Ch 1 Introduction Om

8/12/2019 Ch 1 Introduction Om

1/88

OPERATIONS MANAGEMENT

K. Mohanasundaram

[email protected] [email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


2/88

OPERATIONS MANAGEMENTWilliam J. Stevenson, 9 th Edition, Tata Mcgraw Hill

Reference books:1. Operations Management, Theory and Practice - B.

Mahadevan

2. Operations Management for competitive advantage Chase, Jacobs3. Production and Operations Management

Paneerselvam4. Operations Management

Russel & Taylor5. Operations Management- Jay Heizer, Barry Render,Jagadeesh Rajashekhar


3/88

Assessment

INTERNAL (50) MID TERM 20 ATTENDANCE 05 CASE STUDY (G) 10 PRESENTATION (G) 05 CLASS TEST 10

EXTERNAL (50) (Tentative/ subject to change)

SECTION A 5x2 = 10 All SECTION B 4x5 = 20 Choice SECTION C 5x10 =50 Choice SECTION D 1x20 = 20 Compulsory


4/88

Syllabus

IntroductionForecastingProduct andservice designCapacity planning

Process selectionFacilities layoutLocation analysisDesign of work

system

SCMinventoryAPPMRP/ERPJIT / LEAN

Network analysisQualityAcceptancesamplingMaintenance

SchedulingProductivityReliability


5/88

OBJECTIVES Introduction Definition

Management function

Organizations core function Decision making

System perceptive Transformational Value added

Product /service difference / similarities Goods and service continuum Why to study OM

Importance of OM Scope of OM Performance Objectives Evolution Current trends in OM/ Challenges in OM


6/88

ntroduction


7/88

Organization --> product tangible/intangible

Products are combination of both goods /services

Heart of every organization are the activities that makesproducts. OPERATIONS

Operation describe what the organization does.Eg: IBM make of computers

BA fly passengersBBC radio/TV programmes


8/88

What is Operations Management?

Can be viewed as

1) Management function

2) Organizations core function

3) Decision Making

4) System


9/88

OM- Management function

Operations management (OM) is defined asthe design, operation, and improvement of

the systems that create and deliver thefirms primary products and services

The business function responsible for

planning , coordinating , and controlling theresources needed to produce a companys products and services


10/88

OM Across the Organization- corefunction

Most businesses are supported by thefunctions of operations, marketing, andfinance

The major functional areas must interact toachieve the organization goals


11/88

OM Across the Organization -continued

Marketing is not fully capable of meeting customer needs ifthey do not understand what operations can produce

Finance cannot judge the need for capital investments if theydo not understand operations concepts and needs

Information systems enables the information flow throughoutthe organization Human resources must understand job requirements and

worker skills Accounting needs to consider inventory management,

capacity information, and labor standards


12/88

OM- organization core function

Operations

PlantManager

OperationsManager

Director

Manufacturing, Production control,Quality assurance, Engineering,Purchasing, Maintenance, etc

Finance Marketing


13/88

Functions - Airline

OperationsFinance/

AccountingMarketing

GroundSupport

FlightOperations

FacilityMaintenance

Catering

Airline 1984-1994 T/Maker Co.


14/88


15/88

Functions - Manufacturer

OperationsFinance/

AccountingMarketing

Production

ControlManufacturing

Quality

ControlPurchasing

Manufacturing


16/88

Typical role


17/88

1-17

Business Operations Overlap

Operations

FinanceMarketing


18/88

1-18

Operations Interfaces

PublicRelations

Accounting

Industrial

Engineering

Operations

Maintenance

Personnel

Purchasing

Distribution

MIS

Legal


19/88

OM Decisions

All organizations are based on decisions Decisions follow a similar path

First decisions very broad Strategic decisions Strategic Decisions set the direction for the entire

company; they are broad in scope and long-term innature

Following decisions focus on specifics - Tactical

decision and operational


20/88

OM Decisions

Tactical decisions focus on Specific day-to-day issues

Resource needs, schedules, & quantities to produce

Tactical decisions are very frequent Strategic decisions less frequent Tactical decisions must align with strategic

decisions


21/88

OM- decision making perspective


22/88

Classification of operations management

decision/production management functions

Periodic/Continual Decision Planning and designing of production systems/Operations and

control of production system Planning, organising and control decisions Strategic ( long term) and operational ( Short term) Decision


23/88

Productions management decision

Selection

Products

Processes

Equipment

Workforce

LocationLayout

Design

ProductsProcess EquipmentJobsMethodsWage paymentOperating andControl systemsSystem & Procedures

Updating

Involvesrevision of

productionsystem in thelight ofchanging

environment

Operating-controlling

Setting targets

Scheduling

Sequencing

Inventory control

Quality control

Production control

Cost control

Maintenance


24/88

Long Term ( STRATEGIC)

Product selection and design Process selection and planning Facilities location ( minimize total delivered to customer

cost) Facilities layout and material handling Capacity planning


25/88

SHORT TERM (OPERATIONAL)

Production planning, Scheduling and control

Inventory planning and control Quality Assurance Work and Job Design Maintenance and replacement

Cost reduction and control


26/88

OM Decisions


27/88

Operations Management system based

OM Transforms inputs to outputs

Inputs are resources such as

People, Material, and Money

Outputs are goods and services


28/88

OMs Transformation Process


29/88

Diagrammatical expression

INPUTS PROCESSOUTPUTS

Humanresources(Workers, managers)

Capital(Equipment, facilities)

Purchases(Materials, services)

Land Energy

Goods

Services

Transformation

depends on type

of

facility


30/88

1-30

OM system perspective

The operations function involves the conversion ofinputs into outputs

InputsLandLaborCapital

Transformation/Conversion

process

OutputsGoodsServices

Control

Feedback

FeedbackFeedback

Val ue added


31/88

Food Processor

Inputs Processing Outputs

Raw Vegetables Cleaning CannedvegetablesMetal Sheets Making cans

Water CuttingEnergy CookingLabor PackingBuilding Labeling

Equipment


32/88

Hospital Process

Inputs Processing Outputs

Doctors, nurses Examination Healthy

patientsHospital SurgeryMedical Supplies MonitoringEquipment MedicationLaboratories Therapy


33/88

Operations

The process of changing input into output andthereby adding value to some entity


34/88

Value added by performingoperation Function

Alter - change in the form or state of input: physical manufacturing;sensual/psychological feeling comfort or

satisfaction Transport - located somewhere other than where it currentlyis. Entity like people, garbage or goods.

Store - kept in a protected environment for some periodof time ( ware house)

Inspect - value of the entity may be enriched through aninspection as we better understand its properties and then makea decision ( repair, decision regarding purchase)


35/88

OMs Transformation Role

To add value

Increase product value at each stage

Value added is the net increase between output product value and

input material value

Provide an efficient transformation

Efficiency perform activities well at lowest possible cost


36/88

What is a Transformation Process?Defined

A transformation process is defined as ause of resources to transform inputs intosome desired outputs


37/88

Transformations

Physical--manufacturing

Locational--transportation

Exchange--retailing

Storage--warehousing

Physiological--health care

Informational--telecommunications


38/88

OM

Inputs OutputsConversionSubsystem

ControlSubsystem

Product

Service

External Legal, Economic, Social,

Technological

Market

Competition, CustomerDesires, Product Info.

Primary Resources Materials, Personnel,

Capital, Utilities

Physical (Manufacturing) Locational Services

(Transportation)

Exchange Services (Retailing) Storage Services (Warehousing) Other Private Services (Insurance) Government Services

(Federal, State, Local)


39/88

Monitoring and feedback control

Establish standards of performing or outputs Measures actual performance Compare the difference between the actual and planned Take appropriate remedial actions by changing inputs revising

plans, Changing priorities, Expediting the progress etc.,


40/88


41/88

1-41

Types of Operations

Operations ExamplesGoods Producing Farming, mining, construction ,

manufacturing, power generationStorage/Transportation Warehousing, trucking, mail

service, moving, taxis, buses,hotels, airlinesExchange Retailing, wholesaling, banking,

renting, leasing, library, loansEntertainment Films, radio and television,

concerts, recordingCommunication Newspapers, radio and television

newscasts, telephone, satellites


42/88

Goods & Services

Services Intangible product

Product cannot beinventoried

High customer contact Short response time

Labor intensive

Manufacturing Tangible product

Product can beinventoried

Low customer contact Longer response time

Capital intensive


43/88


44/88

Comparison: Continuum

Physical

nature ofproduct

Inventories

Customercontact

Customer

response time

Quality

Resource Size

Location

CATEGORIES


45/88


Intangible, Perishable(ideas, concepts,information)

Physical, durable

PHYSICAL NATURE OF PRODUCTS

TOWARDS SERVICESTOWARDS MANUFACTURING

Output less able to beinventoried

Output can be inventoried

INVENTORY - ABLE


46/88


47/88

CUSTOMER RESPONSE TIMELong Short

Difficulty matchingcapacity with demand

demands fluctuate.

TOWARDS MANUFACTURING TOWARDS SERVICES



48/88


49/88


MEASUREMENT OF QUALITYEasy to measure Quantitative nature

Harder to measure subjective assessments

TOWARDS MANUFACTURING TOWARDS SERVICES

G d i C i


50/88

1-50

Automobile assembly, steel making

Home remodeling, retail sales

Automobile Repair, fast food

Goods-service Continuum

Computer repair, restaurant meal

Song writing, software development

Goods Service

Surgery, teaching


51/88

Similarities

Process and the use of technology

Concern for quality, productivity andcustomer

Choices capacity, location, layout offacilities

Package offered - goods and services


52/88


53/88

Core services are basic things

that customers want fromproducts they purchase

Core ServicesDefined


54/88


55/88

Value-added services differentiate the organizationfrom competitors and buildrelationships that bind

customers to the firm in apositive way

Value-Added Services Defined


56/88

Value-Added Service Categories

Operations Management

Information

Problem Solving

Sales Support

Field Support

D fi i i OM


57/88

Definition : OM

57

Operations management is an area of business that is

concerned with the production of goods and services, andinvolves the responsibility of ensuring that business operations are efficient and effective .

APICS The Association for Operations Management defines operations

management as "the field of study that focuses on the effectiveplanning, scheduling, use, and control of a manufacturing or serviceorganization through the study of concepts from design engineering,industrial engineering, management information systems, qualitymanagement, production management, inventory management,accounting, and other functions as they affect the organization"

Operations refers to the production of goods and services, the setof value-added activities that transform inputs into many outputs
http://en.wikipedia.org/wiki/Business_operationshttp://en.wikipedia.org/wiki/Efficienthttp://en.wikipedia.org/wiki/Effectivehttp://en.wikipedia.org/wiki/APICShttp://en.wikipedia.org/wiki/APICShttp://en.wikipedia.org/wiki/Effectivehttp://en.wikipedia.org/wiki/Efficienthttp://en.wikipedia.org/wiki/Business_operations


58/88

MANUFACTURING AND SERVICES

Manufacturing OrganizationsUse operations management in thetransformation process of turning raw

materials into physical goods.

Service OrganizationsUse operations management in creatingnonphysical outputs in the form ofservices (the activities of employeesinteracting with customers).


59/88

IMPORTANCE OF OM

- It encompasses both services and manufacturing.

- It is important in effectively and efficiently managingproductivity.

- It plays a strategic role in an organizationscompetitive success.

- Synergies must exist with other functional areas of theorganization

Operations account for 60-80% of the direct expenses thatburden a firms profit.


60/88

Objective of OM

Produces the goods/service in required quantity and of quality asper schedule at a minimum cost that determine the extent ofcustomer satisfaction.

Performing objective Efficiency doing things right

Effectiveness doing the right things Quality conform to quality specification Lead time time elapsed in the conversion

process (minimize) - Q, Inventory Capacity Utilization manpower/ machines etc. Flexibility flexibility of producing a

combination of o/p, satisfy thecustomers needs


61/88

Wh to St d Operations


62/88

Why to Study OperationsManagement?

Business Education

Systematic Approachto Org. Processes

Career Opportunities

Cross-FunctionalApplications

OperationsManagement

Scope of Operations Management


63/88

1-63

Operations Management includes: Forecasting Capacity planning Scheduling Managing inventories Assuring quality Motivating employees

Deciding where to locate facilities Supply chain management And more . . .

Scope of Operations Management


64/88

HIGHLIGHTS


65/88

Management technology Ethical issues OM in practice Evolution/ History


66/88


67/88


68/88

POM

Marketing

MIS

Engineering

HRM

QA

Accounting

SalesFinance


69/88

OM in Practice

OM has the most diverse organizational function Manages the transformation process OM has many faces and names such as;

V. P. operations, Director of supply chains, Manufacturingmanager

Plant manger, Quality specialists, etc.

All business functions need information from OM inorder to perform their tasks


70/88


71/88

A number of historical milestones have shaped OM. Some ofthe more significant of these are the Industrial Revolution,scientific management, the human relations movement,management science, and the computer age

OM is highly important function in todays dynamic businessenvironment. Among the trends with significant impact are

just-in-time, TQM, reengineering, flexibility, time-basedcompetition, SCM, global marketplace, and environmentalissues

OM works closely with all other business functions


72/88

Business Information Flow

In t ro du ct ion to POM - The Orig ins


73/88

Sakichi Toyoda receives a patent fora wooden loom

philosophy of KAIZEN is born out ofthe need to compete.

Henry Ford inventsthe movingassembly line Toyoda Motor Company Ltd.

is created. Kiichiro Toyoda builds aplant at Koromo and throughthe imbalance caused bypiece work, hangs a sign inhis new production shop thatreads JUST IN TIME.

Taichi Ohno moves tothe Toyota MotorCompany Ltd.

Ohno begins to perfectthe Just -in-Timeconcepts introduced byKiichiro

Toyota brings theToyo ta Produc t ionSystem to theUnited States incollaboration withGM

Womack and Jonespublish The Machine

that Changed theWorld

1890 Late 1890s

Central figures who originated theidea of "Eliminating Waste",

Lillian Gilbreth brings psychology into themix by studying the motivations of workersand how attitudes affected the outcome ofa process.

Frank Gilbreth develops Motion Study andinvented Process Charting.

Frederick W. Taylor develops the principlesof Time Study and standardized work.

1937 19431908 1980 1990

Before : cars were built in onespot and the workers movedfrom car to car. This was calledthe gypsy production system.

After : Ford used a big ropeand winch to pull the carsalong the assembly line and

kept the workers stationary

1990


74/88

Historical Events inOperations Management

Era Events/Concepts Dates Originator

Industrial

Revolution

Steam engine 1769 James Watt

Division of labor 1776Adam Smith

Interchangeable parts 1790 Eli Whitney

ScientificManagement

Principles of scientificmanagement

1911 Frederick W. Taylor

Time and motion studies 1911 Frank and LillianGilbrethActivity scheduling chart 1912 Henry GanttMoving assembly line 1913 Henry Ford


75/88

Historical Events in OperationsManagement (cont.)


HumanRelations

Hawthorne studies 1930 Elton Mayo

Motivation theories1940s Abraham Maslow1950s Frederick Herzberg1960s Douglas McGregor

OperationsResearch

Linear programming 1947 George DantzigDigital computer 1951 Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM

1950s Operations researchgroups

MRP, EDI, EFT, CIM 1960s,1970sJoseph Orlicky, IBMand others


76/88



QualityRevolution

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)TQM (total qualitymanagement) 1980s

W. Edwards Deming,Joseph Juran

Strategy andoperations

1980sWickham Skinner,Robert Hayes

Business process

reengineering1990s

Michael Hammer,

James ChampySix Sigma 1990s GE, Motorola


77/88


Era Events/Concepts Dates Originator InternetRevolution

Internet, WWW, ERP,supply chain management

1990s ARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE

E-commerce 2000s Amazon, Yahoo,eBay, Google, and

othersGlobalization WTO, European Union,and other tradeagreements, global supplychains, outsourcing, BPO,Services Science

1990s2000s

Numerous countriesand companies

B i O i D fi i i


78/88

Business Operations: Definition

Early Concepts : 1776 1880

Scientific Management Era : 1880-1910

Mass Production Era: 1910-1980

Lean Production Era: 1980-1995

Mass Customization Era: 1995- present

Cost Focus

Quality Focus

CustomizationFocus

Si ifi t E t i OM


79/88

Significant Events in OM

Division of labor (Smith, 1776) Standardized parts (Whitney, 1800) Scientific Management (Taylor, 1881) Coordinated assembly line (Ford 1913)

Gantt charts (Gantt, 1916) Motion Study (the Gilbreths, 1922) Quality control (Shewhart, 1924) CPM/PERT (DuPont, 1957)

MRP (Orlicky, 1960) CAD Flexible manufacturing systems (FMS) Manufacturing Automation Protocol (MAP)

Computer Integrated Manufacturing (CIM)


80/88

Current Issues in OM

Coordinate the relationships betweenmutually supportive but separateorganizations.

Optimizing global supplier, production, anddistribution networks.

Increased co-production of goods andservices


81/88

Current Issues in OM (contd) Managing the customers experience

during the service encounter

Raising the awareness of operations as asignificant competitive weapon


82/88

POM in Global economy

82

Product Architecture

Service Design Current Vs Future Industry Verticals Centers of Excellence


83/88

1-83

Challenges of Managing Services

Service jobs are often less structured thanmanufacturing jobs

Customer contact is higher

Worker skill levels are lower Services hire many low-skill, entry-level workers Employee turnover is higher

Input variability is higher Service performance can be affected by workers

personal factors

Trends in Business


84/88

1-84

Trends in Business

Major trends The Internet, e-commerce, e-business Management technology Globalization Management of supply chains Outsourcing Agility

Ethical behavior

Discussion


85/88

Discussion

With regard to the type of businesses below,detail the:

Input, processes, output

Extent of client/customer participation Nature and source of information

Types of business: Educational institution Factory manufacturing iron pipes Jewellery store


86/88


87/88

S


88/88

Summary

It is a management function

Organizations core function

Every organization has OM function

Service or Manufacturing

For profit or Not for profit

Ch 1 Introduction Om

Documents