OPERATIONS MANAGEMENT

1. OPERATIONS MANAGEMENT +

2. Introduction ………………………………………………….

3. Operations Management • Operations Management deals with Management of transforming inputs to outputs. • Operation management is management of Direct Resources i.e. • MEN MATERIAL MACHINE • OM deals with • Design of Products & Processes • Acquisition of Resources • Transformation of Resources into Output • Distribution of Goods & Services

4. Operations Management • Traditional view perceives Operations Management as a system that is involved with the manufacture and production of goods and services • Modern view perceives OM as a system designed to deliver Value

5. Operations Management Importance of Operations Management - • Organizations need to offer superior quality product /services at competitive price & still survive. • This calls for efficiently managed operations • Upto 1970, basic focus of OM was Cost Reduction • Since 1990 focus is shifted to Value Creation

6. Operations Management Typical Operations Management Decisions • Capacity Decisions – Type, Quantum and Flexibility • Facility decision – Location and its size • Workflow and Technology decisions – Type of production processes and layout of facilities • Materials and Inventory decisions • Quality Decisions – Level and how to achieve it

7. Production Systems • Production function is concerned with transformation of various inputs into required output • Production System is the way in which this production function is carried out • Selection of production nsystem is based on criteri like • What will each alternative cost in short term and long term • What will it provide in terms of cost, quality,time and availability of output • What will require in terms raw material, energy, infrastructure, managerial talent and other inputs

8. Classification of Production Systems Prod./Opera. volume Continuous Production Mass production Mass Production Batch production Batch production Job-shop Production Job-shop Production Output/Product Variety

9. OM in Organization Chart

10. OM in Organization Chart • In Manufacturing Firm Operations would include • Prod. Control, Scheduling and Materials control • Purchasing • Manufacturing • Quality Assurance • Engineering Support • Warehouse Management • In Service industry it may differ according to the type of service offered

11. Product and Service

12. Operations as Service • Emerging model is every organization is in service business • In manufacturing such services can be divided • As Core Service • Manufacturing and delivering customized product correctly at required time at competitive price • As Value-added Service • Information • Problem-solving • Sales Support • Field Support

13. HISTORICAL EVOLUTION • Adam Smith -- Division of Labor • Assigning workers to tasks based on their SKILLS • Production Management was re-titled as OPERATIONS MANAGEMENT (70’s) to enlarge the Field

14. HISTORICAL EVOLUTION • Taylor’s Scientific Management • Task to workers based on skills • Output time should be used for Plan & Schedules • Standardized & written specifications, Job-Instructions • Training of Supervisors & Workers • Monetary Incentive for Motivation • Working for Maximum Output, rather than Restricted output • Developing all workers to the fullest extent possible

15. HISTORICAL EVOLUTION • Moving Assembly Line • Applying Taylor’s Principle in Automobile production line in Ford Motors, Assembly time was reduced drastically. • This increased popularity of Scientific Management • Hawthorne Studies -- by Elton Mayo • Introduced Human Dimensions • Illumination Studies implied the effect of group and work environment on productivity of workers

16. HISTORICAL EVOLUTION • Operations Research -- Started with World War II Mathematical Technique to Deploy Limited Resources. • Computers • 50’s – Salary & Accounting Statements • 60’s – L.P. to analyze operational problems • 70’s -- Mnfrg. Information System • Material Requirement Planning (MRP) • 80’s -- CAD CAM FMS AS/RS • 90’s – Robots for Repetitive & Hazardous tasks

17. HISTORICAL EVOLUTION • 1980 - Manufacturing Strategy Just In Time (JIT) TQC Service Quality and Productivity • 1990 - TQM and Quality Certification Business Process Reengineering (BPR) Supply Chain Management (SCM) E - Commerce

18. Shift in Emphasis • Operations Management underwent three key shifts in emphasis • From Cost and Efficiency to Value Creation • From Mass Production to Agility and Customization • From Functional Specialization to a Systems approach to achieve high performance

19. Current Issues in OM • Coordinating the relationship between mutually supportive but separate organizations • Optimizing Global SCM • Increased co-production of goods and services • Operational Challenges • Process Design and Improvements • Employee diversity • Human Resource scarcity • Global workforce

20. Current Issues in OM • Challenges at Marketplace • Market fragmentation • Vocal Customers • Customer-Supplier relationship • Technological Challenges • Technological changes • Bio-genetic • Miniaturization • Societal Challenges • The Environment • Intellectual Property

21. Operations Strategy & Competitiveness ………………………………………

22. OPERATIONS STRATEGY • STRATEGY is a Plan consistent with the Objectives to eliminate external threats or to take advantage of Opportunities. • Levels of Strategy • Corporate Strategy • Business Strategy • Functional Strategy  Operations Strategy • Operations Strategy is influenced by Product / Services Market served

23. Corporate Strategy Design Process • Firm should develop comprehensive strategy that integrates Finance, Marketing and Operations • Financial Perspective : two basic strategies • Growth • Build the Franchise – Develop new sources of revenue • Increase customer value • Productivity • Improve cost structure • Improve asset utilization

24. Corporate Strategy Design Process • Customer Perspective – Find ways to differentiate itself in the marketplace • Product Leadership • Customer intimacy • Operational excellence • Internal Perspective • Defines business process • Specifies desired outcomes and the process to achieve them

25. Corporate Strategy Design Process • Learning and Growth Perspective – Defines intangible assets needed • Strategic Competencies • Strategic Technologies • Climate for action

26. Strategy • Organizations should have Resources and capabilities to execute and support the strategy • The extent to which organization is matching its resources and capabilities with the opportunities in external environment is Strategic Fit • Strategy is delivered through a set of tailored activities

27. Operations Strategy • Operations Strategy specifies how operations can help implement firm’s corporate strategy. • Operations Strategy involves linking design decisions and operating decisions • Cross-functional interaction must occur for implementing any functional strategy. • Operation Strategy must be linked vertically to the customer and horizontally to other parts of enterprise

28. Operations Competitive Dimensions Competitive priorities – Four Groups • COST Low cost operations, Commodity type products • QUALITY High performance design, Consistent Quality. • TIME Fast delivery time, On time Delivery Development Speed • FLEXIBILITY Volume flexibility, Customisation, Varieties of product Special services to augment the sale

29. ELEMENTS OF OPERATION STRATEGY • Designing the Production System • Product / Service Design & Development • Technology Selection & Process Development • Allocation of Resources to Strategic alternatives • Facility Planning

30. DEVELOPING AN OPERATIONS STRATEGY • Should be in line with Organization Strategy And Organization Strategy should be in line with Corporate vision • Aim is to achieve Long Term goals of Business strategy • Operations Strategy should be Flexible to support product through its Lifecycle. • Operations Strategy should be consistent with strategies of other functional areas.

31. Long Term Operation Strategy Decisions concerned with • Developing New Product • Determining appropriate production capacity • Establishing new production facilities • Adopting new technologies • Locations of Plant & Warehouses

32. Operations Strategy as Weapon in Competition • Identify distinct Competencies • Expertise in Product (ITC) / Process / Marketing (P&G) / Supply (HLL) expertise • Shorter Product Cycle – Fast entry & Growth (CD Mnfrg) • Production Flexibility (Garment manufacturing lines) • Low Cost Process (Labor Intensive Jobs) • Convenience & Location ( HLL vis a vis Sara Lee) • Product variety & Facility Size • Quality

33. Productivity • The productivity is the measure of efficiency. • Productivity is a ratio of Output to Input. • Higher the ratio, higher the efficiency Two basic types of Productivity Total Productivity – Considers all the Inputs & Ratio is Total Output / Total Input Gives very little indication about Input areas needing improvement. It requires all variables to be expressed in same unit. Partial Productivity – Considers only Specific Input (like Labor, R.M.) and Ratio is total Output / Partial Input • Partial Productivity ratio is more preferred.

34. Productivity • Productivity ratios are used to measure efficiency of operation and comparison of same with reference to Time, Industry. • Here it gains importance as control measure. To improve productivity we look at factors affecting productivity • Time spent on unproductive activity • Social or legal obligations • Unrest in employees • Learning new skills It is easy to measure the productivity of quantifiable tasks. But for Knowledge workers where tasks are • Not quantifiable • Intangible • Dependent on many other factors • Such that results are not directly attributable to tasks and results come up after a long period

35. Example of Productivity Measures • Input & Output Data Output • Fin. Units Rs. 10000 • WIP 2500 • Dividends 1000 Total 13500 Input • Human Rs. 3000 • Material 153 • Capital 10000 • Energy 540 • Other expenses 1500 Total 15193 • Total Measure • Multifactor Measures • Partial Measures

36. Learning Curve • Learning Curve is a line displaying relationship between unit production time and cumulative units produced • Learning Curve Theory is based on three assumptions • The amount of time required to complete a given task will be less each time the task is undertaken • Unit time will decrease at a decreasing rate • The reduction in time will follow a predictable pattern

37. Limited Passenger Service No baggage transfer No meals No seat assignment Frequent Reliable Departures Lean and highly productive ground and gate crews

38. Process Analysis +++++++++++

39. Process Analysis • Process is any part of the organization that takes inputs and transforms them into output expected to be of greater value • By analyzing process we can understand • Handling capacity • Serving time • Changes required to increase capacity • How much does the process cost • We must clearly define the purpose of analyzing the process

40. Process Analysis • Process Analysis generally involves following tasks • Decide process boundaries that mark the entry point of the process inputs and exit points of the process outputs • Construct process flow diagram showing various process activities and their interrelationships • Determine capacity of each step in the process • Identify the bottlenecks • Evaluate further limitations in order to quantify the impact of the bottlenecks • Use the analysis to make operating decisions and improve the process

41. Process Flowcharting • Process Flow-charting is a tool that categorizes each activity & provides operational details to understand the process • Good way to start analyzing a process is with diagram showing the basic elements of process • Tasks • Flows • Storage • Decision points • Some times diagram is separated into different horizontal or vertical bands to allow separation of tasks

42. Types of Processes • Single –stage process • Multi-stage process • May be buffered internally • Buffering refers to storage area between stages • Buffering allows stages to operate independently • If no buffering, it is possible that Blocking or Starving may happen • Processes by Market Orientation • Make to stock - generally standard products • Make to order – generally customize products • Hybrid – combination of both above

43. Types of Processes • Processes by Production Systems • Project • Job-Shop • Batch Production • Assembly Line • Continuous Flow • Cell Manufacturing • Flexible Manufacturing System • Pacing – refers to the fixed timings of movement of the items through the process

44. Multistage Process Alternate Paths Multistage Process with Buffer

45. Measuring Process Performance • Utilization =Actual utilized time / Available time • Efficiency = Actual output of the process / standard • Run-time – time required to produce a batch of parts • Set-up time – time required to prepare a machine to make a particular item • Operation time – sum of set-up and run-time for a batch • Cycle time – time elapsed between starting and completing a job

46. Measuring Process Performance • Throughput time – time that a unit spends actually being worked on together with time spent waiting in a queue • Throughput rate – Output rate that a process is expected to produce • Process Velocity – Ratio of total throughput time to the value-added time • Value-added time – time in which useful work is actually being done on the unit

47. Throughput Time Reduction • Perform activities in parallel • Reduce back and forth movements • Change the sequence of activities • Reduce interruptions • Eliminate redundant activities • Combine activities wherever possible

48. Product Design /\/\/\/\/\/\/\/\/\/\/\/\/\/\

49. Product Design • Starts with conceptualization with objectives of • Providing value to the customer • Return on Investment to the company • Competitiveness in the market • Product design has impact on • Materials & components used • Processes used for manufacturing • Machines used for processing • Methods of storage • Ways of transportation • Production / Operations Strategies • Marketing Strategies

50. Product Design • Design for Customer • Achievement of purpose for which it is required, expressed or implied • Features • Ease of operation • User-friendly • Reliability • Consistency • Conformance to specification • Competitive price • Serviceability • Safety • Aesthetic • Environmental friendly • Disposal value • Durability