UNIT 1- OPERATIONS MANAGEMENT

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 CHAPTER OUTLINE
• OPERATONS MANAGEMENT
–Importance of operations management
–Basic transformation process
• Product strategies
–Product life cycle
• Productive system types
–Process focused system
–Product focused system
–Production to stock or order

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 Chapter outline
• Impact of technology
–Product life cycles and technology
• Organization of the operation function
–Process focussed organization
–Product focussed organization
• Requirements of forecasting for operations

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 Learning objectives
• After reading this chapter, you will be able to
understand
What is operations management
What are the different types of production system
available
How process focussed systems are different from
product focussed
Describe about the product life cycle and
technology
Examining the product strategy in light of
competitive criteria
How product focussed organization is different
from process focussed organization
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 Operations Management

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 Operations Management
• Operations management designs, operates and
improve productive systems
• Consists of all activities directly related to producing
goods or providing services

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 Basic production process

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 Operations management

• Planning • Staffing
–Capacity –Hiring/lay off
–Location –Use of overtime
–Products & services • Directing
–Make or buy - Incentive plans
–Layouts - Issuance of work orders
–Projects - Job assignments
–Scheduling • Controlling/Improving
• Organizing –Inventory
– Degree of –Quality
centralization –Costs
– Process selection –Productivity
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 Characteristics of systems to produce
product versus system to produce services
products services
1. Tangible 1. intangible and perishable,
consumed in the process of
2. Can be produced to their production
inventory for off the shelf 2. Availability achieved by
availability keeping the productive
system open for services
3. Minimal contact with the 3. High contact with clients or
ultimate customer customers
4. Complex and interrelated 4. Simple processing
processing 5. Demand commonly varies
5. Demand on system variable on hourly, weekly and daily
on weekly, monthly and bases
seasonal bases
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 The marketing and operations link
• Order winner and order qualifier describe marketing
oriented dimension that are key to competitive
success
• Order Winner:
– It is a criterion that differentiates the products or
services of one firm from those of another.
–The order winning criterion may be the
• Cost of the product
• Quality of the product
• Reliability

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 • Order Qualifier :
–It is a screening criterion that permits a firm’s
products to be even be considered as possible
candidates for purchase
–(e.g) When Japanese companies entered yhe
world automobile markets in the 1970s , they
changed the way these products won orders from
predominantly price to product quality and
reliability.

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 Characteristics of systems to produce
product versus system to produce services
product services
6. Markets served by 6. Market served by
productive system are productive system are
regional, national and local
international
7. Large units that can take 7. Relatively small units to
advantage of economies serve local markets
of scale

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 Introduction to types of production system
• By examing the nature of the product demand in its
growth from introduction to maturity and by relating
it to the competitive criteria of
–Cost
–Quality
–On-time delivery
–Flexibility
• We can develop logical types of manufacturing
systems that match marketplace needs
• Therefore the best place is to start with product
strategies
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 Product strategies – customized products
• At one extreme we have products that are custom in
nature
– Product is designed to the specifications and needs of the
customers or clients.
– The emphases are on
• Uniqueness
• Dependability of on-time delivery
• Quality and
• Flexibility to change
– Cost or price is a lesser consideration
– Strategy is to obtain the high profit margins that are typically
available from custom designs

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 Product strategies- standardized products
• The other extreme is highly standardized products
– Products are available from inventory
–Each unit is identical in nature and the nature of the
demand is such that availability and costs are
important elements of competitive strategy
–Very little product differentiation between producers
–(E.g ) Standard steel, aluminium shapes and
commodities like sugar or gasoline
–The managerial concern for this products are
dependability of
• Delivery and
• low cost
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 Product strategies – mixed strategies
• Between the extremes of product focussed and
process focussed strategies, we have mixed
strategies that are sensitive to
–Some flexibility
–Moderate cost
–Dependability of supply
• Quality of the product is very important but not an
overwhelming criterion as with custom products
• The great majority of products available today are in
the middle of this category

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 Fit of process

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 Types of productive system
• Though the product occur in great diversity , we
seek to classify them in relation to the four
competitive criteria(Recall it from slide no. ---)
• Product focussed system –Nature
–High volume, standardized products results in
continuous use of facilities
–Individual process are physically arranged in the
sequence required and the entire system is
integrated for single purpose
–Production process is integrated and makes use
of mechanization and automation to achieve
standardization at low cost
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 Types of productive system
• Mixed focussed system:
–In between the product focussed strategies and
process focussed strategies, we have mixed
focussed system that must deal with
• Low volume multiple products (process focussed
system but are produced in batches)
• Relatively high volume multiple products (involves
both product focussed and process focussed)

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 Types of productive system
• Production to stock or production to order
– The products that could be produced either to
stock or to order , that decision is possible
• Areas where production to stock is viable
– to offer better service in terms of availability
– to reduce variable cost
– to increase market share (when customers have
urge to buy)
• Areas where production to order is viable
–Flexibility to customers
–Minimize risk associated with carrying inventories
–Closer control of quality
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 Examples of two dimensions of positioning

Type of system Finished goods inventory policy

To Stock To Order

Product focussed/ to stock Product focussed /to order

Office copiers Construction Equipment

Tv Sets Buses, Trucks
Product Calculators Experimental Chemicals
focussed Gasoline Textiles
Cameras Cable and wires

Process focussed /to stock Process focussed/ to order

Machine tools
Medical Equipment Nuclear power vessels
Process Test Equipment Electronic components
focussed Spare parts Space shuttle
Some steel producers Nuclear Ships
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Molded plastic parts Construction projects
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 Product life cycle
Product
focussed to
stock
Product
(Continuous)
focussed
to Stock
(Batch)

Process
focussed
Process to order
focussed to (Batch)
order ( Job
Shop)

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 Product life cycle

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 Impact of technology
• Factor correlated with the development of process
life cycle is the employment of rather different levels
of process technology at each stage of
development.
1. When volumes are low:
–Great deal of variety in product design , the
process technology must reflect the need for
flexibility
2. When volume Increases:
– Variety in the line decreases, product focussed
facilities becomes justified
– More mechanization, automation and numerically
controlled machines are used
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 Impact of technology
3. When product matures :
– It becomes virtually a commodity
– Variety is further reduced
– Cost is the dominant weapon
– Productive systems are fully integrated
– Process technology emphasises high levels of
mechanization and automation including
• Computer controls and
• Robotics

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 Process focussed organizational structure

General
management

Personnel and
Product Finance and Plant Manager Marketing Industrial
engineering Accounting Relations

Industrial
Manufacturing Engineering and
Purchasing Materials control Quality control
Manager plant
Maintenance

Supervisor Supervisor Supervisor

process process process
department A department B department c

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 Product focussed organizational structure

General
management

Product Personal and

Finance and Plant
Marketing Industrial
Accounting Manager
engineering relations

Industrial
Manager Manager Manager
Engineering
purchasing production of production of Production
and plant
product A Product B Product C
Maintenance

Planning ,
scheduling and Quality
Supervisor B
Inventory control Control B
product B
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 Requirements of forecasting for operations
• Planning and control for operations take place at
several levels
• It is unlikely that one kind of forecast can serve all
needs
• We require forecast of different time spans to serve
as the basis for operating plans developed for
different planning horizons
–These Include
1. Plans for current operations and for the
immediate future

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 Requirements of forecasting for operations
2. Intermediate range plans to provide for the
capacities of personnel, materials and
equipment required for the next 1 to 12 months
3. Long range planning for capacity, locations,
changing product and service mix and the
development of new products and services
- The horizon of the forecast must be matched with
the decision the forecast will affect

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 Requirements of forecasting for operations
• Plans • Detail required
1. Current operations 1. High (how many tellers
and immediate should be assigned
future during the lunch hour
on Friday)
2. Intermediate range 2. Aggregated by product
plans types (monthly
production levels or
workforce levels)
3 . Long range plans
3. Integrate objective
data and subjective
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inputs