1. Operations Management

2. Operations Management
Recommended Reading:
1. Operations & Supply Management
Richard B. Chase et al
12th
Edition
Tata McGraw Hill Education Private Limited
2. Operations Mgt strategy and Analysis ---- Krajweski & Ritzman
3. Operations Management ---- Norman Gaither & Greg Fraizer

3. Curriculum Overview
1. Operation Strategy & Competitiveness
2. Process Analysis
3. Product Design & Process Selection – Mfg
4. Product Design and Process Selection - Services
5. Facility Location
6. Facility Layout
7. Waiting Line Management
8. Strategic Capacity Management
9. Aggregate Sales & Operations Planning
10. Inventory Control
11. Material Requirements Planning
12. Supply Chain Strategy
13. Total Quality management
14. Just in time & Lean Systems
15. Project Management

4. Important objective of Operations function:
Providing Products, what the customers want.
Elements of Operations function:
Quality / Cost / Delivery / Service with Flexibility

5. Historical development of Operations Management :
1910s
>> > Principles of scientific management
Industrial psychology
Moving assembly line / Economic Order Quantity
1930s
>>> Quality control
Hawthorne studies of worker motivation
1940s
>>> Linear programming concepts
1960s
>>> Development of Operations Research tools

6. 1970s
>>> Inventory control / Forecasting / Project management
1980s
>>> Manufacturing as a competitive weapon
KANBAN / Poka-Yoke / CAD / CAM / CIM ……
1990s
>>> Malcom Baldrige Quality Award
ISO 9000
Quality Function Deployment
Kaizen
ERP
Lean
Supply chain management

7. Management Function Levels
Strategic >> Long term decisions
Tactical >> Medium term decisions
Operational >> Short term decisions
Basic concepts in Operations Management :
Plan your work
Control quality
Ensure productivity
Five Ps of Ops. Mgt :
People
Plant
Parts
Process
Planning

8. Operations strategies over a time period :
Upto 1980 1980 – 90 1990 – 2000 Beyond 2000
Ops focus Mass production Lean production Agile mfg.
Competitive Cost Quality Delivery Flexibility
strategy
Process criteria Economy Kaizen Quick Integration
of scale response Economy of
knowledge
Source Capital Work teams IT enabled Intelligent
of value addition automation CFTs processes systems

9. Operations management :
Can be defined as the Design, Operation and Improvement of the production
systems that create the firm’s primary products or services.
Operations Management is a functional field of business

10. Market place
Corporate strategy
Fin. strategy
Ops. strategy Mkt. strategy
Operations Mgt
People Plant Parts Process
Planning
and Control

11. Operations strategy :
is concerned with setting up of broad policies and plans for using the resources of
the firm to best support the firm’s long-term competitive strategy.
Operation strategy needs to get integrated with firm’s corporate strategy.
Operations priorities
>> Cost
>> Product quality and reliability
>> Delivery reliability
>> Coping with changes in demand
>> Flexibility
>> New product introduction speed
>> Technical liaison and support
>> After sale support

12. Developing a Manufacturing Strategy :
Theme :
$$ Translate the required priorities (obtained from marketing) into specific
performance requirements for operations.
$$ Make the necessary plans to assure that operations capabilities are
sufficient to accomplish them.
Steps for developing priorities :
1. Segment the market according to product group
2. Identify the product requirements, demand patterns and profit margins of
each group.
3. Determine the order winners and order qualifiers for each group.
4. Convert order winners into specific performance requirements.

13. Framework for Operations Strategy in Manufacturing
Customer needs
Existing and New
Products
Performance priorities
and requirements
Quality / Dependability /
Flexibility / Price / Speed
Operational capabilities /
Supplier capabilities / R&D /
Systems / TQM / JIT / People
Service
New product
Development

14. Productions Systems
Examples of transformation :
Physical >>> Manufacturing
Locational >>> Transportation / Ware-housing
Exchanges >>> Retailing
Physiological >>> Health-care
Psychological >>> Entertainment
Informational >>> Communication
Transformation process
Input Output
Feedback

15. Transformation Process happening in :
Hospital
Restaurant
Automobile Factory
College
Dept. Store

16. Examples of Operation Systems :
System Input Process Output
Hospital Patients Health care Healthy individuals
Restaurant Hungry well prepared Satisfied customers
customers food
Automobile Steel, Plastic… Fabrication and High quality cars
Factory assembly
College High school Imparting Educated
graduates knowledge individuals
Dept. Store Shoppers Fill orders Sales to satisfied
customers

17. Operation priorities :
>> Cost
>> Product quality
>> Reliability
>> Delivery speed
>> Delivery adherence
>> Flexibility
>> New product introduction speed

18. Elements of Operations Strategy
>> Positioning the production system
>> Product / Service plans
>> Outsourcing plans
>> Process and Technology plans
>> Strategic allocation of resources
>> Facility plans : Capacity / Location / Layout

19. Operations Strategy
ExampleStrategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes
and Infrastructure
More Product
Increase Org.
Size
Increase Production Capacity
Build New Factory

20. Competitive Dimensions
• Product Quality and Reliability
• Cost
• Delivery Speed
• Service Reliability
• Coping with Changes in Demand
• Flexibility and New Product Introduction
Speed

21. Order Qualifiers and Winners
•Order qualifiers?
• They are the basic criteria that permit the
firm’s products to be considered as
candidates
for purchase by customers.
•Order winners?
•They are the criteria that differentiates the
products and services of one firm from
another.

22. Examples
• A brand name car
can be an “order
qualifier”
• Repair services can be “order winners”
Other Examples:
Warranty, Roadside Assistance,
Lease facilities etc;

23. Operations Strategy Framework
Customer Needs
New and Old
products
Competitive
Dimensions
Quality, Cost, Delivery,
Service & Flexibility
Operations & Supplier capabilities
Technology PeopleSystems R&D CIM JIT TQM Distribution
Support Platforms
Financial management Human resource management Information management
Enterprise capabilities

24. Discussion point :
Holiday Candle Company
Bob Venture is the owner of Holiday Candle Company and would like to expand his
Company’s operations. For the past two years Bob has sold candles via the
Internet, but sales have steadily grown beyond his ability to produce the candles
alone from his garage workshop. Because future sales growth looks very
promising, Bob has decided to open a small manufacturing plant to produce the
candles. Sales have primarily been to customers in the United States with
occasional orders from other countries. In addition to selling via the Internet, Bob
would like to start selling his candles to specialty stores in the United States. With
the new plant, he would also like to consider expanding the products he offers in
the new future.
Discuss:
1. What do you think should be Bob’s competitive priorities ?
2. Different aspects of the operations strategy that you think Bob needs to develop.

25. Operations – some commonly used terminologies
Competitive capabilities:
Cost / Quality / Delivery / Service / Flexibility
Low-cost operations:
Producing a product at the lowest possible cost
Top Quality:
Delivering an outstanding product or service
Consistent Quality:
Producing products that meet design specifications on a consistent basis
Delivery Speed :
Quickly filling a customer’s order
Lead Time :
A measure often used for delivery speed
On-time Delivery :
Meeting delivery time promises

26. Development Speed :
Quickly introducing a new product or a service
Time-based competition :
Focuses on delivery speed and development speed
Customisation :
Satisfying the unique need of each customer by changing service or product
designs
Variety :
A wide assortment of products and services
Volume Flexibility :
Accelerating or slowing down the rate of production to handle large fluctuations
In demand.

27. Productivity :
A common measure of how well a country, industry or business unit is using
its resources (or factors of production).
Productivity = Quantity of products or services produced
Amount of resources used
Productivity = Total output
Total Input

28. Some productivity measures :
Business Productivity Measure
Restaurant
Customers per labour hour
Retail store
Sales per square feet
Utility plant
Kilowatts per ton of coal
Paper mill
Tons of paper per cord of wood

29. Total Measure Productivity
• Total measure Productivity = Outputs
Inputs
or
• = Goods and services produced
All resources used

30. Partial Measure Productivity
• Partial measures of productivity =
• Output or Output or Output or Output
Labor Capital Materials Energy

31. Multifactor Measure
Productivity
• Multifactor measures of productivity =
• Output .
Labor + Capital + Energy
or
• Output .
Labor + Capital + Materials

32. Example of Productivity
Measurement
• You have just determined that your service
employees have used a total of 2400 hours of
labor this week to process 560 insurance forms.
Last week the same crew used only 2000 hours of
labor to process 480 forms.
• Is productivity increasing or decreasing?
• Answer:
Last week’s productivity = 480/2000 = 0.24
This week’s productivity is = 560/2400 = 0.23
Here productivity is decreasing slightly.

33. Characteristics of Services and Manufactured products
Services Manufactured products
$$ Intangible outputs Tangible products
$$ Outputs can not be stored Products can be inventoried
$$ Extensive customer contact Little customer contact
$$ Short lead times Long lead times
$$ Labour intensive Capital intensive
$$ Service quality subjectively Product quality objectively
determined determined