cd626pom module 1 (2)
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Amity School of Business
FUNDAMENTALS OF PRODUCTION ANDOPERATION MANAGEMENT
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Amity School of Business
Module I: UnderstandingOperations
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Amity School of Business
Operations management: trends and issues.Operations management in service systems.
Operations managementa system
perspective.
Challenges of operations management.Priorities of operations management.
Operations strategy and its formulation process.
Determinants of process characteristics in
operations.Process design issues in service systems.
Coverage
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Amity School of BusinessOrigin
The origins of operations management can be
traced back through cultural changes of the 18th,
19th, and 20th centuries, including the Industrial
Revolution , the development of interchangeablemanufacture, the American system of
manufacturing, scientific management, the
development of assembly line practice and mass
production, and the Toyota Production System. Combined, these ideas allowed for the
standardization and continuous improvement of
production processes.
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Amity School of BusinessContd.
Key features of these early production systemswere the departure from skilled craftsmen to amore thorough division of labor and the transfer ofknowledge from within the minds of skilled,
experienced workers into the equipment,documentation, and systems.
Operations research as a subdiscipline gained
prominence during World War II, whenmathematicians applied analytical tools to optimizeoperational questions, initially with a militarycontext, and later also within general operations.
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Amity School of BusinessPrimary Functions of an Org.
Operation
Marketing
Finance/accounting
HRM
Marketing HRM
Finance
Operations
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Amity School of BusinessEvolution of POMDifferent
Phases
The industrial revolution
Scientific management
The service revolution The computer revolution
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Amity School of BusinessHistory of OM
Pre Industrial Revolution
- Public works or projects for the
government.
- Pyramids of Egypt, Great Wall Of China
etc.
- Craft Production
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Amity School of BusinessIndustrial Revolution
1770s in England
Replaced manpower with machine power
Invention of machines e.g. steam engine
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Amity School of BusinessThe Industrial Revolution
1764: Invention of steam engine byJames Watt.
Led to:-
1. Provided machines for factories.
2. Increased productivity.
3. Gathering of workers into factories from
villages.
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Amity School of BusinessThe Industrial Revolution
1776 Publication of Adam Smiths Thewealth of Nations
Led To :-
1.Highlighted the economic benefitsof thedivision of labor, i.e. specialization of labor.2. Broke the production of products into small,specialized tasks.
3.Concept of ways of planning & controlling the
work of production workers.
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Amity School of BusinessThe Industrial Revolution
1790 Eli Whitney developed the concept of
interchangeable parts.
Led To:-
1.Displaced the old method of either sortingthrough parts to find one that fit or modifying a
part so that it would fit.
2. Standardization of design & manufacturingprocesses.
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Amity School of BusinessThe Industrial Revolution
1800 Development of gasoline engines
& electricity.
Led To :-
Old cottage system of producing
products replaced by the factory system.
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Amity School of BusinessThe Industrial Revolution
By 20thCentury:
1. Massive influx of farmers to the cities provided a largeworkforce for the rapidly developing urban industrialcenters.
2. Large capital arranged through the establishment ofjoint stock companies.
3. More demand of goods in market after 2ndWW, leadingto urbanization & necessity of big companies.
4. Increased capital, higher production capacity, expandedurban work force, new markets, effective nationaltransportation systemset the stage for the greatproduction explosion.
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Amity School of BusinessScientific Management
Focused on observation , measurement,
analysis & improvement of work design.
Scientific management met the challenges
for mass production & efficiency.Replaced
craft production by mass production.
Low skilled workers replaced highly skilled
workers.
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Amity School of BusinessScientific Management
Management Pioneers:
- Frederick Taylor
- Henry Gantt- Harrington Emerson
- Henry Ford
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Amity School of BusinessScientific Management : The
Players & Their PartsContributors Contribution
FW Taylor Scientific management principles, Time study, Method analysis
Frank B Gilbreth Motion study, Methods
Lillian M Gilbreth Fatigue studies, Human factor in work, Employee selection & training
Henry L Grant
Gantt charts, Incentive pay system, Humanistic approach to labor,
Training
Carl G Barth Mathematical analysis, Feeds & speeds studies
Harrington Emerson Principles of efficiency, Methods of control
Morris L Cooke Scientific management application to education and government
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Amity School of BusinessHuman Relations Movement
Emphasized on the human factor in
production.
Emergence of motivational theories by:
- Frederick Herzberg
- Douglas Mcgregor
- Abraham Maslow
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Amity School of BusinessJapanese Influences
Developed and redefined existing
management practices
Introduced the concept of quality,
continual improvement, and time based
management.
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Amity School of BusinessRecent Trends
Internet & Electronic Business
SCM
- Supply chain is a sequence of activitiesand organizations involved in producing a
good or a service.
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Amity School of BusinessThe Service Revolution
One important development of present time is
the growth of service organizations.
More than two-thirds of the workforce is
employed in service. There are diversity of private service industries
in India today.
Impact of this explosion on operationsmanagement is enormous.
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Amity School of BusinessThe Computer Revolution
Advances in computer & communication
technologies have significant impact on
the ways organizations manage their
operations.
Many operations decisions are made
quickly because of availability of computer
technologies & various software.
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Amity School of BusinessThe Computer Revolution
A recent supplement to the Harvard BusinessReview listed the following developments thathave impacted POM:-
1. CAD 2. SCM3. CAM 4. JIT
5. Benchmarking 6. SPC
7. ISO Standards 8. BPR
9. Outsourcing 10. Virtual Organization
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Amity School of BusinessImportance of OM
1. Operations activity is the core of all businessorganizations.
2. A large percentage of job is in the field ofoperations.
3. All activities in the other areas of business areinterrelated with operations management.
4. Responsible for a large portion of thecompanys assets.
5. It has a major impact on quality and is the faceof the company to its customers.
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Amity School of BusinessFactors affecting Operations
Management Today Quality, customer service and cost
challenges.
Scarcity of operations resources.
Expansion of advanced technologies.
Continued growth of service sector.
Reality of global competition.
Social responsibility issues.
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Amity School of BusinessDecision Making in POM
Strategic Decisions: Decisions aboutproducts, processes, and facilities. These havelong term significance for the org.
Operating Decisions: Decisions about
planning production to meet demand. These arenecessary for the ongoing production.
Control Decisions: Decisionsabout planning &controlling operations. These are concerned to
day-to-day production activities, quality ofproducts & services, maintenance of equipment.
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Amity School of BusinessWays to remain competitive
through operations Price
Quality
Product / Service differentiation
Flexibility
Time
Service
Management & Workers
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Amity School of BusinessDeveloping Mission & Strategies
An effective OM effort must have a mission so itknows where it is going and a strategy so itknows how to get there.
Mission: The purpose or rationale for anorganizations existence.
Strategy: How an organization expects toachieve its mission and goals / or an
organizations action plan to achieve themission.
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Amity School of BusinessStrategic Concepts
Firms achieve mission in three conceptual
ways:
- Differentiation (Better , or atleast different)
- Cost leadership ( Cheaper)
- Response ( More responsive)
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Amity School of BusinessOperation Strategies
Global Strategy
Transnational Strategy
International Strategy Multidomestic Strategy
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Amity School of BusinessOperation strategies
Global
Strategy
Internationalstrategy
MultidomesticStrategy
Transnational
StrategyCost Reduction
Considerations
Local Responsiveness Considerations
( Quick response and/or Differentiation )
Low High
Low
High
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Amity School of BusinessGlobal Strategy
High Degree of Centralization, with HQcoordinating the organization to seek outstandardization and learning between
plants, thus generating economies of scale. Strategy is appropriate when the strategic
focus is cost reduction but has little torecommend it when the demand for localresponsiveness is high.
E.g. Texas instruments, Caterpillar, Otiselevator.
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Amity School of BusinessTransnational Strategy
Exploits economies of scale and learning, as well aspressure for responsiveness, by recognizing that corecompetence does not reside in just the home country butcan exist anywhere in the organization.
Transnational describes a condition in which material,people, and ideas cross- or transgress- nationalboundaries.
Key activities are neither centralized nor decentralized ,each subsidiary can carry out its own tasks on a localbasis.
E.g. Nestle ( Swiss95% assets98% sales outside ),ABB ( Asea Brown Boverian engg. Firm that is Swedishbut HQ in Switzerland ), Reuters ( a news agency),Citicorp ( a banking Corporation), Bertlesmann (publisher)
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Amity School of BusinessInternational Strategy
A strategy in which global markets arepenetrated using exports and licenses.
Low local responsivenesssince we areexporting or licensing a good from the homecountry.
Low cost advantageusing the existingproduction process at some distance from the
new market. E.g. U.S. steel, Harley-Davidson
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Amity School of BusinessMultidomestic strategy
A strategy in which operating decisions aredecentralized to each country to enhance localresponsiveness.
These are typically subsidiaries, JVs , franchiseswith substantial independence.
Adv: Maximizing a competitive response for thelocal marketstrategy has little or no costadvantage.
E.g. Heinz , McDonalds , Hard Rock Cafe
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Amity School of BusinessElements of Operations Strategy
Positioning the production system.
Product/ service plan.
Outsourcing plans.
Process & technology plans.
Strategic allocation.
Facility plans : capacity, location and
layout.
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Amity School of BusinessPositioning of Production
System
It means selecting the type of product
design, type of production processing
system and type of finished goods
inventory policy for each product group inthe business strategy.
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Amity School of BusinessProduct/ Service plan
As products are designed, all the detailed
characteristics of each product are established.
Each product characteristics directly affects how
the product can be produced. How the product is made determines the design
of the production system, and the design of the
production system is the heart of the operation
strategy.
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Amity School of BusinessOutsourcing Plans
Outsourcing refers to hiring out or
subcontracting some of the work that a
company needs to do.
Outsourcing is an integral part of a
companys supply chain.
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Amity School of BusinessProcess & Technology Plans
It determines how products and services
will be produced.
It involves planning every detail of
production process and facilities by
combining high technology equipment with
conventional equipments.
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Amity School of BusinessStrategic Allocation of Resources
Resources like cash, capital funds, capacity,workers, machines, materials are divided amongother products or business utilities.
These resources are allocated optimally tomaximize the achievements of the objectives ofoperations.
Allocation decisions which are constrained bythe availability of resources constitute a commontype of strategic decision.
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Amity School of BusinessEffect of Global Competition
Fluctuations of International FinancialConditions: Inflation, fluctuating currencyexchange rates, turbulent interest rates,
volatility of international stock markets,huge national debts of many countries,and imbalances among internationaltrading partners have created complex
financial conditions for global business.
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Amity School of BusinessEffect of Global Competition
Need for international companies : The marketdynamics create the need of MNCs whose scope ofoperations spans the globe as they buy, produce, andsell in world markets.
Strategic alliance & production sharing: In the face ofworld free trade agreements and the formation ofregional trading blocks, the scope of the firm shiftsnational to global. Such shifts create need for formationof Strategic alliance, which are joint ventures among
international companies.
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