1. Operation Management
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Prepared by: Mohamed Reda

2. What is Operation Management
 is an area of management concerned with overseeing,
designing, and controlling the process of production and
redesigning business operations in the production of
goods or services.
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3. Operation Management Dimension of
performance
 Time (responsiveness)
 Variety
 Quality
 Cost (effectives)
These dimensions important for :
1. Performance measurement
2. Defining business strategy
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4. 2 ways to get competitive advantages
Cost of leadership (reducing
operation overall costs)
Differentiation (Variety,
Quality, Time)
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5. Operation Management could help to
 Making operational
trade offs
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6. Operation Management could help to
 Overcome
inefficiencies
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7. Operation Management could help to
 Evaluate
proposed
redesigned/
new idea or
technology
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10. Process Analysis
 Flow rate (throughput)
 Flow time
 Inventory
 Processing time
 Capacity: m/processing time
 Bottleneck
 Process capacity
 Utilization: Flow rate/ Capacity
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12. Process Analysis (cont.)
 Processing time
 Capacity: m/processing time
 Bottleneck
 Process capacity
 Utilization: Flow rate/ Capacity
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13. Labor productivity measure
 Capacity
 Cycle time
 Direct labor content
 Idle time
 AVG labor utilization
 Cost of direct labor
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14. Little’s law
 Inventory=Flow
rate*Flow time
 Inventory turns=
COGS/inventory
 Per unit
inventory cost
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15. 5 Reasons to for inventory
 Pipe line inventory: min inventory to get output
 Seasonal inventory: for seasonal variation
 Cycle inventory: economics of scale
 Safety inventory: Buffer against demand
 Decoupling inventory/buffer inventory: buffer between several steps
Buffer or suffer
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16. Produce/ Process matrix
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17. Produce/ Process matrix
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18. Make to Order or Make to Stock
 Make to order: (product waits for customer)
 Scale of economies in production
 Rapid fulfillment
Make to Stock: (customer waits for product)
 Fresh preparation
 Allow for more customization
 Produce exactly in demanded quantity
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19. Productivity
 Output of units produced/ input
used
 Productivity= Output/
(capital$+labor$+material$+service
$+energy$)
 Inefficiency: or waste is the distance
between your operational
performance and efficient frontier.
 https://www.youtube.com/watch?
v=Aw7A2LPE3lA
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20. Sources of waste
 Overproduction: to produce sooner of greater.
 Over produced need to be stored (inventory)
 Bad for inventory turns
 Product become obsolete
 Transportation: unnecessary movement of parts or people between process
 Result of poor layout of the system
 Create handling damages or cause production delay
 Need to relocate resources
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21. Sources of waste (cont.)
 Rework: Repeat or correcting of a process because of quality problems
 Failure to meet (do it right the first time)
 Can be caused by methods, material, machine or manpower
 Require additional resources so that normal production is disrupted
 Need analysis and solve root cause
 Over processing: processing beyond customer required
 May result from internal standards that don’t reflect customer requirement
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22. Sources of waste (cont.)
 Motion: unnecessary movement of parts within work space
 Result for poor workstation design/ layout
 Arrange people and part around the stations and work content that has been
standardized to minimize motion
 Inventory: number of flow unit in the system
 Raw material , WIP or finished products.
 Increase inventory costs, bad for inventory turn
 Often require real state or storage space
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23. Sources of waste (cont.)
 Waiting: under utilizing people or parts while a process complete a work
cycle
 Decrease labor utilization
 Waiting for customer (long flow time)
 Waiting for resource (Idle time)
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24. Productivity example
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Activity time 47 Sec/cust 47 42.3
Demand rate 100 Cust/hour 100 100
Avg rate per customer 6 $/cust 6 6
Avg food cost per customer 1.5 $/cust 1.35 1.5
Staff 4 4 4
Wages 15 $/H 15 15
Fix cost 250 $/H 250 250
Process capacity 76.59574 76.59574 85.10638
Flow rate 76.59574 76.59574 85.10638
Revenue 459.5745 459.5745 510.6383
COGs 114.8936 103.4043 127.6596
Staffing 60 60 60
Fixed costs 250 250 250
Profit 34.68085 46.17021 72.97872

25. KPI Tree
 Tool to understand the relationship between operation and financial
impact
 The starting point for sensitivity analysis that identify operational variables
that yields the biggest financial improvement
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26. KPI tree and sensitivity analysis
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27. Overall Equipment Effectiveness
 The fraction of time that resources adding true value
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28. Line balancing
 Is sharing work equally among resources and the process, scaling up
process capacity as demand fluctuation or to overcome bottle neck
 Line balancing and staffing to demand (Example)
 Volume flexibility
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29. Variety
Fit based
Variety
Performance
Variety
Taste based
Variety
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30. Setup time: is to change
configuration between batches
Batches: collection of flow units
made between 2 setups
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31. Time/ Responsiveness
 Pooling
 Sequencing
 FIFO, or first in first served
 Easy to implement
 Perceived fairness
 Lowest variance to waiting time
 Sequence based on importance
 Emergency cases
 Identify profitable flow units
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32.  Shortest processing time rule
 Minimizing AVG waiting time
 Problem of having true processing time
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33. Quality
Capability
analysis
Conformance
analysis
Investigating
Assignable
cause
Eliminate
Assignable
cause
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Statistical process control

34. Ishikawa Diagram (Cause and Effect)
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35. Thank You
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