OPERATIONS MANAGEMENT
CHECK POINT 62: CLASSIFICATION OF OPERATIONAL ACTIVITIES
Please Select Any Topic In Check Point 62 Below And Click. |
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DO I NEED TO KNOW THIS CHECK POINT?
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1. CLASSIFICATION OF OPERATIONAL ACTIVITIES |
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ARE YOU FAMILIAR WITH VARIOUS OPERATIONAL ACTIVITIES? |
Business owners and operations managers must have a strong understanding of various types of cost-effective operational activities, which represent the cornerstone of successful operations management in every business organization.
All Operational Activities can be classified into several types as illustrated below. These activities represent the core of any organization, irrespective of its size, volume of business, type of operations, or location. For this reason, business owners and managers must develop an excellent understanding regarding the nature of their specific operational activities to succeed in a competitive business environment.
In fact, one of the main reasons of business failure is ineffective operational management and poor operational performance. So, now you have an opportunity to get a better understanding of what Operations Management really is, and how you can improve your company’s operational performance and succeed in the challenging business environment. |
CLASSIFICATION OF OPERATIONAL ACTIVITIES
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Manufacturing
Operations |
Service
Operations |
Merchandising
Operations |
Project
Management
Operations |
Contract
Management
Operations |
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2. WHERE DO YOU BELONG? |
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WHERE DO YOU BELONG? |
Are you aware of the type of operation to which your company belongs?
It is essential that you and your management team become familiar with various types of operational activities and identify which are most suited to your type of operation.
WHAT TYPE OF BUSINESS ARE YOU IN?
No. |
Details |
1. |
If you are a Manufacturer, please refer to all manufacturing parts in this program and ignore the rest. This includes traditional manufacturing methods and new world class operational guidelines and methods, which provide the foundation for Lean Operations, namely, Lean/Just-In-Time (JIT) Manufacturing, Kaizen, Total Quality Management (TQM), and Supply Chain Management (SCM). |
2. |
If you are a Service Provider, please refer to all service management parts, which you will find throughout this program. Some elements of Lean Operations, including Lean/Just-In-Time (JIT), Kaizen, Total Quality Management (TQM) and Supply Chain Management (SCM) also apply to service providers. |
3. |
If you are a Wholesaler or a Retailer, please refer to all merchandising management parts which you will find throughout this program. Some elements of Lean Operations, including Lean/Just-In-Time (JIT), Kaizen, Total Quality Management (TQM) and Supply Chain Management (SCM) also apply to merchandising companies. |
4. |
If you are involved in Project Management, please refer to all project management parts, which you will find throughout this program. Some elements of Lean Operations, including Lean/Just-In-Time (JIT), Kaizen, Total Quality Management (TQM) and Supply Chain Management (SCM) also apply to project management companies. |
5. |
If you are a Contractor, please refer to all contract management parts, which you will find throughout this program. Some elements of Lean Operations, including Lean/Just-In-Time (JIT), Kaizen, Total Quality Management (TQM) and Supply Chain Management (SCM) also apply to contractors. |
6. |
If you are a Student, please read everything, since you never know which type of business activities you will be involved in the future. |
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Note:
Try to find time to familiarize yourself with the entire contents of this Tutorial, irrespective of your type of business activities. This may prove to be very beneficial in the future. |
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3. TRADITIONAL MANUFACTURING OPERATIONS |
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WHAT IS A MANUFACTURING PROCESS?
Manufacturing Operation entails the process of converting raw materials into semi-finished or finished products through the utilization of plant and equipment, tools, labor, and various production facilities. This process is known as the Manufacturing Process.
There are three traditional Manufacturing Methods frequently used by various manufacturing companies, as outlined below.
Note:
Operations Planning and Operations Control for each manufacturing method are discussed in detail in Tutorial 4. |
THREE TRADITIONAL MANUFACTURING METHODS |
Job Shop
Production |
Batch
Production * |
Flow (Mass)
Production |
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Custom-designed products. |
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Special purpose machinery. |
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Tool making manufacturing. |
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General engineering shop. |
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Model manufacturing. |
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Handmade products. |
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- • Bakery.
- • Clothing.
- • Chemical products.
- • Electrical products.
- • Fasteners.
- • Footwear.
- • Furniture.
- • Jewelry.
- • Machinery.
- • Metal products.
- • Plastic products.
- • Printing.
- • Sheet metal products.
* Note:
Large quantities of these products can be manufactured in a flow production environment. |
- • Appliances.
- • Brewery.
- • Brick and tile.
- • Cable and wire.
- • Chemicals.
- • Cosmetics.
- • Food.
- • Glass.
- • Newspapers.
- • Paint.
- • Paper mill.
- • Pharmaceuticals.
- • Refinery.
- • Soft drinks.
- • Textile mill.
- • Tobacco products.
- • Vehicles.
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WORLD CLASS OPERATIONAL GUIDELINES AND METHODS |
Additional operational guidelines and methods took hold in the manufacturing world in the last few decades. These methods, also known as World Class Operational Guidelines And Methods, are influenced primarily by such methodologies, as Supply Chain Management (SCM), Total Quality Management (TQM), Kaizen, and Lean/Just-In-Time (JIT) Methodology.
A successful implementation of these methodologies is instrumental in the development of a new type of operations, known as Lean Operations and a new type of organization, known as Lean Operational Company.
The abovementioned methodologies are discussed in detail in this Tutorial to enable you to appreciate the differences and advantages of each methodology, and to successfully implement them within your company.
Note:
You should become familiar with all relevant methodologies and select the most cost-effective options in accordance with your specific manufacturing needs. This will help you to be successful in today’s highly competitive manufacturing environment. |
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4. COMPARATIVE EVALUATION OF TRADITIONAL MANUFACTURING METHODS |
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A comparative evaluation of three Traditional Manufacturing Methods is presented below. |
COMPARATIVE EVALUATION OF TRADITIONAL MANUFACTURING METHODS |
Description |
Job Shop Production |
Batch Production |
Flow Production |
Type Of Order |
Manufacturing is done to meet customers' orders only. Most orders are unique and non-repetitive. |
Manufacturing is done to meet customers' orders and also for stock. Most orders are not unique, but are repetitive. |
Manufacturing is done primarily for stock and sometimes to meet customers’ orders. All orders are standard and repetitive. |
Product Range |
There is no standard range of products. |
There is a broad range of standard and non-standard products. |
There is a limited range of standard products. |
Product Unit Cost |
Very high. |
Average. |
Very low. |
Production Volume |
Very low, usually one or few items. |
Average, in batches of tens, hundreds, or even thousands. |
Very high. |
Production Method |
Very diversified and sometimes repetitive. |
Diversified, but usually repetitive. |
Standardized and repetitive, such as a conveyor line. |
Equipment
Application |
Very general application to various manufacturing processes. |
General and semi-specialized application to various manufacturing processes. |
Very specialized application to a limited number of manufacturing processes. |
Operational Capacity Planning |
Can be scheduled at short notice only. |
Can be planned and scheduled approximately one week in advance. |
Must be planned and scheduled well in advance. |
Raw Material Inventory |
Should be purchased for every order on an individual basis. |
Should be purchased in advance in optimal quantities to meet manufacturing requirements. |
Must be pre-purchased in optimal quantities well in advance to meet manufacturing requirements. |
Work-In-Process And Components Inventory |
No need. |
Buffer stock should be kept in optimal quantities for selected products. |
Buffer stocks should be kept in optimal quantities for all products. |
Finished Goods Inventory |
No need. |
Optimal quantities should be kept for selected products. |
Optimal quantities should be kept for all finished goods. |
Sub-Contracting Services |
Should be used on an individual order basis. |
Should be pre-planned and used on and individual batch basis. |
Must be planned well in advance for every production run. |
Employee Skills Requirements |
Very high level for a general application. |
Average level for semi-standardized application. |
Average level for a highly standardized application. |
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5. JOB SHOP PRODUCTION |
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JOB SHOP PRODUCTION
Job Shop Production, or an Open Job Shop, is the intermittent manufacturing process in which each assignment is performed in accordance with a specific customer's order.
The Job Shop, in essence, offers manufacturing facilities and skilled labor to customers at short notice. A job shop operation, such as a general engineering shop or a custom-designed furniture manufacturer, maintains production capability but does not offer a particular product for sale. Several characteristics of a job shop production are outlined below. |
JOB SHOP PRODUCTION CHARACTERISTICS |
No. |
Details |
1. |
Manufacturing a broad range of non-standard products in small quantities, often on a one-off basis, according to specific customer requirements. |
2. |
Job shop production requires substantial capital investment in general purpose plant and machinery and high plant set-up costs. |
3. |
Job shop production requires highly skilled and versatile labor and management supervision. |
4. |
Irregular flow of work necessitates effective implementation of operations planning and control procedures. |
5. |
Job shop production requires to carry only those raw materials inventory and supplies that are frequently used. |
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6. BATCH PRODUCTION |
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BATCH PRODUCTION
Batch Production, or a Closed Job Shop, is another intermittent manufacturing process whereby various customers' requirements are grouped into batches on a similar product basis.
Batch production remains a popular method utilized by many small and medium-sized manufacturing companies. Several characteristics of a batch production are outlined below. |
BATCH PRODUCTION CHARACTERISTICS |
No. |
Details |
1. |
A batch production operation is geared to produce small and average quantities, or batches, of products on repetitive and non-repetitive basis. |
2. |
Batch production method requires that specific raw materials are purchased in advance, and certain components and finished goods are kept in stock in optimal quantities. |
3. |
Batch production combines versatile manufacturing capabilities and offers operational capacity and skilled labor to customers at a reasonable notice period. |
4. |
Products may be manufactured in batches of tens, hundreds, thousands, or more depending upon the specific production requirements. |
5. |
The length of production runs may fluctuate in relation to the quantities manufactured and the cost per product unit may vary accordingly. |
6. |
Batch production may accommodate the manufacturing requirements of a broad range of standard and non-standard products. |
7. |
Batch production method requires a flexible approach and effective planning and control of the manufacturing operations. |
8. |
Batch production requires high capital investment in plant and equipment, and average plant set-up costs. |
9. |
Batch production requires general and special purpose machinery and skilled labor to operate them. |
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7. FLOW PRODUCTION |
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FLOW PRODUCTION
Flow Production, also known as Continuous Production or Mass Production, is the manufacturing process during which the work content of the product continually increases with time.
A typical example of flow production is a conveyor line or an assembly line. Large companies frequently utilize flow production methods to manufacture standard products in a make-to-stock operation.
However, the arrival of Lean/Just-In-Time (JIT), Kaizen, Total Quality Management (TQM), and Supply Chain Management (SCM) methodologies and their influence in the manufacturing environment caused substantial changes in the flow production methodologies. Each methodology is discussed in detail in this Tutorial.
Several characteristics of flow production are outlined below. |
FLOW PRODUCTION CHARACTERISTICS |
No. |
Details |
1. |
In a flow production environment, as the work on each operation is completed, the work-in-process is passed to the next manufacturing stage without waiting for completion of the entire batch. |
2. |
Smooth performance of flow production necessitates that all manufacturing operations last the same period of time, known as the cycle time, and that no deviation from the standard manufacturing cycle is allowed. |
3. |
The flow production method is characterized by a large volume of identical products that undergo repetitive and highly mechanized manufacturing processes. |
4. |
Flow production is also characterized by specialized equipment, long production runs, and average labor skill requirements. |
5. |
The flow production method requires detailed planning of all operations well in advance. |
6. |
Operations control in a flow production environment remains relatively simple since all operational instructions are incorporated into the manufacturing process at the planning stage. |
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8. WHAT MANUFACTURING METHOD SHOULD YOU USE? |
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MANUFACTURING METHOD
The job shop, batch production, and flow production methods are not necessarily associated with any particular manufacturing volume. Some companies often start the manufacturing process as a job shop, and proceed to batch production methods as volume increases. Finally, upon further increase of the production demand, they may introduce flow production techniques, if required.
The selection of the most suitable Manufacturing Method may entail a number of steps illustrated below. |
SELECTION OF A SUITABLE MANUFACTURING METHOD
Step 1: Make Initial Selection Of A Suitable Manufacturing Method.
You and your management team must decide on a specific manufacturing or operational method which will be most appropriate and cost-effective for your types of products or services.
Step 2: Evaluate The Selected Method.
Once you select a particular method, it will need to be evaluated in light of your company's ability to compete in the existing marketplace.
Step 3: Select New Manufacturing Method If Necessary.
If you find that the selected method does not produce the desired results, you should identify, select, and implement more suitable methods without delay. |
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CURRENT TRENDS IN THE MANUFACTURING ENVIRONMENT
The current trends in the manufacturing environment are based on maximizing the advantages of all available types of operational methodologies, including Lean/Just-In-Time (Lean/JIT) Manufacturing, Kaizen, Total Quality Management (TQM), and Supply Chain Management (SCM) with the following objectives:
- To minimize manufacturing costs.
- To minimize the level of inventories.
- To minimize the production cycle times.
- To maximize the labor productivity.
- To maximize the plant utilization efficiency.
Adherence to the abovementioned methodologies will enable business owners and managers to convert their manufacturing facility into a Lean Manufacturing Facility and achieve higher levels of productivity and profitability. |
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9. NON-MANUFACTURING OPERATIONS |
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NON-MANUFACTURING OPERATIONS |
Non-Manufacturing Operations include four categories, as illustrated below. Some examples of these operations are described below to help you identify where you may belong. |
TYPES OF NON-MANUFACTURING OPERATIONS
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Note:
If your type of business is not mentioned here, you may be able to find a fit with a similar type of business. |
EXAMPLES OF NON-MANUFACTURING OPERATIONS |
Service Operations |
Merchandising Operations |
Custom
Service |
Standard
Service |
Wholesale
Operation |
Retail
Operation |
- • Accounting.
- • Advertising.
- • Architectural.
- • Catering.
- • Cleaning.
- • Consulting.
- • Electrical.
- • Electroplating.
- • Engineering.
- • Financial Planning.
- • Health care.
- • Insurance.
- • Legal.
- • Limousine service.
- • Maintenance.
- • Musicians.
- • Plumbing.
- • Psychotherapy.
- • Repair shop.
- • Photography.
- • Secretarial.
- • Search Engine
Optimization (SEO).
- • Transportation service.
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- • Banking.
- • Child day care.
- • Communication.
- • Education.
- • Entertainment.
- • Equipment rental.
- • Restaurant.
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- • Export agency.
- • Import agency.
- • Product wholesaler.
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- • Gas station.
- • Food market.
- • Retail store.
- • Supermarket.
- • Travel agency.
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PROJECT MANAGEMENT AND CONTRACTING |
| Special Projects |
Contractors |
- • Advertising.
- • Actors and artists.
- • Architects and designers.
- • Film producers and writers.
- • Performing musicians.
- • Product and service designers.
- • Publishers.
- • Science researchers.
- • Software program developers.
- • Song writers.
- • Writers.
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- • Air conditioning contractors.
- • Building contractors.
- • Flooring contractors.
- • Civil contractors.
- • Electrical contractors.
- • Framing contractors.
- • Masonry contractors.
- • Painting contractors.
- • Plumbing contractors.
- • Property developers.
- • Roofing contractors.
- • Swimming pool contractors.
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Note:
You should become familiar with all relevant methods and select the most cost-effective options in accordance with your specific operational needs. This will help you succeed in the existing highly competitive business environment. |
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10. SERVICE OPERATIONS |
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SERVICE OPERATIONS
A Service Operation is a non-manufacturing activity in which each assignment results in completing a specific type of work or, simply, satisfying a customer's need. All service operations, in turn, can be classified into two types illustrated below. |
TWO TYPES OF SERVICE OPERATIONS
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Custom
Services |
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Standard
Services |
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Service Operations Management is discussed in detail in Tutorial 4 |
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11. CUSTOM SERVICE |
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CUSTOM SERVICE
Custom Service, also known as Specialized Service, similar to a job shop, is characterized by a specialized service-to-order operation.
This includes such services as secretarial, plumbing, electrical, repairs, maintenance, catering, medical, legal, insurance, consulting, accounting, and photographic services. Each of these services is provided in accordance with the particular customer's requirements and it differs from one customer to the next.
The majority of small and medium-sized companies provide custom service to their customers. |
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12. STANDARD SERVICE |
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STANDARD SERVICE
Standard Service entails rendition of services on a continuous process basis irrespective of a specific customer's order. Such services include education, banking, entertainment, communication, and transportation.
Standard services are generally provided by larger organizations, although many small organizations also provide such services, e.g. kindergarten, pre-school, small transportation company, limousine services. |
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13. COMPARATIVE EVALUATION OF SERVICE METHODS |
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Comparative evaluation of two types of Service Methods is presented below. |
COMPARATIVE EVALUATION OF SERVICE METHODS |
Description |
Custom Service |
Standard Service |
Service Is Rendered |
On an intermittent basis to customer's requirements only. |
On a continuous flow basis. |
Type Of Order |
Most orders are unique and non-repetitive. |
All orders are standard and repetitive. |
Service Range |
There is a broad but very specialized range of services. |
There is a limited range of standard services. |
Service Unit Cost |
Very high. |
Very low to medium. |
Service Volume |
Low to medium. |
Medium to high. |
Service Method |
Very diversified and sometimes repetitive. |
Standardized and always repetitive. |
Equipment Application |
Very general application to various types of service processes. |
Very specialized application to a limited number of services. |
Operational Capacity
Planning |
Can be scheduled at a short notice only. |
Must be planned and scheduled well in advance. |
Inventory
Requirements |
No need except for consumable items. |
No need except for consumable items. |
Employee Skill Requirements |
Very high level for a general application. |
Average level for a highly standardized application. |
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14. MERCHANDISING OPERATIONS |
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MERCHANDISING OPERATIONS
Merchandising Operation represents another type of a non-manufacturing activity. Merchandising operation, in essence, is based on buying and selling of products or merchandise at a profit.
There are two basic types of merchandising operations illustrated below. |
TWO TYPES OF MERCHANDISING OPERATIONS
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Wholesale
Operation |
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Retail
Operation |
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15. WHOLESALE OPERATION |
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WHOLESALE OPERATION
A Wholesale Operation entails the purchase of large quantities of highly specialized materials and goods for resale to the retail trade. Wholesalers usually carry a limited number of product lines and sell a high volume of products at a reasonable profit markup.
Business owners and managers, who are involved in a wholesale operation, could derive substantial benefits by studying various aspects of business management, covered in this program, including:
- Tutorial 1 - General management.
- Tutorial 2 - Human resources management.
- Tutorial 3 - Financial management.
- Tutorial 4 - Operations management.
- Tutorial 5 - Marketing and sales management.
Thus, if you own a wholesale business, you and your management team may benefit by improving your general knowledge in various areas of small business management, and this will subsequently improve your chances for success in your business. |
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16. RETAIL OPERATION |
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RETAIL OPERATION
A Retail Operation entails the purchase of small to average quantities of products for resale to the general public. Retailers often specialize in particular product lines such as food, appliances, clothing, or furniture and normally carry a large variety of products in that line. These products are sold to individual customers in small quantities at higher profit markups.
Business owners and managers, who are involved in a retail operation, could derive substantial benefits by studying various aspects of business management covered in this program, including:
- Tutorial 1 - General management.
- Tutorial 2 - Human resources management.
- Tutorial 3 - Financial management.
- Tutorial 4 - Operations management.
- Tutorial 5 - Marketing and sales management.
Thus, if you own a retail business, you and your management team may benefit by improving your general knowledge in various areas of small business management, and this will subsequently improve your chances for success in your business. |
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17. COMPARATIVE EVALUATION OF MERCHANDISING METHODS |
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Comparative evaluation of two types of Merchandising Methods is presented below. |
COMPARATIVE EVALUATION OF MERCHANDISING METHODS |
Description |
Wholesale Operation |
Retail Operation |
Selling |
Usually to retail trade and sometimes also open to the public. |
To general public only. |
Type Of Order |
Most clients are repetitive and new clients are acquired on continuous basis. |
Most clients are not repetitive, but some clients are. |
Type Of Order |
Most orders are standard and repetitive. |
Most orders are unique and non-repetitive. |
Size Of Order |
Most orders are usually medium-high in volume. |
Most orders are usually low in volume, sometimes a one-off item. |
Product Range |
Usually standard and limited product range. |
Usually broad and specialized product range. |
Product Volume |
Large quantity per product type or product line is required to be kept in stock. |
Small to medium quantity per product type or product line is required to be kept in stock. |
Product Cost Markup |
Usually low to medium mark-up. |
Usually high mark-up. |
Inventory Requirements |
Large quantity per product type. |
Small or medium quantity per product type. |
Employee Skill
Requirements |
Average level of employee skill requirements for a standardized application. |
High level of employee skill requirements for a specialized application. |
Location OF The Facility |
Location is usually not important and most wholesalers prefer the least expensive location, based on $ per square foot area. |
Location is usually very important, and sometimes even represents a critical factor in determining the success or failure of the retail operation. |
Layout Of The Facility |
The main objective of an effective warehouse layout is to find an optimal trade-off between the total cost associated with the warehouse space and the total material handling cost. |
The main objective of an effective retail layout is to maximize the sales volume and profitability, based on effective exposure of products to customers according to their buying behavior. |
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18. PROJECT AND CONTRACT MANAGEMENT |
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PROJECT AND CONTRACT MANAGEMENT |
Project And Contract Management represents another important category of non-manufacturing operational activities. These activities include developing and managing a specific project or completing a particular contract for a client or for investment purposes.
Many companies specialize in project and contract management and provide a wide range of products and services to their clients such as preparation of architectural blueprints for a new house, writing a script for a new movie, developing an advertising campaign, composing a new song for an advertising campaign, developing land, and building new homes. |
CHARACTERISTICS OF PROJECT MANAGEMENT AND CONTRACTING |
No. |
Details |
1. |
These activities are performed in accordance with particular contractual obligations undertaken by certain companies or individuals. Architects, for example, are engaged in designing commercial and residential buildings and single family homes. Building and civil engineers, and contractors, on the other hand, are engaged in erecting buildings and homes, building roads, and constructing bridges. |
2. |
Each project entails a large number of operations and requires heavy planning and equipment, substantial volume of material, and a large number of employees. |
3. |
Special projects may involve such activities as writing a book, designing new product, conducting scientific research, or making a new film. |
4. |
These projects usually require special types of skills, may involve a substantial budget, and may last for long periods of time. |
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In order to be successful, business owners and managers, who are involved in project and contract management, must have an excellent understanding about the basic management principles related to project and contract execution.
Project And Contract Management is discussed in detail in Tutorial 4. |
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19. FOR SERIOUS BUSINESS OWNERS ONLY |
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ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY? |
Reprinted with permission. |
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20. THE LATEST INFORMATION ONLINE |
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LESSON FOR TODAY:
Ultimately, All Operational Activities Can Be Classified
As Profitable Or Not Profitable - That's Really Up To You! |
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