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BY K. SASHI RAO TRAINING AND MANAGEMENT CONSULTANT
To help understand the concepts of operations and production management To help get exposure to operation process, models and their effectiveness To help learn production and operation control mechanism
Introduction to Operations Management
Operations make products/services ± Dell makes computers, Jet Airways fly airplanes, LIC gives insurance, Star TV makes television programs et al Operations make products to satisfy customer demand ± soaps to keep clean, food to satisfy hunger, houses to provide shelter, cars to provide mobility Operations transform inputs to outputs ± steel to make furniture, sugar to make sweets, coal to make power
his co-workers Frank and Lillian Gilbreth introduced motion study and basic concepts of psychology .Historical Journey of Operations Management(1) ³Scientific management´ as a principle was developed by Frederick Taylor in the early 1900s who propounded that scientific laws govern how much a worker can produce per day and it is up to management to apply it to production systems and he introduced time study and work-study Later.
Historical Journey of Operations Management(2) It was Henry Ford who revolutionized production management in 1913 by introducing the ³moving assembly line´ as the most efficient means of mass production and bringing about labor specialization Elton Mayo then thro¶ the Hawthorne studies in the early 1950s found that people performed better under certain conditions that motivated them.which was the basis for current personnel management and human relations World War 2 pressures for producing for the War created the field of Operations Research to form multidisciplinary teams to scientifically analyze a problem and have mathematically optimal solutions .
JIT. Lean Manufacture.Historical Journey of Operations Management(3) It was in the 1950s and 1960s that the systems approach to production evolved and integration of organizational systems The 1970s brought about wider use of computers and development of materials requirement planning( MRP1) as a precursor to manufacturing resource planning( MRP-2) and later enterprise planning( ERP) Current decade has brought about modern manufacturing methods driven by Automation. and now leading to Computer Integrated Manufacture (CIM). TQM. Flexible Manufacturing Systems (FMS) and Factory of the Future (FOF) .
Operations to meet demand CUSTOMERS Passed to Create demand SUPPLY Of products DEMAND for products Arrange OPERATIONS In the process Passed to .
Operations transforming inputs to outputs INPUTS -People -Buildings -Materials -Equipment -Money -Energy -Others OPERATIONS OUTPUTS -Goods -Services -Profit -Pay -Waste -Others -Manufacture -Serve -Transport -Sell -Deliver -Others .
Operations in Practice SUPPLIERS Procurement Processing Or Manufacturing Operations CUSTOMERS Distribution .
plumbing Preparing. plastering. removing waste. finishing. shearing Extraction. brewing. monitoring Storing. concreting. harvesting. feeding. processing . growing. testing. billing Booking tickets. displaying. bottling Diagnosis. mixing.distribution Assembly. entertaining . cleaning Refining.Variety of Operations Organization Farm Coal mine Oil refinery Computer maker House builder Brewery Hospital Retail shop Airline Typical Operations et al Planting. treatment. packing Bricklaying. flying. selling. surgery.
Goods and Services SERVICES Intangible Provided by service set-ups Cannot be stored Cannot be moved around Production and consumption simultaneous Value declines very quickly More likely to be unique More contact with customers Customers part of service Facilities close to customers More likely to be labor-intensive Quality more difficult to measure Quality depends on the server Difficult to measure output GOODS Tangible Made by manufacturers Can be stored( inventory) Can be moved( transportation) Delay between production and use (inventory) Maintains value longer( product/shelf life) Often similar and often mass produced Less direct customer contact with makers Customers not involved in manufacturing Factories centralized and away from customers Capital-intensive and easier to automate Quality is easily measurable Quality assurance is internal to the maker Output can be measured .
restaurants prepare meals. or even universities educate students Operations managers are responsible for making and/or delivering goods and services . power stations generate electricity.Operations and the Process(1) Operations are the activities that make an organization¶s products These products can be any combination of goods and/or services that satisfy customer demand In factories products are made.
everybody is affected by operations and should be involved with operations management Operations are at the heart of every organization and they define what they do and how they do it All organizations need proper operations management Their success will come only if they supply products that customers want .Operations and the Process(2) In µoperations¶ we can think of any product/service using any kind of µprocess or processes¶ Hence.
e.Process(1) Process for a product consists of all the steps to make it Process for wine-making consists of the following steps: Pick the grapes from vineyard Crush the grapes and remove stems Separate the juice from the skins and seeds Treat the must( i. juice that turns into wine) Ferment the must in vats Do first racking to filter the wine into containers Do second racking to clarify the wine and age in barrels Blend( sometimes) and bottle Age in bottles Pack bottles in cases and dispatch .
it may be possible to have many steps going on simultaneously or in parallel to save overall process time e. sequencing.g. cutting vegetables while water is boiling or oil being heated before making an elaborate food dish Hence.Process(2) Previous wine-making example listed the various steps in a sequential manner This implies that these steps have to be followed and the end of one step is the beginning of the next step In making some items. priority and time management are essential concepts in operations .
time Space et al) .Buffering Operations Suppliers Raw Materials Stocks OPERATIONS Finished goods Stocks Customers Stocks Of Work in Progress Internal Buffers (capacity.
Key Operational Issues(1) Objectives ± maximize output or minimize costs or aim for best quality ? Capacity ± how much maximum can we make ? Demand variability Batch-wise or continuous process operations Production ± how much should we produce ? Scheduling ± how much to produce when ? .
Key Operational Issues(2) Selection and design of particular products/services to be offered Capacity decisions and locations plan Suitable supply. and logistics and distribution plans Optimum utilization of available resources . manufacturing methods. storage.
how to do it. planning. staffing. motivating.Managers and Operations Managers are those who make decisions They decide what to do. allocating. when it should be done and how to get things done Their roles are setting objectives. organizing. who can/should do it. directing. controlling and informing et al . monitoring.
they are responsible for all activities that make an organization¶s products Operations Management is the management function that is concerned with all aspects of operations Operations Management is the management of systems and processes that creates and produces goods and/or provide services OM is involved with everything to do with transformation of inputs into outputs .Operations Managers and Operations Management (OM) People who manage operations are Operations Managers.
5Ps of Operations Management Product Plant Processes Programs People .
Product Market Need Aesthetics Performance Quality Reliability Quantity Cost and Price Relationship Delivery dates/schedules .5Ps.
Plant Plant Plant Plant Plant Plant Plant Plant capability size/capacity performance layout equipment and performance maintenance safety and operation .5Ps.
batch.5Ps.Processes Process type. priority and conditionality Production processes and systems integration Organizational processes and systems integration . semi-continuous. continuous Process sequencing.
delivery and dispatch .Programs Demand forecasting and Sales forecasting Production planning Production control Production scheduling Production programs Timetables for purchasing. production.5Ps.
5Ps.People People skills and capabilities Manpower size and growth Work conditions and safety Wages/salaries People education and training People motivation Trade unionization .
Operations Management .schematic(1) Decisions Manager Decisions Information Information Inputs Operations Outputs .
Operations Management -schematic(2) Operations Management Operations Strategy Process Design Product Design Planning and Scheduling Resources Managing the Supply Chain .
(handout) . procurement planning and execution et al System Model of Operations Management.Operations Management -a systems view The operating system of a manufacturing or service organization is made up of set of highly interactive subsystems which are independently operable. plant layout. scheduling and control. inventory management. process selection. capacity.product/service design. quality control/assurance. work systems design et al Systems operation elements ± production planning. but yet all aimed at overall organizational profitability and productivity Systems design elements.
What are our aims? How do we work with other parts of the organization? Product.Operational Management Decisions(1) Objectives.What is desired quality? How is it measured? How do we maintain required quality? .What products do customers want? What should we make? Demand.How much capacity do we have and what is needed now and in future? Quality.How do we forecast demand? Is there demand variability? Capacity.
How do we arrange the facilities? Materials.How do we measure performance? What targets should we aim for ? Technology.When do we make products and schedule resources? Performance.Operational Management Decisions(2) Process-How do we make our products? What facilities do we need? Planning.What materials do we need? Where do we get them from ? .What level of technology should we use? Layout.
Operational Management Decisions(3) Stocks.What type of management systems should we use? Organizational structure.How do we move goods thro¶ the supply chain? Pricing.What do we keep in stock? How do we minimize the cost? Logistics.Where is the best place for our operations? Management systems.How many and what type of people do we employ? How do we motivate them? .What is the best structure to support our operations? People.What prices should we charge customers? Location.
Key Concepts in Operations Management(1) Operations Operations Management Operations Strategy Production Management Production Planning and Control Product Design and Quality .
Key Concepts in Operations Management(2) Process Design and Control Capacity Planning and Plant Layout Manufacturing Resources Planning and Scheduling Job Design and Work Measurement Managing the Supply Chain Managing Stocks Enterprise Resources Planning .
costs of material and used services Internal constraints. conflicting organizational goals and objectives. customers willingness to buy and pay asked price. business and operating risks Inevitably. economic situation. competition scenario. skills and manpower availability.Operational Management Constraints External constraints. compromises are needed to give products that are accepted by customers while using resources efficiently enough to meet internal requirements .limited resources.market demand and growth. expensive costs of available resources.
Operational Management Constraints Customer demands Internal constraints Operational Management decisions External constraints OPERATIONS .
Alvin Toffler( 1985) . If lightening or crushing wind don¶t destroy it. it will simply run out of gas.Operations Strategy A corporation without a strategy is like an airplane weaving thro¶ stormy skies. slammed by the wind. hurled up and down. lost in the thunderheads.
Operations Strategy This flows from the organization¶s business strategy Business strategy is illustrated below: Mission Business Strategy Environment Operations Strategy Distinctive Competence .
products depend on the process used to make them. policies. and the features of products and processes are set by the operations strategy . plans and culture relating to operations Such a strategy can have different focus from time to time linked to the corporate strategy Organizations compete by making products that customers prefer.Operations Strategy Operations strategy consists of all the strategic decisions.
to focus on product flexibility for customization or on volume flexibility to meet changing demand levels Technology.to offer best possible quality or lower quality that customers need and/or willing to pay Timing. latest or superior technology Customer service.to meet customer satisfaction or customer delight .to deliver when exactly needed or earlier from stocks for standard items Flexibility.go for any of appropriate.to go for lowest costs or minimizing costs to offer lowest prices Quality.Operations Strategy -focus alternatives Cost.
low variability. high quality materials Adequate capacity. skilled employees. close customer relations Short lead times. responsive operations. dedicated operations Versatile operations. automation. short lead times Investment in R&D. continuous product development. low overheads Reliable processes. responsive operations. exploiting new ideas Customer delight. standard products. open to suggestions Quality Timing High quality Delivery when needed No waiting time Customized products Meet changing demand levels Most advanced Pampering customers Fast response Product reliability Demand flexibility Technolog y Customer service . high productivity. quick product changeovers Variable capacity. spare capacity.Operations Strategy -focus effects Focus Cost Competitive Types of operations Advantage Low prices High volume production. efficient work scheduling. TQM. close customer relationships. efficient work scheduling.
Operations Strategy Implementation While implementing operations strategy. decisions taken are at strategic level. tactical level and operational level Strategic level decisions are of long-term nature and long term impact Tactical level decisions similarly of medium term nature and impact Operational level decisions are of short term implications and consequences .
Vertical integration Types of decisions Setting long term aims and objectives Deciding type of business to be in Choosing best way to organize operations Designing the type of products Showing how to make the products Choosing where to make the products Setting the plant size Setting how good the products are Deciding how much of supply chain to own .Operational Decisions .strategic Area Objectives Business Structure Product Process Location Capacity Quality Mgmt.
tactical Area Layout Planning Q.A.Operational Decisions . Logistics Type of decision Designing how operations are to be arranged Deciding when to introduce new products Setting checks on quality Planning the distribution of products Replacement Finding best time to replace equipment Staffing Technology Make/buy Employing people with right skills Choosing technology level for process Deciding to make or buy materials Performance Defining measures of performance Control system Designing checks for operations .
operational Area Scheduling Staffing Inventory Reliability Maintenance Quality Job design Work measurement Type of decisions Setting the order in which operations are to be done Designing staff schedules Deciding how much stock to hold Finding ways to improve equipment reliability Scheduling maintenance periods Checking that products reach designed quality Finding the best way to do something Seeing how long operations take .Operational Decisions .
Operational Management Decisions. loyalty programs Supplier arrangements.targets for all operations on product groups/product lines/departments like food.to ensure adequate to provide expected level of customer service . textiles.POS readers and scanners.supermarket case study Performance. shopping comfort and ease of pickup and carry Capacity.supply sources and price negotiation detailing Staffing.decide on periodic sales promotion schemes and incentives. discounts.products/sections designed for convenience. backend SCM methods Pricing and promotions. in-house branding.to decide based on forecasted customers footfalls and actual buyers to meet current and future demand Technology use. household goods etc Location.select right site to attract customers keeping competitive mall locations in mind Layout. energy saving store design and maintenance.
Operational Strategy -success factors Flexible organizational structure that allows innovation Implementation procedures are formalized Effective information systems to support decisions Acceptance that strategies evolve and keep changing Control systems that monitor progress Everybody committed to chosen strategy Developing an organizational culture that supports the strategy .
Operational Strategy -failure factors People who design strategy are not responsible for implementation Strategy badly designed Strategy poorly implemented Strategy not realistic or practical Strategy not aligned with actual operations They ignore critical factors People pay only lip service to strategy Enthusiasm declines over time .
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