OPERATIONS MANAGEMENT

Key Operations Management Concepts



Key Operations Management Concepts

Introduction

With intense global competition, companies today understand that the best way to boost the bottom line is to cut costs through more efficient operations management (OM) (Davis, 2010, pp. 83-86). With good understanding of the various operations management tools, Achilles believes that key OM concepts are crucial in helping companies make both micro and macro business decisions. Here are some of the common business decisions and some of the OM concepts that can provide the intuition and logic to support each decision making process.

Elimination of the Seven Wastes

Waste elimination is one of the most effective ways to increase profitability in manufacturing and distribution businesses. In order to eliminate waste, it is important to understand exactly what waste is and where it exists in the factory or warehouse(Colvin, 2011, pp. 166-167). While products differ in each factory, the typical wastes found in manufacturing environments are quite similar. After years of work to eliminate waste Toyota, the Japanese automobile manufacturer, identified the following seven types of waste as the most prominent ones:

1.      Waste from overproduction

2.      Waste of waiting time

3.      Transportation waste

4.      Processing waste

5.      Inventory waste

6.      Waste of motion

7.      Waste from product defect

Waste from overproduction is one of the greatest wastes commonly found in manufacturing operations. It is created by producing more products than are required by the market. When the market is strong, this waste may not be very noticeable. Overproduction usually begins by getting ahead of the work required. More raw materials are consumed and wages paid than necessary, resulting in extra inventory. This situation requires additional material handling, storage space and interest paid on money used to carry the inventory. Additional staff, computers, and equipment may be needed to monitor the extra goods. But as serious as these problems are, even more critical is the confusion about what the priorities are (or should be). People are distracted and unable to focus on immediate goals, which results in additional production control staff. Since the overproduction causes the machinery and operators to seem busy, additional equipment may be purchased and labor hired, under the assumption that they are necessary(Bowie, 2010, pp. 374-375).

Since overproduction creates difficulties that often obscure more fundamental problems, it is considered one of the most serious types of waste and should be eliminated as promptly as possible. The elimination lies in the understanding that machines and operators do NOT have to be fully utilized to be cost efficient, as long as market demands are met. Unfortunately this concept is difficult for many people to grasp. It is helpful for the operator at each stage of production to think of the next stage of the process as his or her "customer". Only the amount required by this customer should be produced, meeting the requirements of high quality, lowest cost and correct timing.

Unlike waste from overproduction, waste from waiting is usually readily identifiable. Idle workers who have completed the required amount of work, or employees who spend much time watching machines but are powerless to prevent problems are two examples ...