01-Introduction to Ops Mgt

8/8/2019 01-Introduction to Ops Mgt

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Module 1Module 1Module 1Module 1

Introduction to Operations ManagementIntroduction to Operations Management


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A smile will gainA smile will gain

you ten moreyou ten more

years of lifeyears of life


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OverviewOverviewOverviewOverview

IntroductionIntroduction

DefinitionsDefinitions

Historical Milestones in OMHistorical Milestones in OM

Factors Affecting OM TodayFactors Affecting OM Today

Different Ways of Studying OMDifferent Ways of Studying OM

Role of Operations ManagementRole of Operations Management

Scope of Operations ManagementScope of Operations Management

Productivity and QualityProductivity and Quality


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IntroductionIntroductionIntroductionIntroduction

ProductionProduction means creation ofmeans creation ofutilitiesutilities andand

covers all activities of procurement, allocationcovers all activities of procurement, allocation

and utilization of resources such as labor,and utilization of resources such as labor,

energy, materials, equipments, machinery etc.energy, materials, equipments, machinery etc. UtilitiesUtilities : These are goods and services which: These are goods and services which

have want satisfying power.have want satisfying power.

Nature & Characteristics ofUtilities i.e.Nature & Characteristics ofUtilities i.e.Goods and ServicesGoods and Services : Determination is enabled: Determination is enabled

by marketing research.by marketing research.


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IntroductionIntroductionIntroductionIntroduction

Operations managementOperations management is the managementis the managementof an organizations productive resources or itsof an organizations productive resources or itsproduction system.production system.

AA production systemproduction system takes inputs andtakes inputs andconverts them into outputs.converts them into outputs.

TheThe conversion processconversion process is the predominantis the predominantactivity of a production system.activity of a production system.

The primary concern of anThe primary concern of an operationsoperationsmanagermanager is the activities of the conversionis the activities of the conversionprocess.process.


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DEFINITIONS OFDEFINITIONS OFPRODUCTIONPRODUCTION

MANAGEMENTMANAGEMENT

DEFINITIONS OFDEFINITIONS OFPRODUCTIONPRODUCTION

MANAGEMENTMANAGEMENT

When principles of management are applied inWhen principles of management are applied inproduction area of business then it is productionproduction area of business then it is productionmanagement.management.

It involves planning, organizing, directing andIt involves planning, organizing, directing and

controlling the production function or productioncontrolling the production function or productionsystemsystem a suba sub--system of business enterprise (system)system of business enterprise (system)which itself is a subwhich itself is a sub--system of its environment.system of its environment.

It is the process of effectively planning,It is the process of effectively planning,

programming, coordinating and controllingprogramming, coordinating and controllingproduction i.e. the operations part of the enterprise. Itproduction i.e. the operations part of the enterprise. Itis responsible for the actual transformation ofis responsible for the actual transformation ofmaterials into finished products.materials into finished products.


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MOREMORE DEFINITIONSDEFINITIONS OFOF

PRODUCTIONPRODUCTION MANAGEMANAGEMENTMENT

MOREMORE DEFINITIONSDEFINITIONS OFOF

PRODUCTIONPRODUCTION MANAGEMANAGEMENTMENT

Production Management is the process of planningProduction Management is the process of planningand regulating the operations of that part of anand regulating the operations of that part of anenterprise which is responsible for actualenterprise which is responsible for actualtransformation of materials into finished products.transformation of materials into finished products.

-- A.W.A.W. FieldField Production Management deals with decision makingProduction Management deals with decision making

relating to production process, so that the resultingrelating to production process, so that the resultinggoods and services are produced in accordance withgoods and services are produced in accordance with

the quantitative specifications and demand schedulethe quantitative specifications and demand schedulewith minimum cost.with minimum cost.

-- BuffaBuffa


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Organizational ModelOrganizational ModelOrganizational ModelOrganizational Model

MarketingMarketing

MISMISEngineeringEngineering

HRMHRM

QAQA

AccountingAccounting

SalesSales

FinanceFinance

OMOM


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Historical Milestones in OMHistorical Milestones in OM

The Industrial RevolutionThe Industrial Revolution

PostPost--Civil War PeriodCivil War Period

Scientific ManagementScientific Management Human Relations and BehaviorismHuman Relations and Behaviorism

Operations ResearchOperations Research The Service RevolutionThe Service Revolution


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The Industrial RevolutThe Industrial RevolutionionThe Industrial RevolutThe Industrial Revolutionion

TheThe industrial revolutionindustrial revolution developed in England in thedeveloped in England in the

1700s.1700s.

The steam engine, invented by James Watt in 1764,The steam engine, invented by James Watt in 1764,

largely replaced human and water power for factorieslargely replaced human and water power for factories.. Adam SmithsAdam Smiths The Wealth of NationsThe Wealth of Nations in 1776 toutedin 1776 touted

the economic benefits of thethe economic benefits of the specialization of laborspecialization of labor..

ThusThus in thein the latelate--1700s factories had not only machine1700s factories had not only machine

power but also ways of planning and controlling thepower but also ways of planning and controlling the

tasks of workers.tasks of workers.


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The Industrial RevolutionThe Industrial RevolutionThe Industrial RevolutionThe Industrial Revolution

The industrial revolution spread from England toThe industrial revolution spread from England toother European countries and to the United States.other European countries and to the United States.

In 1790 an American, Eli Whitney, developed theIn 1790 an American, Eli Whitney, developed the

concept ofconcept of interchangeable partsinterchangeable parts..

The first great industry in the US was the textileThe first great industry in the US was the textile

industry.industry.

In the 1800s the development of the gasoline engineIn the 1800s the development of the gasoline engine

and electricity further advanced the revolution.and electricity further advanced the revolution. By the midBy the mid--1800s, the old1800s, the old cottage systemcottage system ofof

production had been replaced by theproduction had been replaced by the factory systemfactory system..

. . . more. . . more


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PostPost--Civil War PeriodCivil War PeriodPostPost--Civil War PeriodCivil War Period

During the postDuring the post--Civil War periodCivil War period (1865(1865 --) great) great

expansion of production capacity occurred.expansion of production capacity occurred.

By postBy post--Civil War the following developments set theCivil War the following developments set the

stage for the great production explosion of the 20thstage for the great production explosion of the 20thcentury:century:

increased capital and production capacityincreased capital and production capacity

the expanded urban workforcethe expanded urban workforce

new Western US marketsnew Western US markets an effective national transportation systeman effective national transportation system


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Scientific ManagementScientific ManagementScientific ManagementScientific Management

Frederick Taylor is known as the father ofFrederick Taylor is known as the father ofscientificscientificmanagement (1911)management (1911).. HisHis shop systemshop system employedemployed

these steps:these steps:

Each workers skill, strength, and learning abilityEach workers skill, strength, and learning ability

were determined.were determined. Stopwatch studies were conducted to precisely setStopwatch studies were conducted to precisely set

standard output per worker on each task.standard output per worker on each task.

Material specifications, work methods, and routingMaterial specifications, work methods, and routing

sequences were used to organize the shop.sequences were used to organize the shop.

Supervisors were carefully selected and trained.Supervisors were carefully selected and trained.

Incentive pay systems were initiated.Incentive pay systems were initiated.


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Scientific ManagementScientific ManagementScientific ManagementScientific Management

In the 1920s, Ford Motor CompanysIn the 1920s, Ford Motor Companys operationsoperations

embodiedembodied the key elements of scientificthe key elements of scientific management :management :

standardized product designsstandardized product designs

mass productionmass production low manufacturing costslow manufacturing costs

mechanized assembly linesmechanized assembly lines

specialization of laborspecialization of labor

interchangeable partsinterchangeable parts


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Human Relations andHuman Relations and BehavioralismBehavioralismHuman Relations andHuman Relations and BehavioralismBehavioralism

In the 1927In the 1927--1932 period, researchers in the1932 period, researchers in the

Hawthorne Studies realized that human factors wereHawthorne Studies realized that human factors were

affecting production.affecting production.

Researchers and managers alike were recognizingResearchers and managers alike were recognizingthat psychological and sociological factors affectedthat psychological and sociological factors affected

production.production.

From the work ofFrom the work of behavioralistsbehavioralists came a gradualcame a gradual

change in the way managers thought about andchange in the way managers thought about andtreated workers.treated workers.


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Operations ResearchOperations ResearchOperations ResearchOperations Research

During World WarDuring World War II (1939II (1939--44),44), enormous quantitiesenormous quantitiesof resources (personnel, supplies, equipment, ) hadof resources (personnel, supplies, equipment, ) hadto be deployed.to be deployed.

Military Operations Research (OR) teams were formedMilitary Operations Research (OR) teams were formed

to deal with the complexity of the deployment.to deal with the complexity of the deployment. After the war, operations researchers found their wayAfter the war, operations researchers found their way

back to universities, industry, government, andback to universities, industry, government, andconsulting firms.consulting firms.

OR helps operations managers make decisions whenOR helps operations managers make decisions whenproblems are complex and wrong decisions are costly.problems are complex and wrong decisions are costly.


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The Service RevolutionThe Service RevolutionThe Service RevolutionThe Service Revolution

The creation of services organizations acceleratedThe creation of services organizations accelerated

sharply after World War II.sharply after World War II.

Today, more than twoToday, more than two--thirds of the US workforce isthirds of the US workforce is

employed in services.employed in services. About twoAbout two--thirds of the US GDP is from services.thirds of the US GDP is from services.

There is a huge trade surplus in services.There is a huge trade surplus in services.

Investment per office worker now exceeds theInvestment per office worker now exceeds the

investment per factory worker.investment per factory worker.

Thus there is a growing need for service operationsThus there is a growing need for service operations

management.management.


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The Computer RevolutionThe Computer RevolutionThe Computer RevolutionThe Computer Revolution

Explosive growth of computer and communicationExplosive growth of computer and communication

technologiestechnologies

Easy access to information and the availability ofEasy access to information and the availability of

more informationmore information Advances in software applications such as EnterpriseAdvances in software applications such as Enterprise

Resource Planning (Resource Planning (ERPERP) software) software

WidespreadWidespread useuse of eof e--mailmail

More and more firms becoming involved in EMore and more firms becoming involved in E--Business using the InternetBusiness using the Internet

Result :Result : FasterFaster, better decisions over greater distances, better decisions over greater distances


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Today's Factors Affecting OMToday's Factors Affecting OMToday's Factors Affecting OMToday's Factors Affecting OM

Global CompetitionGlobal Competition

Quality, Customer Service, and CostQuality, Customer Service, and Cost

ChallengesChallenges

Rapid Expansion of AdvancedRapid Expansion of Advanced

TechnologiesTechnologies

Continued Growth of the Service SectorContinued Growth of the Service Sector Scarcity of Operations ResourcesScarcity of Operations Resources

SocialSocial--Responsibility IssuesResponsibility Issues


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Studying Operations ManagementStudying Operations Management

Effective Approach :Effective Approach :

V

iew a firms OperationsV

iew a firms Operationsas aas a system,system,

Then focus on decisionThen focus on decisionmakingmaking in OMin OM


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Operations as a SystemOperations as a SystemOperations as a SystemOperations as a System

InputsInputs OutputsOutputs

ConversionConversion

SubsystemSubsystem

Production SystemProduction System

ControlControl

SubsystemSubsystem


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Inputs of anInputs of an OperationsOperations SystemSystemInputs of anInputs of an OperationsOperations SystemSystem

External InputsExternal Inputs::

Legal, Economic, Social,Legal, Economic, Social,

TechnologicalTechnological

Market InputsMarket Inputs ::

Competition, Customer Desires,Competition, Customer Desires,

Product Information.Product Information. Primary Resources as InputsPrimary Resources as Inputs ::

Materials, Personnel, Capital, UtilitiesMaterials, Personnel, Capital, Utilities


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Conversion SubsystemConversion SubsystemConversion SubsystemConversion Subsystem

Physical (Manufacturing)Physical (Manufacturing)

LocationalLocational Services (Transportation)Services (Transportation)

Exchange Services (Retailing)Exchange Services (Retailing) Storage Services (Warehousing)Storage Services (Warehousing)

Other Private ServicesOther Private Services ((Insurance etc)Insurance etc) Government ServicesGovernment Services (Local, Federal(Local, Federal))


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Outputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations System

Direct Outputs:Direct Outputs:

ProductsProducts

ServicesServices

Indirect OutputsIndirect Outputs::

Taxes, wages and salaries,Taxes, wages and salaries,

Environmental Impact (Waste, Pollution)Environmental Impact (Waste, Pollution)

Employee impact andEmployee impact and ssocial impactocial impact

Technological AdvancesTechnological Advances


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Decision Making inDecision Making in OMOM

((to understand how ops managers manage)to understand how ops managers manage)

Decision Making inDecision Making in OMOM

((to understand how ops managers manage)to understand how ops managers manage)

Strategic DecisionsStrategic Decisions

Operating DecisionsOperating Decisions

Control DecisionsControl Decisions


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Strategic DecisionsStrategic Decisions

These decisions are ofThese decisions are ofstrategic importancestrategic importance

and haveand have longlong--term significanceterm significance for thefor the

organization.organization.

Examples include deciding:Examples include deciding: thethe designdesign for a new productsfor a new productsproductionproduction

process.process.

where towhere to locatelocate a new factory ?a new factory ? whether to launch awhether to launch a newnew--productproduct

development plan ?development plan ?


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Operating DecisionsOperating DecisionsOperating DecisionsOperating Decisions

These decisions are necessary if the ongoingThese decisions are necessary if the ongoing

production of goods and services is to satisfyproduction of goods and services is to satisfy

market demands and provide profits.market demands and provide profits.

Examples include deciding:Examples include deciding: how much finishedhow much finished--goodsgoods inventoryinventory to carryto carry

the amount ofthe amount ofovertimeovertime to use next week.to use next week.

the details forthe details forpurchasingpurchasing raw material nextraw material nextmonth.month.


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Control DecisionsControl Decisions

These decisions concern the dayThese decisions concern the day--toto--dayday

activities of workers, quality of products andactivities of workers, quality of products and

services, production and overhead costs, andservices, production and overhead costs, and

machine maintenance.machine maintenance. Examples include deciding:Examples include deciding:

labor cost standardslabor cost standards for a new product.for a new product.

frequency offrequency ofpreventive maintenancepreventive maintenance.. newnew quality controlquality control acceptance criteria.acceptance criteria.


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What Controls the Operations System?What Controls the Operations System?What Controls the Operations System?What Controls the Operations System?

Information about the outputs, theInformation about the outputs, the

conversions, and the inputs is fed back toconversions, and the inputs is fed back to

management.management.

This information is matched withThis information is matched with

managements expectations.managements expectations.

When there is a difference, managementWhen there is a difference, managementmust take corrective action to maintainmust take corrective action to maintain

control of the system.control of the system.


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Role ofProduction ManagementRole ofProduction ManagementRole ofProduction ManagementRole ofProduction Management

ForecastingForecasting

PlanningPlanningConversionConversion

ControlControl


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Role ofProduction ManagementRole ofProduction ManagementRole ofProduction ManagementRole ofProduction Management

For consumers.For consumers.

For investorsFor investors

For communityFor community For suppliersFor suppliers

For employeesFor employees For nationFor nation


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Scope ofProduction ManagementScope ofProduction ManagementScope ofProduction ManagementScope ofProduction Management

Product Planning andProduct Planning and

DevelopmentDevelopment

Production AdministrationProduction Administration Execution of Plans, Policies andExecution of Plans, Policies and

Decisions (transformation).Decisions (transformation). Dependent Services andDependent Services and

DepartmentsDepartments..


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ProductProduct PlanningPlanning and Developmentand DevelopmentProductProduct PlanningPlanning and Developmentand Development

Evaluation of new productsEvaluation of new products

Designing of products on theDesigning of products on the

basis of specific demandsbasis of specific demandsreceived from marketing orreceived from marketing or

sales department.sales department.


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Production AdministrationProduction AdministrationProduction AdministrationProduction Administration

Production EngineeringProduction Engineering

Production PlanningProduction Planning

Production ControlProduction Control


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Dependent Services and DepartmentsDependent Services and DepartmentsDependent Services and DepartmentsDependent Services and Departments

Standardization,Standardization,

Specialization,Specialization,

Inspection & Quality Control,Inspection & Quality Control,

Inventory Control,Inventory Control,

Diversification,Diversification,

Employee Amenities etcEmployee Amenities etc..


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Production ManagementProduction Management vsvs

Operations ManagemenOperations Managementt

Production ManagementProduction Management vsvs

Operations ManagemenOperations Managementt Production ManagementProduction Management OutputOutput

is physical goods.is physical goods. (Older term)(Older term) Operations ManagementOperations Management OutputOutput

is physical goods or services oris physical goods or services orboth.both. (New term)(New term)


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Duties ofProduction ManagerDuties ofProduction ManagerDuties ofProduction ManagerDuties ofProduction Manager

Demand forecastingDemand forecasting PlanningPlanning location of factory,location of factory,

Capacity planning,Capacity planning, Layout of equipment,Layout of equipment,

Production Planning & Control,Production Planning & Control, Inventory Management,Inventory Management,

Quality ControlQuality Control


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PRODUCTIVITYPRODUCTIVITYPRODUCTIVITYPRODUCTIVITY

Productivity isProductivity is the quality or state ofthe quality or state ofbeing productivebeing productive. It is the concept that. It is the concept that

guides the management of productionguides the management of production

systems and measures its success.systems and measures its success. It isIt isthe quality that indicates how wellthe quality that indicates how well

labor, capital, materials and energylabor, capital, materials and energy

are utilized.are utilized.

-- RiggsRiggs


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Productivity refers toProductivity refers to measurablemeasurablerelationship between well definedrelationship between well definedoutputs & inputsoutputs & inputs i.e. between thei.e. between the

production results and the relativeproduction results and the relativeproduction agents in both the financialproduction agents in both the financialand physicaland physical terms,terms, given the termsgiven the terms

and conditions.and conditions.-- BBBB LalLal


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ProductivityProductivity = Outputs / Inputs= Outputs / Inputs

= (No. of units produced)/ (man= (No. of units produced)/ (man--

hours used)hours used)= (No. of units produced) /= (No. of units produced) /

(machine hours used)(machine hours used)

= (No. of units produced) / (man= (No. of units produced) / (man--hours used) + (machine hrs used)hours used) + (machine hrs used)


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QUALITYQUALITYQUALITYQUALITY

The degree to which the designThe degree to which the design

specifications for a product orspecifications for a product or

service are appropriate to itsservice are appropriate to itsfunction and usefunction and use,, andand the degreethe degree

to which a product or serviceto which a product or service

conforms to its designconforms to its design

specifications.specifications.


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IMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITY

ReductionReduction in production cost.in production cost.

CheaperCheaper goods to public.goods to public.

NationalNational prosperity.prosperity.

SpeedySpeedy industrialization andindustrialization and

economic development ofeconomic development ofunderdeveloped countries.underdeveloped countries.


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IMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITYIMPORTANCE OFPRODUCTIVITY

OptimalOptimal use of resources.use of resources.

HigherHigher output.output.

ForFor a company :a company :-- Reduction in overheads,Reduction in overheads,

Reduction in labor cost per unit,Reduction in labor cost per unit,

Reduction in cost of raw material,Reduction in cost of raw material,

Increase in wages / salaries.Increase in wages / salaries.


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FACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITY

1. Technological Factors :

(a) R & D (b) Production Process

(c) Scientific Management Techniques,(d) Use of Power, Raw material etc

(e) Size of Plant and Capacity Utilization,

(f) Plant Layout,

(g) Machine / equipment vintage,


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FACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITYFACTORS AFFECTING PRODUCTIVITY

2. Employee Job Performance Factors

(a) Motivation,

(b) Ability,

(c) Physical Work Environment


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End ofEnd ofModuleModule 11End ofEnd ofModuleModule 11

01-Introduction to Ops Mgt

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