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Transcript of Park_BS_OM_1a
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OPERATIONS MANAGEMENT
BY
K. SASHI RAO
TRAINING AND MANAGEMENT
CONSULTANT
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Course Objectives To help understand the concepts of
operations and production management
To help get exposure to operationprocess, models and their effectiveness
To help learn production and operation
control mechanism
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Introduction to OperationsManagement
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Operations Operations make products/services Dell
makes computers, Jet Airways fly airplanes,LIC gives insurance, Star TV makes televisionprograms et al
Operations make products to satisfy customerdemand soaps to keep clean, food to satisfyhunger, houses to provide shelter, cars toprovide mobility
Operations transform inputs to outputs steel
to make furniture, sugar to make sweets, coalto make power
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Historical Journey of Operations
Management(1) Scientific management as a principle was
developed by Frederick Taylor in the early1900s who propounded that scientific laws
govern how much a worker can produce perday and it is up to management to apply it toproduction systems and he introduced timestudy and work-study
Later, his co-workers Frank and Lillian Gilbrethintroduced motion study and basic concepts ofpsychology
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Historical Journey of Operations
Management(2) It was Henry Ford who revolutionized production
management in 1913 by introducing the movingassembly line as the most efficient means of massproduction and bringing about labor specialization
Elton Mayo then thro the Hawthorne studies in theearly 1950s found that people performed better undercertain conditions that motivated them- which was thebasis for current personnel management and humanrelations
World War 2 pressures for producing for the Warcreated the field ofOperations Research to formmultidisciplinary teams to scientifically analyze aproblem and have mathematically optimal solutions
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Historical Journey of Operations
Management(3) It was in the 1950s and 1960s that the systems
approach to production evolved and integration oforganizational systems
The 1970s brought about wider use ofcomputers and
development of materials requirement planning( MRP-1) as a precursor to manufacturing resource planning(MRP-2) and later enterprise planning( ERP)
Current decade has brought about modernmanufacturing methods driven by Automation, TQM,
JIT, Lean Manufacture, and now leading to ComputerIntegrated Manufacture (CIM), Flexible ManufacturingSystems (FMS) and Factory of the Future (FOF)
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Operations to meet demandCUSTOMERS
SUPPLYOf products
DEMANDfor products
OPERATIONSIn the process
Passedto
Createdemand
Passedto
Arrange
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Operations transforming inputs to
outputs
INPUTS OPERATIONS OUTPUTS
-People-Buildings-Materials-Equipment-Money-Energy
-Others
-Manufacture-Serve-Transport-Sell-Deliver-Others
-Goods-Services-Profit-Pay-Waste-Others
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Operations in Practice
Procurement
Processing
Or Manufacturing
OperationsDistribution
CUSTOMERSSUPPLIERS
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Variety of Operations
Organization Typical Operations et alFarm Planting, growing, harvesting, shearing
Coal mine Extraction, removing waste, cleaning
Oil refinery Refining, processing ,distribution
Computer maker Assembly, finishing, testing, packing
House builder Bricklaying, concreting, plastering,plumbing
Brewery Preparing, mixing, brewing, bottling
Hospital Diagnosis, surgery, treatment,monitoring
Retail shop Storing, displaying, selling, billing
Airline Booking tickets, flying, feeding,
entertaining
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Goods and Services
SERVICES GOODSIntangible Tangible
Provided by service set-ups Made by manufacturers
Cannot be stored Can be stored( inventory)
Cannot be moved around Can be moved( transportation)
Production and consumption simultaneous Delay between production and use(inventory)
Value declines very quickly Maintains value longer( product/shelf life)
More likely to be unique Often similar and often mass produced
More contact with customers Less direct customer contact with makers
Customers part of service Customers not involved in manufacturingFacilities close to customers Factories centralized and away from
customers
More likely to be labor-intensive Capital-intensive and easier to automate
Quality more difficult to measure Quality is easily measurable
Quality depends on the server Quality assurance is internal to the maker
Difficult to measure output Output can be measured
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Operations and the Process(1) Operations are the activities that make an
organizations products These products can be any combination of
goods and/or services that satisfy customerdemand
In factories products are made, restaurantsprepare meals, power stations generateelectricity, or even universities educatestudents
Operations managers are responsible formaking and/or delivering goods and services
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Operations and the Process(2) In operations we can think of any
product/service using any kind of process orprocesses
Hence, everybody is affected by operations andshould be involved with operationsmanagement
Operations are at the heart of everyorganization and they define what they do andhow they do it
All organizations need proper operationsmanagement Their success will come only if they supply
products that customers want
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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.e. 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
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Process(2) Previous wine-making example listed the various
steps in a sequential manner
This implies that these steps have to be followed andthe end of one step is the beginning of the next step
In making some items, it may be possible to havemany steps going on simultaneously or in parallel tosave overall process time e.g. cutting vegetableswhile water is boiling or oil being heated beforemaking an elaborate food dish
Hence, sequencing, priority and time management areessential concepts in operations
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Buffering Operations
OPERATIONSSuppliersRaw Materials
Stocks CustomersFinished goods
Stocks
StocksOf Work in Progress
InternalBuffers
(capacity, timeSpace et al)
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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 ?
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Key Operational Issues(2) Selection and design of particular
products/services to be offered
Capacity decisions and locations plan Suitable supply, manufacturing methods,
storage, and logistics and distribution plans
Optimum utilization of available resources
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Managers and Operations Managers are those who make decisions
They decide what to do, how to do it, whocan/should do it, when it should be doneand how to get things done
Their roles are setting objectives, planning,organizing, staffing, directing, motivating,allocating, monitoring, controlling andinforming et al
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Operations Managers and
Operations Management (OM) People who manage operations are Operations
Managers; they are responsible for all activities thatmake an organizations products
Operations Management is the management functionthat is concerned with all aspects of operations
Operations Management is the management of systemsand processes that creates and produces goods and/orprovide services
OM is involved with everything to do with transformation
of inputs into outputs
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5Ps of Operations Management Product
Plant
Processes Programs
People
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5Ps- Product Market Need
Aesthetics
Performance
Quality Reliability
Quantity
Cost and Price Relationship
Delivery dates/schedules
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5Ps- Plant Plant capability
Plant size/capacity
Plant performance
Plant layout
Plant equipment and performance
Plant maintenance
Plant safety and operation
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5Ps- Processes Process type- batch, semi-continuous,
continuous
Process sequencing, priority and conditionality
Production processes and systems integration
Organizational processes and systems
integration
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5Ps- Programs Demand forecasting and Sales forecasting
Production planning
Production control Production scheduling
Production programs
Timetables for purchasing, production, delivery
and dispatch
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5Ps- People People skills and capabilities
Manpower size and growth
Work conditions and safety
Wages/salaries
People education and training
People motivation
Trade unionization
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Operations Management
- schematic(1)
Manager
Inputs Operations Outputs
DecisionsDecisions
InformationInformation
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Operations Management
-schematic(2)Operations
Management
OperationsStrategy
ProductDesign
ProcessDesign
Planning andSchedulingResources
Managing theSupply Chain
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Operations Management
-a systems view
The operating system of a manufacturing or serviceorganization is made up ofset of highly interactive sub-systems which are independently operable, but yet allaimed at overall organizational profitability and
productivity Systems design elements- product/service design,
capacity, process selection, plant layout, work systemsdesign et al
Systems operation elements production planning,scheduling and control, inventory management, quality
control/assurance, procurement planning and executionet al
System Model of Operations Management- (handout)
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Operational Management
Decisions(1) Objectives- What are our aims? How do we
work with other parts of the organization? Product- What products do customers want?
What should we make?
Demand- How do we forecast demand? Isthere demand variability?
Capacity- How much capacity do we have andwhat is needed now and in future?
Quality- What is desired quality? How is it
measured? How do we maintain requiredquality?
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Operational Management
Decisions(2) Process-How do we make our products? What
facilities do we need?
Planning- When do we make products and scheduleresources?
Performance- How do we measure performance?What targets should we aim for ?
Technology- What level of technology should we use?
Layout- How do we arrange the facilities?
Materials- What materials do we need? Where do we
get them from ?
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Operational ManagementDecisions(3)
Stocks- What do we keep in stock? How do weminimize the cost?
Logistics- How do we move goods thro the supplychain?
Pricing- What prices should we charge customers? Location- Where is the best place for our operations?
Management systems- What type of managementsystems should we use?
Organizational structure- What is the best structure to
support our operations? People- How many and what type of people do we
employ? How do we motivate them?
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Key Concepts in OperationsManagement(1)
Operations
Operations Management
Operations Strategy Production Management
Production Planning and Control
Product Design and Quality
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Key Concepts in OperationsManagement(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
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Operational ManagementConstraints
External constraints- market demand and growth,economic situation, customers willingness to buy andpay asked price, competition scenario, costs of materialand used services
Internal constraints- limited resources, expensive costsof available resources, conflicting organizational goalsand objectives, skills and manpower availability,business and operating risks
Inevitably, compromises are needed to give products
that are accepted by customers while using resourcesefficiently enough to meet internal requirements
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Operational ManagementConstraints
OperationalManagement decisions
Customerdemands
Externalconstraints
OPERATIONS
Internalconstraints
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Operations Strategy
A corporation without a strategy is like anairplane weaving thro stormy skies, hurledup and down, slammed by the wind, lost inthe thunderheads. If lightening or crushingwind dont destroy it, it will simply run outof gas.
Alvin Toffler( 1985)
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Operations Strategy
This flows from the organizationsbusiness strategy
Business strategy is illustrated below: Mission
BusinessStrategy
EnvironmentDistinctive
Competence
OperationsStrategy
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Operations Strategy
Operations strategy consists of all the strategic
decisions, policies, 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; products depend on the process used
to make them; and the features of products and
processes are set by the operations strategy
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Operations Strategy-focus alternatives
Cost- to go for lowest costs or minimizing costs tooffer lowest prices
Quality- to offer best possible quality or lower qualitythat customers need and/or willing to pay
Timing- to deliver when exactly needed or earlier fromstocks for standard items
Flexibility- to focus on product flexibility forcustomization or on volume flexibility to meetchanging demand levels
Technology- go for any of appropriate, latest orsuperior technology
Customer service- to meet customer satisfaction orcustomer delight
Operations Strategy
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Operations Strategy-focus effectsFocus Competitive
Advantage
Types of operations
Cost Low prices High volume production, automation, highproductivity, standard products, lowoverheads
Quality High quality Reliable processes, TQM, low variability,high quality materials
Timing Delivery whenneeded
Adequate capacity, responsive operations,efficient work scheduling, close customerrelations
Fastresponse
No waitingtime
Short lead times, spare capacity,dedicated operations
Product
reliability
Customized
products
Versatile operations, skilled employees,
quick product changeovers
Demandflexibility
Meet changingdemand levels
Variable capacity, responsive operations,efficient work scheduling, short lead times
Technology
Most advanced Investment in R&D, continuous productdevelopment, exploiting new ideas
Customerservice Pamperingcustomers Customer delight, close customerrelationships, open to suggestions
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Operations StrategyImplementation
While implementing operations strategy,decisions taken are at strategic level, tacticallevel and operational level
Strategic level decisions are of long-termnature and long term impact
Tactical level decisions similarly of mediumterm nature and impact
Operational level decisions are of short term
implications and consequences
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Operational Decisions- strategic
Area Types of decisions
Objectives Setting long term aims and objectives
Business Deciding type of business to be in
Structure Choosing best way to organize operations
Product Designing the type of products
Process Showing how to make the products
Location Choosing where to make the products
Capacity Setting the plant size
QualityMgmt.
Setting how good the products are
Verticalintegration
Deciding how much of supply chain to own
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Operational Decisions- tactical
Area Type of decision
Layout Designing how operations are to be arranged
Planning Deciding when to introduce new products
Q.A. Setting checks on quality
Logistics Planning the distribution of products
Replacement Finding best time to replace equipment
Staffing Employing people with right skills
Technology Choosing technology level for processMake/buy Deciding to make or buy materials
Performance Defining measures of performance
Control
system
Designing checks for operations
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Operational Decisions- operational
Area Type of decisionsScheduling Setting the order in which operations are to be done
Staffing Designing staff schedules
Inventory Deciding how much stock to hold
Reliability Finding ways to improve equipment reliability
Maintenance Scheduling maintenance periods
Quality Checking that products reach designed quality
Job design Finding the best way to do something
Workmeasurement
Seeing how long operations take
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Operational ManagementDecisions- supermarket case study
Performance- targets for all operations on productgroups/product lines/departments like food, textiles, householdgoods etc
Location- select right site to attract customers keepingcompetitive mall locations in mind
Layout- products/sections designed for convenience, shoppingcomfort and ease of pickup and carry
Capacity- to decide based on forecasted customers footfalls andactual buyers to meet current and future demand
Technology use- POS readers and scanners, energy saving storedesign and maintenance, backend SCM methods
Pricing and promotions- decide on periodic sales promotionschemes and incentives, discounts, in-house branding, loyalty
programs Supplier arrangements- supply sources and price negotiation
detailing Staffing- to ensure adequate to provide expected level of
customer service
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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 thestrategy
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Operational Strategy-failure factors
People who design strategy are not responsiblefor 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