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Amity Business School

MBA, Semester II Operations Management


Dr. Sumeet Singh Jasial

Amity Business School

The Hard Rock Cafe


First opened in 1971
Now 110 restaurants in over 40 countries

Rock music memorabilia Creates value in the form of good food and entertainment 3,500+ custom meals per day in Orlando How does an item get on the menu? Role of the Operations Manager
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What Is Operations Management?


Production is the creation of goods and services Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs
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Organizing to Produce Goods and Services


Essential functions:
Marketing generates demand Production/operations creates the product Finance/accounting tracks how well the organization is doing, pays bills, collects the money

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Organizational Charts
Commercial Bank
Operations
Teller Scheduling Check Clearing Collection Transaction processing Facilities design/layout Vault operations Maintenance Security

Finance
Investments Security Real estate Accounting

Marketing
Loans Commercial Industrial Financial Personal Mortgage Trust Department

Auditing

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Airline

Operations
Ground support equipment Maintenance Ground Operations Facility maintenance Catering Flight Operations Crew scheduling Flying Communications Dispatching Management science

Finance/ accounting
Accounting Payables Receivables General Ledger Finance Cash control International exchange

Marketing
Traffic administration Reservations Schedules Tariffs (pricing) Sales Advertising

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Organizational Charts
Manufacturing

Operations
Facilities
Construction; maintenance

Finance/ accounting
Disbursements/ credits Receivables Payables General ledger Funds Management Money market International exchange Capital requirements Stock issue Bond issue and recall

Marketing
Sales promotion Advertising Sales Market research

Production and inventory control


Scheduling; materials control

Quality assurance and control Supply-chain management Manufacturing


Tooling; fabrication; assembly

Design
Product development and design Detailed product specifications

Industrial engineering
Efficient use of machines, space, and personnel

Process analysis
Development and installation of

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Why Study OM? OM is one of three major functions (marketing, finance, and operations) of any organization We want (and need) to know how goods and services are produced We want to understand what operations managers do OM is such a costly part of an organization
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Options for Increasing Contribution


Marketing Option Finance/ Accounting Option OM Option Reduce Production Costs 20% $100,000 64,000 36,000 6,000 30,000 7,500 $ 22,500

Current
Sales Cost of Goods Gross Margin Finance Costs Subtotal Taxes at 25% Contribution $100,000 80,000 20,000 6,000 14,000 3,500 $ 10,500

Increase Reduce Sales Finance Revenue 50% Costs 50% $150,000 120,000 30,000 6,000 24,000 6,000 $ 18,000 $100,000 80,000 20,000 3,000 17,000 4,250 $ 12,750

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What Operations Managers Do?

Basic Management Functions


Planning Organizing Staffing Leading Controlling
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Ten Critical Decisions Ten Decision Areas Service and product design Quality management Process and capacity design Location Layout design Human resources, job design Supply-chain management Inventory management Scheduling Maintenance

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The Critical Decisions

Service and product design


What good or service should we offer? How should we design these products and services?

Quality management
How do we define quality? Who is responsible for quality?

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The Critical Decisions


Process and capacity design
What process and what capacity will these products require? What equipment and technology is necessary for these processes?

Location
Where should we put the facility? On what criteria should we base the location decision?
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The Critical Decisions


Layout design
How should we arrange the facility and material flow? How large must the facility be to meet our plan?

Human resources and job design


How do we provide a reasonable work environment? How much can we expect our employees to produce?
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The Critical Decisions


Supply-chain management
Should we make or buy this component? Who are our suppliers and who can integrate into our e-commerce program?

Inventory, material requirements planning, and JIT


How much inventory of each item should we have? When do we re-order?
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The Critical Decisions Intermediate and shortterm scheduling


Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next?

Maintenance
Who is responsible for maintenance? When do we do maintenance?
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The Heritage of OM
Division of labor (Adam Smith 1776; Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Coordinated assembly line (Ford/ Sorenson/Avery 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950)
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From

New Challenges in OM

To

Local or national focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization

Global focus Just-in-time Supply chain partnering Rapid product development, alliances Mass customization Empowered employees, teams
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Quality of Inputs monitored

Random disturbances

Quality of School Amity Business outputs monitored

Inputs

Transformation process

Outputs

Feedback mechanisms

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Quality of Inputs monitored Inputs Raw minds (students) Teachers Administrative Staff Classrooms Computer Lab Library Projectors (OHP, LCD, etc.)

Random disturbances Strikes of students, teachers, or staff Undue interference of the government in the working of institutions

Quality of School Amity Business outputs monitored Outputs Englightened students with good communication skills pleasant personalities leadership qualities good analytical ability team spirit decision- making abilities computer skills

Transformation process

Feedback mechanisms Success at placement interviews Grades obtained in examinations Rising career graph of alumni in corporates Number of applications for admission in the institute Ratings of surveys

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Quality of Inputs monitored

Random disturbances High turnover of chefs, waiters Govts taxation Policy

Quality of School Amity Business outputs monitored Outputs Customers satisfied with good preparations of the food pleasant behaviour and personality of the waiters appropriate prices charged

Inputs
Customers Waiters Chefs Manager Furniture Building Food

Transformation process

Feedback mechanisms Rising revenues Repeat customers Appreciation of customers

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Quality of Inputs monitored Inputs Machines and equipments Components, Parts, sub assemblies, Office Infrastructure (computers, furniture etc) Packaging material Capital Building Workers Managers

Random disturbances High turnover of workers and managers Quality of School Amity Business outputs Recession monitored Govts taxation policy Strikes instigated by Outputs trade unions Refrigerators with good cooling performance less consumption Transformation of electricity good after sales process service genuine prices new advanced features Feedback mechanisms Rising sales volumes lesser customer complaints Positive response of customers in the feedback forms

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Process Design:

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Transformation Process can be of various types: Continuous Process, Semi-continuous Process, Intermittent Process,
Batch Process Job shop

Projects
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Characteristics of Goods
Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction
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Characteristics of Service
Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed
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Industry and Services as Percentage of GDP


90 80 70 60 50 40

Services

Manufacturing

30
20 10 0

Hong Kong

Japan

Russian Fed

Czech Rep

France

Germany

Canada

Mexico

South Africa

China

Spain

UK

Australia

US
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Goods Versus Services


Attributes of Goods (Tangible Product) Can be resold Can be inventoried Some aspects of quality measurable Selling is distinct from production Product is transportable Site of facility important for cost Often easy to automate Revenue generated primarily from tangible product Attributes of Services (Intangible Product) Reselling unusual Difficult to inventory Quality difficult to measure

Selling is part of service


Provider, not product, is often transportable Site of facility important for customer contact Often difficult to automate Revenue generated primarily from the intangible service

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Goods and Services


Automobile Computer Installed carpeting Fast-food meal Restaurant meal/auto repair Hospital care Advertising agency/ investment management Consulting service/ teaching Counseling
100%
|

75
|

50
|

25
|

0
|

25
|

50
|

75
|

100%
|

Percent of Product that is a Good Percent of Product that is a Service


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Operations Strategy

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Strategy Formulation Consists of four basic steps: Defining a primary task, Assessing core competencies, Determining order qualifiers and order winners, and Positioning the firm.
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Competitive Priorities Amity Business School


Competing on Cost, Competing on Quality, Competing on Flexibility, and Competing on Speed

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New Product Opportunities


1. Understanding the customer 2. Economic change

3. demographic change
4. Technological change Brainstorming 5. Political/legal change is a useful tool 6. Market practice, professional standards, suppliers, distributors

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Concepts involved in Product design:


Research and Development, Reverse Engineering, Manufacturability, Standardization, Robust Design, Concurrent Engineering, Computer-aided Design.
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Product Development System


Ideas
Ability Customer Requirements Functional Specifications Scope of product development team

Product Specifications Scope for design and Design Review engineering teams Test Market
Introduction Evaluation
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Quality Function Deployment


Identify customer wants Identify how the good/service will satisfy customer wants Relate customer wants to product hows Identify relationships between the firms hows Develop importance ratings Evaluate competing products
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QFD House of Quality Amity Business School


Interrelationships

How to Satisfy Customer Wants


Analysis of Competitors

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation


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House of Quality Example Your team has been charged with designing a new camera for Great Cameras, Inc.

The first action is to construct a House of Quality

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Interrelationships

Amity Business School How to Satisfy


Customer Wants

House of Quality Example What the customer wants

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation

Customer importance rating (5 = highest)

Lightweight Easy to use Reliable Easy to hold steady No double exposures

3 4 5 2 1
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Analysis of Competitors

Interrelationships

Amity Business School How to Satisfy


Customer Wants

House of Quality Example


High relationship Medium relationship Low relationship

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation

Lightweight Easy to use Reliable Easy to hold steady No double exposures

3 4 5 2 1

Relationship matrix
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Analysis of Competitors

Interrelationships

Amity Business School How to Satisfy


Customer Wants
Analysis of Competitors

House of Quality Example

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation

Aluminum components

Relationships between the things we can do

Low electricity requirements

Ergonomic design

Auto film advance

Auto exposure

Auto focus

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Interrelationships

Amity Business School How to Satisfy


Customer Wants

House of Quality Example

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation

Lightweight Easy to use Reliable Easy to hold steady No double exposures

3 4 5 2 1

Our importance ratings


Weighted rating

22

27 27

32

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Analysis of Competitors

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Interrelationships

How to Satisfy Customer Wants Analysis of Competitors

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What the Customer Wants

Relationship Matrix

House of Quality Example


Company B P P G P P
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How well do competing products meet customer wants Lightweight Easy to use Reliable Easy to hold steady No double exposures Our importance ratings 3 4 5 2 1 22 5

Company A G G F G P

Technical Attributes and Evaluation

Interrelationships

What the Customer Wants

Relationship Matrix

Technical Attributes and Evaluation

Analysis of Competitors

House of Quality Example Amity Business School


How to Satisfy Customer Wants

Failure 1 per 10,000

Company A 0.7 60% yes 1 Technical evaluation Company B 0.6 50% yes 2 Us 0.5 75% yes 2

2 circuits

Technical attributes
2 to 0.5 A 75%

ok G ok F ok G
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Panel ranking

House of Quality Example Amity Business School

Completed House of Quality

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House of Quality Sequence Amity Business School

Deploying resources through the organization in response to customer requirements


Quality plan Production process Specific components Specific components Design characteristics Design characteristics Customer requirements Production process

House 1

House 2

House 3

House 4

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