THE OPERATIONS MANAGEMENT FUNCTION

Materials Management

Possibly the most important strategy for modern Operations Managers in large corporations.

Planning – Organising – Controlling

materials.

Controlling

Planning

Organising

Ramsay Health, Mallee Division

Build a new hospital, engage architect.

Hire a building firm.

Buy hospital equipment, supplies.

Administer contract with builder and suppliers.

Check waypoints.

Marketing for new hospital, hire local staff, ensure local suppliers in place. Accreditation process.

Organise a location, survey, ABS data.

Council permits,

Materials Management

Stock and supplies / materials control.

Too much stock = cash tied up

= inefficient allocation

= opportunity cost

= waste (perishables)

Materials Management

Ensure an adequate supply for reasonable manufacturing conditions of or sale of goods.

Ensure a smooth production process.

ILUKA ILU

Eg Iluka – needs 3 scrapers to have the mineral separation plant running at optimum production. A$800k per day Y

2 scrapers = A$500k per day Y 1 scraper = A$200 per day Y

Y = Income

ILUKA

Scrapers take 4 days to be hired and despatched from supplier in Melbourne.

4 days downtime = A$1,200K lost Y

ILUKA – an easy decision!

Operations manager must make a decision?????

Should we have 3 scrapers working and 1 spare for breakdowns?

Cost of renting a scraper per day depends on its hours of use. Idle scraper costs A$700 per day for hire.

Production Plan

Stage 1 of materials management.

The Production Plan.

An outline of the activities that are undertaken in the operations process.

Production Plan

What goods or services will we produce or provide?

How will we produce or supply them?

How much will we produce or what services will we supply?

Materials Management

The production plan encompasses most of the information needed for the management of materials in the organisation.

Realise however that it is just a plan and allow for situations and contingencies.

Master Production Schedule

Quantity of Goods to be produced. When it will happen. Where it will be done.

Includes type of goods / services, the production process and labour required (Human Capital)

Materials Requirement Planning

Computerised system of ordering and stock control that ensures materials / parts / labour are on hand when needed in the production process.

Inventory Control

An inventory is the stock on hand.

On an oil drilling ship it includes

US$2 mil in spare parts, oils, lubricants, hydraulic fluids, diesel, cement and drilling fluids and about US$20K in food.

Inventory Control

Materials, spare parts and equipment are ordered, purchased and supplied.

Their storage and use is Inventory Control

Inventory items are costed. Inventory control is vital in operations

mangement and can be analysed from stock reports and data.

Inventory Control

Organisations that can reduce their stock can reduce costs and increase efficiency.

FIFO – first in first out LIFO – last in first out

Inventory Control

Oil Rig

Santa Fe Global has been drilling for 75 years and operates may rigs.

Each rig operates in a unique environment and has a lead time for supply of materials.

Down time due to lack of spares is costly.

Inventory Control

Reording materials and spares is usually done through a max / min system.

Stocktakes determine exact quantities of parts / materials.

Stocktakes are done physically from an inventory sheet.

Inventory Control

Santa Fe Global has an inventory system of max / mins set by the operations manager working with the warehouse staff at sea and at the depots.

Physical inventories are done in a 12 month cycle with an inventory of each section every month.

JIT (Just in Time) Method

Popular stock control method used to reduce costs.

Not ideal when you have disasters like Japan and stock is lost and production lead time destroyed.

Billabong – warehouse to Pacific lost.

Quality Management

Quality – a grade or level of excellence.

To achieve continuous quality products or services requires an a continuous examination of the process.

A reputation for quality can mean a competitive advantage

Who has the best pencil cases???

Quality Management

This is the management of the Production Process to ensure that outputs of goods or services are consistently reliable and durable.

1. Quality Control

2. Quality Assurance

3. Quality Management

Quality Control

Inspect and maintain the quality of a

G & S. Done at intervals. Avoid recalls (Toyota – brakes)

Quality Assurance

Process through which an organisation achieves a level of quality in the G & S it produces that is defined by an independent body.

ISO International Standards organisation 9001

Total Quality Management

Taking a whole organisation approach. Designed to achieve quality in the

G & S and maintain it.

Commitment of excellence becomes part of the corporate culture.