex: Let the task times be {1,2,3,4} but suppose that the task with time 1 can only done after the task with time 4 is completed. Moreover task with time 3 can only do after the task with time 2 is completed. How to group?

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CYCLE TIME
The major determinant: cycle time

Cycle time is the maximum time allowed at each workstation to complete its tasks on a unit.

Minimum cycle time: longest task time by assigning each task to a workstation Maximum cycle time: sum of the task time by assigning all tasks to a workstation

DETERMINE MAXIMUM OUTPUT CYCLE TIME: TIME TO PROCESS 1 UNIT OT: OperatingTimePerDay D: DesiredOutputRate OT ! DesiredCycleTime D CT ! CycleTime n FromProcessDesign OT u CT Can produce at the desired level, design is feasible D OT CT Cannot produce at the desired level, design is infeasible D Example: If a student can answer a multiple choice question in 2 minutes but gets a test with 30 questions and is given only 30 minutes then OT=30 minutes; D=30 Desired cycle time=1 minute < 2 minutes = Cycle time from the process capability

DETERMINE THE MINIMUM NUMBER OF WORKSTATIONS REQUIRED: EFFICIENCY

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Example: Students can answer a multiple choice question in 2 minutes but given a test with 30 questions and is given only 30 minutes. What is the minimum number of students to collaborate to answer all the questions in the exam? Total operation (task) time = 60 minutes = 30 x 2 minutes Operating time=30 minutes 60/3=2 students must collaborate. This Nmin below.
Total task time for all products produced in a day (D)( t) ! Availabale time in a day OT

N min = N min !

t
OT/D

Total task time for a product t ! Availabale time for a product CT

t = sum of task times

PERCENT IDLE TIME

Percent idle time =

Idle time per cycle (N)(CT)

Efficiency = 1 Percent idle time

EXAMPLE 1: PRECEDENCE DIAGRAM

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PRECEDENCE DIAGRAM: Tool used in line balancing to display elemental tasks and sequence requirements

0.1 min.

1.0 min.

a c
0.7 min.

b d
0.5 min.
EXAMPLE 1: ASSEMBLY LINE BALANCING

e
0.2 min.

Arrange tasks shown in the previous slide into workstations. Use a cycle time of 1.0 minute Every 1 minute, 1 unit must be completed Rule: Assign tasks in order of the most number of followers If you are to choose between a and c, choose a If you are to choose between b and d, choose b Number of followers: a: 3, b: 2, c: 2, d: 1, e: 0 Eligible task fits into the remaining time and all of its predecessors are assigned.

SOLUTION TO EXAMPLE 1

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Assigning operations by the number of followers

WorkTime Assign Station Remaining Eligible Task 1 1.0 a,c a .9 c c .2 none 2 1.0 b b 0 none 3 1.0 d d .5 e e .3 -

Station Idle Time .2 0 .3 .5

CALCULATE PERCENT IDLE TIME

Percent idle time = Sum of Idles times at station during a cycle (N)(CT) = Total station time Percent Idle time = 0.2+0+0.3 (3)(1) = 0.167 or 16.7%

Efficiency=1-percent idle time=1-0.167=0.833=83.3%

LINE BALANCING HEURISTIC RULES

Assign tasks in order of most following tasks. Assign task in the order of the greatest task time. Assign tasks in order of greatest positional weight. Positional weight is the sum of each tasks time and the times of all following tasks.

SOLUTION TO EXAMPLE 1

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Assigning operations using their task times.

WorkTime Assign Station Remaining Eligible Task 1 1.0 a,c c .9 a a .2 none 2 1.0 b b 0 none 3 1.0 d d .5 e e .3 -

Station Idle Time .2 0 .3 .5

Eligible operation fits into the remaining time and its predecessors are already assigned. POSITIONAL WEIGHTS Assign tasks in order of greatest positional weight. Positional weight is the sum of each tasks time and the times of all following tasks. a:1.8 mins; b: 1.7 mins; c:1.4 mins; d: 0.7 mins; e:0.2 mins.

EXAMPLE 2

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0.2

0.2

0.3

a
0.8

b
0.6

f
1.0

g
0.4

h
0.3

SOLUTION TO EXAMPLE 2

Station 1

Station 2

Station 3

Station 4

f c d

DESIGNING PROCESS LAYOUTS

REQUIREMENTS:

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List of departments Shape requirements Projection of work flows One way vs. two way: Packaging and final assembly. Distance between locations One way vs. two ways: Conveyors, Elevators. Amount of money to be invested List of special considerations Technical, Environmental requirements EXAMPLE 3: LOCATE 3 DEPARTMENTS TO 3 SITES

Distance in Meter: From\To A B C Work Flow in kilos: From\To 1 2 3 1 20 90 2 10 70 3 80 30 A 20 40 B 20 30 C 40 30 -

EXAMPLE 3 Mutual Flow: From\To 1 2 3 1 30 170 2 100 3 -

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Closeness graph:

1 3

DESIGNING PROCESS LAYOUTS

Create Layout Alternatives Find the one which minimizes transportation costs and distance traveled

EXAMPLE 3: LAYOUT ALTERNATIVE 1

30 1 170 2 3

B
Total Distance Traveled by Material=7600 m

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170 1 30 3 100 2

Total Distance Traveled by Material=10400 m

CLOSENESS RATING: MULTIPLE CRITERIA

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EXAMPLE 4 Heuristic: assign critical departments first. The critical departments are those with X and A ratings.

SOLUTION

As
1-2

Xs
1-4

1-3

3-6

2-6

3-4

3-5

4-6

5-6

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EXAMPLE 4 Begin with most frequently in the A list (6) Add remaining As to the main cluster Graphically portray Xs Fit the cluster into the arrangement

2 1 3 6

SUMMARY Process Selection Objective, Implication, types Product Layout Line balancing: procedures and measures Process layout Information requirements, measures from to chart and Muther grid

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AN EXAMPLE FOR RECITATION TASKS TIMES AND PREDECESSORS FOR AN OPERATION

TASK LABEL A B C D E F G H I J K L M N

TIME 2 7 5 2 15 7 6 4 9 10 4 8 6 15

PREDECESSORS None A None None C,D A,E None B,G A None None J,K A,L F,H,I,M

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AN EXAMPLE FOR RECITATION TASKS TIMES AND PREDECESSORS FOR AN OPERATION

C E D F

B H N

J L K
RECITATION EXAMPLE

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Find a workstation assignment by taking cycle time=17 minutes by assigning in the order of the greatest task time. Can you find an assignment that uses only six stations and meets 17 minute cycle time requirement. See the solution in the next recitation

SOLUTION 1: GREATEST TASK TIME FIRST

Station
A B C D E F G H I J K L M N 2 7 5 2 15 7 6 4 9 10 4 8 6 15 None A None None C,D A,E None B,G A None None J,K A,L F,H,I,M

Time remaining 17 7

Eligible C,D,A,G,J,K C,D,A,G,K C,D,A,K D,A,K D,A,L D,A D,B,I,M D,B,M D,B D,H D E F N

Assign J G C K L A I M B H D E F N

Idle Time

17 12 8

17 15 6

17 10 6

4 2 10 2

5 6 7

17 17 17

SOLUTION 2: A HEURISTIC

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Workstation Assignment that uses only six stations and meets 17 minute cycle time requirement

STATION NO 1 2 3 4 5 6

OPERATIONS C,D,G,K E,A J,B L,I F,H,M N

STATION TIME 17 17 17 17 17 15

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SOLUTION 3: GREATEST POSITIONAL WEIGHT FIRST OPERATION C D J E K L A B G I F M H N SUCCESSORS' TASK TIME 42 39 39 37 33 29 28 26 25 24 22 21 19 15 TASK TIME 5 2 10 15 4 8 2 7 6 9 7 6 4 15
STATION NO OPERATIONS STATION TIME

1 2 3 4 5 6 7

C,D,J E,A K,L B,G,H I,F M N

17 17 12 17 16 6 15