Operations Management

PAN African eNetwork Project
MFC
Operations Management
Semester - II
Shraddha Sharma
Copyright Amity University
1
Objective of the Class
Maintenance Management
Quality Management
Cost of quality
Concept of TQM
Supply chain management
ERP
What is Maintenance?
The function of production management that is
concerned with the day to day problem of
keeping the physical plant in good operating
condition.
It is an essential activity in every manufacturing
firm, because it is necessary to ensure the
availability of the machines, buildings & services
needed by other parts of the organization for the
performance of their function at an optimum
return on investment in machines, materials &
employees.
It is concerned with planning, organizing &
directing the resources in order to control
the availability & performance of the
industrial plants to some specified level.
Maintenance operations include all efforts
to keep production facilities & equipments
in acceptable operating condition.
Scope of Maintenance
Primary functions
1. Maintenance of existing plant & equipments
2. Maintenance of existing plant buildings &
grounds
3. Equipment inspection & lubrication
4. Utilities generation & distribution
5. Alterations to existing equipments & buildings.
6. New installations of equipments & buildings.
Scope of Maintenance
Secondary functions
Storekeeping
Plant protection including fire protection
Waste disposal
Salvage
Insurance administration (against fire, theft etc.)
Janitorial services
Property accounting
Pollution & noise abatement or control
Any other service delegated to maintenance by
plant management.
Impact of Poor Maintenance
Production capacity
Production costs
Production & service quality
Employee or customer safety
Customer satisfaction
Objectives of Maintenance
Management
Minimizing the loss of productive time because of equipment failure

Minimizing the repair time & repair cost
Minimizing the loss due to production stoppages
Efficient use of maintenance personnel and equipments
Prolonging the life of capital assets by minimizing the rate of wear &
tear.
To keep all productive assets in good working condition.
To maximize efficiency & economy in production through optimum
use of facilities.
To minimize accidents through regular inspection & repair of safety
devices.
To minimize the total maintenance cost which includes the cost of
repair, cost of preventive maintenance & inventory carrying cost due
to spare parts inventory.
To improve the quality of products and to improve productivity.
Areas of Maintenance
Civil Maintenance: building construction &
maintenance service facilities such as water,
gas, steam, compressed air.
Mechanical Maintenance: Maintaining machines
& equipments, transport vehicles, material
handling equipments. Lubricating the machines
is also part of mechanical maintenance work.
Electrical Maintenance: Maintaining electrical
equipments such as generators, transformers,
switch gears, etc.
Types of Maintenance
Break down Maintenance

Preventive Maintenance
Predictive Maintenance
Routine Maintenance
Planned Maintenance

Also known as corrective or remedial
maintenance.
Corrective maintenance occurs when
there is a work stoppage because of
machine breakdown. In this, maintenance
become repair work an electric motor
will not start, a conveyor belt is ripped, or
a shaft has broken.

To get equipment back into operation as quickly as
possible in order to minimise interruption to production.
To control the cost of repair crews, including regular time
& overtime labour costs.
To control the cost of the operation of repair shops.
To control the investment in replacement spare parts that
are used when machines are repaired.
To control the investment in replacement spare
machines which are also called standup or backup
machines.
To perform the appropriate amount of repairs at each
malfunction.
Preventive Maintenance
1.
2.
3.
4.
Maintenance activities under taken before the

machines or equipments fail.
Aims to minimize the possibility of unanticipated or
major breakdowns.
It consists of:
Proper design & installation of equipment.
Periodic inspection of plant & equipment to prevent
break downs before they occur
Repetitive servicing, upkeep & overhaul of equipment
Adequate lubrication, cleaning & painting of buildings
& equipment.
Benefits of Preventive
Maintenance
Preventive maintenance offers several benefits
to the users.
They include greater safety for workers,
decreased production downtime, fewer large
scale & repetitive repairs, less cost for simple
repairs made before breakdown, less standby
equipment required, better spare parts control,
identification of items with high maintenance
costs, and lower unit cost of manufacture.
Predictive Maintenance
Modern approach to preventive maintenance
using sensitive instruments (e.g., vibration
analyzers, amplitude meters, audio gauges,
optical tooling etc.) to predict anticipated failure
of machines & equipments.
Condition can be measured periodically or on a
continuous basis & this enables the
maintenance people to plan for overhaul.
This will allow an extension to the service life
without fear of failure.
Routine Maintenance
This includes activities such as periodic inspection,

cleaning, lubrication & repair of production equipments
after their service life.
It may be classified as:
1. Running maintenance in which the maintenance work
is carried out while the equipment is in the operating
condition (i.e. performing some operation) e.g.,
greasing or lubricating the bearings while the machine
is running.
2. Shut down maintenance in which the maintenance
work is carried out when the machine or equipment is
out of service i.e., after shutting down the machine or
equipment e.g., repairing boiler tubes of a boiler.
Planned Maintenance
Maintenance activities that are carried out
according to a predetermined schedule.
Also known as scheduled or productive
maintenance.
It involves inspection of all plant & equipments,
machinery, building in order to service, overhaul,
lubricate or repair before actual break down or
deterioration in service occurs.
Planned approach to maintenance reduces the
machine or equipment down time, reduces the
cost of maintenance & increases productivity as
compared
to
haphazard
or
unplanned
maintenance.
Planning & Scheduling of

maintenance
a.
b.
c.
d.
e.
f.
g.
h.
Know the equipment to be maintained, available technique for maintenance

& the facilities available to carry out maintenance work.
Establish the priorities of maintenance activities by categorizing the
activities as emergency work, priority work & non priority work.
Investigate the maintenance work to be done at the workstation to ascertain
physical access & space limitations etc.
Develop the repair plan on the basis of
Recommendation of original equipment manufacturing
Technical experience
Equipment history
Management decision for a new technique of maintenance work.
Prepare a list of maintenance materials & spare parts required.
Prepare a list of special tools & special facilities such as material handling
equipments required.
Estimate the time required to do the maintenance work
Provide for necessary safety devices & safety instructions.
Total Quality Management
What is Quality?
Quality is:
Conformance to specifications.
Conformance to requirements.
What the customer thinks it is.
Measure of the conformance of the product/service to the
customers needs.
Combination of aesthetics, features & design.
Value for money.
The ability of a product to meet customers needs.
Meeting or exceeding customer requirements now & in the future.
Fitness for use of a product /service by the intended customer.
A customers perception of the degree to which the
product/service meets his/her expectations.
Totality of features & characteristics of a product/service that
bears on its ability to satisfy a stated or implied need.
New thinking about Quality

Old quality is small q
New quality is Big Q
About products
Technical
For inspectors
Led by experts
High grade
About control;
About organization
Strategic
For everyone
Led by Management
The appropriate grade
About improvement
Dimensions of product quality

1.
2.
3.
4.
5.
6.
7.
8.
Performance
Features
Reliability
Serviceability
Aesthetics (appearance)
Durability
Customer service
safety
Dimensions of service quality
Reliability
Responsiveness
Competence
Access
Courtesy
Communication
Credibility
Understanding
Security/safety
Tangibles
Benefits of Quality
Gives positive company image

Improves competitive ability
Increases market share & net profits
Reduce costs
Reduces product liability problems
Improves employee morale
Improves productivity
Three levels of Quality

Organization level
- meeting external
customer requirements
Process level
- meeting the
needs of internal customers
Performer level
- meeting the
requirements of accuracy, completeness
innovation, timeliness & cost.
What is Total Quality Management?
1.
2.
3.
4.
5.
6.
A philosophy that involves everyone in an

organization in a continual effort to improve
quality & achieve customer satisfaction.
Top management commitment & support
Focus on both internal & external customers.
Employee involvement & empowerment
Continuous improvement
Partnership with suppliers
Establishing performance measures for
processes.
Essentials of TQM focus
Customer satisfaction
Leadership
Quality policy
Organization structure
Employee involvement
Quality costs
Supplier selection & development
Recognition & reward.
Modern Quality Management

Quality Gurus & their Philosophies
Joseph Juran (USA)
One of Jurans significant contributions is his focus on
the definition of quality and the cost of quality. Juran is
credited with defining quality as fitness for use rather
than simply conformance to specifications.
Defining quality as fitness for use takes into account
customer intentions for use of the product, instead of
only focusing on technical specifications.
Juran is also credited with developing the concept of cost
of quality, which allows us to measure quality in dollar
terms rather than on the basis of subjective evaluations.
W. Edwards Deming
A core concept in implementing TQM is Demings 14 points, a set of
management practices to help points, a set of management practices to help
companies increase their quality and productivity:
1. Create constancy of purpose for improving products and services.
2. Adopt the new philosophy.
3. Cease dependence on inspection to achieve quality.
4. End the practice of awarding business on price alone; instead, minimize total
cost by working with a single supplier.
5. Improve constantly and forever every process for planning, production and
service.
6. Institute training on the job.
7. Adopt and institute leadership.
8. Drive out fear.
9. Break down barriers between staff areas.
10. Eliminate slogans, exhortations and targets for the workforce.
11. Eliminate numerical quotas for the workforce and numerical goals for
management.
12. Remove barriers that rob people of pride of workmanship, and eliminate the
annual rating or merit system.
13. Institute a vigorous program of education and self-improvement for everyone.
14. Put everybody in the company to work accomplishing the transformation.
Deming Wheel (PDCA cycle)
Deming Cycle
P Plan- plan (process) the improvement
D Do- do implement the plan
C Check- check how closely result meets
goals
A Act use the improved process as
standard practice.
Kaoru Ishikawa
Kaoru Ishikawa is best known for the development of quality
tools called cause-and-effect diagrams, also called fishbone
or Ishikawa diagrams. These diagrams are used for quality
problem solving. He was the first quality guru to emphasize
the importance of the internal customer, the next person in
the production process. He was also one of the first to stress
the importance of total company quality control, rather than
just focusing
on products and services. Dr. Ishikawa believed that everyone
in the company needed to be united with a shared vision and
a common goal. He stressed that quality initiatives should be
pursued at every level of the organization and that all
employees should be involved.
Dr. Ishikawa was a proponent of implementation of quality
circles, which are small
teams of employees that volunteer to solve quality problems.
Dr. Genichi Taguchi

Dr. Genichi Taguchi is a Japanese quality expert known
for his work in the area of product design. He estimates
that as much as 80 percent of all defective items are
caused by poor product design. Taguchi stresses that
companies should focus their quality efforts on the
design stage, as it is much cheaper and easier to make
changes during the product design stage than later
during the production process.
Taguchi is known for applying a concept called design of
experiment to product design.
This method is an engineering approach that is based on
developing robust design, a design that results in
products that can perform over a wide range of
conditions.
Kaizen
1.
2.
3.
4.
5.
6.
Kaizen enhances quality through:

Improvement in supplier relations
New product planning & development
Improvement in employee satisfaction
Reduction in cost
Meeting delivery schedules
Employer skill development
Three guiding principles of Kaizen

1. Process view of the system analysis of design &
production process
2. Success comes from people- employee participation &
team work.
3. Constant sense of urgency- need for change.
Total Quality Management
TQM is a process that underlines three

philosophies:
1. Continuous improvement
2. Involvement of every employee in the
organization
3. The goal for customer satisfaction
Benchmarking
1.
2.
3.
Measuring a companys performance against that of

best in-class achieve those performance levels &
using the information as a basis for the companys
targets, strategies & implementation.
3 types of benchmarking are:
Performance benchmarking pricing, technical quality,
product performance & features & services.
Process benchmarking work processes such as
billing, order entry, employee training etc.
Strategic benchmarking how firms complete & seek
winning strategies that have led to competitive
advantage & market success.
Benchmarking Process
1.
2.
3.
4.
5.
Decide what to benchmark

Select companies to benchmark
Obtain data & collect information
Analyze data & form action plans
Recalibrate & start the process again
Business Process
Reengineering (BPR)
The fundamental rethinking & radical redesign

of business processes to achieve dramatic
improvements in critical, contemporary
measures of performance such as cost,
quality, service & speed.
Requirements of successful BPR Process
1. Fundamental understanding of the process.
2. Creative thinking to break away from old
traditions & assumptions.
3. Effective use of information technology.
Business Process
Reengineering (BPR)
Steps in BPR process
1.State a case for action (i.e. need for
change)
2.Identify the process for reengineering
3.Evaluate enablers for reengineering
4.Understanding the current process
5.Create a new process design
6.Implement the reengineered process.
Quality Circles (QC)

A small group of employees who meet
regularly to undertake work related
projects designed to improve working
conditions, super mutual self-development
& to advance the company, all by using
quality control concepts.
The QC activities are4 interconnected in a
nationwide network, & QC members have
easy access to what other people are
doing in other industries.
Cost of Quality
1.
2.
3.
4.
Preventive costs: costs of quality planning, new product

review, training, process planning, quality data &
improvement projects.
Appraisal costs: costs of incoming inspection, process
inspection, finished goods inspection, quality laboratories
& calibration of instruments.
Internal failure costs: costs of scrap, rework, down
grading, retest, downtime.
External failure costs: costs of warranty, returned
goods, customer complaints, allowance to customers for
substandard quality products.
Costs of quality can be reduced by revising the production

system including technology, management, attitudes and
training.
Supply Chain Management
Supply Chain Management

Integration of various activities encompassed by
the supply chain through improved supply chain
relationships
to
achieve
a
sustainable
competitive advantage.
A supply chain refers to the way that materials
flow through different organizations, starting with
raw materials & ending with finished products
delivered to the ultimate consumer.
A supply chain is a sequence of suppliers,
warehouse, operations and retail outlets.
Supply chains
A typical supply chain may involve the following stages:
Customers
Retailers
Wholesalers/distributors
Manufacturers
Components/raw material suppliers
Objectives of a supply chain
1. To maximize the overall value generated.
2. To achieve maximum supply chain profitability
3. To reduce the supply chain costs to the minimum
possible level.
Supply chain for a

Manufacturing Organization
Supply chain for a Service

Organization
Activities involved in
supply chain management
Four major activities involved in supply
chain management are:
1. Purchasing
2. Logistics
3. Warehousing
4. Expediting
Supply chain strategies

Supply chain strategies include:
1. Multiple suppliers
2. Few suppliers
3. Vertical integration
4. Keiretsu network
5. Virtual companies
Multiple suppliers
Historically, the objective of purchasing &
materials management has always been
to have two or more suppliers. The
thinking was that competition would drive
down price & reduce the risk of suppliers
being cut off. Long term partnering
relationships are not the goal. This
strategy plays one supplier against
another & places the burden of meeting
the buyers demand on the supplier.
Few suppliers
This is a strategy of few suppliers which implies
that rather than looking for short term attributes
such as low cost, a buyer is better off developing
a long term relationship with a few dedicated
suppliers.
Using few suppliers can create value by allowing
suppliers to have economies of scale & a
learning curve that yields both lower transaction
costs & lower production costs.
It can foster both formal & informal contact, that
may contribute to the alignment of organizational
culture of the two firms, further strengthening the
partnership.
Vertical Integration
Developing the ability to produce goods or
services previously purchased or actually buying
a supplier or a distributor.
Backward integration suggests a firm purchase
its suppliers. For example, an automobile
manufacturing
company
deciding
to
manufacture its own batteries or tyres.
Forward
integration
suggests
that
a
manufacturer of components make the finished
product. For example, a manufacturer of a
computer memory chip also manufactures
computer hardware.
Keiretsu Network
Many Japanese manufacturers have found a
trade-off between purchasing from few suppliers
& vertical integration. These manufacturers are
often financial supporters of suppliers through
ownership or loans. The supplier then becomes
part of a company coalition known keiretsu.
Members of the keiretsu are assumed long term
relationships & are therefore expected to
function as partners, providing technical
expertise & stable quality production to the
manufacturer.
Virtual companies
Virtual companies are companies that rely on a
variety of supplier relationships to provide
services on demand. These are also known as
hollow corporations or network companies.
The advantage of virtual companies include
specialized management expertise, low capital
investment, flexibility & speed.
A traditional example of virtual organization is an
apparel or readymade garments business in
which the designers of cloths seldom
manufacturer,
rather
they
license
the
manufacture.
Measuring supply chain

performance
1.
2.
3.
4.
Four measures of supply chain

performance are:
Delivery: on-time-delivery
Quality: customer satisfaction
Time: less lead time
Cost: total delivered cost & value added
or productive cost
Enterprise Resources Planning
Enterprise Resource Planning

Integration of financial, manufacturing & human
resources on a single computer system.
An enterprise is a group of people with a
common goal, which has certain resources at its
disposal to achieve that goal.
Resources include money, manpower, materials
& all other things that are required to run the
enterprise.
Planning is done to ensure that all necessary
functions are performed in the right manner at
the right time.
Enterprise Resource Planning

ERP is a method of effective planning of all the
resources in an enterprise.
ERP includes the techniques & concepts
employed for an integrated management of a
business as a whole, from the view point of the
effective use of resources, to improve the
efficiency & effectiveness of an enterprise.
ERP is a software package that organizes &
manages a companys business processes by
sharing information across all functional areas in
the organization.
An ERP system
An ERP system is a set of integrated business
applications or modules which carryout common
business functions such as general ledger
accounting,
accounts
payable,
accounts
receivables, MRP, order management & HRM.
In some cases, a company chooses to buy only
a subset of these modules from a particular
vendor & mix them with modules from other
vendors & with the companys existing
applications.
An ERP system
Advantages of ERP system

ERP systems help companies manage their
resources efficiently & at the same time, better
serve their customers.
ERP simplifies customer interaction & speed
production
with
its
configure-to-order
capabilities.
Data entered once into an ERP system, say
from manufacturing, need not be reconciled with
accounting or warehouse records because the
records are all the same.
ERP systems encourage flatter organizational
structures & more decentralized decision
making.
Advantages of ERP system

ERP systems also centralize control over
information & standardize processes.
ERP
include
improved
efficiency,
integration of information for better
decision making, faster response time to
customer queries etc.
The indirect benefits include better
corporate image, improved customer
good-will, customer satisfaction etc.
Disadvantages of ERP systems

Implementation of an ERP system is extremely
difficult because the company must change its
way of doing business.
ERP systems are very expansive.
Choosing the right ERP software is a difficult
task.
For multi-division firms, implementing an ERP
system is a very complex, challenging task that
needs the best mind & careful attention of
internal information system specialist, internal
business mangers & external consultants.
Selected Enterprise software

vendors & their Area of Expertise
Vendor
Specialty
1. SAP America
Large enterprise, discrete

manufacturing
2. Oracle Corporation
Large enterprise, discrete

manufacturing & services
3. Invensys software
Systems
Electronics industry
4. Siebel systems
management
Customer relationship
Selected Enterprise software

vendors & their Area of Expertise
Vendor
5. People soft Inc.
Specialty
Employees & customer
relationship management
6. i2 Technologies
Supply chain management
7. J D Edwards
Mid-market manufacturing
8. QAD
Multinational mid-market
manufacturing
Multiple Choice Questions
MCQ 1
A measure of the success of an operation in
producing outputs that satisfy customers is
a. Efficiency
b. Effectiveness
c. Quality
d. Profitability
MCQ 2
A measure of the success of an operation in
converting inputs to outputs is
a. Efficiency
b. Effectiveness
c. Quality
d. Profitability
MCQ 3
____ is the reintroduction of an
intermediary in a supply chain.
a. Disintermediation
b. Re-intermediation
c. Channel assembly
d. Warehousing
MCQ 4
A measure of capacity that generally does
not include adjustments for preventive
maintenance or unplanned downtime is
called
a. Sustainable capacity
b. Effective capacity
c. Theoretical capacity
d. Safety capacity
MCQ 5
Which of the following does not fit with an
efficient supply chain?
a. Highly predictable demand
b. Products with short life cycles that change
frequently.
c. Low contribution margins
d. Stable product lines
MCQ 6
Which is true regarding a responsive supply
chain?
a. Demand is stable and predictable.
b. Product life cycles are short and change
often because of innovation.
c. Customers require standardization.
d. Contribution margins are low.
MCQ 7
Which of the following is not considered
part of Total Quality?
a. A focus on the customers & stakeholders
b. A process focus
c. Participation and team work
d. Six Sigma
MCQ 8
Machine down time is an example of which
type of quality cost?
a. Prevention
b. Appraisal
c. Internal-failure
d. External-failure
MCQ 9
The cost of quality is
a. An expression of an organizations performance in
quality in financial terms
b. The difference between customers expectations of a
product or service and their perceptions of their
experience of it.
c. A proactive approach towards quality management by
seeking to prevent defects ever being produced.
d. The inspection and testing of the outputs from a
transformation process.
MCQ 10
Continuous improvement is synonymous
with
a. Step changes
b. BPR
c. Kaizen
d. The performance-importance matrix
MCQ 11
Which of the following order of activities is most
appropriate for BPR?
a. Integrating, simplifying, eliminating, automating
b. Simplifying, eliminating, automating, integrating
c. Eliminating, simplifying, integrating, automating
d. Automating, integrating, simplifying, eliminating
MCQ 12
Quality assurance is a function responsible
for
a. Controlling quality
b. Managing quality
c. Inspection
d. Removal of defects
MCQ 13
The objective of TQM is
a. To improve processes
b. To improve profitability
c. All of the above
d. None
MCQ 14
The concept of continuous improvement as
applied to quality means:
a. Employees will continue to get better results
b. Processes will be improved by a lot of small
improvement
c. Processes will be improved through a few large
improvements
d. None
Answers
1. C
2. A
3. B
4. C
5. B
6. C
7. D
8. C
9. B
10. C
11. B
12. B
13. A
14. B
Thank You
Please forward your query
To: ssharma20@amity.edu
CC:
manoj.amity@panafnet.com
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PAN African eNetwork Project

Objective of the Class

Copyright Amity University

Copyright Amity University

Copyright Amity University

Copyright Amity University

Copyright Amity University

Impact of Poor Maintenance

Copyright Amity University

Minimizing the loss of productive time because of equipment failure

Copyright Amity University

Break down Maintenance

Copyright Amity University

Break down Maintenance

Copyright Amity University

Break down Maintenance

Copyright Amity University

Maintenance activities under taken before the

Copyright Amity University

Copyright Amity University

This includes activities such as periodic inspection,

Copyright Amity University

Planning & Scheduling of

Know the equipment to be maintained, available technique for maintenance

Copyright Amity University

Total Quality Management

Copyright Amity University

Copyright Amity University

New thinking about Quality

New quality is Big Q

Copyright Amity University

Dimensions of product quality

Copyright Amity University

Dimensions of service quality

Copyright Amity University

Gives positive company image

Copyright Amity University

Three levels of Quality

What is Total Quality Management?

A philosophy that involves everyone in an

Copyright Amity University

Essentials of TQM focus

Copyright Amity University

Modern Quality Management

Copyright Amity University

Deming Wheel (PDCA cycle)

Copyright Amity University

Copyright Amity University

Dr. Genichi Taguchi

Kaizen enhances quality through:

Three guiding principles of Kaizen

Total Quality Management

TQM is a process that underlines three

Copyright Amity University

Measuring a companys performance against that of

Copyright Amity University

Decide what to benchmark

Copyright Amity University

The fundamental rethinking & radical redesign

Quality Circles (QC)

Preventive costs: costs of quality planning, new product

Costs of quality can be reduced by revising the production

Supply Chain Management