Operations Management: Theory and Practice

Cover
Copyright
Dedication
About the Author
Brief Contents
Contents
Preface
Part I: Conceptualizing Sustainable Operations
	1. Operations Management: Trends and Issues
		Ideas at Work 1.1: Narayana Health (NH): A Journey that Began with Wining the Heart of India
		1.1 Introduction to Operations Management
		1.2 Manufacturing and Service Sector Trends in India
		1.3 Services as a Part of Operations Management
			Intangibility
			Heterogeneity
			Simultaneous Production and Consumption
		Video Insights 1.1
			Perishability
		Ideas at Work 1.2: Operations Management in Service Systems
		1.4 Operations as a Key Functional Area
		1.5 Operations Management: A Systems Perspective
		Video Insights 1.2
		1.6 Operations Management Functions
			Design Versus Operational Control Issues
			Long-term Versus Short-term Issues
		1.7 Challenges in Operations Management
			Competitive Pressure due to Economic Reforms
			Growing Customer Expectations
			Technological Developments
			Environmental Issues
		1.8 Current Priorities for Operations Management
		Ideas at Work 1.3: India – An Emerging Global Manufacturing Base
		Summary
		Review Questions
		Net-Wise Exercises
		Notes
		Suggested Readings
	2. Operations Strategy
		Ideas at Work 2.1: Café Coffee Day: A Strategy for Affordable Luxury
		2.1 The Relevance of Operations Strategy
		2.2 The Strategy-Formulation Process
			Step 1: understand the Competitive Market Dynamics
			Step 2: Identify Order-qualifying and Order-winning Attributes
			Step 3: Identify Strategic Options for Sustaining Competitive Advantage
			Step 4: Devise the Overall Corporate Strategy
			Step 5: Arrive at the Operations Strategy
		2.3 Measures for Operational Excellence
		Video Insights 2.1
		Ideas at Work 2.2: Measures for Operational Excellence: The Case of Indigo Airlines
		2.4 Options for Strategic Decisions in Operations
			Product Portfolio
			Process Design
			Supply Chain
			Technology
		Video Insights 2.2
			Capacity
		2.5 Break-Even Analysis
		2.6 The Cost versus Flexibility Trade-off in Operations Strategy
		2.7 World-class Manufacturing Practices
			Toyota’s Journey as a World-class Manufacturer
			Principles of World-class Manufacturing
			Challenges in WCM
		2.8 Emerging Context for Operations Strategy
			Globalization of the Indian Economy
			The Outsourcing Wave
			Collaborative Commerce through the Internet
		Summary
		Review Questions
		Problems
		Net-Wise Exercises
		Case: Ginger Hotel
		Notes
		Suggested Readings
	3. Sustainability in Operations
		Ideas at Work 3.1: First Energy: A Sustainable Technology to Address Cooking Needs
		3.1 Sustainability: A Key Business Requirement
		3.2 Notion of Sustainability
		Video Insights 3.1
		3.3 Framework for Sustainable Operations Management
		Ideas at Work 3.2: Reuse Through Recycling: A Core Element of Creating Sustainable Operations
		3.4 Reverse Logistics: A Framework
			Networks in Reverse Logistics
			Decision Options in Reverse Logistics
			Entities in Reverse Logistics
		3.5 Design for Sustainability
		Ideas at Work 3.3: Sustainability—Indian Cultural Ethos
		3.6 Remanufacturing
		Ideas at Work 3.4: Green Manufacturing Excellence Awards
		3.7 Periodic Review Inventory Control for Remanufacturing
		3.8 Challenges in Creating Sustainable Operations
			Lack of Regulatory Framework
		Video Insights 3.2
			Mindset Inertia
			Lack of Top Management Vision
			Inability to See the Big Picture
			Need for Substantive Investments
			Benefits are Notional, not Obvious
			Crisis Is Yet to Blow Over
		Summary
		Review Questions
		Net-Wise Exercises
		Notes
		Suggested Readings
	4. Project Management
		Ideas at Work 4.1: Terminal Three at Indira Gandhi International (IGI) Airport, New Delhi
		4.1 Characteristics of Project Organizations
		Video Insights 4.1
		4.2 The Phases of Project Management
		4.3 A Framework for Project Management
			Work Breakdown Structure
			Organization Breakdown Structure
			Cost Breakdown Structure
		4.4 Tools and Techniques for Project Management
			Developing a Network Representation of a Project
		Ideas at Work 4.2: The Chainsa–Gurgaon Pipeline Project
			Analysis of Project Networks
		4.5 Addressing Time and Resource Constraints
			Resource Levelling
			Time–Cost Trade-offs in Projects
		4.6 Handling Uncertainty in Project Completion
			Simulation of Project Networks
		Ideas at Work 4.3: Critical Chain: Application of the Theory of Constraints to Project Management
		Summary
		Formula Review Questions
		Review Questions
		Problems
		Mini Projects
		Case Study
		Notes
		Suggested Readings
Part II: Operations and the Value Chain
	5. Supply Chain Management
		Ideas at Work 5.1: Mother Dairy: A Case for Supply Chain Management?
		5.1 What is a Supply Chain?
			The Need for Efficient Supply Chain Management
			Information and Material Flows in the Supply Chain
		5.2 Supply Chain Components
			The Inbound Supply Chain
			The In-house Supply Chain
			The Outbound Supply Chain
		Video Insights 5.1
		Ideas at Work 5.2: Supply Chain Management Solution for Indian Oil Corporation Limited
		5.3 Supply Chain Management: A Process Orientation
		5.4 Supply Chain Structure
		5.5 The Bullwhip Effect
		5.6 Measures of Supply Chain Performance
			Post-process Indices
			Process Indices
		Ideas at Work 5.3: Project Shakti of HUL: A Unique Distribution Chain for Rural Markets
		5.7 Design of Supply Chains
		Video Insights 5.2
			Designing Efficient Supply Chains
			Designing Responsive Supply Chains
		5.8 Third-Party Logistics in Web-Based Firms
		Summary
		Review Questions
		Formula Review
		Net-Wise Exercises
		Mini Projects
		Notes
		Suggested Readings
	6. Facilities Location
		Ideas at Work 6.1: Akshaya Patra: The Nation-wide Mid-day Meal Scheme of ISKCON
		6.1 Globalization of Operations
			Regulatory Issues
			Factor Advantages
			Expanding Markets in Developing Countries
		6.2 Factors Affecting Location Decisions
			Market-related Issues
		Ideas at Work 6.2: Aravind Eye Hospital’s Approach to Location of Healthcare Delivery Systems
			Cost-related Issues
			Regulatory and Policy Issues
			Other Issues
		6.3 Location Planning Methods
			Location Factor Rating
		Ideas at Work 6.3: Special Economic Zones: A Policy Angle to Location Planning
			The Centre-of-gravity Method
			The Load–Distance Method
			The Transportation Model
		6.4 Other Issues in Location Planning
		Summary
		Formula Review Questions
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Project
		Case Study
		Notes
		Suggested Readings
	7. Sourcing and Supply Management
		Ideas at Work 7.1: Eid Parry: Supplier as a Stakeholder in Business
		7.1 The Importance of Sourcing and Supply Management
			Quality Management Issues
			Changing Cost Structure
			Quick-response Requirements
			Creating a Lean Organization
			The Importance of New-product Development
		7.2 Strategic Sourcing
		7.3 The Procurement Process
		7.4 Approaches to Supply Management
		Ideas at Work 7.2: Alternative Procurement Processes Followed by Organizations
		Ideas at Work 7.3: Trusting Suppliers?
		7.5 Developing Reliable Vendors
			Supplier Development
		Video Insights 7.1
			Supplier Certification Programmes
		Ideas at Work 7.4: The Cluster Approach to Supplier Development
			Vendor Rating
		7.6 Measures for Sourcing and Supply Chain Management
			Basic Measures for Supplier Performance
			Measures for Long-Term Partnerships
		Ideas at Work 7.5: Total Cost of Ownership in an Auto-Component Manufacturing Unit
		7.7 The Make-or-Buy Decision
			Cost
			Core Versus Non-core Activities
			Management of Capacity Expansion
			Strategic Restructuring
		7.8 E-Procurement
		Video Insights 7.2
			Collaborative Market Mechanisms
			Quasi-market Mechanisms
			Neutral Market Mechanisms
		Summary
		Review Questions
		Case Study
		Notes
		Suggested Readings
Part III: Designing Operations
	8. Process and Capacity Analysis
		Ideas at Work 8.1: Capacity Expansion Plans at Indian Oil Corporation Limited (IOCL)
		8.1 Process as a Unit of Measurement in Operations
		8.2 Process Flow-Charting
		8.3 Planning Premises and Process Implications
			Make to Stock (MTS)
			Make to Order (MTO)
			Assemble to Order (ATO)
		8.4 Analysing Processes
		8.5 Process Redesign Using Business Process Re-Engineering (BPR)
			Value-added (VA) Activities
			Non-value-added (NVA) Activities
			Necessary but Non-value-added (NNVA) Activities
		8.6 Defining Capacity
		Video Insights 8.1
		8.7 Measures of Capacity
		8.8 The Time Horizon in Capacity Planning
		Ideas at Work 8.2: Nine Sources of Waste
		8.9 The Capacity Planning Framework
			Estimating the Total Requirement
			Estimating Labour and Machine Requirements
			Computing Capacity Availability
			Process Mapping and Capacity Analysiss
		8.10 Alternatives for Capacity Augmentation
			Waste Elimination
			Multi-skilling of the Workforce
			Subcontracting/Outsourcing
		8.11 Decision Tree for Capacity Planning
		Summary
		Formula Review Questions
		Review Questions
		Problems
		Mini Project
		Case Study
		Notes
		Suggested Readings
	9. Design of Manufacturing Processes
		Ideas at Work 9.1: Process Design at Milltec Machinery
		9.1 Determinants of Process Characteristics in Operations
			Volume
			Variety
			Flow
		9.2 Types of Processes and Operations Systems
			Continuous Flow Systems
		Video Insights 9.1
		Ideas at Work 9.2: The Polyester Filament Yarn Plant at Reliance Industries Limited
		Video Insights 9.2
			Intermittent Flow
			Jumbled Flow Systems
		Ideas at Work 9.3: Process Redesign for Improving Flow
		9.3 The Process–Product Matrix
		9.4 Layout Planning
		9.5 Types of Layouts
			Process Layout
			Product Layout
			Group Technology Layout
			Fixed Position Layout
		Ideas at Work 9.4: Workplace Organization at Thermax
		9.6 Performance Measures for Layout Design
		9.7 Design of Process Layouts
			The Qualitative Approach to Layout Design
			The Quantitative Approach to Layout Design
			Software Packages for Layout Design
		9.8 Design of Product Layouts
		9.9 Design of Group Technology Layouts
		9.10 One Worker–Multiple Machine Layouts
		9.11 Technology Issues in Process Design
			Flexible Manufacturing Systems
			Automated Material-handling Systems
		9.12 Complexity in Operations Management
		Summary
		Formula Review
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Project
		Case Study
		Notes
		Suggested Readings
	10. Design of Service Systems
		Ideas at Work 10.1: Design of Luxury Services
		10.1 Design of Service Systems: Characteristic Aspects
		10.2 Customer Contact in Service Systems
		Video Insights 10.1
		10.3 Complexity and Divergence in Service Systems
		10.4 Service Positioning
		Video Insights 10.2
		Ideas at Work 10.2: Blue Ginger: The Vietnamese Restaurant at Taj West End, Bangalore
		10.5 Service Blueprinting
		10.6 Capacity Planning in Services Using Queueing Analysis
			The basic Structure of a Queueing System
		10.7 Other Aspects of Addressing Capacity Issues in Services
		10.8 Service Quality
		Ideas at Work 10.3: Improving Service Quality Through Better Communication: The Case of Aravind Eye Hospitals
		Summary
		Formula Review
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Projects
		Case Study
		Notes
		Suggested Readings
		Supplement 10A: Simulation Modelling
		Summary
		Review Questions
		Problems
		Suggested Readings
	11. Product Development Process
		Ideas at Work 11.1: Development of AEH by Philips: A New Approach to R&D
		11.1 India’s Role in Research and Development
		11.2 Product Development: The Key to Competitive Advantage
		11.3 The Product Development Process
			Stages in the Product Development Process
		Ideas at Work 11.2: Cross-Badging: A Tool for New Rapid and New Product Introduction
		Video Insights 11.1
			The Stage–Gate Approach: An Alternative Representation of the Product Development Process
		11.4 Organization for Product Development
		11.5 Tools for Efficient Product Development
			Understanding Customer Needs
		Ideas at Work 11.3: Getting Together to Know What the Customer Wants
		Video Insights 11.2
			Quality Function Deployment
			Value Engineering
			Design for Manufacturability
			Tools for Mass Customization
		Ideas at Work 11.4: Variety Reduction Exercise: Opportunities for Cost Cutting
		11.6 Performance Measures for the Product Development Process
		11.7 Management Accounting Tools for Product Development
		11.8 Software Product Development
		Summary
		Review Questions
		Net-Wise Exercises
		Case Study
		Notes
		Suggested Readings
	12. Total Quality Management
		Ideas at Work 12.1: Poka Yoke for Defect Prevention
		12.1 The Quality Revolution
		12.2 Quality Gurus
			William Edwards Deming
			Joseph M. Juran
			Philip B. Crosby
			Karou Ishikawa
			Shigeo Shingo
			Genichi Taguchi
		12.3 Definitions of Quality
			Conformance to Specifications
			Fulfilling Customer Needs
			Fitness for Use
		12.4 Total Quality Management
			Commitment of Top Management
		Ideas at Work 12.2: Quality Policy in Some Organizations
			Employee Involvement
			Addressing Training Requirements
		12.5 Quality Management Tools
			Histograms
			Pareto Diagrams
			Cause and Effect (Fishbone) Diagrams
			CEDAC
			Poka Yoke
		Ideas at Work 12.3: Matrix Diagram for Enhancing the Competitiveness of a Product
			Quality Function Deployment
			Quality Costing
		12.6 Quality Certifications and Awards
			Quality Awards
			Quality Certifications
		Ideas at Work 12.4: SRF’s TQM Journey Towards the Deming Prize
		12.7 Design of Quality Assurance Systems
		Summary
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Projects
		Case Study
		Notes
		Suggested Readings
	13 Lean Management
		Ideas at Work 13.1: Notion of Waste in Offices
		13.1 The Origins of Lean Management
		13.2 Why Lean Management?
		13.3 The Philosophy of Lean Management
		13.4 Creating a Lean Enterprise
		13.5 Waste Elimination as the Core Logic of JIT
		Video Insights 13.1
		13.6 Elements of JIT Manufacturing
			Changes in the Manufacturing Architecture
			Lot-size Reduction
			Set-up Time Reduction Through SMED
			Kanban as a Control Tool
		Ideas at Work 13.2: Set-Up Time Reduction in Brakes India
		13.7 Production Planning and Control in JIT
			Push and Pull Scheduling
			The Kanban System
			Design of Kanban Quantities
		13.8 The Continuous Improvement Process
		Ideas at Work 13.3: Towards Zero Non-value-added Activities
		Video Insights 13.2
		13.9 Tools for Continuous Improvement
		13.10 Organization for Continuous Improvement
			Task Force for Continuous Improvement
			Quality Circles
			Project-based Small group Improvement Activities (SGIA)
			Visual Control Aids for Improvement
		13.11 Organizational Challenges in Lean Management
			JIT Implementation Issues
		Ideas at Work 13.4: Application of Lean Management in Healthcare
			Cultural and Human Issues
		Summary
		Review Questions
		Problems
		Mini Projects
		Case Study
		Notes
		Suggested Readings
Part IV: Planning and Control of Operations
	14. Demand Forecasting
		Ideas at Work 14.1: The Role of Forecasting in a Petrochemical-Manufacturing Company
		14.1 Forecasting as a Planning Tool
		14.2 Why Do We Forecast?
		14.3 Forecasting Time Horizon
			Short-term Forecasting
			Medium-term Forecasting
			Long-term Forecasting
		14.4 Design of Forecasting Systems
		14.5 Developing the Forecasting Logic
		14.6 Sources of Data
			Sales-Force Estimates
			Point of Sales (POS) Data Systems
			Forecasts from Supply Chain Partners
			Trade/Industry Association Journals
			B2B Portals/Marketplaces
			Economic Surveys and Indicators
			Subjective Knowledge
		14.7 Extrapolative Methods Using Time Series
		Ideas at Work 14.2: A Forecasting Model to Improve Credit Card Business Performance at Commerce Bank
			Moving Averages
			The Exponential Smoothening Method
			Extracting the Components of Time Series
			Estimating the Trend Using Linear Regression
			Extracting the Seasonal Component
		14.8 Causal Methods of Forecasting
			Econometric Models
		14.9 Accuracy of Forecasts
			Ideas at Work 14.3: Factors Affecting Fertilizer Use in Punjab
			Forecast Error (FE)
			Mean Absolute Deviation (MAD)
			Mean Absolute Percentage Error (MAPE)
			Mean Squared Error (MSE)
			Tracking Signal (TS)
		14.10 Using the Forecasting System
			Getting Started
			Focus Forecasting
			Incorporating External Information
			Forecasting Systems: Stability Versus Responsiveness
		Summary
		Formula Review
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Project
		Case Study
		Note
		Suggested Readings
	15. Operations Planning
		Ideas at Work 15.1: Operations Planning at Amazon to Improve Service Effectiveness
		15.1 Planning Hierarchies in Operations
		15.2 Aggregate Operations Planning
		15.3 The Need for Aggregate Operations Planning
		15.4 Alternatives for Managing Demand
			Reservation of Capacity
			Influencing Demand
		15.5 Alternatives for Managing Supply
			Inventory-based Alternatives
			Capacity Adjustment Alternatives
		15.6 Basic Strategies for Aggregate Operations Planning
			Level Strategy
			Chase Strategy
			Mixed Strategy
		15.7 Aggregate Operations Planning Methods
			Heuristic Methods for AOP
			Optimal Methods for AOP
		15.8 Operations Research Tools for Operations Planning
			Aggregate Operations Planning Using the Transportation Model
		Ideas at Work 15.2: Use of Spreadsheets for Aggregate Production Planning
			The Linear Programming Model for AOP
			The Linear Decision Rule (LDR)
		15.9 Master Operations Scheduling
		Summary
		Review Questions
		Problems
		Case Study
		Notes
		Suggested Readings
		Supplement 15: Linear Programming
		Summary
		Review Questions
		Problems
		Suggested Readings
	16. Resources Planning
		Ideas at Work 16.1: ERP Implementation at HPCL
		16.1 Dependent Demand Attributes
		16.2 Planning A Framework: The Basic Building Blocks
			Multiple Levels in Products
			Product Structure
			The Bill of Materials (BOM)
			Time Phasing the Requirement
			Determining the Lot Size
			Incorporating Lead-Time Information
			Establishing the Planning Premises
		16.3 MRP Logic
		16.4 Using the MRP System
			Updating MRP Schedules
			Safety Stock and Safety Lead Time
		16.5 Capacity Requirements Planning (CRP)
		16.6 Distribution Requirement Planning (DRP)
		16.7 Manufacturing Resources Planning (MRP II)
		Ideas at Work 16.2: Open Source ERP Solution for Venkateswara Hatcheries
		16.8 Enterprise Resource Planning (ERP)
		16.9 Resources Planning in Services
		Ideas at Work 16.3: Services Resources Planning (SRP): An ERP Solution from Ramco
		Summary
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Projects
		Notes
		Suggested Readings
	17. Inventory Planning and Control
		Ideas at Work 17.1: Inventory Management in a Consumer Products Company
		17.1 Inventory Planning for Independent Demand Items
			Continuous Demand
			Uncertainty of Demand
		17.2 Types of Inventory
			Seasonal Inventory
			Decoupling Inventory
			Cyclic Inventory
			Pipeline Inventory
			Safety Stock
		17.3 Inventory Costs
			Inventory-carrying Cost
			Cost of Ordering
			Cost of Shortages
		17.4 Inventory Control for Deterministic Demand Items
			Problems in the EOQ model
		17.5 Handling Uncertainty in Demand
		17.6 Inventory Control Systems
			The Continuous Review (Q) System
			The Periodic Review (P) System
			Issues in the P and Q Systems of Inventory Control
		17.7 Selective Control of Inventory
			ABC Classification
			Other Classification Schemes for Selective Control
		Ideas at Work 17.2: The Inventory Control System of a Petrochemical Manufacturer
		17.8 Inventory Planning for Single-Period Demand
		17.9 Other Issues in Inventory Planning and Control
		Summary
		Formula Review
		Review Questions
		Problems
		Mini Projects
		Case Study
		Notes
		Suggested Readings
	18. Operations Scheduling
		Ideas at Work 18.1: Scheduling the Order Processing Operation at Blockbuster Distribution Center
		18.1 The Need for Scheduling
		18.2 Scheduling: Alternative Terms
			Planning-related Terms
			Technological Constraints-related Terms
			Administration-related Terms
		18.3 The Loading of Machines
		18.4 The Scheduling Context
		Ideas at Work 18.2: Scheduling of Physician in the Emergency Department of a Hospital
			Scheduling Rules
			Performance Criteria
		18.5 Scheduling of Flow Shops
			Johnson’s Rule
		18.6 Scheduling of Job Shops
		18.7 Input–Output Control
		18.8 Operational Control Issues in Mass Production Systems
			Machine Redeployment
			Altering Operator Allocations
			Adjusting Material Feed Rates
		18.9 Operations Planning and Control Based on the Theory of Constraints
			Measures of Performance
			The Analogy of Marching Soldiers
			Synchronous Manufacturing
			Constraints in a Manufacturing System
			The Drum–Buffer–Rope (DBR) Methodology
		Summary
		Formula Review
		Review Questions
		Problems
		Mini Projects
		Notes
		Suggested Readings
	19. Six-Sigma Quality Control
		Ideas at Work 19.1: Quality Control at Indian Food Specialties Limited
		19.1 The Six-Sigma Approach to Quality Control
		19.2 Defects Per Million Opportunities (DPMO)
		19.3 Six-Sigma Methodology (DMAIC)
		Ideas at Work 19.2: Defect Opportunities: The Case of Fixed Deposits
		19.4 Variations in Processes
			Common Causes
			Assignable Causes
		19.5 Process Control Fundamentals
		19.6 Setting Up a Process Control System
			Step 1: Choose the Characteristic for Process Control
			Step 2: Choose the Measurement Method
			Step 3: Choose an Appropriate Sampling Procedure
			Step 4: Choose the Type of Control Chart
			Step 5: Compute the Control Limits
			Step 6: Plot the Data and Analyse it
		19.7 Process Improvements in the Long Run
			Process Capability
			Potential Capability
			Actual Capability
		19.8 Six Sigma and Process Capability
		19.9 Acceptance Sampling
			Single Sampling Plan
			AQL and LTPD
		Summary
		Formula Review
		Review Questions
		Problems
		Net-Wise Exercises
		Mini Project
		Notes
		Suggested Readings
Subject Index
Company Index