Operation Management by Kushan Rathnayaka

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Contents 1.0

Introduction ..................................................................................................................... 1

1.1 Objectives ......................................................................................................................... 1 1.2 Methodology .................................................................................................................... 1 1.3 The Organization .............................................................................................................. 1 2.0 Operational problem ............................................................................................................ 2 2.1 Observation ...................................................................................................................... 2 2.2 Justification ...................................................................................................................... 3 2.2.1

PERT Chart .......................................................................................................... 4

2.2.2

Variance Time ...................................................................................................... 5

2.2.3

Standard deviation ............................................................................................... 5

2.2.4

Probability ............................................................................................................ 6

3.0 Solutions .............................................................................................................................. 7 3.1 Solution – 1 ...................................................................................................................... 7 3.2 Solution – 2 ...................................................................................................................... 8 3.3 Solution – 3 ...................................................................................................................... 9 3.4 Selection of Best Solution for Union apparel................................................................... 9 4.0 Conclusion ......................................................................................................................... 10 5.0 References .......................................................................................................................... 11 6.0 Appendix ............................................................................................................................ 12

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1.0 Introduction 1.1 Objectives This report mainly highlights the following objectives:  Observe an operational problem of a organisation  Justify the particular operational base problem  Recommend sensible solution to the identified problem

1.2 Methodology

In order to accomplish aforesaid objectives several quantitative and qualitative methods have been used. Particular operational problem has been justified by using network model and probability analysis. After all sensible solution suggested based on the knowledge gathered through the course.

1.3 The Organization

Union Apparels is specialising in sulphur and pad-dyed cotton, vat- pigment, cotton-lycra and fabric reactive; and it’s the one of the large woven fabric manufacturer (Finishing). Union apparel produce some of world leading brands such as Reebok, Mango, C & A, Marks & Spencer, Simply Vera, Debanhams, Hello Kitty, Kristin, Next, Davis, Tesco, Columbia, Charles Vogele, Gymboree and Camaieu. These finished garments mainly export to South American, South East Asian, Mediterranean and now South Indian markets with unsparing standards. Union apparel consists with 6 main factories in Sri Lanka which designed to meet world class standards with every item that is produced. A team of nearly 4,000 trained and qualified personnel is the core competency of Union Apparels. This motivated, enthusiastic and highly dedicated work team is able to gain company reputation in cost effectiveness and excellent quality.

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Union apparel is constantly seeking new ways in which to create value and establish long term relationships with company customers through flawless products, inspiring design and unparallel service while supporting to the highest ethical standards of business. Company also strive to make a positive contribution in the communities throughout proper CSR planning.

Union apparel, design concepts are created by company product designers and then implemented by the factories. Each product goes through a multi stage manufacturing process before reaching the customer. Throughout this process, every item is subject to rigorous and exacting quality control checks that conform to global standards. At the end of each season, performance is assessed, customer feedback gathered and improvements are put into operation and the cycle begins all over again.

2.0 Operational problem Due to high demand, Union apparel some time unable to accept some of well profitable orders from its clients as itâ&#x20AC;&#x2122;s unable to deliver order on time. At the same time if the company unable to deliver order on time, they will have to air freight the fabric to client which is highly expensive. This is a mostly occur operational problem face by Union apparel. In order to have an in depth understand about this problem, letâ&#x20AC;&#x2122;s illustrate one practical situation that the company actually faced to this type of problem.

2.1 Observation

Union apparel has received a bulk order of 400,000 yards of 100% cotton 2x2 (Fabric Construction) from M&S (Marks & Spencer). This order should be delivered to a Bangladeshi Garment manufacturing plant in 12weeks. If Union apparel accepts this order and if they are not able to deliver the fabric on time they will have to air freight the fabric to Bangladesh which is highly expensive and if this is done the project will be a loss instead of a profit.

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2.2 Justification For the justification of this problem, Network Models and the Probability Analysis will be used. Network models (Pert charts) will be used to see if the dead line could be met by Union apparel in delivering the 400,000 yards of 100% cotton fabric to M&S where as the probability analysis will basically be used to see what probability Union apparel holds in order to deliver the fabric. Explanation of theories used; refer Appendix 1

When the project begins the weaving of the fabric can start (Activity A) and the modification needed to the fabric can be made (Activity B). The singeing process (Activity C) can be started once the weaving process is completed. Desizing (Activity D) can be done as soon as the modification is done to the fabric. When the singeing process is done, the scouring process can done (Activity E), with this the bleaching could start (Activity F). The mercerizing process (Activity G) should be done after the scouring process. At last after the processes of bleaching a full quality check will be done in order to see the quality of the manufactured fabrics (Activity H). (Please refer appendix 1 for the fabric technology termsSingeing/desizing/Scouring/Bleaching/Mercerizing)

Activity Predecessor

Description

Immediate

weaving of the fabric

Construction

Singeing Process

Desizing Process

Scouring Process

Bleaching

Mercerizing Process

E, D

Quality Checking

F, G

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Activity

Optimistic

A B C D E F G H

Most Probable

3 1 2 1 1 1 2 1

Pessimistic

4 2 3 2 2 2 3 2

5 3 4 3 3 3 4 3

4 2 3 2 2 2 3 2

Expected time = A+4m+B A= Optimistic time. M=Most Probable time time 6 2.2.1

Expected

B= Pessimistic

PERT Chart

4 (A)

3 (C)

4 7

F (2)

6 12 12

3 3

2 (E)

7 14 14

H (2)

2(B)

3 2 7 3

G (3) 2

(D)

5 9 9 3

3 3

As to the PERT chart the expected time it takes to deliver the fabric of 400,000 yards is 14 weeks. [As to this Project the Critical path is A-C-E-G-H]

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2.2.2

Variance Time

[( Pessimistic - Optimistic ) / 6 ]2

Activity Variance time A B C D E F G H

2.2.3

1.11 1.11 1.11 1.11 1.11 1.11 1.11 1.11

Standard deviation

St. Deviation = â&#x2C6;&#x161;1.11+1.11+1.11+1.11+1.11 =

2.3558 weeks

According to the calculations this project is expected to be completed in 14weeks with a standard deviation of 2.3558 weeks. The project completion time confirms to a normal distribution with a mean value of 14weeks and standard deviation of 2.3558 weeks.

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2.2.4

Probability

Finding the probability of completing the project within 12 weeks. P (t<12)

x-Âľ Ď&#x192;

12 - 14 2.356

-0.85 0.3023

0.5000-0.3023 =

0.1977

19.77%

According to all aforementioned calculations, it is justified that this project (400,000 yards of 100% cotton fabric to M&S) which needs to complete within 12 weeks will take 14 weeks to complete and there is only 20% chance of complete within 12 weeks.

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3.0 Solutions In operation management, there are many ways or methods that help to increase the production capacity of a firm by improving supply chain, production layout, operation process etc. The production manager of garment factory must evaluate different alternatives or ways of increasing production capacity to select best solution. In this case, the large scale garment factory can use these operational management techniques or solutions to manage production as well as orders of fabrics. Some of the recommended solutions are as follow:

3.1 Solution â&#x20AC;&#x201C; 1 Reducing cycle time

Union apparel garment factory can increase its production capacity by reducing cycle time that has many positive impacts on production process. In operation management, reducing cycle time is one of the best ways that help to increase operational and organizational productivity, and improve overall effectiveness of production process (Barnes, 2008). In this case, the firm has only 20% probability to complete an order of 4000 fabrics within 12 weeks that creates problem for the company to deliver order on right time. In this strategy, Union apparel factory can increase its production capacity by monitoring the overall equipment effectiveness (OEE) at their production plant. By using this solution, the firm can reduce the complexity in current production that helps to improve the flow of fabric production, efficiency, effectiveness and reduce downtime. The reduction in manufacturing cycle time can be helpful for Union apparel factory to increase output of fabric that helps to complete order within 12 weeks of time. In this way, the use of simulation technique can be also helpful for the Union apparel to reduce cycle time and work in progress (WIP) that increases production quantity of fabric (Dickersbach, 2009).

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3.2 Solution â&#x20AC;&#x201C; 2 Use of manufacturing or enterprises resources planning

Effective manufacturing resources planning can be also helpful for Union apparel to increase production capacity or current output level of fabric. It is also known as an enterprise resources planning (ERP) software.

Union apparel can design or develop effective

manufacturing resources plan within the production plant that helps to effectively integrate current production process with capacity planning of equipments, supply chain, and production and labour scheduling (Crowther & Green, 2004). It is a computer based solution or system that can help the firm to plan and control their production process for producing fabric according to the required changes. Union apparel can reduce the current level of order completion time by implementing manufacturing resources planning that helps to improve the flow of operations, use of material, plant, and increase availability of resources according to demand and production capacity. Manufacturing resources planning can be also useful for the firm to make plan or schedule for their resources like employees, finance, raw materials etc. to improve the current performance of production capacity, and supply chain or inventory management of the Union apparel (Barnes, 2008). This method can be helpful for Union apparel to increase output of fabric as well as achieve completion of order of 40000 fabrics in 12 weeks period. ERP System explanation refer- Appendix 2

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3.3 Solution â&#x20AC;&#x201C; 3 Expand production line or equipments Expanding production lines or equipments is another option for the Union apparel that can help to increase current level of production capacity or output. To complete order within 12 weeks, the firm can increase production lines by adding additional shifts of employees or expand adding new production lines. This can be helpful for the Union apparel to increase output or production quantity of fabrics to meet customer demand or complete order. At the same time, the expansion of production lines or equipments can increase operational cost of the firm, because of additional investment in plant and machinery (Askin & Goldberg, 2007). On the other side, production department of Union apparel can also increase production capacity by improving efficiency of existing production line, increasing speed of current production line, and upgrading capacity of existing machine. These ways can be also helpful for the Union apparel to produce or manufacture 40000 fabrics within 12 weeks that help to meet expectation of customer regarding delivery time. This way can also give long term benefits to the firm in terms of capacity to increase production, and completing order within set time period.

3.4 Selection of Best Solution for Union apparel From the above solutions, the use of enterprises or manufacturing resources planning in operational process can be a best solution for the Union apparel as compared to others. In this case, enterprises resources planning can be applied by integrating information and software systems related to production scheduling, inventory control, production layout etc. within the organization. At the same time, by implementing advanced software or systems in the firm, the management of Union apparel can apply enterprise resources planning (ERP Software in garment factory. Enterprise resources planning is a best way or tool for the Union apparel to increase production capacity, as it can be helpful for the company to reduce production lead time, cycle time, and increase flexibility and performance of current operational process. So, it can be a best solution for the firm to achieve completion of order of 40000 fabrics within 12 weeks time.

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4.0 Conclusion Union apparel is one of a leading firm existed within Sri Lankan apparel industry which produce some of world leading brands such as Reebok, Mango, C & A, Marks & Spencer, etc. Due to high demand of the market sometimes firm unable to accept some of its profitable orders from its clients as firm production capacity unable to complete those orders within given time. This is the main operational problem faced by Union apparel which leads to loos its competitiveness. From this report this operational problem had been justified by using one practical example.

Further this report identified three main solutions for the company which it can use to maximise production capacity. Those solutions are reducing cycle time, use of manufacturing or enterprises resources planning and expand production line or equipments. When considering firm capabilities and cost factor it is proposed that the implementation of manufactory or enterprises resources planning as the best solution which Union apparel can use to overcome its main operational problem effectively.

Implementation of this enterprises resources planning will bring additional operational capacity while enhancing its competitive advantage.

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5.0 References  Adam, E.E and Ebert Ronald, JR.J. (1992) Production and Operations managementConcepts, Models and Behaviour. 5th ed. New Delhi: Prentice- Hall of India.  Askin, R.G & Goldberg, J.B. (2007). Design and Analysis of Lean Production Systems. John Wiley & Sons.  Barnes, D. (2008) Operational Management: An International Perspective. USA: Cengage Learning.  Chase,R, Shankar, R, Jacobs, F.R and Aquilano, N.J. (2010) Operations & Supply Management. 12th ed. New Delhi: Tata McGraw Hill Education Private Limited. 

Crowther, D & Green, M. (2004) Organisational Theory. London: CIPD Publishing .

 Dickersbach, J.T. (2009) Supply Chain Management with APO: Structures, Modelling Approaches and Implementation of SAP SCM 2008. 3rd ed. New York: Springer.  ERP Software in Garment and Apparel Company. (n.d) [Online]. Available at: http://www.nickmutt.com/erp-software-for-garment-company.htm [Retrieved on June 3, 2011].  Netessence.com.cy n.d., ‘enterprise resource planning’, [Online], Available from: http://www.netessence.com.cy/downloads/erp.pdf [Retrieved on June 3, 2011].  Plenert, G.J. (2002) International operations management. USA: Copenhagen Business School Press DK.  PrimeX Technology, Inc. 2011, Enterprise Resource Planning, [online], Available: http://primextechnology.com/solutions/information-technology-2/managedservices/supply-chain-management/enterprise-resource-planning-erp [Retrieved on June 3, 2011].  Union Apparel, [Online], Available http://www.unionapp.com [Retrieved on June 3, 2011].

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6.0 Appendix Appendix 1

Theories for Justification

PERT Chart Complex projects require a series of activities, some of which must be performed sequentially and others that can be performed in parallel with other activities. This collection of series and parallel tasks can be modelled as a network. The Program Evaluation and Review Technique (PERT) is a network model that allows for randomness in activity completion times. It has the potential to reduce both the time and cost required to complete a project. The Network Diagram In a project, an activity is a task that must be performed and an event is a milestone marking the completion of one or more activities. Before an activity can begin, all of its predecessor activities must be completed. Project network models represent activities and milestones by arcs and nodes. PERT originally was an activity on arc network, in which the activities are represented on the lines and milestones on the nodes. Over time, some people began to use PERT as an activity on node network.

Benefits of PERT PERT is useful because it provides the following information: Expected project completion time. Probability of completion before a specified date. The critical path activities that directly impact the completion time. The activities that have slack time and that can lend resources to critical path activities. 12

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Activity starts and end dates.

Limitations The following are some of PERT's weaknesses: The activity time estimates are somewhat subjective and depend on judgement. In cases where there is little experience in performing an activity, the numbers may be only a guess. In other cases, if the person or group performing the activity estimates the time there may be bias in the estimate. Even if the activity times are well-estimated, PERT assumes a beta distribution for these time estimates, but the actual distribution may be different. Even if the beta distribution assumption holds, PERT assumes that the probability distribution of the project completion time is the same as the that of the critical path. Because other paths can become the critical path if their associated activities are delayed, PERT consistently underestimates the expected project completion time. The underestimation of the project completion time due to alternate paths becoming critical is perhaps the most serious of these issues. To overcome this limitation, Monte Carlo simulations can be performed on the network to eliminate this optimistic bias in the expected project completion time. Steps in the PERT Planning Process PERT planning involves the following steps: Identify the specific activities and milestones. Determine the proper sequence of the activities. Construct a network diagram. Estimate the time required for each activity. Determine the critical path. If necessary the use of probability.

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1. Identify Activities and Milestones The activities are the tasks required to complete the project. The milestones are the events marking the beginning and end of one or more activities. It is helpful to list the tasks in a table that in later steps can be expanded to include information on sequence and duration.

2. Determine Activity Sequence This step may be combined with the activity identification step since the activity sequence is evident for some tasks. Other tasks may require more analysis to determine the exact order in which they must be performed. 3. Construct the Network Diagram Using the activity sequence information, a network diagram can be drawn showing the sequence of the serial and parallel activities. For the original activity-on-arc model, the activities are depicted by arrowed lines and milestones are depicted by circles or "bubbles". 4. Estimate Activity Times Weeks are a commonly used unit of time for activity completion, but any consistent unit of time can be used. In this report it will be weeks that will be used as the customer M&S wants the fabric (400,000 yards) in 12 weeks. A distinguishing feature of PERT is its ability to deal with uncertainty in activity completion times. For each activity, the model usually includes three time estimates:

Optimistic time - generally the shortest time in which the activity can be completed. It is common practice to specify optimistic times to be three standard deviations from the mean so that there is approximately a 1% chance that the activity will be completed within the optimistic time. Most likely time - the completion time having the highest probability. Note that this time is different from the expected time. Pessimistic time - the longest time that an activity might require. 14

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PERT assumes a beta probability distribution for the time estimates. For a beta distribution, the expected time for each activity can be approximated using the following weighted average:

Expected time = (Optimistic + 4 x Most likely + Pessimistic) / 6 Critical Path Determine the Critical Path The critical path is determined by adding the times for the activities in each sequence and determining the longest path in the project. The critical path determines the total calendar time required for the project. If activities outside the critical path speed up or slow down (within limits), the total project time does not change. The amount of time that a non-critical path activity can be delayed without delaying the project is referred to as slack time. If the critical path is not immediately obvious, it may be helpful to determine the following four quantities for each activity: ES - Earliest Start time EF - Earliest Finish time LS - Latest Start time LF - Latest Finish time These times are calculated using the expected time for the relevant activities. The earliest start and finish times of each activity are determined by working forward through the network and determining the earliest time at which an activity can start and finish considering its predecessor activities. The latest start and finish times are the latest times that an activity can start and finish without delaying the project. LS and LF are found by working backward through the network. The difference in the latest and earliest finish of each activity is that activity's slack. The critical path then is the path through the network in which none of the activities have slack.

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Variance Time To calculate the variance for each activity completion time, if three standard deviation times were selected for the optimistic and pessimistic times, then there are six standard deviations between them, so the variance is given by: [(Pessimistic - Optimistic ) / 6 ]2

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Appendix 2

ERP System

ERP is software architecture which combines the different functions of an organization such as; manufacturing and production, accounting and finance, quality control and human resource management. ERP is also can be considered as a methodology which integrates three key components â&#x20AC;&#x201C; Information Technology, Business processes and Business objectives. ERP is capable to bring together departments and elements of an organization which are geographically scattered to provide a central and comprehensive system (Netessence.com.cy, n.d.). Through the synchronization and integration of business processes with an ERP, the business managers as well as the top management of the company are better able to analyze how efficiently and effectively is the business is performing. ERP provides vital insights into business operations and business performance by showing the efficiency of current communication channels, workforce and the manufacturing processes. Crucially, a well implemented ERP model is capable of improving a companyâ&#x20AC;&#x2122;s financial as well as nonfinancial performance by preventing the wastage of time and losses in operational activities, in addition to high level security settings which helps to prevent frauds and thefts. Furthermore, it also reduces operational costs while improving the efficiency of manufacturing processes (PrimeX Technology, Inc., 2011). Through the use of an ERP system, the managers are able to plan, execute and monitor the most effective strategic activities to ensure the business goals and objectives are met and surpassed. An ERP model functions as a communication channel which links departments of an organization with customers and suppliers, ensuring the constant flow of key information such as purchase orders, delivery schedules, performance and quality reports. ERP information is real time, which is mostly valuable to the operational streamlining process. Streamlining of operations would ensure that organizational performance is maximized throughout the entire operational chain from product conception and production through to product delivery.

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The following diagram summarizes the key functionalities of an ERP system.