OPERATION MANGEMENT CONCEPTS

INTRODUCTION

• Industrial revolution in 18th century, brought in factory system.

• Means mass production using machines and mechanisms.

• Rapid technical inventions in all spheres of activities led to advent of modern industry with aid of advanced production method and process.

• Pre industrial revolution was mostly manual production old gen. techniques to latest most advanced flexible manufacturing systems, says the transition of production process.

What is production• Process by which raw materials and other inputs are

converted into finished products.• It is most basic function, heart of any organisation.• Two ingradients of production , people and natural

resources, exploitation of resources by people , deliver goods, to gain benefits and raise standard of living members of society.

• All departments Purchase, finance, marketing, R & D, Software development etc., revolves around production.

• Aim of every production system is to produce economically to entire satisfaction of the customer, ( for whom the product is meant for )employer, employee.

Production and manufacturing DO THEY CARRY SAME MEANING ???

PRODUCTION• Process through which

goods and services are created.

• Services can refer other non manufacturing sectors of economy like transport, health, banking, warehousing, postal system etc.,

Manufacturing • Refer to process of

producing only tangible goods in factory like situation.

Operating system• Configuration resources combined for provision of goods or services.• Retail organisation, hospital, bus and taxi services, tailors, motels,

dentists examples of operating system.• Converts inputs using physical resources, to create outputs to satisfy

the customer need.• Inputs like labour, captial, information produce output using

transformation processes like storing, transport, manufacture, supply, service etc.,

• Organisation takes measurement at various points / feedback at various points and compare with previous established standard and do corrective action.

• Goods and services can occur jointly like car oil change, painting.

INPUTS Conversion subsystem

OUTPUTS

EXTERNALLegal or politicalSocial, economictechnolgical

MARKETCompetitionProduct informationCustomer desires

PRIMARY RESOURCES

Materials and supplies, personel,

captial , capital goods, utilities

Physcial like manufacturing.Locational services like transportationExchange services like retailing or whole salingStorage services like warehousing.Other private services like insurance, finance, real estates, health, business service, Govt. services like local , state , federal.

Direct outputs like products , services.Indirect outputs like

taxes , wages and salaries, technolgical

developments, enviormental ,

employee impact, societal impact.

CONROL SUBSYSTEM

FEED BACK INFORMATION

Operation system in hotel industry

• Inputs like furniture, linen, employee, water, fruits, meat , vegetables for kitchen, and computers.

• Processes include cleaning rooms, making reservations, checking guests in and out of the hotel, room service delivery, organising functions.

• Outputs include provision of guest rooms, food served in restaurants, facilities provided for function and conferences.

Production/operation management• Operation generally used to imply activities of service

organization, now implies production as well. • It covers both manufacturing and service industries.• Theory of operation management is common to both goods

and service production.• Some common functions are forecasting, scheduling, QC,

other managerial activities. • So it is the management of productive system, regardless

whether it is product oriented or service oriented. • Deals with decision making related to production processes so

that the resulting goods or services are produced according to specifications, in the amounts, and by the schedule demanded and at minimum cost.

Different time stages leading to operation management

• Handicraft era• Industrial revolution era,

invention of steam engine, assignment and division of labour by skill, basis of time study.

• Scientific management era - seperation of planning from doing. Time study, work study,, differential wages.

• Operation research and Computers Era- computers used for large scale computation. Study of organisation behaviour, Integrating operations into overall statergy and policy. Computer application of manufacturing, scheduling., Quality and productivity applications from Japan, Robotics, CAD, CAM, TQM, JIT, KANBAN.

total integrated system, integration of several engineering disciplines, production of global marketing, and total customer satisfaction, E commerce, email, Internet, etc.,

Role of operation management• Marketing group generates demand.• Financial group generates capital.• Production group to supply the output. • To supply the output, production department

engagaes in 2 major sets of activities. convert finance into physical resources

required for production. convert physical resource into saleable

goods and services.

Convert raw materails to finished proudcts through following functions.

• Forecast demand / sales department which decides the requirement of production.

• Arrange and bring together all the inputs, men, material, machines, methods

• Arrange for services like maintenance, store keeping, material handling, inspection, QC.

• Produce goods at minimum time, cost.• Right time , sufficient in quantity, quality.• Utilize all factors of production, service facilities

available to produce the product.Contd…..

• Take statergic decisions concerning the design of product, and production system which includes.

o New product indentification, design.o Production planning and control.o Process design and planning.o Facilities location and lay out planningo Design of material handling system.o Capacity planningo Inventory control.o Maintenance and replacement.o Cost reduction, cost control, work system design.

• To be flexible in order to respond to changes in products or all together to new products.

• To sum up it Op.management is to produce goods or services of the right quality and quantity at right time and the right cost.

PRODUCTS• Goods are tangible• Quality is fairly constant.• Goods can be produced,

stored, and transported to customers.

• Location of mfg. tend to nearer to source of raw materials.

• Iocation need not attract end customers and can be in rural area.

• More of unskilled labours than skilled labours , rates can be flexible.

• Inventory can be built

SERVICES• Goods are intangible.• Variable.• Services are usually

produced, consumed simultaneously.

• Location services tend to near to place of demand.

• Service location to attract customers and urban and accessible to customer.

• More of skilled labours, rates may not be flexible.

• Inventory can not be built.

Classification of production systems.

• Continuous production or flow production system.

1. Mass production or flow production system.

2. Process production.• Intermittent production system.1. Job production2. Batch production.

Mass or flow production • Raw materials gets processed through a standard set of processes

and sequences to produce continuous stream of products.• Standardization is the key feature.• Facilities are standardised as inputs goes through a series of

successive connected operations.• Variety of products manufactured but in big volume. Plant lay out

is arranged according to the sequence of operation needed for manufacturing particular product.

• For another product lay out has to be changed ( flow prod.system).

• Continuous manufacturing anticipating demand. • Demand may not be uniform through out the year.• Examples like steel, fertilizer, soft drink.

Mass production advantage.

• Material handling because of possible application of conveyers, belts etc.,

• Automation is possible.• Highly skilled machine operators are not

required.• Raw material inventories are low, as they are

used at steady rates and in large quantities.

Mass production Disadvantage.

• Because of big labour force reqd. labour problems may creep up.

• High investments on machines and equipments.• Cost of changing the sequence of operation is

high.• Only limited range of products are produced.• Like automobiles, sugar refining, electrical

goods.

Process production

• Continuous production takes place her also, but the raw materials go through a few major processes maintained as separate departments.

• Finished product of one process is raw material to next process.

• Large industries like petroleum refinery, heavy chemical industries employ this system

• One raw material is transformed into several products ( by- products) at different stages of operation.

Process production advantage and disadvantages.

• Cost of production per unit is lowest in process production.

• Skilled managers are sufficient. No need for skilled labour.• Higher job security because of stable and continuous

demand of product.• DISADVANTAGES like High investment .• Changes in product variety cannot be easily

incorporated. • Application : Chemical, petroleum, milk processing

industries.

Intermittent production system.

• Wide variety of prducts and sizes are manufactured .• System should be flexible to handle the production of

different product designs with different input characteristics.• Standardized materials, machines or processes can not be

used.• Manufacturing is done in lots, more often based on

customer orders.• Components are first made and later combined differently.

Like watch, textile, shoe making.• Finished product heterogenous but with standardized

options assembled by producers.

Intermittent production system types1. JOB PRODUCTION./ Jobbing.• Goods are produced according to the orders from the

customer. • Demand not assured. • Each job and process set up is unique and some time may not

get repeat order.• Eg., Heavy, Special purpose machines (SPMs), aeroplanes ,

boilersetc., • Advantages like relatively low capital investment and

flexibility in production is high. • Disadvantages like Skilled workers essential, cost of

production per unit is highest. Low job security. • Applications like bridges, flyovers, packing machines,

Automatic material handling systems for different companies.

Intermittent production system type 22. Batch production.• Manufacturing done batches or in lots either on

basis of customer orders or with a hope of continuous demand of product.

• Medium scale production takes place and appears some where between mass and job production.

• Machines are available for next batches as soon as production of one batch is completed.

• Eg., pharma , textile, machine tool. Etc.,• Extension of job production , here multiple units

are produced.

Comparision of different production system.

Continuous

• Standardised raw materials, processes, sequences,

• Product variety is low• High volume production• Production on anticipation of

customer demand.• Cost of production per unit is

low.• Equipment is special purpose.• Capital intense operation.

Intermittent

• Normally not standardised.

• High.• Low volume• As per customer demand.• High.

• General purpose.• Labour intense operation.

Comparision of different production system 2.

FLOW PRODUCTION• Emphasis on product.• Line or product lay out

preferred.• Automation is possible.• Less floor space.• Not easy to change

product line.

PROCESS PRODUCTION.• On process.• Process or function lay

out is preferred.• Difficult.• Large floor space.• Accommodates change

in product line.

Productivity.• Achieve greater output from same set of

inputs we say efficiency is increased.• Efficiency is used referring to machines.• Productivity is used while addressing

production systems. • Both are analogous.• Efficiency (Output/input <1), • Productivity ( Output/input >1) for profitable

organisation.

Productivity defenition.• Ratio of output to input.• Measure of input required to produce given output.• Efforts to produce more and more with less and less

consumption of resources. • Or balance between all factors of production that

will give the maximum output with smallest effort.• It is a mental attitude, and constant urge to find

better, cheaper, easier and safer means of doing a job, manufacturing product or providing a service.

When is productivity increased.• Increase in production with out increase in inputs.• Same production is achieved with decrease in inputs.• Rate of increase in output is more when compared to rate of

increase in inputs. • Simple ratio may not sufficient , as in ratio both has to be in

same units.• Outputs are different quantities like profit earned, customer

satisfaction, social improvement, ecolgical upgradation etc., • Inputs like money, manpower, materials, machinary land,

building etc., • Productivity = value of output/ cost of inputs. • Improve the productivity to increase the profitability, and be

more competitive in the market.

Factors affecting productivity.

1. Controllable or interal factors.

• Product• Plant and equipment• Technology• Materials• Work methods and

processes.• Energy resources and

power supply• Human factors• Management style.

2. Uncontrollable or external factors.

• Changes in economic situation.

• Social changes and attitudes.

• Natural resources.• Government policy.• Infrastructure.

Techniques to improve productivity.1. Technology based like• Use of CAD, CAM,• Use of robotics• Modern maintenance techniques, optimum use of energy• Flexible manfacturing systems.2. Employee based.• Giving financial and non financial incentives to individuals or

group level.• Extending promotion to employees whenever due.• Encourage workers participation in management.• Incorporating concepts like TQM , QC, QIT. • Stressing on personality development programs.• Human engineering practice.

Techniques to improve productivity contd..3. Material based.• Materials requirement planning(MRP)• Purchase of materials,logistics.• Materials storage and retrieval.• Selection of proper sources and procurement of quality material.• Waste elimination• Material recycling and reuse.4. Process based.• Method studies and work simplification.• Job design, job evaluation, job safety. 5. Product based.• Value analysis and value engineering.• Product diversification• Standardisation and simplification.• Reliability engineering.• Product mix and promotion.

Techniques to improve productivity contd..

6, Management based.• Management style.• Communication practices in organisation.• Work culture.• Motivation and employee welfare.• Promoting group activity.

International dimensions of productivity

• Corporate objectives – priority level from customer, employee, and owner

• Time horizon – long term sustainability.• Production system – emphasis on automated systems using

mechatronics, robotics. Quality is paramount and things happen as scheduled.

• Employment schedule- workers join services for a life long career in same company. Unions constructive towards nation building, politeness and harmony are practised everywhere.

• Materials – Resources are limited. Space is used efficiently while inventories are kept to minimum.

• Financing – more use is made of debt capital and less of equity capital.

• Training – Employees are given training , job rotation, job enlargement , are practiced.

• Worker participation. Via suggestions, feeback, quality circles etc.,

The environment of operations. • Operation deparment transforms inputs to outputs.• In the process operations are affected by its

environment both internal and external. • Internal means the different departments in the

organization with which operation has to interact.• External means forces outside the operation.• Both internal and external environment affects

inputs, transformation process, which in turn affect output.

• Feedback help in controlling factors which affect input and transformation process.

Operational excellence.• Companies which excel in operational management

and statergies are found to be more successful and long lasting.

• Various measures are there to check operational excellence.

1. Quality measures.• Percentage of products which do not need rework.• Costs incurred to improve quality• No. of defective pieces ( parts per million ppm)• Average no. of suggestions from employee. Per

month.

Measures of operational excellence

2. Delivery schedule measures.• Lead time required to procure raw material• Manufacturing lead time and cycle time requried.• No. of times delivery schedules not met. 3. Cost measures.• Average time spent by inventory before usage.• Cost of manufacturing as percentage of selling price.• Cost of ordering and procuring raw materials.• Cost reduction due to import substitution.

Measures of operational excellence contd..

4. Flexibility measures.• range of products offered w.r.t colour, size, capacity etc.,• Time taken from design stage to customer delivery stage.• Process and manufacturing flexibility.5. Other measures.• Direct labour to indirect labour ratio.• Average training time per employee.• Process rate to sale rate ratio. ALL MEASURES MAY NOT DIRECTLY YIELD FINANCIAL NUMBERS

BUT WILL IMPROVE COMPETITIVE ADVANTAGE IN OPERATIONAL EXCELLENCE , A LONG TERM VIEW.

World class manufacturing practices. WCM.

1 . Just In time manufacturing (JIT)• System operated with low level of inventory of all kinds like

raw materials, work in process and finished goods.• Products are assembled just before sale.• Sub assemblies made just before they are assembled.• Components fabricated before subassembly.• Raw materials procured before components fab.• Ultimate aim is to bring inventory cost to zero.• Help cost efficient production, through delivery of necessary

items, in right quantity in right time, right place using minimum facilities.

WCM Contd…22 TQM• Total quality management• Aims at organising the entire work force into small improvement groups• Creating mindset for continious improvement3. TPM Total productive maintenance.• Aims at removal of maintenance department • Production takes care of maintenance also.• Gives sense of ownership, awareness of problems with wrong usage of

equipment. 4. Employee involvement• Don’t follow rigid rules, believe in involving employees in mulitple

responsibilites. • Production repsonsible for maintenance, scheduling, planning of

production tasks, quality checks etc.,

WCM contd.. 35. Simplicity – hall mark of any organisation how ever big it may be.

Some of the managerial techniques by japanese companies.• A. Kanban systems - kind of production systems, which

operates based on the information written on the cards called kanban.

with drawl kanban type(WK): contains how much raw material / semi finished components should any machine with draw from a previous machine for processing.

Production order kanban (POK): contains information on how much raw materials / semi finished components that any machine should produce to be consumed by succeeding process.

o Ensures non surplus productiono Brings immediately any problem present in the system to the

notice of the concerned person for corrective action.

WCM Contd.. 4• 2. POKA YOKE. Japanense term meaning mistake proofing. Aims at fool proof operations, no rejections or rework. It is a bunch of small devices like jigs, fixtures, gadgets, warning signals

etc., used to detect or prevent defects from occuring in the first place. Hence expenditure on rework or inspection less. Minimize wastage of energy, time and resources and bring more profits.• 3. KAIZEN Philosophical concept Means to change to good. Calls for continuous improvement in all facets of business so as to

eliminate all kinds of wastes. Forms basis and lies behind many japanese management concepts such as

total quality control, quality circles, labour relation etc., which made Japanese companies ahead in international manufacturing segment.

Decision making situtations

• Whether to order raw materials in bulk or smaller quantities.

• To produce for demand or for future also.• Whether to go for new machine or repair the

exisiting one.• Full time skilled labour or employ on need.• Volume production with low price or low

volume , high price item products to be made.

Classifying decision making1. Strategic decisions• Decisions about products, processes, facilities. Are of

strategic importance and have long term significance.• People from various departments put together study

business opportunities, arrive at the decision on long term goals.

• Examples like deciding on whether to launch a new product development project. on the design for a production process for a new product. how to allocate scarce materials, utilities, capacity and

personnel among new and existing business oppurtunities On what new facilities are needed and the where to locate.

Operating decision

• Issues concerned with planning production to meet customers demands for products and services.

• Operation has to ensure that orders generated by marketing are delivered to the satisfaction of customers at reasonable costs.

• Decision on How much finished goods inventory to carry out for each

product. What products and how much to include in next months

production schedule. How many temprovary employees to hire next week. Decide on how much to purchase from vendor next month.

Control decision• Concerned with variety of problems in organisation like workers

performance, product quality, break down etc., • Operation managers to take control decision engage in planning,

analysing and controlling activities for improvement on the areas.• Decides on What to do about departments failure to meet the planned labor

cost target. Developing labor cost standards for a revised product design that

is about to be produced. New quality acceptance criteria should be for a product that has

had a change in design. Deciding on Preventive maintenance schedules.