Introduction to Operations Management

भारतीय प्रबंधन संस्थान शिलांग

Indian Institute of Management Shillong
The Operations Function
• Operations as a transformation process
• Operations as the technical core

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September भारतीय प्रबंधन संस्थान शिलांग
Operations as a Transformation Process

INPUT
Material
Machines OUTPUT
Labor TRANSFORMATION Goods
Management PROCESS Services
Capital

Feedback

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September भारतीय प्रबंधन संस्थान शिलांग
Transformation Processes
✓ Physical (manufacturing)

✓ Locational (transportation/ warehouse)

✓ Exchange (retail)

✓ Physiological (health care)

✓ Psychological (entertainment)

✓ Informational (communications)

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September भारतीय प्रबंधन संस्थान शिलांग
Operations as the Technical Core
Finance/Accounting

Production and Budgets

Inventory data Cost analysis
Capital budgeting requests Capital investments
Capacity expansion and Stockholder
Technology plans requirements
Orders for materials Product/Service
Production and delivery Availability
Schedules Quality Lead-time estimates
Requirements Design/ Status of order

Marketing
Suppliers

Performance specs Delivery schedules

Operations
Material availability Sales forecasts
Quality data Customer orders
Delivery schedules Customer feedback
Designs Promotions
Personnel needs
Hiring/firing
Skill sets
Training
Performance evaluations
Legal requirements
Job design/work
Union contract negotiations
measurement

Human Resources

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September भारतीय प्रबंधन संस्थान शिलांग
Historical Events in OM
✓ Industrial Revolution
✓ Scientific Management
✓ Human Relations
✓ Management Science
✓ Quality Revolution
✓ Globalization
✓ Information Age/Internet Revolution
✓ Green Revolution

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September भारतीय प्रबंधन संस्थान शिलांग
Continues…

Industrial Revolution
Steam engine 1769 James Watt
Division of labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney

Scientific Management
Principles 1911 Frederick W. Taylor
Time and motion studies 1911 Frank & Lillian Gilbreth
Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford

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September भारतीय प्रबंधन संस्थान शिलांग
Continues…

Human Relations
Hawthorne studies 1930 Elton Mayo
Motivation theories 1940s Abraham Maslow
1950s Frederick Hertzberg
1960s Douglas McGregor

Management Science
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, PERT/CPM, 1950s Operations research
Waiting line theory groups
MRP 1960s Joseph Orlicky, IBM

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September भारतीय प्रबंधन संस्थान शिलांग
Continues…

Quality Revolution
JIT 1970s Taiichi Ohno, Toyota
TQM 1980s W. Edwards Deming,
Joseph Juran, et. al.
Strategy and operations Skinner, Hayes
Reengineering 1990s Hammer, Champy
World Trade Organization 1990s Numerous countries
and companies

Globalization
WTO 1990s China, India
European Union and 2000s Emerging economics
Global supply chain
Outsourcing
Service science

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September भारतीय प्रबंधन संस्थान शिलांग
Continues…
Information Age/
Internet Revolution

Internet, WWW, ERP 1990s ARPANET, Tim

Supply chain Berners-Lee, SAP, i2
management, Technologies, ORACLE,
E-commerce 2000s Amazon, Yahoo, eBay, and
others

Green Revolution
Global warming Today Scientists, Statesmen,
Government
An inconvenient truth
KOYOTO
Paris agreement

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September भारतीय प्रबंधन संस्थान शिलांग
Operations for Goods and Services
Services – Economic activities that typically produce an
intangible product (such as education, entertainment, lodging,
government, financial, and health services)
• Manufacturers produce tangible product, services often
intangible
• Operations activities often very similar
• Distinction not always clear
• Few pure services

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September भारतीय प्रबंधन संस्थान शिलांग
Differences Between Goods and Services
CHARACTERISTICS OF SERVICES
Intangible: Ride in an airline seat
Produced and consumed simultaneously: Beauty salon
produces a haircut that is consumed as it is produced
Unique: Your investments and medical care are unique
High customer interaction: Often what the customer is
paying for (consulting, education)
Inconsistent product definition: Auto Insurance
changes with age and type of car
Often knowledge based: Legal, education, and medical
services are hard to automate
Services dispersed: Service may occur at retail store,
local office, house call, or via internet.
Quality may be hard to evaluate: Consulting,
education, and medical services
Reselling is unusual: Musical concert or medical care
CHARACTERISTICS OF GOODS
Tangible: The seat itself
Product can usually be kept in inventory (beauty care
products)
Similar products produced (iPods)
Limited customer involvement in production
Product standardized (iPhone)
Standard tangible product tends to make automation
feasible
Product typically produced at a fixed facility
Many aspects of quality for tangible products are easy
to evaluate (strength of a bolt)
Product often has some residual value
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September भारतीय प्रबंधन संस्थान शिलांग
Categories of E-Commerce

Business Consumer

B2B B2C
Business Amazon.com
Commerceone.com

C2B C2C
Consumer
Priceline.com eBay.com

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September भारतीय प्रबंधन संस्थान शिलांग
A New Value Chain
(a) Traditional Value Chain

Wholesaler/
Manufacturer Retailer Consumer
distributor

(b) Intermediaries Eliminated

Wholesaler/
Manufacturer Retailer Consumer
distributor

(b) New Intermediary Introduced

Manufacturer E-Retailer Consumer

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September भारतीय प्रबंधन संस्थान शिलांग
An Integrated Value Chain

Customer Manufacturer Supplier

Flow of information (customer order)

Flow of product (order fulfillment)

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September भारतीय प्रबंधन संस्थान शिलांग
Competitiveness
The degree to which a nation can produce goods and services
that meet the test of international markets while simultaneously
maintaining or expanding the real incomes of its citizens.

Measures of Competitiveness

✓ Productivity
✓ GDP (Gross domestic product) growth
✓ Technological infrastructure
✓ Quality of education
✓ Efficiency of government

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September भारतीय प्रबंधन संस्थान शिलांग
Productivity

Output
Productivity =
Input
Productivity improves when firms:
✓ Become more efficient
✓ Downsize
✓ Expand

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September भारतीय प्रबंधन संस्थान शिलांग
Types of Productivity

✓ Single-Factor Productivity

Output
Productivity = Single Input

✓ Multi-Factor Productivity

Output
Productivity = Sum of Inputs

✓ Total Factor Productivity

Output
Productivity = Sum of all Inputs

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September भारतीय प्रबंधन संस्थान शिलांग
Improving Productivity at Starbucks
A team of 10 analysts continually look
for ways to shave time. Some
improvements:

Stop requiring signatures on improvements

Operations Saved 8 have
seconds per
helped
credit card purchases under increasetransaction
Starbucks yearly revenue per
$25 outlet by $250,000 to $1,000,000.
Change the size ofProductivity
the ice Saved 14byseconds
has improved 27%, orper
scoop drink
about 4.5% per year.
New espresso machines Saved 12 seconds per
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September भारतीय प्रबंधन संस्थान शिलांग
Impact of Covid-19 on manufacturing
industry
Manufacturing output contracted by half from March 2020 –
March 2021. Due to this Indian economy shrunk by 7% in the first
quarter of 2020 – 21.
• Supply chain disruptions
• Raw material shortages
• Capacity underutilization
• Labour shortage
• Weaker demand
• Special regulatory restrictions
• Liquidity crunch

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September भारतीय प्रबंधन संस्थान शिलांग
Current Challenges in OM
• Localization or Globalization
• Supply-chain partnering or sustainable supply-chain partnering
• Sustainability
• Rapid product development or responsible consumption
• Mass customization or standardization for responsible
consumption
• Lean operations or green operations

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September भारतीय प्रबंधन संस्थान शिलांग