THE OPERATIONS MANAGEMENT FUNCTION

Materials Management Possibly the most important strategy for modern Operations Managers in large corporations. Planning – Organising – Controlling materials.

OrganisingPlanningControlling 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.