Chapter 8: DESIGN OF WORK SYSTEM

- Constraints on human resource strategy

- Quality of work life:

 The favorableness or unfavorableness of a job environment for the people working in an
organization.
 Covers a person’s feelings about every dimension of work including economic rewards
and benefits, security, working conditions, organizational and interpersonal relationships
and its intrinsic meaning in a person’s life
 QWL affects:
+ Worker’s overall sense of well-being and contentment.
+ Worker productivity
 Labor retention rate, organization’s productivity, quality, profit …
- QWL includes:
 Job satisfaction: working environment, people at work, job security, work
responsibilities, Rewards, pay, and benefits…
 Workplace stress: Workload (46%), People issue (28%), Work-life balance (20%), Lack
of job security (6%)
 Financial Reimbursement: Rewards, pay, and benefits
 Work-Life Balance: Flexible working hours, Work from home, Remote working, Part
time…
 Working Conditions / Job Environment: Temperature and Humidity, Ventilation,
Illumination, Noise and Vibrations, Work Time and Work Breaks, Occupational Health
Care, Safety, Ethical Issues.
- Ethical issues affect operations through: Work methods, Working conditions, Employee safety,
Unbiased performance appraisal system, Fair compensation, Opportunity for advancement
- Compensation:
 Time based system: Compensation based on time employee has worked during a pay
period.
 Output based (incentive) system: Compensation based on amount of output an employee
produced during a pay period.
o Individual incentive plan: Base rate, Bonus
o Group incentive plan
  Knowledge based system: Used by organizations to reward workers who undergo training
that increase their skills.

- Form of Incentive: Plan, Accurate, Easy to apply, Consistent, Easy to understand, Fair
- Work/job Design: the systematic examination of the methods of doing work with an aim of:
o finding the means of effective and efficient use of resources
o setting up of standards of performance for the work being carried out.
- Job design is an approach that specifies the tasks that constitute a job for an individual or a
group.
- Job design involves specifying the content and methods of job: What will be done, Who will do
the job, How the job will be done, Where the job will be done, What is the standard time to do the
work => productivity, safety, quality of work life.
- Work design:
 A properly designed job guarantees that the qualified worker is able to accomplish what is
required in a safe and healthy fashion, and thereby reduce physical and psychological strain.
 It helps with the organization of work, e.g. in identifying issues such as: work overload,
repetitiveness, and limited control over work; and thereby improve on occupational safety and
health (OSH) within organizations
 A well-designed job could result in more engaged, healthy and productive employees, and these
outcomes would benefit both employees and organizations
- Specialization: Work that concentrates on some aspect of a product or service
- Job enlargement: increasing the scope of a job through extending the range of its job duties and
responsibility generally within the same level.
 Job enlargement involves combining various activities at the same level in the
organization and adding them to the existing job.
 It is also called the horizontal expansion of job activities.
- Job enrichment: adding dimensions to existing jobs to make them more motivating.
 Increasing skill variety, adding meaning to jobs, creating autonomy, and giving feedback.
 The goal of job enrichment is to create a motivating job.
- Job Rotation is a management approach where employees are shifted between two or more
assignments or jobs at regular intervals of time in order to expose them to all verticals of an
organization. => Workers periodically exchange jobs.
- Successful Job Design must be:
 Carried out by experienced personnel with the necessary training and background
 Consistent with the goals of the organization
 In written form
 Understood and agreed to by both management and employees
- Ergonomics: Incorporation of human factors in the design of the workplace.
- Methods analysis:
 Analyzing how a job gets done
 Begins with overall analysis
 Moves to specific details
 Good source of productivity improvement
- The need for methods analysis can come from a number of different sources:
 Changes in tools and equipment
 Changes in product design or new products
 Changes in materials or procedures
 Other factors (e.g. accidents, quality problems)
- Methods Analysis Procedure
1. Identify the operation to be studied
2. Get employee input
3. Study and document current method
4. Analyze the job
5. Propose new methods
6. Install new methods
7. Follow-up to ensure improvements have been achieved
- Analyzing the Job:
 Flow process chart: Chart used to examine the overall sequence of an operation by
focusing on movements of the operator or flow of materials
 Worker-machine chart: Chart used to determine portions of a work cycle during which an
operator and equipment are busy or idle
- Motion study is the systematic study of the human motions used to perform an operation.
 Purpose: Eliminate unnecessary motions and to identify the best sequence of motions for
maximum efficiency.
- Developing Work Methods
1. Eliminate unnecessary motions
 2. Combine activities
3. Reduce fatigue
4. Improve the arrangement of the workplace
5. Improve the design of tools and equipment
- Therbligs: Basic elemental motions that make up a job: Search, Select, Grasp, Hold, Transport
load, Release load
- Work measurement: Determining how long it should take to do a job.
- Standard time: The amount of time it should take a qualified worker to complete a specific task,
working at a sustainable rate, using given methods, tools and equipment, raw materials, and
workplace arrangement.

Observed time =
∑ Total time
number of observation
Normal time = Observed time x Performance rating
Standard time = Normal time x Allowance factor (AF)
AFjob (Job time) = 1 + A (A: Allowance percentage based on job time)
 Used when different jobs have different allowances.
1
AFday (Workday) = (A: Allowance percentage based on workday)
1− A
 Used when jobs are the same or similar and have the same allowance factors.
- Stopwatch Time Study: Development of a time standard based on observations of one worker
taken over a number of cycles.
- The basic steps in a time study:
1. Define the task to be studied
2. Determine the number of cycles to observe
3. Time the job
4. Compute the standard time
- Standard elemental times: Time standards derived from a firm’s historical data.
- Steps for standard elemental times
1. Analyze the job
2. Check file for historical times
3. Modify file times if necessary
4. Sum elemental times to get normal time
- Predetermined time standards: Published data based on extensive research to determine
standard elemental times.
- Advantages:
1. Based on large number of workers under controlled conditions
2. Analyst not requires to rate performance
3. No disruption of the operation
4. Standards can be established
- Work sampling: technique for estimating the proportion of time that a worker or machine spends
on various activities and idle time.
 Work sampling involves making brief observations of a worker or machine at random
intervals
 Work sampling does not require: Timing an activity, Continuous observation of an
activity.
 Chapter 9: MRP AND INVENTORY MANAGEMENT
- Material Requirements Planning (MRP): Computer-based information system that translates
master schedule requirements for end items into time-phased requirements for subassemblies,
components, and raw materials.
- Master Production Schedule (MPS) is a timetable that specifies what is to be made (usually
finished goods), when it is needed and in what quantities.
- An MRP system is intended to simultaneously meet three objectives:
 Ensure raw materials are available for production and products are available for delivery
to customers.
 Maintain the lowest possible material and product levels in store
 Plan manufacturing activities, delivery schedules and purchasing activities.
- MRP is designed to answer three questions: What is needed? How much is needed? When is it
needed?
- Dependent demand: Demand for items that are subassemblies or component parts to be used in
production of finished goods.
 Once the independent demand is known, the dependent demand can be determined.
- Three primary inputs in MRP:
 Master schedule: One of three primary inputs in MRP; states which end items are to be
produced, when these are needed, and in what quantities.
o Cumulative lead time: The sum of the lead times that sequential phases of a
process require, from ordering of parts or raw materials to completion of final
assembly.
 Bill of materials (BOM): One of the three primary inputs of MRP; a listing of all of the
raw materials, parts, subassemblies, and assemblies needed to produce one unit of a
product.
o Product structure tree: Visual depiction of the requirements in a bill of materials,
where all components are listed by levels.
 Inventory records: Includes information on the status of each item by time period
- Assembly time chart showing material order points needed to meet scheduled availability of the
end item
- MRP Primary Reports
 Planned orders - schedule indicating the amount and timing of future orders.
 Order releases - Authorization for the execution of planned orders.
 Changes - revisions of due dates or order quantities, or cancellations of orders.
- MRP Secondary Reports
 Performance-control reports
 Planning reports
 Exception reports
- Benefits of MRP:
 Low levels of in-process inventories
 Ability to track material requirements
  Ability to evaluate capacity requirements
 Means of allocating production time
 Ability to easily determine inventory usage by backflushing
 Backflushing: Exploding an end item’s bill of materials to determine the quantities of the
components that were used to make the item.
- Requirements of MRP
 Computer and necessary software
 Accurate and up-to-date
o Master schedules
o Bills of materials
o Inventory records
 Integrity of data
- Why Hold Inventory?
 Cover process time
 Allow for uncoupling of processes
 Anticipation / Speculation
 Minimize control costs
 Buffer against uncertainties: Demand, Supply, Delivery, Manufacturing/Processing
- Three Levels of Inventory Decisions:
 Supply Chain Decisions
 Deployment Decisions
 Replenishment Decisions
- Classification of Inventory
 Financial / Accounting Categories
o Raw Materials
o Work in Process (WIP)
o Components, Semi-Finished Goods
o Finished Goods
 Functional Roles
o Cycle Stock: The amount of inventory needed to meet expected demand.
o Safety Stock: Extra inventory carried to reduce the probability of a stockout due
to demand and/or lead time variability.
o Pipeline Inventory: Transit stock, refers to the units which are in transit between
locations
- REQUIREMENTS FOR EFFECTIVE INVENTORY MANAGEMENT
1. A system to keep track of the inventory on hand and on order.
2. A reliable forecast of demand that includes an indication of possible forecast error.
3. Knowledge of lead times and lead time variability.
4. Reasonable estimates of inventory holding costs, ordering costs, and shortage costs.
5. A classification system for inventory items.
6. Inventory turnover Ratio of average cost of goods sold to average inventory investment.
- Inventory Counting Systems
 Periodic system: Physical count of items in inventory made at periodic intervals (weekly,
monthly)
 Perpetual inventory system: System that keeps track of removals from inventory
continuously, thus monitoring current levels of each item.
- Total relevant cost = Purchase cost + Ordering cost + Holding cost + Shortage cost
(4 standard cost components)
- Relevant Costs
 Purchase (Unit Value) Costs (C): is the amount paid to a vendor or supplier to buy the
inventory
 Units ?: $ / Unit
 How do we determine this number? => Purchase price vs. manufacturing cost §
 When is it relevant? => When purchase price differs with respect to quantity or timing of
order
 Ordering costs are the costs of ordering and receiving inventory.
o Vary with the actual placement of an order: shipping costs, determining how
much is needed, preparing invoices, inspecting goods upon arrival for quality and
quantity, moving the goods to temporary storage.
o Ordering costs are generally expressed as a fixed dollar amount per order,
regardless of order size.
 Setup costs: The costs involved in preparing equipment for a job => preparing
equipment for the job by adjusting the machine, changing cutting tools) are analogous to
ordering costs.
 Holding, or carrying, costs relate to physically having items in storage.
 Costs include interest, insurance, taxes (in some states), depreciation, obsolescence,
deterioration, spoilage, pilferage, breakage, tracking, picking, and warehousing costs
(heat, light, rent, security). They also include opportunity costs associated with having
funds that could be used elsewhere tied up in inventory.
 Holding costs are stated in either of two ways:
o as a percentage of unit price or as a dollar amount per unit.
o Typical annual holding costs range from 20 percent to 40 percent or more of the
value of an item. to hold a $100 item in inventory for one year could cost from
$20 to $40.
- Classification system
 Items held in inventory are not of equal importance in terms of dollars invested, profit
potential, sales or usage volume, or stockout penalties.
 The A-B-C approach classifies inventory items according to some measure of
importance: annual dollar value (i.e., dollar value per unit multiplied by annual usage
rate) and then allocates control efforts accordingly
- Annual Dollar Value = Annual Demand x Unit Cost
- Economic order quantity (EOQ): The order size that minimizes total annual cost.
Formula of EOQ:

- Reorder point: R= Ld
- Number of orders per year = D/Q
- Length of order cycle = Q/D
- Economic Production Quantity (EPQ)
- EPQ model’s assumptions:
1. Only one item is involved
2. Annual demand is known
3. The usage rate is constant
4. Usage occurs continually, but production occurs periodically
5. The production rate is constant
6. Lead time does not vary
7. There are no quantity discounts

- The cycle time (the time between orders or between the beginnings of runs) for the economic run
size model is a function of the run size and usage (demand) rate:
Cycle time = Qp / u
- The run time (the production phase of the cycle) is a function of the run (lot) size and the
production rate:
Run time = Qp / p
- The maximum and average inventory levels are

I max=
Qp
p ( )
Q I
( p−u )∨Q p− p u∧I average = max
P 2
I max D
Total cost min=Carrying cost + Setup cost= H+ S
2 Qs
 Chapter 10: SCHEDULING
- The production-schedules are developed by performing the following functions:
 Loading refers to the assignment of jobs to processing (work) centers.
o Loading decisions involve assigning specific jobs to work centers and to various
machines in the work centers.
 Sequencing establishes the order for doing the jobs at each facility.
 Sequencing reflects job priorities according to the way that jobs are arranged in the queues.
 Sequencing rules determine which job should be first in line, which second, etc.
 Scheduling: Establishing the timing of the use of equipment, facilities and human
activities in an organization.
o Effective scheduling can yield cost savings and increase in productivity
- Each job is characterized by its routing that specifies the information about the number of
operations to be performed, the sequence of these operations, and the machines required for
processing these operations.
- The times required for processing these operations are also required for developing a production
schedule.
- The objective is to schedule these jobs to minimize the time to complete all jobs (make-span)
- Assumption:
 Once a job is started on a machine, its processing cannot be interrupted, that is,
preemption is not allowed.
 The machines are continuously available and will not break down during the planning
horizon. This assumption is rather unrealistic but we make this assumption to avoid
complexity in discussing scheduling concepts.
 A machine is not kept idle if a job is available to be processed.
 Also, each machine can process only one job at a time.
- The scheduling problems can be classified based on the following criteria:
 Sequence of machines:
o Flow Shop: processing of all jobs requires machines in the same order
o Job Shop: the jobs may require machines in different sequences
 Number of machines:
o Single machine problems
o Two-machine problems
o Multiple (3 or more) machine problems
 Processing times
o Deterministic: If processing times of all jobs are known and constant the
scheduling problem is called a deterministic problem.
o Probabilistic: The scheduling problem is called probabilistic (or stochastic) if the
processing times are not fixed; i.e., the processing times must be represented by a
probability distribution.
 Job arrival time
o Static: In the case of static problems the number of jobs is fixed and will not
change until the current set of jobs has been processed.
 o Dynamic: In the case of dynamic problems, new jobs enter the system and
become part of the current set of unprocessed jobs. The arrival rate of jobs is
given in the case of dynamic problems.
 Objective functions:
o Minimize make-span
o Minimize average flow time (or job completion time)
o Average number of jobs in the system
o Minimize average tardiness
o Minimize maximum tardiness
o Minimize number of tardy jobs
 Static and deterministic flow shop problems consisting of two machines where the objective
is to minimize make-span.
- pi : processing time of job i
- ri : release day of job i
- di : due date of job i
- ci : completion time of job i
- Lateness: L = d - c (L < 0: Late, L > 0: Early)
- Tardiness: Late jobs
- Fi : Flow time of job i
- Make-span: time to complete all scheduled jobs.
- Sequencing
 Priority rules: Simple heuristics used to select the order in which jobs will be processed
o FCFS - first come, first served
o SPT - shortest processing time
o LPT - longest processing time
o EDD - earliest due date
o SIRO – selected in random order
- Assumptions of Priority Rules
 The setup of jobs is known
 Setup time is independent pf processing sequence
 Setup time is deterministic
 There will be no interruptions in processing such as: Machine breakdowns, Accidents,
Worker illness
- Two Work Center Sequencing
 Johnson’s Rule: technique for minimizing completion time for a group of jobs to be
processed on two machines or at two work centers.
 Minimizes total idle time
 Several conditions must be satisfied
- Johnson’s Rule Conditions
 Job time must be known and constant
 Job times must be independent of sequence
 Jobs must follow same two-step sequence
 Job priorities cannot be used
 All units must be completed at the first work center before moving to second
- Johnson’s Rule Optimum Sequence
 1. List the jobs and their times at each work center
2. Select the job with the shortest time
3. Eliminate the job from further consideration
4. Repeat steps 2 and 3 until all jobs have been scheduled
- Scheduling Difficulties
 Variability in: Setup times, Processing times, Interruptions, Changes in the set of jobs
 No method for identifying optimal schedule
 Scheduling is not an exact science
 Ongoing task for a manager
- Hungarian method
 key idea: if a number is added to or subtracted from all of the entries of any one row or
column of a cost matrix, then an optimal assignment for the resulting cost matrix is also an
optimal assignment for the original cost matrix.
1. Step 1: Subtract the smallest entry in each row from all the other entries in the row. This will
make the smallest entry in the row now
2. Step 2: Subtract the smallest entry in each COLUMN from all the other entries in the
COLUMN. This will make the smallest entry in the COLUMN now equal to 0.
3. Step 3: Draw lines through the row and columns that have the 0 entries such that the fewest
lines possible are drawn.
4. Step 4: If there are n lines drawn, an optimal assignment of zeros is possible, and the
algorithm is finished. (If the number of lines is less than n, then the optimal number of zeroes
is not yet reached. Go to the next step.)
5. Step 5: Find the smallest entry not covered by any line. Subtract this entry from each row that
isn’t crossed out, and then add it to each column that is crossed out. Then, go back to Step 3.
- SUPPLY CHAIN:
 A supply chain is a network between a company and its suppliers to produce and
distribute a specific product or service.
 The entities in the supply chain include producers, vendors, warehouses, transportation
companies, distribution centers, and retailers.

- SUPPLY CHAIN MANAGEMENT: A management system that coordinates and integrates all of
the activities performed by supply chain members into a seamless process, from the source to the
point of consumption, resulting in enhanced customer and economic value.
 SCM encompasses the planning and management of all activities involved in sourcing
and procurement, conversion, and all logistics management activities.
 It includes coordination and collaboration with channel partners, which can be suppliers,
intermediaries, third party service providers, and customers.
 Supply chain management integrates supply and demand management within and across
companies.
 The philosophy behind supply chain management is that: by visualizing the entire supply
chain, supply chain managers can maximize strengths and efficiencies at each level of the
process to create a highly competitive, customer-driven supply system that is able to
respond immediately to changes in supply and demand.
- Goals of SCM
 Supply chain management is concerned with the efficient integration of suppliers,
factories, warehouses and stores so that merchandise is produced and distributed: In the
right quantities, To the right locations, At the right time, Right price, Right customers,
Right conditions
 In order to: Minimize total system cost, Satisfy customer service requirements
- Why SCM is important?
 Boosts customer service
 Reduces operating costs
 Improves financial position
- BENEFITS OF SCM: Supply chain - oriented companies commonly report:
 Lower inventory, transportation, warehousing, and packaging costs
 Greater supply chain flexibility
 Improved customer service
 Higher revenues
  Increased performance and profitability
- Bullwhip Effect: the magnification of safety stocks and costs based on separate forecasts and
uncoordinated planning and sharing of information along the supply chain.
- How to reduce the bullwhip effect?
 Process integration- Interdependent activities can lead to improved quality, reduced cycle
time, better production methods, better forecasts, less safety stock, etc.
- Important Elements of SCM
 Purchasing: Supplier alliances, supplier management, strategic sourcing
 Operations: Demand management, MRP, ERP, JIT, TQM
 Distribution: Transportation management, customer relationship management, network
design, service response logistics
 Integration: Coordination/Integration activities, global integration problems, performance
measurement
- KEY BUSINESS PROCESSES
1. Customer relationship management
2. Customer service management
3. Demand management
4. Order fulfillment
5. Manufacturing flow management
6. Supplier relationship management
7. Product development and commercialization
8. Returns management
- Customer Relationship Management (CRM): the combination of practices, strategies and
technologies that companies use to manage and analyze customer interactions and data
throughout the customer lifecycle.
 The goal is to improve customer service relationships and assist in customer retention and
drive sales growth
- CRM process: Allows companies to prioritize their marketing focus on different customer groups
according to each group’s long-term value to the company or supply chain.
- Customer service management (CSM) is the supply chain management process that represents the
firm's face to the customer.
- CSM process: Presents a multi-company, unified response system to the customer whenever
complaints, concerns, questions, or comments are voiced
- DEMAND MANAGEMENT: focused efforts to estimate and manage customers’ demand, with
the intention of using this information to shape operating decisions.
- Demand management process seeks to align supply and demand throughout the supply chain by
anticipating customer requirements at each level and create demand-related plans of action prior
to actual customer purchasing behavior.
- Demand Management Objectives
 Sharing with other supply chain members knowledge about consumers and customers,
available technology, and logistics challenges and opportunities.
 Developing products and services that solve customers’ problems.
 Developing and executing the best logistics, transportation, and distribution methods to
deliver products and services to consumers in the desired format.
- Consequences of stock out: Customers have to wait, Back orders, Lost sales, Lost customers
- Collaborative Planning, Forecasting, and Replenishment (CPFR) is a business practice that
combines the intelligence of multiple trading partners in the planning and fulfillment of customer
demand.
 Emphasizes a sharing of consumer purchasing data among and between supply chain
partners.
 Creates a direct link between the consumer and the supply chain.
 Introduced by Wal-mart and Warner-Lambert
- A make-or-buy decision is an act of choosing between manufacturing a product in-house or
purchasing it from an external supplier.
- Make-or-buy decisions: A comparison of the costs and advantages of producing in-house versus
buying it elsewhere.
- Outsourcing:
 Outsourcing is the business practice of hiring a party outside a company to perform
services and create goods that traditionally were performed in-house by the company's
own employees and staff.
 Outsourcing is a practice usually undertaken by companies as a cost-cutting measure.
- Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or
works from an external source for business purposes.
- Procurement objectives
 OBJECTIVE 1: Support Operational Requirements
+ Understand business requirements
+ Buy products and services: At the right price, From the right source, At the right
specification that meets users needs, In the right quantity, For delivery at the right time,
To the right internal customer
 OBJECTIVE 2: Manage the Procurement Process and the Supply Base Efficiently and
Effectively
 OBJECTIVE 3: Develop Strong Relationships with Other Functional Groups
 OBJECTIVE 4: Support Organizational Goals and Objectives
- SUPPLY STRATEGIES: Many Suppliers, Few Suppliers, Vertical integration, Joint venture,
Keiretsu networks
- Inventory
 Financial / Accounting Categories: Raw Materials, Work in Process (WIP), Components,
Semi-Finished Goods, Finished Goods
 Functional Roles: Cycle Stock, Safety Stock, Pipeline Inventory
- Multimodal transport (also known as combined transport) is the transportation of goods under a
single contract but performed with at least two different modes of transport
- the carrier is liable (in a legal sense) for the entire carriage, even though it is performed by several
different modes of transport (by rail, sea and road, for example).
- The carrier does not have to possess all the means of transport, and in practice usually does not;
the carriage is often performed by subcarriers (referred to in legal language as "actual carriers")
- The carrier responsible for the entire carriage is referred to as a multimodal transport operator, or
MTO.
- RISK: Potential for an unwanted outcome resulting from an incident, event, or occurrence, as
determined by its likelihood and the associated consequences.
- RISK MANAGEMENT:
 Is any action taken by any members of an organization that will eliminate, mitigate (make
less serious) or controls risks.
 It is the process of making and carrying out decisions, policy, training, directives,
discipline, supervision or procedures to stop or reduce the adverse (harmful) effects of
loss to an organization.
- Sustainable supply chain management requires that sustainability criteria be met while
maintaining competitiveness through meeting customer needs.
- Why Should Supply Chains Try to Be Sustainable? • Reduce cost and wastes • Manage risks •
Create distinguishing (sellable) reputation • Reinforce shareholder value
- Issues affecting sustainability • Product design • Product returns • Length of product life cycle •
Extension of product life cycle • End of life disposal • Packaging • Source reduction • Recycling •
Material substitution • Waste disposal • Refurbishing • Repair • Remanufacturing