intro opn mangt

7/29/2019 Intro Opn Mangt

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Introduction to Operations Management



What is production management?

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What is a product?



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Satisfies someone's need

Some one is willing to buy!



Product is a result of a process, a set of

activities which creates a sellable output

Such a process is called production

Production is a process and product is the

result

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Types of Products

Tangible/Intangible

Consumer /Industrial

Consumer durable & Non-durable

Discrete/Continuous

Standard/Customized



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Products and services

• Expanded concept of product and activity

that creates it - operation

• Factory and facility

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When does someone buy a product?

Need experience and satisfaction

Choice of a particular product from variety?

Concept of value

How can we create value [function/cost]?

Can we define operation now?



VA/NVA

Value is created by value adding activities

Wastes are created by non-value addingactivities

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What activities add value?

(Such activities are operations)

Alter physical state-water to ice

Alter form-blacksmith

Alter chemical composition-chemical

products

Alter metallurgical condition-alloys

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Store, preserve-refrigerate deep freeze

Impart knowledge-teach, train, give

information

Give advice-medical advice, legal opinion

Give medical treatment

Transport – mangoes from Ratnagiri to

Mumbai



What is the result of such activities?

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Result of operations (value adding

activities) is a product which may be tangible

or intangible

Product or service

Why do customers buy a product?

Every product is finally a service!

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What is core service?

Products meeting QCD expectations of

customer

What is Value added service?Help external customers use the core

service effectively

Help internal customers perform effectively



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1. Information on product and product

performance-safety, cost etc.

2. Problem solving-product support, workers

visiting customers works to learn product

performance for C/CA/PA

3. Sales support- technology demonstration4. Field support-parts replacement, stock

replenishment



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Product Vs Service

• Result of a process

• Tangible

• Inventoriable

• Customer is away,

product is to be

delivered to the

customer

• A process itself

• Intangible

• Non inventoriable

• Customer is on the

shop floor and

involved in creation

of service



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What is management?

Important features of management

Facilitation

Resource allocation

Accountability

Review – PDCA

Efficiency & Effectiveness

Visualization & Planning



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What is Operations Management? A function of Corporate Management



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CORPORATE MANAGEMENT

OPERATIONS HRD FINANCE MARKETING ENGINEERING LOGISTICS



What is a function?

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Function is a set of goal focused activities

Goals are subsets of corporate objectives

Corporate objectives are aimed at

customer satisfaction

customer satisfaction is the result of

meeting customer’s expectations

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What are customer’s expectations?



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QCD of the product

How are they fulfilled?

P,Q,C,D,E,F,S,H,E, the Objectives of

Operations Management



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Definition of Operations Management

Design, operation and improvement of

systems that create and deliver the firms

primary products and services

O/M is a function of general management

O/M is a line function



O/M uses tools of OR (Operations

Research), MS (Method Study) & IE

(Industrial Engineering), hence closely

associated with these functions

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Functions of production management

Planning

Product-selection, design, development

Location, layout

Capacity planning

Production planning



Organizing

Work-study

Staffing

Materials management

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Controlling

Stores management

Value analysis

Quality control

Maintenance management

Inventory management



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Operations Management Objectives

Performance Objectives

Efficiency & Effectiveness

Quality

Lead times

Capacity utilizationFlexibility



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Cost Objectives

Explicit [visible] costs: material, labor, scrap,

rework, maintenance

Implicit [invisible]costs: inventory, stock-outs,

shortages, delayed deliveries, mat.handling,

inspection, grievances, dissatisfaction,opportunity



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Importance of Operations Management

1. Important part of Business education

Central to every business activity

Knowledge of issues in the field is critical in

manufacturing or service, private or public

2. Government is moving towards customer

service models



‘Reinventing Government’ in the US -

1990

(David Osborne and Ted Gaebler-1992 book

Reinventing Government)

It applies the customer service

model to government and the PSUs

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In India many of the PSUs are either

getting privatized or following the customer service model as in the US

• Customer sensitiveness

• Productivity orientation

• Importance of conservation

• Process focus for result

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This approach focuses on results and

promotes competition inside and outside

government

‘Reinventing Government’ initiatives draw

from the concepts of Supply Chain

Management, TQM, BPR and JIT delivery,

concepts that fall under OM umbrella



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3. Operations Management provides a

systematic way of looking at organizationalprocesses

Analytical approach to a situation

Problem solving

Respect for standards



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4. O/M presents interesting carrier

opportunitiesLine positions-direct supervision of

operations

Staff positions-Supply Chain Management,

Quality Assurance

Consulting opportunities-BPR, ERP, JIT,

TQM



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5. Concepts and tools of O/M are used in all

functions of management

Quality Control (prevention of defectives)

Productivity improvement(resource

utilization)

Internal customer concept, who is customer?



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6. Competitive edge through O/M to business

and to management professionalsHuge potential to boost the productivity of

the process, offer products at lower cost and

high quality

Meeting the ‘QCD’ expectations of the

customers with improved flexibility



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History of Operations Management

Concept of O/M - an evolution: House hold

trades to factories as investment

opportunities



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1910s

Frederic Taylor

Principles of scientific management

Concept of productivity, time study

Frank and Lillian Gilbreth

Motion study



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Henry Ford and Henry Gantt

Moving assembly line and activity scheduling,

Gantt Chart

F.W. Harris

Inventory Control, concept of EOQ



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1930s

Walter Shewhart & H.F. Dodge and H.G.Romig

Quality control, sampling inspection &

statistical tables for quality control

Elton Mayo & L.H.C. Tippet

Hawthorne studies of worker motivation



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1940

George B. DantzigSimplex method of linear programming to

solve complex multidisciplinary problems



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1950s -1960s

Many researchers in US & Western Europe

Extensive development of OR tools like

simulation, waiting line theory, decision theory,

mathematical programming, PERT & CPM

1970



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1970

Many computer manufacturers lead by IBM

in US

Wide spread use of computers in business for

production scheduling, inventory control,

forecasting, project management, MRP

Mc Donald's restaurants in US

Service Quality and Productivity, mass

production in service sector



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1980

Harvard Business School Faculty

Manufacturing as a competitive weapon

Tai-ichi Uhno of Toyota Motors,D E Deming & J E Juran

Kanban, Pokayoke, CIM, FMS, CAD/CAM,

robots etc.



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Eliyahu M. Goldratt

Synchronous manufacturing-Lean principles

to variety production, Theory Of Constraints:

bottleneck analysis-methodology for solving

problems, goal-performance-constraints



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1990

National Institute of Standards and

Technology, American Society of Quality

Control and International Organization for

Standardization



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Total Quality Management, Balridge quality

award, ISO 9000, Quality FunctionalDeployment, value engineering and

concurrent engineering-modern approach to

product development

Michael Hammer and other major

consulting firms

Business Process Re-engineering



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US government, Netscape Communication

Corporation and Microsoft CorporationSAP (Germany), Oracle (US)

Supply chain management, SAP/R3,

client/server software

2000

Amazon, eBay, American Online, Yahoo

E-commerce, Internet, World Wide Web

What is Operations Strategy?



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What is Operations Strategy?

Evaluating most Cost effective methodology

of producing goods while achieving desired

Quality and Delivery objectives

A planning process to organize the resources

to fulfill the long term objectives of operations,

which are focused on organizational objectives

Organizational objectives are dynamic as

they are competitive - post war US and Japan



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Objectives are flexible to meet changing

expectations of customers

Operations strategy is a process by which

key operations decisions are made that are

consistent with overall strategic objectives of

the firm

Operations Strategy leads to operational

excellence

Wh t ti l d i i ?



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What are operational decisions?

Decisions are at the core of a strategy.

Operational Decisions are the strategic

options selected by the organization.

Product & Process

Product portfolio- products, product line,

extent of customization

Product design



Process design

Technology selection

Capacity planning

Inventory decisions

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Infrastructure



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Infrastructure

Plant and equipment

Process location

Planning systems, MRP? DRP? ERP?

Control systems, Manual? Automatic?

Computerized?

Quality assurance and control

Work payment structure

Organization of Operations function



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Relevance of Operations Strategy

1.Changing expectations of customers due to

the competitive dynamics

2. Need for a cost effective plan to respond to

these changes

3. Need for adaptation to competitive

priorities, Quality? Cost? Delivery?



4. Competitive pressure on price line, lead

time and quality

5. Challenges of modern business- pushes

and pulls, customers, suppliers, investors,

workers, government, NGOs

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COMPETITIVE DIMENTIONS IN



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COMPETITIVE DIMENTIONS IN

OPERATIONS STRATEGY

‘Make it cheap’- cost reduction, post war

demand for volumes

‘Make it good’- quality and reliability as a

dimension, competition from Japanese

products

‘Make it quick’- lead time reduction

‘Deliver it when promised’-OTD



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‘Change its volume’-Meeting rising demand

and scaling down

‘Change it’-new product introduction

‘Support it’-competitive dimensions related

to service

COMPETITIVE ADVANTAGE



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COMPETITIVE ADVANTAGE

Competitive Advantage creates value for the

customer

Firm’s profit exceeds the competition

average

Cost advantages-core service is delivered at

lower cost

Differentiation advantage (service advantage)

-benefits delivered are superior



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Resources

DistinctiveCompetencies

Cost Advantage

or

Differentiation

Advantage

ValueCreation

Capabilities



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Resources

Firm’s resources and capabilities are to be

superior to competition- Without this superiority,

any advantage quickly would disappear

Patents and trademarks

Proprietary know-how

Installed customer base

Reputation of the firm



Brand equity-is the value that customers

PERCEIVE in a brand. It is measured based

on how much trust a customer has in the

brand.

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Capabilities Firm's ability to utilize its resources

effectively

Aspects that are difficult to document

Embedded strengths of the company



Distinctive Competencies

The firm's resources and capabilities

together form its distinctive competencies

competencies enable innovation, efficiency,

quality, and customer responsiveness, all of

which can be leveraged to create a costadvantage or a differentiation advantage.

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TIME BASED COMPETITION



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TIME BASED COMPETITION

Business organizations seek competitive

advantage to attract customers

Focus of the competition changed with time

post war focus in the US was cost (concept

of 'make it cheap')

Japanese introduced quality focus in 1980s

(concept of 'make it better')

A th t d lit b lifi



As the cost and quality become qualifiers

in competitive business. Now focus comes on

time. (concept of 'make it quick')

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Classical ILO approach to work talks about

work content and ineffective timeTBC as an initiative puts the focus on NVA

elimination/reduction

As the NVAs shrink changes occur in O/S

Productivity goes up, Output rises,

Business prospers

S ti f i 'D' t ti b th



Satisfying 'D' expectation became the

winner characteristic in competitive business

Lead-time came under the scanner of

business managers

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TBC has a methodology for implementation

Value stream mappingProcess mapping

Prioritization with respect to product delivery

Selecting focus area

Reduce NVAs



Tools used: SMED, KANBAN, 5S, Process

mapping, layout change, Technology,Logistical Management, Supply Chain

Management

intro opn mangt

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