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Operations

Management – Nature
and scope of
Operations &
Operations Strategy

By
Prof. Nadpurohit

Course Plan
Session Topics to be covered
1 Introduction & Course plan
•Nature and scope of Operations, Operations Strategy.
2 Types of Production Systems
Process Selection / Design, New Product Development
3 Facilities Location
•Plant Location Factors affecting Location,
• Plant Layout Types of Layouts
4 Strategic Capacity planning
Capacity expansion strategies , Forecasting methods,
5 Production Planning and Scheduling
Aggregate Planning, MPS, MRP
6 Scheduling Methods
Scheduling Objectives, Rules. Mid- term Test
7 JIT Methods
SMED , TPM, Lean manufacturing, Kanban
8 Inventory Management
Inventory Planning, EOQ, Inventory Control, ABC classification
9 Value Analysis/Project Management
Concept of Value, Methods of analysis.
10 Supply Chain Management
Case study
11 Quality Control
TQM, QC Tools, ISO discussion.
12 Recent Advances in OM
CAD/CAM, Productivity improvement, Recent advances in OM,ERP
End –Term Examinations
Operations Management By Prof.
July - Nov 2010 Slide 2 of 80
Nadpurohit

Reference Material
Text: Operations Management by B. Mahadevan.

Suggested Readings:
a)Operations Management by William J Stevenson
b)Production & Operations Management by Chase ,Aquilino.
Jacobs.
c)Quality Management .by P.N.Mukherjee
d) Production and Operations Management by K Ashwathapa
& Bhat.

Operations Management By Prof.
July - Nov 2010 Slide 3 of 80
Nadpurohit

Evaluation
•Class attendance 10 marks (for those classes above 75
%)
•Case study Report/presentation (Group) 20 marks
•Mid Term exam 20 marks.
•End Term exam 50 marks

Operations Management By Prof.
July - Nov 2010 Slide 4 of 80
Nadpurohit

July . Learning Objectives • Define the term operations management • Identify the three major functional areas of organizations and describe how they interrelate • Compare and contrast service and manufacturing operations • Describe the operations function and the nature of the operations manager’s job Operations Management By Prof.Nov 2010 Slide 5 of 80 Nadpurohit .

Nov 2010 Slide 6 of 80 Nadpurohit . Learning Objectives • Differentiate between design and operation of production systems • Describe the key aspects of operations management decision making • Briefly describe the historicalevolution of operations management • Identify current trends that impact operations management Operations Management By Prof. July .

Goal Operations Operations Management By Prof. Mission.Nov 2010 Slide 7 of 80 Nadpurohit . July . Business Organizations' Marketing Finance Organization Vision.

Food Processor

Inputs Processing Outputs
Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

Operations Management By Prof.
July - Nov 2010 Slide 8 of 80
Nadpurohit

Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy
Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy

Operations Management By Prof.
July - Nov 2010 Slide 9 of 80
Nadpurohit

Value-Added Process

The operations function involves the conversion of
inputs into outputs
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback

Operations Management By Prof.
July - Nov 2010 Slide 10 of 80
Nadpurohit

Operation
SERVICE OPERATION

INPUTS
Materials
Equipment
Customers PROCESS OUTPUTS
Staff
Technology Goods and
Facilities services

The service operation

OUTCOMES INPUTS Value Time Emotions Effort EXPERIENCE Judgements Cost Intentions SERVICE PRODUCT Customer Service = experience + outcome .

Operation SERVICE OPERATION INPUTS Materials Equipment OUTCOMES Customers PROCESS Value Staff Emotions Technology EXPERIENCE Judgements Facilities Intentions SERVICE PRODUCT Customer Managing service and service operations .

Operations Management By Prof.Nov 2010 Slide 14 of 80 Nadpurohit . July . therefore having poor tangibility • Heterogeneity: High variability in the operation system performance • Simultaneous Production & Consumption: Degree of customer contact is very high • Perishability: Services cannot be inventoried as in the case of manufactured products. Service Operations Salient Features • Tangibility: Services are performances and actions rather than objects.

July .Nov 2010 Slide 15 of 80 Nadpurohit . Goods v/s Service Characteristic Goods Service Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems High Low Inventory Much Little Evaluation Easier Difficult Patentable Usually Not usual Operations Management By Prof.

national. national. Manufacturing & Service Similarities & Differences Manufacturing Organisations Service Organisations Differences Physical durable product Intangible. schedules and resources Balance capacity with demand by a careful choice of resources Has to make an estimate of demand Operations Management By Prof. Intl. productivity & timely response to its customers Must make choices about capacity. Intl. markets Regional.Nov 2010 Slide 16 of 80 Nadpurohit . markets Large facilities Small facilities Capital intensive Labour intensive Quality easily measured Quality not easily measured Similarities Is concerned about quality. location. layout Has suppliers to deal with Has to plan its operations. perishable product Output can be inventoried Output can’t be inventoried Low customer contact High customer contact Long response time Short response time Regional. July .

Management By Prof. July .Nov 2010 Slide 17 of 80 Nadpurohit . (2005). T. pp 14. OperationsOperations Management (Palgrave Macmillan). Service – Manufacturing Continuum Pure Product Pure Service Ayurvedic Healing Treatment Legal/Tax Consulting Cyber Café – Telephone Booths Emergency Maintenance Services Facilities Maintenance High quality restaurant meal Fast food in a eat out joint Customised durable goods Fast moving commodities Vending Machines Adopted from Hill. 2nd Edition.

4 4.6 Consumer Goods 2.2 6.2 23.1 8.3 4.0 Salaries & Wages 6.0 Source * Monthly Review of the Indian Economy.2 Intermediate Goods 6.9 5.6 3.1 12.1 6.4 16.0 7. November 2004.2 -12.7 9.8 41.7 -3.5 8.9 6.1 7.6 Interest Payments 13.4 Capital Goods 12. Operations Management By Prof.4 10.6 17.0 7.0 8. 21 . CMIE. D.4 7. CRISIL Rating Scan.3 4.2 21.2 5.7 PBIT 1.0 44.2 2.1 19.6 Corporate Sector Performance (Manufacturing)* Sales 8.3 1.8 Interest Payments 5.3 11.2 5. July .0 6.7 6.4 3.2 3. (2004).0 1.7 1.9 17.0 -5.5 20.6 7.Nov 2010 Slide 18 of 80 Nadpurohit . "Indian Manufacturing: Price Vs Margin dilemma".3 7.6 17.7 8.5 4. May 2005 # Joshi.8 40. Manufacturing Sector Salient Aspects 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Index of Industrial Production (Growth %over previous year)* Manufacturing 4.8 11.8 44.6 6.5 13.5 20.8 4.9 6.8 4.4 2.1 8.8 8.8 -3.3 39.2 Components of cost (Growth %over previous year)# Raw material expenses 7.1 Components of cost (As %of net sales)# Raw material expenses 39.7 Salaries & Wages 11.2 5.8 10.1 19.4 Automobile Sector 3.25.2 -0.2 -23.

ven d o r b a se d o m e s tic de m an d Ap p a rel M a n u fa ctu rin g $ 6 . s k ille d lab o u r. de s igonp eratio n a l ex p ertis s k ills Au to -c o m p o n e n ts $ 1 .2 5 b $ 1 5 .Nov 2010 Slide 19 of 80 Nadpurohit .18 b D es ign & E n gin ee rin L ag ck o f s ca le .25 b E n gin ee rin g a nd F ra gm e nted in d us t c o ntin u o us a n d p oo r O E M im p ro ve m e n t of sk illslin k ag e s S p e c ia lty ch e m ic als $ 1 . Lo w s k ills .1 0 b $ 2 5 . July .15 b L o w co s t m a n po w erA pp lic a tio n R & D a a n d p ro ce ss m ark e tin g in no va tio n sk ills Operations Management By Prof.6 0 b $ 1 2 .L a ck o f s ca le . Indian Manufacturing Export Potential of Sectors C u rre n t P o te n tia l S ec to r o f In d u s try S tre n g th s W e a k n e s se s E x p o rts E x p o rts E le c trica l & E le c tro n ic s $ 1 .1 0 b $ 2 0 .30 b V e rtica l inte gra tio n .

Transport.5 8.8 11.1 Coomunity.5 6.8 Financial Services 7. July .0 9.7 8.6 3.4 10.9 9.7 7.1 5. Hotels.2 5.1 3.5 4.8 Source Economic Survey of India.1 Trade.8 7. Communications 7. Ministry of Finance.8 9. Service Sector in India GDP growth rate 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Service Sector Growth rates in GDP (% change over last year) Service (Overall) 8. Government of India. Economic Division Operations Management By Prof. 2004-2005.4 10.4 12.9 5. Social & Personal Services 10.5 6.Nov 2010 Slide 20 of 80 Nadpurohit .2 5.

and – could fetch revenue to the operations system Operations Management By Prof. Operations Management Definition • An operations system is defined as one in which – several activities are performed – to transform a set of inputs into useful output – using a transformation process. July . • Operations Management is – a systematic approach to – address all the issues pertaining to – the transformation process that converts some inputs into output that are useful.Nov 2010 Slide 21 of 80 Nadpurohit .

Nov 2010 Slide 22 of 80 Nadpurohit . July . Operations A key functional area in an Organisation Finance Operations Marketing HRM Operations Management By Prof.

July . Operations Interfaces Industrial Engineering Maintenance Distribution Purchasing Public Operations Relations Legal Personnel Accounting MIS Operations Management By Prof.Nov 2010 Slide 23 of 80 Nadpurohit .

July .Nov 2010 Slide 24 of 80 Nadpurohit . Operations Function Linkages with other functions Customer Layer Operations Support Layer Ultimate Dealers Marketing Maintenance Quality Customer Retailers Costing Planning Tooling Core Operations Layer Material IT Design IE Testing Assembly Layer of Innovation Fabrication Machining Innovation Supplier Layer Strategy Service Delivery system Sub-contractors Suppliers Research & Development Other service providers Operations Management By Prof.

Nov 2010 Slide 25 of 80 Nadpurohit . Operations Management A systems Perspective Forecasting PROCESSING Labour Process & Purchasing & Goods OUTPUT Product Inventory INPUT Design Control Material Capital Operations Material & Services Planning & Capacity Control Planning Feedback Quality Maintenance Process Management Management Improvement Operations Management By Prof. July .

• Operational Control issues focuses on optimising the use of available resources in the short-term while delivering goods and services as per plan. Operations Management By Prof. July . Operations Management Functions Design of Operations Operational Control of Operations Product Design & Development Forecasting Process Design Production Planning and Control Quality Management Supply Chain Management Location and Layout of facilities Maintenance Management Capacity Planning Continuous improvement of operations • Design issues in Operations Management lay down overall constraints under which the operations system functions.Nov 2010 Slide 26 of 80 Nadpurohit .

Operations Management Salient Aspects • A systematic approach using scientific tools & techniques and solution methodologies to analyse problems • Addressing several issues varying in terms of time horizon.Nov 2010 Slide 27 of 80 Nadpurohit . July . nature of decisions • Addressing design & operational control issues in the transformation process • Focusing on keeping costs to the minimum • Developing a set of measures to assess performance of the system Operations Management By Prof.

Nov 2010 Slide 28 of 80 Nadpurohit . July . 1960-70’s) • Influence of Japanese manufacturers Operations Management By Prof.Historical Evolution of Operations Management • Industrial revolution (1770’s) • Scientific management (1911) – Mass production – Interchangeable parts – Division of labor • Human relations movement (1920-60) • Decision models (1915.

Trends in Business • Major trends – The Internet.Nov 2010 Slide 29 of 80 Nadpurohit . e-business – Management technology – Globalization – Management of supply chains – Outsourcing – Agility – Ethical behavior Operations Management By Prof. July . e-commerce.

Nov 2010 Slide 30 of 80 Nadpurohit . July . Management Technology • Technology: The application of scientific discoveries to the development and improvement of goods and services • Product and service technology • Process technology • Information technology Operations Management By Prof.

Nov 2010 Slide 31 of 80 Nadpurohit . July . Other Important Trends • Ethical behavior • Operations strategy • Working with fewer resources • Revenue management • Process analysis and improvement • Increased regulation and product liability • Lean production Operations Management By Prof.

Operations Management Impact of Economic Reforms in India • Tariff reduction has exposed Indian companies to global competition – Chelliah Committee tax reforms proposed during 1992 – 94 triggered this process • Abolition licensing policies had enabled several new players to enter into business increasing domestic competition and capacity build up – Examples include liberalisation of two wheelers and LCV segment in early 1980’s and passenger car segment in early 1990’s • Indian customers are more demanding in terms of quality.Nov 2010 Slide 32 of 80 Nadpurohit . July . cost and delivery of goods & services Operations Management By Prof.

July . Operations Management Challenges & Priorities Challenges • Quality Management issues need greater attention • Long lead time for order fulfillment • Low labour productivity offsets cost advantages Priorities • Acquire Capabilities to tolerate product proliferation • Relate operations system to Customer/Market • Develop systems and procedures that promote learning Operations Management By Prof.Nov 2010 Slide 33 of 80 Nadpurohit .

Improving July . Understanding Operations Management Understanding Designing Planning & Control Operations & Operations Operations of Operations the value chain 15 16 3 Process Project Supply Chain 1 Management Design Management Operations 6 13 17 4 Management: Product Statistical Just in Time Purchasing & Trends & Development Quality Manufacturing Supply Issues Control Management 14 5 Total Quality Scheduling 18 Management Inventory 12 Resources Planning & 7 Control Facilities Planning Location 11 19 Aggregate Maintenance 2 8 Plant Production Management Layout Planning Operations 20 Strategy 10 Continuous 9 Capacity Demand Improvement Planning Forecasting Operations Management By Prof.Nov 2010 Slide 34 of 80 Nadpurohit Operations .

• From an operations management perspective. Operations Management: Trends & Issues Highlights • Operations Management is a systematic approach to address all issues pertaining to the transformation process that converts some inputs into useful output • Globally. a vast majority of operations share a continuum of products and services. Several recent studies point to emerging opportunities for Indian manufacturing to grow and attain a global presence. In reality.Nov 2010 Slide 35 of 80 Nadpurohit . India is emerging as an important manufacturing base. Operations Management By Prof. July . the notion of a ‘pure product’ and ‘pure service’ is just the two ends of the spectrum.

– Long term and short term decisions • Some of the challenges faced by operation firms include – low productivity and long lead time – quality management – inability to relate the system to market/customer – Promoting a culture of learning Operations Management By Prof. from an operations management perspective there are several similarities between the two settings • The decision context in operations management can be broadly classified as – Design and operations control issues.Nov 2010 Slide 36 of 80 Nadpurohit . July . Operations Management: Trends & Issues Highlights • Despite several important differences between products & services.

Operations Management By Prof.Nov 2010 Slide 37 of 80 Nadpurohit . July .

July .Nov 2010 Slide 38 of 80 Nadpurohit . • Define the term strategy and explain why strategy is important for competitiveness. Learning Objectives • List and briefly discuss the primary ways that business organizations compete. • List five reasons for the poor competitiveness of some companies. • Contrast strategy and tactics. Operations Management By Prof.

Nov 2010 Slide 39 of 80 Nadpurohit . • Describe and give examples of time- based strategies. July . Operations Management By Prof. and explain why it is important to link the two. Learning Objectives • Discuss and compare organization strategy and operations strategy.

strategies and tactics relate to decision making and distinctive competencies? Operations Management By Prof. Mission/Strategy/Tactics Mission Strategy Tactics How does mission. July .Nov 2010 Slide 40 of 80 Nadpurohit .

July . Strategy • Mission – The reason for existence for an organization • Mission Statement – States the purpose of an organization • Goals – Provide detail and scope of mission • Strategies – Plans for achieving organizational goals • Tactics – The methods and actions taken to accomplish strategies Operations Management By Prof.Nov 2010 Slide 41 of 80 Nadpurohit .

study. July . Strategy Example Example A student. buy books. Get PG degree. have a good job. take courses. and earn enough income to live comfortably Mission: Live a good life • Goal: Successful career. get job Operations Management By Prof.Nov 2010 Slide 42 of 80 Nadpurohit . Would like to have a career in business. good income • Strategy: Obtain a Mgmt PG qualification • Tactics: Select an Institute and a major • Operations: Register.

July .Nov 2010 Slide 43 of 80 Nadpurohit . Competitiveness: How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services Operations Management By Prof.

Nov 2010 Slide 44 of 80 Nadpurohit . • Strategy Factors – Price – Quality – Time – Flexibility – Service – Location Operations Management By Prof. Strategy and Tactics • Distinctive Competencies The special attributes or abilities that give an organization a competitive edge. July .

July . Examples of Strategies • Low cost • Scale-based strategies • Specialization • Flexible operations • High quality • Service Operations Management By Prof.Nov 2010 Slide 45 of 80 Nadpurohit .

Quality and Time Strategies • Quality-based strategies – Focuses on maintaining or improving the quality of an organization’s products or services – Quality at the source • Time-based strategies – Focuses on reduction of time needed to accomplish tasks Operations Management By Prof.Nov 2010 Slide 46 of 80 Nadpurohit . July .

Time-based Strategies JAN FEB MAR APR MAY JUN Planning Designing Processing Changeover On time! Delivery Operations Management By Prof.Nov 2010 Slide 47 of 80 Nadpurohit . July .

July .Nov 2010 Slide 48 of 80 Nadpurohit . Businesses Compete Using Marketing • Identifying consumer wants and needs • Pricing • Advertising and promotion Operations Management By Prof.

Nov 2010 Slide 49 of 80 Nadpurohit . Businesses Compete Using Operations • Product and service design • Cost • Location • Quality • Quick response Operations Management By Prof. July .

July .Nov 2010 Slide 50 of 80 Nadpurohit . Businesses Compete Using Operations • Flexibility • Inventory management • Supply chain management • Service and service quality • Managers and workers Operations Management By Prof.

Nov 2010 Slide 51 of 80 Nadpurohit . Planning and Decision Making Mission Goals Organizational Strategies Functional Goals Finance Marketing Operations Strategies Strategies Strategies Tactics Tactics Tactics Operating Operating Operating procedures procedures procedures Operations Management By Prof. July .

July . consistent with organization strategy. that is used to guide the operations function. Operations Strategy • Operations strategy – The approach. Operations Management By Prof.Nov 2010 Slide 52 of 80 Nadpurohit .

first-class postage Motel-6. On-time delivery One-hour photo. July . Red Roof Inns Quality High-performance design Sony TV or Consistent quality Lexus. ATMs Operations Management By Prof. Cadillac Pepsi. UPS Flexibility Variety Burger King Volume Supermarkets Service Superior customer Disneyland service Nordstroms Location Convenience Banks. Examples of Operations Strategies Price Low Cost U.S. Motorola Time Rapid delivery Express Mail. Kodak.Nov 2010 Slide 53 of 80 Nadpurohit . Fedex.

Nov 2010 Slide 54 of 80 Nadpurohit . Operations Strategy • Strategic planning exercise – Enables an organisation to respond to the market needs in the most effective manner – By aligning various resources and activities in the organisation – To deliver products & services that are likely to succeed in the market • Operations Strategy – Is a process by which key operations decisions are made that are consistent with the overall strategic objectives of a firm – Decisions in the operations function are made on the basis of the inputs from the overall corporate strategy Operations Management By Prof. July .

employee safety. services. Strategic OM Decisions Decision Area Affects Product and service design Costs. skill level. flexibility Process selection and layout Costs. flexibility.Nov 2010 Slide 55 of 80 Nadpurohit . productivity Scheduling Flexibility. shortages Maintenance Costs. July . equipment reliability. quality. capacity Work design Quality of work life. shortages. or operating systems Operations Management By Prof. productivity Location Costs. efficiency Supply chains Costs. agility. vendor relations Projects Costs. quality liability and environmental Capacity Cost structure. visibility Quality Ability to meet or exceed customer expectations Inventory Costs. new products.

Key External Factors • Economic conditions • Political conditions • Legal environment • Technology • Competition • Markets Operations Management By Prof.Nov 2010 Slide 56 of 80 Nadpurohit . July .

July . Key Internal Factors • Human Resources • Facilities and equipment • Financial resources • Customers • Products and services • Technology • Suppliers Operations Management By Prof.Nov 2010 Slide 57 of 80 Nadpurohit .

000 in 1990 to Rs. July .Nov 2010 Slide 58 of 80 Nadpurohit .5 million watts category over the last six years • Need a mechanism to systematically respond to these changes in the most effective way • Need to tune their operations to match with the competitive priorities Operations Management By Prof. 180. Need for Operations Strategy • Competitive dynamics & expectations of customers change with time • Due the changes in market place.000 in 1999. – Triveni Engineering. competitive priorities for an organisation is likely to change – While it was customary for people to book for a passenger car and wait for a few months to get delivery of the car. reported that the price of a 33 KV circuit braker dropped from Rs. today a manufacturer of passenger cars cannot afford to make customers wait that long – ABB Ltd. 275. a manufacturer of Turbines faced a 40% reduction in the price of turbines in the less than 3.

Flexibility Firm level Strengths & Corporate Strategy Weaknesses Strategic decisions for Measures for Operations System Operations Strategy Operational Excellence Operations Management By Prof. Cost. competitive advantage Delivery. July . Strategy formulation process Competitive Order winners Dynamics at Order Qualifiers the marketplace Strategic options for Generic Competitive Priorities Sustaining Quality.Nov 2010 Slide 59 of 80 Nadpurohit .

variety and convenience Operations Management By Prof. However. Order Qualifiers & Order Winners • Order qualifying attributes are the set of attributes that customers expect in the product or service they consider for buying • Order winning attributes are other attributes that have the potential to sufficiently motivate the customer to buy the product or service • What constitutes order winning and order qualifying might change from time to time – During the early 1980’s providing superior quality products was an order winning attribute. July . speed. in the 1990’s quality became an order qualifying attribute as customers began to expect high levels of quality – Order winning attributes include efficient consumer response.Nov 2010 Slide 60 of 80 Nadpurohit .

Cost. Operational Excellence Performance Measures • Provide critical linkage between order winning and order qualifying attributes and choices made in operations • Help organisations evaluate how well the operations system is responding to the requirements at the marketplace • Serve a useful purpose in comparing performances amongst competitors and for benchmarking • Four generic options are useful for developing measures for operational excellence. Delivery and Flexibility Operations Management By Prof.Nov 2010 Slide 61 of 80 Nadpurohit . this includes Quality. July .

6 1.P.4 11 12 Average development time per new car (months) 46. Rawson Associates. Operations Management By Prof. D.Measures for operational excellence: An example Performance Criterion for Comparison (1987) Japan@ U. is done (%) 30 81 No.Nov 2010 Slide 62 of 80 Nadpurohit .Single supplier.) 380. of models between 1982 & 1989 47 to 84 43 to 49 36 to 53 No. of patents in motor vehicle industry (1986) 2100 1475 1100 No. J. of employees in purchasing 337 6000 Number of suppliers for upholstery 1# 25** Design to customer delivery time (million Hrs.Data pertaining to GM # .a. D.25 Suppliers were supplying components to seat buiding department. ** .3 No.4 0.000 Parts on which detailed Engg.0 46. Performance Criterion for comparison Group A Group B Group C Suggestions/Employee 61. and Roos.4 Training of new production workers (Hrs.4 57.Data pertaining to Toyota.4 Return to normal quality after new model introduction (months) 1.2 60. * .* Production of vehicles (Million) 4 8 Number of employees 37.T.000 850. of plants closed down during 1987-90 None 10 n.) 1. “The Machine that changed the world”. (1990).7 3 Design to customer delivery time (months) 46 60 @ . Jones. Source: Womack.S. of suppliers per plant 170 238 509 Proportion of parts delivered JIT 45% 35% 15% No.3 370. July ..

Operational Excellence Performance measures Quality Cost First Pass Yield Average days of inventory (No.Nov 2010 Slide 63 of 80 Nadpurohit . cost reduction Process Capability Indices Target cost reduction efforts Delivery Flexibility Lead time for order fulfillment Number of models introduced Procurement and Manufacturing Lead time New product development time On time delivery for supplies Breadth and depth of the product offerings Schedule adherence Process & Manufacturing flexibility Indirect Measures Direct labour to Indirect labour ratio Number of suggestions per employee Lead time to work content Non-value added content in processes Process rate to sales rate ratio No. of certified deliveries Average training time per employee Delivery quote for customised products Operations Management By Prof. July . of inventory turns) Quality Costs Manufacturing cost as percent of sales Defects (Parts per Million) Procurement costs Number of suggestions per employee Value of import substitution.

July .Nov 2010 Slide 64 of 80 Nadpurohit . Options for Strategic Decision in Operations Pro ct ess d u c Pro tfolio Por Operatio ns l ogy no System Tec S ai n Strategic ly h p Ch Options up Capa city Operations Management By Prof.

Operation Strategy Options Product Portfolio • Product portfolio pertains to decisions on – what products the organisation wants to produce – the number of variations in each product line – the extent of customisation offered to customers • Product portfolio as a strategic option – Wide product portfolio: Overall strategic objective is to provide highly differentiated set of products and services to the customer – Narrow product portfolio: Overall strategic objective is one of cost leadership • Examples in Services & Manufacturing – Air travel from Bangalore to Delhi: JetLite and Kingfisher Airlines differ vastly in terms of the service offered – Computer manufacturers.Nov 2010 Slide 65 of 80 Nadpurohit . IBM appears to emphasise on robust and reliable computing power Operations Management By Prof. Dell and IBM (Lenova): Overall strategic objective of Dell appears to be one of providing highly differentiated products. July .

July . Operation Strategy Options Process Choices • Three types of flow happen on account of process choices: – Continuous streamlined flow – Intermittent or batch flow – Jumbled flow • Choice of process will be consistent with product portfolio decisions – A manufacturer emphasising on production volumes. fewer varieties and less cost will make process choices pertaining to continuous streamlined flow – An organisation wishing to satisfy an objective of providing wide range of products to the customers will adopt batch/intermittent flow type – the need to provide a very large variety and practically a production volume of one or few will adopt jumbled flow Operations Management By Prof.Nov 2010 Slide 66 of 80 Nadpurohit .

Operation Strategy Options Technology Choices • Technological advancements in recent years have given new opportunities for creating competitive advantage for firms – Case of Asian Paints utilising technological advancements for mixing of basic pigments to distribute paints in large varieties of colours and in large assortment of sizes • Using new technology options for manufacturing processes.Nov 2010 Slide 67 of 80 Nadpurohit . July . organisations can – react faster to customer needs – manage a wide portfolio of product offerings and – yet maintain high levels of productivity • Organisations making a strategic choice to operate in the manufacture of mid-volume. mid-variety products could utilise new technology Operations Management By Prof.

Nov 2010 Slide 68 of 80 Nadpurohit . • Ease of expansion: Provides volume flexibility to the organisation. making it much easier to expand in response to a growing market • Reduced manufacturing lead time • Lower in-process inventory: Several of the above benefits directly translate to lower work in process inventory and reduced cost of manufacturing Operations Management By Prof. New Technology Options Strategic Advantages • Increased machine utilisation • Scheduling flexibility: Permits an organisation to have flexibility in scheduling thereby enabling the organisation to react to changes fast • Ease of engineering challenges: Changes in engineering design and process plans can be easily accommodated by use of technology based manufacturing and process design. July .

July .Nov 2010 Slide 69 of 80 Nadpurohit . Operation Strategy Options Capacity • Capacity is defined as – maximum number of units of goods that can be produced per unit time in the case of manufacturing system – the maximum number of service offerings that can be made per unit time in the case of a service system • Capacity decision influences the cost of goods and services offered in three ways: – accrued cost advantage due to economies of scale – Ability to spread fixed costs over a larger capacity – additional cost advantages in procuring other factors of production Operations Management By Prof.

typically used in the case of functional products – Responsive supply chain: the key objective is to develop a capability to respond fast to the market requirements. Operation Strategy Options Supply Chain issues • Supply chain refers to the network of entities supplying components and raw material to an organisation as well as those distributing the finished goods of an organisation to the customers through alternative channels • Designing an appropriate supply chain calls for a better understanding of the product profile for which the supply chain is configured • Two types of supply chains can be configured: – Efficient supply chain: objective is cost optimisation and better utilisation of resources employed in supply chain operations.Nov 2010 Slide 70 of 80 Nadpurohit . July . typically used in the case of innovative products Operations Management By Prof.

Flexibility – Cost Trade-off Flexibility and Cost are Cost often viewed as competing dimensions in Operations Strategy Flexibility Operations Management By Prof.Nov 2010 Slide 71 of 80 Nadpurohit . July .

World Class Manufacturing (WCM) Core building blocks • WCM firms perform very well in all the four parameters of Quality. July . Cost.Nov 2010 Slide 72 of 80 Nadpurohit . Delivery and Flexibility at the same time using better operations management practices • The new operations management tools that form the core building blocks of WCM are: – Just in Time (JIT) – Total Quality Management (TQM) – Total Productive Maintenance (TPM) – Employee Involvement (EI) – Simplicity Operations Management By Prof.

July . Operations Management By Prof. Changing Competitive Priorities for WCM 1986 1996 Qual Qual ity ity Competi Competi Flexib Flexib tive tive ility ility Val Co ue Prioritie st Prioritie s of s of WCM WCM Deliv Spe ery ed Weak companies are plagued by Trade-off obstacles.Nov 2010 Slide 73 of 80 Nadpurohit . WCMs have gained an upper hand over the trade-off obstacles.

employee safety. shortages Maintenance Costs. July . productivity Location Costs. vendor relations Projects Costs. quality. new products. equipment reliability. productivity Scheduling Flexibility. or operating systems Operations Management By Prof. agility. flexibility.Nov 2010 Slide 74 of 80 Nadpurohit . capacity Work design Quality of work life. Strategic OM Decisions Decision Area Affects Product and service design Costs. efficiency Supply chains Costs. shortages. flexibility Process selection and layout Costs. visibility Quality Ability to meet or exceed customer expectations Inventory Costs. quality liability and environmental Capacity Cost structure. skill level. services.

manufacturing know-how and experience in manufacturing management – Indian manufacturing firms need to equip themselves with the required operations management practices to enlarge the global trading opportunities – Operations management practices in the country should focus on providing other advantages in addition to narrowing down the cost differentials with China Operations Management By Prof. Operations Strategy Emerging Trends & Implications • Trend 1: Dismantling of trade barriers: – Cost pressures from overseas players and large scale dumping of goods (from low cost countries such as China) – Tougher terms from regional trading blocks such as EU. NAFTA and ASEAN – Chinese manufacturers are a major threat to Indian manufacturing firms as they have installed large capacities to benefit from capacity related cost advantages Implications – Indian manufacturing firms can provide goods and services at a fraction of the cost of that in the developed countries due to factor cost advantages – India has a large installed base of technical manpower. July .Nov 2010 Slide 75 of 80 Nadpurohit .

July . Capacity and Core competency Implications – Primary consideration for BPO is cost. Operations Management By Prof. operations strategy for BPO firms must emphasise on cost leadership – Since an organisation often out-sources the entire operations pertaining to a business process to a third party. Operations Strategy Emerging Trends & Implications • Trend 2: Outsourcing – a major wave – Business Process Outsourcing (BPO) is an arrangement by which some of the business processes are done by a third party on behalf of the organisation – The key motivation for a firm to outsource some of its processes stems from three factors: Cost. – Stringent delivery requirements may also have to be met as the processes may be in the intermediate stages of the value creation process.Nov 2010 Slide 76 of 80 Nadpurohit . quality considerations are to be met with stringent norms.

BPO applications in Organisations: Process View Consulting Services Change Management STRATEGIC Workflow Enhancements New Product Development PROCESSES Brand Management E-business/E-governance Vendor Asset Mgmt. Facilities upkeep IT Enabled Services ENABLING Recruitment & Training Services. OPERATIONAL PROCESSES Employee welfare support.Nov 2010 Slide 77 of 80 Nadpurohit . Manufacturing Warehouse Management Installation & Evaluation & Accounts Receivables Fabrication Market Survey Servicing Selection Stores & Payables Assembly Telemarketing Systems Integration Management R& D Testing &Consulting. Auditing of Books of accounts Contract Labor. July . Marketing & Sales support Operations Management By Prof. Employee Surveys PROCESSES Transaction Processing.

Operations Strategy Emerging Trends & Implications • Trend 3: Collaborative commerce thru Internet – Collaborative commerce is defined as the electronic mechanism that enables the trading partners to transact several aspects related to commerce Implication – Collaborative commerce opens up new areas for consideration in operations management • procurement and supply management practices • design and new product development – Trading partners can exchange vital production planning and other technical information between them for mutual benefit – Organisations are benefiting from greater efficiency and lower costs Operations Management By Prof.Nov 2010 Slide 78 of 80 Nadpurohit . July .

Nov 2010 Slide 79 of 80 Nadpurohit . July . Why Some Organizations Fail • Too much emphasis on short-term financial performance • Failing to take advantage of strengths and opportunities • Neglecting operations strategy • Failing to recognize competitive threats Operations Management By Prof.

Why Some Organizations Fail • Too much emphasis in product and service design and not enough on improvement • Neglecting investments in capital and human resources • Failing to establish good internal communications • Failing to consider customer wants and needs Operations Management By Prof. July .Nov 2010 Slide 80 of 80 Nadpurohit .

Operations Strategy Summary • A strategic planning exercise enables an organisation to respond to the market by aligning the resources and activities in the organisation to the market needs • Operations strategy is the process of making appropriate decisions in the operations function on the basis of inputs from the corporate strategy • A strategy formulation exercise enables an organisation to identify order winners and order qualifiers.Nov 2010 Slide 81 of 80 Nadpurohit . July . Operations Management By Prof.

processes. Operations Management By Prof. Operations Strategy Summary • Four generic performance measures are useful in any operations strategy exercise. cost. • Translating corporate strategy to operations strategy boils down to making appropriate choices with respect to product portfolio. These include Just in Time (JIT). July . capacity and supply chain. delivery & flexibility. These pertain to quality. • World Class Manufacturing organisations feature five basic elements of operational excellence. Total Quality Management (TQM). technology. Total Productive Maintenance (TPM). • Dismantling of trade practices demands that Indian manufacturing & service organisations equip themselves with the required operations management practices to tap global trading opportunities. Employee Involvement (EI) and Simplicity.Nov 2010 Slide 82 of 80 Nadpurohit .