Intro- OM, Strategy, Productvity

04/08/23 [email protected]

Introduction Introduction

to to

Operations ManagementOperations Management

Suhas RaneSuhas Rane

04/08/23 [email protected] 2

AgendaAgenda

Historical Development of OM Historical Development of OM Taylor, Henry Ford, Hawthorne Studies Taylor, Henry Ford, Hawthorne Studies Operations Research, Computers & Adv. Opn. Operations Research, Computers & Adv. Opn. Technology.Technology.

OM in the Organisation ChartOM in the Organisation ChartSix Basic Functions of BusinessSix Basic Functions of Business O M. DefinitionO M. DefinitionScope of Operations Mgmt.Scope of Operations Mgmt.

Mfg. Industry v/s Service IndustryMfg. Industry v/s Service Industry

Production SystemsProduction Systems““Input –Transformation –Output” Relationships Input –Transformation –Output” Relationships Productivity MeasurementsProductivity MeasurementsDecisions & Activities in OM Decisions & Activities in OM


Historical Development of OMHistorical Development of OM In olden days, did Production Systems In olden days, did Production Systems

exist ?exist ? Great Wall of China, Great Wall of China, Egyptian Pyramids, Egyptian Pyramids, Taj MahalTaj Mahal Village ActivitiesVillage Activities

Features of Old production activitiesFeatures of Old production activities Cottage System Cottage System Hand Work Hand Work UnorganizedUnorganized UniqueUnique..


Historical Development of OM Historical Development of OM (Contd.)(Contd.)

1770 - 18001770 - 1800 : Series of events took place in UK : Series of events took place in UK 8 Great Inventions in UK, France, USA , mainly in 8 Great Inventions in UK, France, USA , mainly in Yarn Yarn

SpinningSpinning Increase of UK colonies.Increase of UK colonies. Use ofUse of Machine Power Machine Power facilitatedfacilitated gathering of workersgathering of workers inin factories.factories. Need to Need to organize organize workers.workers. Division of workers into Division of workers into Small Specialized Task Forces.Small Specialized Task Forces.


Historical Development of OM Historical Development of OM (Contd.)(Contd.)

All this led to All this led to Industrial Revolution.Industrial Revolution.

Spread from UK Spread from UK

to Europe to Europe

to USA.to USA.

The missing factor – The missing factor – “Management”“Management”

later provided by later provided by Management Management Thinkers, Thinkers, Researchers, Business leaders , Researchers, Business leaders ,

Consultants.Consultants.


Evolution of OMEvolution of OM

Phases in evolution of OMPhases in evolution of OM

Craft ProductionCraft Production

Mass ProductionMass Production

Lean Management Lean Management

Mass Mass CustomisationCustomisation


Historical Evolution of OMHistorical Evolution of OM

F.W. TaylorF.W. Taylor (1856-1915) – (1856-1915) –

Father of Sc. Management Father of Sc. Management Each worker trained for suitable job Each worker trained for suitable job

(according to his skill, strength, learning ability ) (according to his skill, strength, learning ability ) Standard Output Norms set per worker.Standard Output Norms set per worker. Instructions Card, Routing Sheets, Material SpecsInstructions Card, Routing Sheets, Material Specs

-All Standardized.-All Standardized. Supervision Supervision Incentive for motivation & increasing productivityIncentive for motivation & increasing productivity



Henry FordHenry Ford (1913) – (1913) –

Moving Assembly Line concept Moving Assembly Line concept Standardized product design Standardized product design Mechanized assembly line Mechanized assembly line Specialized labour Specialized labour Interchangeable parts Interchangeable parts

Result : Result : Av. labour per chassisAv. labour per chassis

reduced from 12.5 hrs to 93 min. reduced from 12.5 hrs to 93 min.



Hawthorne StudiesHawthorne Studies

Until 1920s – OM emphasised on role of Org. Until 1920s – OM emphasised on role of Org.

Structure, Structure, Specialization, Planning Specialization, Planning & Control. & Control.

(But not on human dimension) (But not on human dimension)

Late 1920s - Harvard Research Team (led by Late 1920s - Harvard Research Team (led by Elton Mayo) Elton Mayo) conducted studies and conducted studies and established relationship established relationship between between behaviour of workers & their job behaviour of workers & their job

environments.environments.



Operations ResearchOperations Research

II World War - Complex problems of logistics II World War - Complex problems of logistics control control due to massive due to massive deployment of soldiers, deployment of soldiers, supplies, planes, ships. supplies, planes, ships.

For efficient utilization of resources, For efficient utilization of resources,

Allies formed O.R. teams in military Allies formed O.R. teams in military branches. branches.

Effective use of O.R techniques to solve Effective use of O.R techniques to solve complex problems led to their applications in complex problems led to their applications in industrial environsindustrial environs..



Computers & Advanced Operations Computers & Advanced Operations TechnologyTechnology 19541954 - - GE - computers to reduce clerical cost in pay GE - computers to reduce clerical cost in pay

roll. roll. 1960s1960s - - Op. managers started using computers for Op. managers started using computers for

demand forecasting, purchasing, inventories, demand forecasting, purchasing, inventories, and subsequently developed MRP. and subsequently developed MRP.

Late 80sLate 80s – CAD, CAM, FMS, – CAD, CAM, FMS,

ASRS ASRS (Automated Storage & Retrieval System),(Automated Storage & Retrieval System),

AIS AIS ( Automatic Id System- thru barcode),( Automatic Id System- thru barcode), TQM, MRP, JIT TQM, MRP, JIT 1990s1990s – – Use of reprogrammable m/cs (like Robots) Use of reprogrammable m/cs (like Robots)

for variety of complex 3 D movements, ERP. for variety of complex 3 D movements, ERP. 2000s - 2000s - SCM, RFID SCM, RFID


Historical Events in O. M.Historical Events in O. M.

EraEra Events/ConceptsEvents/Concepts YearYear OriginatorOriginator

IndustrialIndustrial

RevolutionRevolution

Steam engineSteam engine 17691769 James WattJames Watt

Division of laborDivision of labor 17761776 Adam SmithAdam Smith

Interchangeable partsInterchangeable parts 17901790 Eli WhitneyEli Whitney

Scientific Scientific ManagemeManagementnt

Principles of scientificPrinciples of scientific

managementmanagement19111911 Frederick W. Frederick W.

TaylorTaylor

Time and motion Time and motion studiesstudies 19111911 Frank and Lillian Frank and Lillian

GilbrethGilbreth

Activity scheduling Activity scheduling chartchart 19121912 Henry GanttHenry Gantt

Moving assembly lineMoving assembly line 19131913 Henry FordHenry Ford


Historical Events in O. M. (cont.)Historical Events in O. M. (cont.)

EraEra Events/Events/ConceptsConcepts

DatesDates OriginatorOriginator

Human Human RelationsRelations

Hawthorne studiesHawthorne studies 19301930 Elton MayoElton Mayo

Motivation theoriesMotivation theories

1940s1940s Abraham MaslowAbraham Maslow

1950s1950s Frederick Frederick HerzbergHerzberg

1960s1960s Douglas McGregorDouglas McGregor

OperationOperations Researchs Research

Linear Linear programmingprogramming 19471947 George DantzigGeorge Dantzig

Digital computerDigital computer 19511951 Remington RandRemington RandSimulation, waitingSimulation, waiting

line theory, decisionline theory, decision

theory, PERT/CPMtheory, PERT/CPM1950s1950s Operations Operations

research groupsresearch groups

MRP, EDI, EFT, MRP, EDI, EFT, CIMCIM

1960s, 1960s, 1970s1970s

Joseph Orlicky, Joseph Orlicky, IBMIBM

and othersand others


Historical Events in O. M. (cont)Historical Events in O. M. (cont)

EraEra Events/Events/ConceptsConcepts

DateDatess

OriginatorOriginator

QualityQuality

RevolutioRevolutionn

JIT (just-in-time)JIT (just-in-time) 1970s1970s Taiichi Ohno Taiichi Ohno (Toyota)(Toyota)

TQM (total qualityTQM (total quality

management)management)1980s1980s

W. Edwards Deming, W. Edwards Deming,

Joseph JuranJoseph JuranStrategy andStrategy and

operationsoperations1990s1990s

Wickham Skinner, Wickham Skinner,

Robert HayesRobert HayesBusiness processBusiness process

reengineeringreengineering1990s1990s

Michael Hammer,Michael Hammer,

James ChampyJames Champy


Historical Events in O. M. (cont)Historical Events in O. M. (cont)

EraEra Events/ConceptsEvents/Concepts DateDatess

OriginatorOriginator

GlobalizatioGlobalizationn

WTO, European WTO, European Union, and other Union, and other trade agreementstrade agreements

1990s1990s

2000s2000sNumerous Numerous countriescountries

and companiesand companiesInternet Internet RevolutionRevolution

Internet, WWW, ERP, Internet, WWW, ERP, Supply Chain Supply Chain ManagementManagement

1990s1990s ARPANET, TimARPANET, Tim

Berners-Lee SAP,Berners-Lee SAP,

i2 Technologies,i2 Technologies,

ORACLE,ORACLE,

PeopleSoftPeopleSoftE-commerceE-commerce 2000s2000s Amazon, Yahoo, Amazon, Yahoo,

eBay, and otherseBay, and others


OM in the Organisation ChartOM in the Organisation Chart

SIX BASIC FUNCTIONS OF BUSINESSSIX BASIC FUNCTIONS OF BUSINESS

1.1. CREATIONCREATION : : Product Selections / Idea GenerationProduct Selections / Idea Generation

2.2. FINANCEFINANCE : : Managing Resources, Capital Acqn., Managing Resources, Capital Acqn., keeping Financial keeping Financial

Records. Records.

3.3. PERSONNEL PERSONNEL :: H.R., Labour Relations.H.R., Labour Relations.

4.4. PURCHASINGPURCHASING : : Buying of required Buying of required

(Eqpt. + Material + (Eqpt. + Material + Services)Services)

5.5. CONVERSION/ CONVERSION/ : : Changing Raw Materials Changing Raw Materials

((PRODUCTION)PRODUCTION) to Economic to Economic Goods. Goods.

6.6. DISTRIBUTION DISTRIBUTION : : Selling & Marketing (Selling & Marketing (reaching the reaching the Customer) .Customer) .


O. M. Definition O. M. Definition

Operations Management is the Operations Management is the effective effective and efficient management of processes.and efficient management of processes.

A PROCESS has an input and value added A PROCESS has an input and value added output.output.

The objective of a process is to The objective of a process is to add value add value by conversion from input to output. by conversion from input to output.


What does Operations Manager What does Operations Manager Do?Do?

Operations -Operations - a function or system that transforms a function or system that transforms

inputs into outputs of greater valueinputs into outputs of greater value

Transformation Process -Transformation Process - a series of activities along a a series of activities along a value chainvalue chain

extending from supplier to end-extending from supplier to end-customercustomer

activities that do not add value are superfluous activities that do not add value are superfluous

and should be eliminatedand should be eliminated

What is Operations Management?What is Operations Management? design, conversion, and improvement of productive design, conversion, and improvement of productive

systemssystems


Physical : Physical : as in manufacturing operationsas in manufacturing operations Locational : Locational : as in transportation operationsas in transportation operations Exchange : Exchange : as in retail operationsas in retail operations Physiological: Physiological: as in health careas in health care Psychological: Psychological: as in entertainmentas in entertainment Informational: Informational: as in communicationas in communication

Is there any Business / Industry Is there any Business / Industry

where an operation is not where an operation is not involved?involved?

Transformation ProcessesTransformation Processes


INPUT •Material•Machines•Labor•Management•Capital

TRANSFORMATIONPROCESS

OUTPUT •Goods•Services

FeedbackFeedback

Operations as a Operations as a Transformation ProcessTransformation Process


Operations ManagementOperations Management

Is functionally Is functionally related to – related to –

MarketingMarketing Finance and Finance and

AccountingAccounting Human Human

ResourcesResources Outside Outside

SuppliersSuppliers


LAND, BLDG

PLANT, M/C

MATERIAL ENERGY MANPOWER

PRODUCTS AND SERVICES

OUTPUT

INPUT RESOURCES

OPERATIONS MANAGEMENTObtains the factsPlans,Directs,Coordinates,Controls,Motivatesin order to PRODUCE


Mfg. v/s Services – What’s the Mfg. v/s Services – What’s the

difference?difference?

Mfg. Industry

Service Industry

Creation of Goods

Providing Services

Production Mgmt

Operations Mgmt

Business Organization


Mfg. v/s Services – What’s the Mfg. v/s Services – What’s the difference?difference?

Manufacturing Services1. Step by step conversion of Material Service to satisfy customer

2. Tangible & Stockable Output Non-Stockable Output

3. Mass Production with few variations Customisation

4. More M/c Oriented, Less Labour More Mind Skill / Labour Oriented

5. Factory Location – Near RM or Market, or Better Facilities

Near Customer

6. Low / No Customer involvement in Conversion Process

Direct interaction between Customer and Process


A Systems View of OperationsA Systems View of Operations

Manufacturing System (e g. Television)Manufacturing System (e g. Television)

Inputs Inputs :: Equipment, labour, parts, etcEquipment, labour, parts, etc Conversion Process:Conversion Process: Producing parts, Assembling Producing parts, Assembling Output:Output: Television setTelevision set Feedback:Feedback: Defect rates, Customer responseDefect rates, Customer response

Service System (e.g. Banking)Service System (e.g. Banking)

Inputs :Inputs : Clerks, equipment, cash, etc..Clerks, equipment, cash, etc.. Conversion Process :Conversion Process : Monetary transactions.Monetary transactions. Output :Output : Loans, and depositsLoans, and deposits Feedback :Feedback : Interest earned, Deposits receivedInterest earned, Deposits received


“Input –Transformation –Output” Relationships

System Primary Inputs

Resources Transformation Fn.(s) Typical Desired Output

Automobile Factory

Sheet steel, engine parts

Tools, equipment, workers

Fabrication and Assy. of cars (physical)

High-quality cars

Hospital Patients MDs, nurses, medical equipment

Health care (physiological) Healthy individuals

Restaurant Hungry customers

Food, chef, wait-staff, environment

Well-prepared, Well-served food; Stimulating environment

Satisfied customers

College or university

High school graduates

Teachers, books, classrooms

Imparting knowledge and skills (informational)

Educated individuals

Department store

Shoppers Displays of goods, sales clerks

Attract shoppers, Promote products, Fill orders (exchange)

Satisfied customers

Distribution Centre

SKUs Storage bins, stock-pickers

Storage and redistribution Fast delivery, availability of SKUs


1. Planning1. Planning

Mix of goods & services, Plant locations Mix of goods & services, Plant locations planning. planning.

Capacity planning, Production method.Capacity planning, Production method. Equipment planning, Setting master Equipment planning, Setting master

schedules .schedules . Deciding No. of Shifts & work hours.Deciding No. of Shifts & work hours.


2. Organizing2. Organizing

Centralized or Decentralized Centralized or Decentralized Organized by functions, product or hybrid Organized by functions, product or hybrid

Assign responsibility for every activityAssign responsibility for every activity Arrange supplier/ subcontractor networkArrange supplier/ subcontractor network Establish maintenance policies Establish maintenance policies


3. Controlling3. Controlling

Compare costs to budget Compare costs to budget Inspect the quality Inspect the quality Compare labour hours to standardsCompare labour hours to standards Compare work progress to schedule Compare work progress to schedule Compare inventory to targetsCompare inventory to targets


4. Directing4. Directing

Personnel policies Personnel policies Employment contracts Employment contracts Issue job instructions Issue job instructions Issue routings Issue routings Issue despatch lists Issue despatch lists


5. Motivating 5. Motivating Encourage thru praise , recognition , tangible Encourage thru praise , recognition , tangible

rewards rewards Motivate thru enriched jobs & challenging Motivate thru enriched jobs & challenging

assignments assignments

6. Co-ordinating 6. Co-ordinating Common forecasts & Master Schedules Common forecasts & Master Schedules Common standardised database Common standardised database Co-ordinate purchases, deliveries, design Co-ordinate purchases, deliveries, design

changes, Maintenance, Tooling.changes, Maintenance, Tooling. Respond to customer enquiries about order Respond to customer enquiries about order

status status


7. 7. Training & DevelopmentTraining & Development

Encourage employees to seek a Encourage employees to seek a better way better way

Give more advanced job assignments Give more advanced job assignments Support employees in training Support employees in training

programmes programmes


Production ManagementProduction Management

Definition:Definition: (by E. S. Buffa)(by E. S. Buffa)““Production Management deals with Production Management deals with decision decision

makingmaking related to related to production processesproduction processes, so , so thatthat

resulting goods & services are producedresulting goods & services are produced

according to specificationaccording to specification, in the , in the amountamount & & byby

the the schedule demandedschedule demanded and at and at minimum minimum costcost.”.”

ObjectivesObjectives of Prod. Mgmt.of Prod. Mgmt.

1.1. Manufacturing CostManufacturing Cost

2.2. Product QualityProduct Quality

3.3. Manufacturing Time ScheduleManufacturing Time Schedule


Operations Strategy

Earlier : Concentration on Finance & Marketing strategies Earlier : Concentration on Finance & Marketing strategies

(Unaware of Operations Mgmt. as a strategic (Unaware of Operations Mgmt. as a strategic function)function)

1969 : Prof. Wickham Skinner (Harvard) described1969 : Prof. Wickham Skinner (Harvard) described

““A firm lacking proper Operations Strategies is like A firm lacking proper Operations Strategies is like an an anchored shipanchored ship. Finance, design and marketing may set . Finance, design and marketing may set the radar and expect the ship to steam off , but with the radar and expect the ship to steam off , but with anchors set, anchors set,

the ship won’t move, or moves reluctantly, dragging its the ship won’t move, or moves reluctantly, dragging its burden”burden”


Scope of Operations Mgmt.Scope of Operations Mgmt.

Long Term / Strategic DecisionsLong Term / Strategic Decisions

1.1. Product Selection & DesignProduct Selection & Design2.2. Process Selection & PlanningProcess Selection & Planning3.3. Facilities LocationFacilities Location4.4. Facilities Layout Facilities Layout 5.5. Capacity PlanningCapacity Planning

Short Term / Operational DecisionsShort Term / Operational Decisions

11. . Production Planning & ControlProduction Planning & Control2. 2. Inventory ControlInventory Control3. 3. Quality ControlQuality Control4.4. Method Study / Work StudyMethod Study / Work Study5. 5. Maintenance & ReplacementMaintenance & Replacement


Production & ProductivityProduction & Productivity

Production Production Output (in No of Units) Output (in No of Units)

OutputOutput Productivity Productivity ------------ ------------ No. of No. of

pcs./hr.pcs./hr.

InputInput


Productivity MeasuresProductivity Measures( Output in terms of Input) ( Output in terms of Input)

Machines Machines - - Out put per Machine HourOut put per Machine Hour

MenMen -- Out put per Man HourOut put per Man Hour

Materials - Materials - No of units produced per input of No of units produced per input of R.M.R.M.

(e.g. - No of Screws per Kg of (e.g. - No of Screws per Kg of wire)wire)

Power - Power - No of Pcs. per KW Unit of El. PowerNo of Pcs. per KW Unit of El. Power

Boiler Boiler - - Kgs. of Rubber cured / Kg of Kgs. of Rubber cured / Kg of steam steam usedused


Productivity Measurements and their Productivity Measurements and their NeedNeed

Myth 1. - Higher production mean Higher Myth 1. - Higher production mean Higher ProductivityProductivity

Automobile Manufacturing Co. -Automobile Manufacturing Co. - Yr. 2004 : Annual Production = 50,000 CarsYr. 2004 : Annual Production = 50,000 Cars Yr. 2005 : Annual Production = 55,000 CarsYr. 2005 : Annual Production = 55,000 Cars

This means Production Increase = 10%This means Production Increase = 10%

But in 2004 : 50,000 Cars with Cap. Invest. of 500 Cr.But in 2004 : 50,000 Cars with Cap. Invest. of 500 Cr. 2005 : 55,000 Cars with Cap. Invest. of 550 Cr.2005 : 55,000 Cars with Cap. Invest. of 550 Cr.

2004 Productivity = 100 Cars / Rs. 1 Cr. 2004 Productivity = 100 Cars / Rs. 1 Cr. Invest.Invest.

2005 Productivity = 100 Cars / Rs. 1 Cr. 2005 Productivity = 100 Cars / Rs. 1 Cr. InvestInvest

i.e. Productivity Increase = Nili.e. Productivity Increase = Nil


Myth 2 : Myth 2 : Higher productivity mean working Higher productivity mean working Harder.Harder.

In fact adequate personal rest, contingency need to be In fact adequate personal rest, contingency need to be provided to get continuous good quality of out put.provided to get continuous good quality of out put.

Myth 3 : Myth 3 : Higher productivity means working Higher productivity means working faster.faster.

It may unnecessarily lead to errors, accidents and It may unnecessarily lead to errors, accidents and injuries.injuries.

Due to such misconception in people’s mind, it is all Due to such misconception in people’s mind, it is all the more imp. to find out correct method of the more imp. to find out correct method of measuring productivity.measuring productivity.


Productivity of an OrganizationProductivity of an Organization

Sugar Mill - Sugar Mill - Kg. of sugar produced / Kg. of sugar produced /

Ton of sugar-cane Ton of sugar-cane crushedcrushed

Fabrication -Fabrication - Tons of Fabrication / Tons of Fabrication /

Kg. of Welding Kg. of Welding RodRod


Productivity of a Service Function

Transporter - Transporter - Ton-km / Vehicle/ Month.Ton-km / Vehicle/ Month.

OROR

Ton-km / 1000 Lit. Diesel Ton-km / 1000 Lit. Diesel

Pharma. Marketing Div. -Pharma. Marketing Div. -

Rs Order booked / MR /Month Rs Order booked / MR /Month


Service Industry : Service Industry : Productivity Measures

BusinessBusiness Productivity MeasureProductivity Measure

RestaurantRestaurant Customers (meals) per hourCustomers (meals) per hour

Retail StoreRetail Store Sale per Sq. footSale per Sq. foot

Chicken farmChicken farm Kg. of meat per kg. of feedKg. of meat per kg. of feed

Utility plantUtility plant Kilowatts per ton of coalKilowatts per ton of coal

Paper millPaper mill Tons of paper per ton of Tons of paper per ton of woodwood

Intro- OM, Strategy, Productvity

Documents

evolution of omphases

s use o

management thinkers

ge computers

s harvard research team

behaviour of workers

division of workers

definition scope of