Page 9 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes therefore, useful as an aid in calculating and giving insight to real world situations. There
are two types of models that are used:
Optimization Models: Production problems offer great opportunities for cost savings
using optimization models. Such models reflect complex systems involving large numbers
of decision variables and constraints and are broadly labeled mathematical programming
models. Some of the most complex constrained optimization models involve tens of
thousands of constraints and hundreds of thousands of decision variables. Operation
researchers not only model these complex systems but also have developed algorithms
that can efficiently search for optimal or near optimal solutions. Another class of
deterministic models involves networks: routing through the network or optimal location
on a network. Decisions involving multiple objectives can be addressed with a general
class of models called Multi-Criteria Decision Analysis (MCDA).
Heuristic Models: For a great many problems, no solution technique is known at all. For
these problems, heuristic solution techniques are the alternative. These are mathematical
models to predict behaviour of systems that attempt to provide service for randomly arising
demands. Heuristic problem solving involves finding a set of rules or a procedure, that
provides satisfactory solutions to a specific problem. These models are sometimes called
“good enough, fast enough’’ solution techniques. There are many valuable applications of
heuristic models, including traffic flow (vehicles, aircraft, people, communications),
scheduling (patients in hospitals, jobs on machines, programs on a computer), and facility
design (banks, post offices, amusement parks, fast-food restaurants), etc.
Mathematical models are created in a world of make-believe, and not in the real world.
However, with a mathematical model in hand, the operations researcher can work with
managers and decision makers to evaluate decision alternatives or system redesign. The
purpose of computing is insight, but it should not replace thought.

1.1.3 The 1970s to 1980s – The Japanese Challenge

Operations research faced a new challenge in this period. Japan, without the extensive knowledge
of operations research and the new models and methodologies, was able to deliver vehicles to
the European market at lower costs than the Europeans themselves. This made no sense at all to
the west and the industry attention moved to Japan. Since the Japanese systems produced results,
this created an interest in the use of these systems.

One of the major focus areas was the Toyota production system. The Toyota production system
was developed by Taiichi Ohno and is now being implemented in many western companies,
usually under the names of Lean production or World Class Manufacturing program. Ohno
identified seven categories of Muda (Waste), which form the basis for process improvements:

1. Defects, including rework
2. Overproduction of goods not needed/wanted by customers
3. Inventories of goods awaiting further processing
4. Unnecessary processing
5. Unnecessary movement of people

6. Unnecessary transportation of goods
7. Waiting by employees for upstream activity.
This resulted in important changes in the field of Operations Management. Holistic systems of
physical and human processes that extended its reach into the whole firm in a cross-disciplinary

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