01, Production systems and operations management


1.1, POM Value

       On time in Full value added production, promised good quality with relaive low cost to keep the sustainable competitiveness .

1.2, Production systems and organization functions

       Converting inputs into outputs is defined as producing or manufacturing. Handling products usually invoilves three units including marketing, financial acting and operating in which marketing supplys the demands of products, financial acting processes the value streams and operating add value to the final products. So 1-2% cost saving in operations can produce 5-20% increase in net profit according the statistics from American Business.

1.3, What is operations management

        It is a discipline or practice to plan, design, act to achieve the goal of organization. The main goal of operations management is assure the sustainable profits, assure market needs of products to keep the unit existence and make unit growth. Effeciency, productivity and cost reduction is one side of effective weapon to assure the sustainable profits. The other side is to expand the market.

        Every organization should have a strategy that refelects its mission and defines its organizational goals, policies, and performance measures precisely. The strategy should describe what general products the organization will produce, how it will compete most directly for customers, and how performance will be measured. It should identify where effort should be concentrated and what competitive advantages the organization will exploit. A well designed stratey should help the organization coordinate its organizational components and provides direction so that all actions contribute to the goals with marketing, financial and operating have their strategies respectively to support the general strategy that is usually decided by marketing.

        Operations managers' responsibilities are designing and planning such as Product design, capacity planning, process design and choice of technologies, facility location, facility design and work organization and product quality assurance. The lower level work are operation and control including aggregate/intermediate-term planning, materials management and inventory control, Maintenance, scheduling personnel, equipment, jobs, distributions and logistics.

        Operations management is concerned with the process of how to design, plan and operate production systems. Clearly, to be an effective operations manager, it is important to be sensitive to the physical and psychological characteristics of employees and to interact well with people on a personal basis. In addition, three other skills are important: (1) general knowledge of production processes, (2) knowledge and understanding of operations management principles, and (3) woking knowledge of decision making tools and techniques to help solve problems that occur in managing operations.

        Many decision can be made using personal experience and simple decision rules. However, many tools and techiques were developed in past 60 years to solve the complex operational issues such as statistical process control, learning curves, scheduling heuristics(Scheduling jobs, designing facilities and designing production processes.), forecasting methods(Predicting prouct demands, materials and prices.), queueing analysis, optimization models or integer programming(Locating facilities, scheduling machines) and linear programming(Schedling production, personnel, fomulating products), decision analysis(Planning capacity, configuring and designing processes) and simulations(Designing facilities and processes, scheduling operations and managing inventories).

1.4, Operations management history

        Production systems can be verified from the pyramids of Egypt and the great wall of China related to product design, facilities location, personnel scheduling and materials preparations. Until the 18th century, came the morden productions with very small scale.

        Industrial revolution created modern operations management. The first major technological innovations appeared in the textile industry. Between 1733 and 1785 the invention of the flying shuttle, the spinning jenny, the water frame, the mule spinner, and the power loom revolutionized the industry. However, three other developments were necessary for the industrial revolution to become widespread: (1) invetion of the steam engine, (2) mass production of interchangeable parts, and (3) creation of machine tools to replace human labors in England and America. The industrial revolution was in full swing in Egland in 1825. Wages remained low, factories were drab and unhealthy, working days of 14-16 hours were common, and woman and children (many as young as 10 years old) were used almost exclusively as labor in several industries(Such as textiles).

        The industrial revolution spread to the united states soon after the American Revolutionary War. Industrialization developed quickly in America for two reasons. First, the US economy was expanding because of the attraction of free land in the West. This created a constant shortage of labor, especially skilled craftsman. Second, there was a general openness to new ideas; the lack of an existing industrial base meant that there was no established way of doing things. Mechanization made it possible to produce more goods with less labor and less skilled labor. And because of mechanization, mass production of products needed more workers, materials, distibution of products, more specific or specialized labor and machines or tools which made modern operation managment possible.

        Charles Babbage, a prominent mathematician and engineer who is best known today for designing the predecessor of the digital computer, called a difference engine was one of the first to propose using scientific methods to solve business problems and improve production processes. In 1832 Babbage wrote On the Economy of Machines and manufactures, in which he recommended the use of time study, wage incentive plans, research and development to improve products and processes, and economic analysis for selecting the location of facilities. But these recommendations went relatively unnoticed, and the study of operations management evolved slowly until the end of the 19th century.

       During the second half of the 19th centry, scientific management appeared as influenced by natrual laws contributed by development of astronomy, chemistry, phisics and biology etc. which belived the production was led by production law. Taylor-father of engineering created the famous philosophy, use right (personality of people is different which needs operational managers to select proper person with related wage inscentive plan) people to do right thing on right time. And he also raised the concept of standard. Frank Gilbreth began his career as a bricklayer and laid five times more bricks than the average putting his philosophy " work smarter, not harder." Lillian Gilbreth are best known as the book and movie Cheaper by the dozen, which descibes how they used scientific management to raise their 12 children.

        Some of the fruits of scientific management could be seen in 1913, when Henry Ford constructed the first moving assembly line which made it possible to use sub skilled workers, less assembly time (one auto assembly time decreased from 12.5 to 1.5 person hours) and the proce of autos plummeted and Model T Ford line can be considered the first Just In Time production system.

        Social psychological effect study was done in 1927 at the Hawthorne plant of Western Electric Company now called Hawthorne Studies  which ran for over 10 years using different group workers in different illumination room in which both of the groups displayed the improved productivities. The conclusion is that the workers in experiemnts considered themselves special and worked harder. Other experiments supported their results.

        Walter Shewhart developed statistical control tools in the 1920s and 1930s. And during World War II the British government advocated research on military operations and US and Canadian governments created similar research.

        After World War II the magnitude and complexity of organizations grew rapidly. Computers are now used to control and coordinate materials movements among several machines and to change tool settings for the machines continuously which are called flexible manufacturing system with the abbreviation of FMSs and Computer aided design (CAD) helps speed up product development, standardize the parts used in products, and make it easier to trasfer tool movement information to computer control equipment which is now known as information flow management system.

        During 1970s, Japanese companies became significant players in the world economy, especially in products such as steel, automobiles, housewares, and computer electronics. During the 1980s, they came to dominate many industries.

        A little known fact is that the majo components of the Japanese production system were introduced to Japan soon after World War II through a series of management training programs provided by US government: the Civil Communication Section (CCS) seminars, the Training Within Industry (TWI) courses, and the Management Training Program (MTP). These stuff was developed during World War II to help US companies gear up for the demands put on them during ther war but their influence diminished after the war. Japanese adopted and expanded such methodologies with 3 principles or goals: 1, Quality comes first. (a) designing products for better quality, (b) holding everyone responsible for product quality rather than using inspectors, (c) making the product correct the first time to avoid rework and rejects, and (d) utilizing statistical quality control methods where appropriate. 2, Imrove the product and process continuously. Most advances in process technology are the result of many small improvements overtime. Japanese production system encourages imrovements suggestions to reduce cost and increase quality. Japanese relys more on field workers to make suggestions but not experts. 3, Eliminate all forms of waste. Any activity or material that costs money but does not add value to the product is eliminated. This idea led to inventory reduction methods such as just in time production. Inventories usually do not add value to the product but cost money, so any reduction in inventories that soes not jeopardize on time delivery is beneficial. Similarly, quality defects are a form of waste and must be eliminated. This idea is the motivation behind the quality policy of making things right the first time.

        The way Japanese companies such as Toyota implement these principles is as important as the principles themselves. First, there is total orgnizational commitment and involvement. Everyone is responsible for product quality, process improvement, and reduction of waste. These are not assigned to separate quality control or process engineering departments. Second, because they have greater responsibilities, workers require more education and training; Japanese comapnies devote considerable resources to training. Third, Japanese companies still utilize classical scietific management priciples of experimentation and measurement to see whether or not alternative methods are better. Industrial engineering is an integral component of most Japanese manufacturing companies.

    In summary, the Japanese production system is based on US ideas that have been synthesized and improved by the Japanese.

    An interesting aspect of operations management is that most of the vital problems a centry ago are still improtant today. The difference is that we have better tools and information to execute them. Of course, some new challenges face operations managers today such as environment issues. There are many opportunities for doing this, such as reducing production of harmful by-products, recycling waste materials and energies, and even scheduling employee work hours to reduce traffic and air pollution. Some are not only socially responsible but also economically beneficial.

1.5, Operations management, productivity and competitiveness

        The ultimate survival of a company is to well market well manufactured good quality product in a proper cost. The ability to compete depends on how much value can be added to products relative to the cost of adding that value. During the 1960s and 1970s, productivity increased at higher rates in Japan and Western Europe than US who is now learning his lesson. For example, Motorola reduced its defect rate by over 99% in 5 years while generating annual cost saving of over $600 million. Overall, manufacturing productivity in US increased 3.5% annually in average from 1980 to 1990 compared to only 2.3% in the 1970s. Though was 16% from 1982 to 1993, the main reason was the exchange rate which contributed doubled exports of US  in past 10 years. At the same time, per unit labor cost increased by 124% in Japan and 101% in Germany!

1.6, Operation management is for everyone

       Operations management is the process and thinking but not limited in one person's profession which should be kept in every person's mind to guide the production.