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Definitions of Operations management

Operations management is an area of business concerned with the production of goods and
services, and involves the responsibility of ensuring that business operations are efficient in
terms of using as little resource as needed, and effective in terms of meeting customer
requirements. It is concerned with managing the process that converts inputs (in the forms of
materials, labor and energy) into outputs (in the form of goods and services).
Operations traditionally refer to the production of goods and services separately, although the
distinction between these two main types of operations is increasingly difficult to make as
manufacturers tend to merge product and service offerings. More generally, Operations
Management aims to increase the content of value-added activities in any given process.
Fundamentally, these value-adding creative activities should be aligned with market opportunity
(see Marketing) for optimal enterprise performance.
According to the U.S. Department of Education, Operations Management [is the field concerned
with managing and directing] the physical and/or technical functions of a firm or organization,
particularly those relating to development, production, and manufacturing. [Operations
Management programs typically include] instruction in principles of general management,
manufacturing and production systems, plant management, equipment maintenance
management, production control, industrial labor relations and skilled trades supervision,
strategic manufacturing policy, systems analysis, productivity analysis and cost control, and
materials planning.

Various types of operations

• Purchasing

• Control and Coordinating Function of Management

• Product and Service Management

• Quality Management

• Inventory Management

• Logistics and Transportation Management

• Facilities Management

• Configuration Management

• Distribution Channels

• Enterprise Resource Planning

Task of operation managers
Work Environment

One of the duties an operation manager has to perform is to provide a work environment that
engenders positive energy, creativity and teamwork among employees. To ensure that this goal is
achieved, operations managers try to reach compromises with employees by conducting
meetings, listening to each department's issues and concerns, and setting a professional example
by showing leadership qualities.

Institute Rules

In order for a department to run smoothly, an operations manager has to set rules and procedures
for employees to follow. This includes setting policies in the workplace to ensure effective
implementation and adherence among each and every employee in the organization.

Manages Budget

An operations manager usually handles a company’s operating budget to determine how much
the company has spent and what it can purchase in the near future. Being an operations manager
is all about serving customers; therefore the individual needs to know how much money is in a
company's budget to provide the products and services that will retain customers.


Operations managers are also representatives at committee meetings and functions. The manager
will be a spokesperson for the company and discuss the various objectives and plans the
organization has in store to make its business more successful.


Handling issues is also a top priority among operations managers. Many issues that operations
managers have to face include risk management, shipment delays, clients’ dissatisfaction and
employee problems. This is when leadership skills come into play, as operations managers have
to make effective decisions that will not only help the company run smoothly but that also serve
to prevent difficult situations in the future.


Operation managers are also responsible for hiring employees inside an organization, as well as
supervising and evaluating employees and their job performance. In addition to being a recruiter,
operations managers give directions to employees on certain job tasks, resolve problems
concerning employees’ work performance, establish rules and procedures and create work
Tasks of an operation manager

• Oversee activities directly related to making products or providing services.

• Direct and coordinate activities of businesses or departments concerned with the
production, pricing, sales, or distribution of products.
• Review financial statements, sales and activity reports, and other performance data to
measure productivity and goal achievement and to determine areas needing cost
reduction and program improvement.
• Manage staff, preparing work schedules and assigning specific duties.
• Direct and coordinate organization's financial and budget activities to fund operations,
maximize investments, and increase efficiency.
• Establish and implement departmental policies, goals, objectives, and procedures,
conferring with board members, organization officials, and staff members as necessary.
• Determine staffing requirements, and interview, hire and train new employees, or oversee
those personnel processes.
• Plan and direct activities such as sales promotions, coordinating with other department
heads as required.
• Determine goods and services to be sold, and set prices and credit terms, based on
forecasts of customer demand.
• Locate, select, and procure merchandise for resale, representing management in purchase

Importance of operation management in an organization

To be able produce professional managers capable of fulfilling strategic roles within business
and government enterprises the need for the practice of operations management cannot be
forgone. Operations management is very important in business operations since it forms the heart
of the organization by controlling the system of operation. Operations management deals with
the design, operation, and improvement of the systems that create and deliver a firm’s primary
products and services. Like marketing and finance, operations management is a functional field
of business with clear management responsibilities. Guinness Ghana limited is a company in
which produces alcoholic and nonalcoholic beverages such as Guinness and Malta Guinness
respectively. In a business entity like Guineas Ghana limited the use of operations management
is very necessary in every fabric of the company’s activities. Guinness Ghana Limited uses
operations management to ensure and sustain efficiency and effectiveness in the organization.
Efficiency in Guinness Ghana is concerned with how well resources such as human expertise and
inputs are put in use irrespective of the purpose for which they were deployed in the company.
The company through its activities ensures that the primary objective for its establishment to
make profits and maximize shareholders value is realized. The company reduces its cost of
production by ensuring that tangible and intangible resources are not over stretched or wasted in
the organization. This is a situation where the company carries out effectively its objectives to be
the market leader using minimum resources to achieve maximum output. The measures of
effectiveness and efficiency in Guinness Ghana leads to labor productivity, yield, capacity fill
working capital utilization and the efficiency of production systems. Guinness Ghana Limited
also makes good use of its products and services management through operations management.
Product (or service) management includes a wide range of management activities, ranging from
the time that there's a new idea for a product to eventually provide ongoing support to customers
who have purchased the new product. Every organization conducts product management,
whether it's done intentionally or unintentionally. Guinness Ghana through this module provides
a wide overview of considerations in developing and managing its product. How a product is
developed or managed depends very much on the nature of the organization and its products,
Guinness Ghana uses it core competences in the areas of manufacturing, branding, marketing
through wholesale and retail outlets to gain competitive advantage in the market place. Quality
management is also a very important aspect of operations management in every organization.
Guinness Ghana is very critical about its products developed for the customer in the market
place. Quality management is crucial to effective operations management, particularly
continuous improvement to match the consumers taste and preference at all times. More recent
advancements in quality, such as benchmarking and total quality management, outsourcing and
reengineering have resulted in advancements to operations management in Guinness Ghana
Limited. The company through its reengineering and benchmarking activities has always earned
the leadership in the market. Benchmarking serves as a first class internal auditing process which
the company uses to diagnose its weaknesses and identify ways of turning them into strength to
increase its customer base in the market place. Management Control and Coordinating Function
cannot be forgone in operations management especially in a company like Guinness Ghana
Limited. Management control and coordination includes a broad range of activities to ensure that
the company’s goals are consistently being met in an effective and efficient fashion. Basically,
organizational coordination and control is what the company uses to take a systematic approach
to figuring out if it is actually doing what it wanted to be doing or not. Some of the major
approaches to the company’s organizational control and coordination include product evaluation,
product distribution, advertising and promotion, sales and service and product development. For
instance, product distribution in Guinness Ghana is done through retailers and other small
distribution outlets organized by the company to ensure that its products reaches the consumer
within an arm’s length. The company also uses advertisements as a major instrument to reach the
customer and reorient the perception of customers about its products. In this increasingly
expanding and competitive marketplace, the company ensures its products and services are
prominently in the minds of their customers and clients. This occurs as a result of ongoing
advertising and promotion by the company. Facilities management is also a necessary function
and its importance on operations management for Guinness Ghana is needed. Effective
operations management in the company’s activities depends on a great deal of effective
management of facilities, such as buildings, computer systems, signage, lighting and plants and
machinery. Facilities management in Guinness Ghana is very important since the company may
be engaged in a batch or mass production depending on the demand circumstances on the
market. In a case high demand which Could necessitate higher or mass production, facilities
needs to be managed in producing large quantities of products which must be standardized to
meet the market demand at specific period. Well managed facilities like plants and machinery in
the company help in production speed, lower per unit cost, ease of manufacture and control and
the efficiency in the company’s production process. Inventory control and management is one
importance of operations management that Guinness Ghana limited uses in its operations.
Managing and controlling the inventory of the company is very critical. Innovative methods,
such as Just-in-Time inventory control, are some of the major instruments used by the company
to save costs and move products and services to customers more quickly.

Key Forces in the Internal Environment

The resource strength, behavior, weakness, synergy and distinctive competences are major
components of the internal environment of an organization.

An organization uses different types of resources which leads to its advantage (synergy) or
disadvantage disynergy within an organization.

It is the effective use of these resources that leads to synergistic advantage of the firm over
another firm in the industry (strengths) weakness of over a period of time.

Organizational capability in the design and implementation of corporate policy and strategy rest
on an organizations capacity and ability to use its distinctive competences to excel in a particular

Some of the constituents of internal environments of an organization are:

Organizational Resources
These are all the inputs physical or human used in the organization to create outputs in the firm
of product or services through a transformation process.

Some other resources of organizations are money, facilities, systems, knowledge, materials and
manpower. The cost and availability of these resources are important factors that determine the
success of an organizations policy and strategy.

Organizational Behavior
These behaviors’ an organization demonstrates as a result of influences and forces operating in
the internal environment of determine the ability or constraints in the usage of resources is
termed organizational behavior.

Synergistic Advantage
This is a situation where the whole is greater than the sum of its parts within an organization. 1 +
1 = 3. it is a situation where attributes do not add up mathematically but combine to yield an
enhanced or reduced impact i.e. (synergistic effect).

Two or more department could combine to support each other, in order to realize higher output
or to share an impact within the organization. For instance, marketing, distribution and
promotion may support each other for higher level of marketing strategy. Conversely, marketing
inefficiency on the other hand, reduces production efficiency (dysenergy) i.e. negative synergy

Strengths and Weaknesses

The strength of an organization are the attributes the organization has over another organization.
The strength gave the organization the competitive edge over another in the same industry, while
weaknesses are areas within the organization where the competitors in the same industry can take
advantage of as their competitive edge.

Distinctive Competence
This is a comparative quality of one organization over the other.

A distinctive competence of an organization is the ability of that firm to do what its competitors
cannot do or do better whet they can do. This concept is useful for strategy formulation. Use of
trained and qualified manpower could be an organization distinct. Competences over the other
who may resolve o use the unskilled and low paid workers.

Key Forces in the External Environment

Administrative/Legal Environment

The administrative and legal environment in a country provides a framework within which an
organization operates. In some countries this environment is very restrictive and has significant
impact on all aspects of the organization; in other countries the administrative/legal context is
more permissive. Understanding the administrative/legal environment is essential to determining
if organizational change can take place. The administrative context within which the
organization operates may be shaped by a unique combination of forces, including international,
governmental, nongovernmental policy, legislative, regulatory, and legal frameworks. An
organization is affected by the policy or regulatory context that gave rise to it. This includes
specific laws and regulations that support or inhibit the institution's development.

Several specific dimensions of the administrative environment should be examined:

• Whether there are constitutional restrictions on the organization: An assessment

should first determine whether the organization is part of a government ministry or
department, and whether it is under federal or provincial jurisdiction.

• Whether specific regulations govern the goals and structures of the organization: It is
important for IDRC to know if the organization has a specific mandate and/or a
specific structure that has been imposed.

• Whether there is a legislative mandate that restricts leadership of the organization: It

is helpful to understand any parameters that have been set around who can lead an
organization. This includes identifying the governing body of the organization, and
understanding how its members are selected, and further understanding who has the
mandate or authority to set goals for the organization and develop curriculum.

Technology Environment

Both the types and the level of technology in the society give insight into understanding an
institution. Institutions dealing with Western paradigms are dependent on the state of national
infrastructure, e.g. power, water, transport; those which concentrate on indigenous research
paradigms may have totally different dependencies. Thus, it is important to understand the level
of relevant technology in the institutional context and whether such technology is defined by
computer literacy or by highly developed indigenous methods of verbal and nonverbal
communication. It might also be helpful for an assessment to include a consideration of the
process by which new technology comes into use, both to understand how difficult it is to
acquire needed research technologies and to develop an appreciation for the society's willingness
to embrace both new knowledge and change.

Political Environment

At a general level, IDRC needs to understand the relationship between governmental strategy or
development plans and the institution. Several specific dimensions of the political context should
be scrutinized:

• The extent to which government and its bureaucracy supports and contributes resources
to the institution: It is imperative that IDRC and other funding agencies know whether
significant governmental inputs are anticipated to support increased staffing,
maintenance, or other recurring costs typical in research projects. The political context
usually entails resource trade-off decisions at the government level.
• The extent to which the political system is stable or poised to undergo significant change:
This factor is vital; the foreign policy context and its effect on IDRC should also be

• Whether the political context of the institution directly involves the legal context: Some
institutions require specific legal status to operate, to receive external funding, and to
import equipment in support of research.

Economic Environment

In the economic environment, the organizational analysis should centre on those aspects of the
economic system that directly impact the type of project being considered. For example,
inflation, labour laws, and opportunity costs for researchers in public institutions directly impact
organizational activities. Clearly, a country under a structural adjustment regime or one that is
expecting to undergo restructuring presents an investment context that IDRC needs to
understand. Countries with foreign currency restrictions represent different environments for
institutions than countries without them, for such restrictions have ramifications for research, e.g.
for equipment procurement and maintenance. It is important for IDRC to know how the
organization the Centre is supporting is affected by these and other economic forces.

Social and Cultural Environments

Social and cultural forces at local, national, and often regional levels have profound influence on
the way organizations conduct their work and on what they value in terms of outcomes and
effects. For example, the mores of an indigenous culture have a bearing on the work ethic and on
the way in which people relate to one another. Undoubtedly, the most profound cultural
dimension is language. The extent to which organizational members can participate in the
discourse of the major scientific language will determine the extent to which research efforts
focus inwardly or contribute to regional and global research agendas. Understanding the
national/regional/local values toward learning and research provides insight into the type and
nature of research that is valued. For example, what is the relative priority placed on contract
research in partnership with local clients, e.g. testing products and procedures with indigenous
populations, as opposed to sharing information with academic peers internationally, or
generating biostatistical data that will shape national or regional policy? Arriving at these
priorities involves culture-based decisions.

Stakeholder Environment

Although research institutions tend to be driven by the research mission and the process of
achieving it, all institutions are dependent for their survival on various groups of stakeholders.
The stakeholder environment consists of those people and organizations external to the research
institution who are directly concerned with the organization and its performance. Examples of
stakeholders are suppliers, clients, sponsors, donors, potential target groups, and other
institutions doing similar or complementary work. An organizational analysis seeks to learn the
identity of these groups in order to assess their potential impact on the organization. Because of
its international interdependent dimension, contemporary research relies on institutional
relationships, and these need to be understood. Thus formal and de facto relationships with
universities, government departments and agencies and other research institutions both within
and outside the country need to be understood.

Influences from these multiple environmental contexts can become major facilitating or
constricting forces on the institution as it works to accomplish its mission. In the extreme, these
forces can keep an institution alive artificially; conversely, they can thwart organizational

Strategic Planning
A strategic plan:

1) Is a road map to lead an organization from its present state to its Strategic planning involves
determining the required actions to achieve a desired vision considering the present state of an
organization. desired medium or long term future state

2) Specifies the mission, vision, goals, strategies and objectives Strategic Planning Process Steps

a. Analyzing the present environment – SWOT

b. Providing a vision statement

c. Refining vision into goals

d. Determining strategies using the outcomes of SWOT analysis and specified goals

e. Formulating concrete and measurable objectives from strategies

f. Communicating and reviewing the strategic plan

The Value Chain

To analyze the specific activities through which firms can create a competitive advantage, it is
useful to model the firm as a chain of value-creating activities. Michael Porter identified a set of
interrelated generic activities common to a wide range of firms. The resulting model is known as
the value chain and is depicted below:
Primary Value Chain Activities

Inbound Marketing
> Operations > d > > Service
Logistics & Sales

The goal of these activities is to create value that exceeds the cost of providing the product or
service, thus generating a profit margin.

• Inbound logistics include the receiving, warehousing, and inventory control of input
• Operations are the value-creating activities that transform the inputs into the final
• Outbound logistics are the activities required to get the finished product to the customer,
including warehousing, order fulfillment, etc.
• Marketing & Sales are those activities associated with getting buyers to purchase the
product, including channel selection, advertising, pricing, etc.
• Service activities are those that maintain and enhance the product's value including
customer support, repair services, etc.

Any or all of these primary activities may be vital in developing a competitive advantage. For
example, logistics activities are critical for a provider of distribution services, and service
activities may be the key focus for a firm offering on-site maintenance contracts for office

These five categories are generic and portrayed here in a general manner. Each generic activity
includes specific activities that vary by industry.

Support Activities

The primary value chain activities described above are facilitated by support activities. Porter
identified four generic categories of support activities, the details of which are industry-specific.

• Procurement - the function of purchasing the raw materials and other inputs used in the
value-creating activities.
• Technology Development - includes research and development, process automation, and
other technology development used to support the value-chain activities.
• Human Resource Management - the activities associated with recruiting, development,
and compensation of employees.
• Firm Infrastructure - includes activities such as finance, legal, quality management, etc.
Support activities often are viewed as "overhead", but some firms successfully have used them to
develop a competitive advantage, for example, to develop a cost advantage through innovative
management of information systems.

Value Chain Analysis

In order to better understand the activities leading to a competitive advantage, one can begin with
the generic value chain and then identify the relevant firm-specific activities. Process flows can
be mapped, and these flows used to isolate the individual value-creating activities.

Once the discrete activities are defined, linkages between activities should be identified. A
linkage exists if the performance or cost of one activity affects that of another. Competitive
advantage may be obtained by optimizing and coordinating linked activities.

The value chain also is useful in outsourcing decisions. Understanding the linkages between
activities can lead to more optimal make-or-buy decisions that can result in either a cost
advantage or a differentiation advantage.

The Value System

The firm's value chain links to the value chains of upstream suppliers and downstream buyers.
The result is a larger stream of activities known as the value system. The development of a
competitive advantage depends not only on the firm-specific value chain, but also on the value
system of which the firm is a part.

Micro and Macro Operations

A digital computer performs various operations. These operations can be classified into two
groups–micro operations and macro operations.

Micro Operations: This is an elementary operation during one clock pulse on the information
stored in one or more registers i.e., the operations executed on data stored in registers are called
micro operations. The result of these micro operations may change the previous contents of the
registers or it may be transferred to the other registers.

Macro Operations: A set of micro operations specified by an instruction is known as macro

operation. For example when an instruction is decoded, the necessary control signals are
generated by the control unit. To do this various operations are performed on registers. All these
operations are separately known as micro operations and combined together are known as macro
The addition of memory contents into accumulator is treated as one macro operation. This is
achieved with the instruction opcode ADD.

The above macro operation consists of the following set of micro operations which are activated
for every clock pulse.

T1 State: Contents of program counter are transferred to memory address register.

T2 State: Program counter is incremented to point to next instruction.

T3 State: The instruction is transferred to instruction register.

T4 State: The instruction is decoded and executed resulting in the addition of memory contents
M to accumulator.

Internal team factors to consider

Task Structure: Is the team task clear, consistent with the team’s purpose, and aligned with
Important organizational goals? Does the team have a meaningful piece of work to do for which
members share responsibility and accountability and that provides opportunities for the team to
learn how well it is doing? Is the outcome that the team is seeking clearly understood by each of
the members?

Team Composition: Is the team well staffed? Is it the right size, given the work to be done? Do
members have the expertise required to perform the task well? Do they have sufficient
interpersonal skill to function collaboratively? Are team members so similar in background and
perspectives that there is little for them to learn from one another? Or are they so different that
they risk having difficulty communicating and coordinating with one another?

Core Norms: Expectations of what is “acceptable” team behavior tend either to be “imported” to
the team by members or established very early in the team’s lifespan. Articulating these “norms”
ahead of time via a “team charter” or “team vision statement” can be very helpful, and should
cover areas such as how the team will make decisions, communicate and evaluate itself.

Decision Making: Does the team have an appropriate process in place for making decisions, and
does it in fact adhere to that process?

External team factors to consider

Reward System: Does the company’s reward system provide recognition, reinforcement and
compensation that are contingent on team performance? Are rewards administered to the team as
a whole or to individuals within the team? Does the reward system truly encourage team
members to work collaboratively?

Educational System: Is training or technical assistance available to the team for any aspects of
the work for which members do not already have adequate knowledge, skill or experience?
Information System: Does the team have ready access to the data, tools and other resources that
enable superior performance?

Organizational Culture: Does the company for which the team works have a collaborative
culture that genuinely fosters and supports teams? Or is it a culture that still promotes and
recognizes individual achievement? Do the company’s top leaders really “buy-into” the concept
of teams?

In summary, those who create, lead and evaluate work teams in organizations should focus their
efforts on these internal and external factors that support effective team performance.

Operations performance objectives

This first point made in this section of the chapter is that operations objectives are very broad.
Operations management has an impact on the five broad categories of stakeholders in any
organization. Stakeholders is a broad term but is generally used to mean anybody who could
have an interest in, or is affected by, the operation. The five groups are:

• Customers – These are the most obvious people who will be affected by any business.
What the chapter goes on to call the five operations performance objectives apply
primarily to this group of people.
• Suppliers – Operations can have a major impact on suppliers, both on how they prosper
themselves, and on how effective they are at supplying the operation.
• Shareholders – Clearly, the better an operation is at producing goods and services, the
more likely the whole business is to prosper and shareholders will be one of the major
beneficiaries of this.
• Employees – Similarly, employees will be generally better off if the company is
prosperous; if only because they are more likely to be employed in the future. However
operations responsibilities to employees go far beyond this. It includes the general
working conditions which are determined by the way the operation has been designed.
• Society – Although often having no direct economic connection with the company,
individuals and groups in society at large can be impacted by the way its operations
managers behave. The most obvious example is in the environmental responsibility
exhibited by operations managers.
After making this general point about operations objectives, the rest of the part goes on to look at
the five performance objectives of quality, speed, dependability, flexibility, and cost.


The chapter makes two important points here. The first is that the cost structure of different
organizations can vary greatly. Note how the different categories of cost vary in the four
examples given in the chapter. Second, and most importantly, the other four performance
objectives all contribute, internally, to reducing cost. This has been one of the major revelations
within operations management over the last twenty years.

"If managed properly, high quality, high speed, high dependability and high flexibility can not
only bring their own external rewards, they can also save the operation cost."


Quality is placed first in our list of performance objectives because many authorities believe it to
be the most important. Certainly more has been written about it than almost any other operations
performance objective over the last twenty years. Later in the book we devote two whole
chapters (Chapter 17 and Chapter 20) which look at different aspects of quality. As far as this
introduction to the topic is concerned, quality is discussed largely in terms of it meaning
‘conformance’. That is, the most basic definition of quality is that a product or service is as it is
supposed to be. In other words, it conforms to its specifications.


Speed is a shorthand way of saying ‘Speed of response’. It means the time between an external
or internal customer requesting a product or service, and them getting it. Again, there are internal
and external affects.


Dependability means ‘being on time’. In other words, customers receive their products or
services on time. In practice, although this definition sounds simple, it can be difficult to
measure. What exactly is on time? Is it when the customer needed delivery of the product or
service? Is it when they expected delivery? Is it when they were promised delivery? Is it when
they were promised delivery the second time after it failed to be delivered the first time? Again,
it has external and internal affects.

This is a more complex objective because we use the word ‘flexibility’ to mean so many
different things. The important point to remember is that flexibility always means ‘being able to
change the operation in some way’. The chapter identifies some of the different types of
flexibility (product/service flexibility, mix flexibility, volume flexibility, and delivery
flexibility). It is important to understand the difference between these different types of
flexibility, but it is more important to understand the affect flexibility can have on the operation.
Guess what! There are external and internal affects.

The Relationship between Manufacturing and Service Provision in

Operations Management
Operations management is a large segment which is concerned with the existence of any
organization. Every organization has an operations function to produce some type of products
and/or services. It is well-known that manufacturing differs from service provision in many
aspects. The main difference between products and services would be tangibility. While the
outputs of manufacturing are tangible, the outputs of service provision are intangible.

Some industries are the mixture of both manufacturing and service provision, which provide both
products and services. Likewise, the operations managements which different industries apply
are also very different. This article is concerning these differences in different areas, providing
some industries and some companies for the analysis.

Operations management is a large segment which is concerned with the existence of any
organization. Every organization has an operations function to produce some type of products
and/or services. It is well-known that manufacturing differs from service provision in many
aspects. The main difference between products and services might be the tangibility. While the
outputs of manufacturing are tangible, the outputs of service provision are intangible. Some
industries are the mixture of both manufacturing and service provision, which provide both
products and services. Likewise, the operations managements which different industries apply
are also very different. This essay is concerning these differences in different areas.
All operations are concerned with input-transformation-output process. Such process in different
sorts of areas might be significantly different.

Operations management in manufacturing

The principle role of the manufacturing firm is to turn physical raw materials into tangible
products. A tangible product is one that can be physically touched, valued in monetary terms,
visualized, and described by dimensional terms such as weight, length, height, volume, etc.
(D. L. Waller, 1999, p.6)

According to the example of car industry, it is clear that car industry just produce cars during the
entire transformation process. The activities of operations in car industry are to make
components to assemble the cars through the product line, namely, to transform raw materials or
components into finished goods destined for final consumers. There is less client contact in
manufacturing. The clients only make an appearance on delivery of the finished cars or perhaps
at the start of the operation if the car is of new design. Car manufacturing is usually a higher
proportion of technicians and engineers.

Operations management in mixed industry of manufacturing and service provision

As for mixed industry such as restaurant, it is easily seen that such kind of industry combines the
generic characteristics of both the manufacturing and the service. Restaurants produce food as
well as provide service. So, operations managers or manageress are responsible to pay attention
to both the products and the services on the running of the services. It is concerned with the
production of the food and the services the waiter/waitress provide to the customers.

Operations management in services

A service industry also provides a product but this product is often (but not always) intangible
and cannot be described in the same dimensional terms as manufactured goods (D. L. Waller,
1999, p.6).

As the example of the clinic above given, clinic just provides medical services, namely, the
treatment which is the pure service. Compared with manufacturing, there is generally more client
contact of the operating environment. Furthermore, as opposed to car manufacturing, clinic is
more people oriented.

As an organization develops plans and strategies to deal with the opportunities and challenges
that arise in its particular operating environment, it should design a system that is capable of
producing quality services and goods in demanded quantities in acceptable time frames.

Operations management design objectives


Designing the system begins with product development. Product development involves
determining the characteristics and features of the good (or service if engaged in a service-
oriented industry) to be sold. It should begin with an assessment of customer needs and
eventually grow into a detailed product design. The facilities and equipment that will produce the
product, as well as the information systems needed to monitor and control performance, are part
of this system design process. In fact, manufacturing process decisions are integral to a system's
ultimate success or failure. "Of all the structural decisions that the operations manager faces, the
one with the greatest impact on the manufacturing operation's success is the process/technology
choice, " said Thomas S. Bateman and Carl P. Zeithaml in Management: Function and Strategy.
"This decision addresses the question 'How will the product be made?' " Product development
should be a cross-functional decision making process that relies on teamwork and
communication to install the marketing, financial, and operating plans needed to successfully
launch a product.

Product design is a critical task because it determines the characteristics and features of the
product, as well as how the product functions. Product design determines a product's cost and
quality, as well as its features and performance. These are important factors on which customers
make purchasing decisions. In recent years, new design models such as Design for
Manufacturing and Assembly (DFMA) have been implemented to improve product quality and
lower costs.

DFMA focuses on operating issues during product design. This can be critical even though
design costs are a small part of the total cost of a product, because, procedures that waste raw
materials or duplicate effort can have a substantial negative impact on a business's operating
profitability. Another innovation similar to DFMA in its emphasis on design is Quality
Functional Deployment (QFD). QFD is a set of planning and communication routines that are
used to improve product design by focusing design efforts on customer needs.

Process design describes how the product will be made. The process design decision has two
major components: a technical (or engineering) component and a scale economy (or business)
component. The technical component includes selecting equipment and selecting a sequence for
various phases of operational production.

The scale economy or business component involves applying the proper amount of
mechanization (tools and equipment) to make the organization's work force more productive.
This includes determining: 1) If the demand for a product is large enough to justify mass
production; 2) If there is sufficient variety in customer demand so that flexible production
systems are required; and 3) If demand for a product is so small or seasonal that it cannot support
a dedicated production facility.

Facility design involves determining the capacity, location, and layout for the production acility.
Capacity is a measure of an organization's ability to provide the demanded services or goods in
the quantity requested by the customer in a timely manner. Capacity planning involves
estimating demand, determining the capacity of facilities, and deciding how to change the
organization's capacity to respond to demand.

Facility location is the placement of a facility with respect to its customers and suppliers. Facility
location is a strategic decision because it is a long-term commitment of resources that cannot
easily or inexpensively be changed. When evaluating a location, management should consider
customer convenience, initial investment necessary to secure land and facilities, government
incentives, and operating transportation costs. In addition, qualitative factors such as quality of
life for employees, transportation infrastructure, and labor environment should also be taken
under consideration.

Facility layout is the arrangement of the work space within a facility. It considers which
departments or work areas should be adjacent to one another so that the flow of product,
information, and people can move quickly and efficiently through the production system.


Planning the system describes how management expects to utilize the existing resource base
created as a result of the production system design. One of the outcomes of this planning process
may be to change the system design to cope with environmental changes. For example,
management may decide to increase or decrease capacity to cope with changing demand, or
rearrange layout to enhance efficiency.

Decisions made by production planners depend on the time horizon. Long-range decisions could
include the number of facilities required to meet customer needs or studying how technological
change might affect the methods used to produce services and goods. The time horizon for long-
term planning varies with the industry and is dependent on both complexity and size of proposed
changes. Typically, however, long-term planning may involve determining work force size,
developing training programs, working with suppliers to improve product quality and improve
delivery systems, and determining the amount of material to order on an aggregate basis. Short-
term scheduling, on the other hand, is concerned with production planning for specific job orders
(who will do the work, what equipment will be used, which materials will be consumed, when
the work will begin and end, and what mode of transportation will be used to deliver the product
when the order is completed).


Managing the system involves working with people to encourage participation and improve
organizational performance. Participative management and teamwork are an essential part of
successful operations, as are leadership, training, and culture. In addition, material management
and quality are two key areas of concern.

Material management includes decisions regarding the procurement, control, handling, storage,
and distribution of materials. Material management is becoming more important because, in
many organizations, the costs of purchased materials comprise more than 50 percent of the total
production cost. Questions regarding quantities and timing of material orders need to be
addressed here as well when companies weigh the qualities of various suppliers.

Environmental sensitivities
The term Environmental sensitivities describes a variety of reactions to chemicals,
electromagnetic radiation and other environmental factors at exposure levels commonly tolerated
by many people. These phenomena are not yet fully understood. In contrast, some toxic
environmental agents such as such as metals (e.g. lead, mercury), rock dusts (e.g. asbestos,
silica), chemicals (e.g. hydrogen sulphide, dioxin) and biological agents (e.g. scorpion or snake
venom) are better understood as to their ill effects on people.

"Environmental sensitivities" does not describe a single, simple condition with a universal cause.
Environmentally sensitive individuals link their symptoms to aspects of their environment such
as being in a particular place or being exposed to one or more factors such as chemicals,
biological materials or electromagnetic phenomena.

Environmental exposures may not contribute to all these conditions in all patients, but one
should be alert to the possibility that a range of factors may contribute to an individual’s ill

Evaluation Design

The first step in any project is to develop a plan for the work to be done. The plan for an
evaluation project is called a "design" and is a particularly vital step to provide an appropriate
assessment. A good design offers an opportunity to maximize the quality of the evaluation, helps
minimize and justify the time and cost necessary to perform the work, and increases the strength
of the key findings and recommendations by ensuring that threats to valid results are minimized.
When you wish to have your program evaluated, be prepared to engage in this planning process
to ensure that your questions will be answered and your needs met.

An evaluation design consists of the evaluation questions under study, the methodological
strategies for answering these questions, a data collection plan that anticipates and addresses
problems that may be encountered, an analysis plan that will ensure that questions are answered
appropriately, and a product description (usually a report). Taking the time to adequately define
the evaluation questions is perhaps the most important task, one the evaluator will need to
perform with the client to ensure that the client's needs and concerns are met. Selecting an
appropriate methodological approach is probably the most important scientific task the evaluator
will perform, taking into consideration resource and time constraints as well as scientific issues.
Providing a product description shows the client what to expect from the evaluation and ensures
that results will be useful. Each of these sections is expanded upon below.

Evaluation Questions

Evaluators help clients develop the "correct" questions for study, because how questions are
posed has immense implications for the evaluation approach taken, the data collected, etc.-in
other words, for the entire evaluation design. This is so because evaluators want to properly
answer client questions. Therefore, evaluators will work with clients to ensure that the wording
of questions accurately reflects what the client really wishes to know. To ensure optimal results,
you, as the client, must devote time during this phase of the evaluation.

Methodological Strategies

There are various general types of evaluations to meet one or more basic client needs.
"Normative" evaluation aims to determine the extent to which programs are implemented in the
way they were meant to be; "process" evaluation aims to describe how the program is actually
functioning; and "outcome" or "impact" evaluation aims to assess what effect the program had.
Evaluators also use the terms "formative" versus "summative" evaluation to refer to work that
focuses on forming/planning/improving a program, versus assessing the end result or summary
effects of the program.

Evaluation questions will fall into these types of categories and evaluators will ensure that the
methodological strategy selected will allow an answer based on the type of question. For
example, merely describing the program implementation requires a simple, less scientifically
rigorous approach than attempting to claim that the program had a certain effect on the intended
targets. The latter requires a method that assesses changes over time, and perhaps comparisons
among targets or control groups who did not participate in the program. Evaluators are trained to
recognize what sort of approaches various types of evaluation questions require.

Data Collection and Analysis

From the evaluation questions, the evaluator will determine the kinds of information needed, the
sources of this information (e.g., employees, customers, clients), methods of collecting the
information (e.g., questionnaires, interviews, observations), and the timing and frequency of data
collection. All the while, the evaluator will keep in mind the resources available to collect
information, and the time period in which this information is needed, adjusting the plan
accordingly. To be truly efficient, any plan will require only the work actually needed to
complete a project. So it is with the data collection and analysis sections of the evaluation plan.
Only those data needed to address the evaluation questions should be collected and a plan will be
ready to manipulate and use those data. You, as the client, would not be expected to devote time
to this phase.

Not only will evaluators know exactly what data are needed and be ready to analyze them, but
they will also have a plan for presentation of those data and results that will simply and
accurately report the answers to the evaluation questions. The design will show the product
plans, customized for various audiences if necessary.

An in-depth evaluation design as described above is the responsibility of the PEIS evaluation
staff to create and use. Once this in-depth evaluation plan has been prepared, PEIS provides a
short, summary evaluation plan for client review to ensure that the plan captures their concerns
and meets their needs and interests. It includes the following components: evaluation purpose,
study questions, methodology, and deliverables. The deliverables section makes it clear what
product is expected from the evaluation and when.

Effective Design of Office Space

The layout of an office is a crucial element in overall safety. Central to layout is ease of
navigation around the office and ease with which staff and volunteers can complete tasks in a
setting where desks, chairs, computer stations, electronic equipment and file cabinets are placed
in a way that avoids overcrowding. The office layout should be efficient, yet suitably
comfortable so that staff and volunteers can concentrate on work and clients.

The most common safety hazards associated with office design are falls, noise, inadequate
pathways, and placement of furniture/equipment.


A fall occurs when a person loses his/her balance and footing. Once of the most common causes
of office falls is tripping over an open desk or file drawer. Bending while seated in an unstable
chair, and tripping over electrical cords or wires are other common hazards. Office falls are
frequently caused by using a chair or stack of boxes in place of a ladder and by slipping on wet
floors. Loose carpeting, objects stored in halls or walkways, and inadequate lighting are other
hazards that invite accidental falls. Fortunately, all of these fall hazards are preventable.


Noise can be defined very simply as unwanted sound. Office workers are subjected to many
noise sources including video display terminals, high-speed printers, telephones, fax machines,
human voices, outside traffic, vendors, musicians and bullhorns. Noise can produce tension and
stress, as well as damage to hearing at high noise levels. For noise levels in offices, the most
common effects are interference with speech communication, annoyance, and distraction from
mental activities, as well as tension headaches, clenching and grinding of teeth, and neck and
shoulder muscle strain. The annoying effect of noise can decrease performance or increase
errors. If tasks require a great deal of mental concentration, noise can be detrimental to
performance. Additionally, excessive noise can prevent staff, volunteers and other from hearing
emergency warnings, such as fire alarms or sirens, or cries for help. Government standards have
set limits for exposure to noise to prevent hearing loss in employees. The level of noise one can
safely be exposed to depends on the intensity of the noise and its duration of exposure. Problems
could arise in areas with a high concentration of noisy machines, such as high-speed printers or
photocopying machines.

Halls and Pathways

Hallways should be kept free from furnishings, storage compartments, and/or any unnecessary
equipment. The halls and pathways should be positioned where people naturally walk.
“Shortcuts” from one section of the office to another should be recognized as possible new
pathways. Cutting through office spaces that are not considered pathways can be hazardous
because of the potential for tripping and falls.

Placement of furniture/equipment

Office furniture and equipment should be placed so that staff and volunteers can conduct tasks
without having to stretch, strain or reach. The setup of every workplace station should be
customized to fit the ergonomic needs of the user. File cabinets should be located in areas which
are not normally a footpath. Care should also be taken to avoid the placement of furnishings to
avoid the following types of injuries:

 Bumping into doors, desks, file cabinets, open drawers and shelving.

 Walking into other people while moving about the office.

 Striking open file drawers while bending down or straightening up.

 Striking against sharp objects, such as office machines, spindle files, staples, and pins.

Employees and volunteers need to be conditioned to pay attention to where they are walking at
all times, properly storing materials in their work areas and never carrying objects that prevent
the individual from seeing ahead.

Work measurement
Application of time and motion study and activity sampling techniques to determine the time for
a qualified worker to complete a specific job at a defined level of performance. Work
measurement is used in budgeting, manpower planning, scheduling, standard costing, and in
designing worker incentive schemes.
The reason for measuring performance
Fundamental purpose behind measures is to improve performance. Measures that are not directly
connected to improving performance (like measures that are directed at communicating better
with public to build trust) are measures that are means to achieving that ultimate purpose (Behn

Behn 2003 gives 8 reasons for adapting performance measurements:

1. To evaluate

How well is public agency performing. To evaluate performance, managers need to

determine what agency supposed to accomplish. (Kravchuk & Schack 1996). To
formulate a clear, coherent mission, strategy, and objectives. Then based on this
information choose how you will measure those activities. (You first need to find out
what are you looking for).

Evaluation process consists of two variables: organizational performance data and a

benchmark that creates framework for analyzing that data. For organizational information
focus on outcome of agency’s performance, but also including input/ environment/
process/ output- to have a comparative framework for analysis. Its helpful to ask 4
essential question in determining organizational data:

Outcome should be directly related to public purpose of the organization. Effectiveness

Q: did they produce required results (determined by outcomes).

Cost-effective: efficiency Q (outcome divided by input).

Impact Q: what value organization provides.

Best-practice Q: evaluating internal operations (compare core process performance to

most effective and efficient process in the industry).

As in order for organization to evaluate performance its requires standards (benchmark)

to compare its actual performance against past performance/ from performance of similar
agencies/ industry standard/political expectations.

2. To Control

How can managers ensure their subordinates are doing the right thing.

Today managers do not control their workforce mechanically (measurement of time-and-

motion for control as during Taylor) However managers still use measures to control,
while allowing some space for freedom in the workforce. (Robert Kaplan & David
Norton) Business has control bias. Because traditional measurement system sprung from
finance function, the system has a control bias.

Organization creates measurement systems that specify particular actions they want
execute- for branch employees to take a particular ways to execute what they want-
branch to spend money. Then they want to measure to see whether the employees have in
fact taken those actions. Need to measure input by individual into organization and
process. Officials need to measure behavior of individuals then compare this performance
with requirements to check who has and has not complied.

Often such requirements are described only as guidelines. Do not be fooled. These
guidelines are really requirements and those requirement are designed to control. The
measurement of compliance with these requirements is the mechanism of control.

3. To Budget

Budgets are crude tools in improving performance. Poor performance not always may
change after applying budgets cuts as a disciplinary action. Sometimes budgets increase
could be the answer to improving performance. Like purchasing better technology
because the current ones are outdated and harm operational processes. So decision highly
influenced by circumstance, you need measures to better understand the situation.

At the macro level, elected officials deciding which purpose of government actions are
primary or secondary. Political priorities drive macro budgetary choices. Once elected
officials have established macro political priorities, those responsible for micro decisions
may seek to invest their limited allocation of resources in the most cost-effective units
and activities.

In allocating budgets, managers, in response to macro budget allocations (driven by

political objectives), determine allocations at the micro level by using measures of
efficiency of various activities, which programs or organizations are more efficient at
achieving the political objectives. Why spend limited funds on programs that do not
guarantee exceptional performance?

Efficiency is determined by observing performance- output and outcome achieved

considering number of people involved in the process (productivity per person) and cost-
data (capturing direct cost as well as indirect)

4. To Motivate

Giving people significant goals to achieve and then use performance measures- including
interim targets- to focus people’s thinking and work, and to provide periodic sense of
Performance targets may also encourage creativity in developing better ways to achieve
the goal (Behn) Thus measure to motivate improvements may also motivate learning.

Almost-real-time output (faster, the better) compared with production targets. Quick
response required to provide fast feed-back so workforce could improve and adapt.

Also it is able to provide how workforce currently performing.

Primary aim behind the measures should be output, managers can not motivate people to
affect something over which they have little or no influence.

Once an agency’s leaders have motivated significant improvements using output targets,
they can create some outcomes targets.

“Output”- focuses on improving internal process.

“Outcome”- motivate people to look outside the agency (to seek way to collaborate with
individuals & organizations may affect the outcome produced by the agency)

5. To Celebrate

Organizations need to commemorate their accomplishments- such ritual tie their people
together, give them a sense of their individual and collective relevance. More over, by
achieving specific goals, people gain sense of personal accomplishment and selfworth
(Locke & Latham 1984).

Links from measurement to celebration to improvement is indirect, because it has to work

through one of the likes- motivation, learning...

Celebration helps to improve performance because it brings attention to the agency, and
thus promotes its competence- it attracts resources.

Dedicated people who want to work for successful agency.

Potential collaborators.

Learning-sharing between people about their accomplishments and how they achieved it.

Significant performance targets that provide sense of personal and collective

accomplishment. Targets could ones used to motivate. In order for celebration to be a
success and benefits to be a reality managers need to ensure that celebration creates
motivation and thus improvements.

By leading the celebration.

6. To Promote

How can public managers convince political superiors, legislators, stakeholders,

journalists, and citizens that their agency is doing a good job.

(National Academy of Public Administration’s center for improving government

performance- NAPA 1999) performance measures can be used to: validate success;
justifying additional resources; earn customers, stakeholder, and staff loyalty by showing
results; and win recognition inside and outside the organization.

Indirectly promote competence and value of government in general.

To convince citizens their agency is doing good, managers need easily understood
measures of those aspects of performance about which many citizens personally care.

(“National Academy of Public Administration-NAPA” in its study of early performance-

measurement plans under the government performance and results Act) most plans
recognized the need to communicate performance evaluation results to higher level
officials, but did not show clear recognition that the form and level of data for these
needs would be different than that for operating managers. Different needs: Department
head/ Executive Office of President/ Congress. NAPA suggested for those needs to be
more explicitly defined- (Kaplan & Nortan 1994) stress that different customers have
different concerns (1992).

7. To Learn Learning

Is involved with some process, of analysis information provided from evaluating

corporate performance (identifying what works and what does not). By analysing that
information, corporation able to learn reasons behind its poor or good performance.

However if there is too many performance measures, managers might not be able to learn
anything. (Neves of National Academy of Public Administration 1986)

Because of rapid increase of performance measures there is more confusion or “noise”

than useful data.

Managers lack time or simply find it too difficult to try to identify good signals from
mass of numbers.

Also there is an issue of “black box” enigma (data can reveal that organisation is
performing well or poorly, but they don’t necessarily reveal why). Performance measures
can describe what is coming out of “black box” as well as what is going in, but they do
not reveal what is happening inside. How are various inputs interacting to produce the
output? What more complex is outcome with “black box” being all value chain?
Benchmarking is a traditional form of performance measurement which facilitates
learning by providing assessment of organizational performance and identifying possible
solutions for improvements.

Benchmarking can facilitate transfer of knowhow from benchmarked organisations.

(Kouzmin et al. 1999)

Identifying core process in organization and measuring their performance is basic to

benchmarking. Those actions probably provide answer to issue presented in purpose
section of the learning.

Measurements that are used for learning act as indicators for managers to consider
analysis of performance in measurement’s related areas by revealing irregularities and
deviations from expected data results.

What to measure aiming at learning (the unexpected- what to aim for?)

Learning occurs when organization meets problems in operations or failures. Then

corporations improve by analyzing those faults and looking for solutions. In public sector
especially, failure usually punished severely- therefore corporations and individuals hide

8. To Improve

What exactly should who- do differently to improve performance? In order for

corporation to measure what it wants to improve it first need to identify what it will
improve and develop processes to accomplish that.

Also you need to have a feedback loop to assess compliance with plans to achieve
improvements and to determine if those processes created forecasted results

Improvement process also related to learning process in identifying places that are need

Develop understanding of relationships inside the “black box” that connect changes in
operations to changes in output and outcome.

Understanding “black box” processes and their interactions.

How to influence/ control workforce that creates output.

How to influence citizens/ customers that turn that output to outcome (and all related
They need to observe how actions they can take will influence operations, environment,
workforce and which eventually has an impact on outcome.

After that they need to identify actions they can take that will give them improvements
they looking for and how organization will react to those actions ex. How might various
leadership activities ripple through the “black box”.

Principles of performance measurement

All significant work activity must be measured.

 Work that is not measured or assessed cannot be managed because there is no objective
information to determine its value. Therefore it is assumed that this work is inherently
valuable regardless of its outcomes. The best that can be accomplished with this type of
activity is to supervise a level of effort.

 Unmeasured work should be minimized or eliminated.

 Desired performance outcomes must be established for all measured work.

 Outcomes provide the basis for establishing accountability for results rather than just
requiring a level of effort.

 Desired outcomes are necessary for work evaluation and meaningful performance

 Defining performance in terms of desired results is how managers and supervisors make
their work assignments operational.

 Performance reporting and variance analyses must be accomplished frequently.

 Frequent reporting enables timely corrective action.

 Timely corrective action is needed for effective management control.

Design and competitive advantage

Quantitative Benefits

• Reduced (avoided) costs spent on technical development and R&D of new


• Decreased resources spent on laboratory tests for human health and environmental
Qualitative Benefits

• A greater number of product combinations and product alternatives can be

evaluated early in concept development. This allows for greater technology
innovation and is due to the quick and cost-effective nature of the P2 Framework.

• Better and early information on environmental and health (E&H) impacts allows
the product development team to focus resources on technical performance.
Knowing the E&H profile early allows the team to anticipate any additional E&H
lab testing that may be required for PMN submittal to EPA. Such information
may also alert the team to a chemical candidate that it wants to screen out from
the selection process based on E&H concerns before significant resources have
been spent on investigating its technical performance.

• Better information allows companies to compare competing product alternatives

and helps them identify environmentally sound technologies.

• Greater awareness of “green design”.

In the absence of an ERP system, a large manufacturer may find itself with many software
applications that cannot communicate or interface effectively with one another. Tasks that need
to interface with one another may involve:

• ERP systems connect the necessary software in order for accurate forecasting to be done.
This allows inventory levels to be kept at maximum efficiency and the company to be
more profitable.
• Integration among different functional areas to ensure proper communication,
productivity and efficiency
• Design engineering (how to best make the product)
• Order tracking, from acceptance through fulfillment
• The revenue cycle, from invoice through cash receipt
• Managing inter-dependencies of complex processes bill of materials
• Tracking the three-way match between purchase orders (what was ordered), inventory
receipts (what arrived), and costing (what the vendor invoiced)
• The accounting for all of these tasks: tracking the revenue, cost and profit at a granular
• ERP Systems centralize the data in one place. Benefits of this include:
• Eliminates the problem of synchronizing changes between multiple systems -
consolidation of finance, marketing and sales, human resource, and manufacturing
• Permits control of business processes that cross functional boundaries
• Provides top-down view of the enterprise (no "islands of information"), real time
information is available to management anywhere, anytime to make proper decisions.
• Reduces the risk of loss of sensitive data by consolidating multiple permissions and
security models into a single structure.
• Shorten production leadtime and delivery time
• Facilitating business learning, empowering, and building common visions

Some security features are included within an ERP system to protect against both outsider crime,
such as industrial espionage, and insider crime, such as embezzlement. A data-tampering
scenario, for example, might involve a disgruntled employee intentionally modifying prices to
below-the-breakeven point in order to attempt to interfere with the company's profit or other
sabotage. ERP systems typically provide functionality for implementing internal controls to
prevent actions of this kind. ERP vendors are also moving toward better integration with other
kinds of information security tools.

Problems with ERP systems are mainly due to inadequate investment in ongoing training for the
involved IT personnel - including those implementing and testing changes - as well as a lack of
corporate policy protecting the integrity of the data in the ERP systems and the ways in which it
is used.

• Customization of the ERP software is limited.

• Re-engineering of business processes to fit the "industry standard" prescribed by the ERP
system may lead to a loss of competitive advantage.
• ERP systems can be very expensive (This has led to a new category of "ERP light"
• ERPs are often seen as too rigid and too difficult to adapt to the specific workflow and
business process of some companies—this is cited as one of the main causes of their
• Many of the integrated links need high accuracy in other applications to work effectively.
A company can achieve minimum standards, and then over time "dirty data" will reduce
the reliability of some applications.
• Once a system is established, switching costs are very high for any one of the partners
(reducing flexibility and strategic control at the corporate level).
• The blurring of company boundaries can cause problems in accountability, lines of
responsibility, and employee morale.
• Resistance in sharing sensitive internal information between departments can reduce the
effectiveness of the software.
• Some large organizations may have multiple departments with separate, independent
resources, missions, chains-of-command, etc, and consolidation into a single enterprise
may yield limited benefits.

Inventory capacity and control situation

Manufacturers make production decisions and carry inventory to satisfy uncertain demand.
When holding and shortage costs are high, carrying inventory could be even more expensive for
a capacitated production system. Recent developments in information technology and sales
strategies enabled firms to acquire, collect, or induce advance demand information.

We address a periodic-review, stochastic, capacitated, finite and infinite horizon production

system faced by a manufacturer who has the ability to obtain advance demand information. We
establish optimal policies and characterize their behavior with respect to capacity, fixed costs,
advance demand information, and the planning horizon. With a numerical study, we quantify the
value of advance demand information and additional capacity for specific problem instances. We
illustrate how advance demand information can be a substitute for capacity and inventory.
Subject classifications: inventory/production: stochastic, optimal policies, no station.

There are a number of approaches to managing project activities including agile, interactive,
incremental, and phased approaches.
Regardless of the methodology employed, careful consideration must be given to the overall
project objectives, timeline, and cost, as well as the roles and responsibilities of all participants
and stakeholders.
The traditional approach
A traditional phased approach identifies a sequence of steps to be completed. In the "traditional
approach", we can distinguish 5 components of a project (4 stages plus control) in the
development of a project:
Typical development phases of a engineering project

 Project initiation stage;

 Project planning and design stage;
 Project execution and construction stage;
 Project monitoring and controlling systems;
 Project completion.

Not all the projects will visit every stage as projects can be terminated before they reach
completion. Some projects do not follow a structured planning and/or monitoring stages. Some
projects will go through steps 2, 3 and 4 multiple times.
Many industries use variations on these project stages. For example, when working on a brick
and mortar design and construction, projects will typically progress through stages like Pre-
Planning, Conceptual Design, Schematic Design, Design Development, Construction Drawings
(or Contract Documents), and Construction Administration. In software development, this
approach is often known as the waterfall model, i.e., one series of tasks after another in linear
sequence. In software development many organizations have adapted the Rational Unified
Process (RUP) to fit this methodology, although RUP does not require or explicitly recommend
this practice. Waterfall development works well for small, well defined projects, but often fails
in larger projects of undefined and ambiguous nature. The Cone of Uncertainty explains some of
this as the planning made on the initial phase of the project suffers from a high degree of
uncertainty. This becomes especially true as software development is often the realization of a
new or novel product. In projects where requirements have not been finalized and can change,
requirements management is used to develop an accurate and complete definition of the behavior
of software that can serve as the basis for software development. While the terms may differ
from industry to industry, the actual stages typically follow common steps to problem solving —
"defining the problem, weighing options, choosing a path, implementation and evaluation."
Critical Chain Project Management
Critical Chain Project Management (CCPM) is a method of planning and managing projects that
puts more emphasis on the resources (physical and human) needed in order to execute project
tasks. The most complex part involves engineering professionals of different fields (Civil,
Electrical, Mechanical etc) working together. It is an application of the Theory of
Constraints (TOC) to projects. The goal is to increase the rate of throughput (or completion rates)
of projects in an organization. Applying the first three of the five focusing steps of TOC, the
system constraint for all projects is identified as are the resources. To exploit the constraint, tasks
on the critical chain are given priority over all other activities. Finally, projects are planned and
managed to ensure that the resources are ready when the critical chain tasks must start,
subordinating all other resources to the critical chain.
Regardless of project type, the project plan should undergo Resource Leveling, and the longest
sequence of resource-constrained tasks should be identified as the critical chain. In multi-project
environments, resource leveling should be performed across projects. However, it is often
enough to identify (or simply select) a single "drum" resource—a resource that acts as a
constraint across projects—and stagger projects based on the availability of that single resource.
Planning and feedback loops inExtreme Programming (XP) with the time frames of the multiple

Extreme Project Management

In critical studies of Project Management, it has been noted that several of these
fundamentally PERT-based models are not well suited for the multi-project company
environment of today. Most of them are aimed at very large-scale, one-time, non-routine
projects, and nowadays all kinds of management are expressed in terms of projects.
Using complex models for "projects" (or rather "tasks") spanning a few weeks has been proven
to cause unnecessary costs and low maneuverability in several cases. Instead, project
management experts try to identify different "lightweight" models, such as Agile Project
Management methods including Extreme Programming for software development
and Scrum techniques.
The generalization of Extreme Programming to other kinds of projects is extreme project
management, which may be used in combination with the process modeling and management
principles of human interaction management.
Event chain methodology
Event chain methodology is another method that complements critical path method and critical
chain project management methodologies.
Event chain methodology is an uncertainty modeling and schedule network analysis technique
that is focused on identifying and managing events and event chains that affect project schedules.
Event chain methodology helps to mitigate the negative impact of psychological heuristics and
biases, as well as to allow for easy modeling of uncertainties in the project schedules. Event
chain methodology is based on the following principles.

 Probabilistic moment of risk: An activity (task) in most real life processes is not a
continuous uniform process. Tasks are affected by external events, which can occur at some
point in the middle of the task.
 Event chains: Events can cause other events, which will create event chains. These event
chains can significantly affect the course of the project. Quantitative analysis is used to
determine a cumulative effect of these event chains on the project schedule.
 Critical events or event chains: The single events or the event chains that have the most
potential to affect the projects are the “critical events” or “critical chains of events.” They can
be determined by the analysis.
 Project tracking with events: Even if a project is partially completed and data about the
project duration, cost, and events occurred is available, it is still possible to refine
information about future potential events and helps to forecast future project performance.
 Event chain visualization: Events and event chains can be visualized using event chain
diagrams on a Gantt chart.

PRINCE2 is a structured approach to project management, released in 1996 as a generic project
management method. It combined the original PROMPT methodology (which evolved into the
PRINCE methodology) with IBM's MITP (managing the implementation of the total project)
methodology. PRINCE2 provides a method for managing projects within a clearly defined
framework. PRINCE2 describes procedures to coordinate people and activities in a project, how
to design and supervise the project, and what to do if the project has to be adjusted if it does not
develop as planned.
In the method, each process is specified with its key inputs and outputs and with specific goals
and activities to be carried out. This allows for automatic control of any deviations from the plan.
Divided into manageable stages, the method enables an efficient control of resources. On the
basis of close monitoring, the project can be carried out in a controlled and organized way.
PRINCE2 provides a common language for all participants in the project. The various
management roles and responsibilities involved in a project are fully described and are adaptable
to suit the complexity of the project and skills of the organization.

Process- based

Capability Maturity Model, predecessor of the CMMI Model

Also furthering the concept of project control is the incorporation of process-based management.
This area has been driven by the use of Maturity models such as the CMMI (Capability Maturity
Model Integration) and ISO/IEC15504 (SPICE - Software Process Improvement and Capability
Agile Project Management approaches based on the principles of human interaction
management are founded on a process view of human collaboration. This contrasts sharply with
the traditional approach. In the agile software development or flexible product
development approach, the project is seen as a series of relatively small tasks conceived and
executed as the situation demands in an adaptive manner, rather than as a completely pre-
planned process.
Capacity Management
You can’t always get what you want. No, you can’t always get what you want. But if you try
sometimes, you just might find you get what you need.

Long-Term Capacity Management

Efficient long-term capacity management is vital to any manufacturing firm. It has implications
on competitive performance in terms of cost, delivery speed, dependability and flexibility. In a
manufacturing strategy, capacity is a structural decision category, dealing with dynamic capacity
expansion and reduction relative to the long-term changes in demand levels. Sales and operations
planning (S&OP) is the long-term planning of production levels relative to sales within the
framework of a manufacturing planning and control system. Within the S&OP, resource
planning is used for determining the appropriate capacity levels in order to support the
production plan. Manufacturing strategy and sales and operations planning provide two
perspectives on long-term capacity management, raising and treating different issues. In this
paper, we compare and link them in a framework for long-term capacity management.

• Equipment additions

• Facility expansions

• Workforce policies