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8/2/2019 1 Intro- OM, Strategy, Productvity
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Introduction
to
Operations Management
Suhas Rane
7/6/2011 [email protected] 1
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Agenda
Historical Development of OMTaylor, Henry Ford, Hawthorne Studies
Operations Research, Computers & Adv. Opn. Technology.
OM in the Organisation ChartSix Basic Functions of Business
O M. Definition
Scope of Operations Mgmt.
Mfg. Industry v/s Service Industry
Production SystemsInput TransformationOutput Relationships
Productivity Measurements
Decisions & Activities in OM
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Business
Whats the purpose of business ?
Why are we in business ?
. to create wealth(Adam Smith )
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SIX BASIC FUNCTIONS OF BUSINESS
1. CREATION : Product Selections / Idea Generation
2. FINANCE : Managing Resources, Capital Acqn.,
keeping Financial Records.
3. PERSONNEL : H.R., Labour Relations.
4. PURCHASING: Buying of required(Eqpt. + Material + Services)
5. CONVERSION/ : Changing Raw Materials
(PRODUCTION) to Economic Goods.
6. DISTRIBUTION : Selling & Marketing (reaching theCustomer) .
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Evolution of OM
Phases in evolution of OM
Craft Production
Mass Production
Lean Management
Mass Customisation
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Features of Diff. Prod. Systems
1. CRAFT System : Skill based, Manual,
Small Qty., Customization,
Low Cap. Investmt., but high unit cost of prodn.
(MH Husain Painting, DC Car, Space-Lab)
2. Mass Production : Low skill, More automation,
Large Qty. Standardization,High Cap Invst., but low unit cost of prodn.
(Tata Salt, HUL Lux, Nano, SSC Course)
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Features of Diff. Prod. Systems
3. LEAN System : All muscle, No fat (of mainly inventory)
Leopard
Multi-skilled staff,
TQM, Quick change-over (SMED),
Single Pc. Flow, Kanban
(Toyota Prod. System)
4. Mass Customization : High FlexibilityLimited Customization at affordable extra cost
(Dell, Asian Paints, Godrej Furniture)
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OM Gurus
F.W. Taylor(1856-1915)
Father of Sc. Management
Each worker to be trained for suitable job
(according to his skill, strength, and learning ability Divn. of Labour Synergy Effect )
Standard Output Norms set per worker.
Instructions Card, Routing Sheets, Material Specs
-All Standardized. Supervision . Not for keeping watch, but to arrange
facilities.
Incentive for motivation & increasing productivity
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OM Gurus
Henry Ford (1913)
Moving Assembly Line concept
Standardized product design
Mechanized assembly line Specialized labour
Interchangeable parts
Result :Av. labour per chassis
reduced from 12.5 hrs to 93 min.
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O. M. Definition
Operations Management is the effective and efficient
management of processes.
A PROCESS has an input and value added output.
The objective of a process is to add value by conversion
from input to output.
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Transformation ProcessesDiff. forms
Physical : as in manufacturing operations
Locational : as in transportation operations
Exchange : as in retail operations Physiological: as in health care
Psychological: as in entertainment
Informational: as in communication
Is there any Business / Industry
where an operation is not involved?
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Operations as a Transformation Process
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INPUTMaterialMachinesLaborManagementCapital
TRANSFORMATIONPROCESS
OUTPUTGoodsServices
Feedback
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7/6/2011 [email protected] 13
LAND,
BLDG
PLANT,
M/C
MATERIAL ENERGY MANPOWER
PRODUCTS AND SERVICES
OUTPUT
INPUT RESOURCES
OPERATIONS
MANAGEMENT
Obtains the factsPlans,
Directs,Coordinates,Controls,Motivatesin order to PRODUCE
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Mfg. v/s Services Whats the difference?
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Mfg. Industry Service Industry
Creation of
Goods
Providing Services
Production MgmtOperations Mgmt
Business Organization
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Mfg. v/s Services Whats the difference?
Manufacturing Services
1. 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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I t T f ti O t t R l ti hi
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Input TransformationOutput 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 Hungrycustomers 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
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Scope of Operations Mgmt.
Long Term / Strategic Decisions
1. Product Selection & Design2. Process Selection & Planning3. Facilities Location4. Facilities Layout
5. Capacity Planning
Short Term / Operational Decisions
1. Production Planning & Control2. Inventory Control3. Quality Control
4. Method Study / Work Study
5. Maintenance & Replacement
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Strategic issues
in
Operations Management
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Operations80-90% Hidden
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The Value Equation
price
ePerformancValue
price
InnovationyFlexibilitTimelinessQualityValue
P
IFTQValue
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Maximizing Value Addition in Operations
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Scope for Adding Value
for the Customer Reduce product costs to customer.
Make the product more readily available.
Provide faster service.
Provide customers with additional relevant
information.
Customize the product to the customers
specific needs.
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Strategic 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 (masscustomization).How fast a firm can produce a new product line.
Service Providing value-added service.How products are delivered and supported.
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Questions to be resolved in Op. Mg.
Location: Where do we locate them?
Capacity : How big do we make the facilities?
Vertical Integration:Which part of the supply
chain do we choose to control ourselves? Process Technology : What type of process(es)
do we install to make the products?
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Questions to be resolved in Op. Mg. -
Workforce : Whom do we hire?
Quality Management : How will we define, measure
and monitor quality in the organization?
Policies & Procedures : How work will be
performed and how decisions will be made?
Organization Structure : What hierarchical
structure will we choose for the organization?
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Productivity Concepts
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Production & Productivity
Production Output (in No of Units)
Output
Productivity ------------ No. of pcs./hr.
Input
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Three Main Productivity Indices
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Productivity Measures( Output in terms of Input)
Machines - Out put per Machine Hour
Men - Out put per Man Hour
Materials - No of units produced per input of R.M.
(e.g. - No of Screws per Kg of wire)
Power - No of Pcs. per KW Unit of El. Power
Boiler - Kgs. of Rubber cured / Kg of steam used
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Productivity of an Organization
Sugar Mill - Kg. of sugar produced /
Ton of sugar-cane crushed
Fabrication - Tons of Fabrication /
Kg. of Welding Rod
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Productivity of a Service Function
Transporter - Ton-km / Vehicle/ Month.
OR
Ton-km / 1000 Lit. Diesel
Pharma. Marketing Div. -Rs Order booked / MR /Month
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Service Industry : Productivity Measures
Business Productivity Measure
Restaurant Customers (meals) per hour
Retail Store Sale per Sq. foot
Chicken farm Kg. of meat per kg. of feed
Utility plant Kilowatts per ton of coal
Paper mill Tons of paper per ton of wood