operations management i for confederation of indian industry (cii) r m harindranath mba mca (ph d)...
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Operations Management I For Confederation of Indian Industry
(CII)
R M Harindranath MBA MCA (Ph D) MCT
Development Of OMScientific Management by Frederick Taylor• Major Landmark in Operations management • Scientific laws governs how much a worker can
produce per day• Taylor introduced formalized time-study and work-
study concepts.Moving Assembly Line by Henry Ford• Because of Assembly line the worker can reduce from
12.5 hours to 93 minutes• Moving Assembly line coupled with the concept of
scientific management gives labor specialization
Computers & MRP• 1970 – Application of Materials management
planning to product control• MRP program helps to manage to production
schedules & Inventory.JIT/TQC/AUTOMATION• JIT strives to eliminate sources of manufacturing
waste by producing the right part in the right place at the right time
• (TQC) which seeks to eliminate causes of production defects
• CIM,FMS & FOF
Development Of OM
Operations Management• Operations management (OM) involves all
activities involved in the production of goods and/or services.
• Inputs Transformation Outputs
Goal of Operations Activities
To produce the right product/service at the right time, in the right quantity, with the highest quality, at the lowest cost, and with the shortest delivery time.
Operating Decisions
System Design
Product and service designLong-range capacity
Process selection
Layout
Work system design
Location
Total quality management
System Operation
Quality managementQuality control
Short-term capacity (waiting line management)
Production planning
Inventory management
Scheduling
Components of OM• Production ( goods/services )• Product/service Design• Realization process Design• Inventory Management• Marketing etc.,
• Supportive Components:• Production Planning and Control• Plant Maintenance• Human resource management• Financial Management etc.,
Why study OM
• Production and Operations lie at the heart of business activity.
• They use human and material resources to create the products that either make an organization healthy and competitive
• The underlying theory of OM is common to both goods and services production.
• e.g., these are applicable to the management of hospital or airline operations as it is to the manufacture of automobiles.
• Operations are one of the most strategically vital areas of managerial concern
Chapter IIConcept of costing, Finance and Accountancy in OM• Cost Used for forecasting, planning and budgeting,
cost control, decision making and reporting• Cost can be direct or Indirect and Fixed or Variable• Direct costs belong to a product or service where
indirect don’t• Fixed costs cannot be during the accounting period• Variable cost directly relates to volume
CostingFull Costing• Allocates both fixed and variable costs to products
and allocates cost in various waysMarginal Costing• Allocate variable costs to products and so product
contribution (= revenue – variable costs) is the target
Activity-based CostingCost are allocated on the basis of activity & business
drivers
How much to cost• 1. Pricing decisions• 2. Formulating overall strategies• 3. Product and service-emphasis decisions
Product Costing Systems• Product Costing Systems accumulate, track and
assign the costs of production to the goods and services produced
• Three different costing systems: job costing, process costing, and operations costing
Job costing: • Assign cost for each job• Work well when individual products/services are
customized
• Process costing• Assigns costs to processes and then to products equally
by process• Works well when products are homogeneous and are
produced on a continuous basis
• Operations Costing• Hybrid of job & Process costing• Used by Cos that produce products in large batches• Each batch is treated like job costing, and each product is
treated like process costing. •
Product Costing Systems
Basic Job-order Costing for Manufacturing and Service Companies
• Measuring and tracking direct material• Usually an easy task • Determine how much material was used for each
job and then apply the correct cost.•
Spoilage
• Normal – results from the regular operation of the production process.
• Abnormal – results from improper handling, poorly trained craftspeople, and/or equipment that is in poor condition.
• Service companies usually have very little direct material.
Measuring and Tracking Direct Labor
• Usually an easy task • Measure the amount of hours used in the production
process for each job and apply the wage rate.• Fringe Benefits• Must be included in the wage rate• Usually run 30 to 35 percent of actual base wage rate • Overtime Premium• The cost of the overtime premium should be
included in manufacturing overhead.
Manufacturing Overhead
• Most difficult of the product costs to accumulate, track, and assign to products
• Most overhead is indirect so it cannot be tracked individual products or services
• With one product, divide total overhead costs by the number of products produced
The Role of Cost Pools and Cost Drivers
• 1. Cost drivers are activities that cause overhead costs to be incurred.
Examples are direct labor hours and machine hours.• 2. Cost pools are used to accumulate similar costs as
they are incurred.• 3. Finally, cost drivers are used to allocate the cost pools
to products. • Departmental Overhead Rates• Useful as products become more diverse and plants
become more heavily automated• Each department has a separate cost pool
Target Costing• Target costing is the radical idea that products can
include ‘cost’ as part of their design specification• Designing costs out at an early stage it is possible
to develop a product that meets the specification at an appropriately low cost
Financial Concepts
• Financial management deals with the management of finances of a business enterprise,
• Investments deals with financial markets and security pricing
• Financial institutions deals with financial firms (such as banks).
• Managers who work in all three areas rely on the same basic knowledge of finance
Finance
• Finance is based on economic principles. • Finance uses accounting information as input to
decision-making. • Finance is international in perspective. • Finance is constantly changing. • Finance is the study of how to invest and raise
money productively.
Financial Analysis
• Financial Analysis is a tool that involves evaluating the financial condition and operating performance of a business enterprise. Financial analysis requires an evaluation of the firm, the firm's industry, and the economy.
• Financial analysis may be used to determine the credit-worthiness
Types of Accounts1.Financial accounts – also called as statutory
Accounts• Follow set of rules & conventions• What went during the financial year• Mainly used by the people outside the business2.Management Accounts• Not strictly required by law• Often predict the future as well as the past
Job Design• Identifies the content of the job, where is to be
performed & competencies required by the personThree basic school of thought: 1. Socio-technical Approach designed by Eric Trist et al
Social ConstraintsTechnological Constraints
Set of all
feasible social job designs
Set of feasible solutions for a joint optimum
Set of all feasible technical job designs
Advantages & Disadvantages Socio-technical Approach
S. No. For Management For Labor
1. Simplifies training Low education and skill requirements
2. High productivity Minimum responsibilities
3. Low wage costs Little mental efforts needed
S. No. For Management For Labor
1. Difficult to motivate quality work Monotonous work
2. Worker dissatisfaction, possibly resulting in absenteeism, high turnover and disruptive tactics
Limited opportunities for advancement
3. Little control over work Little opportunity for self-fulfillment
Disadvantages
Behavioral Approaches to Job Design
• Job enlargement = giving a worker a larger portion of the total task, by horizontal loading
• Job rotation = workers periodically exchange jobs• Job enrichment = increasing responsibility for
planning and coordination tasks, by vertical loading
Benefits of sound job designBenefits to Organization Benefits for staff members
- Highly skilled workforce
- Flexible and responsive workforce
- Increased productivity and efficiency
- Improved quality delivery
- A reduction in Occupational, Health & Safety(OHS) problems
- Reduction of unnecessary levels of supervision, checking and control
- Greater organizational effectiveness
- Increased customer service standards
- Improved efficiency by reducing costs associated with waste/delays/ accidents
- Positions are appropriately developed/ described
- Better work focus
Increased job satisfaction
Increased skills and training
More opportunity to participate in decision-making and planning
A safer workplace
More career opportunities
Improved quality of working life
Greater clarity of work role and purpose
Shared understanding of work expectation between staff member and supervisor
Key Characteristics of a well designed job
Factors in a job to make it meaningful & satisfying• Variety• Personal responsibility for the position• Autonomy to the level possible• Task Identity• Constructive feedback• Participation in decision-making• Provision of recognition and support• A conducive working environment
Who designed the job• Nominated supervisor of the position is
responsible for designing the job• Staff in the functional/ organizational unit may
also play an important part in assisting with this process
• For redesigning, the affected employees need to be consulted
• Both the incumbent & supervisor should be provided to contribute to the design
Key Factors In Job Design
Variety: • Greater variety in a job can improve the interest,
challenge and commitment• Too much variety can also be frustrating and a
source of conflict and dissatisfaction• Optimum variety differ from person to personResponsibility for the Position:People need responsible for the job individually or
as a teamWork should be clearly identified
Autonomy• Giving more scope to people to regulate and control their
own work within the parameters set for the jobTask Identity• More satisfaction from doing a whole piece of work• Highly desirable that people see the end results• Feedback• Performance feedback helps the jobholder to learn on-the-
job, and to keep on learning.• Supervisor has the main responsibility for giving feedbackWork Environment• Safe & healthy environment
Key Factors In Job Design
Ergonomics is the science of fitting jobs to people
Ergonomic design is the application of this body of knowledge to the design of the workplace
Good ergonomic design makes the most efficient use of worker capabilities
Ergonomics