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Introduction

to

Operations Management

Suhas Rane

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Agenda

Historical Development of OMTaylor, Henry Ford, Hawthorne Studies

Operations Research, Computers & Adv. Opn. Technology.

OM in the Organisation ChartSix Basic Functions of Business

O M. Definition

Scope of Operations Mgmt.

Mfg. Industry v/s Service Industry

Production SystemsInput TransformationOutput Relationships

Productivity Measurements

Decisions & Activities in OM

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Business

Whats the purpose of business ?

Why are we in business ?

. to create wealth(Adam Smith )

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SIX BASIC FUNCTIONS OF BUSINESS

1. CREATION : Product Selections / Idea Generation

2. FINANCE : Managing Resources, Capital Acqn.,

keeping Financial Records.

3. PERSONNEL : H.R., Labour Relations.

4. PURCHASING: Buying of required(Eqpt. + Material + Services)

5. CONVERSION/ : Changing Raw Materials

(PRODUCTION) to Economic Goods.

6. DISTRIBUTION : Selling & Marketing (reaching theCustomer) .

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Evolution of OM

Phases in evolution of OM

Craft Production

Mass Production

Lean Management

Mass Customisation

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Features of Diff. Prod. Systems

1. CRAFT System : Skill based, Manual,

Small Qty., Customization,

Low Cap. Investmt., but high unit cost of prodn.

(MH Husain Painting, DC Car, Space-Lab)

2. Mass Production : Low skill, More automation,

Large Qty. Standardization,High Cap Invst., but low unit cost of prodn.

(Tata Salt, HUL Lux, Nano, SSC Course)

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Features of Diff. Prod. Systems

3. LEAN System : All muscle, No fat (of mainly inventory)

Leopard

Multi-skilled staff,

TQM, Quick change-over (SMED),

Single Pc. Flow, Kanban

(Toyota Prod. System)

4. Mass Customization : High FlexibilityLimited Customization at affordable extra cost

(Dell, Asian Paints, Godrej Furniture)

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OM Gurus

F.W. Taylor(1856-1915)

Father of Sc. Management

Each worker to be trained for suitable job

(according to his skill, strength, and learning ability Divn. of Labour Synergy Effect )

Standard Output Norms set per worker.

Instructions Card, Routing Sheets, Material Specs

-All Standardized. Supervision . Not for keeping watch, but to arrange

facilities.

Incentive for motivation & increasing productivity

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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.

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O. M. Definition

Operations Management is the effective and efficient

management of processes.

A PROCESS has an input and value added output.

The objective of a process is to add value by conversion

from input to output.

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Transformation ProcessesDiff. forms

Physical : as in manufacturing operations

Locational : as in transportation operations

Exchange : as in retail operations Physiological: as in health care

Psychological: as in entertainment

Informational: as in communication

Is there any Business / Industry

where an operation is not involved?

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Operations as a Transformation Process

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INPUTMaterialMachinesLaborManagementCapital

TRANSFORMATIONPROCESS

OUTPUTGoodsServices

Feedback

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LAND,

BLDG

PLANT,

M/C

MATERIAL ENERGY MANPOWER

PRODUCTS AND SERVICES

OUTPUT

INPUT RESOURCES

OPERATIONS

MANAGEMENT

Obtains the factsPlans,

Directs,Coordinates,Controls,Motivatesin order to PRODUCE

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Mfg. v/s Services Whats the difference?

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Mfg. Industry Service Industry

Creation of

Goods

Providing Services

Production MgmtOperations Mgmt

Business Organization

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Mfg. v/s Services Whats the difference?

Manufacturing Services

1. Step by step conversion of Material Service to satisfy customer

2. Tangible & Stockable Output Non-Stockable Output

3. Mass Production with few variations Max. Customisation

4. More M/c Oriented, Less Labour More Mind Skill/ Labour

Oriented

5. Factory Location Near RM

or Market, or Better Facilities

Near Customer

6. Low / No Customer involvement in

Conversion Process

Direct interaction between

Customer and Process

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I t T f ti O t t R l ti hi

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Input TransformationOutput Relationships

System Primary

Inputs

Resources Transformation Fn.(s) Typical Desired Output

Automobile

Factory

Sheet steel,

engine parts

Tools,

equipment,workers

Fabrication and Assy. of

cars (physical)

High-quality cars

Hospital Patients MDs, nurses,

medical

equipment

Health care (physiological) Healthy individuals

Restaurant Hungrycustomers Food, chef,wait-staff,

environment

Well-prepared,Well-served food;

Stimulating environment

Satisfied customers

College or

university

High school

graduates

Teachers,

books,

classrooms

Imparting knowledge and

skills (informational)

Educated individuals

Department

store

Shoppers Displays of

goods, sales

clerks

Attract shoppers, Promote

products, Fill orders

(exchange)

Satisfied customers

Distribution

Centre

SKUs Storage bins,

stock-pickers

Storage and redistribution Fast delivery, availability

of SKUs

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Scope of Operations Mgmt.

Long Term / Strategic Decisions

1. Product Selection & Design2. Process Selection & Planning3. Facilities Location4. Facilities Layout

5. Capacity Planning

Short Term / Operational Decisions

1. Production Planning & Control2. Inventory Control3. Quality Control

4. Method Study / Work Study

5. Maintenance & Replacement

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Strategic issues

in

Operations Management

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Operations80-90% Hidden

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The Value Equation

price

ePerformancValue

price

InnovationyFlexibilitTimelinessQualityValue

P

IFTQValue

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Maximizing Value Addition in Operations

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Scope for Adding Value

for the Customer Reduce product costs to customer.

Make the product more readily available.

Provide faster service.

Provide customers with additional relevant

information.

Customize the product to the customers

specific needs.

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Strategic Priorities

Type Priority

Cost Providing low price products.Controlling costs across the board.

Quality Providing high quality products.Focus is on product and process quality.

Delivery Providing products reliably and quickly.

Flexibility Providing a wide variety of products (masscustomization).How fast a firm can produce a new product line.

Service Providing value-added service.How products are delivered and supported.

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Questions to be resolved in Op. 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?

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Questions to be resolved in Op. Mg. -

Workforce : Whom do we hire?

Quality Management : How will we define, 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?

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Productivity Concepts

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Production & Productivity

Production Output (in No of Units)

Output

Productivity ------------ No. of pcs./hr.

Input

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Three Main Productivity Indices

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Productivity Measures( Output in terms of Input)

Machines - Out put per Machine Hour

Men - Out put per Man Hour

Materials - No of units produced per input of R.M.

(e.g. - No of Screws per Kg of wire)

Power - No of Pcs. per KW Unit of El. Power

Boiler - Kgs. of Rubber cured / Kg of steam used

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Productivity of an Organization

Sugar Mill - Kg. of sugar produced /

Ton of sugar-cane crushed

Fabrication - Tons of Fabrication /

Kg. of Welding Rod

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Productivity of a Service Function

Transporter - Ton-km / Vehicle/ Month.

OR

Ton-km / 1000 Lit. Diesel

Pharma. Marketing Div. -Rs Order booked / MR /Month

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Service Industry : Productivity Measures

Business Productivity Measure

Restaurant Customers (meals) per hour

Retail Store Sale per Sq. foot

Chicken farm Kg. of meat per kg. of feed

Utility plant Kilowatts per ton of coal

Paper mill Tons of paper per ton of wood