Production and Operations Management: Manufacturing and Services

Introduction to Operations

#Production Production is the process by which raw materials and other inputs are converted into finished products. Another word synonymous to production is manufacturing management which is the process of exploitation of resources to achieve desired goals

#What is Operations Management?Defined Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services

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Production is the creation of goods Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs

#Role of Operations Research(OR) in Operations management (OM)

Operations management is the field of managementOperations research is the application of quantitative methods to decision making in all the fieldsOperations managers use the decision making tool of OR (Critical path scheduling) in decision making

#Production and operations management The term Production and operations management is being increasingly replaced by simply operations management , as the production function relating to the manufacturing organizations has become the part of operations Operations management is a broad term which includes manufacturing as well as service organization

#Why Study Operations Management?

Business Education

Systematic Approach to Org. Processes

Career Opportunities

Cross-Functional Applications

OperationsManagement

#What is a Transformation Process?

Defined A transformation process is defined as a user of resources to transform inputs into some desired outputs

#Operations as a transformation process.

OutputsServicesGoods

Internal andexternal customersInformation on performance

Transformation Processes and operations

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InputsWorkersManagersEquipmentFacilitiesMaterialsServicesLandEnergy

#Transformation Process

Raw minds (students)TeachersClass roomsComputer labLibraryProjectors (OHP, LCD etc)Administrative staffEnlightened students with: Good communication skills Pleasant personalities Leadership qualities Good analytical ability Team spirit Decision making abilities Computer skills

Random disturbances Strikes of students, teachers or staff Undue interference of the government in the working of institutionsQuality of inputs monitored Quality of outputs monitored

The Transformation Process For a Service Organization (An MBA Institute)

INPUTSFeedback Mechanisms Success at placement interviews Grades obtained in examinations Rising career graph of alumni in the industry Number of applications for admission in the institute Ratings of surveysOUTPUTS

#Transformation Process

BuildingOffice infrastructure (computers, furniture, etc.)WorkersPackaging materialCapitalManagersCustomers satisfied with: Good cooling performance Less consumption with electricity Good after-sales service New advanced features

Random disturbances High turnover of workers and managers Recession Governments taxation policy Strikes instigated by trade unionsQuality of inputs monitored Quality of outputs monitored

INPUTSFeedback Mechanisms Rising sales volume Lesser customer complaints Positive response of customers in the feedback formsOUTPUTSMachines & EquipmentsComponents, parts, sub-assemblies, etc.

The Transformation Process For a Purely Manufacturing Organization (A Refrigerator Manufacturer)

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TransformationsPhysical-manufacturingExchange--retailingPhysiological--health careInformational--telecommunications

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Operations

Finance/AccountingHuman ResourcesMarketingSuppliersProduction andInventory dataCapital budgeting requestsCapacity expansion andTechnology plansBudgetsCost analysisCapital investmentsStockholder requirementsOrders for materialsProduction and deliverySchedules QualityRequirements Design/

Material availabilityQuality dataDelivery schedulesDesigns

Product/ServiceAvailabilityLead-time estimatesStatus of orderDelivery schedules

Sales forecastsCustomer ordersCustomer feedbackPromotions

Recruitment and selectionPerformance evaluationsJob design/workmeasurementHiring/firingTrainingPersonnel needsSkill sets

Operations as a technical core.

#How is Operations Relevant to my Major?Accounting

Information Technology

Management

As an auditor you must understand the fundamentals of operations management.IT is a tool, and theres no better place to apply it than in operations.

We use so many things you learn in an operations classscheduling, lean production, theory of constraints, and tons of quality tools.

#How is Operations Relevant to my Major?Economics

Marketing

Finance

Its all about processes. I live by flowcharts and Pareto analysis.How can you do a good job marketing a product if youre unsure of its quality or delivery status?Most of our capital budgeting requests are from operations, and most of our cost savings, too.

#Historical Events in Operations ManagementEraEvents/ConceptsDatesOriginatorIndustrialRevolutionSteam engine1769James WattDivision of labor1776Adam SmithInterchangeable parts1790Eli WhitneyScientific ManagementPrinciples of scientificmanagement1911Frederick W. TaylorTime and motion studies1911Frank and Lillian GilbrethActivity scheduling chart1912Henry GanttMoving assembly line1913Henry Ford

#Historical Events in Operations ManagementEraEvents/ConceptsDatesOriginatorHuman RelationsHawthorne studies1930Elton MayoMotivation theories1940sAbraham Maslow1950sFrederick Herzberg1960sDouglas McGregorOperations ResearchLinear programming1947George DantzigDigital computer1951Remington RandSimulation, waitingline theory, decisiontheory, PERT/CPM1950sOperations research groupsMRP, EDI, EFT, CIM1960s, 1970sJoseph Orlicky, IBMand others

#Historical Events in Operations ManagementEraEvents/ConceptsDatesOriginatorQualityRevolutionJIT (just-in-time)1970sTaiichi Ohno (Toyota)TQM (total qualitymanagement)1980sW. Edwards Deming, Joseph JuranStrategy andoperations1980sWickham Skinner, Robert HayesReengineering1990sMichael Hammer,James ChampySix Sigma1990sGE, Motorola

#Historical Events in Operations ManagementEraEvents/ConceptsDatesOriginatorInternet RevolutionInternet, WWW, ERP, supply chain management1990sARPANET, TimBerners-Lee SAP,i2 Technologies,ORACLE, DellE-commerce2000sAmazon, Yahoo, eBay, Google, and othersGlobalizationWTO, European Union, Global supply chains, Outsourcing, Service Science1990s2000sChina, India, emerging economies

#Historical Events in Operations ManagementEraEvents/ConceptsDatesOriginatorGreen RevolutionGlobal warming, An Inconvenient Truth, KyotoTodayNumerous scientists, statesmen and governments

#GlobalizationWhy go global?favorable costaccess to international marketsresponse to changes in demandreliable sources of supplylatest trends and technologiesIncreased globalizationresults from the Internet and falling trade barriers

#Hourly Compensation

#GDP per Capita

#Trade in Goods, % of GDP

#Productivity and CompetitivenessCompetitivenessdegree to which a nation can produce goods and services that meet the test of international marketsProductivityratio of output to inputOutputsales made, products produced, customers served, meals delivered, or calls answeredInputlabor hours, investment in equipment, material usage, or square footage

#Measures of Productivity

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Operations Strategy and Competitiveness

The McGraw-Hill Companies, Inc., 2006#

#Operations strategyOperations strategy can be viewed as a part of a planning process that co-ordinates operational goals with those of the larger organization

Since the goals of the large organization change overtime , the operation strategy must be designed to anticipate future needs The operations capabilities of a firm can be viewed as a portfolio best suited to adapt to the changing product and service needs of the firms customers

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Operations Strategy

ExampleStrategy ProcessCustomer Needs

Corporate StrategyOperations StrategyDecisions on Processes and Infrastructure

More Product

Increase Org. SizeIncrease Production Capacity

Build New Factory

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Competitive DimensionsCost- Make it cheap Product Quality and Reliability- Make it good Delivery Speed- Make it fastDelivery Reliability -Deliver it when promisedCoping with Changes in Demand-Change its volumeFlexibility and New Product Introduction Speed- Fast and frequent Change Other Product-Specific Criteria-Support it

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Dealing with Trade-offsCostQualityDeliveryFlexibility

For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems. For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.

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Core Services Performance Objectives

OperationsManagement

Flexibility

Quality

Speed

Price (or cost Reduction)

#Positioning the Firm: CostWaste eliminationrelentlessly pursuing the removal of all wasteExamination of cost structurelooking at the entire cost structure for reduction potentialLean productionproviding low costs through disciplined operations

#Positioning the Firm: SpeedFast moves, Fast adaptations, Tight linkagesInternetCustomers expect immediate responsesService organizationsalways competed on speed (McDonalds, LensCrafters, and Federal Express)Manufacturerstime-based competition: build-to-order production and efficient supply chainsFashion industrytwo-week design-to-rack lead time of Spanish retailer, Zara

#Positioning the Firm: QualityMinimizing defect rates or conforming to design specificationsRitz-Carlton - one customer at a timeService system designed to move heaven and earth to satisfy customerEmployees empowered to satisfy a guests wish Teams set objectives and devise quality action plansEach hotel has a quality leader

#Positioning the Firm: FlexibilityAbility to adjust to changes in product mix, production volume, or designMass customization: the mass production of customized partsNational Bicycle Industrial Companyoffers 11,231,862 variationsdelivers within two weeks at costs only 10% above standard models

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Operations Strategy Framework

Customer NeedsNew product : Current product

Competitivedimensions & requirements

Quality, Speed, Flexibility, and Price

Operations & Supplier capabilitiesR&D

TechnologySystemsPeople

DistributionSupport PlatformsFinancial managementHuman resource managementInformation management

Enterprise capabilities

Operations and Supplier CapabilitiesR&D TechnologySystemsPeopleDistribution

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Order Qualifiers and WinnersOrder qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customerswhat qualifies an item to be considered for purchase

Order winners are the criteria that differentiates the products and services of one firm from another what wins the order

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Order Winnersand Order Qualifiers

Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Operations and Process Management, Prentice Hall, 2006, p. 47

#Strategy FormulationDefining a primary taskWhat is the firm in the business of doing?Assessing core competenciesWhat does the firm do better than anyone else?Determining order winners and order qualifiersWhat qualifies an item to be considered for purchase?What wins the order? Positioning the firmHow will the firm compete?Deploying the strategy

#Strategic PlanningMissionand VisionCorporateStrategyOperationsStrategyMarketingStrategyFinancialStrategyVoice of theBusinessVoice of the Customer

#Balanced ScorecardBalanced scorecardmeasuring more than financial performancefinancescustomersprocesseslearning and growingKey performance indicatorsset of measures to help managers evaluate performance in critical areas

#Balanced Scorecard

Radar Chart

Dashboard

#Evolution of Operations and Supply Chain ManagementSupply chain managementmanagement of the flow of information, products, and services across a network of customers, enterprises, and supply chain partners

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