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Essex College

Operation Management

( British Aerospace )

Submitted By:

Muhammad Umar Butt

Student ID No:

EC-PGDBA-MUB160985

Submitted To :

Dr. Zachariah M Mulenga 

Course Title :

Post Graduate Diploma In Business

Administration (PGDBA)

Course Session :

January (2010 – 2011)

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3Role and importance of effective operations management:-

The use of operations management is very necessary in every fabric of the

company’s activities. Companies use operations management to ensure and sustain efficiency

and effectiveness in the organizations. Efficiency is concerned with how well resources such

as human expertise and inputs are put in use irrespective of the purpose for which they were

deployed in the company. The company through its activities ensures that the primary

objective for its establishment to make profits and maximize shareholders value is realized.

The company reduces its cost of production by ensuring that tangible and intangible

resources are not over stretched or wasted in the organizations.

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4Inventory control and management is one of the important aspects of operations

management. Innovative methods, such as Just-in-Time inventory control, are some of the

major instruments used by the company to save costs and move products and services to

customers more quickly.

Quality management is also a very important aspect of operations management in

every organization. Quality management is crucial to effective operations management,

particularly continuous improvement to match the consumers taste and preference at all

times. More recent advancements in quality, such as benchmarking and total quality

management, outsourcing and reengineering have resulted in advancements to operations

management. The company through its reengineering and benchmarking activities has always

earned the leadership in the market. Benchmarking serves as a first class internal auditing

process which the company uses to diagnose its weaknesses and identify ways of turning

them into strength.

Management Control and Coordinating Function cannot be forgotten in operations

management. Management control and coordination includes a broad range of activities to

ensure that the company’s goals are consistently being met in an effective and efficient

fashion. Some of the major approaches to the company’s organizational control and

coordination include product evaluation, product distribution, advertising and promotion,

sales and service and product development.

The five performance objectives of:

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5  Quality

  Speed

  Dependability

  Flexibility

  Cost.

Quality :-

Quality is placed first in our list of performance objectives because many authorities

believe it to be the most important. There are two important points to remember while

reading quality as a performance objective.

  The external affect of good quality within in operations is that the customers who

‘consume’ the operations products and services will have less (or nothing) to

complain about. And if they have nothing to complain about they will (presumably)

be happy with their products and services and are more likely to consume them again.

This brings in more revenue for the company (or clients satisfaction in a not-for-profit

organizations).

  Inside the operation quality has a different affect. If conformance quality is high in all

the operations processes and activities very few mistakes will be being made. This

generally means that cost is saved, dependability increases and (although it is notmentioned explicitly in the chapter) speed of response increases. This is because, if an

operation is continually correcting mistakes, it finds it difficult to respond quickly to

customers requests. See the figure below.

Speed:-

Speed is a shorthand way of saying ‘Speed of response’. It means the time between an

external or internal customer requesting a product or service, and them getting it. Again, there

are internal and external affects.

  Externally speed is important because it helps to respond quickly to customers. Again,

this is usually viewed positively by customers who will be more likely to return with

more business.

  The internal affects of speed have much to do with cost reduction. The two areas

where speed reduces cost (reducing inventories and reducing risks).

Dependability:-

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Is it when the customer needed delivery of the product or service? Is it when they

expected delivery? Is it when they were promised delivery? Is it when they were promised

delivery the second time after it failed to be delivered the first time? Again, it has external

and internal affects.

  Externally (no matter how it is defined) dependability is generally regarded by

customers as a good thing. Certainly being late with delivery of goods and services

can be a considerable irritation to customers. Especially with business customers,

dependability is a particularly important criterion used to determine whether suppliers

have their contracts renewed. So, again, the external affects of this performance

objective are to increase the chances of customers returning with more business.

  Internally dependability has an effect on cost. The three ways in which costs are

affected – by saving time (and therefore money), by saving money directly, and by

giving an organization the stability which allows it to improve its efficiencies. What

the chapter does not stress is that highly dependable systems can help increase speed

performance.

Flexibility:-

This is a more complex objective because we use the word ‘flexibility’ to mean so many

different things. Flexibility always means ‘being able to change the operation in some way’.

There are different types of flexibility (product/service flexibility, mix flexibility, volume

flexibility, and delivery flexibility). It is important to understand the difference between these

different types of flexibility, but it is more important to understand the affect flexibility can

have on the operation.

 Externally the different types of flexibility allow an operation to fit its products andservices to its customers in some way. Mix flexibility allows an operation to produce

a wide variety of products and services for its customers to choose from.

Product/service flexibility allows it develops new products and services incorporating

new ideas which customers may find attractive. Volume and delivery flexibility allow

the operation to adjust its output levels and its delivery procedures in order to cope

with unexpected changes in how many products and services customers want, or

when they want them, or where they want them.

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  Once again, there are several internal affects associated with this performance

objective. The three most important, namely flexibility speeds up response, flexibility

saves time (and therefore money), and flexibility helps maintain dependability.

Cost:-

There are two important points. The first is that the cost structure of different

organizations can vary greatly. Second, and most importantly, the other four performance

objectives all contribute, internally, to reducing cost.

"If managed properly, high quality, high speed, high dependability and high flexibility can

not only bring their own external rewards, they can also save the operation cost."

The four V’s of Operations:-

To understand the different types of operation we differentiate between them by using

four dimensions - it calls the four V's of operations. They are,

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  Volume - how many products or services are made by the operation?

  Variety - how many different types of products or services are made by the operation?

  Variation - how much does the level of demand change over time?

  Visibility - how much of the operation's internal working are 'exposed' to its

customers?

Volume dimension:- 

The volume dimension has different implications whether it is in a high level or low.

In the low levels of volume, the company's operations have specific characteristics such as

having low repetition in the everyday procedures, each staff member performs more than one

 job in other words they are multifunctional, less systemization and high unit costs. In the high

levels of volume, the company's operations have its own specific characteristics such having

high repeatability in the everyday procedures, there will be specialization, systemization, and

more capital intensive and low unit costs.

Variety dimension: 

The variety dimension has its own implication as well whether it is high or low. In the

high side of the scale there will be more flexibility in the procedure, complex, the company

will make sure to match customer needs and of course the unit cost will be high. In the other

hand, when the company is in the low side of the scale the procedures will be well defined,

there will be routine, standardization, and of course low unit cost.

Variation in Demand dimension: 

The variation in demand has many implications that can be seen from the company's

characteristics. If the company is in the high levels of demand variation then it has changing

capacity, anticipation for what the customer might demand, flexibility, in touch with demandand high unit cost. While in the other side of the scale, the company would have a stable and

predictable demand, routine, high utilization of resources and low unit cost.

Visibility dimension: 

The visibility dimension which is the customer ability to track his or her order through

its different stages has its implications whether it is high or low. When it is high the

customers have short waiting tolerance, satisfaction governed by customer perception,

customer contact skills are needed and very important and the receive variety is definitely

high. And when it is low, the time lag between production and consumption, there will be

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standardization, the customer contact skills will not be very important or needed, the

company must have a high staff utilization and centralization.

Hayes and Wheelwright's Four Stages :-

Hayes and Wheelwright describe four stages of manufacturing competitiveness: 

Stage I:-

Stage I companies consider their manufacturing organizations to be internally neutral,

in that its role is simply to "make the stuff", without any surprises. Such companies believe

that their product designs are so unusual or their marketing organizations so powerful that if 

the product can simply be delivered to customers, as advertised, the company will be

successful.

Stage II:-

Stage II companies look outward and ask their manufacturing organizations to be

externally neutral, that is, able to meet the standards imposed by their major competitors.

Such companies tend to adhere to industry practice and industry standards. They buy their

parts, materials and production equipment from the same suppliers that their competitors use,

follow similar approaches to quality and inventory control, establish similar relationships

with their workforce, and regard technicians and managers as interchangeable parts - hiring

both, as needed, from other companies in the industry.

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Stage III:-

Stage III companies have a manufacturing organizations that is internally supportive

of other parts of the company, with a co-ordinate set of manufacturing structural and

infrastructural decisions tailored to their specific competitive strategy.

Stage IV:-

Stage IV companies regard their manufacturing organizations as externally

supportive, that is, playing a key role in helping the whole company achieve an edge over its

competitors. Such companies are not content simply to copy their competitors, or even to be

the "toughest kid on the block" in their own neighborhood. They seek to be as good as

anybody in the world at the things they have chosen to be good at - that is, world-class.

Understanding the operations contribution: 

The model can be used to describe the contribution of operations. Competitiveness is one

which has been well known for many years and was originally devised by Professor Hayes

and Wheelwright at Harvard University. It is useful here because it can be adapted to

incorporate the three roles of the operations function. Moving from Stage 1 to Stage 2

requires the ability to implement strategy. Moving from Stage 2 to Stage 3 requires the ability

to support strategy. Moving from Stage 3 to Stage 4 requires the operation to drive strategy

through its unique capabilities. A number of points may be thought when using this model.

  It is a conceptual model which allows organizations to think about how good their

operations are. It is not a precise instrument for measuring operations excellence.

  Some parts of the business could be at different stages to other parts. So for example,

an airport could have Stage 4 check-in facilities which use the most advancedinformation systems and have the most dedicated staff, while its baggage handling

system is at Stage 2. The overall customer experience therefore might be very mixed

(depending on whether their bags were lost or not).

  The real objective of this model is to show operations managers that they can be

better (very few operations are at Stage 4) and to go some way in defining what really

excellence in operations is (Stage 4).

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Task 2:-

Total Quality Management (TQM) refers to an integrated approach by management

to focus all functions and levels of an organization on quality and continuous improvement. 

Over the years TQM has become very important for improving a firm's process capabilities

in order to achieve fit and sustain competitive advantages. TQM focuses on encouraging a

continuous flow of incremental improvements from the bottom of the organization's

hierarchy.

TQM is a strategy which must be instituted at all levels of a manufacturing business

in order to have the desired effect. Everyone from the management, to call center employees,

and even assemblers/welders/machinist/fabricators on a manufacturing floor that never come

in contact with the customer, must all be aware of the total quality system and must be fit into

it.

TQM can also result in manufacturing products with fewer defects which meet

customer (internal or external) needs more exactly. The downside to TQM can be said to be a

loss of productivity as a result of worker's need to be focused on customer at all times.

Training and other exercises use up time that could be spent producing value, and such a

system may have negligible impact for certain positions, especially those with no customer

contact, such as janitorial staff or assembly line workers for instance.

TQM believes in quality assurance rather than checking. Quality is inbuilt to the

system, so that products are assured to be in good quality. Some decision like narrowing

down the supplier base is total quality management concepts used for this purpose, which is

revolutionary still today.

Unlike in traditional management style, total quality management makes decisions on

facts and figures. Therefore problems are identified correctly in a production system.

Therefore solutions are well planned.TQM depends on cyclic thinking. Also it is continuous.

Therefore improvements are small, stable and continuous in nature. This is also known as

Kaizen.

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12For Management System to ensure quality of product and services :-

  Oversee the implementation of monitoring and evaluation plan and activities.

  Support and train Database Officer and Programme Assistant in maintaining database

and other monitoring tools.

  Actively support design and implementation of Assessments, Surveys and Evaluations

(internal and external).

  Develop Beneficiary Accountability plan and integrate activities within the project

cycle.

  Provide support to every member in reporting outputs and activities to required

bodies, coordination groups, and other requesting organizations. Some daily, others

weekly, bi-weekly, monthly.

  Research and advise on new quality standards, improvements etc.

  Train all staff on quality management standards and processes.

  Ensure that staff is adequately trained and provide opportunities for mentoring and

coaching where necessary within budget constraints.

  Manage allocated staff (including recruitment, appraisal, management, development

& training, general well-being, job descriptions).

  Ensure good accountability and reduction of the possibility for fraud.

Some other things include,

1.  Test of previous items

2.  Plan to improve

3.  Design to include improvements and requirements

4.  Manufacture with improvements

5.  Review new item and improvements

6.  Test of the new item

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13Statistical Control:-

Many organizations use statistical process control to bring the organization to Six

Sigma levels of quality, in other words, so that the likelihood of an unexpected failure is

confined to six standard on the normal distribution. This probability is less than four in a

million. 

Task 2 (a) :-

Resources:

  Tools and equipments e.g. measuring tools like micrometer, material testing

machines, gauges, stationary, etc.

  computer systems to maintain record

  Manpower e.g. quality inspectors, QC manager ctc.

  Well equipped Labs

  Calibration labs.

  Accurate manufacturing machine tools

  Well trained employees

Tools:

  Business Process Management/Kaizen

  Lean Management

  Creating and Sustaining a Quality Management Committee

  Quality Function Deployment

  Benchmarking

  Cost of Quality

  Effective Quality Processes

  Service Quality for Managers

  Formulating the Checklist Statements

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Systems: 

  Business Process Reengineering System

  Strategic Quality Planning

  Critical Thinking from Analysis to Implementation

Task 2 (b) :-

Quality audit is the process of systematic examination of a quality system carried out

by an internal or external quality auditor or an audit team. It is an important part of 

organization's quality management system and is a key element in the ISO quality system

standard, ISO 9001.Quality audits are typically performed at predefined time intervals and

ensure that the institution has clearly defined internal system monitoring procedures linked to

effective action. This can help determine if the organization complies with the defined quality

system processes and can involve procedural or results-based assessment criteria.

  Audits are an essential management tool to be used for,

  Verifying objective evidence of processes, to assess how successfully processes

have been implemented,

  Judging the effectiveness of achieving any defined target levels.

  To provide evidence concerning reduction and elimination of problem areas.

  The benefit of the organizations.

  Safety purposes. Evans & Parker (2008) describe auditing as one of the most

powerful safety monitoring techniques.

Quality auditing should not only report non-conformances and corrective actions, but also

highlight areas of good practice. In this way other departments may share information and

amend their working practices as a result, also contributing to continual improvement.

The processes that a quality audit involves can be implemented by using,

  A wide variety of software and self-assessment tools.

  In terms of fitness for purpose and conformance to standards.

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  Controlling techniques in terms of  Quality costs or, more accurately, to the Cost of 

poor quality. 

  Analyzing tools for quality checks.

 Applying across the organization rather than just too conventional production orassembly processes.

Task 2 (c) :-

It includes following steps,

  Employees should be preparing all the time to meet any quality issues.

  They should teach complete importance of each and every step taken for

improving or maintaining quality.

  Make them co-operative not problem creative.

  Tools and equipments should be in good condition.

  Work hours should be convenient.

  Extra load of work should not be given however if it is crucial then must pay for it

in a better way.

  Give necessary motivation time by time.

  Show the field results of bad quality to employees.

  Show good results as well.

  Give rewards on meeting quality standards.

  Educate employees in multi dimensions.

  Place proper quality audits.

  Punish, if highly necessary.

  Be pro active not reactive.

  Make preventive maintenance to assure good performance of machines.

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Task 3 (a) :-

Kaizen, Japanese word used for "improvement" or "change for the better", refers to

philosophy or practices that focus upon continuous improvement of processes in

manufacturing, engineering, supporting business processes, and management. In the business

sense and applied to the workplace, kaizen refers to activities that continually improve all

functions, and involves all employees from the CEO to the assembly line workers. It also

applies to processes, such as purchasing and logistics, that cross organizational boundaries

into the supply chain. By improving standardized activities and processes, kaizen aims to

eliminate waste.

Implementation :-

Kaizen system, where all line personnel are expected to stop their moving

production line in case of any abnormality and, along with their supervisor, suggest an

improvement to resolve the abnormality which may initiate a kaizen.

Quality circle is a volunteer group composed of workers (or even students),

usually under the leadership of their supervisor (but they can elect a team leader), who are

trained to identify, analyze and solve work-related problems and present their solutions

to management in order to improve the performance of the organization, and motivate and

enrich the work of employees. Quality circles are an alternative to the dehumanizing concept

of the division of labor, where workers or individuals are treated like robots. They bring back 

the concept of craftsmanship, which when operated on an individual basis is uneconomic, but

when used in group form (as is the case with quality circles), it can be amazingly powerful

and enables the enrichment of the lives of the workers or students and creates harmony and

high performance in the workplace.

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Monitoring systems and work activities to identify problems and opportunities for

improvement that constitute Kaizen, quality circles, quality audits.

  Pareto analysis.

  Cause and effect diagram (or fish bone diagram or Ishikawa diagram).

  Histogram.

  Scatter diagram

  Check sheet

  Control charts and graphs

  Standardize an operation

  Measure the standardized operation (find cycle time and amount of in-process

inventory)

  Gauge measurements against requirements

  Innovate to meet requirements and increase productivity

  Standardize the new, improved operations

  Improving occupational safety and health

  Promote job involvement

  Create problem solving capability

  Improve communication

  Promote leadership qualities

  Increase employee motivation

  Check quality of every activity

  Change sequences of activities

Task 3 (b) :-

Recommendations:-

  Self development.

  Promotes leadership qualities among participants.

  Recognition.

  Achievement satisfaction.

  Promotes group/team working.

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  Serves as cementing force between management/non-management groups.

  Promotes continuous improvement in products and services.

  Brings about a change in environment of more productivity, better quality, reduced

costs, safety and corresponding rewards.

  Lack of faith in and support to Quality Circle activities among management personnel

  Lack of interest or incompetence of leaders/facilitator

  Apathy, fear and misunderstanding among middle level executives

  Delay or non-implementation of Circle recommendations

  Irregularity of Quality Circle activities

  Non-application of simple techniques for problem solving

  Lack of or non-participation by some members in the Circle activities

  Circles running out of problems

  Language difficulty in communication

  Communication gap between Circles and departmental head

  Change of management

  Confusing Quality Circle for another technique

  Resistance from trade unions

Task 3 (c) :-

Organizational change normally involves some threat, real or perceived, of personal loss for

those involved. This threat may vary from job security to simply the disruption of an

established routine. Furthermore, there may be tradeoffs between the long and short run. As

an individual, I may clearly perceive that a particular proposed change is, in the long run, in

my own best interests, and I may be very interested in seeing it happen, yet I may have short-

run concerns that lead me to oppose particular aspects of the change or even the entire change

project.

Implication and cost of new Changes:

  Individuals find themselves between two approximately equal negative goals.

 All store staff should be at high commitment level to achieve goals regardingfasteners especially.

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19  Individuals are exposed to opposing positive and negative forces.

  New equipments may irritate people.

  High cost is required to make such changes.

  Change in job sequences may also create problems.

  Highly professional staff will be required to implement change

  Individuals may stand midway between two positive goals of approximately equal

strength.

  Politics need to be controlled well

  Identifying the roles of the others involved in the process is crucial

  Benefits of stakeholder must be considered

  Cultural issues also need to be addressed

  Effective Communications is also needed

Benefits:

  Effective education, training and skills upgrading of employees will happen

  Errors will be reduced

  Quality will be improved

  Accidents will reduce

  Image of company will be better

  Wastages of materials will be less

  Machines will be in better condition

  Tools will increase accuracy

  Improved process will reduce block aging, starving etc

 Time required to perform operations will be less

  Efficiency will be increased

  Overall quality will increase

Task 3 (d) :-

Change management is the process by which an organization gets to its future state,

its vision. While traditional planning processes delineate the steps on the journey, change

management attempts to facilitate that journey. Therefore, creating change starts with

creating a vision for change and then empowering individuals to act as change agents to

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20attain that vision. The empowered change management agent’s need plans that provide total

systems approach, are realistic, and are future oriented. Change management encompasses

the effective strategies and programs to enable those change agents to achieve the new vision.

The following types of changes are required to achieve objectives of BAE,

  Operational changes

  Strategic changes

  Cultural changes

  Political changes

For implementing changes following step should be taken,

  Identify what roles the others involved in the process are playing

  Be careful to recognize multiple roles.

  Identify carefully which role is speaking when one is communicating with those

playing multiple roles.

  Monitor throughout the process whether any roles are changing

  Effective Communications that informs and prepare various stakeholders of the

reasons for the change

  Provide personal counseling (if required) to alleviate any change related fears.

  Monitoring of the implementation and fine-tuning as required.

  Change can be unsettling, so the manager logically needs to be a settling influence.

  Encourage your management team to use workshops with their people too if they are

helping you to manage the change.

  change must involve the people - change must not be imposed upon the people

  Give credit to those whom it is due.

  Thank those who give assistance.

  Do not suppress ideas- do express.

  Objectives and causes first, solutions next

REFERENCES:-

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22SECTION B

TASK 1:

What profit is the company likely to make in the first and second year. Evaluate what

result would ensure if the forecast was increased to 160,000 units per year. How can

they cope up with this increased demand given the finite capacity?

Forecast

DemandYear1 Year2

100,000 220,000

Fixed Cost £200,000 per annum

Variable Cost £1.00 per print

Selling price £4.00 per print

Max Capacity 100,000 prints per annum

YEAR 1

The demand for year 1 is 100,000 prints which can be fulfilled by purchasing only one

machine and utilising it for maximum capacity.

£ £

Sales

£4 per print 400,000

Costs

T. Fixed Cost 200,000

T. Variable Cost (Demand x £1.00) 100,000

Total Costs 300,000

Profit/(Loss) 100,000

YEAR 2

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24Finally I can say that fix cost will be same for every year, but variable cost will vary with

respect to production, but if the production level is high then per unit cost will be least, and if 

the production level is low the per unit cost will be high.

TASK 2:-

A)   The total standard time worked by team A is

Business application 85.2% (85.2 x 63) = 5367.6 

Tourist Visa 14.8% (39.5 x 55) = 2172.5 

Total = 7540.1

  The total standard weekly time for team A is

4(40*60) = 9600 minutes

Calculation:

Business visa:

(85.2*63) / 4(40*60) = 5367.6 / 9600 = 55.91%

Tourism visa:

(39.5*55) / 4(40*60) = 2172.5 / 9600 = 22.63%

Now:

Business visa + tourism visa = total efficiency

55.91% + 22.63% = 78.54%

Check:

From the above calculation, i came to know that the present efficiency ratio of team A is

78.54%.

Total Actual output / total standard input * 100

7540/9600*100 = 78.54%

B) Efficiency can be increase by these ways :-

Hiring experience and skilled persons.

J.I.T (just in time) concept

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Flexible process

Decentralization

Also by reengineering of process