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Lecture SlidesDr. Biju K Thapalia

Management Campus

Purbanchal University, Nepal


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8/5/2011 2Dr. Biju K Thapalia


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` Activities related to producing goods in an

organisation is called Production functions.

` It is mainly related to manufacturing of tangible

goods` Basically a conversion function

` Example -A Biscuit factory- producing biscuits

for commercial purpose

`



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` What does a Hotel produce? -Services

` To increase the scope of the field the termOperations is used.

` The Operations functions consist of all the activitiesthat are directly related to producing goods orproviding services.

` List all the activities of a College and a noodlecompany. Are there any similarities?



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InputsInputs OutputsOutputs

ConversionConversion

SubsystemSubsystem

Production SystemProduction System

ControlControlSubsystemSubsystem


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FinanceFinance

MarketingMarketing



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` Nature of output

` Customer involvement

` Labor involvement` Consumptions of output

` Uniformity of output

` Measurement of productivity



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` The Industrial Revolution

` Post-Civil War Period

` Scientific Management

` Human Relations and Behaviorism` Operations Research

` The Japanese influence

` New trends



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` The industrial revolution developed in England in

the 1700s.

` The steam engine, invented by James Watt in

1764, largely replaced human and water power

for factories.

` Adam Smiths The Wealth of Nations in 1776

touted the economic benefits of the specialization

of labor.

` Thus the late-1700s factories had not onlymachine power but also ways of planning and

controlling the tasks of workers.



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` The industrial revolution spread from England to otherEuropean countries and to the United Sates

` In 1790 an American, Eli Whitney, developed the concept ofinterchangeable parts. Forced consistent production of parts.Variation evil.

` In the 1800s the development of the gasoline engine andelectricity further advanced the revolution.

` By the mid-1800s, the old cottage system of production hadbeen replaced by the factory system.

` Development of rail lines provided quick, cheap transportationof goods.Also influx of labor from farm to urban centers.

` . . . more



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` During the post-Civil War period great

expansion of production capacity occurred.

` By post-Civil War the following developments

set the stage for the great productionexplosion of the 20th century: increased capital and production capacity

the expanded urban workforce

new Western US markets

an effective national transportation system



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` Frederick Taylor is known as the father of scientificmanagement. His shop system employed thesesteps: Each workers skill, strength, and learning ability were

determined.

Stopwatch studies were conducted to precisely setstandard output per worker on each task. Material specifications, work methods, and routing

sequences were used to organize the shop. Supervisors were carefully selected and trained. Incentive pay systems were initiated.

` Gilbreth couple time and motion study

` Henry Gantt- system of scheduling (Gantt chart)



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` In the 1920s, Ford Motor Companys

operation embodied the key elements of

scientific management:

standardized product designs mass production

low manufacturing costs

mechanized assembly lines

specialization of labor

interchangeable parts



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` In the 1927-1932 period, researchers in the

Hawthorne Studies realized that human

factors were affecting production.

` Researchers and managers alike wererecognizing that psychological and

sociological factors affected production.

` From the work of behavioralists came a

gradual change in the way managers thoughtabout and treated workers.



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` During World War II, enormous quantities ofresources (personnel, supplies, equipment, )had to be deployed.

` Military operations research (OR) teams were

formed to deal with the complexity of thedeployment.` After the war, operations researchers found their

way back to universities, industry, government,and consulting firms.

` OR helps operations managers make decisionswhen problems are complex and wrong decisionsare costly.

` Quantitative methods use like LP, Forecasting,Inventory management and many more



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` Quality focus

` Continuous improvement

` Elimination of waste

` Customization` Total quality management

` JIT



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` Globalization and global competition

` Cost reduction

` Computerization

` Rapid advancement of IT` Automation

` Out sourcing



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` Cost Ryanair- no baggage facility, direct hall, second

airport of the city Nano Car

` Quality Toyota Quality comes first

` Flexibility Colgate Toothpaste- 10 variety in Indian market

` Speed DHL- quick delivery Sony- new products always

` Differentiation Ncell Blackberry service, wide coverage



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` Make-to-Order products and services are made to customer specifications

after an order has been received

` Make-to-Stock products and services are made in anticipation of demand

` Assemble-to-Order products and services add options according to customer

specifications



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` Project one-at-a-time production of a product to customer order

` Batch Production systems process many different jobs at the same time in

groups (or batches)` MassProduction

large volumes of a standard product for a mass market

` ContinuousProduction used for very high volume commodity products



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Source:Source:

Adapted fromAdapted fromRobert HayesRobert Hayes

and Stevenand Steven

Wheelwright,Wheelwright,

Restoring theRestoring the

CompetitiveCompetitive

Edge:Edge:

CompetingCompeting

ThroughThrough

ManufacturingManufacturing(New York:(New York:

John Wiley &John Wiley &

Sons, 1984), p.Sons, 1984), p.

209209


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` Capacity strategic decisions include: When, how much, and in whatform to alter

capacity

` Facility strategic decisions include:Whether demand should be met with a few largefacilities or with several smaller ones

Whether facilities should focus on serving certaingeographic regions, product lines, or customers

Facility location can also be a strategic decision



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` What are the skill levels and degree ofautonomyrequired to operate production system?

` What are the training requirements and selectioncriteria?

` What are the policies on performance evaluations,

compensation,

and incentives?` Will workers be salaried, paid an hourly rate, or

paid a piece rate?` Will profit sharing be allowed, and if so, on what

criteria?` Will workers perform individual tasks or work in

teams?` Will they have supervisors or work in self-

managed work groups?` How many levels of management will be required?` Will extensive worker training be necessary?` Should workforce be cross-trained?` Wha

t efforts will be made in terms of retention?8/5/2011 24Dr. Biju K Thapalia


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` What is the target level of quality for ourproducts and services?

` How will it be measured?` How will employees be involved with quality?` What will the responsibilities of the quality

department be?` What types of systems will be set up to ensure

quality?` How will quality awareness be maintained?` How will quality efforts be evaluated?` How will customer perceptions of quality be

determined?` How will decisions in other functional areas

affect quality?



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` Vertical Integration degree to which a firm produces parts that go into its

products` Strategic Decisions

How much work should be done outside the firm? On what basis should particular items be made in-

house? When should items be outsourced? How should suppliers be selected? What type of relationship should be maintained with

suppliers? What is expected from suppliers?

How many suppliers should be used? How can quality and dependability of suppliers be

ensured? How can suppliers be encouraged to collaborate?



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` Production and productivity are different in

concept.

` Its wrong to think that higher production leads to

higher productivity

` Production is related to the activity of producing

goods or services. It is a process (or system) of

converting input into some useful, value-added

output

` Productivity is related to the efficient utilization of

input resource into produced in the form of value

added goods or services



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` Productivity

` Productivity is an arithmetic ratio of amount

produced and the resources used during the

process of production.

` Therefore productivity implies efficient

resource utilization


InputOutput!


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` Production means aprocess of transformationof raw materials and otherinputs into finished goodsand services.

` Production is transforminginputs into outputs, byadding values.

`

Production= value additionto new materials

` Production denotes

surplus generation.

` Productivity is defined in

terms of input output

relationship; productivity

is to get higher output

over given input.

` Productivity = efficiency ofproduction


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` Methods` Capital

` Quality

` Technology

`

Management

Improve Productivity by-` Develop measures

` Analysis system to find bottleneck

` Improve methods- process and management

` Reasonable goals

` Incentives



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` Better utilization of resources

` To earn good profit because of reduction in

costs

` Competitive in market` Higher wages

` reduced prices for customer



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` A company is manufacturing 24,000

components per month by employing 100

workers in 8 hour shift. The company gets

additional order from government to supplyadditional 6000 components. The

management decides to employ additional

workers. What will be production and

productivity level when the number of aadditional workers employed are: (i) 30 (ii) 25

(iii) 20



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` Forecasting is a statement about the future` Forecast or Prediction?

Features of forecasting

`

Forecasting is rarely perfect` All forecasting techniques assume that there is

some degree ofstability in the system

` what happened in the past will continue tohappen in the future

` Forecasting for a group of items is moreaccurate than the forecast for individuals.

` 4. Forecasting accuracy decreases as timehorizon increases.



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` Timely: Forecasting horizon must cover the timenecessary to implement possible changes.

` Reliable: It should work consistently.

` Accurate: Degree of accuracy should be stated.

` Meaningful: Should be expressed in meaningfulunits.Production should know how many units to beproduced, and schedulers need to know whatmachines and skills will be required.

` Written: to guarantee use of the same information

and to make easier comparison to actual results.` Easy to use: users should be comfortable working

with forecast.



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Information

Planning thesystems

Schedulingthe system

Controllingthe system

Demandforecast foroperations


Output


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` In Planning the system Product design

Process design

Equipment investment

Capacity planning

` In Scheduling the system Aggregate production planning

Operation scheduling

` In Controlling the system Production control

Inventory control

Labour control



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Qualitativex based on experience,

x Judgment

x Knowledge and opinion

Quantitative

x based on data

x statistics



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Qualitative Methods` Uses when situation

is vague and littledata available

`

New products` New technology` Involves knowledge

and judgement` Example:

forecasting newlyintroduced onlinesales


Quantitative Methods

` Used in stablesituations

` Historical data

available` Existing products

` Current technology

` Involves mathematical

techniques` Example: Example:

sales of color TVs


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1. Executive Opinions Group of upper-level managers (read expert) makes

collective opinion about future Useful for long-range forecast or new product

2. Sales Force Composite

estimates from sales individuals are reviewed forreasonableness (may tend to make under estimates),then aggregated

3. Consumer Surveys asking the customers may give best forecasts but it is

higher in cost, difficult to apply

4. Delphi method The Delphi technique was developed at RAND

Corporation in the 1950s to help capture the knowledgeof diverse experts while avoiding the disadvantages oftraditional group meetings.



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(a) Panel of experts queried.(b) Chosen experts to participate should be of a variety

of knowledgeable people in different areas (finance,marketing, production etc). They are unknown to anyone, except for the coordinator.

(c) Through questionnaire the coordinator obtainsestimates from all participants.

(d) Coordinator summarizes results and redistributesthem to participants along with appropriate newquestions.

(e) Summarize again and refine forecasts and developnew question(f) Continue till 2-3 times before getting almost similar

answer from all



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` Time Series Quantitative methods Simple average

Exponential smoothing

` Causal Quantitative methods Regression analysis

Economic modeling



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` Based on past data Simple average

Simple moving average

Weighted moving average

Exponential smoothing

x The pattern of weights is exponential

x Demand of latest period is weighted most heavily

x And weights on subsequent periods are decreased

exponentially



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periodtheistandwhere

FDF ttt

,10

)1( 11

ee

E

EE

What should be the value of ?

When the demands are stable over the period than .1-.3 are ok

When the demands are very unstable than .7-.9 are ok

When the demands are slightly unstable than .4-.6 are ok


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The sales for the ABC company are as follows-

Forecast September sales

a) A five-month moving averageb) Exponential smoothing with smoothing

constant equal to 0.2, assuming a Marchforecast of19000


Month Sales (in thousand units)

Feb 19

March 18

April 15

May 20June 18

July 22

Aug 20


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` When there is some kind of trend than first order exponentialsmoothing is not so good tool for forecasting

` If the trend is linear than we can use Trend equation

` Develop a straight line equation through which we forecast

future value


linetheofSlope

0

!

!!

!

!

!

b

tatyofValuea

tperiodforForecasty

periodstimet

where

btay

t

t

t


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n

tbya

ttn

yttynb

!

!

22 )(


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8/5/2011 52Dr Biju K Thapalia

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