Operations managers engage in the daily activities of material management: purchasing, inventory control, and work scheduling.
Purchasing and Supplier Selection
Purchasing is the process of acquiring materials and services to be used in the production process. It is also known as procurement. General business supplies such as pens, paper, etc. are not included in this category, only resources that are directly connected with the product.
Operations managers oversee choosing the best suppliers for the company. Following the supplier selection process, managers consider the next attributes:
- Materials price.
- Quality of materials.
- Reliability (are the products deliver on time?)
- Supplier Reputation.
- Supplier is easy to work with.
Nowadays, companies arrange most of their purchases through the Internet. This process is called E-procurement. Companies interact with suppliers going directly to private supplier’s websites or using a system called Electronic Data Interexchange (EDI). EDI processes the company’s transactions and transmits all purchasing documents. Using E-procurement cuts the cost of buying resources; it also saves administrative costs (time), as operation managers can fulfill most of their supplies needs in one place.
Operations managers make sure manufacture lines does not run out of materials, otherwise, production stops. Imagine you are producing cars and you run out of tires in your facility. The entire production must stop; therefore, you lose money. Holding large inventories of materials in your facilities may be a solution, but it is an expensive one. When choosing facilities, operations managers should consider this aspect, how big the plant is going to be in order to hold inventory, but at this point, when the site has already been chosen, managers need to implement inventory control methods to remain competitive. They need to create a balance between holding a certain amount of inventory and no wasting money.
Just-in-Time Production (JIT):
Materials arrive at production facilities JUST IN TIME to enter the manufacturing process. Parts and materials needed for the product don’t sit unused for long periods, so the cost of holding inventory is reduced. In addition, the JIT method does not tie your cash, as you don’t buy huge quantities of supplies that you won’t use. Manufacturers can react to customers need very quickly and ask for more in case of necessity. JIT method requires good synergy between manufacturer and supplier as communication and cooperation should be fluid and constant in order to make it work.
Material Requirement Planning (MRP):
MRP is a software tool that uses sales forecast and ordering lead times to determine quantity of components needed for production and when manufacturers should order and made them. MRP is an operations management system that tell manufacturers if parts and materials are available when needed. Sales forecast turns into Master Production Schedule (MPS). MPS takes MRP and turns into forecast of needed parts based on bill of materials, a list of parts that make up the end product.
Enterprise Resource Planning (ERP) is a newer version of MRP. It combines computerized functions into a single integrated software program using a single database. It manages information flow from among all database applications within the company.
- Finance: Reports customer’s credit rating and current selling prices.
- Human Resources: Recruits, train, evaluate and compensates sales people.
- Operations: Controls inventory through the supply chain, from procurement to distribution.
- Accounting: Records sales and payments; it also tracks business performance.
- Marketing: Coordinate sales activities and handles customer relationship management.
Production Scheduling uses graphical tools that focus on activities to transform materials into finished goods. In service businesses, it focuses on worker availability to handle fluctuating customer demands. We have two major software, Gantt Chart, and Pert Chart besides other technologies of goods production as CAD, CAM, and CIM.
Gantt Chart: an easy-to-use graphical tool that helps operation managers determine the status of a project.
Pert Chart: useful when the production process has complex schedules. Designed to produce a good in the most efficient sequence. It identifies the Critical Path, the path that takes the longest amount of time.
Computer-Aided Design (CAD): software for designing products.
Computer-Aided Manufacturing (CAM): software to determines the steps to produce components and instruct the machine to do the work.
CAD and CAM systems permit companies to design and manufacture goods faster, more efficiently, and at a lower cost with higher quality.
Computer Integrated Manufacturing (CIM): software that expands the capabilities of CAD/CAM to include order entry, inventory, control, warehousing, and shipping.