Operations Management – Nature and scope of Operations & Operations Strategy

By Prof. Nadpurohit

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

4 5 6 7 8 9 10 11 12

July - Nov 2010

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.

July - Nov 2010

Operations Management By Prof. Nadpurohit

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•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

July - Nov 2010

Operations Management By Prof. Nadpurohit

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Nov 2010 Operations Management By Prof.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 July . Nadpurohit Slide 5 of 80 .

Nadpurohit Slide 6 of 80 .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 July .Nov 2010 Operations Management By Prof.

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

Food Processor
Raw Vegetables Metal Sheets Water Energy Labor Building Equipment

Cleaning Making cans Cutting Cooking Packing Labeling

Canned vegetables

July - Nov 2010

Operations Management By Prof. Nadpurohit

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Hospital Process
Doctors, nurses Hospital Medical Supplies Equipment Laboratories

Examination Surgery Monitoring Medication Therapy

Healthy patients

July - Nov 2010

Operations Management By Prof. Nadpurohit

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Value-Added Process
The operations function involves the conversion of inputs into outputs
Value added
Inputs Land Labor Capital Transformation/ Conversion process

Outputs Goods Services

July - Nov 2010 Operations Management By Prof. Nadpurohit

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INPUTS Materials Equipment Customers Staff Technology Facilities


OUTPUTS Goods and services

The service operation

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

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

Nov 2010 Operations Management By Prof. 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. Nadpurohit Slide 14 of 80 . July .Service Operations Salient Features • Tangibility: Services are performances and actions rather than objects.

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

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

2nd Edition.Nov 2010 Slide 17 of 80 Nadpurohit . (2005). T. Operations Management (Palgrave Macmillan). Operations Management By Prof. July .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. pp 14.

2 6.2 6.1 Corporate Sector Perform ance (M anufacturing)* Sales 8.1 23.0 July .5 Salaries & W ages 11.8 2. N ovem 2004. Nadpurohit Slide 18 of 80 .8 11.4 3.3 7.8 8.5 44.0 8.6 A utom obile Sector 3.0 10.6 6.0 5.6 17.2 5.Nov 2010 Operations Management By Prof.3 4.7 6.1 6.0 -5.2 -0.2 20.6 7. M 2005 y.8 -3.2 Source *M onthly R eview of the Indian Econom C IE. ber 21 .6 -23.3 PBIT 1.9 8.0 Interm ediate G oods 6.2 Interest Paym ents 5.4 2.2 5.4 Consum G er oods 2.9 Capital G oods 12. "Indian M .6 12.25.Manufacturing Sector Salient Aspects 1998-99 1999-00 2000-01 2001-02 Index of Industrial Production (G row %over previous year)* th Manufacturing 4. D (2004).0 1.3 4.5 Interest Paym ents 13.7 20.2 10.4 16.1 44.1 11.5 4.8 40.8 4.4 13.7 9.9 3. 2002-03 6. anufacturing: Price Vs M argin dilem a".7 8.6 17.1 8.5 7.4 4.1 3. M ay # Joshi.0 6.8 -12.2 21.8 Salaries & W ages 6.3 1.7 8.2 2003-04 7.0 5.2 C ponents of cost (G om rowth %over previous year)# Raw m aterial expenses 7.7 1. CR m ISIL R ating Scan.8 41.4 19.9 17.8 4.4 7.3 39.1 19.7 -3.6 7.2 C ponents of cost (A %of net sales)# om s Raw m aterial expenses 39.

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

2004-2005.1 5.8 9.4 10.0 9.9 5.5 8. Transport.4 12.1 Coomunity.5 4.1 Trade.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. Communications 7.5 6. Nadpurohit Slide 20 of 80 .8 11.8 Financial Services 7.4 10.2 5. Ministry of Finance.9 9. Economic Division July . Government of India.5 6.8 7.7 8.Nov 2010 Operations Management By Prof.6 3.2 5.1 3. Social & Personal Services 10.8 Source Economic Survey of India.7 7. Hotels.

Nadpurohit Slide 21 of 80 .Nov 2010 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. • 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. and – could fetch revenue to the operations system July .

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

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

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

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

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

Nadpurohit Slide 27 of 80 .Nov 2010 Operations Management By Prof. 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 July .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 Operations Management By Prof. Nadpurohit Slide 28 of 80 .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. 1960-70’s) • Influence of Japanese manufacturers July .

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

Nadpurohit July .Nov 2010 Slide 30 of 80 .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 .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. Nadpurohit July .

cost and delivery of goods & services July .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 Operations Management By Prof. Nadpurohit Slide 32 of 80 .

Nov 2010 Slide 33 of 80 . Nadpurohit 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.

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

Nadpurohit Slide 35 of 80 .Nov 2010 Operations Management By Prof. the notion of a ‘pure product’ and ‘pure service’ is just the two ends of the spectrum. In reality. • From an operations management perspective. July . 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. India is emerging as an important manufacturing base.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.

– 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.Nov 2010 .Operations Management: Trends & Issues Highlights • Despite several important differences between products & services. 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. Nadpurohit Slide 36 of 80 July .

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

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

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

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

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

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

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

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

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

Nov 2010 . Nadpurohit Slide 46 of 80 • Time-based strategies – July .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 Focuses on reduction of time needed to accomplish tasks Operations Management By Prof.

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

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

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

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

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

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

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

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.Nov 2010 Slide 54 of 80 . Nadpurohit July .

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

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

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

000 in 1999. a manufacturer of Turbines faced a 40% reduction in the price of turbines in the less than 3. Nadpurohit Slide 58 of 80 .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 July .Nov 2010 Operations Management By Prof. today a manufacturer of passenger cars cannot afford to make customers wait that long – ABB Ltd. reported that the price of a 33 KV circuit braker dropped from Rs. – Triveni Engineering.000 in 1990 to Rs. 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. 180. 275.Need for Operations Strategy • Competitive dynamics & expectations of customers change with time • Due the changes in market place.

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

Nov 2010 Slide 60 of 80 . variety and convenience Operations Management By Prof.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. Nadpurohit July . speed. However. 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.

Nadpurohit Slide 61 of 80 . Cost. Delivery and Flexibility July .Nov 2010 Operations Management By Prof. this includes Quality.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.

.25 Suppliers were supplying components to seat buiding department. Jones. and Roos. of employees in purchasing Number of suppliers for upholstery Design to customer delivery time (million Hrs. (1990).Single supplier.) Return to normal quality after new model introduction (months) Average development time per new car (months) No.3 1.000 81 6000 25** 3 60 @ .T.S.a.6 380. is done (%) No. Source: Womack.3 36 to 53 1100 509 15% n. of models between 1982 & 1989 No. “The Machine that changed the world”. ** .Data pertaining to Toyota. July .4 46. Performance Criterion for comparison Suggestions/Employee Training of new production workers (Hrs. J.Data pertaining to GM # . of patents in motor vehicle industry (1986) No.Nov 2010 Operations Management By Prof.7 46 U. of plants closed down during 1987-90 Group A 61. * .4 43 to 49 1475 238 35% 10 Group C 0. of suppliers per plant Proportion of parts delivered JIT No.P. D.4 370. Rawson Associates.4 46.2 47 to 84 2100 170 45% None Group B 1.) Design to customer delivery time (months) Japan@ 4 37.0 11 60.000 30 337 1# 1. D.4 12 57.* 8 850.Measures for operational excellence: An example Performance Criterion for Comparison (1987) Production of vehicles (Million) Number of employees Parts on which detailed Engg. Nadpurohit Slide 62 of 80 .

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

Options for Strategic Decision in Operations c Pro ess t duc io Pro tfol Por ply up in S a Ch Operatio ns System Strategic Options Capa city Tec h l ogy no July . Nadpurohit Slide 64 of 80 .Nov 2010 Operations Management By Prof.

Nov 2010 Operations Management By Prof. Nadpurohit Slide 65 of 80 .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. Dell and IBM (Lenova): Overall strategic objective of Dell appears to be one of providing highly differentiated products. IBM appears to emphasise on robust and reliable computing power July .

Nov 2010 Operations Management By Prof.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. Nadpurohit Slide 66 of 80 . 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 July .

mid-variety products could utilise new technology July .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. Nadpurohit Slide 67 of 80 .Nov 2010 Operations Management By Prof. 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.

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. 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. Nadpurohit Slide 68 of 80 • • • • July .Nov 2010 . Ease of expansion: Provides volume flexibility to the organisation.

Nadpurohit Slide 69 of 80 .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 July .Nov 2010 Operations Management By Prof.

Nov 2010 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. Nadpurohit Slide 70 of 80 . typically used in the case of innovative products July .

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

Nadpurohit July .Nov 2010 Slide 72 of 80 .World Class Manufacturing (WCM) Core building blocks • WCM firms perform very well in all the four parameters of Quality. 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. Cost.

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

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

Nadpurohit Slide 75 of 80 . 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 July . 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 Operations Strategy 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.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.Nov 2010 Operations Management By Prof.

Nov 2010 Slide 76 of 80 .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. Nadpurohit July . 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. Capacity and Core competency Operations Strategy Implications – Primary consideration for BPO is cost. quality considerations are to be met with stringent norms. – Stringent delivery requirements may also have to be met as the processes may be in the intermediate stages of the value creation process. Operations Management By Prof.

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

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 Operations Strategy 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 July . Nadpurohit Slide 78 of 80 .Nov 2010 Operations Management By Prof.

Nadpurohit Slide 79 of 80 .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 July .Nov 2010 Operations Management By Prof.

Nadpurohit Slide 80 of 80 .Nov 2010 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 July .

Nov 2010 Operations Management By Prof. Nadpurohit Slide 81 of 80 .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. July .

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

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