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1 Operations management

1 Operations management

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Published by: Ankit Modani on Feb 06, 2011
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Chapter 1

Operations Management: Trends & Issues

Operations Management
 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
Mahadevan (2010), “Operations Management: Theory & Practice”, 2nd Edition © Pearson Education

2nd Edition © Pearson Education . nature of decisions  Transformation processes are central to Operations  Focusing on keeping costs to the minimum  Developing a set of measures to assess performance of the system Mahadevan (2010).Operations Management (OM) Salient Aspects  OM is a systematic approach  using scientific tools & techniques and solution methodologies to analyze problems  OM is about addressing several issues  varying in terms of time horizon. “Operations Management: Theory & Practice”.

88 Wages and Salaries: Financial services  12. 2008.20 15. pp 201 # Compiled from Economic Intelligence Services (EIS) database on Corporate Sector .70 34.90 39.65 PAT: Financial services  62.50 18.03 financial)  Total Assets: Financial services  14.10 ‐13.80 8.70 22.60 ‐14.50 17.60 31.90 26.70 14.90 15.30 20.80 18.10 21.00 21.30 24.60 85.50 18.30 18. Oxford University Press.20 11.55 Total Assets: Manufacturing  7.80 20.20 9.10 12.50 23.90 31.60 16.88 147.00 6.50 14.27 Capital goods 13.60 21.50 10.80 8. New Delhi.60 109. 2nd Edition © Pearson Education All number in the table represent growth % over the previous year * Compiled from Economic Survey 2007 – 08.93 Gross Savings: Manufacturing  58.30 40.13 Sales/Income: Financial services  Wages and Salaries: Manufacturing  6.60 13.50 12.70 14.60 18.10 10.50 30.38 Consumer goods 7.70 3.75 # Corporate Sector Performance Sales/Income: Manufacturing 13.80 Sales/Income: Services (other than  financial)  27.45 PAT: Manufacturing  PAT: Services (other than financial)  165.20 10.30 17. Economic Division.10 ‐66.20 11.90 10.40 15.30 23.80 58.00 8.90 32.10 37.00 10.10 13.70 12.10 2.30 58.00 45.80 17.60 29.70 27.23 Gross Savings: Financial services  Mahadevan (2010).50 27.Manufacturing Sector Salient Aspects Index of Industrial Production* 2003‐04 2004‐05 2005‐06 2006‐07 Average Manufacturing 9. Ministry of Finance. “Operations Management: Theory & Practice”.20 9.40 70.60 11.20 Wages and Salaries: Services (other than  financial)  16. Government of India.30 ‐2.90 18.90 30.10 18.68 ‐9.30 20.00 35.00 12.10 17.75 Total Assets: Services (other than  11.25 Intermediate goods 6.40 6.60 23.30 Gross Savings: Services (other than  financial)  34.

25 b Potential Exports $ 15 . “Operations Management: Theory & Practice”.Indian Manufacturing Export Potential of Sectors Sector of Industry Electrical & Electronics Current Exports $ 1.10 b $ 20 .25 b Specialty chemicals $ 1. skilled labour.60 b $ 12 . 66–72. operational expertise Fragmented industry and poor OEM linkages Application R & D and marketing Apparel Manufacturing $ 6. Mahadevan (2010). design skills Engineering and continuous improvement of skills Low cost manpower and process innovation skills Weaknesses Lack of scale. 2nd Edition © Pearson Education . Low domestic demand Lack of scale. pp.10 b $ 25 . “Manufacturing’s Next Export Wave.18 b Strengths Design & Engineering skills.30 b Auto-components $ 1.” Business Today. vendor base Vertical integration. 24 April 2005 .15 b Source: Based on Roshni Jayakar.

(2005). “Operations Management: Theory & Practice”. 2nd Edition © Pearson Education . Operations Management (Palgrave Macmillan). 2nd Edition.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 Customized durable goods Fast moving commodities Vending Machines Adopted from Hill. T. Mahadevan (2010). pp 14.

2008.1 3.0 5.6 10. “Operations Management: Theory & Practice”. Mahadevan (2010). 2nd Edition © Pearson Education . Communications Financial Services. Transport. Table A-7.2 7.9 4. Oxford University Press.0 12. Real Estate & business services Public administration & defence and other services 2001 -02 2002 -03 200304 2004 -05 2005 -06 200607 9. Hotels.5 11. Insurance. New Delhi. Ministry of Finance.9 All number in the table represent growth % over the previous year * Compiled from Economic Survey 2007 – 08.4 6.4 8.3 9.7 11.Service Sector in India GDP growth rate Service Sectors Trade.4 11.8 13. Economic Division.9 7.7 8.9 5.2 6. Government of India.

Mahadevan (2010). 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. “Operations Management: Theory & Practice”. 2nd Edition © Pearson Education .

Mahadevan (2010). Bahuguna (2006). “Rule Bound Government Agency to Customer Centric Service Facility: Can Indian Passport Offices make the leap?” IIMB Management Review. 59 – 66. “Operations Management: Theory & Practice”.Operations Management in Services Process flow diagram for passport application processing Source: Ravichandran. 18(1). N and D. 2nd Edition © Pearson Education .

perishable product Output can’t be inventoried High customer contact Short response time Local markets Small facilities Labour intensive Quality not easily measured Similarities Large facilities Capital intensive Quality easily measured Is concerned about quality. location.Manufacturing & Service Similarities & Differences Manufacturing Organizations Differences Physical durable product Output can be inventoried Low customer contact Long response time Regional. national. markets Service Organizations Intangible. schedules and resources Balance capacity with demand by a careful choice of resources Has to make an estimate of demand Mahadevan (2010). layout Has suppliers to deal with Has to plan its operations. productivity & timely response to its customers Must make choices about capacity. Intl. 2nd Edition © Pearson Education . “Operations Management: Theory & Practice”.

“Operations Management: Theory & Practice”. 2nd Edition © Pearson Education .Operations A key functional area in an Organisation Finance Operations Marketing HRM Mahadevan (2010).

The New Manufacturing Architecture. 1999. New Delhi.Operations Function Customer Layer Ultimate Customer Dealers Retailers Linkages with other functions 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 Supplier Layer Service Delivery system Sub-contractors Suppliers Other service providers Source: B Mahadevan. 2nd Edition © Pearson Education . “Operations Management: Theory & Practice”. Tata McGraw Hill. Mahadevan (2010).

2nd Edition © Pearson Education Feedback . “Operations Management: Theory & Practice”.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 Maintenance Management Process Improvement Mahadevan (2010).

2nd Edition © Pearson Education .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 • Operational Control issues focuses on optimizing the use of available resources in the short-term while delivering goods and services as per plan under the given design constraints Mahadevan (2010). “Operations Management: Theory & Practice”.

Operations Management Challenges  Competitive Pressures due to economic reforms  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 liberalization 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. cost and delivery of goods & services Mahadevan (2010). 2nd Edition © Pearson Education . “Operations Management: Theory & Practice”.

2nd Edition © Pearson Education . “Operations Management: Theory & Practice”.Operations Management Challenges  Growing customer expectations  Examples: Tariff plans and options provided by mobile operators. options in passenger car  Customers tend to demand more and refine their expectations  Manufacturing & Service organizations must learn to respond to these expectations  Need to develop capabilities to bring newer products and services faster and yet profitably Mahadevan (2010).

a customer can accomplish all tasks pertaining to ticket booking and cancellation at leisure.in/. Example 4: New Product Development. Customers need not visit a bank branch.co.    Mahadevan (2010). Example 3: Procurement of goods & services. “Operations Management: Theory & Practice”. A team of design personnel from across different geographical locations can participate in new product development using technological tools. Example 2: Buying a train ticket. the best price for a component and the supplier willing to provide the component at a desired quality can be located.irctc. 2nd Edition © Pearson Education . A manufacturing organization can procure goods & services by organizing a reverse auction on the Internet. Drafts and cheques replaced with electronic payment gateways & fund transfer mechanisms.Operations Management Challenges  Today’s businesses are constantly challenged by the rapid technological advancements  Example 1: ATMs & Internet Banking. In 3 to 4 hours. By visiting a Web site like http://www.

Growing urbanization creates societal problems arising out of scarcity of available resources and generation of solid wastes. Growing industrialization raises concerns regarding the depletion of natural resources and the waste generated from production systems and end-of-life products. Consumption of energy and water in countries like India is on the rise. Such a situation requires better practices and newer methods of addressing these requirements using better operational practices. 2nd Edition © Pearson Education . “Operations Management: Theory & Practice”. sustaining.Operations Management Challenges   Environmental Issues When Government of India announced a scheme for special economic zones (SEZs). Increasingly. and expanding the planet’s ecosystem instead of merely exploiting it. it generated controversies and social concerns.      OM practices must address environmental concerns in order to ensure a sustainable world Mahadevan (2010). firms are under pressure to take responsibility of restoring.

2nd Edition © Pearson Education .Operations Management Implications & Priorities  Relate operations system to Customer/ Market  Acquire Capabilities to tolerate product proliferation  Develop systems and procedures that promote learning  Develop Green Manufacturing Practices Mahadevan (2010). “Operations Management: Theory & Practice”.

a vast majority of operations share a continuum of products and services. “Operations Management: Theory & Practice”. Mahadevan (2010).  In reality.  From an operations management perspective. the notion of a ‘pure product’ and ‘pure service’ is just the two ends of the spectrum.Operations Management: Trends & Issues Chapter Highlights  Operations Management is a systematic approach to address all issues pertaining to the transformation process that converts some inputs into useful output  Globally. India is emerging as an important manufacturing base. 2nd Edition © Pearson Education .  Several recent studies point to emerging opportunities for Indian manufacturing to grow and attain a global presence.

Operations Management: Trends & Issues Chapter Highlights…  Despite several important differences between products & services. “Operations Management: Theory & Practice”. 2nd Edition © Pearson Education . from an OM perspective there are several similarities between the two  Decision context in operations management can be broadly classified as  Some of the challenges faced by operation firms include  Need to address increased competition due to economic reforms  Addressing the growing expectations of the customers  Rapid technological advances  Emerging environmental concerns  Design and operations control issues  Long term and short term decisions Mahadevan (2010).

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