Operations Management — Module 3: Operations Planning and Execution in a Global Context
Course Code: BBA5B08 • Comprehensive DegreeLive Lecture Notes
11. Production and Demand Planning for Global Operations: Scheduling and Flowtime
Production planning is the process of deciding what products should be produced, how much should be produced, and when production should take place. Demand planning involves forecasting customer demand and aligning production activities accordingly. In global operations, planning becomes more complex because organizations serve customers across different countries with varying demand patterns, regulations, and market conditions.
Objectives of Production and Demand Planning
- Meet customer demand
- Minimize production costs
- Avoid stock shortages
- Optimize resource utilization
- Improve customer satisfaction
Planning Process Flow:
Example: A global smartphone manufacturer forecasts demand in different countries before planning production volumes.
Scheduling
Scheduling is the process of assigning resources, tasks, and time to production activities. It determines when each activity should begin and end.
- Ensure timely production and meet delivery deadlines
- Reduce idle time and improve resource utilization
Forward Scheduling
Production starts immediately and moves forward until completion.
Backward Scheduling
Production starts from the delivery date and works backward to determine when activities should begin.
Example: A garment manufacturer schedules production to ensure clothes are ready before a festive season sale.
Flowtime
Flowtime refers to the total time required for a product or job to move through the entire production process. It includes Waiting time, Processing time, Inspection time, and Transportation time.
- Measures production efficiency and helps identify delays
- Improves customer service and reduces operational costs
Example: If manufacturing a laptop takes 2 days but it spends 3 days waiting between processes, the total flowtime is 5 days.
12. Learning Curves and Human Resource Planning for Global Operations: Learning Rates, Procedure Durations, and Future Costs
Learning Curves
A learning curve shows the relationship between experience and performance. As workers repeatedly perform a task, they become more efficient, resulting in reduced time and cost per unit. The concept is based on the principle of "learning by doing."
Example: Workers assembling smartphones become faster after producing hundreds of units.
Learning Rates
The learning rate indicates the percentage reduction in production time when cumulative production doubles. Common learning curves include 70%, 80%, and 90%. A lower percentage indicates faster learning.
Example: Under an 80% learning curve, if the first unit takes 100 hours, the average time per unit after production doubles will decrease to 80 hours.
Human Resource Planning (HRP) for Global Operations
Human Resource Planning (HRP) is the process of determining the workforce required to achieve organizational objectives. Global organizations must plan for employees across different countries, cultures, and legal environments.
HR Planning Process:
Procedure Durations
Refers to the time required to complete a specific task or activity. Accurate estimation is crucial for scheduling.
Factors Affecting Duration:
- Employee skill levels
- Technology used
- Complexity of tasks
- Availability of resources & learning effects
Example: A trained worker completes a task in 15 mins vs 30 mins for a novice.
Future Costs
Refers to costs expected to be incurred in future operations, estimated for budgeting and strategic planning.
Factors Influencing Future Costs:
- Inflation
- Labor costs & raw material prices
- Technological changes
- Learning curve effects
Example: Estimating future manufacturing costs before launching a new product.
13. Supply Chain Management and Risk Mitigation: Purchasing and Warehousing
Supply Chain Management (SCM) is the coordination and management of activities involved in sourcing, production, transportation, storage, and delivery of goods and services. SCM aims to ensure that products reach customers efficiently and cost-effectively.
Components of Supply Chain Management
Risk Mitigation in Supply Chains
Risk mitigation involves identifying and reducing potential disruptions (natural disasters, supplier failures, transportation disruptions, political instability, cybersecurity threats, demand fluctuations).
Supplier Diversification
Using multiple suppliers instead of relying on one source.
Inventory Buffers
Maintaining safety stock to handle uncertainties.
Technology Integration
Using tracking systems and real-time analytics.
Contingency Planning
Preparing alternative action plans for emergencies.
Purchasing
Acquiring materials, goods, and services required for operations. Ensures quality materials at the right price and time.
Purchasing Process:
Identify Need → Select Supplier → Place Order → Receive Goods → Payment
Example: A factory purchasing steel from approved suppliers.
Warehousing
Storing goods until needed for production or sale. Critical for inventory management and supply chain efficiency.
Functions:
Storage, protection of goods, inventory control, order fulfillment, and shipment consolidation.
Example: E-commerce companies storing products in fulfillment centers.
14. Advanced Topics in Global Inventory Management: MRP and Bullwhip Effect
Material Requirements Planning (MRP)
Material Requirements Planning (MRP) is a computerized system used to determine the quantity and timing of materials required for production. MRP ensures that materials are available when needed while minimizing inventory costs.
Three Fundamental Inputs of MRP:
- Master Production Schedule (MPS): Specifies what products will be produced and when.
- Bill of Materials (BOM): Lists all materials and components required.
- Inventory Records: Provides information about current inventory levels.
MRP Process Flow:
Example: A computer manufacturer using MRP to determine how many processors, screens, and batteries are needed.
The Bullwhip Effect
The Bullwhip Effect refers to a situation where small changes in customer demand cause increasingly larger fluctuations in orders throughout the supply chain. As information moves upstream, demand variations become amplified.
Causes of the Bullwhip Effect
- Demand Forecast Updating: Repeatedly revising forecasts on limited data.
- Order Batching: Large periodic orders create surges.
- Price Fluctuations: Discounts and promotions induce artificial buying.
- Shortage Gaming: Placing excessive orders during shortages.
Strategies to Reduce Bullwhip Effect
- Information Sharing: Improve real-time communication across partners.
- Better Forecasting: Use collaborative demand forecasting.
- Smaller Order Quantities: Reduce order batching.
- Stable Pricing Policies: Avoid erratic discounting.
Difference Between MRP and Bullwhip Effect
| MRP | Bullwhip Effect |
|---|---|
| Inventory planning system | Supply chain problem |
| Helps determine material requirements | Causes inventory fluctuations |
| Improves production planning | Creates inefficiencies |
| Supports operational efficiency | Increases costs and uncertainty |
Example: MRP helps a manufacturer order the right quantity of materials, while poor information sharing can create a bullwhip effect and lead to excessive inventory accumulation.
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