Intro om,-strategy,_productvity-copy

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Introduction Introduction

to to

Operations ManagementOperations Management

Prof Amal S RoyProf Amal S Roy

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AgendaAgenda

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

Business Business

What’s the purpose of business ? What’s the purpose of business ?

Why are we in business ? Why are we in business ?

………………. to create wealth . to create wealth (Adam Smith ) (Adam Smith )

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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 Records.keeping Financial Records.

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

4.4. PURCHASINGPURCHASING : : Buying of required Buying of required

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

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

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

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

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Historical Development of OMHistorical Development of OM

In olden days, did Production Systems exist ?In olden days, did Production Systems 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..

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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 CustomisationMass Customisation

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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 to be trained for suitable job Each worker to be trained for suitable job

(according to his skill, strength, and learning ability (according to his skill, strength, and learning ability

Divn. of Labour Divn. of Labour Synergy Effect Synergy Effect ) ) Standard Output Norms Standard Output Norms set per worker.set per worker. Instructions Card, Routing Sheets, Material SpecsInstructions Card, Routing Sheets, Material Specs

-All -All Standardized.Standardized. Supervision Supervision …. Not for keeping watch, but to arrange facilities. …. Not for keeping watch, but to arrange facilities. Incentive for motivationIncentive for motivation & increasing productivity & increasing productivity

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Historical Evolution of OMHistorical Evolution of OM

Henry FordHenry Ford (1913) – (1913) –

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

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O. M. Definition O. M. Definition

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

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

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

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

a function or system that a function or system that transforms transforms

inputs into outputs inputs into outputs of greater valueof 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-customerextending from supplier to end-customer 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

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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 involved?where an operation is not involved?

Transformation ProcessesTransformation Processes – Diff. forms – Diff. forms

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INPUT •Material•Machines•Labor•Management•Capital

TRANSFORMATIONPROCESS

OUTPUT •Goods•Services

FeedbackFeedback

Operations as a Transformation ProcessOperations as a Transformation Process

[email protected]

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

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

Mfg. Industry Service Industry

Creation of Goods

Providing Services

Production MgmtOperations Mgmt

Business Organization

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

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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 Service System (e.g. Banking)(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

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“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

10/31/14 [email protected]

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

Strategic issues Strategic issues

in in

Operations Management Operations Management

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Operations – 80-90% HiddenOperations – 80-90% Hidden

The Value EquationThe Value Equation

price

ePerformancValue =

price

InnovationyFlexibilitTimelinessQualityValue

+++=

P

IFTQValue

+++=

Maximizing Value Added in Maximizing Value Added in OperationsOperations

Scope for Adding Value Scope for Adding Value for the Customerfor the Customer

Reduce product costs to customer.Reduce product costs to customer.

Make the product more readily available.Make the product more readily available.

Provide faster service.Provide faster service.

Provide customers with additional relevant Provide customers with additional relevant information.information.

Customize the product to the customer’s Customize the product to the customer’s specific needs.specific needs.

Strategic PrioritiesStrategic Priorities

CompetitivenessCompetitiveness

A company’s position in the marketplace relative to its A company’s position in the marketplace relative to its competition.competition.

Competitive PrioritiesCompetitive Priorities

How the manufacturing function provides a firm with a How the manufacturing function provides a firm with a competitive advantage.competitive advantage.

PrioritiesPriorities——Low cost, high quality, fast delivery, Low cost, high quality, fast delivery, flexibility, and service.flexibility, and service.

Strategic PrioritiesStrategic Priorities

Type Priority

Cost Providing low price products. Controlling costs across the board.

Quality Providing high quality products. Focus is on product and process quality.

Delivery Providing products reliably and quickly.

Flexibility Providing a wide variety of products (mass customization). How fast a firm can produce a new product line.

Service Providing “value-added” service. How products are delivered and supported.

Questions to be resolved Questions to be resolved in Op. Mg. in Op. Mg.

Location:Location: Where do we locate them? Where do we locate them?

Capacity Capacity : How big do we make the facilities?: How big do we make the facilities?

Vertical Integration:Vertical Integration: Which part of the supply Which part of the supply

chain do we choose to control ourselves?chain do we choose to control ourselves?

Process Technology Process Technology : What type of process(es): What type of process(es)

do we install to make the products?do we install to make the products?

Workforce Workforce : Whom do we hire?: Whom do we hire?

Quality Management Quality Management : How will we define, : How will we define,

measure and monitor quality in the organization?measure and monitor quality in the organization?

Policies & Procedures Policies & Procedures : How work will be : How work will be

performed and how decisions will be made?performed and how decisions will be made?

Organization Structure Organization Structure : What hierarchical : What hierarchical

structure will we choose for the organization?structure will we choose for the organization?

Productivity Concepts Productivity Concepts

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Production & ProductivityProduction & Productivity

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

OutputOutput Productivity Productivity ------------ ------------ No. of pcs./hr. No. of pcs./hr.

InputInput

Three Main Productivity IndicesThree Main Productivity Indices

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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 R.M.No of units produced per input of R.M. (e.g. - No of Screws per Kg of wire)(e.g. - No of Screws per Kg of 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 steam Kgs. of Rubber cured / Kg of steam usedused

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Productivity of an OrganizationProductivity of an Organization

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

Ton of sugar-cane crushedTon of sugar-cane crushed

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

Kg. of Welding RodKg. of Welding Rod

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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

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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 woodTons of paper per ton of wood