Operations Management

Operations management is the function responsible for planning and controlling production in order to produce the correct product in type, quantity, quality, at the right time and at acceptable costs (Westkämper 2006, pp. 195). Operations management spans multiple levels corresponding to the three different planning horizons in a business environment, particularly strategic, tactical, and operative production management. Strategic production management comprises strategic positioning in technologies, vertical integration, capacity dimensioning, production sites, while tactical production management is concerned with the current product palette, human resources planning, machine purchases, and logistical structures (Dyckhoff 2010, pp.

32). In contrast, operative production management focusses on increasing serviceability, reducing lead times, reducing inventory, and increasing utilization without changing the existing technology, staff, or product structures.

Figure 11 presents the resulting control-loop at the operative level. The actuating variables utilized by production managers to tweak the performance of the system include changes to the number and the timing of produced parts, subassemblies and final products, and the daily activities of production planning and control (PPC).

Figure 11: Control loop of operative production (Dyckhoff 2010, pp. 32)

2.1.3.1 Goals of Operations Management

Profitability serves as the primary objective of a manufacturing system. While a number of factors outside the realm of production planning and scheduling define the output of the system to a certain extent, production planning and scheduling can significantly influence cost.

The costs that are determined by production planning and control are as follows (Kurbel 2003, pp. 20):

 Setup costs of production equipment

 Idling- and downtime costs

 Inventory costs for raw materials, half-finished goods, and finished goods

 Costs for failure to adhere to delivery dates (contractual penalties)

 Costs from avoiding non-adherence to delivery dates (over time)

However, operations management rarely utilizes pure cost information as a target figure to control production systems for several reasons; i.e., this approach would require current cost data at every planning occasion, and the required cost information includes an opportunity cost characteristic, making it hard to quantify. Alternative target figures are frequently used, which are

correlated with cost (Kurbel 2003, pp. 20). Wiendahl’s objective system demonstrates two cost goals, to minimize manufacturing cost and capital tie-up costs, and two market or “performance” goals, to minimize delivery reliability and throughput time, as pictured in Figure 12.

Figure 12: Manufacturing goal system (Wiendahl 2010, pp. 352)

Within this objective system, multiple target conflicts exist, which have been deemed to be the dilemma of production scheduling, first identified by Gutenberg (Gutenberg 1951, pp. 216; Gutenberg 1979, pp. 216; Kurbel 2003, pp. 21; Wiendahl 2010, pp. 352).

The first conflict lies between the objectives of short throughput times and high utilization, as maximum machine utilization can only be safeguarded through high levels of inventory ready to be processed. These high levels of inventory lead to a higher average throughput time.

Secondly attaining high delivery reliability requires available (i.e. unutilized) machine capacity for customer/specific products or high inventory levels for customer-anonymous products, both driving up cost.

For these reasons is impossible to achieve all goals simultaneously (REFA 1991, pp. 39). In the last 50 years however, manufacturers shifted from the primary pursuit of economy goals (low inventory and high utilization) towards

market goals (high delivery reliability and short throughput time) (Kurbel 2003, pp. 22; Wiendahl 2010, pp. 352)

2.1.3.2 Production Scheduling as a Corrective Variable

In the following section, the terms ‘production scheduling’ and ‘production control’ are described in the context of the manufacturing system. As many definitions are used in this field, the terminology in the context of this work will be clarified. The REFA differentiates planning from control, describing planning as “a systematic setting of goals, jobs, and the means to reach the goals”, while control describes “the arrangement, supervision, and ensuring that jobs are completed in the correct quantity, at the correct time, in the correct quality, at the correct costs and working conditions (REFA 1991, pp.

39).”

Work management describes a segment of the formal order processing procedure and the link between product development and manufacturing, while today work management encompasses work planning and work scheduling (Eversheim 1989, pp. 2; Wiendahl 2010, pp. 246).

Work planning is concerned with all planning measures to manufacture a product or service with a one-time characteristic. Here the manufacturing processes and equipment are specified and selected, without direct connection to specific order or deadline. Without considering capacity restrictions, the most economical operation is generally preferred. Frequently, work planning is characterized by the following questions (Eversheim 1989, pp. 3; Wiendahl 2010, pp. 246):

 What should be manufactured?

 How should it be manufactured?

 With which equipment should it be manufactured?

In contrast to work planning, work scheduling is concerned with all measures

scheduling can be summarized as follows (Eversheim 1989, pp. 3; Wiendahl 2010, pp. 246):

 How many pieces should be made in each time period (lot-sizing, line-balancing, shift schedule)?

 When do the orders, materials, equipment, and manpower need to be provided (order sequencing, synchronization)?

 Where should the order be processed (machine assignment)?

 Who should process the orders (shift planning)?

In this work, only the effects of work scheduling on material efficiency and the levers available to schedulers to improve material efficiency is investigated. Assuming a preexisting production system equipped with machinery and a fixed product range, work scheduling completes the following tasks (Kurbel 2003, pp. 17):

 Which quantities of which products should be planned in a given timeframe (production scheduling)?

 Which quantities of pre-products or half-finished goods are needed for these products (secondary requirement planning)?

 Which quantities of products should be produced in lots/batches?

 At what point in time should the processing and the acquisition of materials take place (scheduling)?

 How can the time requirements be aligned with the available machine capacity (capacity planning)?