Chapter 7 – Optimising Operations Students will learn about strategies to optimise operations: Facilities design & layout Materials Management Management.

Chapter 7 – Optimising OperationsStudents will learn about strategies to optimise operations:

Facilities design & layout

Materials Management

Management of Quality

Extent of the use of Technology

SCSC Year 12 Business Management . Weebly . com

Chapter 7 – Optimising OperationsFacilities design and layout (floor Plan)

The physical layout of the plant has a significant impact on the efficiency of the opganisations operations. There are a number of critical factors that influence location and design including:

• Product / service being produced or supplied• Volume of output required• The amount of physical space required• The process to be undertaken• Appropriate type of layout.



Optimising the use of physical space Adequate workspace must be provided to all areas. Insufficient workspace will often result in bottlenecks and subsequent blockages in workflows. The workspace, however, must not be too large, as it may hinder productivity if workers have to move around or walk long distances during completion of tasks.

Optimising the use of equipment Extracting maximum productivity from equipment is a key to operational optimisation. Equipment must be easily accessible, reliable and operational to maximise its throughput. It is vital that each piece is located so that it is easily accessible to those who require it.


Chapter 7 – Optimising OperationsFacilities design and layout (floor Plan)Regular maintenance program A regular maintenance program is essential to keeping equipment and facilities operational. Easy accessibility to these for maintenance is crucial in order to minimise downtime. Multi- skilling of workers is necessary to ensure maximum utilisation of equipment. While regular maintenance will be a cost in time, labour and component parts, it will avert costly downtime. Any piece of equipment lying idle results in lost output and thus, lost revenue.

Location of raw materials stocks and finished products The location of raw materials stocks and finished products is another determinant of operational efficiency and effectiveness. These must be readily accessible during the production process. Time wasted in locating and moving required inputs must be minimised in order to optimise productivity.



Layout of plant and equipment The layout of plant and equipment must allow for an efficient flow of production. This involves linking the processes and the different stages of production so that production needs are met.


Chapter 7 – Optimising OperationsFacilities design and layout (floor Plan)Types of layout The facility layout must be planned with a view to streamlining the production process. The best layout to adopt depends on the type of organisation and the nature of its activities.

fixed position layout the product remains in a fixed position with the required resources taken to the product process layout production layout where pieces of equipment with like

function are grouped together functional layout pieces of equipment with like function are grouped together; the product being produced is taken to each piece of

equipment product layout equipment is used for a single purpose along a production flow line; the product progresses along the line in a

continuous flow; suitable for mass production SCSC Year 12 Business Management . Weebly . com

Chapter 7 – Optimising OperationsFacilities design and layout (floor Plan)Types of layout The facility layout must be planned with a view to streamlining the production process. The best layout to adopt depends on the type of organisation and the nature of its activities.

fixed position layout the product remains in a fixed position with the required resources taken to the product process layout (batch production)production layout where pieces of equipment with like

function are grouped together functional layout (batch production)pieces of equipment with like function are grouped together; the product being produced is taken to each piece of

equipment product layout (mass production)equipment is used for a single purpose along a production flow line; the product progresses along the line in a

continuous flow; suitable for mass production SCSC Year 12 Business Management . Weebly . com

Chapter 7 – Optimising OperationsFacilities design and layout (floor Plan)Other associated words to the factory layout include:

Assembly line - used in manufacturing organisations when machines pass a product past workers who perform a small specialised task

Customisation - made or altered to meet an individual order

Mass customisation - large-scale production of customised products

Cell production - the production line is split into a number of self-contained cells or units; each cell produces the whole of one unit or a significant subassembly of a unit

Lean manufacturing - efficient management of the production process with the aim of achieving minimum use of resources (streamlined production)

Closed factory - model of production where all production is carried out within the four walls of a factory site

Virtual factory - the decentralisation of productive activities so that production does not occur at one worksite; also referred to as decentralisation


Chapter 7 – Optimising OperationsImproving operations through technology

The introduction of new technology as it becomes available to organisational operations can offer significant efficiency savings as well as improvements in the quality of product. Organisations that fail to keep pace with the latest technological advancements tend to rapidly lose competitiveness. Following are several examples of the technological innovations developed in recent years that have added significantly to operational productivity. All are examples of automation. Automation the techniques and equipment used to achieve automatic, as opposed to human, operation or control of a process, equipment or a system


Chapter 7 – Optimising OperationsImproving operations through technologyComputer Numerical Control Computer Numerical Control (CNC), also referred to as Computer Aided Manufacturing (CAM), involves the control of machinery, tools and equipment through a computer.

Computer aided Design (CaD) - a computer program that facilitatesthe creation and modification of product design

Computer Integrated Manufacturing - Computer Integrated Manufacturing (CIM) is the combination of CAD and CNC. CIM is a computer program that controls and directs production from start to finish.

Robotics - the use of computer- controlled robotsto perform manual tasks, especially on an assembly line, replacing functions previously performed by human labour


Chapter 7 – Optimising OperationsImproving operations through technologyFlexible Manufacturing Systems (FMS) This is a complete system involving total computer control of the operations system using CNC-based equipment and automated transport systems that deliver component parts and raw materials in the correct quantities just as they are required. FMS creates total computer control of all aspects of the operations system involving the integration of CAD, engineering and manufacturing.

Service industries In recent years, service industries have had access to considerable productivity improvements via technological development. Specific examples of these include the following: - E-commerce allows business transactions to occur using the internet.

- Computerisation has reduced operating costs and made significant time economies.

- The development of mobile phone technology through the 3G network has opened up many possibilities for businesses.

- The ability to communicate via the internet has enabled significant cost savings.


Chapter 7 – Optimising OperationsMaterials and Supply chain management

Supply chain management is the process of integrating and planning, implementing and controlling the system of organisations, people, technology, activities, information and resources that transforms inputs into finished outputs. Aspects of supply chain management include:

- Inventory management,

- The procurement of supplies, and

- Distribution of finished products to customers (logistics).



In recent years, the Just In Time (JIT) system of inventory management from Japan has been growing in popularity with Australian businesses. This system involves the reduction/ minimisation of inventory levels in the supply chain, thereby reducing inventory costs. Inherent to JIT is the availability of products in the required amounts at the right time at every stage in the production process, while at the same time minimising the use of materials, equipment, labour and space.

Just in time (Jit) An inventory management system that aims to avoid holding any stocks (either as inputsor finished goods); supplies arrive just as needed for production, and finished products are immediately dispatched or sold to customers



Inventory management, Inventory is the storage of: • raw materials and component parts • unfinished production• finished goods ready for distribution.

The inventory of a business takes up storage space and is therefore a cost. The aim of inventory management is to ensure that the right in what quantities. The key to success is to maintain a level of inventory that allows production to continue without any delays, while avoiding the cost of excess stock.

A system of inventory control that deter- mines how and when to store items, and is capable of tracking the movement of raw materials, components and partly completed units while protecting against loss due to theft or damage.



Procurement of inputs / SuppliesLocating and acquiring a regular and reliable supply of high-quality inputs is a vital aspect of efficient operations management. Contracts need to be established with reliable suppliers of high-quality inputs.

• Supplier lead-in time must also be taken into account. Some suppliers will require prior warning of requirements.

• Planning must occur in order to ascertain the exact amounts of materials that will be required. This may give the opportunity to purchase in bulk and therefore obtain an input at a lower cost per unit.

• The operations manager must also factor in an attempt to anticipate the possibility of future price rises or falls caused by seasonal variations, world market conditions, changes in the value of the Australian dollar or potential industrial action at a supplier’s production facility.

• A system must also be established, such as JIT, to keep inventory at the required levels to avert theft and loss of materials while in storage.



Distribution of finished products to customers (logistics).

An efficient system of transporting finished products to the customer must also be developed. This may involve contracts with transport specialists such as couriers. The frequency of deliveries must be established, as must the routes taken.


Chapter 7 – Optimising OperationsManagement of Quality

Quality describes the degree of excellence in a product or service and its ability to satisfy client/customer needs and wants. Consumers generally base their purchasing decisions on the quality and price of a product as they look for the best possible quality at the lowest price.

Quality management in a large-scale organisation may take one or a combination of:quality control,quality assurance and Total Quality Management (TQM), as discussed later.

Quality management programs aim to: minimise waste and defect rates in production, thereby maximising operational efficiency and productivity obtain consistently high standards of product and service at every stage of production achieve set quality standards or benchmarks.



Quality control Quality control involves the use of a series of physical checks at different stages of the production process to ensure that products and services meet designated standards and errors are eliminated post-production. Defective products are usually rejected and may be sold as ‘seconds’. Quality control is reactive and aims to detect defects after they have occurred. Once detected, operations management will decide whether production needs to be halted to fix the cause of the problem or that this was a one-off case. In some instances, a product recall becomes necessary to rectify problems on units already sold.



Quality assurance A quality assurance system aims to build quality into work processes, thereby avoiding errors before they occur. It is a proactive process that may involve the use of an external organisation called a ‘certification body’, which audits against published national or international standards. Achievement of certification entitles an organisation to display certification marks. SAI Global is the best-known Australian certification body that issues certification against published International Organization for Standardization (ISO) standards.

While different quality standards apply to different types of organisations, standards usually cover aspects such as: • specific processes to be adopted in regard to customer satisfaction, continuous improvement, the production process • training of staff• documentation of processes • controls• corrective action• auditing of processes.



Quality assurance

While different quality standards apply to different types of organisations, standards usually cover aspects such as: • specific processes to be adopted in regard to customer satisfaction, continuous improvement, the production process • training of staff• documentation of processes • controls• corrective action• auditing of processes.

Quality certification is growing at a rapid rate among Australian organisations as globalisation increases international competition and the quality expectations of Australian consumers.



Total Quality Management (TQM) TQM is a holistic approach to quality where all members of an organisation aim to participate in ongoing improvement of organisational culture and production processes. All organisational members are required to have a commitment to ongoing, incremental quality improvements in everything they do. Employees are placed into a work group known as a quality circle and are required to work together to achieve quality improvements on an ongoing basis.


Chapter 7 – Optimising OperationsManagement of QualityCore TQM concepts 1 continuous process improvement – everyone is always looking for improvement

2 customer focus –Everyone has a customer: External customer – the person who purchases the product or service. Internal customer – those who use what another group in the workplace provides. Every work group must think about provid- ing value to the people who use their product.

3 defect prevention - TQM tries to prevent defects in products or services before they arise rather than relying on inspection to find them after they occur.

4 universal responsibility - With TQM, quality is not just the responsibility of the inspection department: it is everybody’s responsibility.


Chapter 7 – Optimising OperationsEthical and Socially responsible management of operations


Chapter 7 – Optimising Operations Students will learn about strategies to optimise operations: Facilities design & layout Materials Management Management.

Documents