Operations Management

 Design of Process

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Factors Influencing Process Choices
 Volume: Average quantity of the products produced in a
manufacturing system
 Low volume: Turnkey project management firms such as
L&T and BHEL
 High volume: Consumer non-durable and FMCG sector
firms, Automobile, Chemical Processing
 Mid-volume: Consumer durables, white goods and several
industrial products
 Variety: Number of alternative products and variants of
each product that is offered by a manufacturing system
 Variety of product offerings is likely to introduce variety at
various processes in the system; alternative production
resources, materials, and skill of workers
 Flow: Flow indicates the nature and intensity of activities
involved in conversion of components and material from
raw material stage to finished goods stage

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Relationship between volume
and variety
Hi g h
h H ig

Volume Variety

Mass Mid volume Project

Production Mid variety Organisations
Petrochemicals, Motor Manufacturing Turnkey Project
Automobile Pharmaceuticals Execution

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Processes & Operations Systems
Available Alternatives
 Process characteristics are largely
determined by the flow of products in
the operating system
 Three types of flows occur in
operating systems:
 Continuous
 Intermittent
 Jumbled

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Continuous Flow System
 Characterised by a streamlined flow of products in the operating
system
 Conversion process begins with input of raw material at one
end, progresses through the system in an orderly fashion to
finally become finished goods at the final stage
 Production process is sequential and the required resources are
organised in stages
 Examples:
 several chemical processing industries such as manufacture of
petrochemicals, steel, pharmaceutical, cement and glass
 In a discrete manufacturing industry high volume production of
very few varieties (such as electrical bulbs or spark plugs)

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Paper Manufacturing
An example of process industry

Logs and chips Crushing of Processing of

of wood stored logs and chips the wood

Preparatory

Drying the Refining the Cleaning &

wood pulp Wood pulp Bleaching
Pulp making

Stretching Cutting
Paper rolling Final packing

Paper making
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
 Process Industries
Investment in spare parts

Industry Segment 3/90 3/91 3/92 3/93 3/94 3/95 3/96

Chemicals & Plastics 26.5 26.7 24.5 23.9 22.9 20.8 18.2
Polymers 38.3 35.0 35.5 39.3 39.3 36.2 34.0
Petroleum Products 14.0 11.8 12.9 11.3 9.9 12.0 10.8
Synthetic Textiles 21.5 18.6 21.1 23.7 18.4 15.4 16.1
Inorganic Chemicals 32.7 21.9 23.6 25.3 29.9 24.1 20.1
Steel 33.5 32.8 28.6 27.6 28.0 25.9 23.4
Paper & Paper 39.5 39.2 35.0 36.5 36.2 33.2 31.4
products
Source: Corporate Sector, Centre for Monitoring Indian Economy, July 1997.

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Backward Integration at Reliance Retailing
Naroda Textiles
Fabric Wool, Silk
Complex

Texturised Yarn Spun Yarn

PG Complex PSF PFY LAB

Polyester chips Polyester resin PTA PX N-Parafins

Polyethylene Poly Propylene PVC

MEG
VCM
EO Oxygen
Hazira EDC
Complex Caustic Unit

Fuel Gas Ethylene C4s Propylene Toluene Xylene Benzene Salt

Polymers
Cracker & Chemicals

ATF
LPG Naptha Gasoline Diesel Sulphur Fuel Oil Bitumen
Jamnagar Kerosene
Complex
Refining & Marketing Refining

Bombay
Oil & Gas Exploration & Production Oil & Gas
High
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
Operations Management Issues
Process Industry
 The notion of capacity
 Flow rate determines capacity
 Bottleneck easily identifiable
 Nature of inventories
 Work in Progress will be minimal
 Inventory of Spares & Maintenance will be high
 Importance of maintenance
 Relevance of vertical integration
 Joint & Bye Products are many
 Exploiting processing opportunities of these
important

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Continuous Flow System
Mass production in discrete manufacturing
 In discrete manufacturing various components are
manufactured in discrete fashion and the final product is
obtained through an assembly process
 In a mass production system, the volume of production
is very high and the number of variations in the final
product is low
 Examples:
 Automobile and two wheeler manufacturers,
 Manufacturers of electrical components such as switches
and health care products such as disposable syringes
 The entire manufacturing is organised by arranging the
resources one after the other as per the manufacturing
sequence (known as product line structure)

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

 Process Design for Mass
Production Systems
Pre manufacturing Activities
Product A Product B Product C

Machining Machining Machining

Fabrication Fabrication Fabrication

Assembly Assembly Assembly

Testing Testing Testing

Dedicated & Decentralised Manufacturing Support

Product A Machine
1
Machine
2
Machine
3
... Machine
m
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
Intermittent Flow System
 Characterised by mid-volume, mid-variety
products/services
 Increases the flow complexities
 Flow and capacity balancing are difficult but
important
 Process industries use batch production methods
 Discrete industries use alternative methods of
designing layout issues
 Capacity Estimation is hard
 Production Planning & Control is complex

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Process Design for Intermittent Flow
in Discrete Manufacturing

Pre-manufacturing activities

Gear Shafts Other

Components rotating parts
Housings
Prismatic
Sheet
Components
Metal parts

Assembly & Test Assembly & Test Assembly & Test

Product A Product B Product C

Dedicated Manufacturing Support for the products

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Layout redesign to minimise complexity
in Intermittent flow: An example

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

 Intermittent Flow System
Sources of Problems

 A bad choice on structure & people issues

Leads to
 Complicated Material & Information Flows
Thereby
 Making Production Planning & Control Complex
Which Demands
 Special mechanisms to bring order out of chaos

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

 Special Mechanisms
To bring order out of Chaos

 Lot of paper work

 Enormous supervision/Co-ordination
 Progress Chasing/Expedition
All these finally result in
 Long Lead Times/Poor Delivery
Reliability
 Excess and Unwanted Inventory
 High Overhead/High Cost

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Jumbled Flow System
 Occurs on account of non-standard and complex flow
patterns characteristic in certain systems
 Highly customised items
 customer orders for one or a few
 Examples
 turnkey project executor such as BHEL or L&T
 customised manufacturing systems such as PCB fabricators,
sheet metal fabricators, tool room operators and printing
and publishing
 Operational complexity arising out of jumbled flow is high
 Discrete manufacturing with Jumbled flow uses a Job
Shop structure

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Process flow in Job Shops

Machine Machine
1 3
Job 1
Machine
6
Job 3
Machine
4

Machine Machine
2 7
Job 2
Machine
5

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Jumbled Flow System
 Complex issue is capacity management
 Considerable time is lost due to repeated setup
of processes
 Due to jumbled flow, crisscrossing of jobs
in the system results in poor visibility.
 Problems are often hidden and build up of work
in process inventory takes place
 Cost accounting and estimation systems
are crucial as there is a constant need to
quote for specific customer orders

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Process design for operations
Salient feature of alternative choices
Flow Characteristics Continuous
Product High Volume, Very low
Characteristics variety
Examples of Process Industry, Mass
production systems production systems in
discrete manufacturing
Issues of importance Flow Balancing,
Maintenance, Capacity
utilisation and
debottlenecking,
Backward integration
Operations Line Balancing,
Management Tools & Maintenance
Techniques management, Process
optimisation, Product
layout design, Flow
shope scheduling, Pull
type scheduling, Single
piece flow design
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
Intermittent Jumbled
Mid volume, Mid variety Very high variety, low
volume
Batch production in Project Organisations,
Process and discrete Tool Rooms, General
manufacturing purpose fabricators
Manufacturing system Capacity Estimation,
and layout design, Scheduling, Production
Changeover Control, Cost estimation
management, Capacity
planning and estimation
Forecasting, Capacity Project Management &
Planning and estimation, Scheduling, Capacity
Optimised production planning and
planning and product optimisation, Job shop
sequencing, Group scheduling, Functional
Technology layout Layout design, Job order
design, Materials costing, Work in Process
Management Management
 Product – Process Matrix
Low Volume High Volume
Multiple Products Few Major Products
Low Standardisation High Standardisation
Low Volume Higher Volume
One of a kind Commodity Products
Jumbled
Satellite Launch
Flow Vehicle
(Job Shop)
None
Disconnected
Line Flow Machine Tools
(Batch)

Connected Line
Auto electric
Flow (Assembly parts
Line)

Continuous
Flow Polyethylene
None
Source: Adapted from Hayes, R.H. and Wheelright, S.C., (1979), “Link manufacturing process and product life cycles”, Harvard
Business Review, 57 (1), 133 – 140.
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
Process Design Issues
Service Systems
 Customer contact signifies
 the extent to which customer participates in the preparation
and consumption of service
 the nature and intensity of interaction that the customer has
with the entities and service personnel
 the level of exposure that the customer has of the various
facets of the service system while the customer is receiving the
service
 Degree of complexity refers to the steps and sequences in
the process measured by the number and intricacy of the
steps
 Degree of divergence indicates the executional latitude or
variability of these steps and sequences
 All the three influence the service process design

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Degree of Customer Contact
Design implications
 Low: Quasi- Manufacturing
 Medium: Mixed Service
 High: Pure Service

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Customer Contact
Implications
 Efficiency of Operations
 Capacity Decisions
 Facility Location Choices
 Control of Operations
 Effectiveness Vs Efficiency Goals

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

 Degree of Complexity & Degree of
Divergence: An illustration
Low complexity/Divergence
No reservation
Self seating, Menu on the board
Eliminate
Customer calls out his requirements
Pre-prepared: Fixed set of offering
Just 2 or 3 choices offered
Only South Indian (Vegetarian)
Payment at the counter while leaving
(Cash only)
Source: Adapted from Shostack, G.L., “Service Positioning through Structural Change”, Journal of Marketing, 51: 34 – 43.
Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education
Process Description High Complexity/Divergence
Table Reservation Specific table selection options offered
Seating Guests, Offering Menus Recite Menu, Describe in detail all
starters & other special items in offer
for the day
Serve Water & Starters at the Assortment of salads, chips and fruit
beginning of the service juices offered
Order taking process Order takers interact with the
customers at the table in constructing
the menu for the guests
Salads, Papads Individually prepared and served at the
table as per request
Starters Customers can choose from 20
alternatives
Main Menu South Indian, Jain, Tandoori, Chinese,
Continental, Brazilian (Both vegetarian
& non-vegetarian)
Cash Payment Multiple choices of payments (Cash,
Card, Coupons etc.)
 Service Process Matrix
Low Degree of interaction/customisation High
Degree of labour intensity

Service Factory Service Shop

•Low cost airlines •Automobile garage
•Trucking •Large Hospitals
•Hotels •Repair services

Mass Service Professional Service

•Retailing •Legal services
•Education (Schools) •Medicare
•Wholesale business • Home Design

High
Source: Schmenner, R.G. (1986), “How can service business survive and prosper?”, Sloan Management
Review, Spring 1986, 21 – 32.

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Flexible Manufacturing System
Definition
 A Flexible Manufacturing Systems (FMS) is
 A system consisting usually of numerical control (NC)
machines
 Connected by an automated material handling system.

 Operated under a central computer control

 Capable of simultaneously processing a family of parts
with low to medium demand, different process cycles
and operation sequences
 It is an attempt to solve the process
complexities arising out of mid-volume and mid-
variety parts

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Typical Machines used in FMS

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Structure of an FMS

System Controller

Load Primary Secondary

Unload MHS MHS

Machine Auxiliary
Tools Equipment

Information flow Material flow

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Flexibilities in FMS
 Machine flexibility: the ease of making changes required to
produce a given set of part types
 Process flexibility or mix flexibility: the ability to produce a
given set of part types, each possibly using different materials
in several ways
 Product flexibility: the ability to produce a new set of products
very economically and quickly
 Routing flexibility: is the ability to handle breakdowns and to
continue processing the given set of part types
 Volume flexibility: is a measure of the ability to operate an
FMS profitably at different production volumes
 Expansion flexibility: is the capability of building a system, and
expanding it as need arises, easily and in a modular fashion

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Material Handling in FMSs
 An automated storage system is used for large scale
bulk storage as well as for small in line buffer storage
 Automated Storage and Retrieval System (AS/RS)
 Horizontal & Vertical Carousels
 An automated transport system is used to move parts
and products from the storage systems to the production
operations
 Automated Guided Vehicle (AGV) system
 Conveyors in a wide variety of forms such as overhead,
monorail, carry and free, power and free and under floor
drag chain
 Gantry and Pick & Place Robots

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Planning Premises in Process
Design
 Three generic planning premises are in use in
operations management;
 Make-to-Stock: more amenable for systems with fewer
product varieties and high production volume as in the
case of continuous and streamlined flow systems
 Assemble-to-order: useful for intermittent flow systems
catering to the mid-volume mid-variety situations
 Make-to-order: organisations typically belong to
manufacturer of high product variety (jumbled flow
process systems) use this planning methodology

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Complexity of Operations Management
Some indicators
igh
H

y in
et ,
Vari odels ,
er M gs
reat ducts, outin oices
G ro ss R ch
• P roce ology
rde
r • P echn
to O • T
de
Ma
More stages
Order in Production
to
em ble
Ass Jumbled Flow

o S tock
et Intermittent Flow
Mad
w
Lo Continuous Flow

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Design of Processes
Chapter Highlights
 Volume, variety and flow exert significant influence on process
design in organisations.
 Process industries and mass production systems generally have
a streamlined flow of products.
 Mid-volume and mid-variety manufacturing systems have
intermittent flow. Capacity estimation is difficult in such
systems compared to a continuous flow systems.
 Project organisations and customised manufacturing systems
have jumbled flow. Capacity estimation and scheduling of jobs
are quite difficult. Therefore operations management
complexity is high in jumbled flow systems.
 A process – product matrix depicts the relationship between
process flow characteristics and volume of production in any
manufacturing organisation.

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Design of Processes
Chapter Highlights…
 Process design of service systems differs vastly from that of
manufacturing systems. Degree of customer contact and the
complexity and diversity of service offerings have a significant
bearing on process design in service systems.
 New technology manufacturing such as Flexible Manufacturing
Systems (FMS) have the potential to simplify the flow
complexities in mid-volume, mid-variety manufacturing
organisations due to increased flexibility.
 Made to stock, Made to order and Assemble to order
approaches to planning are specifically employed in
organisations having certain flow characteristics.
 Volume, variety and flow characteristics determine the
complexity of operations management. By a careful design of
the process, some of the complexities can be minimised.

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education