Operations Management

Operations Management
Recommended Reading:
1. Operations & Supply Management
Richard B. Chase et al

12th Edition
Tata McGraw Hill Education Private Limited

2. Operations Mgt strategy and Analysis ---- Krajweski & Ritzman

3. Operations Management

----

Norman Gaither & Greg Fraizer

Curriculum Overview

1. Operation Strategy & Competitiveness

2. Process Analysis
3. Product Design & Process Selection Mfg
4. Product Design and Process Selection - Services
5. Facility Location
6. Facility Layout
7. Waiting Line Management

8. Strategic Capacity Management

9. Aggregate Sales & Operations Planning
10. Inventory Control
11. Material Requirements Planning
12. Supply Chain Strategy
13. Total Quality management
14. Just in time & Lean Systems

15. Project Management

Important objective of Operations function:

Providing Products, what the customers want.

Elements of Operations function:

Quality / Cost / Delivery / Service with Flexibility

Historical development of Operations Management :

1910s
>> > Principles of scientific management
Industrial psychology
Moving assembly line / Economic Order Quantity

1930s
>>> Quality control

Hawthorne studies of worker motivation

1940s
>>> Linear programming concepts

1960s
>>> Development of Operations Research tools

1970s

>>> Inventory control / Forecasting / Project management

1980s
>>> Manufacturing as a competitive weapon
KANBAN / Poka-Yoke / CAD / CAM / CIM

1990s

>>> Malcom Baldrige Quality Award

ISO 9000
Quality Function Deployment
Kaizen
ERP
Lean
Supply chain management

Management Function Levels

Strategic

>> Long term decisions

Tactical

>> Medium term decisions

Operational >>

Short term decisions

Basic concepts in Operations Management :

Plan your work
Control quality
Ensure productivity

Five Ps of Ops. Mgt :

People
Plant
Parts
Process
Planning

Operations strategies over a time period :

Upto 1980

1980 90

1990 2000

Lean production

Beyond 2000

Ops focus

Mass production

Agile mfg.

Competitive

Cost

Quality

Delivery

Flexibility

Economy

Kaizen

Quick

Integration

response

Economy of

strategy

Process criteria

of scale

knowledge

Source

Capital

Work teams

IT enabled

Intelligent

of value addition

automation

CFTs

processes

systems

Operations management :

Can be defined as the Design, Operation and Improvement of the production

systems that create the firms primary products or services.
Operations Management is a functional field of business

Market place

Corporate strategy

Ops. strategy

Fin. strategy

Mkt. strategy

Operations Mgt

People

Plant

Parts

Process

Planning
and Control

Operations strategy :

is concerned with setting up of broad policies and plans for using the resources of
the firm to best support the firms long-term competitive strategy.
Operation strategy needs to get integrated with firms corporate strategy.

Operations priorities
>> Cost
>> Product quality and reliability

>> Delivery reliability

>> Coping with changes in demand
>> Flexibility
>> New product introduction speed
>> Technical liaison and support
>> After sale support

Developing a Manufacturing Strategy :

Theme :
$$ Translate the required priorities (obtained from marketing) into specific
performance requirements for operations.
$$ Make the necessary plans to assure that operations capabilities are
sufficient to accomplish them.

Steps for developing priorities :

1. Segment the market according to product group

2. Identify the product requirements, demand patterns and profit margins of
each group.
3. Determine the order winners and order qualifiers for each group.
4. Convert order winners into specific performance requirements.

Framework for Operations Strategy in Manufacturing

Customer needs

Existing and New

Products
New product
Development

Performance priorities
and requirements

Quality / Dependability /
Flexibility / Price / Speed

Operational capabilities /
Supplier capabilities / R&D /
Systems / TQM / JIT / People

Service

Productions Systems

Input

Output
Transformation process

Feedback
Examples of transformation :

Physical

>>> Manufacturing

Locational

>>> Transportation / Ware-housing

Exchanges

>>> Retailing

Physiological

>>> Health-care

Psychological >>> Entertainment

Informational

>>> Communication

Transformation Process happening in :

Hospital

Restaurant
Automobile Factory
College
Dept. Store

Examples of Operation Systems :

System

Input

Process

Output

Hospital

Patients

Health care

Healthy individuals

Restaurant

Hungry

well prepared

Satisfied customers

customers

food

Steel, Plastic

Fabrication and

Automobile
Factory

College

Dept. Store

High quality cars

assembly

High school

Imparting

Educated

graduates

knowledge

individuals

Shoppers

Fill orders

Sales to satisfied
customers

Operation priorities :
>> Cost
>> Product quality
>> Reliability

>> Delivery speed

>> Delivery adherence
>> Flexibility
>> New product introduction speed

Elements of Operations Strategy

>> Positioning the production system
>> Product / Service plans
>> Outsourcing plans

>> Process and Technology plans

>> Strategic allocation of resources
>> Facility plans : Capacity / Location / Layout

Operations Strategy
Strategy Process

Example

Customer Needs

More Product

Corporate Strategy

Operations Strategy

Decisions on Processes
and Infrastructure

Increase Org. Size

Increase Production Capacity

Build New Factory

Competitive Dimensions

Product Quality and Reliability

Cost
Delivery Speed
Service Reliability
Coping with Changes in Demand
Flexibility and New Product Introduction
Speed

Order Qualifiers and Winners

Order qualifiers?
They are the basic criteria that permit the
firms products to be considered as candidates
for purchase by customers.
Order winners?
They are the criteria that differentiates the
products and services of one firm from
another.

Examples
A brand name car
can be an order
qualifier

Repair services can be order winners

Other Examples:
Warranty, Roadside Assistance,
Lease facilities etc;

Operations Strategy Framework

Customer Needs

New and Old

products
Competitive
Dimensions

Quality, Cost, Delivery,

Service & Flexibility

Enterprise capabilities
Operations & Supplier capabilities
Technology

Systems

People

R&D

CIM

JIT

TQM

Distribution

Support Platforms
Financial management

Human resource management

Information management

Discussion point :
Holiday Candle Company
Bob Venture is the owner of Holiday Candle Company and would like to expand his
Companys operations. For the past two years Bob has sold candles via the
Internet, but sales have steadily grown beyond his ability to produce the candles
alone from his garage workshop. Because future sales growth looks very
promising, Bob has decided to open a small manufacturing plant to produce the
candles. Sales have primarily been to customers in the United States with
occasional orders from other countries. In addition to selling via the Internet, Bob
would like to start selling his candles to specialty stores in the United States. With
the new plant, he would also like to consider expanding the products he offers in
the new future.

Discuss:

1. What do you think should be Bobs competitive priorities ?

2. Different aspects of the operations strategy that you think Bob needs to develop.

Operations some commonly used terminologies

Competitive capabilities:
Cost / Quality / Delivery / Service / Flexibility
Low-cost operations:
Producing a product at the lowest possible cost
Top Quality:
Delivering an outstanding product or service
Consistent Quality:

Producing products that meet design specifications on a consistent basis

Delivery Speed :
Quickly filling a customers order
Lead Time :
A measure often used for delivery speed
On-time Delivery :
Meeting delivery time promises

Development Speed :

Quickly introducing a new product or a service

Time-based competition :
Focuses on delivery speed and development speed
Customisation :
Satisfying the unique need of each customer by changing service or product
designs
Variety :
A wide assortment of products and services
Volume Flexibility :
Accelerating or slowing down the rate of production to handle large fluctuations
In demand.

Productivity :
A common measure of how well a country, industry or business unit is using
its resources (or factors of production).

Productivity =

Productivity =

Quantity of products or services produced

Amount of resources used

Total output
Total Input

Some productivity measures :

Business

Productivity Measure

Restaurant
Customers per labour hour
Retail store
Sales per square feet
Utility plant
Kilowatts per ton of coal

Paper mill
Tons of paper per cord of wood

Total Measure Productivity

Total measure Productivity = Outputs
Inputs

or

= Goods and services produced

All resources used

Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output

Labor

Capital

Materials

Energy

Multifactor Measure
Productivity
Multifactor measures of productivity =

Output
Labor

Capital

.
+

Energy

or

Output
Labor

Capital

.
+

Materials

Example of Productivity
Measurement
You have just determined that your service
employees have used a total of 2400 hours of
labor this week to process 560 insurance forms.
Last week the same crew used only 2000 hours of
labor to process 480 forms.
Is productivity increasing or decreasing?
Answer:
Last weeks productivity = 480/2000 = 0.24
This weeks productivity is = 560/2400 = 0.23
Here productivity is decreasing slightly.

Characteristics of Services and Manufactured products

Services

Manufactured products

$$ Intangible outputs

Tangible products

$$ Outputs can not be stored

Products can be inventoried

$$ Extensive customer contact

Little customer contact

$$ Short lead times

Long lead times

$$ Labour intensive

Capital intensive

$$ Service quality subjectively

Product quality objectively

determined

determined