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OM/U1 Topic 3 Systems Perspectives of Operations Management

A System is a group of interrelated items in which no item studied in isolation will act in the same way as it would in the system. A system is divided into a series of parts or subsystems, and any system is a part of a larger system. The system’s boundary defines what is inside the system and what is outside. A system’s environment is everything outside the system boundary that may have an impact on the behaviour of the system. A system’s inputs are the physical objects of information that enter it from the environment and its outputs are the same which leave it for the environment.

Systems view of operations management states that activities in an operations system can be classified as inputs, transformation process and output. Inputs are classified into three general categories-external, market and primary resources.

Transformation resources are the elements that act on, or carry out, the transformation process on other elements. These include such elements as labour, equipment/plant and energy. The nature and mix of these resources will differ between operations. The transformed resources are the elements which give the operations system its purpose and goal. The operations system is concerned with converting the transformed resources from inputs into outputs in the form of goods and services. There are three main types of transformed resource of materials which can be transformed either physically (e.g. manufacturing), by location (e.g. transportation), by ownership (e.g. retail) or by storage(e.g. Warehousing)

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These sub systems are present in all the 4 major sections. They are centrally controlled by the Plant Management Office (PMO).The PMO controls the central decision making and is responsible for running all the departments in sync. The PMO ensures that the decisions made by the departments do not contradict and a healthy harmony is maintained so that all of them work together as a part of a system.

Thus we see how systems view in operations can be put to a practical use. The idea behind systems model is that the operations function can concentrate solely on transforming input of raw material into goods and services without considering the external environment. The systems view gives a very simplified view of the company and thus helps us in understanding the basic processes in a company. We can see what are the major areas of attention in accompany and helps us in understanding the hierarchy and layout of an organization. However the disadvantages of this model includes the slowness of response to change in environment as they are transmitted through various connected functions and the inability of operations to develop in response of the needs of the customers. Systems view gives us an oversimplified view. In real life the processes are much more complex and cannot be differentiated so easily

Capacity and Constraint Management

TOC systematically focus efforts, energy and attention on the “system constraint.” This constraint, or bottleneck, restricts the output of the entire system and at the same time represents the primary leverage point for improving it. Simply put, TOC means identifying  constraints and managing them, resulting in:

  • On-Time In-Full (OTIF) delivery to customers
  • Elimination of stock-outs across the supply chain
  • Better control over operations and far less firefighting
  • Reduced cycle times and therefore inventories
  • Rapid response culture and fewer chronic conflicts between team members
  • Exposing additional production capacity without any investment
  • Higher Net Profit, ROCE & Free Cash Flow

To accomplish this, TOC shifts the focus of management from optimizing separate assets, functions and resources to increasing the flow of throughput generated by the entire system. TOC’s key processes are focused on removing barriers that prevent each part from working together as an integrated whole.

​Constraints are the Key to Unlocking Performance

Like the weakest link in a chain, every system must have a bottleneck or “CONSTRAINT” which governs it’s output. We know this because no system has infinite output … if you check the financial results of a company, you will never observe infinite profits! A particular type of machine, employee, or even shelf space might serve as the constraint. So could supplies, orders, or cash.

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Constraints restrict output whether we acknowledge them or not. When properly identified and managed, constraints provide the fastest route to significant improvement and form the bedrock for continuous growth. When ignored, the constraint may lie idle, squandering large amounts of capacity. An out-of-control constraint may also wreck havoc on delivery schedules and cause unpredictable delays. It is therefore crucial for any manager to make the most of their constraint and manage it well.

Overview of TOC Applications

  • Availability in Supply & Distribution: Reliable Rapid Replenishment
  • Availability in Finished Goods: Simplified Drum-Buffer-Rope (S-DBR) for make-to-stock of make-to-availability
  • On-Time Production: Simplified Drum-Buffer-Rope (S-DBR) for make-to-order
  • On-Time Assembly: Full Kit
  • On-time Projects: Critical-Chain Project Management
  • Turnaround of Sick Units: Evaporating Cash Constraint
  • Increasing Customer Demand: Un-Desirable Effect, Unrefusable “Mafia Offer”
  • Reducing Demand Risk: Customer Segmentation
  • Causing Change: 6 Layers of Resistance/Buy-In
  • Sound Financial Decision-Making: Operational measurements T/I/OE
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