AN OVERVIEW OF PRODUCTIONS & OPERATIONS MANAGEMENT

Production/Operation management can be viewed as the process through which various

resources are combined and transformed following production/operation system of a specific
organisation into value added products/services.

Therefore, at each stage in the process, there is high need for feedback and control so as to
ensure that transformed value added products/services are of the pre-stated quality and / or
quantity.

Thus it may be stated that the 5Ps of production/operations management are:

1. Plants – The factory, the location where activities take place

2. People – Both direct and indirect workforce
3. Parts –The components, sub assemblies or even products
4. Processes – Methodologies, technologies
5. Planning and Control – Information management system which initiates, manages,
monitors, controls and collects feedback so as to ensure efficient use of all resources

Some important Notions

Production process: A production process is the method of using economic input or resources, like
labor, capital equipment or land, to provide goods and services to consumers. The production process
typically covers how to efficiently and productively manufacture products for sale to reach customers
quickly without sacrificing the quality of the product.

Manufacturing operations: refers to a framework in which man, machine and material

come together to produce a tangible product. It deals with all the supply chain activities such
as gathering requirements from customers, procuring raw materials, allocating resources,
scheduling the production, maintaining the inventory, and delivering end products to
customers.

Manufacturing operations are classified into process manufacturing and discrete

manufacturing. Process manufacturing is an operational method that produces goods by
following a specified sequence of steps or a predefined formula. Discrete manufacturing

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 1
emphasizes producing individual finished goods that are distinct from one another. While
pharmaceutical and food and beverage industries adopt the process manufacturing method,
automobiles and smartphone manufacturers adopt a discrete manufacturing method.

Service operations: Service operation encompasses the day-to-day activities, processes, and
infrastructure responsible for delivering intangible value to the business through technology
which at times bring about a tangible product

No customer wants to pay for a service that does not perform as needed or is not available for
usage. Thus, the goal of service operation is to maintain day-to-day services to the point that
there are no issues. When issues do occur service operation principles dictate response based on
business priority.

Characteristics of Manufacturing

 Specialization – division of work or effort

 Mechanization
 Use of technology of industrial engineering – devise improvements to increase
production through waste elimination
 Use of computers and data processing equipments

Characteristics of Services

 Intangible – you cannot touch or see

 Perishability – Most services cannot be stored as they are simultaneously produced and
consumed e.g seats on an airplane
 Inseparability – production and consumption is simultaneous
 Variability – variations in service quality resulting from the human element involved in
providing a service

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 2
Summary: Consider the simple diagram below to capture Production/Operations
Management system

Revision question

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Production/Operations Management Strategy Development and Implementation

It is concerned with the pattern of strategic decisions and actions which set the role, objectives

and activities of operations for internal or external competitive business environment. Ultimate

benefits for developing strategy are to obtain competitive advantage from competitions. 

Strategy helps for increasing competitiveness.  Strategies always develop from the strength side

of the organization. It is tools used in competitive business environment.

DEVELOPING MISSION AND STRATEGIES

Strategy - It is an organization’s action plan to achieve the mission. - It exploit the opportunities

and strength, neutralize threats and avoid the weaknesses. - It concern with ―how to get

competitiveness?‖Mission - It is the purpose or rationale for an organizations existence. - It is a

statement about the organization’s business scope and methods of competing. - It concern with

―why organization is existence?‖

TYPES OF STRATEGY

Strategy Type 1.Competitive strategy which includes: Cost or price, Quality,

Dependability, Flexibility and Quick response
Strategy Type 2.Operational strategy which includes: • Product or service
strategy, Location strategy, Layout strategy, Process strategy, HR strategy

These are explained below:

Strategy Type 1.Competitive strategy - It is long term plan in order to gain competitive

advantage over its competitors in the competitive business environment.

Dependability - Produce and deliver its customer on time with agreed price

Quality - It is strategy to produce in accordance with specification and without error i.e. high

quality.  Price or cost - It is strategy to produce at low cost and low price. 

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Quick response - Quick deliver, short lead time, feedback

Flexibility - It is strategy to change operations that are: - Change the volume of production -

Change the time taken to produce - Mix of production - Innovate and introduce new products

cost

Strategy Type 2.Operational strategy is the combination of the follows aspects to gain

advantage

Process strategy - Selection, method, information, manpower

HR strategy - Talent development, succession planning, reward

Layout strategy - Space, warehouse, process, work cell 

Location strategy - This strategy concern the market, transportation, materials 

Product or service strategy - It is strategy related to product lifecycle, quality, size - It is plan

or methods used to reach their objectives and achieve organizational goals.

Achieving Competitive Advantage Through Operations/Production

Competitive advantage implies the creation of a system that has a unique advantage over the

competitors. Achieving Competitive Advantage through Operations/Production e can be attained

through the following three strategies - Competing on Differentiation, Competing on Cost,

Competing on Response.

:

1. Costs - Low cost products - Producing high volume of standardized products to take

advantage over the costs and economic of scale. - Continuous search for cost reduction -

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 5
 Concern the low-cost leadership. This exactly what Chinese construction enterprises are

using.

2. Differentiation - Products should be unique - Providing uniqueness goods in a way that

the consumer perceives as adding value. - It can be achieve through broad product line,

products features, service related experience differentiation

3. Response - It is a set of values related to rapid, flexible and reliable performance and

response - It’s main aspects are flexibility, reliability and quickness.

Strategy Development and Implementation (Identify Critical Success Factors, A Global view

of Operations Cultural and Ethical Issues, Build and Staff the Organization, Integrate OM with

Other Activities)

Implementation of strategy is the process which turns strategies and plans into actions in order to

accomplish the strategic objectives and goals. Development of strategy generally involves the

environmental analysis, setting corporate mission and determining actions to execute the actions.

Strategy development is the extent to control mechanisms for guiding the implementation of the

strategy.

DEVELOPMENT AND IMPLEMENTATION OF STRATEGY

Strategy Development Process

1. Environmental Analysis - It means identify the strengths, weaknesses, opportunities and

threats. - This step involves understanding the environment through SWOT, customers, industry

and competitors.

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2. Build a Corporate Mission - It means to state the reason for the firm’s existence. - And,

identify the value of which it wishes to create.

3. Form a Strategy - It means to build a competitive advantage such as low price, design or

volume flexibility, quality, quick response, delivery, dependability, after sale services or broad

product lines.

Implementation of Strategy ( Build and Staff Organization, Integrate OM with Other

Activities)

1. Build and Staff Organization - It is a step to group the necessary activities into the

organizational structure. - Manager must staff the organization with personnel who will get the

job done. - Manager works with subordinates so must build plans, budgets and programs that

will successfully implementation the strategy.

2. Integrate OM with Other Activities - To proper implement, the strategies must be supported

by the related activities. - Integrate the Operations with the marketing, financing, IT, supplies

etc.

GLOBAL VIEW OF OPERATIONS

Global View of operations and production management focus on - Reducing cost, Improving

supply chain, Attract & retain global talents , Improving operations Understanding market,

Better goods and services. These can be seen as explained below

1. Reducing Cost - Many international operations seek to take advantage of the tangible

opportunities to reduce the costs. - Foreign location can help lower both direct and indirect costs.

- Moving productions to international market can save money, labour cost and tax benefit,

advantage on trade agreements.

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2. Improving supply chain - the supply chain can often be improved by locating facilities in

countries where unique resources are available such as human resource expertise, low cost

materials and labour etc. - Thus, supply chain is a critical piece in an organization’s success. 4

3. Attract and Obtain global talents - Global organizations can attract and retain better

employees by offering the more employment opportunities. - Operations need people in all

functional areas and areas of expertise worldwide. - Global firm can recruit and retain good

employees because they provide both greater growth opportunities and insulation against

unemployment.

4. Improving Operations - Operations learn from better understanding of differences in the way

business is handled in different countries. - Another, improvement in operations is to reduce

response time to meet customer through providing them with quick and adequate service and

products as per their requirements in their home countries.

5. Understanding Market - It is the reason to go into the global market which interactions with

foreign customers, suppliers, and other competitive business and international firms inevitably

learn about the opportunities for new products and services.

6. Better goods and services - Global business can learn from business operations in other

countries to provide better goods and services through the taking advantages of being in their

location, market and business environment which automatically leads towards the quality

provision and customer satisfaction. 6

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 Global Operations Strategy Options (International Strategy, Multi-domestic Strategy,

Global Strategy, Transnational Strategy)

There are four different common strategies businesses use to expand internationally (Production

and Operations activities) These include:

1. International strategy

2. Multidomestic strategy

3. Global strategy

4. Transnational strategy

Whichever is considered by an organization, key things they seek to achieve are Local

responsiveness and Global integration

Local responsiveness refers to how companies serve a specific market’s needs — essentially,

how much do they change from market to market? This is not just about translating the website

or mobile app into a different language, but about the entire customer experience, from payment

processes to imagery and product choices or specifications.

Global integration, on the other hand, refers to the standardization companies achieve as they

scale. Brands that prioritize global integration have little to no differences between various

countries (eg Guinness).

International strategy

A successful international strategy focuses on a single point of operation while exporting

products and services around the world. As such, it ranks low on both global integration and

local responsiveness.

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An international strategy is often the first strategy companies use when they expand to secondary

markets, and that’s because it’s the most accessible. It’s essentially an extension of your

domestic strategy, operating with a central or head office in your home market and exporting

your products to target markets.

The major advantage of this approach is that it’s a quick way to test out the global appeal of your

product without making significant investments in infrastructure or staffing in other markets.

Multidomestic strategy (The most local responsiveness)

A multi-domestic strategy ranks high on local responsiveness and low on global integration,

making it the ―local-first‖ approach. Companies that employ a multi-domestic strategy change

their product, messaging, go-to-market, and customer support (among other things) based on

each market they enter.

The greatest advantage to this is a highly specialized, localized product that directly matches

customer tastes and preferences, with employees on the ground in that market that understand the

cultural nuances (distinctions).

Global strategy(The most global integration)

This approach focuses on standardization as much as possible, including colors, messaging,

products, and operations, so they can build repeatable, scalable processes no matter which

foreign market they operate in. That means having one brand, one suite of products, and one

message from a central headquarters.

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 The advantage of this is that pursuing this strategy gives you an instantly recognizable global

brand with a step-by-step path toward global market penetration. Choosing this strategy allows

you to:

 Harness economies of scale with efficient processes and operations

 Streamline product development with one product line and minimal changes by market

Transnational strategy

Transnational businesses operate with a central or head office in one country (the global

integration part) and also employ local subsidiaries in international markets (the local

responsiveness part). That way, they get the best of both worlds: one overarching brand that

provides a cohesive structure and efficient center of operations while optimizing for local market

preferences and tastes as needed. Choosing this strategy allows you to:

 Create a standardized brand that’s immediately recognizable but accommodate differences in

market preferences

 Centralize and streamline operations, getting the advantage from economies of scale

 Be able to flex between a high-level strategic overview of investments without losing customer-

centricity with local markets

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 AUTOMATION

Entry: let students explain their understanding of automation and give examples (in
the engineering fields) of automated systems they have experienced, how they
function etc

Let students identify an area in the engineering field needing automation and
suggest their thinking on how it should be done – To be completed as home work
by students

Meaning

It is the use of computers and other automated machinery for the execution of business related

tasks. It includes right from simple sensing devices to robots and other sophisticated equipment.

With increasing advances in technology, automation of business activities is more and more. For

example, if you go to banks in Commercial Avenue Bamenda, you will discover that the number

of tellers is reducing every day. This is simply because teller related jobs are gradually be

automated. You can now withdraw you cash using ATM machines, you can now link your Bank

account to mobile money account etc. Online banking is gradually on the rise. These are all

aspects of automation.

Generally, while automation is bringing about advantages like; reducing the production time,

increase manufacturing, flexibility, reduce costs, eliminate human error and labour shortage

problems, it is also associated with disadvantages like increasing unemployment or layoffs, some

security challenges etc

Overall, automation is needed because of the following:

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  Facilitates efficient and detailed information through the use of computers

 Ensures speedy recording, processing and presenting of information

 Increases the volume of work, scarcity of time and reduces the manual process.

 Facilitates better quality of work by reducing errors created by manual work.

 Achieves greater accuracy and speed through the use of automation.

 Increases the goodwill and reputation of the firm because automation adds to the prestige

and status of the firm..

Types of Automation

a. Numerically Controlled (NC) Machines– It uses computers to store, calculate and execute

operations that are performed by hands. Eg: computerized numerical controlled mills.

b. Industrial Robots– It also helps in higher quality parts, reduced cycle times and increases

savings. They can work 24/7 to keep up the industrial demands. They can be suitable to work in

an environment which may be dangerous to humans. They perform tasks like welding, material

handling, assembling etc.,

c. Flexible manufacturing systems (FMS)– It is a combination of Numerically Controlled

(NC) Machines, Industrial Robots and other types of automation into one automation system.

It produces similar products and parts but maintains flexibility to change parts or processes.

d. Computer aided manufacturing (CAM)– It uses computers in different functions of

production planning and control. It also includes computer aided process planning (CAPP),

group technology (GT), and production scheduling, manufacturing flow analysis.

e. Support automation– It refers to the software packages which focuses on the routine work of

help desk personnel. It includes CAM, knowledge base applications for self service etc.,

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f. Run book automation– They define a set of items along with work flows through GUI. It

offers connectors and interfaces to existing items suitable for the user.

g. Policy based automation– This type of automation works on the basis of term policy for the

rules management. They provide a rich set of features for designing and managing policies.

h. IT-Workload automation– They allow the processing of job scheduling for improvement

and automate recurring tasks. They offer multi-platform compatibility, policy based execution

etc.,

i. Data centre automation– This is the fastest growing area in the recent world. It helps in

bringing the high demand for automated tools to provision, change and manage vast number of

components.

Advantages and Disadvantages of Automation

Advantages of Automation

1) Increases output and productivity: It increases the speed of work and reduces the

consumption of time taken for production of products. Since there is no intervention of labor

involved the goods passes from one process to another, smoothly and quickly.

2) Improves and enhances quality: The quality of goods produced is better when there is

automation .the goods pass through definite process till it comes out as finished goods. Thus

there is an increase in the quality of goods produced.

3) Consistency and uniformity in quality: The products produced are identical in nature. Since

all the raw materials are fed into the machines the finished goods are uniform in nature which is

very important from the point of view of satisfying the customers.

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4) Reduction in cost per unit of output: Automation results in reduced total cost per unit of

output. When the goods are produced in a bulk cost per unit, will be low.

5) Lesser industrial accidents: Automation eliminates the use of labor force. Hence the number

of accidents to workers is eliminated to a greater extent.

6) Better production control: The speed of production increases the productivity. Since no

labor is involved control on production is easier. The machines are arranged in such a sequence

that raw materials pass from one process to another without human intervention. Thus production

can be controlled.

7) Ensures high safety: Since labor does not intervene in production working on machines

which all otherwise dangerous can be avoided. Proper safety measures are incorporated by

introduction of automation.

8) Reduces labor problem: Goods are produced without the involvement of men hence labor

problems are eliminated.

Disadvantages of Automation

1. Heavy capital investments: Automation involves heavy capital investment. The cost of

capital, power consumption etc. increases tremendously.

2. Displacement of labor: Replacement of workers by machines affects the morale of workers.

3. Benefit of employee suggestion lost: Labor being displaced the benefits of suggestion from

employee is lost.

4. High cost of depreciation: Since automation eliminates labor, machines are used instead of

labor. Machines tend to depreciate every year. Therefore depreciation is high in automation.

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5. Not suitable for small firm: Since heavy investments are required in the automated plants, it

is not suitable for small industries. Moreover the expenses involved like power, consumption,

depreciation etc. are very high

6. Lack of ready market: Automation results in increased production. If increased production

does not find a ready market, the pieces will fall and results will be disastrous.

7. Unemployment problem: automation poses certain peculiar problems for developing

countries. These countries are characterized by a high rate of unemployment scarcity of foreign

exchange shortage of highly skilled personnel, shortage of capital etc.

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 MATERIALS MANAGEMENT

Meaning of Materials Management

It deals with many important aspects connected with materials such as

purchasing, storage, inventory control, material handling etc., It is an approach

for planning, organizing and controlling all those activities concerned with the

flow of materials into an organization.

Material management is the management of the flow of materials into an

organization to the point where those materials are connected into the end

products.

Objectives of Materials Management

 Reduce material cost

 Uniform flow of material for production, ensure right quality at right

price

 Establish and maintain good relations with the suppliers and customers

 Economy in using imported item and to find their substitutes

 Helps in using working capital Decision for buy or making

Functions of Materials Management

Material management covers all aspects of material costs, supply and

utilization. The functional areas involved in material management usually

include purchasing, production control, shipping, receiving and stores. The

following are the essential functions of material management:

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Production and Material Control: Production manager prepares the

schedules of production to be carried in future. The requirements of parts and

materials are determined as per production schedules. It is ensured that every

type or part of material is made available so that production is carried on

smoothly.

Purchasing: Purchasing department is authorized to make buying

arrangements on the basis of requisitions issued by other departments. The

effort by this department is to purchase proper quality goods at reasonable

prices. Purchasing is a managerial activity that goes beyond the simple act of

buying and includes the planning and policy activities covering a wide range of

related and complementary activities.

Non-Production Stores: Non-production materials like office supplies,

perishable tools and maintenance, repair and operating supplies are

maintained as per the needs of the business. These stores may not be required

daily but their availability in stores is essential. The non-availability of such

stores may lead to stoppage of work.

Transportation: The transporting of materials from suppliers is an important

function of materials management. The traffic department is responsible for

arranging transportation service. The vehicles may be purchased for the

business or these may be chartered from outside. The purpose is to arrange

cheap and quick transport facilities for incoming materials.

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Materials Handling: It is concerned with the movement of materials within a

manufacturing establishment and the cost of handling materials is kept under

control. It is also seen that there are no wastages or losses of materials during

their movement. Special equipment‟s may be acquired for material handling.

Receiving: The receiving department is responsible for the unloading of

materials, counting the units, determining their quality and sending them to

stores etc. The purchasing department is also informed about the receipt of

various materials.

Purchasing

Meaning: It refers to the activity of acquiring goods or services to accomplish

the goals of an organization. It is the procurement of materials and other

requirements from certain external agencies. It includes activities like deciding

what to buy, where to buy, when to buy, how much to buy and at what prices

to buy.

Steps in material purchasing process

Step 1: Need Recognition

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The business must know it needs a new product, whether from internal or

external sources. The product may be one that needs to be reordered, or it may

be a new item for the company.

Step 2: Specific Need

The right product is critical for the company. Some industries have standards

to help determine specifications. Part numbers help identify these for some

businesses. Other industries have no point of reference. The company may

have ordered the product in the past. If not, then the business must specify the

necessary product by using identifiers such as color or weight.

Step 3: Source Options

The business needs to determine where to obtain the product. The company

might have an approved vendor list. If not, the business will need to search for

a supplier using purchase orders or research a variety of other sources such as

magazines, the Internet or sales representatives. The company will qualify the

suppliers to determine the best product for the business.

Step 4: Price and Terms

The business will investigate all relevant information to determine the best

price and terms for the product. This will depend on if the company needs

commodities (readily available products) or specialized materials. Usually the

business will look into three suppliers before it makes a final decision.

Step 5: Purchase Order

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The purchase order is used to buy materials between a buyer and seller. It

specifically defines the price, specifications and terms and conditions of the

product or service and any additional obligations.

Step 6: Delivery

The purchase order must be delivered, usually by fax, mail, personally, email

or other electronic means. Sometimes the specific delivery method is specified

in the purchasing documents. The recipient then acknowledges receipt of the

purchase order. Both parties keep a copy on file.

Step 7: Expediting

Expedition of the purchase order addresses the timeliness of the service or

materials delivered. It becomes especially important if there are any delays. The

issues most often noted include payment dates, delivery times and work

completion.

Step 8: Receipt and Inspection of Purchases

Once the sending company delivers the product, the recipient accepts or rejects

the items. Acceptance of the items obligates the company to pay for them.

Step 9: Invoice Approval and Payment

Three documents must match when an invoice requests payment – the invoice

itself, the receiving document and the original purchase order. The agreement

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of these documents provides confirmation from both the receiver and supplier.

Any discrepancies must be resolved before the recipient pays the bill. Usually,

payment is made in the form of cash, check, bank transfers, or other types of

electronic transfers.

Step 10: Record Maintenance

In the case of audits, the company must maintain proper records. These

include purchase records to verify any tax information and purchase orders to

confirm warranty information. Purchase records reference future purchases as

well.

Principles of purchasing

 Principle of right price

 Principle of right quality

 Principle of right time

 Principle of right source

 Principle of right quantity

 Principle of right contracts

 Principle of right material

 Principle of right transportation

 Principle of right place of delivery

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Selection of suppliers

It helps to have a quality inputs and also to offer quality products with less

cost. It is required to get all the information from them to evaluate according to

specific criteria and select the best providers for company.

There are common supplier selection criteria include:

 Cost.

 Quality & Safety.

 Delivery.

 Service.

 Social Responsibility.

 Convenience/Simplicity.

 Risk.

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 INVENTORY MANAGEMENT

Meaning

Inventory, often called merchandise, refers to goods and materials that a business holds for sale

to customers in the near future. It is a stock of physical goods that contain economic value and

held in various forms by an organization in its custody awaiting packing, processing,

transformation, sale in future. It includes raw materials, work-in-progress, finished goods and

inventory of suppliers etc.,

Inventory Management can be defined as the systematic location of storage and recording of

goods. It is the control program which allows the management of sales, purchases and payments

Effect inventory management may result in the following benefits to an organisation:

 Inventory balance

 Inventory turnover

 Repeat customer

 Accurate planning

 Warehousing organization

 Employee efficiency

 Inventory orders

 Inventory tracking

 Time saving

 Cost cutting

Assignment: Read and Make Notes on Inventory Control Techniques

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Materials handling system

Materials handling can be also defined as the function dealing with the preparation, placing and

positioning of materials to facilitate their movement or storage. It is a system or combination of

methods, facilities, labor and equipment for moving, packaging and storing the materials to meet

specific objectives. It involves movement of materials from one place to another place for the

purpose of processing.

Factors influencing materials handling

Equipment factors to be taken into consideration may well include the following:

1. Adaptability: The load carrying and movement characteristics of the equipment should fit the

materials handling problem.

2. Flexibility: Where possible the equipment should have flexibility to handle more than one

material, referring either to class or size.

3. Load capacity: Equipment selected should have great enough load carrying characteristics to

do the job effectively, yet should not be too large and result in excessive operating costs.

4. Power: Enough power should be available to do the job.

5. Speed: Rapidity of movement of material, within the limits of the production process or plant

safety, should be considered

6. Space requirements: The space required to install or operate materials handling equipment is

an important factor in its selection.

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7. Supervision required: As applied to equipment selection, this refers to the degree of

automaticity designed into the equipment.

8. Ease of maintenance: Equipment selected should be easily maintained at reasonable cost.

9. Environment: Equipment selected must conform to any environment regulations.

Objectives of material handling

Any activity in an organization has as objective to support the processes necessary for the

creation of utility (goods and services), needed to keep the organization in business. Specifically.

The objectives of materials handling include the following:

1. Minimize cost of material handling.

2. Minimize delays and interruptions by making available the materials at the point of use at

right quantity and at right time.

3. Increase the productive capacity of the production facilities by effective utilization of capacity

and enhancing productivity.

4. Safety in material handling through improvement in working condition.

5. Maximum utilization of material handling equipment.

6. Prevention of damages to materials.

7. Lower investment in process inventory.

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Principles of materials handling

Recall: Materials handling can be also defined as the function dealing with the preparation,

placing and positioning of materials to facilitate their movement or storage. It is a system or

combination of methods, facilities, labor and equipment for moving, packaging and storing the

materials to meet specific objectives. It involves movement of materials from one place to

another place for the purpose of processing.

Following are the principles of material handling:

1. Planning principle: All handling activities should be planned.

2. Systems principle: Plan a system integrating as many handling activities as possible and

coordinating the full scope of operations (receiving, storage, production, inspection, packing,

warehousing, supply and transportation).

3. Space utilization principle: Make optimum use of cubic space.

4. Unit load principle: Increase quantity, size, weight of load handled.

5. Gravity principle: Utilise gravity to move a material wherever practicable.

6. Material flow principle: Plan an operation sequence and equipment arrangement to optimise

material flow.

7. Simplification principle: Reduce combine or eliminate unnecessary movement and/or

equipment.

8. Safety principle: Provide for safe handling methods and equipment.

9. Mechanisation principle: Use mechanical or automated material handling equipment.

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 27
10. Standardisation principle: Standardise method, types, size of material handling equipment.

11. Flexibility principle: Use methods and equipment that can perform a variety of task and

applications.

12. Equipment selection principle: Consider all aspect of material, move and method to be

utilised.

13. Dead weight principle: Reduce the ratio of dead weight to pay load in mobile equipment.

14. Motion principle: Equipment designed to transport material should be kept in motion.

15. Idle time principle: Reduce idle time/unproductive time of both equipment and man power.

16. Maintenance principle: Plan for preventive maintenance or scheduled repair of all handling

equip

Economic Considerations in Material handling

Given that resources (especially financial resources) are scarce, the following economic

considerations are necessary in materials handling

 Initial cost of the equipment required.

 Cost of installation, rearrangement and alterations to utilize equipment and building etc.

 Cost of repair and maintenance of the equipment used.

 Cost of power/fuel required for operation.

 Rate of obsolescence of handling equipment.

 Depreciation rate.

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 28
  Probable salvage value of equipment at the end of its useful life.

 Labour cost for operation of equipment.

 Cost of necessary auxiliary equipment (such as chargers for batteries etc.).

 Interest on investment made for purchasing equipment.

 Taxes and insurance charges on equipment procured.

 License fees (for vehicles that may operate outside the factory or on highways).

 Rent charges for space needed for parking of vehicles.

 Cost of supervision of the equipment.

 Increased production expected by use of handling equipment. Savings that the equipment

shall bring about in direct labour cost or other allied costs

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 29
Facility or Layout Planning and Analysis: (Business Process Modeling),

Facilities are the plant and the office within which a production and operations manager does its
work. In addition to the buildings and the spaces that are built, bought, or rented, facilities also
include equipment used in the plant and the office. There are four main components of facilities
planning and they strongly interact with each other. These four include:

1. Where to locate the plant, or the branch, or the warehouse? This is a regional
determination.
2. The issue is to find the specific structure and site to use.
3. The design the layout.
4. The furniture, lighting, decorative features, and equipment for doing the job.

In fact, these four components interact, and none of them can be considered exclusive of the
others. A great amount of expertise and management ability is required for facilities planning. A
better job is done by broad-based visionaries and generalists who know how to work together as
a team. The systems point of view has never been shown to be a weakness.

The four components of facilities planning

1. Location of facilities. Where, in the geographical sense, should the various operations be
located? Location can apply to only one facility but more generally includes a number of
locations for doing different things. Thus, ―where is it best to . . .‖ fabricate and assemble
each product, locate the service center, situate the sales offices, and position the
administration? These decisions impact the supply chain in many ways.
Many location factors have to be dealt with in a qualitative fashion. Common sense
prevails. Qualitative factors such as being near to supplies of raw materials and/or
sources of skilled labor or with being close to customers. The options may be to choose
one over the other or to compromise with an in-between location. There are similar
problems for distributors who want to be located close by all kinds of transportation
facilities (road, rail, airports, and marine docks). Other location factors are better dealt
with in a quantitative fashion because common sense does not work. For example, if a
transportation analysis is made manageable by dividing the problem into regional sub-

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 30
 problems, the solution may be seriously suboptimal (far from being the best that is
possible).
At the same time, there are strategic issues concerning centralization or decentralization
of facilities. Should there be a factory in each country? Would a central warehouse be
more desirable than regional warehouses or can they both be used to an advantage? Such
decisions might be best reached with a combination of qualitative and quantitative
considerations.
2. Structure and specific site selection. In what kind of facility should the process be
located? How should the building or space be chosen? Is it best for the company to build
the facility, buy, or rent it? Choice of a specific building is often decided after the
location is chosen. However, there are circumstances where the location, site, and
structure should be considered together. This makes structure and site decisions complex
problems best resolved by using the systems approach.
3. Equipment choice. What kind of process technology is to be used? This decision often
dominates structure and site options. In turn, there may be environmental factors that
limit the choice of locations.
4. Layout of the facility. Where should machines and people be placed in the plant or
office? There is interaction of equipment choice with layout, structure, site, and location.
The size of the facility is determined by both current needs and future projections to
allow for growth.

Location Decisions—Qualitative Factors

Best location is related to the function of the facility and the characteristics of its products and
services. Two notions (The need to Enhance Service Contact and Just-in-Time Orientation
Notion) are at the center of these decisions

1. The need to Enhance Service Contact

Service industries locate close to their customers to achieve the kind of contact that
characterizes good service. Bank tellers and ATMs (automated teller machines) are such
contact points. No one wants to travel many miles to make deposits or withdrawals. The
closer bank will get the business. However, the closest bank is online. We can see this
today in Cameroon as financial institutions are embracing mobile banking, linking clients

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 31
 mobile money accounts to bank accounts. This is commonly referred to as online
banking.

However, it may interest us in this MBA class in CATUC to highlight and think about
this. WHAT ABOUT LOCATING HOTELS in residential areas, will the use be more
by those staying around or those not staying around it? And why? .The central issue lies
in making contact with customers successful

2. Just-in-Time Orientation Notion

Fabricators like to be close to their raw materials and customers, but that cannot always
be the setup. A balanced choice has to be made, which will depend on the specific
product and the location of its raw materials, fabrication, and market places. Similarly,
for logical reasons, services usually profit by being close to the customer. Creative
service solutions often depend upon reciprocal interactions.

Generally, location decisions may be highly affected by the following factors

1. Process inputs. Closeness to sources is often important. The transportation costs of bringing
materials and components to be processed from distant locations can harm profit margins.

2. Process outputs. Being close to customers can provide competitive advantages. Among these
are lower transport costs for shipping finished goods and the ability to satisfy customers’ needs
and respond rapidly to competitive pricing—which can provide market advantages.

3. Process requirements. There can be needs for special resources that are not available in all
locations (i.e., water, energy, and labor skills).

4. Personal preferences. Location decision makers, including top management, have personal
biases for being in certain locations that can override economic advantages of other alternatives.

5. Governmental issues. Tax, tariff, trade, and legal factors usually matter. Trade agreements
and country laws are increasingly important in reaching global location decisions.

6. Site and plant availabilities. The interaction between the location and the available facilities
makes location and structure-site decisions interdependent.

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Facilities Layout

Layout is the physical arrangement of facilities within a manufacturing plant or a service facility.
The layout of a plant specifies where various machines and equipment will be placed. Layout
affects the productivity and materials handling cost within the plant

Principles of Layout – the basis of evaluating a layout

There are six main principles of layout. These are

 Principle of overall integration (of man, materials, machine, supporting activities, etc)
 Principle of minimum distance between operations
 Principle of flow (arranging machines according to the sequence of operations)
 Principle of cubic space
 Principle of satisfaction and safety
 Principle of flexibility of rearrangement at a minimum cost

Types of Layouts

1. Fixed position layout

In a fixed-position layout, the project remains in one place, and workers and equipment
come to that one work area. Examples of this type of project are a ship, a highway, a bridge, a
house, and an operating table in a hospital operating room.

2. Job shop process layouts. Similar types of equipment or jobs are grouped together. The lathes
are in one place and the presses in another. Job shop process layouts should facilitate processing
many different types of work in relatively small lots. Mobility of equipment enables
Production/Operations Managers to set up intermittent (alternating) flow shops when a
configuration is attainable. Space must be allocated for work completed at one station and
waiting for access to another station. Equipment mobility and layout flexibility allow this
configuration to be rearranged to suit the various order mixtures that can occur.

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3. Product or Assembly Oriented Layouts − This layout is designed in a linear fashion. The
work stations or work benches are located in a sequence where products manufacturing is carried
out one step after the other. This layout is excellent for the mass production. If there is a demand
to change the product design or appearance, then this layout cannot address the demand
smoothly.

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4. Cellular Layout

Cellular manufacturing is a type of layout where machines are grouped according to the process
requirements for a set of similar items (part families) that require similar processing. Therefore, a
cellular layout is an equipment layout configured to support cellular manufacturing.

NB: Layouts are affected by types of industry, production systems, types of products,
volume of production, and types of manufacturing processes used to get the final products.

Benefits of a good Plant layout

 Material handling and transportation is minimized and efficiently controlled.

 The movements made by workers are minimized.
 Waiting time of the semi-finished products is minimized.
 Bottlenecks and point of congestion are eliminated (by line balancing) so that raw
material and semi-finished goods move faster from one workstation to another.

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  Overall satisfaction & simplification which will result in full utilization, minimum delay
and congestion, ease in maintenance, and low manufacturing time.
 Increased production, safer working conditions, well ventilated rooms, clean environment
 Increased flexibility for changes in product design, future expansion, and optimal use of
space.
 A good layout provides maximum satisfaction to the employees, management, and share
holders.
 Suitable spaces are allocated to production centers and service centers.
 Working conditions are safer, better (well ventilated rooms, etc.) and improved.

Layout Redesigning
After setting up your desired layout, business operations will start moving smoothly. There will
come a time when it will be necessary to redesign your layout. The question is HOW WILL
YOU KNOW IT’S TIME TO REDESIGN YOUR LAYOUT? Below are a few reasons that
may suggest the requirement and necessity of redesigning an existing layout:
 Making changes in the design or process of the product without required layout changes
 The building is not suitable as per the requirement
 A decline in production in a particular area
 Idle time and delays that cannot be explained
 Installing supporting equipment without taking consideration of link with the existing or
current flow pattern
 Problems related to stock control
 Movement of material by a lot of people
 Production bottlenecks
 A huge temporary storage
 Problems in the flow of materials
 Troubles in scheduling
 Idle equipment and people
 A great amount of time being used in the process
 Hazards for safety or accident
 Introducing new products or services

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FORECASTING IN PRODUCTION AND OPERATIONS MANAGEMENT

Forecasting is simply a projection of how the future might look like based upon past data and / or
current events. Thus it is an estimation of the event which will or may happen in future.

Basically, there are two types of forecasting- short term and long term forecasting.

Short Term forecasting is the forecasting that made for short term objectives covering less than
one year. Examples: Material Requirement Planning (MRP), scheduling, sequencing, budgeting

Long Term Forecasting is the forecasting that made for long term objectives covering more
than five years. Examples: Product development and Product diversification, sales and
advertisement.

The Strategic Importance of Forecasting

We cannot know with certainty the future of our business in terms of demand and / or
supply needs. But we need continue of business with hope of it growing. This results in
the strategic importance of forecasting in our businesses. For example the African Cup of
Nations will be played in Cameroon come January 2022. Most Hotels/Motel etc in
Yaounde, Douala, Limbe etc only know that visitors will be coming in but they do not yet
know what the situation will actually look like. Therefore they have to forecast as an
effort not to be taken unaware. Thus the strategic importance of forecasting sets in
because:

 When there is a time lag between awareness of an impending event or need and
occurrence of that event. This lead time is the main reason of planning and forecasting.
 Planning is the fundamental activity of management. But planning alone is impossible
because forecasting forms the basis of planning.
 It is essential for an organization to know for what level of activities before investments
in input (commitment of resources).

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Benefits, Cost implications and Decision making using forecasting

As there may be many benefits when decision making is done based on accurate forecast data,
there are only cost implications. Saying whether decisions made based on anticipations are
beneficiary or not may only be judged when the forecast period has elapsed.

Thus the key forecasting elements that must always be considered when doing forecasting
analysis so as to minimize negative consequences include:

a) Internal Factors
b) External factors that can be either relatively controllable (suppliers) or uncontrollable
(Government, Consumers, Competitors)

Methods of Forecasting

Forecasting Techniques
No single method is superior

Qualitative M odels: Time-Series Methods: Causal Methods:

attempt to include include historical data include a variety of
subjective factors over a time interval factors

Delphi Moving Regression

Methods Average Analysis

Jury of Exponential Multiple

Executive Smoothing Regression
Opinion

Trend
Sales Force Projections
Composite
Decomposition
Consumer
Market
Survey

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  Delphi Method: Interactive group process consisting of obtaining information from a
group of respondents through questionnaires and surveys

 Jury of Executive Opinion: Obtains opinions of a small group of high-level managers in

combination with statistical models

 Sales Force Composite: Allows each sales person to estimate the sales for his/her region
and then compiles the data at a district or national level

 Consumer Market Survey: Solicits input from customers or potential customers

regarding their future purchasing plans

 Moving average methods: Consist of computing an average of the most recent n data
values for the time series and using this average for the forecast of the next period.
Moving average can either be simple or weighted

Simple moving average =

Simple moving average =

 demand in previous n periods
n

Weighted moving average

=
 (weight for period n) (demand in period
n)
∑ weights

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 39
  Exponential smoothing is a type of moving average technique that involves little record
keeping of past data. With this method,

New forecast = previous forecast + (previous actual –previous forecast)

Mathematically this is expressed as:

Ft = Ft-1 + (Yt-1 - Ft-1)

Ft = new forecast
Ft-1 = previous forecast
 = smoothing constant
Yt-1 = previous period actual


Trend projections are used to forecast time-series data that exhibit a linear trend.

Least squares may be used to determine a trend projection for future forecasts.

Least squares determine the trend line forecast by minimizing the mean squared error
between the trend line forecasts and the actual observed values.

The independent variable is the time period and the dependent variable is the actual
observed value in the time series.

Decomposition is the process of isolating linear trend and seasonal factors to develop more
accurate forecasts.

Regression Analyses are parametric approaches to establish causal relationships.

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 40
Note need be taken that determining the forecast error is always very important allow one to see
how well the forecast model works and compare that model with other forecast models.

Forecast error = actual value – forecast value

Thus to forecast accuracy can be measured as follows

Measures of Forecast Accuracy

Measures of forecast accuracy include:

Mean Absolute Deviation (MAD)

=  |forecast errors|
n
Mean Squared Error (MSE)


2
= (errors)
n
Mean Absolute Percent Error (MAPE)

=  error
actual
100
n

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Applications: Assume in March 2022, the following data is provided as concerns forecast and
realization of construction facilities ( number of hotel rooms to be completed in all the game sites
per month) in preparation for CAN 2022 in Cameroon. Compute the MAD, MSE, and MAPE

Month Forecast Actual

JAN 250 243

FEB 320 315

MAR 275 286

APR 260 256

MAY 250 241

JUN 275 298

JUL 300 292

AUG 325 333

SEP 320 326

OCT 350 378

NOV 365 382

DEC 380 396

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Solution

Forecast Actual |error| error^2 |error/actual|

JAN 250 243 7 49 0.03

FEB 320 315

5 25 0.02

MAR 275 286 11 121 0.04

APR 260 256 4 16 0.02

MAY 250 241 9 81 0.04

JUN 275 298 23 529 0.08

JUL 300 292 8 64 0.03

AUG 325 333 8 64 0.02

SEP 320 326 6 36 0.02

OCT 350 378 28 784 0.07

NOV 365 382 17 289 0.04

DEC 380 396 16 256 0.04

AVERAGE

MAD MAPE = .0368*100

=11.83 MSE=192.83 MAPE = 3.68

Lecture NOTES Production/Operations Management for engineering class CATUC 2023/2024 Page 43
Computing moving averages

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 Weighted Moving Average

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 More application Examples: See tutorial sheet

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 Forecasting and Product Life Cycle

The product life cycles are composed of four stages that appear in a regular way over time. All
products and services go through the following stages:

Introduction to the market

Growth of volume and share

Maturation, where maturity is the phase of relative equilibrium

Decline occurs, because of deteriorating sales; decline leads to restaging or withdrawal

At each of the stages, business survival is highly linked to forecasting abilities of production and
operations managers. Thus continuous monitoring of the business environment (macro and
micro) is at the center of business decision making.

During the introduction and growth stages, productions and operations management activities are
centered to deal with producing larger and larger quantities of product and ensuring that sales are
increasing. Thus forecast efforts are focused on getting the right raw materials in sufficient
quantities so that the production department will be able to make products available as at when
needed. At same time, marketing forecast efforts try to build a good relationship with customers.

Note that during the introduction, the demand is led by the desire to ―fill the pipeline.‖ This
means getting product into the stores or into warehouses or wherever it must be to supply the
customers. Thus expenditures usually are high to bring the new product to the distributors,
retailers, and customers. At this stage and with the thinking of one day arriving maturity, the
trick is to estimate how fast demand will increase over time and for how long.

At maturation stage, the marketing–production relationship reaches equilibrium. Marketing takes

specific actions during this phase to maintain the product’s share of the market. At this stage,
management should understand that decline is apparent. Thus forecast efforts should think about
reducing prices, coordination to meet delivery schedules on time as well as forecasting on
restaging or terminating the product.

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When decline is inevitable, as the product begins to lose share, volume drops, management
forecast efforts should be more on replacement that is on the new product that was introduced at
the later stages of maturity.

It is important to note that at each of the stages, the forecasting efforts should always be guided
by the vision and mission of the organization and thus seek answers to the following questions;

What do we want to achieve?

Why do we want to achieve it?

When do we want to achieve it?

How do we want to achieve it?

Do we or can we have the necessary resources?

How much product must be made for distribution at start-up?

How much product will be needed to keep the supply lines filled to meet the demand during
growth?

How much capacity is to be used at each of the stages?

How much training will the evolving work configurations require?

Selection of the Forecasting Method

The selection of a method depends on many factors. These include:

1. The context of the forecast

2. The relevance and availability of historical data,
3. The degree of accuracy desirable,
4. The time period to be forecasted,
5. The cost/ benefit (or value) of the forecast to the company,
6. The time available for making the analysis.

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