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Operations Management

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DOI: 10.23912/978-1-910158-78-4-2910

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Norin Arshed, Julie McFarlane
GMS
& Robert MacIntosh

THE GLOBAL MANAGEMENT SERIES

Enterprise
and its Business
Environment

Operations Management
Umit Bititci and Stavros Karamperidis

This is a sample only. Full information and purchase details for this title
are available at http://www.goodfellowpublishers.com and for other
titles in the series at the Global Management Series page.
THE GLOBAL MANAGEMENT SERIES

Enterprise and
its Business Environment

Norin Arshed, Julie McFarlane and

Robert MacIntosh

(G) Goodfellow Publishers Ltd

(G)
Published by Goodfellow Publishers Limited,
26 Home Close, Wolvercote, Oxford OX2 8PS
http://www.goodfellowpublishers.com

British Library Cataloguing in Publication Data: a catalogue record for this

title is available from the British Library.
Library of Congress Catalog Card Number: on file.

ISBN: 978-1-910158-78-4
Copyright © Norin Arshed, Julie McFarlane and Robert MacIntosh, 2016
All rights reserved. The text of this publication, or any part thereof, may not
be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying, recording, storage in an information
retrieval system, or otherwise, without prior permission of the publisher or
under licence from the Copyright Licensing Agency Limited. Further details
of such licences (for reprographic reproduction) may be obtained from the
Copyright Licensing Agency Limited, of Saffron House, 6–10 Kirby Street,
London EC1N 8TS.

All trademarks used herein are the property of their repective owners, The
use of trademarks or brand names in this text does not imply any affiliation
with or endorsement of this book by such owners.

Design and typesetting by P.K. McBride, www.macbride.org.uk

Cover design by Cylinder

Printed by Baker & Taylor, www.baker-taylor.com

This is a sample only. Full information and purchase details for this
title are available at http://www.goodfellowpublishers.com and
for other titles in the series at the Global Management Series page.
 Contents

Biographies vi
Preface xi
1 Business Organizations: The Internal Environment 1
Julie McFarlane and Ross Curran
2 Creativity, Innovation and Entrepreneurship 21
Julie McFarlane
3 The Legal Function: Starting a New Business – Getting the Structure Right 41
Josephine Bisacre
4 Employment Law 59
Josh McLeod and Yvonne McLaren
5 Research to Create Enterprise Value 77
Geraldine McKay and Linda Phillips
6 Marketing to Create Value 95
Geraldine McKay
7 The Human Resource Management Function 117
Kehinde Olowookere and Katherine Sang
8 Gender and Work-life Balance 135
Steven Glasgow and Katherine Sang
9 Porter’s Five Forces and Generic Strategies 151
Norin Arshed and Jaydeep Pancholi
10 Operations Management 169
Umit Bititci and Stavros Karamperidis
11 Logistics and the Supply Chain 195
Christine Rutherford and Christian König
12 Corporate Social Responsibility and Corporate Governance 215
Julie McFarlane and Keith Gori
Index 231
 10 Operations
Management

Umit Bititci and Stavros Karamperidis

Operations management is the activity of managing products, processes, ser-

vices and supply chains. By managing these activities, an organization creates
and delivers services and products that clients/customers want. Essentially,
operations management is responsible for translating and executing an organi-
zation’s objectives, policies and strategies into day-to-day operations. In other
words, operations management is responsible for delivering the performance
objectives of the organization.
In this chapter we present operations management in two parts. The first
section provides a detailed account of the development of the field since its
inception during the early 1900s through to the modern day. In doing so we
introduce various concepts, methods, tools and techniques that are commonly
used in operations management. In the second section a more detailed account
of key concepts in operations management is provided. Some are covered in
greater detail (e.g. process management) and others just introduced but covered
in detail in other chapters (e.g. supply chain management).

Operations management: evolution and key concepts

The fundamental principles of operations management are rooted in a discipline
that is historically referred to as industrial engineering, which started during
industrialization (1750-1850). Prior to this period, the world’s economy was
largely based on craft-based industries where craftspeople, such as ironmon-
gers, tailors and carpenters made products and provided services customized
to individual people’s requirements. In this craft production model, everything
was produced from scratch, the costs were high and many products and services
were only accessible to the wealthier members of society.
170 Enterprise and its Business Environment

The industrial revolution was born of technological advances which helped

to make everyday products more accessible to the masses, hence the birth of
the term mass manufacturing. The early stages of mass manufacturing are epito-
mized by the Ford Motor Company’s first product, the Ford Model-T, which
you could buy in “any colour as long as it was black” (i.e. there was no choice
for the consumer). These early stages of industrialization also led to develop-
ment of management, and particularly operations management as a scientific
170 discipline,
Enterprise asBusiness
and its captured in F. W. Taylor’s book Principles of Scientific Management
Environment
in 1911 (Taylor, 2006).
Today, the Toyota Production System is heralded as the best example of
modern operations management, as described by the books entitled Machine
That Changed the World (Womack, Jones and Roos, 2008) and Lean Thinking
(Womack and Jones, 2010).

Figure 10.1: From mass manufacturing (Ford Model-T) to lean manufacturing (Toyota
production systems). Source: Toyota GB (2015) and Wikimedia Commons (2015).

„„ Early developments (1900-1940)

During the early stages of industrialization and mass manufacturing, power
lay largely with producers rather than customers. Firms produced what they
thought would be appropriate for the market. Consumers had little if any choice;
the norm was that you simply bought what was available. Taylor (2006), who
undertook research into early factories and mass manufacturing, identified a
key change in manufacturing processes, known as the production line concept.
While in the pre-industrial revolution era, one person would produce the whole
product, this new approach enabled the product to flow at a constant speed
down the production line, where people with specialized skills and equipment
would build a small and very specific part of the product. A production line
allowed specialization of labour on one task (such as hanging a door on a car,
sprinkling cheese on a pizza, sticking a label on a product). Specialization of
labour was achieved by breaking complete jobs into smaller, repetitive com-
ponent parts, which Adam Smith (1776) called “the division of labour”. This
 Operations Management 171

enabled people to get really good at doing a very specific task and led to huge
productivity gains, at the price of more satisfying and skilled work.
The main purpose of industrial engineering was to maximise the flow of
work through the production line, i.e. make as many products as possible out of
the same production line by improving the productivity1 of the production line.
In order to achieve that, production engineering aimed to get as much value
added work2 as possible from every unit of resource. For that reason, techniques
such as work measurement and the method study were developed. Work
measurement is concerned with the measurement of time needed to perform
a job. It typically classifies tasks or activities in to value-adding or non-value
adding activities and attempts to eliminate or minimise the non-value-adding
activities. Method study is concerned with how various activities are organized,
sequenced and integrated to ensure that the product is produced in the most
efficient way. Method study and work measurement are often referred to col-
lectively as work study. Work study helps to ensure the minimization of wasted
time, by minimising non-value adding activities, thus increasing productivity.

Exercise
If you were managing a factory how would you measure production performance, and
why?

„„ Increasing variety and competition (1940-1980)

As the industrial era progressed further into the 20th century, the world
economy started to improve; consumer buying power increased and some
producers began to offer more choice as a means of securing an advantage.
In contrast to the example of the single Model T Ford, General Motors sought 10
to develop a product for every type of customer, through options that would
allow customization. With increased choice, greater levels of uncertainty and
complexity were introduced to the once simple production lines. Now produc-
tion lines had to be designed to deal with a variety of products. This had a
negative affect on both efficiency and productivity. Attention began to focus on
layout planning to ensure that products flowed efficiently from one production
area to another within the same factory. Layout planning is concerned with the
organization of the production resources (i.e. machines, equipment, tooling and

1 Productivity is a measure of the efficiency of a production system. It can be expressed as

the ratio of output to inputs used in the production process.
2 Value added work are the activities conducted by an organization in order to generate
an output which is considered as more valuable by external customers than the inputs
needed for its production.
 172 Enterprise and its Business Environment

people) on the factory floor. Whilst the production line layout was considered
to be most effective for producing a single product in large quantities with little
or no variation (i.e. mass manufacturing), it proved less effective in dealing
with increased variation, uncertainty and consumer choice. Alternative forms
of shop floor organization emerged that included functional/process layout
and later group technology (sometimes referred to as cellular manufacturing).
Descriptions and illustrations for these alternative forms of shop floor organiza-
tion are provided below.
172 A Production/flow
Enterprise line layout is one where resources are organized in a line
and its Business Environment
to enable the products to flow through the production system as efficiently as
possible with minimum interruptions. Here, the focus is on the maximization of
flow and thus productivity by balancing the work content of each work-station
(line-balancing) along the production line. Typically, the production line lay
out is suitable for low-variety high-volume manufacturing (Figure 10.2).

Raw Work Work Work Work Finished

materials station 1 station 2 station 3 station 4 goods

Bottles Corks

Wine Labels

Figure 10.2: Flow line production

Functional/process layout is where similar resources, activities or skills
are grouped together into departments, such as welding department, painting
department, machining department, finishing department. Here different prod-
ucts are routed through different departments according to their production
requirements. Although highly flexible, these layouts do not have the produc-
tivity characteristics of flow line production as products have to travel from
one resource to another. In operations management any unnecessary travel is
considered as non-value adding and waste. Typically, functional/process layout
is more suitable for small batch manufacturing normally characterized by high-
variety and low-volumes.

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