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PGDM -NITTE SOM 1/19/2015
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Ashok Kumar
Management Consultant / Teacher
Discover the Value
Conceptual
Contemporary
Experiential
Learning
Operations Management Unit 1 Session 1 -2
19 January 2015
1 Ashok Kumar
Learning Outcomes
1. Importance of Operations in any business enterprise ( Appreciate )
2. Distinguish between manufacturing and services and See it as a continuum ( Understand )
3. Systems perspective to Operations ( Some Insights )
4. Major issues that the organizations are facing in respect to Operations management
5. Operations management as a Career choice ?
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What is Operations ?
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Operations in a Restaurant
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Operations in an Hospital
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Cost
Efficiency
Time
Responsiveness to demand
Quality
Product quality (how good?)
Process quality (as good as promised?)
Four Dimensions of Performance Customer perspective
Variety
Customer heterogeneity
Important for
- Performance measurement
- Defining a business strategy
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Four Dimensions of Performance: Measurements for a
Cost
Efficiency
Time
Responsiveness to demand
Quality
Product quality (how good?)
Process quality (as good as promised?)
Variety
Customer heterogeneity
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Cost
Efficiency
Measured by: - cost per unit
- utilization
Time
Responsiveness to demand
Measured by: - customer lead time
- flow time
Quality
Product quality (how good?) => Price
Process quality (as good as promised?)
=> Defect rate
Four Dimensions of Performance: Trade-offs
Variety
Customer heterogeneity
Measured by: - number of options
- flexibility / set-ups
- make-to-order
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Example: Call center of a large retail bank
- objective: 80% of incoming calls wait less than 20 seconds
- starting point: 30% of incoming calls wait less than 20 seconds
- Problem: staffing levels of call centers / impact on efficiency
OM helps: Provides tools to support strategic trade-offs
Responsiveness
Labor Productivity
(e.g. $/call)
Low
High
Low labor
productivity
High labor
productivity
Trade-
off
Very short waiting times,
Comes at the expense of
Frequent operator idle time
Long waiting times,
yet operators are almost
fully utilized
What Can Ops Management (This Course) Do to Help? Step 1: Help Making Operational Trade-Offs
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Responsiveness
Low
High
Eliminate
inefficiencies
Current frontier
In the industry
Labor Productivity
(e.g. $/call)
Low labor
productivity
High labor
productivity
Competitor A
Competitor C
Competitor B
Example: Benchmarking shows the pattern above Dont just manage the current system Change it! Provides tools to identify and eliminate inefficiencies => Define Efficient Frontier Types of inefficiencies:
-Poor process design - Inconsistencies in activity network
What Can Ops Management (This Course) Do to Help? Step 2: Overcome Inefficiencies
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Example:
What will happen if we develop / purchase technology X?
Better technologies are always (?) nice to have, but will they pay?
OM helps: Evaluates system designs before they occur
Responsiveness
Low
High
Redesign
process
Current frontier
In the industry
Labor Productivity
(e.g. $/call)
Low labor
productivity
High labor
productivity
New frontier
What Can Ops Management (This Course) Do to Help? Step 3: Evaluate Proposed Redesigns/New Technologies
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Operations management
Systematic approach
Involves addressing various issues that an organization faces
Transformation processes are central to operations systems
Goal :
Costs to a minimum,
Obtain revenue in excess of costs through careful planning and control of operations
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Product or Service?
1. Ayurvedic healing treatment
2. Legal / Tax consulting
3. Emergency maintenance services
4. Facilities maintenance
5. High quality restaurant meal
6. Fast food in a Eat-out joint
7. Customized durable goods
8. Fast moving commodities
9. General-purpose machines
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4 Distinguishing features of Services
1. Perishability
2. Simultaneity
3. Heterogeneity
4. Intangibility
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What is Operations Management?
The business function responsible for planning,
coordinating, and controlling the resources
needed to produce a companys products and
services
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Operations Management
as a Function
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Inputs Transformation Processes
(Adding value) Outputs
Operations Management is
The systematic design, direction and control of processes that transform inputs into services and products for internal, as well as external, customers.
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OMs Transformation Process
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Business Information Flow
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OM Managers take 1. Strategic decisions
about products, processes, and facilities.
long-term importance for the organization.
2. Operating decisions
-- resolve all of the issues concerning planning to meet customers' demands for products and services.
3. Control decisions
-- with a wide variety of day-to-day problems in operations (planning, analyzing, and controlling activities so that things like poor worker performance, inferior product quality, and excessive machine breakdowns do not interfere with the profitable operation of the production system.
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Operations as a Set of Decisions
Development of new capabilities
Maintenance of existing capabilities
Design of new processes Development and
organization of value chains
Key performance measures
Strategic ( Design)
Decisions Operating ( tactical ) Decisions
Process improvement and performance measures
Management and planning of projects
Generation of production and staffing plans
Inventory management Resource scheduling
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Challenges in Operations management
1. Competitive pressures due to Economic reforms
2. Growing Customer expectations
3. Technological developments
4. Environmental issues
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Current Priorities - OM
1. Relate the operations system to customer/market requirements
2. Acquire capabilities to tolerate product/service proliferation
3. Develop systems and procedures that promote learning.
4. Develop green manufacturing practices.
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Careers in Operations /SCM
Plant manager Hospital
administrator Branch manager
Department manager
Call center manager
Supply chain manager
Purchasing manager
Quality manager
Business process improvement
analyst
Lean improvement
manager Project manager
Production analyst
Facilities manager
Chief operating officer
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