Operations Management - Acheiving Competitive Advantage

8/13/2019 Operations Management - Acheiving Competitive Advantage

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Operations

Management



Achieving Competitiveadvantage(Cost)

Cost:

Ability to produce products at a cheaper cost

(and offer at a cheaper price) than theircompetitors .

How to cut Cost? ( 5 P’s of Cost reduction)

a) Product or service b) Process c) Plantd) Programmes & e) Personnel




a) Product or Service:

product Design -> to reduce cost

value engineering -> providing the samefunctionality at a lower price.

b) Process:

Choice of manufacturing process that is cost

effective -> Choice of plant & machinery ->

Automation




c) Plant:

Plant Location; Plant capacity; machine layout

d) Programmes:

Inventory management; inventory control; correct

scheduling of orders; effective production schedules

e) personnel:

employing personnel with requisite skills & training ->

less wastage -> fewer machine fault/breakdown ->

lesser maintenance cost ->lesser warranty costs




Next to Cost, we have to concentrate on

Quality

Time Flexibility

Operations Strategy



Achieving Competitive advantage(Quality)

Quality:

Def:

1) Quality is fitness for the use.

2) Quality is conformance to requirements

3) Quality is the value perceived by the customer

** Use of extra finishes, unnecessary close tolerances,

expensive materials, extra features etc., add only to the

cost & not to the quality.



Achieving Competitiveadvantage(Quality)

Customers are concerned with quality,

price and after-sales-service; customers

are not interested in production cost orproductivity.

Two aspects of Quality:

Quality of DesignQuality of Conformance




Quality of Design:

Identification of the right product ->

selection of appropriate features (like enduse, ease of operation, ease of

maintenance, durability, reliability, strength,

appearance etc., ) -> to ensure that the

product renders satisfactory service to the

customer at the optimal cost.



The production manager should put

continual effort in the development of the

product Should have in-depth knowledge of

alternative materials, manufacturing

processes

Should have access to the latest

technology/process





Quality of Conformance:

Good design features are of little use unless they

are reflected in the final product. This is possibleonly if the pre-determined quality is built into the

final product during the production process.

Since, apart from design, quality depends upon

raw materials, equipments and workmen, allthese must be tied up for ensuring quality.



Achieving Competitiveadvantage(Time)

Time:

Organizations can compete on their ability to

deliver faster than others.Examples:…………………

Timely Delivery should be the AIM.

Organizations should deliver exactly whenexpected – neither too early, nor too late.

Discussion:………………………….



Achieving Competitiveadvantage(Flexibility)

Customers wants keep changing

Flexibility is the ability to respond to

changing circumstance in terms of productimprovement and product innovation

Flexibility to switch over from one

production process to another & flexibility tochange quantity of output are the two key

issues.



Achieving Competitiveadvantage(Operations strategy)

An operations strategy should be designed

within the overall business strategy of the

organization An operations strategy should be designed

on the basis of the competitive priorities of

the organization.

Competitive priorities????

Product or Service… Process….Plant….

Programmes…. Personnel



Achieving Competitiveadvantage(Operations Strategy)

Product or Service:

Made-to-order product ( Ex: Boilers

manufactured by BHEL )Made-to-stock product(Ex: toothpaste,

detergent, readymade garments…..etc)

Assembled-to-order product: (Ex: Computers,furniture, training courses …)



Achieving Competitiveadvantage(Operations Strategy)

Processes:

In-house production

Out-sourcing

Combination of in-house production &out-sourcing

Under in-house production:

Continuous production and Batch production (suitable for

made-to-stock products)

Job Shop production (or project approach) – suitable for

made-to-order products




Plant:

Capacity

Locationlayout

(apart from cost, will help achieving flexibility,

speed of delivery)




Programmes:

Inventory management; inventory control;

correct scheduling of orders; effectiveproduction schedules

Apart from reducing cost, will help in

reducing time of delivery




Personnel:

Skilled & motivated employees

Job Analysis, Job redesign, job enrichment, job rotation, job enlargement

Safety and welfare measures for

employees



Job Analysis

Def: It is the process of determining the

facts related to the jobs.

Data to be collected:Work Performed: 1. Major Duties

2. Minor Duties

Equipments used: 1. Types of machines2. Degree of Automation



Job Analysis…

Employee skills involved:

1. Responsibility

2. Job knowledge

3. Mental Application

4. Dexterity & Accuracy

Physical Demands of the job:

1. Physical activities involved2. Surroundings at the place of work

3. Hazards involved



Job Analysis..

Job Analysis defines the job and it helps in

recruiting the right kind of personnel suited for the

job, training required to be imparted to the existing

employees and finding out the scope for improvingthe job conditions.

Job Descriptions:

A concise statement of the duties, responsibilities,

working conditions and other essential facts abouta job. Prepared after carrying out Job Analysis



Job Re-Design

Def: Revising/altering the job content,

reforming the Job Description, reallocating

altered tasks/functions to employees, withthe objective of placing the right person at

the right job and getting maximum output

and at the same time improving the level of

satisfaction of employees.



Job Enrichment

It is a Vertical restructuring of the job, by

giving the employees additional authority,

autonomy and control over the way the jobis accomplished. It is an attempt to

motivate the employees, by giving them an

opportunity to use their range of abilities.

Job enrichment is to make work more

challenging and rewarding.



Job Enlargement

It is a horizontal restructuring of the job by

adding related tasks. It is meaningful addition of

similar tasks. It is a Job Redesign technique

aimed at reducing monotony in work andincreasing work flexibility ( i.e., increasing the

scope of the carrying out tasks that are versatile

and yet similar in certain aspects.) Does not

require additional skills on the part of the

employees.





Value Engineering;Value Analysis

Value?

Value = Function÷ Cost

i.e, Worth to the customer÷Price paid

by the customer

How to Improve Value?

By Improving the Functions of the product, keeping the

cost same

By keeping the function the same & reducing the cost

By improving the function & Reducing the cost



Value Engineering & ValueAnalysis

Value analysis looks at a function that the

product or service fulfils and explores the

possibilities of performing that function in

cheaper ways.

Both Terms (VE & VA) are synonymous terms

with minor differences

VE is applied while designing a product; VA isused for the product that is already in the

market.



Value Engineering & ValueAnalysis

VE has its role before the product is born;

VA has its role after the product is born.

VE is applied to Direct material cost andDirect Labour cost; VA is applied to all

kinds of costs

Objectives of VE&VA: To make a productmore valuable & less costly.



Cost Reduction vs. Cost Control

Cost Reduction: Reducing the cost to the company ->

Cost of Production - cost of after-sale service - Cost of

sales – Improves competitiveness of the company.

Cost Control: A system of maintaining performance at ornear the Standard. Cost is controlled using tools like

Standard Costing, Budgetary control and Reporting –

Actual costs are compared with Standards fixed,

variances are analysed and reported to the

management



Cost Reduction vs. Cost Control

Areas of Cost reduction: Products

Processes

Procedures

Men

Materials

Establishments R&D

Selling & Distribution etc.



Value Analysis (a comprehensivedefinition)

It is the organized, systematic study of the

function of a material, part, component, product

or system to identify areas of unnecessary cost

that can be eliminated without impairing thecapacity of the item to satisfy its objective or to

identify areas of greater functional utility with

least possible increase in cost or to achieve

both cost-reduction and improvement of

functional utility.



Strategic and Tactical decisions inOperations Management

Levels of Decision making:

1. Strategic

2. Tactical

3. Operational

Strategic Decisions: Deal with the broader aspect of

business and answers questions like: What is the vision

for your business?-Which direction is the business

headed?-How will your business compete in themarket?- What is your business identity? Etc., Strategic

decision making is the domain of Vision Statements.



Strategic Decisions……

They set the Direction for the entire

company

They are broad in scope & long term innature

Examples:

Competitive priority -What shall be theUnique features of our product that make

us competitive?



Strategic Decisions

Examples:

Location strategy

Plant CapacityLong Term partnership

Approach towards Quality

STRATEGIC DECISIONS ARE MADE ATTHE SENIORMANAGEMENT LEVEL





Tactical Decisions….

They focus on specific day-to-day issues like resource

needs, schedules, Quantities to be produced etc.,

Examples:

Job Design/ Job redesignFacility layout

Process design

Work force management

Technology Management

TACTICAL DECISIONS ARE MADE BY MIDDLE LEVEL

MANAGERS



Operational Decisions

They are grass root decisions about who is going to do

what, when and how.

Operational decisions are often made in ‘Real-time’

Ex: Who will be put in charge of Quality control?How can we service a client?

When will we place orders for raw materials?

Production Scheduling, inventory management etc.

OPERATIONAL DECISIONS ARE MADE BY FLOOR

LEVEL/SHOP LEVEL MANAGERS



Order Qualifiers & order winners

Order Qualifiers: Those product/service

features provided by all the manufacturers

which make the product to be consideredfor purchase by the customers.

Order Winners: That feature which

influences the final buying decision

Documents

Operations Management - Acheiving Competitive Advantage