Operations & supply chain

management (205)

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 Unit I

Introduction to Operations
Management (OM)

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 Operations Management
• Operations?
• Manufacturing industry
• Service industry
• Examples

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 Operations Management
▪ Operation:- Process of changing inputs into outputs
thereby adding value to some entity”.
Value added by:-
1. Alteration:- Change in form or state of inputs, May be
physical or psychological,
2. Transportation:- Movement of entity from one place
to another,
3. Storage:- Process of keeping an entity in a protected
environment for some point of time,
4. Inspection:- Process of verification of entity for its
properties & thereby taking more informed
decisions concerning their purchase, use, repair etc,4
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 Evolution from Manufacturing to
Operations Management
1) Adam Smith (1776):- (An economist from
Scotland) - Originator of production management
concept, Division of Labor through his book on
“The Wealth of Nations”

a) If the same work is performed repetitively higher

skills & perfection is achieved,
b) Improvement in production method takes place
when worker is made to specialize on 1 task.

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 • Charles Babbage (1832):- (A Mathematician)
Book:- “Economy of Machinery & Manufacture” ,
He put forward “SPECIALIZATION” as an additional
advantage of Division of Labor & assignment of jobs
by skill.
• Frederick W, Taylor (1900):- “Father of scientific
management”. His concepts have developed into
major scientific management tools like Method
Study, Time study & put forward the concept of
Selection, Training, Placement & Industrial
Relations” in the field of Personnel management.

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 • Frank & Lillian Gilbreth (1900):- Inventor of
Time & Motion study.
• Henry Ford (1913):-
- Mass production
- Organized work stations into a conveyor belt
assembly line,
- His introduction of the Model – T automobile
brought revolution in transportation industry in
USA,
• Henry L. Gantt:- (1910):-
- American Mechanical Engineer
- Developed Gantt Charts in 1910

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 • F.W. Harris (1915):-
- Developed first Economic Lot Sizes model for
inventory control.
• Elton Mayo (1927):-
- Known as founder of the Human Relations
Movement,
- Known for his research in Hawthorne Studies in
1930,
• Walter A, Shewart (1931):-
- TQM
- Statistical Process Control (SPC)
- Control Chart
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 • 1940 to 1980:-
- Period of World War-II & Cold war between
Western Nations & Soviet block,
- Period of rebuilding of war affected nations like
Japan,
- Emergence of “Operations Research” & “Value
Engineering”,
- By 1958 – to monitor & control, CPM(critical
path method) & PERT (Program Evaluation
Review Technique) were introduced,
- By 1960 Scope of Production was widened &
Concept of Operations Management was
introduced,
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• 1980 to 2012:-
Period of emergence of Asian economies like
Japan, South Korea & in later part India & China.
Major techniques introduced were “Quality
Control & Inventory Control , Zero Defect
Production, Just-in- time , TQM, TPM.
• Present trend:-
LPG have established the importance of customer,
Customer choices are changing rapidly.

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 Today’s priorities :-
• Match operations systems to customer / Market
requirements.
• Build up capabilities to accept increase in
number of product & service variety.
• To maintain CIP, develop systems which promote
learning,
• Develop sustainable GREEN manufacturing
practices.

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 • Operation as the conversion process:-

# Example I/p o/p

Steel sections
iron ore, coke, lime stone
like channels,
1 Steel plant etc, workers, machines,
rods, bars,
capital,
sheets etc,

Infrastructure, employees, Serviced

2 Banks
customers customers

Infrastructure, Doctors,
3 Hospital
machines, patients.
Cured patients

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 What is OSCM ?
OSCM is the integration of
business process from end
user through original
suppliers that provides,
products, services &
information that add value
for customers.

OSCM involves the flows of

material, information &
finance in a network
consisting of customers,
suppliers, manufacturers &
distributors.

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 Components of OSCM

OSCM represents a relatively new way of approaching

business :
• Customer relationship management
• Customer service management
• Demand management
• Operation management
• Order fulfillment
• Manufacturing flow management
• Procurement
• Product development and
Commercialization
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Productivity of conversion process:-
1) = (Goods & services)/(Capital, manpower,
materials, machines, land & building)
= Output/input
Higher the productivity, more efficient is the system.
2) Amount of waste:-
Waste in unnecessary o/p, or defective o/p,
Eliminating the waste in
E.g. Idling of resources, (Materials waiting in the
form of inventory in stores, Machines waiting to be
loaded, job orders waiting to be processed, patients
waiting to be attended etc,)
Production of defective goods & services.
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Why OSCM- An Evolving Concept
Changing People , Process and Technology. In
layman’s language, it has to synchronize seven
elements by the delivery
1. Of the right product,
2. In the right quantity,
3. At the right place,
4. At the right time,
5. At the right cost,
6. For the right customer &
7. In the right condition.
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 Objectives of operations management
‘Right quality, right quantity, right time & right
price are the basic requirements of customers’.
Objective:- “To produce goods & services of the right
quality, in the right quantities, according to the time
schedule & at a minimum cost”.
• Effectiveness objective:- Producing the right kind of
goods & services that satisfy customers’ needs.
• Efficiency objective:- Maximizing o/p of goods &
services with min, i/p.

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 Objectives of operations management
• Quality objective:- Ensuring that goods & services
produced conform to pre-set quality specifications.
• Lead time objective:- The time that elapses in
conversion process – by reducing delays, waiting
time & idle time.
• Cost objective:- Minimizing the cost of producing
goods or rendering service.

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 Components of Operation function
# Aspects of mgmt Components of operation function
•Product selection & design
•Process selection & planning
Planning (Conversion •Facility location
1
process & its use) •Facility layout & materials handling
•Capacity planning
•Production planning
Organising (For
2 Work study & job design
conversion)
•Production control
•Inventory control
Controlling
3 •Quality control
(Conversion process)
•Maintenance & replacement
•Cost reduction & cost control
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 Functions of operations Management
1. Product selection & design
2. Process selection & planning
3. Facility location
4. Facility layout & materials handling
5. Capacity planning
6. Production planning
7. Work study & job design
8. Production control
9. Inventory control
10. Quality control
11. Maintenance & replacement
12. Cost reduction & cost control
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 Quality
Definitions:-
• Philip B, Crosby: “Conformance to requirements”.
• Peter Drucker: "Quality in a product or service is
not what the supplier puts in, It is what the
customer gets out and is willing to pay for,“
• ISO 9000: "Degree to which a set of inherent
characteristics fulfills requirements,“
• Joseph M, Juran: “Fitness for use,”
• Six Sigma: "Number of defects per million
opportunities,"

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 Characteristics of quality
1. Degree of excellence a product or service
provides
2. Features that meet consumer needs & give
customer satisfaction,
3. Freedom from deficiencies or defects,
4. Conformance to standards,
5. Value for money,
6. Meeting the requirements and expectations in
service or product those were committed to.

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 Quality is suitability for a specific application
• Quality is comprised of:
1) Reliability
2) Durability
3) Safety
4) Affordability
5) Maintainability
6) Economy
7) Versatility
“ Quality is never an accident, It is always the result
of high intention, sincere efforts, intelligent
direction & skillful execution.”
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 Customer’s view & Manufacturer’s view of quality
Ideal for
penetration Premium
High Underpriced
strategy in offering
marketing
Real bargain
Medium (Real good Average Overpriced
buy)
Quality Unhappy Make the
Low Cheap goods
customers sale & run

Low Medium High

Price
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 • Higher price = Higher quality
• Quality = Tangible + Intangible value
• Customer attaches following values to a
product or service:-
1. Cost value
2. Use value
3. Exchange / Resale value
4. Esteem value

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 • Quality is achieved because of:-
1) Doing the right thing
2) Doing it the right way
3) Doing it right the first time
4) Doing it on time without exceeding cost

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 The two quality gaps
Producer’s view of
quality as specified

Producer Gap
Producer’s view
of quality as
Customer Gap delivered

Customer’s view of
quality as received
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 Concept of internal customer
• Who is external customer? What is it’s significance?
• Who is internal customer?
• Example of Internal customer:-
1) Div A – Div B – Div C – Internal Customers
2) Finance dept – purchase & stores – Production
dept - Internal Customers
3) HR Dept – Production dept – Marketing Dept -
Internal Customers

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5) Financial Research dept – Customer sales
& service - Internal Customers dept
(Financial Institutions like Banks)

6) Customer service dept – Sales team –

Internal Customers (e. g. Banks)

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 • Significance of internal customer:

• For the success of the organization, all departments

& internal customers need to work in collaboration
& synchronization with each other.

• Absence of Co-operation can lead to decline in

sales & unsatisfied external customers.

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 Overview of Total Quality Management
(TQM)
• Total - made up of everything
• Quality - degree of excellence a product or service
provides
• Management – act / art / manner of planning,
Organizing, Staffing, directing & controlling.

Therefore,
TQM is the art of managing everything to
achieve excellence.

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 What does TQM mean?
“Do the right things, right at the first time
and every time,”

The organization's culture is defined by constant

attainment of customer satisfaction through an
integrated system of tools, techniques, and
training.

This involves the continuous improvement of

organizational processes, systems , people,
Partners etc. resulting in high quality products
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Objectives of TQM:-
1) total Customer / client satisfaction
through quality products and services

2) continuous improvements to processes,

systems, people, suppliers, partners,
products, and services etc.

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 The TQM System
Continuous
Objective Improvement

Customer Process Total

Principles Focus Improvement Involvement

• Leadership
Elements • Education and Training
• Supportive structure
• Reward and recognition
• Measurement of defects
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 Principle of TQM:
• “Prevention is better than cure”,
• “A stitch in time saves nine”

basic aspects of Quality control:-

a) Acceptance function
b) Preventive function (TQM)

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 Overview of Lean Management
• Lean Management:-“A systematic approach to
identifying and eliminating waste
(non-value-added activities) through continuous
improvement by flowing the product at the pull of
the customer in pursuit of perfection,”

• Lean Management is an integrated set of

activities designed to achieve high volume of
production using minimum inventories of raw
materials, work in process & other resources.

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 What is a waste?
1) Overproduction – Producing more than the
customer demands.
2) Waiting – This includes waiting for material,
information, equipment, tools, etc. Lean demands
that all resources are provided on a just-in-time
(JIT) basis – not too soon, not too late.

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 What is a waste?
3) Transportation – Material should be delivered
to its point of use, Instead of raw materials
being shipped from the vendor to a receiving
location, moved into a warehouse, and then
transported to the assembly line, Lean demands
that the material should be shipped directly from
the vendor to the location in the assembly line
where it will be used. The Lean term for this
technique is called point-of-use-storage (POUS).

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 What is a waste?
4) Non-Value-Added-Processing:
Reworking (the product or service should have
been done correctly the first time).

Inspecting (parts should have been produced

such that there is no or very little need for
inspection).

5) Excess Inventory – Related to overproduction

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 What is a waste?
6) Defects – Production defects and service
errors waste resources in four ways:
a) materials are consumed
b) the labor used to produce the part (or provide the
service) the first time cannot be recovered.
c) Labor is required to rework the product (or redo
the service)
d) labor is required to address any forthcoming
customer complaints.

7) Underutilized Manpower

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 Principles of Lean Management
1) Pull System – The technique for producing parts
at customer demand.

2) Work Cells – The technique of arranging

operations and/or people in a cell (U-shaped)
rather than in a traditional straight assembly line.
The cellular concept allows for better utilization of
people and improves communication.

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 Principles of Lean Management
3) Total Productive Maintenance (TPM)
TPM capitalizes on proactive and progressive
maintenance methodologies.
It results in:-
1. elimination of breakdowns,
2. reduction of production downtime,
3. improved utilization,
4. Higher throughput,
5. better product quality
6. lower operating costs
7. longer equipment life
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 Benefits of Lean Management
• Lead Time (Cycle Time) reduction
• Productivity enhancement
• Reduction in Work-In-Process Inventory
• Quality improvement
• Reduction in Space Utilization
• High employee involvement & morale

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 Impact of global competition
• Competition is good for the economy
• Customer has more options
• Impact on marketing strategies – Gifts, Lucky
draw, foreign trip etc.
• Role of Information technology – E- banking,
Mobile banking, electronic branch etc.
• “Survival of the fittest” will prevail in corporate
world.

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 Technological change
• Internet – Online shopping – Flipkart.com,
Jabong.com, snapdeal.com, E bay.com,
futurebazaar.com etc
• Use of SAP, ERP systems,
• Banking – RTGS & NEFT etc,
• E- commerce:- Facilitates the conduct of business
in paperless environment.
• Electronic data interchange (EDI):- Computer –
Computer exchange of business documents in a
standard format (E-mails instead of Courier / Fax
etc.)

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 Ethical & Environmental issues in OSCM

• Focus on quality
• Consistency
• Commitment
• Customer satisfaction
• Waste minimisation
• Effective utilisation of natural recourses
• Pollution control

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 Cause effect diagram
(Ishikawa Fish Bone Diagram)
• A fishbone diagram, also called a cause and effect
diagram or Ishikawa diagram. It is a visualization
tool for categorizing the potential causes of a
problem in order to identify its root causes

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 Cause effect diagram
(Ishikawa Fish Bone Diagram)

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 Basic Concepts of Kaizen
• The purpose of Kaizen goes beyond simple productivity
improvement. When done correctly, the process humanizes
the workplace, eliminates overly hard work, and teaches
people how to spot and eliminate waste in business
processes.
The continuous cycle of Kaizen activity has seven phases:
1. Identify an opportunity
2. Analyze the process
3. Develop an optimal solution
4. Implement the solution
5. Study the results
6. Standardize the solution
7. Plan for the future
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 Basic Concepts of Kaizen
Implementing Kaizen
To generate a Kaizen, everyone involved must
begin thinking about their work in a new way – in
terms of:

• Now: Present condition

• Next: Desired state
• New: How to reach that state

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 The 5 S
The 5 Steps are as follows:
1. Sort: Sort out & separate that which is needed &
not needed in the area.
2. Straighten: Arrange items that are needed so that
they are ready & easy to use. Clearly identify
locations for all items so that anyone can find
them & return them once the task is completed.
3. Shine: Clean the workplace & equipment on a
regular basis in order to maintain standards &
identify defects.

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 The 5 S
4. Standardise: Revisit the first three of the 5S on a
frequent basis and confirm the condition of the
standard procedures.
5. Sustain: Keep to the rules to maintain the
standard & continue to improve every day.

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 Quality Circle:-
The concept of QC originally began in the United States
and was exported to Japan in the 1950s.
Meaning
It is a work group of employees who meet regularly to
discuss their quality problems, investigate causes,
recommend solutions, and take corrective actions.
Generally, QC is a small group of employees belonging to
the same similar work area.

This is so because the employees doing the similar type of

work are well familiar to problems faced by them. The size
of the QC should not be too big so as to prevent some
members from participating meaningfully in its meetings.
Generally, six to eight members are considered the ideal
size of the QC.
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 Quality Circle:-
QC is formed to achieve the following objectives:

1. Improvement in quality of product manufactured

by the organisation.
2. Improvement in methods of production.
3. Development of employees participating in QC.
4. Promoting morale of employees.

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 Quality Circle:-
The main features of QC can be listed as follows:
1. Voluntary Groups: QC is a voluntary group of
employees generally coming from the same work
area. There is no pressure from anywhere on
employees to join QC.
2. Small Size: The size of the QC is generally small
consisting of six to eight members.
3. Regular Meeting: QC meetings are held once a
week for about an hour on regular basis. The
members meet during working hours usually at the
end of the working day in consultation with the
manager. The time of the meetings is usually fixed in
advance in consultation with the manager and
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 Quality Circle:-
The main features of QC can be listed as follows:
4. Independent Agenda: Each QC has its own agenda
with its own terms of reference. Accordingly, each
QC discusses its own problems and takes corrective
actions.
5. Quality Focused: As per the very nature and intent
of QC, it focuses exclusively on quality issues. This
is because the ultimate purpose of QC is
improvement in quality of product and working
life.

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 The End

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