Nkrumah University of Science & Technology DEPARTMENT OF BUILDING TECHNOLOGY

MSC PROCUREMENT

Procurement, Operations Management & Governance

Dr. Tetteh-Dumanya Bernard
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Topics

Time

Introduction to Operations Management (OM) The Production System Operations Activities Operations Management in Practice Introduction to Operations Research techniques Introduction to Governance Corporate Governance Parties Elements of Corporate Governance
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An Overview
Definitions: Production/Manufacturing Management which is now called Operations Management (OM) Is the process of obtaining and utilizing resources to produce useful goods and services so as to meet the goal of an organization. OM is also about the transformation of production and operational inputs into "outputs" that, when distributed, meet the needs of customers. OM is the set of activities creating goods or services through transforming inputs into outputs
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Significant Events in OM

Figure 1.3
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Operations as a Transformation Process

INPUTS
Material Machines Labor Management Capital TRANSFORMATION PROCESS

OUTPUT
Goods Services

Feedback & Requirements

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Examples of Inputs, Transformation and Outputs

Inputs
Land Human(intellect/phy) Capital Raw Materials
(water/wood/energy etc)

Transformation Outputs Process

High goods %

Equipment
(machines/tools/trucks etc)

Facilities
(hospitals/factories/stores)

Cutting/drilling Transporting Teaching Packing Copying/Faxing Mixing Repairing

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Houses/cars Clothing/computers Machines/television CD players Textbooks

High Services
Banking/Legal Car Repair communication Skills/Health care

Training Information

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O.M Relevance to
PLANT
Future demand (volume, timing)/Productivity and reliability of equipment Design and layout of factory, equipment, offices Need for (and costs of) maintenance Health and safety (particularly the operation of equipment) Environmental issues (e.g. creation of waste products) Performance/ Aesthetics Quality/- Reliability Quantity/ Production costs Delivery dates

PRODUCT

PROCESSES PROGRAMMES PEOPLE

Type of production Layout of plant and equipment Safety/Production costs Maintenance requirements
Purchasing patterns (e.g. lead time)/ Cash flow Need for / availability of storage/ Transportation Wages and salaries/ Safety and training/-Work conditions/ Leadership and motivation Unionization/Communication
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Difference between Goods & Services

Characteristics Goods Tangible High High Low Easy Low High Services intangible Low Low High Difficult High Low

General Output Uniformity of the Output Uniformity of the Input Labour Content Measurement of Productivity Customer Contact Opportunity to correct problems before delivery Evaluation Patentable
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Easier Usually

More Difficult Not Usually

Characteristics Of Services And Good

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New Challenges in OM
FROM
Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization
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To
Global focus
Just-in-time Supply chain partnering Rapid product development, alliances

Mass customization
Empowered employees, teams

Why companies fail to embrace operations mgt

1. Operations manager are not given free hand to handle the strategic aspects of operations mgt consistently 2. Operations managers are normally instructed verbally by their superiors and do not depend on in written words. 3. Some of the operations mgrs has the tendency to view themselves as holding a reactive corporate brief 4. Companies also view the role of operations mgt as short term and reactive to day-to-day activity and do not stress the long term nature of this task.
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Scope and Significance

Activity
Forecasting Capacity Planning Scheduling Managing Inventory

Example
Weather, landing conditions, demand for flights, growth in air travel, inflation, GDP, Population etc Too many or too few cars/aircrafts/Staff/ resources/students/classroom Servicing of cars ( routine maintenance), Pilots rota, staff leave /staff training programmes etc Resources for production/cash levels at your vault

Assuring Quality
Motivation & Training Employees Locating facilities

Safety/operation of equipment's/turn around tine/services provided

Rewards/punishments

Place railway/roads/airports/sport stadia/Casino/Habour

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O.M As Multidisciplinary
Product Design, Process design, Development & Management Methods & manufacturing Engineering Material handling, System and Layout Studies Capacity & Manning studies/Site Selections & facilities Planning Project Management-establishing or expanding facility Purchasing, Warehousing & materials Management Operations Planning, Scheduling & control Maintenance & Upkeep of Machines/Quality Control & Management Safety, Health & Environmental Management Legal provisions for running an operations facility Human resources & people Management Finance & Costing
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Why Study O.M

PR

Operations
Accounting

Operations

HR

Finance

Marketing
MIS

3 functions of Business organizations overlap

Operations Interfaces with a Number of Supporting functions

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Responsibilities of Operations managers

Planning Organizing Staffing Capacity/make or Buy Location/layout Products & Services Projects Scheduling Degree of Centralization Process Selection Hiring /Laying off Use of Overtime Incentive Plans Issuance of work orders Job assignments

Directing

Controlling/Improving

Inventory Quality Cost Productivity mafioba@yahoo.com

Re-engineering
Systematic starting over and reinventing the way a firm, or a business process, gets its work done. It a fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical measures of performance such as cost, service, and speed.

it the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary modern measures of performance, such as cost, quality, service, and speed.

Re-engineering
It encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions. It is different from other approaches to organization development especially the continuous improvement or TQM movement, by virtue of its aim for fundamental and radical change rather than iterative improvement. It derives its existence from different disciplines organization, technology, strategy, and people - where a process view is used as common framework for considering these dimensions

Trial Questions
(1)Briefly described the term operations Management (2) Describe the operations function and discuss the nature of the operations managers job. Give examples where appropriate. (3) Operations managers are responsible for managing and making decisions concerning the operations function in an organization. List five other tasks that they may be responsible for: (4) List the seven different types of transformation processes and give an example of each type. (5) In simple statements, discuss what operation management is and how it is practiced.(Mention some of the ten decision areas of operation management)

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 Production System is the collection of all interrelated activities involved in producing goods and services.
Production System consist of 5 principal components:
(1) Inputs (resources transformed to desired outputs) (2) Conversion/Creation process (changes in shape/form) (3) Outputs (customer satisfaction) (4) Feedback (5) Managers

The Production System

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Characteristics of Production Systems

System DiscriminationA production system consisting primarily of inputs and output does not have the wider connotations involving all phases from technology forecasting to manufacturing The closed relationships that exist between production and pre-production arrangements is known as the interrelationships between systems

Interrelationship Among Systems-

Stratum Formulationmafioba@yahoo.com

A production system consisting of various strata of corporate hierarchy wherein each stratum has a role to play

Characteristics of Production System

Specification of functions- As the production system expands it trends to have large number of hierarchical strata each performing specialized functions Increase of Entropy- according to Ogawa entropy is a measure of the degradation of the matter and the energy in the universe to an ultimate state of inert uniformity. To cope with the rapid changes of technological innovation the organization as well as production system needs to be rejuvenated.

Insofinality Insofinality is the process of reaching the same goal by different routes. There are different approaches to converting input to output.
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Types Of Production Systems Controls

1.Feedback Control
In this type of control the output is obtained as a result of input and processing. It is then measured to see if it is in agreement with the goal. If the output is not in agreement with the goal, corrective measures are taken to address the shortfall

1.Feedforward Control
In this type of control mechanism, input is checked

against pre-specified standards prior to processing as well as output phase. The feedforward control system collects measurement data, compares them against the specification and initiate corrective measures.
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Production System Design

Design of production systems aims to achieve the right mix of varying proportions of the element of production The production system design must be effective in its overall context Production system must be designed with both the internal and external factors in mind
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Factors of Production
Traditionally factors of production were; Land Labour Capital Entrepreneurship

New classification of resources to entities namely:

Men or women/ Money/ Machines Materials/ Methods/ Management Measurement/ Message/ Motive Power Apart from men and money all the other resources are knowledge based and technology oriented
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Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such as labour and capital) Productivity = Output Input
The objective is to improve this measure of efficiency
Production is a measure of output only and not a measure of efficiency
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Factors that Affect Productivity

Methods/Capital/Quality/Technology Management/Standardizing Use of internet/Computer Viruses Scrap Rates/New Staff Health & Safety Inadequate Skilled hands Labour turnover/Incentive Plans Design of workspace/place Equipment's breakdown
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Productive Use of Resources

Operations personnel should make maximum use of resources at their disposal Input = Output + Waste There are two approaches for enhancing productivity

a. Increasing productivity
The ratio can be improved in various ways 1. Increasing output while keeping inputs constant 2. Decreasing inputs while keeping output constant 3. Increasing output in greater proportion than increase in input
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Productive Use Of Resources

b. Decreasing waste Reduction of waste or scrap is another way of enhancing productivity One way of reducing waste is to minimize the generation of waste The emphasis is shifting to tacking the problem at the source of the generation of the waste rather than dealing with the waste
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Productivity Improvement
Establish reasonable goals for improvement Develop measure for all operations (to manage & control) Holistic approach is critical Develop methods of achieving improvements(eg. Soliciting ideas from experts or studying other firms) Incentives and rewards to contribution of improvement is very important Measure improvements and publicize them In order to maximize the output and minimize the input it is necessary to control the whole of production systems
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Computing Productivity
Productivity measure can be based on the following:

Single Input (partial Productivity) More than one Input (multifactor productivity) All Inputs (Total productivity)
Some Example of Different Types of Productivity Measure

Partial Measure Multifactor Total Measure

Output Labour

Output Machine

Output Capital

Output Energy

Output Labour + Machine

Output Labour + Capital+Energy

Goods & services produced All inputs used to produce them

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Some Examples of Partial Productivity Measures Labour productivity

Units of Output per Labour Hour Units of Output per Shift Value-added per Labour Hour Dollar Value of Output per Labour Hour Units of Output per Machine Hour Dollar Value of Output per Machine Hour

Machine productivity Capital productivity

Energy Productivity

Units of Output per Dollar Input Dollar Value of Output per Dollar Inputs Units of Output per Kilowatt-Hour Dollar Value of Output per KilowattHour
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Trial Questions

(1) Bernadine, a local auto mechanic, finds that it usually takes him 2 hours to diagnose and fix a typical problem. What is his daily productivity (assume an 8 hour day)? (2) Bernadine believes she can purchase a small computer trouble-shooting device, which will allow him to find and fix a problem in the incredible (at least to his customers!) time of 1 hour. She will, however, have to spend an extra hour each morning adjusting the computerized diagnostic device. What will be the impact on his productivity if he purchases the device? (3) Define Productivity. List some factors that can affect productivity and some ways in which productivity can be improved. (4) A production system is characterized by its inputs, transformation process and outputs. Identify for the following production systems the inputs, conversion and major outputs A) Automobiles manufacturing B) A hospital C) A university
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Trial Questions
(5) As the operations manager of a large manufacturing and retailing organization, your managing director has requested you to make a 30 minute presentation on the theme Production/Operations Management to some newly recruited executives. Prepare your notes for the presentation along the following lines: (a) The meaning and importance of production and operations management. (b) A systems view point of operations (c) Why quality is important to the organization (d) Measures taken to improve productivity in the organization.
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Defining Quality-Dimension of Quality Product Dimension Definition Example (car)

Performance Aesthetics Special Features Conformance Reliability Durability Perceived Quality Serviceability
Main characteristics of the product Appearance, feel smell, taste Extra characteristics Correspondence to design specification Consistency of performance Useful life of the product Reputation(indirect evaluation of quality) Handling of complains & repairs
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Everything works, fit & Finish, drive, handling, acceleration Exterior or interior design Convenience like placement of gauge, cell phone, DVD Matches all specifications Infrequent needs for repairs Useful life in miles, resistance to rust Top-rated

Services after sales

Definition: Dimension of QualityServices Definition Dimension Example (car)

Tangibles
Physical appearance of facilities, Facilities equipment, personnel, hygiene communication materials /personnel

Convenience Reliability Responsivenes s Time

Assurance Courtesy

Availability & accessibility of the Is the centre services conveniently located

Dependable, consistency, accuracy No problem for fixing

Willingness of service providers to Customer services help customers in unusual situation people willing to answer questions The speed with which service is Turnaround time delivered Knowledge exhibits by personnel Expertise in repairs &their ability to convey Trust & confidence Way customers employees are treated by Customers services courteous & friendly

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What Does TQM Mean ?

TQM is a systems approach to ensure quality in an organization Total Quality Management means that the organization's culture is defined by and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques, and training. This involves the continuous improvement of organizational processes, resulting in high quality products and services. Quality activities are planned and managed into systems and are oriented towards the achievement of complete customer satisfaction
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TQM:A HISTORIC PERSPECTIVE

Quality mgt systems have evolved through quality control, quality assurance and total quality control Quality control is concerned with defect detection by using post-production inspection procedures Quality assurance systems aim to produce as per design specifications and emphasize defect prevention Total quality control systems are concerned with cost reduction efforts as a drive towards continual improvement
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Defining Quality
Possessing High Degree of Excellence

Is the Ability of an Organization to Provide Goods Or Services Which Consistently Meet or Exceed Customer Expectations.

In technical usage, quality can have 2 meanings:

the characteristics of a product or service that bear on its ability to satisfy stated or implied needs, a product or service free of deficiencies
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Defining Quality- Different Views

Customers view (more subjective)

the quality of the design (look, feel, function) product does whats intended and lasts

Producers view
conformance to requirements costs of quality (prevention, scrap, warranty) increasing conformance raises profits

Governments view
products should be safe not harmful to environment

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TQMs Customer Approach

the customer defines quality. the customer is always right. the customer always comes first. the customer is king. quality begins and ends with the customer
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Customer Attitudes to Quality

An average customer with a complaint tells 910 people; if it is resolved he/she only tells 5 people. For every complaint received, there are twenty others that are not reported. It costs 5-10 times more in resources to replace a customer than it does to retain one. Companies spend 95% of service time redressing problems and only 5% trying to figure out what made the customer angry.
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Productivity and TQM Traditional view:

Quality cannot be improved without significant losses in productivity.

TQM View:
Improved quality leads to improved productivity.

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Basic Tenets of TQM

1. The customer makes the ultimate determination of quality. 2. Top Management must provide leadership and support for all quality initiatives. 3. Preventing variability is the key to producing high quality. 4. Quality goals are a moving target, thereby requiring a commitment toward continuous improvement 5. Improving quality requires the establishment of effective metrics. We must speak with data and facts not just opinions
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Total Quality Management and Continuous Improvement TQM is the management process used to make continuous improvements to all functions. TQM represents an ongoing, continuous commitment to improvement. The foundation of total quality is a management philosophy that supports meeting customer requirements through continuous improvement
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Total Quality Improvement

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So Are the Benefits?

Quality: goods and services that are reliable and perform correctly. Quality allows customers to receive the performance that they expect.

Efficiency: the amount of input to produce a given output. Less input required lowers cost and waste. Responsiveness to customers: actions taken to respond to customer needs. Firm can react quickly and correctly to customer needs as they arise.

Improving Responsiveness to Customers

Without customers, organizations cease to exist. Non-profit and for-profit firms all have customers. Managers need to identify who the customer is and their needs. What do customers want? Usually customers prefer: A lower price to a higher price. High quality over low quality. Fast service over slow service. Also good after sale support. Many features over few features. Products tailored to their specific needs.

Price v. Attributes
Firms offering high quality, fast service and other customer desires, often must raise price.
Customers must tradeoff price for attributes. Operations management tries to push the price/attribute curve to the right with better production. Provides more attributes at the same cost. By enhancing the price/attribute relationship, the firm can increase its competitive position.

 ISO is International Organization for Standardization

Quality Certification

1906 - International Electro-technical Commission 1926 - International Federation of the National Standardizing Associations (ISA) 1946 London - delegates from 25 countries decided to create a new international organization "the object of which would be to facilitate the international coordination and unification of industrial standards 1947 - ISO began to officially function 1951 - The first ISO standard was published
"Standard reference temperature for industrial length measurement".
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What has ISO Accomplished?

ISO film speed code Standard format for telephone and banking cards ISO 9000 which provides a framework for quality management and quality assurance ISO 14000 series provides a similar framework for environmental management Internationally standardized freight containers Standardized paper sizes. Automobile control symbols ISO international codes for country names, currencies and languages
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What are ISO 9000 Standards

ISO 9000 Standards Define the required elements of an effective quality management system Can be applied to any company International Organization for Standardization Geneva ISO tech committee - TC 176 started in 1979 Standards created in 1987 To eliminate country to country differences To eliminate terminology confusion To increase quality awareness
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ISO 9000:2000 Consists of 3 Areas

ISO 9000:2000 Quality Management Systems: fundamentals and vocabulary ISO 9001:2000 Quality Management Systems Requirements (required for certification) Management responsibility Resource management Product/service realization Measurement, analysis, improvement ISO 9004-2000 Quality Management Systems Guidelines for performance improvement
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The ISO 9000: 2000 series is based on eight quality management principles: 1. Systems approach to management 2. Leadership 3. People involvement 4. Continuous improvement 5. Customer focus 6. Sound supplier relationships 7. Process approach 8. Decisions based on facts
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Trial Questions

(1) Bernadine, a local auto mechanic, finds that it usually takes him 2 hours to diagnose and fix a typical problem. What is his daily productivity (assume an 8 hour day)? (2) Bernadine believes she can purchase a small computer trouble-shooting device, which will allow him to find and fix a problem in the incredible (at least to his customers!) time of 1 hour. She will, however, have to spend an extra hour each morning adjusting the computerized diagnostic device. What will be the impact on his productivity if he purchases the device? (3) Define Productivity. List some factors that can affect productivity and some ways in which productivity can be improved. (4) A production system is characterized by its inputs, transformation process and outputs. Identify for the following production systems the inputs, conversion and major outputs A) Automobiles manufacturing B) A hospital C) A university
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Trial Questions

(5) As the operations manager of a large manufacturing and retailing organization, your managing director has requested you to make a 30 minute presentation on the theme Production/Operations Management to some newly recruited executives. Prepare your notes for the presentation along the following lines: (a) The meaning and importance of production and operations management. (b) A systems view point of operations (c) Why quality is important to the organization (d) Measures taken to improve productivity in the organization.

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Thank You

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