Operations ManagementUpdated

7/27/2019 Operations ManagementUpdated

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Introduction to

Operations Managementis the management of the direct resources

required to produce the goods and services

provided by an organization.

Management activities performed include

selecting, designing, operating, controll ing

and updating productive systems


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Types of Decisions

1. Strategic or long-range decisions

2. Tactical or medium- range decisions

3. Operational planning and control or short-

range decisions


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Questions Raised

At Strategic Level: 1. How well we make the

product? 2. Where do we locate facilities? 3. How

much capacity is needed? and 4. When should

capacity be added?

At Tactical Level: 1. How many workers do we

need? 2. When do we need them? 3. Is overtime

needed or perhaps an additional shift? 4. When to

deliver material? and 5. Is a finished goods inventory

needed?

At Operational Level: 1. Jobs to be done today or

this week? 2. To whom tasks are assigned? and 3.

Which jobs have priority?


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Role of OM Within an

Organization

Marketing strategy Operations strategy Finance strategy

Corporate Strategy

Marketplace


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The Transformation Process

Inputs

Customers/or

materials

Transformation

Process

Transformation

process

Outputs

Goods & Services


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Types of Transformation

Physical, as in manufacturing

Locational, as in transportation

Exchange, as in retailing

Storage, as in warehousing

Physiological, as in healthcare Informational, as in telecommunications.


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OM Contributions to Society

1. Higher Standard of Living

2. Better Quality Goods & Services

3. Concern for the Environment

4. Improved working conditions


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Value chain

Trend toward having the transformation

process work more closely with suppliers

and customers alike is often referred to as aproducts value chain.

Definition : All steps that actually add value tothe product without distinguishing where they areadded. This concept attempts to eliminate all non-

value added steps(steps such as inspections andinventory), and results in a higher degree ofdependence among the value added functions thatare linked to the chain.


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Societal Development Vs. Mode and Technology of production

Capital-IntensiveLabor-Intensive

Stone Age,Bronze Age

(Lasted over 500,000 years)

Agrarian stage,Craftsmanship

(Lasted 100,000 years)

Industrial Age

(200 years old)

ServiceInformation Age ?

(Evolving)

Few Workers Mode of Production Many Workers

Technology of production

Complex

Sophisticated

SimplePrimitive

Societal

Development


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Systems and procedures analyst

Organizational level Manufacturing industries Service Industries

Upper Vice president of

manufacturing

Vice-president of

Operations(airline)

Middle

Regional manager of

manufacturing

Chief administrator

(hospital)

Plant manager

Program Manager

Store Manager(dept store)

Facilities Manager(wholesale distributor)

Lower

Department supervisor

Foreman

Branch Manager (bank)Department supervisor

(insurance company)Crew chiefProduction controller

Materials Manager

Quality Manager

Purchasing agent

Work methods analystProcess Engineer

Assistant Manager

Purchasing agentInspectorDietician (hospital)

Customer service manager

Line and staff jobs in operational Management


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Major Responsibilities of OM Managers

1. To estimate the demand for the products andservices the company sells,

2. To produce these products and services

efficiently, i.e. at the lowest cost possible,3. To produce these products and services with a

reasonable level of quality, and

4. To produce them cleanly, i.e. with minimumharm to the environment


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ModelsA model is an approximate representation of reality.

Two Types of Models:

1. Physical Models :

a) Iconic --- looks like the real system

b) Analog --- acts like the real system.

2. Symbolic Models:

a) Verbal --- using language to model thought,

b) Mathematical --- using Math. to model reality


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Mathematical Models

Math Models differ in four respects :

1 ) Purpose ----------------a) descriptive,

b) optimization.

2 ) Mode -------------------a) analytic,b) numeric.

3 ) Randomness ------- --- a) deterministic,

b) probabilistic.4 ) Generality ------------- a) applicable to one system.

b) transferable to other

systems.


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Challenges Facing OM Managers

Effectively consolidating the operations resulting frommergers & acquisition,

Developing flexible supply chain to enable mass

customization of products and services,

Managing global suppliers, production, and distribution

networks, Managing a diverse workforce,

Effective response to restructuring, reengineering, and

downsizing,

Conforming to environmental constraints, ethical, standards,

and governmental regulations,

Developing and integrating new process technology with

existing one.


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Chapter 2

Operations Strategy & Competition

Competitiveness refers to the firms position in the

marketplace.

Operations Strategy refers to how the operations management

function contributes to the firms ability to achieve itscompetitive advantage in the marketplace. Operations

Strategies are developed from the competitive priorities of an

organization which include: 1. Low cost, 2. High quality, 3.

Fast delivery, 4. Flexibility, and 5. Service.Operations Strategy is thus concerned with a long-term plan in

order to determine how to best utilize the major resources of

the firm so that there is a high degree of compatibility between

these resources and the firms long -term corporate strategy.


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Planning Issues

Majorlong term issues include:1. How big do we make the facilities? Plant size

2. Where do we locate them? location

3. What type of processes or technologies do we install tomake the products? Process

Tactical issues include:

1. Workforce size, 2. Material requirement.

Operational issues include:

1. Daily worker scheduling, 2. Jobs & equipment,

3. Process management, 4. Inventory management


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Administrative process

OperationalLevel

StrategicLevel

Tactical orTranslators

Level

Feed

Back

Slack

Or

Information


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Trends Affecting Operations

Strategy

1. Globalization: new opportunitiesand hyper-competition

2. Technology: connectivity, speed,and intangibility.


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Time Line for OperationsStrategies

c

o

m

pe

t

i

t

iv

e

priority

cost

1950s 1960s 1970s 1980s 1990s

quality

delivery

flexibility

Service

cost min. value max.

Manufacturing based Technology info. based


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Order-Qualifiers: Minimum

characteristics of a firm or itsproducts to be considered as a

source of purchase.

Order-Winners: Characteristics

of a firm that distinguish it from

its competition so that it isselected as the source of

purchase.


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Customer Activity Cycle (CAC)

1. Prepurchase: here activities focus on beingresponsive to customer inquires and the

ability to demonstrate technical expertise,

2. Purchase: here activities center around the

actual sale and delivery of the product and

collecting payment,

3. Postpurchase: here activities include after

sales support and product warranties.


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New Product and Service Development, andProcess Selection

Categories of new products:

1. Incremental or Derivative Products: products with least amount of

innovation. These products are often cost-reduced versions of existing

products or with some added minor features, e.g. waterproof Walkman

CD player.

2. Next Generation or Platform Products: these products provide a broad

base for a product family that can be leveraged over several years

requiring more resource than incremental products, e.g. major model

changeovers in the auto industry.

3. Breakthrough or Radical Products: these products require substantial

product design and process change, e.g. first TV, cellular phone, etc.


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The New Product Development Process

1. Idea generation

2. Concept Development or initial design &

analysis of customer requirements and market

demand.3. Quality function Deployment (QFD) translating

customer requirements into engineering

specifications. E.g. House of Quality on page 60.

4. Design for Manufacturability: material choices,

process selection, efficiency, quality and safety

consideration all needed to mass produce the

product.


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Types of Processes in Manufacturing1. Project: process that focuses on making one-of-a-kind

products, e.g. producing a movie

2. Intermittent: process that produces products in small lot sizes:

a) Job Shopprocess where a specific quantity, generallysmall, of a product is produced only once, e.g. printing

programs for a concert, b) Batcha process that produces the

same item again and again, usually in specified lot sizes, e.g.

McDonalds making hamburgers, lot size 12.

3. Line - Flow: continuous process that produces high volume,

highly standardized products: a) Assembly Line: manufacture

individual discrete products such as cars, b) Continuous:

operates 24 hours/day, e.g. refining sugar or oil. See Exhibit

3.9 page 58.


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Customer Contact Approach

Service processes are distinguished by the

degree of customer contact with the service

system during the rendering of the service;thus we have high contact systems such as

healthcare and low contact systems such as

mailing a letter to someone. See serviceSystem Design Matrix on page 73


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Delivery Approaches

1. The Production Line Approach

2. The Customer Involvement Approach

3. The Personal Attention Approach


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Supplement

PROJECT MANAGEMENT

Supplement to Chp 3: Project Management


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Supplement to Chp. 3: Project Management

A project is a statement or proposal of

something to be done. Projects have a series ofrelated jobs directed towards the achievement of a

goal and requiring a significant amount of time to

perform.

Project management involves planning, directing

and controlling resources: people, capital,

equipment, and material to meet the technical, cost,and time constraints of the project.

Work Breakdown Structure


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Work Breakdown Structure

Program is made up of interrelated projects, each is often

contracted by another organization. It is the highest order

of complexity and may take years to complete.

Project is similar to a program but is less complex and

shorter in duration.

Taskis a subdivision of a project, and usually is

completed in several months and performed by one

organization.

Subtaskis subdivision of a task.

Work package is a group of activities combined to be

assignable to a single organizational unit.

Organizational Considerations in Project Management


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Organizational Considerations in Project Management

Role of the project manager: multidisciplinary, wide

variety of skills, collaborative culture, social, and technicalskills.

High Performance project teams: the necessary factors

for the creation of a successful project team are: 1. People-related factorsgood communications, involvement, resolve

conflict, mutual trust and commitment to project objectives, 2.

Leadership factorsability to organize, direct, facilitate group

decision making, and resolve problems, 3. Task relatedfactorsability to produce results within budget and on time,

ability to innovate and to change, 4. Organizational factors

climate, authority structure, policies, procedures, regulations,

values and economic conditions.


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ACTIVITIES OF OM The overall manufacturing system.

Production engineering.

Computerized design, process planning, productionplanning and control and prove the efficiency and

effectiveness of production engineering and manufacturingmethods which in many high-technology and large-scalemass-production or processing plants have largely replacedtraditional and mainly manual techniques.

Manufacturing.

Quality management. Planned maintenance.

Inventory control.

Distribution.


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An itegrated operations system


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Process planning

Process planning determines how the

product or part should be manufactured by

referring to component and assemblydrawings and manufacturing reference data,

and specifications produced at the design

stage.


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Aggregate planning

Aggregate planning aims to ensure that

capacity is available to meet demand at

minimum cost.


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Production control

Production control schedules production,

loads the shops and monitors progress to

ensure that production programs areachieved.


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DISTRIBUTION ACTIVITIES

Distribution activities are concerned with

storing completed products in warehouses,

depots and stores and the dispatching anddelivery of products to customers. Those

concerned with physical distribution

management and distribution planning.


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Manufacturing Systems

Manufacturing is the process of transformingmaterials and information into goods for the

satisfaction of human needs.


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MANUFACTURING DECISIONS

Manufacturing decisions are concerned

with the following four attributes:

1. Cost

2. Time

3. Flexibility 4. Quality


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Time

The speed with which a manufacturing

system can respond to change and how

quickly a product can be produced by thesystem (the production rate).


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Quality

How well the production process meets the

design specifications related to the different

features and properties of the product.


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THE BASIC PPCS MODEL


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Process planningdetermines

the manufacturing processes involved;

the machine tools required to execute these processes;

the tools and fixture required at each stage of processing;

the number and depth of passes in a machining operation; the feeds and speeds appropriate to each operation;

the type of finishing processes necessary to achieve thespecified tolerances and surface quality.


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Rough-cut capacity planning

(RCCP)Rough-cut capacity planning (RCCP)

analyze the feasibility of fulfilling a

particular production program as requiredby the demand forecast. RCCP provides a

basis for producing the master production

schedule.


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Scheduling

The detailed scheduling of work and the allocation

of labour and material requirements is carried out

by one or other of the following computer-based

techniques:

Material requirement planning

Manufacturing resource planning

Optimized production technology

Just-in-time (JIT)


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Monitoring and control

Production monitoring can be carried out by

means of computer control systems, the aim

being to keep machines as fully utilized aspossible.


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BENEFITS

better planning of shop and purchase orders

resulting in on-time deliveries, reduced

manufacturing lead times and fewer shortages;

improved control of shop orders resulting in

shorter queues, reduced work-in-progress, less idle

time and fewer bottlenecks; and

monitoring and control of machine tools andproduction processes resulting in better utilization,

improved quality and reduced costs.


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Tightness, Dependence & Bottlenecks


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These conditions occur as a result of the relationship between

the various stages in a process.

Tightness: it results from a high degree of dependence

between stages as is the case in assembly line production, lack

of buffer inventory causes that. The more buffer the less the

dependence among stages and hence less tightness in theproduction line.

Bottlenecks: it is caused by capacity variation in multistage

operations. The stage with lowest capacity is referred to as thebottleneck in the entire operation.


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E l f P d i i


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Examples of Productivity

Measurement1. Partial measure (single factor)

Output / Labor, Output / Capital

2. Multi-factor measure

Output

Capital + Labor

3. Total measure

Output

All inputs


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Examples of Partial MeasuresBusiness Measure

Restaurant..Customers / labor hour

Retail Store.Sales / square foot

Chicken Farm..lb. Of meat / lb of feed

Utility Plant.Kw / ton of coal

Paper Milltons of paper / cord of wood


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Capacity

Capacity: is the output capability of a process in a

specified period of time. Design Capacity is the output

the plant is designed to achieve and Actual Capacity orOutput is the actual amount the plant is producing.

Capacity Utilization: is the percent capacity used:

Actual Output

Design Capacity


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Quality, Speed of Delivery, and Process

Velocity

Quality: quality can be measured by: defective rate,

number and frequency of kudos/ or complaints (customer

satisfaction), or by amount of toxic waste the company is

releasing into the environment.

Speed of Delivery: is measured from the time an order is

placed to the time it is shipped to the customer.The shorter

the time the better. Also variability of the speed ofdelivery is an important measure of performance.

Process Velocity: Total Throughput time

Value-added time

COMPUTERIZED DESIGN PROCESS PLANNING


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COMPUTERIZED DESIGN, PROCESS PLANNING,

PRODUCTION PLANNING AND CONTROL, AND

MANUFACTURING SYSTEMS.

Computer-aided design (CAD)

Computer-aided design (CAD), uses computers toassist in the production of designs, drawings and

data for use in manufacture. Computer-aided manufacture (CAM)

Computer-aided manufacture uses computers tosupport manufacturing processes, especially those

consisting of computer numerically controlled(CNC) machines, robots and automated materialhandling systems.


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CADCAM

CADCAM, also known as computer-aidedengineering (CAE), links product design andmanufacturing through integrated CAD and CAMcomputer systems. For example, a CADCAMsystem in the electronic industry, where it is mostoften found, might consist of CAD work stations,in which integrated circuits and printed circuit

boards are designed, which are linked to a

processor with a database that provides output todrive computer numerically controlled (CNC)machines.


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CIM

Computer-integrated manufacture (CIM), usesinformation technology to integrate the various

processes which together comprise the totalmanufacturing process. The computerized systemsused in a full CIM system will include CAD andCAM as described previously. A CADCAMsystem is sometimes regarded as beingsynonymous with CIM. A full CIM system,

however, will also incorporate computer-aidedprocess planning (CAPP) and computerizedproduction planning and control (CPPC).


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CAPP

Computer-aided process planning (CAPP)

uses computers to produce process plans for

production or parts. It can automaticallydevelop these and routings from the outputs

of CAD. It leans heavily on the parts

classification and coding aspects of

grouping technology (GT).


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CAPP

There are two approaches to CAPP:

Variant process planning, in which process plans are storedin digital form thus allowing the planner to select and

modify appropriate plans as needed Generative process planning, in which descriptions of the

parts, the manufacturing process, the machine tools and thetooling are entered into the computing system which thendevelops a new process plan. It makes no reference to prior

plans and therefore requires more complex decisionsequences than variant process planning.


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CPPC

The overall production planning andcontrol system (PPCS).

A choice of planning and schedulingsystems:

Material requirements planning (MRPI)

Manufacturing resource planning (MRPII)

Optimized production technology (OPT)

Just-in-time systems (JIT)


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CPPC

Process control systems.

Layout planning which determines the physical

disposition of departments and selection on a

site and location plant, machinery and

equipment in each area. Much of the work of

planning layouts can be computerized although

techniques such as cross charts and relationshipcharts are also used manually.


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AIMS

determine for final products what should be produced atwhat time;

calculate the required production of sub-assemblies;

determine the requirement for materials based on an up-to-date bill of materials (BOM);

calculate inventories, work-in-progress, batch sizes andmanufacturing and packaging lead times; and

generally control inventory by ordering bought-incomponents and raw materials in relation to the ordersreceived or forecast rather than the more usual practice ofordering from stock-level indicators.


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BENEFITS

The benefits of MRPI are that a detailed

forecast of the inventory position is

produced period by period which, togetherwith the planned order release entries,

enables future production to be planned

more accurately and better control to be

maintained of inventory.

Manufacturing Resource Planning


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Manufacturing Resource Planning

(MRPII)

MRPII is a computer-based system designed

to manage all the resources of a

manufacturing organization. It acts as aplanning and scheduling system, linking

manufacturing with the sales and finance

departments and providing tools for joint

decision-making among all three

departments.

ESSENTIAL ELEMENTS OF


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ESSENTIAL ELEMENTS OF

MRPII

The demand forecast

Production planning

Resource planning

Rough-cut capacity planning The master production schedule

Bills of materials

Detailed material and capacity plans

Shop- and purchase-order release Shopfloor control

Purchase and inventory control

MRP II


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MRP II


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BENEFITS

MRPII is a demand-driven system whichintegrates planning and control systems. It takesaccount of capacity requirements and constraints

and enables decisions to be made at each stage ofthe manufacturing process in a coordinatedfashion.

MRPII also provides a systems capability which

can simulate future possibilities by processingmultiple sets of data to model alternativemanufacturing environments.

ERP


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Enterprise Resource Planning Systems : fully integrated

software system that links all of the major functional areas inthe organization. ERP systems are an outgrowth of Material

Requirements Planning (MRP) systems.

Benefits of ERP Systems : Provide competitive advantage

the benefits can take many forms: 1. Reduction of number of

errors because a common database is used, 2. Faster customer

response times, and 3. Better overall communications within

the organization.Failure of ERP systems is due to: lack of top management

commitment, lack of adequate resource, lack of proper

training, and lack of communication.


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Benchmarking

Defined: is the continuous process of

measuring the desired features of products and

services, and practices against world class

standards or reputable companies considered

as tops in that industry. Goods & Services,

Business Processes, and Performance

Measures can be benchmarked.


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Key Steps in Benchmarking

1. Planning

2. Analysis

3. Integration4. Action

5. maturity


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Types of Benchmarking

1. Internal

2. Competitive

3. Functional

4. Generic


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Reengineering

It is the process of rethinking and

restructuring an organization.

Characteristics of a Reengineered Process:

1. Several jobs combined into one

2. Workers make decisions

3. The steps in the process are performed in anatural order

4. Processes have multiple versions

Operations ManagementUpdated

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