Case Study: Module 1

Developing Operations Strategy & Plans

 Case Study for Operations Strategy: Patanjali Ayurved
Designing Operations Planning & Control
1. Implementation of all
• 1 University college 1. Land Acquisition Plan
plans
• 14 Courses 2. Construction Plan
Education
Setting Up 2. Day to day teaching

Identify Order Qualifiers & Winners, Competitive

Market Players, Competition, Quality, products
• Hardwar Location, 3. Hiring & Staffing Plan
Vedic
Institution for 3. Conducting Exams

Market Scan- Understand Customer needs,

• 500 Acre Campus 4. Capacity Plan
To Regain Swadeshi Legacy in INDIA

Organizations own Strength & Weakness

Vedic 4. Award degrees
• 2000 students 5. Process Plan
Education 5. Job placements
intake,50 Staff, 6. Technology Plan

priorities and strategic Options

Site level
1. Implementation of all
• 200 Stores PAN India 1. Land Acquisition Plan
plans
Swadeshi

Launch • 200000 Area, 2. Construction Plan

Culture

2. Opening of stores
Clothing & • 5000 employees 3. Technology Plan
3. Daily sales
other Apparels • 3 manufacturing 4. Hiring & Staffing plan
4. Inventory/refill/Purchas
plants 5. Distribution Plan
business Line 6. Launch Plan
e
• CNC stitching 5. Quality

1. Media tie up plan 1. Sign media contracts

• 10 Yoga teachers 2. Own media channel 2. Start of program
Swadeshi Health

Institutionalize • Exclusive rights with launch plan airing

Astha channel 3. Daily lesson delivery
Yoga 3. Camp organizing plan
• 200 shows/year 4. Quality Monitoring
Care

Site level
Launch Food & • 2 food parks 1. Land Acquisition Plan
1. Plan Implementation
• 2000 Stores PAN 2. Construction Plan
Beverage 3. Technology Plan
2. Opening of stores
India 3. Daily sales
Products • 15000 employees 4. Hiring & Staffing plan
Business 4. Inventory/Purchase
• 3 manufacturing 5. Distribution & Launch
5. Quality Monitoring
Plan
Organization Operations
VISION Mission Strategy Strategy Operations Plan Operations
Designing Operations
Module 2
Phases of Operations Management
•Process •Forecasting
•Product •Production Planning
•Quality •Resource
•Facilities •Manufacturing
•Plant •Scheduling
•Capacity •Project

Planning
Design &
Control

Value
Improve
Chain
•Maintenance •Supply Chain
•Continuous •Purchasing
Improvement •Logistics
•Inventory Planning &
Control
 Designing Operations

Process Design Plant layout

Organization’s
Vision, mission & Forecasting Operations System Production Planning
Strategy
Finalized
Inputs

Capacity Planning
Quality Management

Marketing Has Raw Material Outputs

Done the Market Labor Process Goods Operations
Survey and
shared Customer Land Value Add Services Strategy
Needs, Demand Capital

R&D has finalized

Project
the Measuremen
product/service t & Feedback Measuremen
specifications t & Feedback
Control
Staff & Workers Manufacturing
IT Platform
Finalized
Product Development Facilities Location
5
2.1

Design of Processes
Overview
 Overview

Technologic
al Change
Customer
Demand
 Design of Process is an important and early step

Product
Design
in Operations Management Function

 Process Design or selection refers to deciding on Inputs

the way production of goods & services is
organized Process Capacity
Design Planning
 Design of process indicate how the
manufacturing or service resources are organized
in the operation system so that the flow patterns Outputs

are optimized and appropriate operations

Manageme
Plant layout

Location
Quality

Facility
management tools can be used to effectively

nt
control the overall operations
Determinants of Process Characteristics

•Average quantity of parts produced

Volume & Size •Turnkey Projects of BHEL/L&T with less volume V/S Automobile or FMCG
•Ship Manufacturing- People & Equipment travel near the product

•No. of Alternative products and variants of each product

Variety •Titan watches have 40,000 varieties
•Process Industry have lesser Variety e.g. Oil, Gas, Chemicals

•Sequence of conversion
Flow •Assembly & Testing follow the main conversion processes
•Process starts with Raw Material or inputs

• All 3 characteristics are inter connected

• If Volume is high, Variety tends to decrease and vice versa
• Volume, Size and Variety impact the Process flow
Types of Processes
 Types of processes:

Job Shop Batch Repetitive or Discrete Continuous

• Usually operates • Higher volumes of • High volume of

• Used for moderate
on a small Scale more non discrete,
volume of goods
• Used when a low standardized highly
or services
volume of high goods or services standardized
• Equipment & Skill
variety is needed are needed output is required
level of workers
• Processing is • Repetitive • No equipment
need not be as
intermittent processing is used flexibility
flexible as Job
• High flexibility • Slight flexibility of • Very less variety
Shop
using general equipment • Low to high worker
• Less variety
purpose • Required Skill level skills
• Examples: Bakery,
equipment & of workers is low • Examples:
Airlines, Paint, Ice
skilled workers • Examples: Petroleum
Cream, Soft Drinks,
• Examples: Tool & assembly lines, products, sugar,
etc.
Die shop, Hospital Automobiles, steel, electricity
Handsets, TVs distribution, etc.
Job Shop Process Flow: Tool Room
Batch Process Flow: Paint manufacturing
Repetitive Process Flow: Automobile
Continuous Flow: Petrochemical Refining
Continuous Flow:
Variety v/s volume matrix
High Variety Moderate Low Variety Very Low
Variety
Low Or Very Job Shop
low Volumes Repair Shop
Tool Room

Moderate Batch
Volume Bakery
Classroom
Lecture, Airline
High Volume Repetitive
Assembly Line

Very High Continuous

Volume Flow:
Petroleum
refining
Process Design Case Study:
Hospitality Sector
 Process Design Considerations in Hospitality Sector
Restaurant Business

Market Scan

Org
Over the Counter Alacarte Home Delivery
Strategy

Customer
Medium Maximum Medium/Low
Contact

Order Quick Quick

Service quality/Hygene
Winner Turnaround/Hygene/Price Turnaround/Hygene/Price

Order
Food Quality/Qty Food Quality/Qty Food Quality/Qty
Qualifier
• Lesser Area to sit
• Lesser area for sitting
• More area for Kitchen • Big area for Customer
• Delivery Staff
• Waiting Lounge to sit
Operations • Ordering APP
• No. of counters • Capacity
• Outsourcing
Design • Que Capacity • Waiter Staff
• Menu Options
• Payment Modes • Admin Staff
• Menu Options • Cuisine variety
Flexible Manufacturing
Systems
 Technology Impact in process Design: Flexible
Manufacturing Systems • Manufacturing system that usually consists of
Numerically Controlled Machines connected
Batch Production by an automated Material Handling System
Job Shop
1. Limitation of mid
1. Hi waiting time due • Designed to process simultaneously several
volume & mid types of parts in the given mix
to machine set up
variety • Parts are machined in minimal time through
2. Very low volume
2. High Work in
3. Low production CNC machines
Process
rate • Automated product loading & unloading
3. Low Machine
4. High through automated material handling
utilization
manufacturing
4. Need planners &
lead time
expeditors to keep
job flowing

Flexible Manufacturing
System
Combination of Job
Shop & Batch
Production enabling
limited variety with
Reasonably quick
change over period of
time
Material Handling &
Automated Material Handling
Systems
What is Material Handling

 Material Handling is the movement, protection, storage and

control of materials and products throughout manufacturing,
warehousing, distribution, consumption and disposal
 Based on process design requirements, a Material Handling
System (MHS) is designed.
 It can be automated or manual
Automated Material Handling Systems

When Manufacturing is automated, the Material

Handling System must also be automated to give
highest efficiency to the process
Automated MHS is classified into following:
Automated Storage Systems
Automated Transport & Material transfer systems
 Automated Storage Systems

 Used for large scale bulk storage as well as  High volume capable process
for small inline buffer storage needs quick material storage and
 The Automated Storage & Retrieval system retrieval while low volume and high
(AS/RS) is a technology that takes maximum variety process design need not
advantage of Cube and height while require AS/RS
inherently offering security and inventory
control
 With warehouse feeding by conveyor, an
AS/RS can be used for storage operations
ranging from maintenance supplies to raw
materials for production, packaging & work
in progress
 Automated V/S Manual storage system
defines the process design
 Automated Transport & Material Transfer

 Automated Transport System (ATS) is used to

move parts and products from the storage
system to the production operations
 Automated Material Transfer System(AMTS) is
used for loading & unloading materials at
the workstations
 Automated Guided Vehicle (AGV) system
forms one of the most exciting and dynamic
tools in material handling today
 Automated Guided Vehicles
 AGVs are battery powered vehicles that can move and
transfer materials by following prescribed paths around
the manufacturing floor
 They are of following types
 Guided through buried wires in the floor
 Guided by Photoelectric sensor which follows the lines of painted
floor
 A computer controlled guidance with wireless communication
 AGVs can communicate with factory computer systems
as well
 Recent advancements in AGVs include SGV (Self Guided
vehicles) are computer controlled and have Artificial
intelligence built in them
 AGV compliment automated production line consisting
of by providing the flexibility of complex and re-
programmable movement around the manufacturing
process
 Process Design based on Stocking Strategy
Make to Stock
• Approach is to schedule
production for the purpose of
replenishing stock to some
pre-determined level
• E.g.-Grocery Stores, Apparel
Stores
• Detached with Production
planning, focusses on
replenishment of stocks
• These products are generally
small in size, high volumes and
standard products
Make to Order Assemble to Order
• Scheduling production • Falls in between MTS & MTO
against specific customer • During the early production
orders stages loose parts are made
• E.g. Automobiles, Turbines to stock and at the final
• Completely aligned with stage of assemble, MTO
production planning approach is followed
• These are medium to low in
volume, large in size and
Customised products
 Recap of Sub Module
• Design of process indicate how the manufacturing or service
resources are organized in the operation system so that the flow
patterns are optimized and appropriate operations management
tools can be used to effectively control the overall operations
• Volume & Size, Variety & flow are the 3 determinants of Designing a
Process
• Process Types- Job Shop, Batch, Repetitive/Discrete and Continuous
• Flexible Manufacturing System- A system to overcome challenges of
Job Shop & Batch process flow
• Material Handling Systems- Manual V/s Automated
• Automated Material Handling-
• Automated Storage & Retrieval systems (AS/RS)
• Automated Transportation System (ATS)- E.G. AGV
• Automated Material Transfer System (AMTS)-E.G. Robots
• Material Handling system needs to compliment the Process Flow
 Outcome of this Sub Module
• Design & Readiness of Process flow in an organization
• Design & Readiness of Material Handling Systems
• Availability of required equipment /Resources for
converting into outputs
• Design & Readiness of Stores and in transit inventory
storage
2.2

Designing Capacity
 What is Capacity?
 Capacity is the maximum output of products & Services once can
achieve by using the resources (Materials, Labor, People,
Equipment, etc.)and the conversion process
 It has significant impact on cost of operations
 Customer requirements keep on changing with time
 Capacity investments are generally large and fixed in nature
Capacity = Work Output + Waste
 Waste includes waste in planning, operations, startup,
equipment, defects, materials, labor, etc.)
 It is therefore not possible to attain 100% capacity in real life
Measure of Capacity
 Output or Input based
 Output Based measure
 BPCL – Processing of 260,000 barrels per day
 PCB Manufacturer- Square feet of PCB or no. of PCBs produced

 Input Based Measure

 Tool Room- No. of Man hours or machine hours available
 Capacity Utilization= Capacity Put to Use/Total Capacity Available
 Capacity utilization can be for Inputs (Man, Machine) or Can be on
Process or for operations system
 E.G. 1-Stamping Machine is utilized 80% i.e. Out of the total hour
availability, it is running 80% of time
 Manpower working on that machine is utilized 90% i.e. 10% include lunch &
tea time
 Process Utilization- Assembly shop has capacity to produce 10,000 units per
day. Against an installed capacity of 12,000, its capacity utilization is
10,000/12,000* 100= 83%
 Installed Capacity V/S Utilization
• Installed Capacity is the theoretical capacity of an operations system derived after
theoretical capacity of all inputs and processes
• Utilized Capacity is the actual Capacity put into use or received as an out come from
the operations System
Samsung Mobile phone Model ABC
120000
• First thought comes that of
115000 how can the utilization be
improved
110000 90% 93% 98% 1. Decreasing the wastes
Utilized Utilized Utilized
105000 by reviewing various
100000 100000 100000
98000
100000 100000 inputs or processes
100000
95000
2. After utilization part is
95000 taken care of, then an
90000 organization thinks of
90000
other options like
85000 adding capacity,
outsourcing, etc.
80000
2016 2017 2018 2019 2020
Installed Capacity Sales Expon. (Sales)
 Capacity Planning

Capacity planning deals with

 Estimating amount of capacity an operations system requires
 Evaluation of alternate methods of augmenting capacity
 Devising methods to use existing capacity effectively
 Capacity Planning is continuously required on the existing Product &
services as well as new ones introduced
 Capacity Planning Framework

Compute the
Estimating the Identify available
available capacity
Capacity alternatives and
and identify the
Requirement in select the best one
quantum to be
planning Horizon for Augmentation
augmented

• Starts with inputs

from forecasting
• Calculate the
exercise • Waste Elimination
capacity available
• Based on past • Multi skilling
in system
trends • Sub-Contracting
• Compare
• Use of forecasting • Outsourcing
Requirement with
techniques like • Decision Tree
available
time series, trend • Waiting Line
• Process Mapping
plotting, etc. Models
& Capacity
• Estimate Labor &
Analysis
Machine
Requirement
 Capacity Planning
Working Hours : 8 per day
No. of Shifts: 1

Receipt of
Ready for
Raw Molding Machining Assembly Packing
Shipment
Materials

Capacity Planning @ 1,00,000 Mobiles per Annum or 9,500/Month

Capacity/ month 5,000 8,000 10,000 20,000 Installed

(Nos) Capacity of
Machines 2 2 1 1 10,000 unites
per month
Required
Operators 2 2 1 1
 Installed Capacity V/S Utilization V/S Demand
• Installed Capacity is the theoretical capacity of an operations system derived after
theoretical capacity of all inputs and processes
• Utilized Capacity is the actual Capacity put into use or received as an out come from
the operations System
Samsung Mobile phone Model ABC
120000
Demand
115000 & Supply
110000 Gap
110000

105000
100000 100000 100000 100000 100000
100000 98000
95000 95000
95000 93000
90000
90000

85000

80000
2016 2017 2018 2019 2020
Installed Capacity Sales Customer Demand Expon. (Sales) Expon. (Customer Demand)
 Process mapping No. Of Shifts: 1
Operational Efficiency: 90%

Designed or Installed Capacity: 15,000 Units

Actual Capacity Realized: 12,000
Customer Demand: 12,000
Molding Machining 1-
Machine 1- 8000/M
6000/M Assembly Packing
Receipt Of Machine 1- Machine1-
Raw Material 12000/M 20000/M
Molding Machining 2-
Machine 2- 8000/M
6000/M

Monthly Demand : 15,000 Units Option 1: Reduce Wastage

Option 2: Add Additional

Molding Machining 1- Shift
Machine 1- 8000/M
5000/M Assembly Packing
Receipt Of Machine 1- Machine1- Optional 3: Add 1 Molding
Raw Material 10000/M 20000/M Machine
Molding
Machining 2-
Machine 2- Option 4: Outsource Molding
8000/M
5000/M
activity @ 5000/M
 Alternatives of Capacity Augmentation

 Waste Elimination/Effective utilization of available capacity

 Review waste in planning, Operations, Startup, equipment, defects,
materials, Indirect labor, Human resource or expense

 Multi Skilling Of Work Force

 Sub-Contracting
 Outsourcing
 Time Horizon in Capacity Planning
 Based upon the changing market scenario, an organization need to plan their capacity to meet
the demand
 Below are the Capacity planning decisions taken considering time factor

Criterion Short Term Medium Term Long Term

Time Frame 1 Week to 3 months Typically 1 Year 2~5 Years
Planning Premise • Maximizing availability • Balancing demand & • Augmenting
• Efficient use of Supply capacity for
resources projected growth

Key Decisions Made • Resource deployment • Deployment of • Capacity

strategy additional resources Augmentation
• Maintenance Routines to adjust demand & • Capital Budgeting
• Improvement projects supply
• Initiate medium term
improvements

Tools/Techniques • Planning & Scheduling • Aggregate • Investment planning

• Total Productive production planning • Break even analysis
Maintenance • Make or Buy
• Waste Elimination
 Decision Trees for Capacity Planning

 An organization may have multiple options for capacity augmentation

 Do not do anything about capacity
 Add new machine
 Review and increase utilization of input resources
 Revise Process flow
 Review and modify Material Handling systems
 Outsource
 Decision Trees are useful to evaluate alternative capacity choices on the basis
of cost of capacity and the benefits
 They consists of nodes and branches. Each node represents the decision point
and branches the potential outcome
 The payoffs or the net revenue is then calculated across each branch and
best alternative is determined
 Example: Decision Tree
 A Manager must decide on the size of the video arcade to construct. The manager has narrowed
the choice on 2 options: Large or small. Information has been collected on payoffs and a decision
tree has been constructed . Analyse the decision tree and determine which alternative should be
chosen in order to maximize expected monitory value
1. Determine which alternative would be selected for each
possible second decision
1. For a small facility with high demand, there are
$40
three choices Do Nothing, Overtime and expand.
Low Demand Because Expand has highest payoff, chose it
(0.4) 2. Indicate this by placing a double slash through
Do Nothing
$40 each of the other alternatives
Build Small
2. Determine the product of the chance probabilities and
Overtime
High Demand $50 their respective payoffs for the remaining branches
0.6
Expand $55 Build Small:
Build Large Low Demand - 0.4 * $40= $16
Low Demand
Do Nothing High Demand - 0.6 * $55= $33
0.4
$10
Build Large
High Demand
0.6 Reduce Prices
Low Demand - 0.4 * $50= $20
High Demand - 0.6 * $70= $42
$50

$70 1. Determine the expected value of each alternative

Build Small $16+$33= $49
Build Large $20+ $42= $62,
Hence choice should be to build large facility
 Recap of Sub Module

• Capacity is the maximum output of products & Services once can

achieve by using the resources (Materials, Labor, People,
Equipment, etc.)and the conversion process
• Measure of Capacity
• Output or Input parameters based
• Capacity Utilization
• Capacity Planning & its framework
• Tool to measure gap between available and designed capacity:
Process mapping & Capacity analysis
• Alternatives of Capacity Augmentation
• Short Term- Improve Utilization
• Medium Term- Outsource, Sub Contract
• Long Term- Add Capacity through additional line or plant
• Application of Decision trees during Capacity Augmentation
 Outcome of this Sub Module
• Capacity Design of each process step
• Gap determination between designed and actual
capacity experienced
• Take actions for Capacity Augmentation
2.3

Product Development Process

Product Development process
 Overview
 Stages of a product Development process
 Organization of Product Development
 Tools for effective product Development
 Understanding Customer Needs- Market Research & Competitor Analysis
 Quality Function Deployment
 Value Engineering
 Design for Manufacturing
 Tools for Mass Customization

 Performance Measures
 Benefits
 Software product Development
 Management Accounting for Product Development
 Overview

 To be successful, businesses need to constantly engage in value creation for

both shareholders and customers
 Innovation has been recognized as one potential lever for value creation
 Innovation can be through demonstration some kind of distinctiveness viz.
product/service differentiation, technology, channel deploys or various
processes used
 Amazon offered 1.5 million titles of books through virtual book store in 1995
 Japanese automobile manufacturers like Honda & Toyota introduced 85
models between 1982-89 while their American counterparts were able to
introduce 49 models only during the same time

 Product Development process is the broad set of tools, techniques and

concepts that provide a firm with a capability to provide distinctiveness in the
offerings by rolling out new products and services faster and at lower cost
 Product Development Process

Concept Generation Design Development Production

Final Design &

Prototype
Idea Feasibility Preliminary Process Manufacturin Commercial
Cost Planning Development
Generation Study Design Planning g Production
& Testing
Specifications
Organization for Product Development
 Product dev. is an interdisciplinary effort
 Several functional areas are directly
involved in the process
 Has evolved from traditional approach
where every function used to work in
isolation and provided support and
contribution to Product development
Concurrent Engineering  Today Concurrent Engineering approach
Team Structure
is prevalent in most organizations where a
cross functional team is created for the
product development project
 This helps in
 Development time gets reduced by more than
half due to dedicated and channelized efforts of
all experts at same time
 Encourages In depth discussions across various
areas
 Maximum inputs are provided at the initial stages
 Suppliers are also involved at very beginning and
helps in providing valuable manufacturing
related inputs
 Inherits team culture
 New product Development in Automobiles

Idea Generation Feasibility Study Preliminary Design Prototype Development

•Marketing/Customer •Cross Functional •Incorporation of •Development
Inputs, Research, discussions Manufacturing &
Competitors Quality inputs
•Internal Stakeholders •Continuous discussions
with Manufacturing,
Engineering & Suppliers

Commercial Production Development of Final Design Testing

•1st Production Batch Products •Release of Final Design •In-house
•Commercial •Tools/Equipment •Field
Production •Process Design
•Bought Out Parts
 Tools for effective Product Development

 Understanding Customer Needs

 Market Research
 Competitor Analysis

 Quality Function Deployment

 Value Engineering: Exploring improvement opportunities of existing product or
process
 Design for Manufacturing: A structured approach to ensure that
manufacturing requirements are considered fairly in design
 Reducing Variety
 Reducing cost
 Manufacturability & Serviceability

 Tool for mass customization

 Understanding Customer needs

Questionnaire
Surveys & Competitor Analysis
Interviews Understanding what current
offerings and how the gaps and
problems identified could be
eliminated

Identify Target
Groups and
appropriate
Market Statistical &
Analytical
Reverse Engineering
Research
Reasoning of Perceptual Maps
sampling is
Information Competitor products
done Graphical
are dismantled down
representation of
to individual level
competitors offerings
and detailed studies
and that of one’s
are conducted on
own offerings
then
Helpful in product
List of Options A tool for bench
& Finalize positioning
marking
 Quality Function Deployment
Tradeoff
 Goal of Product Development process
is to bring out products that satisfy Importance
customer needs
 Generally attributes of Customer
Satisfaction are qualitative
 QFD is a Japanese tool that helps
Product developments team is a Product
smooth transition from Qualitative Characteristics
attributes to Quantitative attributes

Customer Benchmarks
Requirements

Technical
Assessment &
Target Values
Value Engineering
 Refers to a set of activities undertaken to investigate the
design of components in a product development strictly
from a cost-value perspective
 During early stages of design, it is important to question
several assumptions pertaining to design, process planning
and manufacture of components
 Since the specifications are not frozen yet, investigating
alternative methods can potentially yield better products
and or lower cost
 Alerts the product development team to alternatives that
could either bring down cost or increase Value by
improving the functionalities and performance without
increase in cost
 E.G. Lower Cost-
 Changing the packing from Corrugated box to polyethylene packing
 Change in the area of cinema ticket
 Add Value
 Free small shampoo kit with Soap
 Extra talk time @ same price
 Reverse Engineering a continuous tool to improve new as well as existing
products and/or services
 Design for Manufacturability

 Design efforts can sometimes lead to loss of productivity, increase in cost and
further delay before commercially manufactured
 One frequently encountered reason for this is that while design engineers may
have come up with design specifications which meet objectives of product
concept, it may not be easy to manufacture or assembly
 DFM is a structured approach to ensure that manufacturing requirements and
preferences are considered fairly early in the design process without need of
extensive coordination between the two.
Variety
Manufacturability & Reduction/Standardization Reduce Cost
Serviceability 1. Minimize number of
1. Product specifications parts 1. Simplify operations
2. Tolerances 2. Use of standard 2. Analyse failures
3. Process consideration products 3. Eliminate duplicates
4. Ease of assembly & 3. Modular design
Service 4. Common Packing
 Tools for mass customization

 One of the fallouts of increased competition is to be more customer focused

 However, in this process, organization realize that they end up creating several
variations of the products or services offered
 This increases the complexity of production planning and control and also
increases investment in inventory
 Therefore, it is important to have mechanism to provide high levels of
customization without increasing complexity of planning and control of
operations
 Mass Customization provides a structured set of ideas and tools to meet this
requirement

Variety Reduction Promote Modular

Product Platforms
Techniques Design

• Review of multiple
products • Flexible system
• Multiple variants on
• Variety Reduction • Common Laptop
single platform
Project batteries, body
Performance Measures for product Development
Cost Based
 Target Cost achievement status
 Cost overrun of product development project

 Design Effectiveness
 % of standard parts and processes
 No. of revisions in product design
 Cost of filed repair/service in first year of introduction

 Strategic Measures
 Time to Market
 No. of new products introduced

Market Impact
 Total product cost
 Market share of the new product
Benefits of a good product Development
Customer Dimensions
 Meets customer expectations
 Innovation offering to customers

 Sustained performance
 Simplifies product use and maintenance
 Reduces the cost of use over product lifetime
 Addresses environmental issues

 Operational advantages
 Simplifies manufacturing & Assembly process

Strategic
 Faster new product introduction
 Reduces the cost of product
 Software product Development
The process followed to design, develop and deliver a
software product from inception of an idea to the
delivery
It consists of 4 stages- Requirement analysis, Design,
Development(Coding) and testing
Requirement Analysis: Process of specifying requirement by
studying customer needs
Design: Specification of software
Development: Programs are written using programmable
languages
Testing: Deriving the outputs as asked by customer and taking
his/her approval
Software Development Process Flow
Management Accounting Tool for Product
Development
 Off late 2 concepts that Management accountants have proposed are of great relevance to the
Product Development process. These are
 Life Cycle Costing, and
 Target Costing
 Traditional cost Accounting and control concepts focus on cost of production and services at
manufacturing stage
 As opposed to it, Life cycle costing is a methodology which focusses on cost and control aspects
through out the life of the product
 Lifecycle approach clearly means that the concept and design stage also need to be analyzed from
cost control purpose
Management Accounting Tool for Product
Development
 Target cost is another useful concept for Product Development
process
 Traditionally, organizations have been managing the cost of
products with a broad philosophy of “ Cost Plus” model
 Price= Cost + Margin
 However, in recent times, as competition has intensified, firms
realize that “Market forces “ dictate the process of product or
service
 Moreover, organizations need a “Margin” to sustain a business
 Therefore, Cost needs to be focused for an organization to remain
competitive
 Cost=Price-margin
 Recap of Sub Module
• Product Development process is the broad set of tools, techniques and concepts
that provide a firm with a capability to provide distinctiveness in the offerings by
rolling out new products and services faster and at lower cost
• 4 Stages of Product Development Process-
• Concept Generation
• Designing
• Development, and
• Commercial Production
• Organization for Product Development
• Tools for effective Product Development
• Understanding Customer Needs-Market Research & Competitor Analysis
• Design for Manufacturing
• Value Engineering
• Quality Function Deployment
• Mass tools for Customization
• Measures of Performance of Product development process- Cost Based, Design
Effectiveness, Strategic & Market impact
• Software Development Process (Services)
• Management Accounting Tools- Life Cycle & Target Costing
Outcome of Product Development Process

Tested & Proven Design of Product(s) or Services

and ready for commercial production
Tested & proven design of Processes (Including
Capacity)
Finalization of Plant/Facility layout
Finalization of Supply Chain-Suppliers, Warehouses,
Service Providers, Channel partners/Dealers
Realistic cost of Product/Service in offering
Estimation of Project Cost spent in the Product
Development Processes
2.4

Total Quality Management

Agenda
 Overview/Definition
 Important Implications of Quality
 The Quality Revolution
 Quality Gurus and their Quality Philosophies
 Total Quality Management
 Overview
 Role of Top Management
 Employee Involvement
 Addressing the training requirements of all involved
 Tools & Techniques for TQM
 Quality Certifications & Awards
What is Quality
The totality of features and characteristics of a product
or service that bears its ability to satisfy stated or implied
needs of a Customer
Conformance to Specifications---William Edward
Deming. This concept was introduced mainly for
Manufacturing Industries
Fulfilling Customer needs…..Even through
manufactured to specifications, a product doesn’t
click with a customer
Fitness for Use…..This definition demands that
organization understands the preferred needs of
customers over a period of time
What is Quality
Philip Crosby’s definition of Quality is “Attaining Zero
Defects”
 Alternate methods to define Quality-Garvin proposed that
Quality has eight dimensions:
 Performance
 Features
 Reliability
 Conformance
 Durability
 Serviceability
 Aesthetics
 Safety
Important implications for Quality Manager

 Attributes of good quality are 100% quantitative on the shop floor

Qualitative and intangible attributes of Quality

Minimize Loss
to Society
Fitness for
Use
Fulfill
Customer
Need

Conformance
to
Specifications

Quantitative Attributes of Quality

 Definition of Quality appears to be constantly changing over time

 Is a moving Target…..achieving zero defects

The Quality Revolution
 The success of Japanese manufacturing firms in the 1970s and 80s is largely
attributed to a quality revolution sweeping across these firms
 Japanese firms penetrated established markets in West by the sheer
performance gaps that they created through the quality of products they had
brought to the market
 David Garvin concluded that quality of Japanese Air Conditioner was 1000 times
better than worst manufacturer in US
 Study of Automobile Sector by MIT (Massachusetts of Technology, USA) came up
with following findings:
 Japanese manufacturers were employing fewer workers, had much small purchasing departments and
reported much fewer defects in the final assembly
 They were able to bring out several newer models much faster than American passenger vehicle
manufacturers
 They were also able to develop superior suppliers which eliminated the need for costly and time-consuming
inspection procedures on supplied components
 Planning and control of operations was simplified and investment in inventory dropped significantly
 All these translated into better quality products at lower cost

 This became an ORDER WINNER for Japanese manufacturers

The Quality Revolution
Key Elements of Quality Revolution are
 Alternative ideas about what constitutes good Quality
 Newer methods to build Quality into products & Services
 Top Management realized the need for addressing certain mindset issues and
providing much needed leadership role
 The roles of middle managers and supervisors underwent a change from
control to facilitation of the process of building quality into products and
services
 Workers were not only responsible for output but also for the quality
 Such improvements happened over a period of time and various definitions of
Quality came
 Quality Gurus
Name Location Period Key Teachings Remarks

William Edwards Japan 1949-1958 • It is possible to provide good possible products Deming
Deming and services to customers at lower price and firms Award which
can operate profitably in long run is a highest
• Proposed systematic approach to quality honor in
management through PDCA concept (Plan, Do Japan
Check and Act)
• 14 point agenda for quality
Joseph M Juran Japan 1960s • Approach complimented Deming's approach
• Believed that quality problems faced by most
companies is due to constraints imposed by their
top management
• Proposed a simple definition of quality “Fit for Use”
• Emphasized on the need for company wise
quality management
• Senior Management must play an active role in
Quality Management
• Approach of Quality Planning, Quality Control &
Quality Improvement
 Quality Gurus…Contd.
Name Location Period Key Teachings Remarks

Philip B. Crosby Japan 70s & • Essence was embodied in 5 absolutes of quality
80s management
• Absolute 1- Quality is Conformance to Standards
• Absolute 2- System of Quality is prevention
• Absolute 3- The performance standard is “ Zero Defects”
• Absolute 4- Measurement of Quality is the price of Non-
Conformance
• Absolute 5- There is no such thing as “Quality Problem”
Karou Ishikawa Japan 1950s • Influenced the development of a participative, bottoms up
approach to Quality Management
• Promoted greater involvement of Employees, from top to
bottom, reducing reliance on Quality professionals and
departments
• Advocated collecting and analyzing factual data using
simple visual tools, statistical techniques and teamwork as
the foundation for implementing Quality
• His Contributions-
• Fish Bone or Cause-effect diagram
Quality Management System (QMS)
Modern Quality Management systems are built on TQM
Philosophy
TQM can be defined as Organization wide effort to
develop required systems, tools , techniques, skills and
mindset to establish a quality assurance system that is
responsive to emerging markets needs
A good TQM program consists of following elements:
 Role of Top Management
 Employee involvement for Continuous Improvement
 Addressing the training needs of Employees, and
 Tools & Techniques for Quality Assurance and Continuous Improvement
Other Definitions
Quality Assurance: Maintenance of desired level of quality
in a service or a Product, especially by means of attention
to every stage of the process of delivery or production

Efficiency

Inputs: • Customer Satisfaction

Material Output: • Goal attainment
Labor Process Products or
Capital Services
Technology

Best Practices
TQM Component 1: Commitment of Top Management

 Total in “Total Quality Management” means

 Everyone

 Everywhere, and

 Every time

 Involving everyone means from CEO to the last Janitor…All must play their respective roles
in Quality Assurance
 This clearly raises the question of “what is role of each person”?
 Responsibility of right product in a manufacturing organization belongs to the
workers….Clearly defined Ownership
 Middle Managers & Supervisors facilitate the workers in their attainment of quality
assurance
 This is a cultural shift which top management can effectively introduce through
communications down the level, involvement in TQM activities and demonstration of
application
 Quality policy is launched by Top Management
Example of Quality policy
TQM Component 2: Employee Involvement
 Under TQM culture, ownership of quality comes on each employee or worker
wherever the source of manufacturing or processing is originating
 With this level of ownership, a worker understands the impact due to Quality and
brings in improvement in the out put
 He/ She keep their surrounding clean and organized and feels part of the
companies goals
 He / She feel empowered
TQM Component 3:Addressing Training Requirements
 Successful TQM program demands substantial investment in
communication
 The Top management is first educated regarding the need, the
required changes and the potential benefits
 The process then continues until the lowest level of hierarchy is
reached
 Middle level managers often form part of change agents
 Communicating the need for alternative procedures, new methods
of empowerment and the benefits that are likely to accrue to the
organization is just one aspect of training
 The other aspects relates to educating all the employees in using the
new Quality control tools and techniques to be adopted
 Supervisors need training on problem solving & Cont. improvement
 Quality Management Tools
Quality Control Chart

Management
Highlighting Quality
Tools Problems
Histograms
Identifying Specific Check Sheets

Improvement
Pareto Charts
Scatter Diagrams
Graphs
Fish Bone
Analyze problems CEDAC
and their Root Cause Affinity Diagram
Relationship Diagram
Tree Diagram
Operations Planning Matrix Diagram
Matrix data Analysis
Process Decision Program Chart
Arrow Diagram
Poka Yoke
Quality Function Deployment
Strategic Planning
Quality Costing
Histograms
 Simple method of graphically representing the frequency
distribution of multiple attributes
 Based on simple count of no. of occurrences, it can be
constructed
Pareto Diagrams
 Helps organize a basic data in a systematic manner so that the
improvement team detects the significant aspects of improvement
and necessary corrective actions
 Through a Pareto Diagram, clear cut priorities are established for
directing the improvement effort
Cause & Effect (Fish Bone Diagram)
 Cause and effect is a generic methodology developed to trace problems to
their root cause
 Since elimination of problem requires understanding the root causes of the
problem, this technique is important for quality improvement
 Useful tool for problem solving in the small group improvement efforts that
organization wants to pursue
CEDAC
 A variation in Cause & Effect diagram is
CEDAC
 AC stands for Action Cards
 While in the Cause & Effect diagram,
there is a fish bone structure and the
members of small improvement groups
activity need to brainstorm on the
problem, causes & solutions, in CEDAC,
this entire process if left open to all
employees of the organization by adding
2 sets of cards to the fish bone
 One set is called “Problem Card” and
another one is “Solution Card”
 By placing a visual board with the fish
bone structure and problem and solution
cards in 2 bins, CEDAC enables an
employee contribute to problem solving
Poka Yoke
 Japanese term for “ Mistake Proofing”
 Shingo proposed this method while he improved the “Toyota Production
System”
 Basic principle being that several defects that creep into an operation are
usually avoidable
 Errors & defects have cause and effect relationship
Quality Function Deployment

Already Covered in “product development process” Sub

Module
Quality Certifications & Awards

 Use of 3rd party quality rating systems offer several advantages in

organization
 It provides a neutral, unbiased and fair method of evaluating its
Quality Management practices
 Secondly, third party rating provides a uniform nomenclature and
helps understands the status of Quality management System
cutting across geographical and sector domains
 While 3rd party Certifications are the minimum requirement for an
Organization to adhere to, Quality Awards prove their credential
and promote business growth
Quality Awards

 Different countries have instituted quality awards to motivate

business organizations towards achieving excellent performance.
Some of the main awards are
 Deming Prize- All Geographies
 Malcolm Balridge national quality award- Only for operations based in US
 European Quality Award- Only for European companies
 CII EXIM business award- Any company in India
Quality Certifications

Every country has national standards body that is

mandated by the government to establish standards
and certify quality
The Bureau of Indian Standards is the Indian body for
Quality Certification
However over the years, there has been a considerable
convergence of alternate standards towards “
International Organization for Standardization(ISO)” a
generic set of standards that enables organizations to
build quality management and assurance systems
 ISO (International Organization for Standardization)
 The International Organization for Standardization is an independent, non-
governmental organization, the members of which are the standards
organizations of the 168[1] member countries.
 It is the world's largest developer of voluntary international standards and
facilitates world trade by providing common standards between nations.
 Headquarters- Geneva, Switzerland
 ISO 9001 is a quality management system that can be integrated into any
business. It is focused on ensuring the business delivers a consistent level of
quality to its customers by having well defined and regularly reviewed processes
and procedures.
 Individual sectors of the industry have added more components to the basic
ISO 9000 system to obtain their standards for quality management.
 QS 9000/IATF 16949- Automobiles
 TL9000- Telecom
 ISO 14000- Environment
 ISO 18000- OHSAS (Occupational Health & Safety)
 Recap of Sub Module
• Quality have evolved through various definitions
• Conforming to specifications
• Fulfillment of customer needs
• Fitment for use
• Attaining “Zero Defects”
• Attributes of a Good Quality: Quantifiable at Shop Floor or
operations area
• TQM can be defined as Organization wide effort to develop
required systems, tools , techniques, skills and mindset to establish a
quality assurance system that is responsive to emerging markets
needs
• Components of TQM- Involvement of Top, Employee Involvement &
their training needs
• Quality Management Tools- Histograms, Pareto Chart, CEDAC
Charts, QFD, Poka Yoke, etc.
• Quality Certifications & Awards and their importance
Outcome of this Sub-Module

Readiness of Quality Policy

Communication of Quality Policy across all levels
of organization
Readiness of Quality Procedures for each Function
Identify Quality management tools to be
deployed
Quality Planning documents for Inputs & Process
e.g. Feasibility Review, Project Plan, Process control
plan, FMEA, Process flow diagram, Inspection
planning, etc.
2.5

Facilities Location
 Case Study: LI & FUNG Global Operations

Customer
Cotton
Japanese Yarn
Zippers
Design Dying/
HQ & Weaving
Assemb
ly

• Locating facilities in regions which offer

• Vision- Creating Superior Value for Customer
• Japanese Zippers are good in design, but
manufactured in Chine @ low cost
• Assembly cost is lowest in Thailand due to Geo
Political reasons like labor availability, local
taxes, etc.
• Approach- Disperse Manufacturing based on
each locations strength on cost and quality
perspective
cost or quality advantage is a tradeoff -
setting up all the manufacturing
locations at single location V/s
Transportation costs + coordination cost
• Local facility will provide better
responsiveness & ease of
communication but cost will be more
 Case Study: Infosys Global Outsourcing Operations

Customer
Customer
Marketing
Customer Office
Marketing
Customer Delivery Office Delivery
Marketing Centre Centre
Delivery Marketing
Office
Centre Office

Delivery
Centre Delivery
Centre
Marketing
Office
Customer
• Vision- Creating Superior Value for
Shareholder Marketing
• Outsourcing Business is a skill based Office Marketing
Customer Office
and cost sensitive business Customer
• Skill Requirements are 2 fold-Domain
Knowledge and Communication
(Including language)
• Tradeoff between Skill Availability in
that region v/s cost of labor
Globalization of Operations

Location issues have become more prominent in

recent years due to increased pace of economic
reforms in several countries
Globalization of markets opens up new
opportunities to corporations identify their
operations in the locations which could produce
world class products at internationally competitive
prices
At the same time, those locations must have
competitive advantages like skilled manpower,
Resources availability, local taxes, distance, etc.
Factors Causing Globalization
 Regulatory Issues
 Country’s economic policy e.g. Economic Liberalization in 1991
 Taxation Structure e.g. GST bringing FDI
 Tie up between countries and groups like SAARC/ASEAN/FTA
 Factor Advantages
 Developed countries have high cost of labor
 Developing countries have required skill @ lower cost….Outsourcing Industry
has grown due to this factor
 Availability of resources like power, water, etc.
 Stable political structure
 Expanding Markets in Developing Countries
 Growth rate in developing economies on the rise
 High populated countries become large customer base
Annexure
Craftsmanship V/S Process Flow

Crafts man Process Steps

•Single person performs •Task is divided into

compete task multiple subtasks
•E.g. Carpenter making a •E.g. IKEA factory where
table completely table leg is made at 1
•Suited for Low Volume stage and top is made
•Person dependent at another stage
•Suited for Higher volumes
•Process & Person
dependent
Car Manufacturing Process Flow