Operations

Some basic terms and definitions related to operations management are given below.
The terms and information contained in this pack is not exhaustive in any manner.
Also, the pack provides for only the introduction to these topics, you could be probed
further in an interview, so please do read beyond the mere definitions.

Operations Management
Operations management is concerned with planning, organizing and supervising in the
contexts of production, manufacturing or the provision of services. It is delivery-
focused, ensuring that an organization successfully turns inputs to outputs in an
efficient manner. The inputs themselves could represent anything from materials,
equipment and technology to human resources such as staff or workers.

Supply Chain Management

Supply chain management is the streamlining of a business' supply-side activities to
maximize customer value and to gain a competitive advantage in the marketplace.
Supply chain management (SCM) represents an effort by suppliers to develop and
implement supply chains that are as efficient and economical as possible. Supply chains
cover everything from production, to product development, to the information systems
needed to direct these undertakings.

Inventory management is the process of ensuring that a company always has the
products it needs on hand and that it keeps costs as low as possible.
Three types of inventory: raw materials, work-in-progress, and finished goods.

Quality
Fitness for use. Quality is what the customer wants. It is the customers perception
about the degree to which the product or service meets his/her expectation.

Quality Specifications:
Performance
 Features

Reliability/ Durability

Serviceability

Aesthetics

Perceived Quality

Quality Assurance vs Quality Control

Quality assurance is a set of activities for ensuring quality in the processes by which
products are developed.
Quality Control is a set of activities for ensuring quality in products. The activities focus
on identifying defects in the actual products produced.

Preventive QC addresses the potential for a non-conformity or error to occur even

before the product is manufactured.

Total Quality Management

Total quality management aims to hold all parties involved in the production process
as accountable for the overall quality of the final product or service. It is a continuous
process that seeks to improve the quality of products and services.

Six Sigma:
Six Sigma is one of the most important concept of Operations management. It is a
process driven approach which emphasize on continuous improvement and focus on
customer needs. It is an approach to achieve less than 3.4 PPM defects by continuous
improvement.
The sigma scale is a universal measure of how well a critical characteristic performs
compared to its requirements. The higher the sigma score, the more capable the
characteristic. For example, if a critical characteristic is defective 31 percent of the time,
you say that this characteristic operates at two sigma. But if it runs at 93.3-percent
compliance, you say that it operates at three sigma.
In some instances, great companies are able to produce Six Sigma quality in their final
products, services, and transactions especially when safety or human life is involved.
For example, did you know that youre about 2,000 times more likely to reach your
destination when you fly than your luggage is? Thats because airline safety operates
at a level higher than Six Sigma, while baggage reliability operates at about four sigma.

Following table gives the difference between compliance level of 99% and 99.99966%

(i.e. Six Sigma) process.

99% Good (3.8 Sigma) 99.99966% Good (Six Sigma)

20,000 lost articles of mail per hour 7 articles of lost mail per hour

Unsafe drinking water for almost 15 minutes per 1 unsafe minute of drinking water every seven
day months

5,000 incorrect surgical operations per week 1.7 incorrect surgical operations per week

2 short or long landings at major airports every day 1 short or long landing at major airports every five
years

200,000 incorrect drug prescriptions each year 68 incorrect drug prescriptions each year

No electricity for almost 7 hours each month One hour without electricity every 34 years

11.8 million shares incorrectly traded on the 4,021 shares incorrectly traded on the NYSE every
NYSE every day day

3 warranty claims for every new automobile 1 warranty claim for every 980 new automobiles

48,000 to 96,000 deaths attributed to hospital 17 to 34 deaths attributed to hospital errors each year
errors each
year

Source: KPMG Lean Six Sigma Advisory

There are two types of Six Sigma Processes:

1. DMAIC: It stands for Define, Measure, Analyse, Improve and Control. This is
used for existing processes.
 2. DMADV: It stands for Define, Measure Analyse, Define and Verify. This is used
for new processes.

Benchmarking is the process of comparing one's business processes and performance

metrics to industry bests and best practices from other companies.

Just In Time
It is an inventory control system in which the materials are delivered just in time before
manufacturing, not before, not after.

Lean Manufacturing/Production Integrated activities designed to achieve high

volume production using minimal level of inventory.

Lean Supply Chain It includes basically lean stakeholders in whole value chain i.e. Lean
Supplier, Lean Procurement, Lean manufacturing, Lean Warehousing, Lean logistics etc.

Logistics It is the science of obtaining, producing and distributing material and product
in the proper place and in the proper quantity.

Job Scheduling Specification of the work activities of an individual or a group and

scheduling their work as per requirement of supply chain.

Procurement Process of purchasing material and products from a given vendor for
various application in an enterprise.

Supply Chain-Upstream & Downstream Upstream in SC indicates supplier side while

downstream in SC indicates goods movement to customer side.
Lead Time The amount of time that elapses between starting of a process and its
completion.

Transportation Movement of goods among organizations and customers.

Value Chain Value chain is a set of activities in which every individual involved in the
process add some value to the product. It includes procurement, design,
manufacturing, logistics, sales, services etc.

Following are some of the latest trends and buzzwords in operations and supply chain
management. Look up and read on about these trends:

1. Supply chain risk management and resiliency

2. How Amazon Go will impact the whole SCM
3. Drone Delivery
4. The Internet of Things
5. Shift to Big Data and Cloud computing
6. Linear Supply Chain vs Circular Supply Chain
7. Role of augmented reality in SCM and operations

You may refer to following websites for further knowledge:

http://www.forbes.com/sites/neilstern/2016/12/05/amazon-go-a-game-changer-for-the-retail-
industry/#16732297efb6

http://cerasis.com/2016/01/05/supply-chain-trends-2016/

http://cerasis.com/2016/08/01/supply-chain-and-logistics-trends/

https://www.journals.elsevier.com/journal-of-operations-management/recent-articles

http://www.slidesandnotes.com/2013/06/recent-trends-in-operations-management.html