BMGT 25 CHAPTER 1 Schematic production system

GLOBALIZATION AND PRODUCTION Inputs

STRATEGY  men
Operation management  materials
 Machine
 it is the process which combines and  Information
transforms various resources used in the  Capital
production operation subsystem of the
organization into value-added products and Transformation process
services in a controlled manner as a per the  Production
policies of the organization.  design
 It is the part of the organization which is  process planning
concerned with the transformation of range  production control
of inputs into the required products or  Maintenance
services having requisite quality level
 Operation management the set of Output
interrelated management activities which are
 Products
involved in manufacturing a certain product is  Services
called production management
Continuous inventory
Input transformation process-output
 Quality
Objective of operations management to produce
 cost
goods and services of the right quality and quantity
 feedback information
at the right time and write manufacturing cost Concept of operation management
RIGHT Quality the quality of product is established
Operation is defined in terms of the mission it
based upon the customer needs the right quality is serves for the organization technology it employs
not necessarily best quality. and the human and managerial process it involves
Right quantity the manufacturing organization
Manufacturing operations is a conversion process
should produce the products in right number if that includes manufacturing yields a tangible
there are produced in excess of demand the capital output a product.
will block up in the form of inventory and if the
quantity is produced in short of them and leads to Service operation is a conversion process that
shortage of products includes service yields an intangible output read a
performance on effort.
Right time timeliness of delivery is one of the
important parameter to judge the effectiveness of Good operations
production department the production department
 tangible products
has to make the optimal utilization of input
 less customer contact
resources to achieve its objective
 more freelance on capital investment and
Right manufacturing cost manufacturing costs are specialized equipment
established before the production is actually  less reliance on skilled labor
manufactured and all attempts should be made to
Service operations
produce the products at pre-established cost so as
to reduce the variation between actual and  intangible products
standard pre-established cost  more customer contact
 less on capital investment and specialized
Organizing to produce goods and services
equipment
 -marketing  more reliance on skilled labor
 -production or operation
 -finance and accounting
The supply chain management
 a global network of organization and
activities that supply affirmed with good and
services
 The supply chain also represents the steps it
takes to get the product or services from its
original state to the customer
FARMER PRODUCER BOTLER
DISTRIBUTION RETAILER
FOUR REASONS
 OM is one of the three major function of any
organizations and it is integrally related to all
the other business functions all organizations
market cell finance account and produce
operate
 we study patient management because you
want to know how products and services are
produced the production function is the
segment of our society that creates the
products and services we use
 we study operation management to
understand that operation management do
regardless of your job in an organization you
can perform better if you understand what
operation management do
 we study operation management because it
is such costly part of an organization a large
percentage of the revenue of most themes is
spent in the operation management
functions
WHAT OPERATIONS DO
Task of the operation manager
Planning is the activity that establishes a course of
action and guide future decision making
Leading refers to the process of motivation
communication and leadership
Organizing is the activities that established a
structure of task and authority
Controlling is the activities that assure the actual
performance in accordance with planned
performance
Selling is a process of recruiting selecting and
training of men involves manning the
organizational structure through proper and
effective evaluation selection and development of
people to perform the roles,
HERITAGE OF OPERATION MANAGEMENT
Cost focus quality focus
OPERATION FOR GOODS AND SEVICES
Services vs goods
Operation for goods and services
characteristics of services
 Intangible ride in airlines seat
 Produced and consumed simultaneously
beauty salon produces a haircut that is
consumed at it is produced
unique your investment and medical care our
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
CHARACTERISTICS OF GOODS
 Tangible the sits itself
 the products can usually be kept in inventory
(beauty care products)
 similar products produced (Ipads)
 limited customer investment in production
 products standardized (Iphone)
Characteristics of services
 often knowledge-based legal education and
medical services are hard to automate
 services disperse add services may occur at
retail store local office house call her via
internet
 quality may be hard to evaluate
consulting education and medical
services
 reselling is unusual musical concert or
medical care
Characteristics of goods
 standard tangible product tends to make
automation in civil
 product typically produced at a fixed facility
 many aspects for quality for tangible products
are easy to evaluate strength of fault
 product of and has some residual value
Productivity the effectiveness and efficiency of
reductive effort specially in industry as measured in
terms of the rate of output per unit of input
THE PRODUCTIVITY LEVEL
 European productivity agency (EPA) has
defined productivity as:
 An attitude of mind it is the mentality of
progress of the constant improvement of that
which exist
 It is the certainty of being able to do better
today than yesterday and continuously
Factor influencing productivity
 Internal-Controllable
 External-uncontrollable
Internal factors
 Product factor in terms of productivity means
the extent to which the product meets output
requirements product is judge by its
usefulness to product cost benefit factor of a
product can be enhanced by increasing the
benefit of the same costs by reducing costs for
the same benefit
 Plant and equipment this play a prominent
role in enhancing the productivity the
increased availability of the plant through
proper maintenance and reduction of idle
time increases the productivity can be
increased by paying proper attention to utilize
a shin age modernization cause investments
etc.
Factors to be considered are:
 Size and capacity of the plant
 timely supply and quality of inputs
 production planning and control
 repairs and maintenance
 waste reduction and
 efficient material handling system
Internal factors
Technology innovative and latest technology
improves productivity to a greater extent
automation and information technology helps to
achieve improvements in material handling storage
communication system and quality control
Material and energy efforts to reduce materials
and energy consumption brings about considerable
improvement in production
Factors to be considered
 Selection of quality material and white
material
 control of waste and scrap
 effective stock control development of
sources of supply optimum energy utilization
and energy savings
Human factors productivity is basically dependent
upon human competence and skill ability to work
effectively is governed by various factors such as
education training experience aptitude of the
motivation of employees will influence productivity
Work methods in proving the ways in which the
work is done or methods improves productivity
work study and industrial engineering techniques
and training are the areas which improved the work
methods which in term enhance the productivity
Management style this influence the organizational
design communication in organization policy and
procedure a flexible and dynamic management
style is a better approach to achieve higher
productivity
External factor
Structural adjustments structural adjustment
includes both economic and social changes
Natural resources manpower land and raw
material are vital to the productivity improvement
Government and infrastructure government
policies and programs are significant to productivity
practices of government agencies transport and
communication power fiscal policies interest rates
taxes influence productivity to the greater extent
Productivity measurement
Single factor productivity
-productivity =unit produced/ over input use
- multifactor productivity – productivity =
output/labor + material + energy + Capital +
miscellaneous
Productivity variables
 Labor contributes about 10% of the annual
increase
 Capital which contributes about 38% of the
annual increase
 Management which contributes about 52% of
annual increase
Productivity in the service sectors
Productivity measurement in the service sector is
more difficult to hunter where the end product is
hard to define how much more of improving it this
is due to the nature of work in this sector
 work is typically labor-intensive teaching for
example
 work is frequently individually process
customize and unique
 work is often an intellectual task performed by
professional medical diagnosis
 work is often difficult to mechanize and
automate
 work is difficult to evaluate for quality
New challenges in operation management
 Global focus supply
 chain partnering
 Sustainability
 rapid product development
 mass customization
 just-in-time performance
 empowered employees
Ethics social responsibility and sustainability
 Develop and produce safe high quality green
products
 Train retain and motivate employees in a safe
workplace
 Honor stakeholder commitments
BMGT 25 CHAPTER 2
GLOBALIZATION AND PRODUCTION
STRATEGY
OUTLINE:
 Global view of operations and supply chains
 Developing missions and strategies
 Achieving competitive advantage through
operations
 Issues in operations strategy
 Strategy development and implementations
 Strategic planning, core competencies and
outsourcing
 Global operations strategy option
PRODUCTION STRATEGY
 A broad long term action plans
 Made of achieving the main objectives of
organization
 Road map of a product
(blueprint of the company in producing products)
GLOBALIZATION
 Business is not only operating locally but
worldwide
 Customers, talents and suppliers are
worldwide
 New standards of global competitiveness:
impact, quality variety, customization,
convenience, timeliness, and cost
6 REASONS WHY DOMESTIC BUSINESS
OPERATIONS TO INTERNATIONAL OPERATIONS:
 Improve supply chain
 Reduce cost (labour, taxes, tariffs etc.)
 Improve operations
 Understand markets
 Improve products
 Attract and retain global talent
1. IMPROVE OF SUPPLY CHAIN
 improved by locating facilities in countries
where unique resources are available
 resources maybe human resource
expertise, low cost labour, or raw
materials
2. REDUCE COST
 seek to take advantage of tangible
opportunities to reduce cost
 less stringent (less strict) government
regulations on a wide variety of operation
practices
Environmental, control, health and safety etc.
3. IMPROVE OPERATIONS
 operations learn from better understanding
of differences in the way business is handle in
different countries
4. UNDERSTAND MARKETS
 International operations require interaction
with foreign customers, suppliers, and other
competitive business, international firms
inevitably learn about opportunities for new
products and services
5. IMPROVE PRODUCT
 firms serve themselves and their customers
well when they remain open to the free flow
of ideas
 many market = many productions which
leads to product improvement
6. ATTRACT AND RETAIN GLOBAL TALENT
 can attract or retain better employees by
offering more employment opportunities
 in all functional areas and areas of expertise
worldwide, people are needed
CULTURAL AND ETHICAL ISSUES
 There are different cultures as well as ethical
issues in different nations which affect the
production of the business in either positive
or negative way (if there’s no compatibility
from the culture or ethics of a certain
country and company, the production might
not be growing)
DEVELOPING MISSIONS AND STRATEGIES
MISSION – to know where it is going
3 COMPETITIVE ADVANTAGE THROUGH
OPERATIONS
 Competing in differentiation
 Competing in low-cost
 Competing in response
COMPETING ON DIFFERENTIATION
 Concerned in providing uniqueness
 Opportunities for creating uniqueness are not
located within a particular function or activity
but arise in virtually everything the firm does
(what separate my business to other
competitors?)
COMPETING ON COST
 Entails achieving maximum value as defined
by customers
 It requires examining each of the 10 OM
DECISIONS (product, quality, process,
location, layout, human resource, supply
chain, inventory, scheduling, and
maintenance) to drive down cost while
meeting customer expectations of value
COMPETING IN RESPONSE
 Flexible response, but it also refers to reliable
and quick response
 Includes the entire range of values
related to timely product development
and delivery

(reason for your existence, where will your

business go?)

 Company’s reason for its existence

 Gives direction so that management knows
where it is going
 Purpose of the firm- what it will contribute to
the society in general
 Answers the question “what business are
in?”

STRATEGY – how to get there OPERATIONS DECISIONS

(what are your design process to be the no. 1?)  Strategic decision
 Tactical decisions
 The means to achieve the mission of any  Implementation
organization
 The course of action or the action plan to STRATEGIC DECISIONS
achieve the mission
 LONG TERM PLANNING
 It should answer the question “how are we
 IDENTIFYING GOALS
going to get there?”
  Depicted at the top-most level 4. FLEXIBILITY
 Can be described as broad scale, long-term
 changing customer needs adaption in
planning
terms of product range and varying
TACTICAL DECISIONS demand
 to cope with capacity shortfalls due to
 MIDTERM PLANNING
equipment breakdown or component
 DEVELOPING SOLUTIONS
shortage
 Tactics, how to pursue goals
 Identifying solutions ready for ASPECT OF BUSINESS TO CREATE AND IMPLEMENT
implementation STRATEGIES
 Rarely address planning horizons longer than
 SWOT ANALYSIS
a single year, and may propose solutions only
a few weeks in length Strengths, weaknesses (internal) opportunities,
threats (external)
IMPLEMENTATION
STRATEGY DEVELOPMENT PROCESS
 SHORT TERM PLANNING
 TAKING ACTIONS  Analyse the environment
 Bottom level of the hierarchy of decision
making but not less important (identify SWOT analysis, understand the
 Accepts solutions identified at the tactical environment, customers, industry and
level and puts them into action competitors)
 Guiding action, sometimes referred to as
 Determine the corporate mission
the operational level of hierarchy
(state the reason for firm existence and identify
ISSUES IN OPERATIONS STRATEGY
the value it wishes to create)
1. COST
 Form a strategy
 Cost base lower than competition
(build a competitive advantage, such as low price,
 If price is equal (earn profit than rivals)
design or volume flexibility, quality, quick delivery,
 If price is lower (gain market share)
dependability, after sales services or broad
 Market niche (identify the market)
product lines

MAJOR CATEGORIES OF COST

 Staff
 Facilities (including overheads)
 Materials
2. TIME
 time delay or speed of operation
 time between a customer request for a
product/service and then receiving that
product/service
 speed is an important factor in making a
choice which organization to use
5 P’s STRATEGY IMPLEMENTATION
1. PURPOSE
 the more clarity that exists the more likely
to achieve the goal
2. POINT OF ENTRY
 the support that the process has from
within the hierarchy of the organization is
central to the implementation success
3. PROCESS

3. QUALITY  any formulation process must be explicit

 covers both quality of product/service 4. PROJECT MANAGEMENT

itself and the quality of the process that  MONITORING THE IMPROVEMENT
delivers the product/service
  basic disciplines: controls, communication
mechanisms, reviews and so on should be
in place

5. PARTICIPATION

 selection of staff to participate in the

implementation process is also critical

KEY EXTERNAL FACTORS GLOBAL OPERATIONS

 ECONOMIC CONDITIONS  Globalization describes businesses

 POLITICAL CONDITIONS - (government deployment of facilities and operations
requirements) around the globe
 LEGAL ENVIRONMENT  Globalization can be defined as a process
 MARKET - (customers) in which geographic distance becomes a
 COMPETITION factor of diminishing importance and
 TECHNOLOGY maintenance of cross border economic,
political and socio-cultural relations
KEY INTERNAL FACTORS
4 DEVELOPMENT TOWARDS GLOBALIZATION
 CUSTOMERS
 TECHNOLOGY 1. improved transportation and communication
 SUPPLIERS technologies
 HUMAN RESOURCES 2. opened financial systems
 PRODUCTS AND SERVICES
 FACILITIES AND EQUIPMENT 3. increased demand for imports
 FINANCIAL RESOURCES
4. reduced import quotas and other trade barriers
BUILDING AND STAFFING THE
DEFINING GLOBAL OPERATIONS
ORGANIZATION
INTERNATIONAL BUSINESS
 STEP 1: formulating the strategy
 STEP 2: group the activities based on  A firm that engages in cross-border
relationships into an organizational transactions
structure
 STEP 3: recruit the right people and fill up MULTINATIONAL CORPORATION (MNC)
the positions in the structure  A firm that has extensive involvement in
STRATEGIC PLANNING, CORE COMPETENCIES, international business, owning or
AND OUTSOURCING controlling facilities in more than one
country
 CORE COMPETENCIES
GLOBAL COMPANY
Pertains to the strengths (what they do as well as
or better than their competitor)  Integrates operations from different
countries, and views world as a single
 OUTSOURCING marketplace
Transferring activities that have traditionally by an TRANSNATIONAL COMPANY
internal to external suppliers
 Seeks to combine the benefits of global
Contract manufacturing scale efficiencies with the benefits of local
responsiveness
INTERNATIONAL OPERATIONS STRATEGIES
MULTI-DOMESTIC STRATEGY
 Decisions are decentralized to each
country to enhance local responsiveness
GLOBAL STRATEGY
 Decisions are centralized and headquarters
coordinates the standardization and
learning between facilities
TRANSNATIONAL STRATEGIES
 Seeks to achieve both global efficiency and
local responsiveness
INTERNATIONAL STRATEGY
 Global markets are penetrated using
exports and licenses
BMGT 25 CHAPTER 3
FORECASTING
 the art and science of predicting future
events
 involve taking historical data such as past
sales and projecting them into the future
with mathematical model
PRINCIPLES OF FORECASTING
 estimates of the occurrence timing or
magnitude of uncertain future events
 essential for the smooth operations of
business organizations rarely perfect
 more accurate for shorter than longer
time periods
FORECASTING TIME HORIZONS
THREE CATEGORIES OF FUTURE TIME HORIZON
1. SHORT RANGE FORECAST
 these forecasts as a time span of up to
one year but is generally less than three
months
 it is used for planning purchasing job
scheduling workforce levels job
assignments and production levels
2. MEDIUM RANGE FORECAST
 also known as intermediate forecast
general is pants from 3 months to 3 year
 it is useful in sales planning production
planning and budgeting cash budgeting
and analysis of various operation plans
3. LONG RANGE FORECAST
 3 years or more in time span long range
are used in planning for new products
capital expenditure facility location or
expansion and research and
development
TYPES OF FORECAST
ECONOMIC FORECAST
 address the business cycle by predicting
inflation rates money supplies housing
starts and other planning indicators
TECHNOLOGICAL FORECAST
 are concerned with rates of technological
progress which can result in the birth of
exciting new products acquiring new
plants and equipment
DEMAND FORECAST
 projection of demand for a company's
products or services forecast or decision
so managers need immediate and
accurate information about real them
and they need them and driving forecast
where the focus is on rapidly identifying
and tracking customer desires
Strategic importance of forecasting
SUPPLY CHAIN
 supply chain management goods supplier
relation and ensuing advantages in
product innovation cause and speed to
market depend on accurate forecast
HUMAN RESOURCES
 hiring training and laying of workers all
depend on anticipated demand if the
human resources department must hire
additional workers without warning the
amount of training declines and the
quality of the workforce suffers
 CAPACITY

 when capacity is inadequate the resulting Types of qualitative approach

shortage can lead to loss of customers
Executive opinion
and market share
 Characteristics - a group of manager middle and
7 steps in the forecasting system come up with a forecast
1 determine the use of forecast
2 select the items to be forecasted Strength - good for strategic or new products
3 determine the time horizon off the forecasting
forecast
Weaknesses - one person's opinion can dominate
4 select the forecasting models
the forecast
5 gather the data needed to make the
forecast
6 make the forecast
7 validate and implement the result MARKET RESEARCH

Characteristics - uses surveys and interviews to

FORECASTING APPROACH identify customer preference

Quantitative analysis Strengths - good determinants of customer

preferences
 use variety of mathematical models that
rely on historical data and associated Weaknesses - it can be difficult to develop a good
variables to forecast demand questionnaire

Qualitative analysis

 incorporate such factors as the decision DELPHI METHOD

makers in tuition emotions personal Characteristics - six to develop a consensus among
experiences and values system in a group of experts
reaching a forecast
Strength - excellent for forecasting long - term
product demand
Quantitative methods
Weaknesses - time consuming to develop
Characteristics - based on human judgment opinion
subjective and non-mathematical

Strengths - can incorporate latest changes in the OVERVIEW QUANTITATIVE MODEL

environment and inside information
Time-series model
Weaknesses - can bias the forecast and reduce
1 naive approach
forecast accuracy
2 moving average

3 exponential smoothing
Quantitative methods
4 trend projection
Characteristics - based on mathematics
quantitative in nature Associative model
Strengths - consistent and objective able to 5 linear regression
consider much information and data at one time
Time series forecasting
Weaknesses - often quantifiable data are not
available only as good as the data on which they are - a time series based on the sequence of evenly
based spaced (weekly, monthly, quarterly) data point
Decomposition of time series Danny supply once a three moving average
forecast including a forecast for May to October
1. Trend
2019
 is the gradual upward or downward
Write to SCHOOL WORKS
movement of the data overtime. Change
in income, population, age distribution or Weighted moving Average
cultural views may account for movement
in trend.  weights can be used to place more
emphasis on the recent values. This
2. Seasonality practice makes forecasting techniques
more responsive to changes because
 is the data pattern that repeats itself after
more recent periods
a period of days, weeks month or
quarters. There are six common
seasonality pattern.

The composition of time series

3. Cycles - are patterns in the data that occur every

several years they are usually tied into the business
cycle and are of major importance in short-term
business analysis and planning

4. random variation - early beliefs in the data cost

by chance and do you know show all situations
they follow no discernible pattern so they
cannot be predicted

Quantitative methods

Naive approach - the simplest way to forecast is to

assume that demand in the next period Will be
equal to demand in the most recent period

Moving averages

 a forecast uses a number of historical

actual data values to generate a forecast
moving averages are useful if we can
assume that the market
 demands will stay fairly steady overtime
CHAPTER 4
PRODUCT DESIGN
 deals with conversion of ideas into reality
 mother of all operations processes in an
organization
(ready to convert ideas to reality that fits to the
needs or wants of the customers)
OBJECTIVES OF PRODUCT DESIGN
 providing value to the customer
 return on investment to company
 competitiveness
GOODS AND SERVICES SELECTION
1. PRODUCT SELECTION
 simply choosing what goods/services to offer
to the customers
 long product line
 one product line
PRODUCT DESIGN AND DEVELOPMENT
 provides link between marketing, customer
needs and expectations and the activities
required to manufacture the product
BUSINESS ORGANIZATIONS HAVE TO:
 design
 develop
 introduce new products as a survival and
growth strategy
GENERATION OF NEW RODUCT OPPORTUNITIES
FACTORS INFLUENCING MARKET OPPORTUNITIES
1. ECONOMIC CHANGE: short-rub economic
phenomena have influenced long-term economic
situations (increasing fuel or basic commodities’
prices)
2. SOCIOLOGICAL AND DEMOGRAPHIC CHANGE:
this affects consumer preference of products to
buy (more women are now working)
3. TECHNOLOGICAL CHANGE: the impact of
information highway called the internet to
businesses of today
4. POLITICAL/LEGAL CHANGE: the advent of
globalization opened doors to new trade
agreements (BFAD, DTI, DENR limits the acts of
companies)
5. OTHERS: new market practice, new standards to
production, suppliers, and distributors
STEPS IN PRODUCT AND SERVICE DESIGN (from
concept to specification)
1. GENERATING IDEAS (CONCEPT GENERATION):
transforms an idea for a product or service into a
concept which captures the nature of the product
or services and provides an overall specification for
its design (brainstorming)
SOURCES:
 market research
 customer viewpoints
 staff
 Research & Development department
 Competitors or relevant developments in
new technology
2. PRODUCT SCREENING (CONCEPT SCREENING)
 Involves examining its feasibility, acceptability,
and vulnerability to ensure that it is sensible
addition to the company’s product or services
portfolio
THE SCREENING PROCESS
 Market analysis
 Economic analysis
 Technical analysis
3. PRELIMINARY DESIGN
 Objective is to have first attempt at both
specifying the component products and
services in the package, defining the processes
to create the package
 Can be achieved in the aid of PROCESS FLOW
CHARTS
4. FINAL DESIGN
 Involves the use of prototype to test the
preliminary design until a final design can be
chosen
 outcome of this stage is fully developed
specification for the package of products and
services, as well as a specification for the
processes that will make and deliver them to
customers
5. PRODUCT DEVELOPMENT OPERATIONS STRATEGY ON PRODUCT AND
SERVICE DESIGN
 Is the process of developing a new
product with all the features, which are 1. invest more in research and development
essential for effective use in the field, and
2. emphasize more on long-term performance
designing it accordingly
than in short-term performance
6. INTRODUCTION TO THE MARKET
3. work toward continual/gradual improvements
 Where the product is introduced to the rather than using the big bang approach
market through promotional activities
4. work to shorten the product life cycle
7. EVALUATION

 Customer’s reaction towards the new

product
 Is the product well received by the target
market?

8. COMPUTER-AIDED DESIGN (CAD)

 Uses computer graphics software in designing

products at a computer work station
o Shorter design time
o Database availability
o Improved product quality
o Reduced production cost

9. ENVIRONMENTALLY FRIENDLY DESIGNS

 One of the industry’s greatest strategic

challenge

BENEFITS:

 Safe and environmentally sound products

 Minimum raw material and energy waste
 Product differentiation
 Environmental liability reduction
 Cost-effective compliance with environmental
regulations
 Recognition as good corporate citizen

OVERVIEW OF SERVICE DESIGN

 One major reason why productivity

improvements in services are so slow is
because both design and delivery of
service offerings include customer
interaction
 Forces the firm to come up with a menu
of service products which the customer
can also modify to suit their tastes and
preferences. Design specification then can
take the form of a contract or narrative
description with visuals