Unit 34: Operations Management: Presented By: Dwayne Cargill Colbourne College July 4, 2016
Unit 34: Operations Management: Presented By: Dwayne Cargill Colbourne College July 4, 2016
Unit 34: Operations Management: Presented By: Dwayne Cargill Colbourne College July 4, 2016
Management
Presented by: Dwayne Cargill
Colbourne College
July 4, 2016
Learning Outcome 2
• LO3 Understand how to organise a typical production process
• Ac 3.1 Assess how linear programming adds value to a given production process
• AC 3.2 Evaluate critical path analysis and network planning
• AC 3.3 Justify the need for operational planning and control in a selected production
process
In this Session
• LO3 Understand how to organise a typical production process:
• AC 3.2 3.3 Justify the need for operational planning and control in a selected
production process
• Operational planning and control:
• activities involved in capacity planning;
• inventory planning;
• project management and quality assurance/control
• Further readings
• References
The Nature of Planning and Control
• According to oxbridgenotes.co.uk (2016) planning and control is concerned
with the reconciliation between what the market requires and what the
operations resources can deliver
• Planning and control activities provide the systems, procedures and decisions
which bring different aspects of supply and demands together.
• The purpose is to make a connection between supply and demand that will
ensure the operations processes run effectively and efficiently and produce
products and services as required by customers.
Capacity Planning for Manufacturing and
Service Systems
• Capacity is the ability of a systems potential for producing goods or delivering services over
a specific time interval.
• The capacity decisions within a company are very important because they help determine
the limit of output and provide a major insight to determining operating costs.
• Basic decisions about capacity often have long term consequences.
• When considering capacity planning within a company, three key inputs should be
considered.
The kind of capacity to be determined,
How much of the products will be needed, and
When will the product be needed.
What is Capacity
2. Effective Capacity: Effective capacity is design capacity minus personal and other
allowances. Product and service factors effect capacity tremendously.
What is Capacity Planning
• Phasing out capacity: The outdated manufacturing facilities cause excessive plant
closures and down time.
Excess Capacity
• Excess capacity arises when actual production is less than what is achievable or
optimal for a firm.
• This often means that the demand in the market for the product is below what the
firm could potentially supply to the market.
• Excess capacity is inefficient and will cause manufacturers to incur extra costs or
lose market share.
Activities involved in Capacity Planning
• The overall objective of strategic capacity planning is to reach an optimal
level where production capabilities meet demand.
• Capacity needs include equipment, space, and employee skills.
• If production capabilities are not meeting demand, high costs, strains on
resources, and customer loss may result.
• It is important to note that capacity planning has many long term concerns
given the long term commitment of resources.
Capacity Decisions - Strategies
Following capacity, where companies wait for demand increases before expanding
capabilities.
Tracking capacity which adds incremental capacity over time to meet demand.
Functions of Capacity Planning
• In planning the design capacity (the maximum designed service capacity or
output rate) and effective capacity (the design capacity minus personal and
other allowances ) these two functions of capacity can be used to find the
efficiency and utilization.
2. The periodic system (used in smaller retailers) is used to take a physical count of inventory at periodic
intervals to replenish the inventory. This system would be most beneficial for companies that do not
have products with UPC or bar codes, such as nuts and bolts and are purchased in large quantities at
a time. In this case, someone on a line would monitor the level of the bin and notify a manager when
an order would need to be placed.
Traditional Inventory Management
• EOQ: Economic Order Quantity method determines the optimal order quantity
that will minimize the total inventory cost. EOQ is a basic model and further
models developed based on this model include production Quantity Model and
Quantity Discount Model.
• Continuous Order Model: works on fixed order quantity basis where a trigger for
fixed quantity replenishment is released whenever the inventory level reaches
predetermined safety level and triggers re ordering.
• Periodic System Model: This model works on the basis of placing order after a
fixed period of time.
Further Reading
• https://www.oxbridgenotes.co.uk/revision_notes/management-university-
of-exeter-operations-management/samples/operations-management-the-
nature-of-planning-and-control-1
• https://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/
samplechapter/0273756192.pdf
• http://www.slideshare.net/WelingkarDLP/product-operation-planning-
control
References
• Bennett, Claudette (2015) Operations Management Lecture Notes, Colbourne College
• Greasley, A. (2008) Operations Management. Online Publication. Date: May 31, 2012.
Publisher: SAGE Publication Ltd. http://knowledge.sagepub.com/view/operation
• oxbridgenotes.co.uk (2016) Operations Management – The Nature of Planning and Control
(1) Notes retrieved from https://www.oxbridgenotes.co.uk/revision_notes/management-
university-of-exeter-operations-management/samples/operations-management-the-nature-
of-planning-and-control-1
• Stevenson, William (2005) Operations Management.8th Ed. McGraw-Hill/Irwin