An Introduction to Operations Management

Upendra Kachru

OPERATIONS MANAGEMENT

MY NAME IS: PROF. UPENDRA KACHRU

I have got a degree in engineering from NIT, Durgapur and a MBA from the University of Illinois, USA. I have over 39 years of work experience out of which I spent nearly 30 years in the corporate world. I am an author and have over 30 titles to my credit and the text that you will be using is one of them. I was teaching at Goa Institute of Management last year. Before that I was teaching at Fore School of Management and at both campuses of IILM.

Upendra Kachru

OPERATIONS MANAGEMENT

WELCOME TO POM 1.
I hope that this course will not only give you some learning experience but you will at the same time also enjoy this course.

Upendra Kachru

OPERATIONS MANAGEMENT

Historical Back Ground

Scientific Management: Time and Motion Study Administrative Management Theory Behavioral Management Theory World War II to the 1960: The 1970 And 1980: The 1990 and After: 1890s 1907 Weber & Fayol Elton Mayo Operation Research Japanese Challenge Operations Management

Upendra Kachru

OPERATIONS MANAGEMENT

Date 1875 1899 1900 1901 1905 1905 1907 1927 1931 1935 1940 1947 1950 1970 1975 1980 1990 2000

Initiator James Watt Eli Whitney Frederick W. Taylor Henry H. Gantt Henry Ford Alfred P. Sloan Frank & Lillian Gilbreth Elton Mayo Walter A. Shewart H.F. Dodge & H.G. Romig P.M.S. Blacket et al George B. Dantzig et al A. Charnes, W.W. Cooper & H. Raiffa J. Orlicky & O. Wright

Event The Steam Engine was commercially manufactured Introduced mass production and the concept of standard interchangeable parts Scientific Management Scheduling Assembly Line Organizational Management Time & Motion Studies Human Resources Movement Quality Control Charts Statistical Sampling applied to quality control Operations Research Applications Linear Programming Non-linear and Stochastic Processes Programming

Computer applications to Manufacturing Material Requirement Planning (MRP) Taiichi Ohno Toyota Production System W.E. Deming, Philip Crosby & J. Juran, Quality and productivity applications from ; General Motors & IBM Computer aided Design and Manufacturing (CAD / ); Robotics, US Defense,Deptt, Michael Hammer, Internet, Electronic James Champy Business Process Reengineering Amazon, eBay, Online E-commerce, Dr. Daniel Whitney and Professor Agile Manufacturing, High performance Work systems Charles Fine, MIT

Upendra Kachru

OPERATIONS MANAGEMENT

Operation Management Themes

Value Mass Customization Service Excellence Cost Mass production Functional Specialization Lean & Agile Manufacturing High-Performance System

Cross-Functional Co-ordination

Upendra Kachru

OPERATIONS MANAGEMENT

Themes
The earlier slide shows three key shifts in emphasis in Operations Management over time: From cost and efficiency to value creation. From mass production to agility and customization. From functional specialization to a systems approach to achieving high performance.

Upendra Kachru

OPERATIONS MANAGEMENT

OM as a Transformation Process
Production Management was traditionally, i.e. until the early 1980s, defined as:
the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user.

In the 1980s Production changed to Operations. Now Operations Management, once viewed primarily as a manufacturing function, became applicable to manufacturing, services and contracts, as a transformation process. As a transformation process, the tremendous competitive potential for both Service and Contract firms, of Operations Management was now recognized.

Upendra Kachru

OPERATIONS MANAGEMENT

OM as Transformation process
Inputs = Transformation = Outputs

INPUTS

PROCESS

OUTPUTS

PERFORMANCE MANAGEMENT

The change in definition reflects a change in focus. Instead of the traditional focus on cost, the focus now encompasses performance management.
Upendra Kachru OPERATIONS MANAGEMENT

OM as Transformation process
Outputs Manufacturing: Automobile Services: Restaurant Services: Insurance Agriculture: Wheat Inputs Transformation

Inputs = Transformation = Outputs

Upendra Kachru OPERATIONS MANAGEMENT

OM as Transformation process
Outputs Manufacturing: Automobile Services: Restaurant Services: Insurance Agriculture: Wheat Roadworthy Car Food, Customer Inputs Labor, Capital, Energy, Raw materials, Components, Subassemblies and Assemblies Labor, Capital, Energy, Vegetables, Meat, Spices, Cooking medium etc. and Customer Labor, Payment, Actuarial Data Labor, Capital, Seeds, Water, Fertilizer and Energy Transformation Assembled Car, Components, Sub-assemblies and Assemblies Semi-cooked and Cooked food

Insurance Policy Wheat, Grain

Processing of data, money, and Policies Preparation of land, Seeds in different stages of evolution, Harvesting and threshing

Inputs = Transformation = Outputs

Upendra Kachru OPERATIONS MANAGEMENT

Outputs
In manufacturing tangible goods are produced where there is little or no customer interaction during the production process and the customer has little impact on the system. Services can be either tangible or intangible. Tangible services behave similar to that in manufacturing, but intangible services have different degrees of customer contact.
Upendra Kachru OPERATIONS MANAGEMENT

Transformation
Transformation processes can be quite varied. In different types products, there could be different types of transformation processes. Generally, these are categorized as follows:
Manufacture the physical creation of products (for example cars) Transport the movement of materials or customers (for example a taxi service) Supply change in ownership of goods (for example in retailing) Service the treatment of customers or the storage of materials (for example insurance).

Upendra Kachru

OPERATIONS MANAGEMENT

Inputs
There are two types of inputs that go into the transformation process. Some inputs are used up in the process of creating goods or services; others play a part in the creation process but are not used up. Inputs always include both types. To distinguish between these, input resources are usually classified as:
Transformed Resources It is those resources that are transformed in some way by the operation to produce the goods or services that are its outputs Transforming Resources It is those resources that are used to perform the transformation process. They are generally in the form of labor or capital.
Upendra Kachru OPERATIONS MANAGEMENT

Value Driven Approach

The current view of Operations Management is that it not just about saving on costs but also about creating revenue. This makes Operations Management as a value creation center within the organization.
The traditional view perceives it as a system that is involved with the manufacture and production of goods and services. The value driven view perceives it as a system designed to deliver value.

Upendra Kachru

OPERATIONS MANAGEMENT

OM - Value Approach
Value is defined as performance by the cumulative benefits that will result if the product is purchased and used as intended. Functionality is a measure of the extent the product, when properly used, is able to accomplish the intended feat. Quality is broadly defined as the extent to which a product or service is delivered in consistence with what the customer has been lead to expect. An organizations speed is often measured in two dimensions: How long a customer must wait for the product once it is requested, and How long its takes to design, develop, and introduce new products. Timeliness is the ability of a firm to get the right product to targeted customers at the most desirable time. Flexibility is the input to the value equation relating to the ability of the Operations Management system to give the customer the desired product.

Upendra Kachru

OPERATIONS MANAGEMENT

Operation Management Performance

Quality Being RIGHT

Speed

Being FAST

Timeliness

Being ON TIME

Flexibility

Being ABLE TO CHANGE

Cost

Being PRODUCTIVE

Upendra Kachru

OPERATIONS MANAGEMENT

OM - Value Approach
There are two approaches to organizing Operations Management:
Functional Approach Process Approach

Upendra Kachru

OPERATIONS MANAGEMENT

Functional View
The functional view sees the system as a number of departmental activities. Therefore, a business function is: A group of business activities that together completely support one aspect of furthering the mission of the business. It is ongoing and continuous. It reflects the organizational component responsible for the activities. It is concerned with what has to be done to operate the business. A business function does not include how the work is carried out. Examples are purchasing, stores, receipt, materials management, etc.
Upendra Kachru OPERATIONS MANAGEMENT

Process View
A Business Process is: A task or group of tasks carried out to furthering the mission of the business. It is executed repeatedly. It has a beginning and an end. It is only concerned with what has to be done. It is described in terms of inputs and outputs. A business process addresses the question of how work is organized and managed across the organization i.e. grouping similar activities together. A business process does not include the organizational component responsible. Examples are Aggregate Planning, Material Requirement Planning, and Supply Chain Management, etc.
Upendra Kachru OPERATIONS MANAGEMENT

Functions vs Processes
The distinct differences between these approaches are as follows: A process produces results through work being done in the process i.e. completing the task, whereas a function produces results through the interaction of processes Processes produce outputs whereas functions create outcomes Process owners manage activities to produce required outputs whereas functional managers manage interactions to produce desired outcomes.

Upendra Kachru

OPERATIONS MANAGEMENT

OM - Functional Approach
There are five drivers that determine the nature of transformation process:
Product: The role of Operations Management is to ensure that the product is manufactured as per specifications and the plan. Plant: In order to make the product, plant and equipment is required; Operations Management has to consider that the plant meets specifications and is in keeping with the requirements. Process: There are many ways of producing the product and Operations Management has the responsibility to choose the best way. Program: The production programme ensures that the schedules of production are met. People: Production depends on people and their skills and motivation. Operations Management has to ensure that skilled and motivated workers are available.
Upendra Kachru OPERATIONS MANAGEMENT

OM Functional Approach

Manufacturing Engineering Quality Production Planning Procurement Inventory Control Logistics & Services

Upendra Kachru

OPERATIONS MANAGEMENT

Operation management Defined as a Function

OM is the business function that manages that part of the business that transforms raw materials and human inputs into goods and services of higher value.

Upendra Kachru

OPERATIONS MANAGEMENT

OM - Process Approach
The Process approach to Operations Management recognizes it as a set of processes, each of which has inputs, outputs, and structure. Each process has a job to do and each process should be measured on how effective it is in achieving the desired outcomes by redesigning processes to improve quality, cut costs, reduce cycle times, or otherwise enhance operating performance. There are two types of processes:

Core processes are those processes that create, produce, and deliver products and services that customers want. Supporting processes are those processes that do not produce outputs that customers want, but that are still necessary for running the business.

Upendra Kachru

OPERATIONS MANAGEMENT

Operation management Defined as a Process

Operation Management can be defined as a Process:
Operations Management constitutes all of the activities that an organization conducts in order to deliver value to its customers. It's the set of processes that transforms either materials or information into a product or service.
Upendra Kachru OPERATIONS MANAGEMENT

Core Processes Model

SUPPORTING BUSINESS PROCESSES

Determine Customer Needs

CORE OM PROCESSES

Monitor Competitive Environment

Market Products & Provide AfterSales Service

Measure Customer Satisfaction

Develop Product Strategy Secure Processes & Materials to Satisfy Demand Manage Strategic Planning Processes

Evaluate Product Concept Operations Planning & Control Processes Manage Human Resources

Create New Products Design or Product Improvements Manage Product Transformation Processes Manage Information Systems

Build and Test Prototypes Manage Business Logistics Manage Financial Resources

Understand Customers, Market Segments & the Competitive Environment Develop New Products or Product Improvements
Manage the Supply Chain Process

Management & Business Support Activities

Upendra Kachru

OPERATIONS MANAGEMENT

Core Processes Model

Product Development

Process Design

Supply Chain

Process Management

Though POM is involved in all the core activities, it is particularly involved in activities revolving around processes the second and third core activities. These are activities that create, produce, and deliver products and services that customers want.
Upendra Kachru OPERATIONS MANAGEMENT

Drivers
There are ten major drivers to success in Operations Management: Customer needs: Customer needs form the basis to support the firms demand, its forecasting needs and its product design and development activities. Product Strategy: This involves creating products that customers desire, evaluating product concepts so that there is support to design new products or introduce product improvements. Processes & Materials to Satisfy Demand: Management activities involve selection of raw materials from vendors and the ultimate delivering and servicing of the product for the customer. These activities include operations planning and control processes and managing the product transformation processes.
Upendra Kachru OPERATIONS MANAGEMENT

Drivers
Information: Operations need information. No process operates completely independently. To make decisions requires information. Price: Potential customers who perceive the price to be too high will either not buy or switch to an alternative. High prices are justified by high quality and/or high functional utility to attract customers. Quantity: Organizations must provide enough goods or services to satisfy their customers needs. Quantity demands require attention to customer needs and the timing of those needs. Service: Service includes advice on how to operate or maintain a product, financing arrangements, checkups, availability of parts, provision of qualified labor, etc.

Upendra Kachru

OPERATIONS MANAGEMENT

Drivers
People: Production depends on people and their skills and motivation. Energy: Normally, energy is a major operations factor. All products and services require energy. In some industries, operations need huge amounts of energy, such as aluminum smelters, which are typically located near an electricity generation facility. Strategic Planning Processes: What the firm must do to achieve its corporate goals and the firms objectives for the POM function.

Upendra Kachru

OPERATIONS MANAGEMENT

Operations
Organizations, generally are still organized on the basis of functions. Therefore, in view of the Process Approach it is essential to understand the role of the Operations Manager and the interfaces with other departments.

Upendra Kachru

OPERATIONS MANAGEMENT

The Operation Managers Role

There are six main decision areas in which the operations manager has responsibility. These relate to: Processes by which goods and services are produced Quality of goods or services Quantity of goods or services (the capacity of operations) Stock of materials (inventory) needed to produce goods or services Management of human resources Coordination.

Upendra Kachru

OPERATIONS MANAGEMENT

The Operation Managers Role

Feedback

Inputs: Materials Capital Equipment People Power Information

Processes

Output Goods Contracts Or Services customers

suppliers

Operation management

Upendra Kachru

OPERATIONS MANAGEMENT

Interface with other functions

Operation Management Marketing Interface Operation Management - Finance Interface Operation Management - Design Interface Operation Management - Human Resource Interface Operation Management - Information System Interface

Upendra Kachru

OPERATIONS MANAGEMENT

OMS FUTURE CHALLENGES

Market Challenges
Market fragmentations Vocal Customers Customers supplier relationships Disruptive Power

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OPERATIONS MANAGEMENT

OMS FUTURE CHALLENGES Production Challenges

Process Design and improvement Employee Diversity Human Resource scarcity The global work force Dealing raw material prices

Upendra Kachru

OPERATIONS MANAGEMENT

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Upendra Kachru

OPERATIONS MANAGEMENT