Operations management: location, layout, ERP and scheduling
Operations turns inputs into goods and services. Key choices: where to locate, how to lay out, how ERP links functions, and how jobs are loaded, sequenced and scheduled.
Role and scope of operations management
- Operations is the function that actually makes the product or delivers the service, converting inputs into outputs.
- Strategic (long-term) decisions: product and service design, process choice, capacity, facility location and layout.
- Tactical (medium-term) decisions: aggregate planning, workforce levels, materials planning (MRP or ERP), quality systems.
- Operational (short-term) decisions: loading, sequencing, scheduling, inventory control and maintenance.
- Productivity = output ÷ input. Services differ from goods: they are intangible and perishable, and are produced and consumed together, often with the customer present.
Facility location methods
| Method | How it works |
|---|---|
| Factor rating | Weight each factor, score each site, multiply and add; choose the highest total |
| Centre of gravity | Cx = Σ(xV) ÷ ΣV and Cy = Σ(yV) ÷ ΣV, where V is the volume shipped to each point; gives a low-cost distribution point |
| Locational break-even (cost-volume) | Total cost = FC + VC × Q for each site; choose the cheapest site at the expected volume |
| Transportation method | Chooses the plant or warehouse that gives the least total shipping cost across the network |
| Brown-Gibson model | Combines objective (cost) factors and subjective factors into one location measure |
Worked example 1: factor rating
A firm compares Pune and Chennai. Weights: labour cost 0.5, market access 0.3, infrastructure 0.2. Scores out of 100 are Pune 80, 70, 60 and Chennai 70, 80, 90.
- Pune = 0.5 × 80 + 0.3 × 70 + 0.2 × 60 = 40 + 21 + 12 = 73.
- Chennai = 0.5 × 70 + 0.3 × 80 + 0.2 × 90 = 35 + 24 + 18 = 77.
Choose Chennai (77 > 73).
Worked example 2: centre of gravity
A distributor serves three markets at grid points (2, 4), (6, 2) and (5, 8), shipping 200, 100 and 200 tonnes a month. Where should the warehouse be?
- ΣV = 200 + 100 + 200 = 500.
- Cx = (2 × 200 + 6 × 100 + 5 × 200) ÷ 500 = (400 + 600 + 1,000) ÷ 500 = 2,000 ÷ 500 = 4.
- Cy = (4 × 200 + 2 × 100 + 8 × 200) ÷ 500 = (800 + 200 + 1,600) ÷ 500 = 2,600 ÷ 500 = 5.2.
Locate the warehouse near (4, 5.2).
Worked example 3: locational break-even
Site X: fixed cost ₹30 lakh a year, variable cost ₹150 a unit. Site Y: fixed cost ₹50 lakh, variable cost ₹100 a unit. Which site is cheaper at 30,000 units and at 50,000 units?
- Equal cost: 30,00,000 + 150Q = 50,00,000 + 100Q, so 50Q = 20,00,000 and Q = 40,000 units.
- At 30,000 units: X = ₹30 lakh + ₹45 lakh = ₹75 lakh; Y = ₹50 lakh + ₹30 lakh = ₹80 lakh. X is cheaper.
- At 50,000 units: X = ₹30 lakh + ₹75 lakh = ₹105 lakh; Y = ₹50 lakh + ₹50 lakh = ₹100 lakh. Y is cheaper.
Below 40,000 units choose X (low fixed cost); above 40,000 units choose Y (low variable cost).
Types of layout
| Layout | Arrangement | Suits | Example | Trade-off |
|---|---|---|---|---|
| Process (functional) | Similar machines or skills grouped together | Low volume, high variety (job shop) | Hospital departments, a tool room | Flexible, but long material flows and high handling cost |
| Product (line) | Machines in the sequence of operations | High volume, standard products | Car assembly line, bottling plant | Low unit cost, but rigid; needs line balancing |
| Fixed-position | The product stays put; workers and equipment come to it | Very large, bulky or one-off products | Ship-building, aircraft, dams, buildings | Hard to schedule; crowded work sites |
| Cellular (group technology) | Cells of different machines, each making a family of similar parts | Medium volume, medium variety (batch) | Engine-part cells in an auto-component plant | Combines line efficiency with process flexibility |
Common ERP modules
| Module | Covers |
|---|---|
| Finance and accounting | General ledger, payables, receivables, costing, budgeting |
| Human resources | Personnel records, payroll, attendance, training |
| Sales and distribution | Orders, pricing, invoicing, shipping |
| Materials management | Purchasing, inventory, vendor evaluation |
| Production planning | MRP, capacity planning, shop-floor control |
| Supply chain and CRM | Logistics, demand planning, customer service |
Implementing ERP
Vendors include SAP, Oracle and Microsoft Dynamics. Most ERP failures come from people and process issues, not from the software.
- 1★Assess readiness, set goals and secure top-management support.
- 2Select the package and vendor; run a gap analysis between the package and current processes.
- 3★Re-engineer processes (BPR) and configure the software, customising only where essential.
- 4Clean and migrate the data, then test the system.
- 5Train users and manage the change.
- 6★Go live: big bang (all at once), phased (module by module) or parallel (old and new systems together).parallel is safest but costliest
- 7Review, stabilise and support the system after go-live.
★ one-way, controls the pace
Loading, sequencing, scheduling and monitoring
Loading and monitoring tools
- Infinite loading assigns work without checking capacity; finite loading never loads a work centre beyond its capacity.
- Gantt load chart: shows how busy each machine or work centre is over time. Gantt schedule (progress) chart: shows each job's planned times and its actual progress.
- Assignment (Hungarian) method: assigns n jobs to n machines, one job each, at the least total time or cost (H. W. Kuhn, 1955).
- Dispatching releases jobs to the shop floor through a dispatch list ordered by a priority rule.
- Input-output control compares planned and actual work entering and leaving a work centre. When input runs above output, a queue is building up.
- Expediting (follow-up) chases late or urgent jobs so that they move ahead.
Priority (dispatching) rules
| Rule | Order jobs by | Known for |
|---|---|---|
| FCFS | Order of arrival | Seen as fair; rarely the best on time measures |
| SPT (shortest processing time) | Shortest job first | Minimises average flow time, average waiting time and average number of jobs in the system |
| EDD (earliest due date) | Earliest due date first | Minimises the maximum lateness |
| LPT (longest processing time) | Longest job first | Usually poor on flow time |
| Critical ratio (CR) | Smallest CR first; CR = time left until the due date ÷ work time left | CR < 1 means the job is behind schedule |
Worked example 4: comparing priority rules
Four jobs arrive in the order J1 to J4. Processing days and due days: J1 (6, 8), J2 (2, 6), J3 (8, 18), J4 (4, 10). Compare FCFS, SPT and EDD.
- FCFS (J1, J2, J3, J4): completions 6, 8, 16, 20; total 50, average flow time 12.5 days. Tardiness 0, 2, 0, 10: total 12; maximum lateness 10.
- SPT (J2, J4, J1, J3): completions 2, 6, 12, 20; total 40, average 10 days. Tardiness 0, 0, 4, 2: total 6; maximum lateness 4.
- EDD (J2, J1, J4, J3): completions 2, 8, 12, 20; total 42, average 10.5 days. Tardiness 0, 0, 2, 2: total 4; maximum lateness 2.
SPT gives the lowest average flow time (10 days); EDD gives the lowest maximum lateness (2 days).
Worked example 5: Johnson's rule (n jobs, 2 machines)
Five jobs go through Machine 1 and then Machine 2. Times in hours (M1, M2): A (5, 2), B (1, 6), C (9, 7), D (3, 8), E (10, 4). Find the sequence and the makespan.
- Rule: find the smallest time left. If it is on M1, place that job as early as possible; if on M2, as late as possible. Strike it out and repeat.
- The smallest is 1 (B on M1), so B goes first. Next is 2 (A on M2), so A goes last.
- Next is 3 (D on M1), so D goes second. Next is 4 (E on M2), so E goes fourth. C fills the third place.
- Sequence: B, D, C, E, A.
- M1 finishes the jobs at 1, 4, 13, 23 and 28. M2 runs B 1-7, D 7-15, C 15-22, E 23-27 and A 28-30.
- M2 is idle from 0-1, 22-23 and 27-28: 3 hours in all.
Sequence B-D-C-E-A; total elapsed time 30 hours.
NET asks you to match layouts with industries, apply Johnson's rule to find a sequence or makespan, pick the priority rule that minimises flow time or lateness, and do quick factor-rating or location break-even sums. ERP questions test modules, evolution and go-live approaches.
Typical MCQ: “In Johnson's rule, the smallest time in the table is on Machine 2. Where does that job go?” As late as possible in the sequence. Trap: putting it first; only a Machine 1 minimum goes to the front.
Typical MCQ: “A job's critical ratio is 0.8. What does that mean?” It is behind schedule: the time left is less than the work left. CR = 1 is on time and CR > 1 is ahead. Trap: reading 0.8 as comfortable.
Typical MCQ: “What is the main design problem in a product layout?” Line balancing: dividing the work so that every station has nearly equal time and idle time is low. Trap: confusing it with the routing problem of a process layout.
SPT cuts the average flow time; EDD cuts the worst lateness. Johnson: a small time on M1 goes to the front, a small time on M2 goes to the back.