Introduction to Operations Management

Suhas Rane

7/6/2011

ranesuhas@hotmail.com

1

Agenda
Historical Development of OM
Taylor, Henry Ford, Hawthorne Studies Operations Research, Computers & Adv. Opn. Technology.

OM in the Organisation Chart
Six Basic Functions of Business O M. Definition Scope of Operations Mgmt.

Mfg. Industry v/s Service Industry Production Systems
“Input –Transformation –Output” Relationships Productivity Measurements Decisions & Activities in OM
7/6/2011 ranesuhas@hotmail.com 2

Business

What’s the purpose of business ?
Why are we in business ?

………. to create wealth
(Adam Smith )
7/6/2011 ranesuhas@hotmail.com 3

6.. CREATION FINANCE : : Product Selections / Idea Generation Managing Resources. Buying of required (Eqpt.SIX BASIC FUNCTIONS OF BUSINESS 1. 4. H.com 4 . keeping Financial Records. 2.R. 5. Capital Acqn. 7/6/2011 ranesuhas@hotmail. Selling & Marketing (reaching the Customer) . + Material + Services) Changing Raw Materials PERSONNEL : PURCHASING: CONVERSION/ : (PRODUCTION) DISTRIBUTION : to Economic Goods.. 3. Labour Relations.

Evolution of OM Phases in evolution of OM     Craft Production Mass Production Lean Management Mass Customisation 7/6/2011 ranesuhas@hotmail.com 5 .

Features of Diff. More automation. Mass Production : Low skill. DC Car. HUL Lux. CRAFT System : Skill based. Investmt. but high unit cost of prodn. Low Cap. (MH Husain Painting. Customization. Space-Lab) 2. Nano. (Tata Salt. Systems 1. Manual. SSC Course) 7/6/2011 ranesuhas@hotmail. Prod.com 6 . Large Qty. Standardization.. but low unit cost of prodn. Small Qty.. High Cap Invst..

com 7 . Single Pc. No fat (of mainly inventory) Leopard Multi-skilled staff. Godrej Furniture) 7/6/2011 ranesuhas@hotmail. System) 4. TQM. Mass Customization : High Flexibility Limited Customization at affordable extra cost (Dell. Prod. Quick change-over (SMED). Systems 3. Asian Paints. Flow. LEAN System : All muscle.Features of Diff. Kanban (Toyota Prod.

OM Gurus  F.com 8 . ◦ Supervision …. strength. Not for keeping watch. Management ◦ Each worker to be trained for suitable job (according to his skill. Routing Sheets. but to arrange facilities. of Labour  Synergy Effect ) ◦ Standard Output Norms set per worker. ◦ Instructions Card. and learning ability  Divn.Taylor (1856-1915) – Father of Sc.W. Material Specs -All Standardized. ◦ Incentive for motivation & increasing productivity 7/6/2011 ranesuhas@hotmail.

OM Gurus  Henry Ford (1913) – Moving Assembly Line concept  Standardized product design  Mechanized assembly line  Specialized labour  Interchangeable parts  Result : Av. labour per chassis reduced from 12.5 hrs to 93 min. 7/6/2011 ranesuhas@hotmail.com 9 .

Definition Operations Management is the effective and efficient management of processes.com 10 . 7/6/2011 ranesuhas@hotmail. M.O. The objective of a process is to add value by conversion from input to output. A PROCESS has an input and value added output.

forms Physical :  Locational :  Exchange :  Physiological:  Psychological:  Informational:  as in manufacturing operations as in transportation operations as in retail operations as in health care as in entertainment as in communication Is there any Business / Industry where an operation is not involved? 7/6/2011 ranesuhas@hotmail.Transformation Processes – Diff.com 11 .

Operations as a Transformation Process INPUT •Material •Machines •Labor •Management •Capital TRANSFORMATION PROCESS OUTPUT •Goods •Services Feedback 7/6/2011 ranesuhas@hotmail.com 12 .

BLDG PLANT.com 13 . Motivates in order to PRODUCE OUTPUT PRODUCTS AND SERVICES 7/6/2011 ranesuhas@hotmail.INPUT RESOURCES LAND. Controls. Coordinates. M/C MATERIAL ENERGY MANPOWER OPERATIONS MANAGEMENT Obtains the facts Plans. Directs.

v/s Services – What’s the difference? Business Organization Mfg. Industry Service Industry Creation of Goods Providing Services Production Mgmt Operations Mgmt 7/6/2011 ranesuhas@hotmail.Mfg.com 14 .

or Better Facilities Low / No Customer involvement in Conversion Process More Mind Skill / Labour Oriented Near Customer 5.com 15 . 6. 2. Customisation Step by step conversion of Material Tangible & Stockable Output Mass Production with few variations 4.Mfg. Services Service to satisfy customer Non-Stockable Output Max. Less Labour Factory Location – Near RM or Market. v/s Services – What’s the difference? Manufacturing 1. 3. Direct interaction between Customer and Process 7/6/2011 ranesuhas@hotmail. More M/c Oriented.

Fill orders (exchange) Storage and redistribution 7/6/2011 Satisfied customers College or university Department store Distribution Centre High school graduates Shoppers Educated individuals Satisfied customers SKUs Fast delivery. Stimulating environment Imparting knowledge and skills (informational) Attract shoppers. classrooms Displays of goods. wait-staff. equipment. engine parts Patients Resources Transformation Fn. of cars (physical) Health care (physiological) High-quality cars Healthy individuals Restaurant Hungry customers Well-prepared. Promote products. workers MDs.(s) Typical Desired Output Automobile Factory Hospital Tools. chef.“Input –Transformation –Output” Relationships System Primary Inputs Sheet steel. sales clerks Storage bins.com . medical equipment Food. stock-pickers Fabrication and Assy. nurses. availability of SKUs 16 ranesuhas@hotmail. Well-served food. environment Teachers. books.

Production Planning & Control Inventory Control Quality Control Method Study / Work Study Maintenance & Replacement 7/6/2011 ranesuhas@hotmail. 5. Long Term / Strategic Decisions 1. 3. 5. Product Selection & Design Process Selection & Planning Facilities Location Facilities Layout Capacity Planning Short Term / Operational Decisions 1. 4. 2. 4.com 17 . 3. 2.Scope of Operations Mgmt.

Strategic issues in Operations Management 7/6/2011 ranesuhas@hotmail.com 18 .

Operations – 80-90% Hidden .

The Value Equation Performance Value  price Quality  Timeliness  Flexibilit y  Innovation Value  price Q T  F  I Value  P .

Maximizing Value Addition in Operations .

◦ Provide customers with additional relevant information. ◦ Provide faster service. ◦ Customize the product to the customer’s specific needs.Scope for Adding Value for the Customer ◦ Reduce product costs to customer. ◦ Make the product more readily available. .

Controlling costs across the board. How fast a firm can produce a new product line. How products are delivered and supported.Strategic Priorities Type Cost Quality Delivery Flexibility Priority Providing low price products. Providing high quality products. Service . Providing a wide variety of products (mass customization). Providing products reliably and quickly. Focus is on product and process quality. Providing “value-added” service.

Mg. ◦ Location: Where do we locate them? ◦ Capacity : How big do we make the facilities? ◦ Vertical Integration: Which part of the supply chain do we choose to control ourselves? ◦ Process Technology : What type of process(es) do we install to make the products? .Questions to be resolved in Op.

measure and monitor quality in the organization? ◦ Policies & Procedures : How work will be performed and how decisions will be made? ◦ Organization Structure : What hierarchical structure will we choose for the organization? . Mg.Questions to be resolved in Op. - ◦ Workforce : Whom do we hire? ◦ Quality Management : How will we define.

Productivity Concepts 7/6/2011 ranesuhas@hotmail.com 26 .

of pcs.com 27 ./hr. No. Input 7/6/2011 ranesuhas@hotmail.Production & Productivity Production  Output (in No of Units)   Productivity Output  -----------.

Three Main Productivity Indices 7/6/2011 ranesuhas@hotmail.com 28 .

per KW Unit of El.Out put per Man Hour .Kgs. (e.M.No of Screws per Kg of wire) . . Power    Boiler .com 29 .Productivity Measures ( Output in terms of Input)   Machines . of Rubber cured / Kg of steam used 7/6/2011 ranesuhas@hotmail.g.No of units produced per input of R.Out put per Machine Hour Men Materials Power .No of Pcs.

of sugar produced / Ton of sugar-cane crushed  Fabrication - Tons of Fabrication / Kg.Productivity of an Organization  Sugar Mill - Kg. of Welding Rod 7/6/2011 ranesuhas@hotmail.com 30 .

Diesel   Pharma. OR Ton-km / 1000 Lit. Rs Order booked / MR /Month 7/6/2011 ranesuhas@hotmail.Ton-km / Vehicle/ Month.com 31 .Productivity of a Service Function Transporter . Marketing Div.

of meat per kg.Service Industry : Productivity Measures Business Restaurant Retail Store Productivity Measure Customers (meals) per hour Sale per Sq.com 32 . foot Chicken farm Utility plant Paper mill Kg. of feed Kilowatts per ton of coal Tons of paper per ton of wood 7/6/2011 ranesuhas@hotmail.

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