Professional Documents
Culture Documents
Operations
Management
Production & Operations
Management
Course Outline: MB202
Operations Management
Product Design and Development
Process Selection
Facility Location
Facility Layout
Capacity Planning
PPC
Work Study & Method Study
Plus …….
What is Operations
Management?
Inputs Outputs
•Materials •Goods
•Capital Organization •Services
•Labor
•Manag. Res.
Operations Management
Operations Management is the
conversion of inputs into outputs,
using physical resources, so as to
provide the desired utility/utilities of
form, place, possession or state or a
combination there of to the customer
while meeting the other organizational
objectives of effectiveness, efficiency
and adaptability.
Ten Decision Areas of OM
Goods & service design
Quality
Process & capacity design
Location selection
Layout design
Human resource and job design
Supply-chain management
Inventory
Scheduling
Maintenance
A Process Management
Perspective
We all manage processes...
Process
Information Management
structure
Network of
Activities and Buffers
Inputs Outputs
Flow units Goods
(customers, data,
material, cash, etc.) Services
Operations Strategy
Operations Management
Inputs
Raw materials Outputs
Human Products
resources Services
Land, buildings Products & Facilities Structure Control Processes
Information Product design Reporting relationships Inventory management
Technology Facilities layout Teams Productivity
Capacity planning Quality
Facilities location
Scheduling
Must obtain materials and supplies
Both must be concerned with quality
and productivity
Functions of Operations
Management
Materials
Methods
Machines and Equipments
Estimating
Loading and Scheduling
Routing
Functions of Operations
Management
Dispatching
Expediting or Follow up
Inspection
Evaluation
OM Decisions
Operations Management
Decisions
Strategic: Tactical:
Product/Service Quality Control
Design Demand Forecasting
Process Selection Supply Chain
Capacity Planning Management
Facility Location
Production Planning
Inventory Control
Facility Layout
Scheduling
Job Design
Product Design and
Development
Product Design
Product design deals with its
form and function. Form
implies the shape and
appearance of the product
while function is related to the
working of the product.
Product Design Objectives
1 Producibility
2 Cost
3 Quality
4 Reliability
Service Design Objectives
1 Producibility
2 Cost
3 Quality
4 Reliability
5 Timing
Characteristics of Goods
Tangible product
Consistent product
definition
Production usually
separate from
consumption
Can be inventoried
Low customer
interaction
Characteristics of Service
Intangible product
100 75 50 25 0 25 50 75 100
Percent of Product that is a Good
Percent of Product that is a Service
Competitive Priorities- The
Edge
Four Important Operations Questions:
Will you compete on –
Cost?
Quality?
Time?
Flexibility?
All of the above? Some? Tradeoffs?
Competing on Cost?
Typically high volume products
Often limit product range & offer little customization
May invest in automation to reduce unit costs
Can use lower skill labor
Probably use product focused layouts
Competing on Quality?
High performance design:
Superior features, high durability, & excellent
customer service
Volume flexibility:
Ability to ramp production up and down to match
market demands
Characteristics of a Good
Design
Repairability
Modular Design
Redesigning Capability
Miniaturization
Warranties
Reliability
Maintainability
Strategy and Issues during a Product’s Life
Time
• Frequent product •Forecasting •Standardization - •Little product
and process changes critical minor product differentiation
•Short production •Products and changes •Overcapacity in
runs process reliability •Optimum capacity the industry
•High production •Increase capacity •Process stability •Reduce capacity
costs •Shift towards •Long production and eventually
•Limited models product focus runs prune line to
•Attention to quality •Enhance eliminate items not
distribution returning good
margin
Product Development
The aim of Product development is to
(i) provide the goods the market
demands with time,(ii) adjust with the
variation in quantity required and (iii)
charge the prices which the customer is
willing to pay as well as under
conditions that it may have net profit
also.
Strategy and Issues During
a Product’s Life
Introduction
Best period to
Growth
Practical to
Maturity Decline
Poor time to Cost
increase change price or change image, control
market share quality image price, or quality critical
R&D product Strengthen Competitive costs
engineering become critical
Strategy/Issues
critical niche
Defend market
Drive-thru position Fax
machines 3 1/2”
restaurants
Company
CD- Floppy
disks
Sales ROM
Station
Internet wagons
Color copiers
HDTV
Detailed engineering
design
fine dining
focus
Assembly line
Moderate (Cars, appliances, TVs,
fast-food restaurants)
Product-focused
Continuous
(steel, beer, paper, bread)
Low
Low Moderate High
Volume
Discrete vs. Continuous Flow and
Repetitive Manufacturing Systems
Operation Process Chart
for discrete part
manufacturing
A typical Organization of the
Production Activity in Repetitive
Manufacturing
Disconnected
line flow Heavy
equipmen
(batch) t
Connected
line flow Auto
(assembly assembly
line)
Continuous Sugar
flow Voi refinery
d
Product structure
Product life-cycle stages
Facility Location
A facility (plant) is a place where
men, materials, money, machinery
and equipment, etc., are brought
together for manufacturing
product.
Facility Location
Cost-benefit analysis – most
common approach to selecting a
site for a new location
New location scouting software is
helping managers turn facilities
location into a science
Importance of Facility
Location
Competition
Cost
Hidden Effects
Location Factors
Primary factors
Secondary factors
Primary factors
Availability of raw material
Nearness to market
Transport facilities
Availability of labour
Availability of fuel and power
Availability of water
Secondary factors
Soil and climate
Industrial atmosphere
Financial and other aids
Availability of facilities like housing,
schools, hospitals and recreation clubs
Momentum of an early start
Secondary factors
Special advantage of the place
Personal factors
Historical factors
Political stability
Comparison between
Urban and Rural area
Urban Rural
Availability of local
market: Due to large The market place is far away
population the local demand from the industries, therefore
for the product is fairly high. cost of distribution of finished
products is more.
Labour: Ample availability of It is rather difficult to get
diversified labour. skilled labour in rural areas.
Tax advantages 4 8 32
Suitability of labor skills 3 2 6
Proximity to customers 3 6 18
Proximity to suppliers 5 2 10
Adequacy of water 1 3 3
Receptivity of community 5 4 20
Quality of educational 4 1 4
system 3 10 30
Access to rail and air 2 7
Total 14
Total Cost Analysis
Total Cost = Fixed Cost + Operational
Cost
Fixed cost include expenditure on
land, building, machines and other
equipments etc. Operational costs
are the expenditure incurred on
inputs, transformation process and
the distribution of output.
Comparative Cost Chart
5
5
4
4 5
5
Tota 3 3
l 4
4 2
2
cost 3
3
2
s 1 2 1
1 1
A B C D
Locations
Break-even Chart
Labor Transportation
Material
Costs
of
Total Fixed Costs
Facts
Volume of Units
Break-even Chart
EB
C
A
B D
Total A
Costs
D
E
C
Volume of
Output
Dimensional Analysis
MA [CA1] W
1 [CA2] W
[CA n] W
= ……….2 n
Process Layout
Product Layout
Cellular Layout
Fixed-position
Layout
Factors affecting the Plant
Layout
Product and material specification
Location and site of the Plant
Manufacturing process
Material Handling
Storage of in-process inventory
Plant personnel and employee facilities
Factors affecting the Plant
Layout
Service facilities
Design of building
Flexibility
Work areas and equipment
Working conditions
Disposal of waste and dangerous
gases
Types of Plant Layout
Process Layout
Product Layout
Group Layout
Capacity Planning
Capacity is the rate of productive
capability of a facility. Capacity is
usually expressed as volume of
output per time period.
Capacity Planning
Total factor
Output
Productivity =
Labor + Capital + Materials + Energy
Labor
Output
Productivity = Labor dollars
Improving Productivity
1. Technological
productivity
2. Employee productivity
3. Managerial productivity
Major Productivity Variables and
their contribution to productivity
increase
Labor
Better basic education
Better diet
Better social infrastructure like transportation and sanitation
Better labor utilization and motivation
Capital
Steady and well-planned investments on equipment and its
timely maintenance
Research & Development
Controlling of the cost of capital
Management
Exploitation of new (information) technologies
Utilization of accumulated knowledge
Education
Productivity
Outputs
P=
Inputs
Measuring Productivity
Productivity is a measure of how efficiently inputs are
converted to outputs
Productivity = output/input
Total Productivity Measure
Productivity relative to all inputs
Partial Productivity Measure
Productivity relative to a single input (e.g., labor hours)
Multifactor Productivity Measure
Productivity relative to a subgroup of inputs (e.g., labor and
materials)
Labor Productivity
Example:
Assume two workers paint twenty-four tables in
eight hours:
Inputs: 16 hours of labor (2 workers x 8 hours)
Outputs: 24 painted tables
Outputs 24 tables
= = 1.5 tables / hour
Inputs 16 hours
Interpreting Productivity
Measures
Is the productivity measure of 1.41
in the previous example good or
bad?
Can’t tell without a reference point
Compare to previous measures
(e.g.: last week) or to another
benchmark
Productivity Growth Rate
Can be used to compare a
process’s productivity at a given
time (P2) to the same process’
productivity at an earlier time (P1)
P2 − P1
Growth Rate =
P1
Productivity Growth Rate
Example:
Last week a company produced 150 units using 200 hours of labor
This week, the same company produced 180 units using 250 hours of
labor
150 units
P1 = = 0.75 units / hour
200 hours
180 units
P2 = = 0.72 units / hour
250 hours
P − P 0.72 − 0.75
Growth Rate = 2 1 = = −0.04
P1 0.75
or a negative 4% growth rate
Productivity Example - An automobile manufacturer has
presented the following data for the past three years in its annual
report. As a potential investor, you are interested in calculating
yearly productivity and year to year productivity gains as one of
several factors in your investment analysis.
Total Productivity
Rs Sales Rs49,000 Rs41,000 Rs38,000 Total Cost Productivity 1.26 1.24 1.19
(billions Rs)
Year-to-year Improvement 1.6% 4.2%