Chapter 10

8/9/2016
Chapter 10 Learning Objectives
• To understand importance of production and operations
Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Operation and Production Plan management in the business plan.
• To learn about purpose of the product design and
development plan section in the business plan.
• To identify and understand the key factors related to design
decisions.
• To understand the importance of location and project layout
decisions in the success of a business.
• To learn about factors to be considered while deciding project
layout plan.
Contd…
Entrepreneurship: Creating and Leading an Entrepreneurial Organization Author: Arya Kumar Entrepreneurship: Creating and Leading an Entrepreneurial Organization Author: Arya Kumar
Learning Objectives Operations Management—Importance
• To learn about factors to be considered for plant and • In the world of business there are many essential parts to a

technology choices. successful operation. Some may say that marketing,
production and/or sales are the most important part of any
• How to deal with matters related to technology transfer.
business, but after studying the process of operation
• To learn about important factors to be considered by the management, it is found to be the backbone of any business
production and operations team to ensure saleability of the process. Operation management embodies all aspects of the
products. business process and unites them to create an efficient
resourceful procedure.
• To learn about key aspects that influence production planning
and control decisions.
• To understand aspects related to commercialization of

technologies.
Different Phases of Operations Broad Categories of Production

Management and Entrepreneurial Systems and Their Characteristics
Strategic Focus
• 1776–1980: • Labour specialization that took deep
• Tangible
Cost-focus roots coupled with scientific • Can be resold
approach management practices. • Can be stored
Goods • Selling is usually separate
• Easy to automate
• 1980–1995: • Use of techniques such as just in time, • Product can be transported
Quality as key computer aided design, total quality

focus management etc.
• Intangible
• Reselling is usually not possible
• 1995–2010: • Customization focus as a result of • Most of the services cannot be stored
Emphasis globalization, Internet usage, enterprise Services • Selling is a part and parcel of service
• Difficult to automate
shifted to mass resource planning, supply chain • Provider of service can be transported
customization management, build to order etc.
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Product Design Issues Important Aspects of Product Design
Conceptualize Design the Ensure Ease

• Design for function product should be able to perform the
and

Product and Product
Its Convenience to function that customer expect it to do.
Ingredients Manufacture
• Design for making product need to focus on ease and
Ensure Strength, convenience to manufacture the product.
Safety, Security and
Wear ability of the
Product • Design for selling product keep customer into focus to
design and develop better and improved products that have
great market potential.
Produce a Product
that Gives Greater
Utility to Consumers
Product Life Cycle—Phases of Growth Key Factors Related to Design

Decisions
Monopoly Competition
Sales
Introduction

Appearance of Product
Development
Maturity
Decline
Growth
Components that Affect

Design Performance
Decision—
Key
Idea Mass Decline of Components Affecting
Competition Factors
development Production Production Production Process and
Investment Required
Stage1 Stage 2 Stage 3 Stage 4 Stage 5

Time
Lifecycle in terms of approaching to the maturity and declining phase differs for
Supply Chain
each product depending upon technology developments, intensity of competition, Management and
obsolescence rate, changing tastes and preferences, economic wellbeing of the Availability of Spare
people in general leading to next level of consumption pattern etc. Parts
Business Location Issues Key Factors Affecting Location Decision

Near Target Market
• Does business location need convenient access to either Near Source of Raw Material
transportation or to suppliers? Supply
Accessibility and Other

• Does it require easy access? Facilities
Location of Competitors and

• Does business has any additional important requirements,
Location Rationale for Their Choice
such as parking and proximity to freeway, accessibility to Decision—
airports, railroads, ports? Key
Factors Security and Safety of Building
• Do you plan to build a building? Most startup companies Government Incentive

cannot afford to put capital into construction. However, if you Programs
are planning to build, you will need to include costs and
Community Receptiveness
specifications of the building into your plan.
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Site Selection Decision Requirements Project Layout
• Plant layout helps in defining scope of the project and

• Within the given location, alternate sites should be identified
provides a basis for project engineering, investment required

and evaluated in respect of land cost, site preparation and on plant, machinery and equipment and production costs.
development cost. • General functional layout focuses on general relationships
between equipment, building and civil works. The purpose is
• Cost of site development depends upon physical features of to ensure smooth and cost-effective flow of raw materials,
the site, work related to utilities and obtaining utility work in progress.
connections, cost related to demolishing existing structures to • Production layout take care of input flow along with main
make it suitable for the purpose, etc. equipment—description, location, dimension, foundation,
spacer equipment, power and other utilities requirement etc.
• Project layout should ensure a balancing in different
sections in terms of capacities.
• Plant layout takes care of physical layout of the factory. In
case of process industries, plant layout is governed by
production process.
Criteria for Plant Selection Technology—Selection Criteria
• Future demand for the product in the short, medium and long Technology

terms of volume and time. Input Tools
Systems Output
• Proposed design and layout of factory, equipment, offices Techniques
and space for utilities, capacity, efficiency and reliability of

plant and machinery.
• Associated maintenance requirements and equipment Criteria for Selection

required for the same, in case it is to be undertaken inhouse. • Functions it would perform
• Ease in use of technology
• Cost–benefit implications
• Safety aspects related to plant and machinery.
• Security issues to ensure that operations
remain highly secured and protected
• Suppliers and their credibility in delivering and maintenance. • Scope for upgradation and modernization
• Environmental aspects related to plant and machinery.

Appropriate Choice of Technology Appropriate Choice of Technology
• Features of technology that is a must to be incorporated in • Source and ready availability of consumables required for use
the production system. of technology at appropriate prices.

• Features that would be helpful and useful but not absolutely • Training of personnel requirements and how same would be
necessary. taken care of.
• How fast new technologies are coming in the area which • Will there be a permanent dependency on suppliers or
makes existing ones obsolete. adaptation of technology by in-house personnel be easy?
• Is it necessary to have compatibility of new technology with • Will the outsourced technology be compatible with the local
existing plant and equipment? raw materials?
Contd…
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Technology Transfer Technology Transfer—Licensing

Agreements
• Technology transfer is the process of sharing of skills, Material Transfer

knowledge, technologies, manufacturing methods, samples of Common Licensing Agreement
manufacturing and facilities among governments and other Agreement on
institutions so as to ensure that scientific and technological Exclusive or Non-
developments are used further for development and exclusive Basis
Collaboration
exploitation of the technology into new products, processes, Agreement
applications, materials and services. Technology
Transfer –
Licensing
• Commercial exploitation of technology developments can Master
Agreement
be through: Industrial Agreement
Licensing agreements Contract
Setting up joint ventures and partnerships to share both the
risks and rewards . Sponsored
Spin-outs wherein the host organization does not have the Research
necessary will, resources or skills to develop a new technology. Agreement
Licensing Agreements Licensing Agreement Terms and

Conditions to Be Covered
• Long-term vs. Short-term Licensing Agreement: The Licensing Period and Its Renewal

terms of use of technology involve a longer duration, say 5
years and above, which is usually more beneficial for Stipulation of Performance Standards
companies with limited cash. Short-term agreement may Licensing

Agreement Payments to the Licensor
involve higher down payment followed by small proportion of —Terms and
sales as the royalty. Conditions Quality Control and Assurance
to be
Covered Accounting, Reports and Audits
• Exclusive vs. Non-exclusive Agreements: A non-
exclusive agreement is the one wherein more than one Conditions to Preserve and Protect
company can utilize the licensed technology; as against an Intellectual Property
exclusive agreement that allows only one company to license Technical Assistance, Training, and
the invention. Support
Warranties
Performance—Key Criteria from Broad Aspects of Quality

Competitive Framework
• Customer looking for shorter lead time for manufacturing

External quality refers to the

satisfaction of clients
• Reduce manufacturing cost to compete well in the market
• Improve return on investment Type of

Quality Internal quality refers to the
• Reduce inventory cost Aspects improvement of a company's
internal processes, so as to
• Build to order to customize achieve defect free, pre-specified
standards
• Improve manufacturing flexibility/agility
• Defining quality benchmarks An entrepreneur has to always aspire for continuous

improvement in the quality whose goal is to identify any
• Raw materials to be used and their specifications. deviation from standards as quickly as possible after it occurs
and takes corrective steps.
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Continuous Improvement—Deming TQM Components

Cycle
• Total Quality Management (TQM)

People
• Plan: Define the goals to be A P refers to the implementation of a
achieved and plan steps involved Act Plan business plan that is based on a
in implementation. quality procedure that involves all
• Do: Develop a system to employees, i.e. a comprehensive
implement the corrective actions. strategy by which an entire Tools and
Techniques TQM Customer
• Check: Have a mechanism to company uses all possible means
confirm that the set goals are to satisfy its customers in terms of
quality, cost and deadline.
achieved.
• Act: Having identified deviations, C D
Check Do • TQM is the set of management Strategies
if any, that occurred in the
processes and systems that
previous step, take preventative creates delighted customers
measures. through empowered employees,
leading to higher revenue and
lower cost.
Essential Aspects of Quality Fourteen-point Process for Achieving

TQM Leadership
• Top management commitment.
• Conformance, not goodness or elegance. • Quality improvement team.

• Quality measurement system in place.
• Nothing like quality problem, it has to become the philosophy • Cost of quality.
of business. • Quality awareness amongst one and all in the organization.
• Timely detection of deviations, if any, and taking corrective
actions.
• It is always cheaper to do the job right in the very first • Zero defects—no tolerance for defects.
attempt. • Quality training to employees—a continuous process.
• Observing zero defects day.
• Measure of performance for the quality has to be cost. • Errors cause removal.
• Recognition to people contributing extraordinary
contributions in quality adherence.
• Zero defect in whatever is done in production or service • Having quality councils to review the system at regular
industry, is the only performance standard. intervals.
• Do it over again.
Key Aspects that Influence Production Characteristics of Leaders in

Planning and Control Decisions Commercialization of Technologies
• Commercialize two to three times the number of new

Changing
Role of the Information products and processes as do their competitors of
Globalization
Technology comparable size.
Customer
• Globalization: The interdependence between nations resulting in • Incorporate two to three times as many technologies in their
growth in the international markets has had a crucial impact on products.
the PPC decisions.
• Changing role of the customer: Meeting customer
requirements and service demands requires both product and • Bring their products to market in less than half the time.
process flexibility to produce customized products at variable
volume.
• Information technology: Responding to global coordination and • Compete in twice as many products and geographic markets.
communication requirements calls for the deployment of
information systems to link functionally disparate, geographically
dispersed and culturally diverse organizational units.
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Key Aspects to Be Taken Care of in

Technology Transfer Agreement

Nature of Method of Consideration Other IPR
the IPR the for the Rights and Infringements
Involved Transfer Transfer of Obligations
Technology
Entrepreneurship: Creating and Leading an Entrepreneurial Organization Author: Arya Kumar

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8/9/2016

Chapter 10 Learning Objectives

• To understand importance of production and operations

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Learning Objectives Operations Management—Importance

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

• To understand aspects related to commercialization of

Different Phases of Operations Broad Categories of Production

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Quality as key computer aided design, total quality

customization management, build to order etc.

Product Design Issues Important Aspects of Product Design

Conceptualize Design the Ensure Ease

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Product Life Cycle—Phases of Growth Key Factors Related to Design

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Components that Affect

Stage1 Stage 2 Stage 3 Stage 4 Stage 5

Business Location Issues Key Factors Affecting Location Decision

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

transportation or to suppliers? Supply

Accessibility and Other

Location of Competitors and

• Do you plan to build a building? Most startup companies Government Incentive

Site Selection Decision Requirements Project Layout

• Plant layout helps in defining scope of the project and

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Criteria for Plant Selection Technology—Selection Criteria

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

and space for utilities, capacity, efficiency and reliability of

• Associated maintenance requirements and equipment Criteria for Selection

• Environmental aspects related to plant and machinery.

Appropriate Choice of Technology Appropriate Choice of Technology

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

the production system. of technology at appropriate prices.

Technology Transfer Technology Transfer—Licensing

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Licensing Agreements Licensing Agreement Terms and

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

companies with limited cash. Short-term agreement may Licensing

Performance—Key Criteria from Broad Aspects of Quality

• Customer looking for shorter lead time for manufacturing

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

External quality refers to the

• Improve return on investment Type of

• Defining quality benchmarks An entrepreneur has to always aspire for continuous

Continuous Improvement—Deming TQM Components

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Essential Aspects of Quality Fourteen-point Process for Achieving

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Key Aspects that Influence Production Characteristics of Leaders in

• Commercialize two to three times the number of new

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Key Aspects to Be Taken Care of in

Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd.

Entrepreneurship: Creating and Leading an Entrepreneurial Organization Author: Arya Kumar

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