571210 – OPERATIONS MANAGEMENT<br />FACILITAOR- T.PRAVEEN KUMAR<br />
REFERENCE<br />Pannerselvam R, Production and operations management, Prentice Hall of India,<br />Norman Gaither and Grego...
EXPECTATIONYOUR SIDE<br />
INTERNAL MARKS<br />INTERNAL / MODEL EXAMS-    10 MARKS<br />ATTENDANCE <br />	/ CLASS PARTICIPATION	     -	5 MARKS<br />A...
OPERATIONS MANAGEMENT = SQUARE OF TQM<br />
PRODUCTION AND OPERATIONSMANAGEMENT (POM)AN INTRODUCTION<br />
OVERVIEW<br />Introduction<br />Historical Milestones in POM<br />Factors Affecting POM Today<br />Different Ways of Study...
INTRODUCTION<br />In the growing global competition the productivity is the key for the survival of business organization....
…contd<br />This should be done from starting stage of product development.<br />Implementation of proper quality control ...
INTRODUCTION<br />Production and operations management (POM) is the management of an organization’s production system.<br ...
HISTORICAL MILESTONES IN POM<br />The Industrial Revolution<br />Post-Civil War Period<br />Scientific Management<br />Hum...
THE INDUSTRIAL REVOLUTION<br />The industrial revolution developed in England in the 1700s.<br />The steam engine, invente...
THE INDUSTRIAL REVOLUTION<br />The industrial revolution spread from England to other European countries and to the United...
POST-CIVIL WAR PERIOD<br />During the post-Civil War period great expansion of production capacity occurred.<br />By post-...
SCIENTIFIC MANAGEMENT<br />Frederick Taylor is known as the father of scientific management.  His shop system employed the...
SCIENTIFIC MANAGEMENT<br />In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management...
HUMAN RELATIONSAND BEHAVIORALISM<br />In the 1927-1932 period, researchers in the Hawthorne Studies realized that human fa...
OPERATIONS RESEARCH<br />During World War II, enormous quantities of resources (personnel, supplies, equipment, …) had to ...
THE SERVICE REVOLUTION<br />The creation of services organizations accelerated sharply after World War II.<br />Today, mor...
Next 3 months you are going to see about<br />PRODUCTION/OPERATION MANAGEMENT<br />TYPES OF PRODUCTION SYSTEM<br />DIFFERE...
DIFFERENT WAYS TO STUDY POM<br />Production as a System<br />Production as an Organization Function<br />Decision Making i...
ORGANIZATIONAL MODEL<br />Finance<br />HRM<br />Sales<br />POM<br />QA<br />  Marketing<br />MIS<br />Engineering<br /> Ac...
PRODUCTION SYSTEM<br />An organization consists of mainly four functional subsystem<br />Marketing<br />Production<br />Fi...
MARKETING FUNCTION<br />Aims to promote its products among customers which helps it to obtain substantial sales order.<br ...
…..cont<br />The resources are raw material, equipment, labor, working capital.<br />The production function needs to orga...
FINANCE FUNCTION<br />This function provides authorization and control to all other subsystems to utilize the money in mor...
ORGANIZATION CHART-MAJOR ELEMENTS<br />
PRODUCTION AS AN ORGANIZATION FUNCTION<br /> companies cannot compete using marketing, finance, accounting, and engineerin...
PRODUCTION MANAGEMENT<br />	Production /operations management is the process which combines and transforms various resourc...
ANOTHER VIEW<br />	Production/operation management function is the part of the organization which is concerned with the tr...
IN GENERAL<br />The set of interrelated management activities which are involved in manufacturing certain products is call...
DECISIONS AT DIFFERENT LEVEL OF MANAGEMENT<br />In the process of managing various subsystem of the organization, executiv...
STRATEGIC DECISIONS<br />These decisions are of strategic importance and have long-term significance for the organization....
OPERATING DECISIONS<br />These decisions are necessary if the ongoing production of goods and services is to satisfy marke...
CONTROL DECISIONS<br />These decisions concern the day-to-day activities of workers, quality of products and services, pro...
MARKETING - FUNCTION<br />Strategic Decisions<br />Consideration of new markets and marketing strategies<br />The informat...
…contd<br />Tactical Decisions<br />Comparison of overall performance against a marketing plan.<br />Concerns data on cust...
PRODUCTION FUNCTION<br />Strategic Decision<br />Alternative manufacturing approaches and alternative approaches to automa...
FINANCE FUNCTION<br />Strategic Decision<br />Long run strategy to ensure adequate financing .<br />Long run tax accountin...
PERSONNEL /HR FUNCTION<br />Strategic Decision<br />Strategies  for recruitment, salary, training and benefits.<br />Analy...
SYSTEM CONCEPT OF PRODUCTION<br />System<br />It is a collection of interrelated  entities.<br />	Operations management is...
PRODUCTION AS A SYSTEM<br />Production System<br />Conversion<br />Subsystem<br />Inputs<br />Outputs<br />Control<br />Su...
FEED BACK INFORMATION<br />Environment<br />Internal/external<br />
INPUTS OF A PRODUCTION SYSTEM<br />External<br />Legal, Economic, Social, Technological<br />Market<br />Competition, Cust...
CONVERSION SUBSYSTEM<br />Physical  (Manufacturing)<br />Locational Services  (Transportation)<br />Exchange Services  (Re...
OUTPUTS OF A PRODUCTION SYSTEM<br />Direct<br />Products<br />Services<br />Indirect<br />Waste<br />Pollution<br />Techno...
WHAT CONTROLS THE OPERATIONS SYSTEM?<br />Information about the outputs, the conversions, and the inputs is feed back to m...
TYPES OF PRODUCTION SYSTEM<br />Production system<br />The production system of a company mainly  uses facilities, equipme...
CLASSIFICATION OF PRODUCTION SYSTEM<br />
FLOW SHOP<br />FLOW SHOP<br />It is a conversion process in which successive units of output undergo the same sequence of ...
CHARACTERISTICS<br />Standardization of product and process sequence.<br />Large volume of products<br />Lower in process ...
ADVANTAGES<br />Standardization of product and process sequence<br />Unit cost is lower due to high volume of production.<...
JOB SHOP <br />This is a conversion process in which units of different types of products follow different sequences throu...
CHARACTERISTICS<br />High variety of products and low volume.<br />Use of general purpose machines and facilities.<br />La...
ADVANTAGES<br />Variety of products can be produced.<br />Operators will become more skilled and competent.<br />DISADVANT...
BATCH MANUFACTURING<br />A batch manufacturing facility produces some intermediate varieties of products with intermediate...
CHARACTERISTICS<br />Shorter production run<br />Plant and machinery are flexible.<br />Manufacturing lead time and cost a...
ADVANTAGES<br />Better utilization of plant and machinery<br />Promotes functional specialization<br />Lower investment in...
PROJECT<br />A project refers to the process of creating a complex kind of product or service with set of well defined tas...
PRODUCTIVITY<br />Productivity = output/input   always p>1<br />Several strategies for improving the productivity<br />Inc...
OPERATION STRATEGY<br />The process of making decisions about their future in this complex and changing environment is cal...
STRATEGIC MANAGEMENT PHASES<br />Strategy management has two phases<br />Strategy formulation<br />Defining the organizati...
HIERARCHY OF STRATEGY<br />Mission<br />Objective<br />Corporate strategies<br />Business unit strategies<br />Functional ...
CORPORATE STRATEGIES<br />Stable growth strategy<br />Growth strategy<br />Concentration on a single product/service<br />...
…contd<br />Retrenchment strategies<br />Turnaround.<br />Disinvestment strategy.<br />Liquidation strategy.<br />Combinat...
GENERIC COMPETITIVE (BUSINESS) STARETGIES<br />Over all leadership strategy<br />Differentiation strategy<br />Focus strat...
FUNCTIONAL STRATEGIES<br />Marketing strategy<br />Financial strategy<br />Personnel/HR strategy<br />Production/manufactu...
PRODUCTION/MANUFACTURING STRATEGIES<br />Production /operation function of an organization aims to provide product/service...
…contd<br />The selected strategies alternatives are translated into operations objectives. Some of the objectives are<br ...
WORLD CLASS MANUFACTURING<br />The following attributes of the world class manufacturing are aimed to fulfill the customer...
ENTRY-LEVEL JOBS IN POM<br />Purchasing planner/buyer<br />Production (or operations) supervisor<br />Production (or opera...
TODAY'S FACTORS AFFECTING POM<br />Global Competition<br /> Quality, Customer Service, and Cost Challenges<br />Computers ...
SCOPE OF POM<br />
Adding value by improving Operations  Management.<br />It can help improve its competitiveness and long term profitability...
SCOPE OF POM<br />Production of goods is the fabrication of the physical object through the judicious use of the resources...
Production is a subset of operations management. It’s scope is a part of operations management. It focuses on:<br />Produc...
Scope cont….<br />Resource Management<br />PPC<br />Job Design<br />Maintenance<br />Quality Management<br />Work Measurem...
Functions of POM<br />Production is a process or a set of procedures to be executed in order to convert or transform a set...
Relationship between POM and other Functions<br />Marketing<br />Customer satisfaction<br />Developing and maintaining mar...
R&D<br />Idea generation<br />Product formulation<br />Test facilities<br />Prototype Development<br />Facilities for deve...
OPERATIONS STRATEGIES<br />IN A GLOBAL ECONOMY<br />
OVERVIEW<br />Introduction<br />Today’s Global Business Conditions<br />Operations Strategy<br />Forming Operations Strate...
INTRODUCTION<br />Operational effectiveness is the ability to perform similar operations activities better than competitor...
FACTORS AFFECTING TODAY’S GLOBAL BUSINESS CONDITIONS<br />????????????????????????????????????????<br />?<br />
REALITY OF GLOBAL COMPETITION<br />Changing nature of world business<br />International companies<br />Strategic alliances...
changing nature of world business<br />The Indian gross domestic product (GDP) growing at 8% making significant presence i...
International companies<br />International companies are those whose scope of operations spans the globe as they buy, prod...
International companies<br />World’s Largest Corporations<br />1.  General Motors		US<br />2.  Wal-Mart Stores		US<br />3....
Strategic Alliances<br />Strategic alliances are joint ventures among international companies to exploit global business o...
Strategic Alliances<br />Japanese companies have long practiced keiretsu, the linking of companies into industrial groups....
Production Sharing<br />Production sharing means that a product might be designed and financed in one country, its materia...
Pros and Cons of Globalization<br />Pros (Pluses)<br />Productivity grows more quickly (living standards can go up faster)...
Pros and Cons of Globalization<br />Cons (Minuses)<br />Most displaced workers find new jobs that pay less<br />Workers fa...
International Financial Conditions<br />International financial conditions are complex due to:<br />inflation<br />fluctua...
International Financial Conditions<br />Companies must be ready to move quickly to shift strategies as world financial con...
QUALITY SERVICE  AND COST CHALLENGES<br />Quality<br />The goal of adequate quality must be replaced with the objective of...
QUALITY SERVICE  AND COST CHALLENGES<br />Customer Service<br />Companies must quickly develop innovative products and res...
QUALITY  SERVICE  AND COST CHALLENGES<br />Cost<br />There is continuing pressure to reduce direct costs (of producing and...
QUALITY SERVICE  AND COST CHALLENGES<br />Cost<br />Cost-cutting measures being used include:<br />Moving production to lo...
ADVANCED TECHNOLOGIES<br />The use of automation is one of the most far-reaching developments to affect manufacturing and ...
CONTINUED GROWTH OF SERVICE SECTOR <br />A robust service sector helps support the manufacturing sector.<br />There is muc...
SCARCITY OF OPERATIONS RESOURCES<br />Raw materials like titanium, nickel, coal, natural gas, water, and petroleum product...
SOCIAL-RESPONSIBILITY ISSUES<br />Corporate attitudes are evolving from doing what companies have a legal right to do, to ...
SOCIAL-RESPONSIBILITY ISSUES<br />Environmental Impact<br />Product-Safety Impact<br />Employee Impact<br />
Social-Responsibility Issues<br />Environmental Impact<br />	Concerns about the global environment include:<br />Landfill ...
Social-Responsibility Issues<br />Environmental Impact<br />There is a need for standardizing government regulations of th...
Social-Responsibility Issues<br />Product-Safety Impact<br />	Harm to people or animals that results from poor product des...
Social-Responsibility Issues<br />Employee Impact<br />	Employee benefits and policies include:<br />Safety and health pro...
Social-Responsibility Issues<br />Employee Impact<br />	Employee benefits and policies impact long-term profitability due ...
DEVELOPING OPERATIONS STRATEGY<br />Corporate Mission<br />Assessment<br />of Global<br />Business<br />Conditions<br />Di...
Corporate Mission<br />A corporate mission is a set of long-range goals and including statements about:<br />the kind of b...
Business Strategy<br />Business strategy is a long-range game plan of an organization and provides a road map of how to ac...
Competitive Priorities<br />Low Production Costs<br />Definition<br />		Unit cost (labor, material, and overhead) of each ...
Competitive Priorities<br />Delivery Performance<br />Definition<br />a) Fast delivery	b) On-time delivery<br />Some Ways ...
Competitive Priorities<br />High-Quality Products/Services<br /> Definition<br />		Customers’ perception of degree of exce...
Competitive Priorities<br />Customer Service and Flexibility<br /> Definition<br />		Ability to quickly change production ...
OPERATIONS STRATEGY<br />Operations strategy is a long-range game plan for the production of a company’s products/services...
ELEMENTS OF OPERATIONS STRATEGY<br />Positioning the production system<br />Product/service plans  <br />Outsourcing plans...
POSITIONING THE PRODUCTION SYSTEM<br />Select the type of product design<br />Standard<br />Custom<br />Select the type of...
Product/Service Plans<br />As a product is designed, all the detailed<br />characteristics of the product are established....
Stages in a Product’s Life Cycle<br />Introduction- Sales begin, production and marketing are developing, profits are nega...
Outsourcing Plans<br />Outsourcing refers to hiring out or subcontracting some of the work that a company needs to do.<br ...
Outsourcing Plans<br />A company might outsource any of the following manufacturing related functions:<br />Designing the ...
Outsourcing Plans<br />Many companies even outsource some service functions such as:<br />Payroll<br />Billing<br />Order ...
Process and Technology Plans<br />An essential part of operations strategy is the determination of how products/services w...
Strategic Allocation of Resources<br />For most companies, the vast majority of the firm’s resources are used in productio...
Facility Plans<br />How to provide the long-range capacity to produce the firm’s products/services is a critical strategic...
Competitive Priorities for Services<br />The competitive priorities listed earlier for manufacturers apply to service firm...
Positioning Strategies for Services<br />Type of Service Design<br />Standard or custom products  <br />Amount of customer...
Positioning Strategies for Services<br />EXAMPLE:  MCDONALD’S<br />Highly standardized service design<br />Low amount of c...
Forming Operations Strategies<br />Support the product plans and competitive priorities defined in the business strategy.<...
Evolution of Positioning Strategies<br />The characteristics of production systems tend to evolve as products move through...
Evolution of Positioning Strategies<br />Life<br />Stage<br />Intro.<br />Early<br />Growth<br />Late<br />Growth<br />Mat...
Linking Operations and Marketing Strategies<br />Operations Strategy<br />Product-focused<br />Make-to-stock<br />Standard...
Linking Operations and Marketing Strategies<br />Operations Strategy<br />Product-focused<br />Make-to-order<br />Standard...
Linking Operations and Marketing Strategies<br />Operations Strategy<br />Process-focused<br />Make-to-stock<br />Custom p...
Linking Operations and Marketing Strategies<br />Operations Strategy<br />Process-focused<br />Make-to-order<br />Custom p...
No Single Best Strategy<br />Start-up and Small Manufacturers<br />Usually prefer positioning strategies with:<br />Custom...
No Single Best Strategy<br />Start-up and Small Services<br />Successfully compete with large corporations by:<br />Carvin...
No Single Best Strategy<br />Technology-Intensive Business<br />Production systems must be capable of producing new produc...
Wrap-Up: World-Class Practice<br />Put customers first<br />Get new products/services to market faster<br />Are high quali...
World-Class Practice<br />Think more globally in purchasing and selling<br />Quickly adopt and develop new technologies<br...
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Unit 1

  1. 1. 571210 – OPERATIONS MANAGEMENT<br />FACILITAOR- T.PRAVEEN KUMAR<br />
  2. 2. REFERENCE<br />Pannerselvam R, Production and operations management, Prentice Hall of India,<br />Norman Gaither and Gregory Fraizer, Operations Management, south western cengage learning 2002.<br />Business line <br />Journals of production management.<br />
  3. 3. EXPECTATIONYOUR SIDE<br />
  4. 4. INTERNAL MARKS<br />INTERNAL / MODEL EXAMS- 10 MARKS<br />ATTENDANCE <br /> / CLASS PARTICIPATION - 5 MARKS<br />ASSIGNMENTS - 5 MARKS<br />DON’T BEG FOR MARKS <br />
  5. 5. OPERATIONS MANAGEMENT = SQUARE OF TQM<br />
  6. 6. PRODUCTION AND OPERATIONSMANAGEMENT (POM)AN INTRODUCTION<br />
  7. 7. OVERVIEW<br />Introduction<br />Historical Milestones in POM<br />Factors Affecting POM Today<br />Different Ways of Studying POM<br />Wrap-Up: What World-Class Producers Do<br />
  8. 8. INTRODUCTION<br />In the growing global competition the productivity is the key for the survival of business organization.<br />Among the different functions in a organization POM is a vital function which does the job of value addition to products /services respectively.<br />Maximize value automatically results in productivity improvement.<br />
  9. 9. …contd<br />This should be done from starting stage of product development.<br />Implementation of proper quality control system, maintenance of equipments and concentrating on various other inter mediate tasks leads to improvement in productivity.<br />
  10. 10. INTRODUCTION<br />Production and operations management (POM) is the management of an organization’s production system.<br />A production system takes inputs and converts them into outputs.<br />The conversion process is the predominant activity of a production system.<br />The primary concern of an operations manager is the activities of the conversion process.<br />
  11. 11. HISTORICAL MILESTONES IN POM<br />The Industrial Revolution<br />Post-Civil War Period<br />Scientific Management<br />Human Relations and Behaviorism<br />Operations Research<br />The Service Revolution<br />
  12. 12. THE INDUSTRIAL REVOLUTION<br />The industrial revolution developed in England in the 1700s.<br />The steam engine, invented by James Watt in 1764, largely replaced human and water power for factories.<br />Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor.<br />Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.<br />
  13. 13. THE INDUSTRIAL REVOLUTION<br />The industrial revolution spread from England to other European countries and to the United Sates.<br />In 1790 an American, Eli Whitney, developed the concept of interchangeable parts.<br />The first great industry in the U.S. was the textile industry.<br />In the 1800s the development of the gasoline engine and electricity further advanced the revolution.<br />By the mid-1800s, the old cottage system of production had been replaced by the factory system.<br />
  14. 14. POST-CIVIL WAR PERIOD<br />During the post-Civil War period great expansion of production capacity occurred.<br />By post-Civil War the following developments set the stage for the great production explosion of the 20th century:<br />increased capital and production capacity<br />the expanded urban workforce<br />New markets<br />an effective national transportation system<br />
  15. 15. SCIENTIFIC MANAGEMENT<br />Frederick Taylor is known as the father of scientific management. His shop system employed these steps:<br />Each worker’s skill, strength, and learning ability were determined.<br />Stopwatch studies were conducted to precisely set standard output per worker on each task.<br />Material specifications, work methods, and routing sequences were used to organize the shop.<br />Supervisors were carefully selected and trained.<br />Incentive pay systems were initiated.<br />
  16. 16. SCIENTIFIC MANAGEMENT<br />In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management:<br />standardized product designs<br />mass production<br />low manufacturing costs<br />mechanized assembly lines<br />specialization of labor<br />interchangeable parts<br />
  17. 17. HUMAN RELATIONSAND BEHAVIORALISM<br />In the 1927-1932 period, researchers in the Hawthorne Studies realized that human factors were affecting production.<br />Researchers and managers were recognizing that psychological and sociological factors affected production.<br />From the work of behavior lists came a gradual change in the way managers thought about and treated workers.<br />
  18. 18. OPERATIONS RESEARCH<br />During World War II, enormous quantities of resources (personnel, supplies, equipment, …) had to be deployed.<br />Military operations research (OR) teams were formed to deal with the complexity of the deployment.<br />After the war, operations researchers found their way back to universities, industry, government, and consulting firms.<br />OR helps operations managers make decisions when problems are complex and wrong decisions are costly.<br />
  19. 19. THE SERVICE REVOLUTION<br />The creation of services organizations accelerated sharply after World War II.<br />Today, more than two-thirds of the workforce is employed in services.<br />About two-thirds of world GDP is from services.<br />There is a huge trade surplus in services.<br />Investment per office worker now exceeds the investment per factory worker.<br />Thus there is a growing need for service operations management.<br />
  20. 20. Next 3 months you are going to see about<br />PRODUCTION/OPERATION MANAGEMENT<br />TYPES OF PRODUCTION SYSTEM<br />DIFFERENT PRODUCTIVITY IMPROVEMENT STRATEGIES<br />NEW PRODUCT DEVELOPMENT<br />PROCESS PLANNING<br />CAPACITY PLANNING<br />MRP<br />TQM TOOLS etc………………………………<br />
  21. 21. DIFFERENT WAYS TO STUDY POM<br />Production as a System<br />Production as an Organization Function<br />Decision Making in POM<br />
  22. 22. ORGANIZATIONAL MODEL<br />Finance<br />HRM<br />Sales<br />POM<br />QA<br /> Marketing<br />MIS<br />Engineering<br /> Accounting<br />
  23. 23. PRODUCTION SYSTEM<br />An organization consists of mainly four functional subsystem<br />Marketing<br />Production<br />Finance <br />Personnel<br />
  24. 24. MARKETING FUNCTION<br />Aims to promote its products among customers which helps it to obtain substantial sales order.<br />PRODUCTION FUNCTION<br />This function will managing the physical resources for the production of an item/ provision of services.<br />The available facilities need to be managed effectively in order to meet the current market requirements. <br />
  25. 25. …..cont<br />The resources are raw material, equipment, labor, working capital.<br />The production function needs to organize its resources according to the predetermined production plans.<br />
  26. 26. FINANCE FUNCTION<br />This function provides authorization and control to all other subsystems to utilize the money in more effectively through a well designed mechanism.<br />PERSONNEL FUNCTION/HR<br />This is a supporting function which plans and provides manpower to all other function of the organization.<br />It involves in recruitment, training and development, performance measures of the manpower.<br />All functions of the organization are interwoven by many linkages for their effective functioning.<br />
  27. 27. ORGANIZATION CHART-MAJOR ELEMENTS<br />
  28. 28. PRODUCTION AS AN ORGANIZATION FUNCTION<br /> companies cannot compete using marketing, finance, accounting, and engineering alone.<br />We focus on POM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside.<br />To succeed, a firm must have a strong operations function teaming with the other organization functions.<br />
  29. 29. PRODUCTION MANAGEMENT<br /> Production /operations management is the process which combines and transforms various resources used in the production/operation sub system of the organization into value added products/ services in a controlled manner as per the policies of the organization<br />
  30. 30. ANOTHER VIEW<br /> Production/operation management function is the part of the organization which is concerned with the transformation of a range of inputs into the required output(product/service) having the requisite quality level.<br />
  31. 31. IN GENERAL<br />The set of interrelated management activities which are involved in manufacturing certain products is called as production management.<br />If the above concept is extended to services management then the corresponding set of management activities is called as operations management.<br />So in general the concept of manufacturing products/providing services is called production/operations management<br />
  32. 32. DECISIONS AT DIFFERENT LEVEL OF MANAGEMENT<br />In the process of managing various subsystem of the organization, executives at different levels of the organization need to take several management.<br />
  33. 33. STRATEGIC DECISIONS<br />These decisions are of strategic importance and have long-term significance for the organization.<br />Examples include deciding:<br />the design for a new product’s production process<br />where to locate a new factory<br />whether to launch a new-product development plan<br />
  34. 34. OPERATING DECISIONS<br />These decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits.<br />Examples include deciding:<br />how much finished-goods inventory to carry<br />the amount of overtime to use next week<br />the details for purchasing raw material next month<br />
  35. 35. CONTROL DECISIONS<br />These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.<br />Examples include deciding:<br />labor cost standards for a new product<br />frequency of preventive maintenance<br />new quality control acceptance criteria<br />
  36. 36.
  37. 37. MARKETING - FUNCTION<br />Strategic Decisions<br />Consideration of new markets and marketing strategies<br />The information requirements for strategic planning<br />Include customer analysis<br />Competitor analysis<br />Consumer survey<br />Income projection<br />Demographic projection<br />Technology projection<br />
  38. 38. …contd<br />Tactical Decisions<br />Comparison of overall performance against a marketing plan.<br />Concerns data on customers, competitors and its products and sales force requirements.<br />Operational decisions<br />Hiring and firing of sales force<br />Day to day scheduling of sales and promotions efforts and periodic analysis of sales.<br />
  39. 39. PRODUCTION FUNCTION<br />Strategic Decision<br />Alternative manufacturing approaches and alternative approaches to automation.<br />Tactical Decision<br />Reports which compare overall planned/standard performance<br />Operational Decision<br />Reports comparing actual performance to production schedule<br />
  40. 40. FINANCE FUNCTION<br />Strategic Decision<br />Long run strategy to ensure adequate financing .<br />Long run tax accounting policy to minimize the impact of taxes.<br />Planning of systems for budgeting<br />Tactical Decision<br />Information on budgeted versus actual cost of financial resources.<br />Cost of processing accounting data. <br />Operational Decision<br />Daily error and exception reports.<br />Records of processing delays reports of unprocessed transaction etc.<br />
  41. 41. PERSONNEL /HR FUNCTION<br />Strategic Decision<br />Strategies for recruitment, salary, training and benefits.<br />Analysis of shift pattern of employment, education and wage rate etc.<br />Tactical Decision<br />Variance analysis on hiring and firing.<br />Cost of recruitment<br />Cost of training, salary paid, distribution of wage rates.<br />Operational decision<br />Decision on hiring, training, termination changing pay rates and issuing benefits.<br />
  42. 42. SYSTEM CONCEPT OF PRODUCTION<br />System<br />It is a collection of interrelated entities.<br /> Operations management is the management of transformation systems which convert input into goods/services<br />Input <br />materials, labors, equipments, capital<br />The types of inputs used vary from one industry to another<br />
  43. 43. PRODUCTION AS A SYSTEM<br />Production System<br />Conversion<br />Subsystem<br />Inputs<br />Outputs<br />Control<br />Subsystem<br />
  44. 44. FEED BACK INFORMATION<br />Environment<br />Internal/external<br />
  45. 45. INPUTS OF A PRODUCTION SYSTEM<br />External<br />Legal, Economic, Social, Technological<br />Market<br />Competition, Customer Desires, Product Info.<br />Primary Resources<br />Materials, Personnel, Capital, Utilities<br />
  46. 46. CONVERSION SUBSYSTEM<br />Physical (Manufacturing)<br />Locational Services (Transportation)<br />Exchange Services (Retailing)<br />Storage Services (Warehousing)<br />Other Private Services (Insurance)<br />Government Services (Federal, State, Local)<br />
  47. 47. OUTPUTS OF A PRODUCTION SYSTEM<br />Direct<br />Products<br />Services<br />Indirect<br />Waste<br />Pollution<br />Technological Advances<br />
  48. 48.
  49. 49. WHAT CONTROLS THE OPERATIONS SYSTEM?<br />Information about the outputs, the conversions, and the inputs is feed back to management.<br />This information is matched with management’s expectations<br />When there is a difference, management must take corrective action to maintain control of the system<br />
  50. 50. TYPES OF PRODUCTION SYSTEM<br />Production system<br />The production system of a company mainly uses facilities, equipments and operating methods (production system) to produce goods.<br />The requirement of production system depend on the type of product that company offers and strategy that the company follows<br />
  51. 51. CLASSIFICATION OF PRODUCTION SYSTEM<br />
  52. 52. FLOW SHOP<br />FLOW SHOP<br />It is a conversion process in which successive units of output undergo the same sequence of operations using specialized equipments usually positioned along a production line.<br />Example<br />Auto assembly<br />assembly of electronic goods.<br />Extreme form of flow shop is sometimes treated as a continuous process<br />
  53. 53.
  54. 54. CHARACTERISTICS<br />Standardization of product and process sequence.<br />Large volume of products<br />Lower in process inventory<br />Perfectly balanced production line.<br />Production planning and control is easy.<br />Material handling can be completely automatic. <br />
  55. 55. ADVANTAGES<br />Standardization of product and process sequence<br />Unit cost is lower due to high volume of production.<br />Person with limited skills can be used on the production line<br />Higher capacity utilization<br />DISADVANTAGES<br />Very high investment.<br />Product differentiated is limited.<br />
  56. 56. JOB SHOP <br />This is a conversion process in which units of different types of products follow different sequences through different shops.<br />This type of system is more flexibility<br />This system results into more set up time more in process inventory, complex scheduling, varying quality.<br />Example -????????????????<br />
  57. 57. CHARACTERISTICS<br />High variety of products and low volume.<br />Use of general purpose machines and facilities.<br />Large inventory of materials, tools, parts.<br />Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre.<br />
  58. 58. ADVANTAGES<br />Variety of products can be produced.<br />Operators will become more skilled and competent.<br />DISADVANTAGES<br />Higher cost due to frequent set up changes.<br />Production planning is complicated.<br />Large space requirements<br />
  59. 59. BATCH MANUFACTURING<br />A batch manufacturing facility produces some intermediate varieties of products with intermediate volumes.<br />The volume of any single product may not be sufficient to justify the use of dedicated set of equipments for its production.<br />
  60. 60. CHARACTERISTICS<br />Shorter production run<br />Plant and machinery are flexible.<br />Manufacturing lead time and cost are lower as compared to job order production.<br />
  61. 61. ADVANTAGES<br />Better utilization of plant and machinery<br />Promotes functional specialization<br />Lower investment in plant and machinery<br />DISADVANTAGES<br />Material handling is complex because of irregular and longer flows<br />Production planning and control is complex<br />Higher set up costs due to frequent changes in set up<br />
  62. 62. PROJECT<br />A project refers to the process of creating a complex kind of product or service with set of well defined tasks in terms of resources required and time phasing.<br />
  63. 63. PRODUCTIVITY<br />Productivity = output/input always p>1<br />Several strategies for improving the productivity<br />Increased output for the same input<br />Decreased input for the same output<br />Proportionate increase in the output is more than the proportionate increase in the input.<br />Proportionate decrease in the input is more than the proportionate decrease in the output.<br />Increase in the output with decrease in the input<br />
  64. 64. OPERATION STRATEGY<br />The process of making decisions about their future in this complex and changing environment is called strategic management.<br />Changing environment  Environment of organization is becoming more complex because of the increased rate of PESTEL<br />Strategic management involves making decision with regard to organizations mission and objectives, it also determine the organizations most effective utilization of its resources.<br />
  65. 65. STRATEGIC MANAGEMENT PHASES<br />Strategy management has two phases<br />Strategy formulation<br />Defining the organization philosophy and mission.<br />Establish long and short range objectives.<br />And choosing the strategy in order achieve the objective.<br />Strategy implementation<br />It concerned with aligning the organizational structure , system and processes.<br />
  66. 66. HIERARCHY OF STRATEGY<br />Mission<br />Objective<br />Corporate strategies<br />Business unit strategies<br />Functional strategies<br />
  67. 67. CORPORATE STRATEGIES<br />Stable growth strategy<br />Growth strategy<br />Concentration on a single product/service<br />Concentric diversification<br />Vertical diversification<br />Horizontal diversification<br />Conglomerate diversification<br />End game strategy<br />
  68. 68. …contd<br />Retrenchment strategies<br />Turnaround.<br />Disinvestment strategy.<br />Liquidation strategy.<br />Combination strategies<br />Simultaneous strategy.<br />Sequential strategy.<br />
  69. 69. GENERIC COMPETITIVE (BUSINESS) STARETGIES<br />Over all leadership strategy<br />Differentiation strategy<br />Focus strategy<br />
  70. 70. FUNCTIONAL STRATEGIES<br />Marketing strategy<br />Financial strategy<br />Personnel/HR strategy<br />Production/manufacturing strategies<br />
  71. 71. PRODUCTION/MANUFACTURING STRATEGIES<br />Production /operation function of an organization aims to provide product/service to its customer by using a combination of following strategies.<br />By timely delivery<br />Flexibility (in meeting customer demands)<br />Quality<br />Cost effectiveness.<br />
  72. 72. …contd<br />The selected strategies alternatives are translated into operations objectives. Some of the objectives are<br />Achieving high efficiency<br />Flexibility in meeting customer demand (in term of product features)<br />Flexibility in production volume to meet changing customers demand.<br />Satisfy customers demand with good quality.<br />Effective in labor relation and manpower cost control.<br />Efficient material utilization and its cost control. <br />Efficient facility utilization and its cost<br />
  73. 73. WORLD CLASS MANUFACTURING<br />The following attributes of the world class manufacturing are aimed to fulfill the customer demands.<br />Products with high quality<br />Products at competitive price<br />Products with several enhanced features<br />Products in a wider variety<br />Products delivered on time<br />
  74. 74. ENTRY-LEVEL JOBS IN POM<br />Purchasing planner/buyer<br />Production (or operations) supervisor<br />Production (or operations) scheduler/controller<br />Production (or operations) analyst<br />Inventory analyst<br />Quality specialist<br />
  75. 75. TODAY'S FACTORS AFFECTING POM<br />Global Competition<br /> Quality, Customer Service, and Cost Challenges<br />Computers and Advanced Production Technology<br />Growth of Service Sector<br />Scarcity of Production Resources<br />Issues of Social Responsibility<br />
  76. 76. SCOPE OF POM<br />
  77. 77. Adding value by improving Operations Management.<br />It can help improve its competitiveness and long term profitability.<br />Intel, FORD, Hewlett Packard.<br />Cost effectiveness?<br />Understanding the fundamental concepts of operations management and being able to use a variety of common decision-making tools and problem solving approaches is key to making better operations decisions.<br />
  78. 78. SCOPE OF POM<br />Production of goods is the fabrication of the physical object through the judicious use of the resources available to the manager.<br />These resources include men, materials, money, methods and machines.<br />Operations management is substituted for Production Management, as many individuals and organizations continue to use the term Production solely to manufacturing activity.<br />Operations management has wider scope, it begins with the idea stage, goes through research and development, manufacturing, purchasing, inspection, quality control and warehousing and ends with customer.<br />
  79. 79. Production is a subset of operations management. It’s scope is a part of operations management. It focuses on:<br />Product Design<br />Forecasting<br />Facility Location<br />Capacity Planning<br />Process Planning<br />Plant Layout<br />
  80. 80. Scope cont….<br />Resource Management<br />PPC<br />Job Design<br />Maintenance<br />Quality Management<br />Work Measurement<br />Purchasing<br />Store Keeping<br />Warehouse Management<br />Inventory control<br />Materials Management<br />Project Management<br />
  81. 81. Functions of POM<br />Production is a process or a set of procedures to be executed in order to convert or transform a set of inputs into pre-determined set of outputs in accordance with the objectives assigned to the production system.<br />Planning<br />Organizing<br />Staffing<br />Directing<br />Controlling<br />
  82. 82. Relationship between POM and other Functions<br />Marketing<br />Customer satisfaction<br />Developing and maintaining market<br />Aggregate Production Planning<br />Sales forecast<br />Production Scheduling<br />ASP<br />Product improvement etc.<br />Finance<br />Economic analysis of investment proposals<br />Production pricing<br />Budgeting and timing of funds<br />Working capital calculations<br />Provision and release of funds<br />Capital Budgeting<br />
  83. 83. R&D<br />Idea generation<br />Product formulation<br />Test facilities<br />Prototype Development<br />Facilities for development activities<br />Test marketing<br />Product Design<br />Maintenance<br />Industrial Engineering<br />Materials<br />Personnel<br />Accounting and Costing<br />
  84. 84. OPERATIONS STRATEGIES<br />IN A GLOBAL ECONOMY<br />
  85. 85. OVERVIEW<br />Introduction<br />Today’s Global Business Conditions<br />Operations Strategy<br />Forming Operations Strategies<br />
  86. 86. INTRODUCTION<br />Operational effectiveness is the ability to perform similar operations activities better than competitors.<br />It is very difficult for a company to compete successfully in the long run based just on operational effectiveness.<br />A firm must also determine how operational effectiveness can be used to achieve a sustainable competitive advantage.<br />An effective competitive strategy is critical. <br />
  87. 87. FACTORS AFFECTING TODAY’S GLOBAL BUSINESS CONDITIONS<br />????????????????????????????????????????<br />?<br />
  88. 88. REALITY OF GLOBAL COMPETITION<br />Changing nature of world business<br />International companies<br />Strategic alliances and production sharing<br />Fluctuation of international financial conditions<br />
  89. 89. changing nature of world business<br />The Indian gross domestic product (GDP) growing at 8% making significant presence in the world.<br />Companies all over the globe are aggressively exporting their products/services to the different countries<br />Many Foreign companies are targeting Indian markets to shore up profits.<br />The global economy that interconnects the economies of all nations has been termed the global village.<br />One of the most important new markets are BRIC.<br />
  90. 90. International companies<br />International companies are those whose scope of operations spans the globe as they buy, produce, and sell.<br />International firms search out opportunities for profits relatively unencumbered by national boundaries.<br />Operations managers must coordinate geographically dispersed operations.<br />
  91. 91. International companies<br />World’s Largest Corporations<br />1. General Motors US<br />2. Wal-Mart Stores US<br />3. Exxon Mobil US<br />4. Ford Motor US<br />5. DaimlerChrysler Germany<br />6. Mitsui Japan<br />7. Mitsubishi Japan<br />8. Toyota Japan<br />9. General Electric US<br />10. Itochu Japan<br />
  92. 92. Strategic Alliances<br />Strategic alliances are joint ventures among international companies to exploit global business opportunities.<br />Alliances are often motivated by<br />Product or production technology<br />Market access<br />Production capability<br />Pooling of capital<br />
  93. 93. Strategic Alliances<br />Japanese companies have long practiced keiretsu, the linking of companies into industrial groups.<br />A financial keiretsu links companies together with cross-holding of shares, sales and purchases within the group, and consultation.<br />A production keiretsu is a web of interlocking relationships between a big manufacturer (Toyota) and its suppliers.<br />
  94. 94. Production Sharing<br />Production sharing means that a product might be designed and financed in one country, its materials produced in other countries, assembled in another country, and sold in yet other countries.<br />The country that is the highest-quality, lowest-cost producer for a particular activity would perform that portion of the production of the product.<br />
  95. 95. Pros and Cons of Globalization<br />Pros (Pluses)<br />Productivity grows more quickly (living standards can go up faster)<br />Global competition and cheap imports keep a lid on prices (inflation less likely to derail economic growth)<br />Open economy spurs innovation (with fresh ideas from abroad)<br />Export jobs often pay more than other jobs<br />India has more access to foreign investment (keeps interest rates low)<br />
  96. 96. Pros and Cons of Globalization<br />Cons (Minuses)<br />Most displaced workers find new jobs that pay less<br />Workers face pay-cuts demands from employers<br />Service and white-collar jobs are increasingly vulnerable<br />employees lose their comparative advantage when companies build advanced factories abroad<br />
  97. 97. International Financial Conditions<br />International financial conditions are complex due to:<br />inflation<br />fluctuating currency exchange rates<br />turbulent interest rates<br />volatility of international stock markets<br />huge national debts of some countries<br />enormous trade imbalances between countries<br />
  98. 98. International Financial Conditions<br />Companies must be ready to move quickly to shift strategies as world financial conditions change.<br />Opportunities are usually available to reduce risk<br />Building smaller, more flexible factories<br />Using foreign suppliers for materials, parts, or products<br />Carefully planning and forecasting so that changing conditions can be anticipated<br />
  99. 99. QUALITY SERVICE AND COST CHALLENGES<br />Quality<br />The goal of adequate quality must be replaced with the objective of perfect product and service quality.<br />The entire corporate culture must be redirected and committed to the ideal of perfect quality.<br />All employees must be empowered to act.<br />A commitment to continuous improvement has to be organization-wide.<br />
  100. 100. QUALITY SERVICE AND COST CHALLENGES<br />Customer Service<br />Companies must quickly develop innovative products and respond quickly<br />Organizational structures must be made more horizontal to quickly accommodate change.<br />Multidiscipline teams must have decision-making authority, responding better to the marketplace.<br />Large, unwieldy companies are spinning off whole business units making them autonomous businesses that can compete with small, aggressive competitors.<br />
  101. 101. QUALITY SERVICE AND COST CHALLENGES<br />Cost<br />There is continuing pressure to reduce direct costs (of producing and selling) and overhead costs.<br />It cost the US automakers $1,500 more per auto for labor in 1980 than it cost the Japanese auto-makers. By the 1990s the difference was almost zero.<br />Giant retailers (like Wal-Mart) squeezed weaker competitors out of the market, giving the retailers the leverage to force their suppliers to streamline operations and reduce costs/prices.<br />
  102. 102. QUALITY SERVICE AND COST CHALLENGES<br />Cost<br />Cost-cutting measures being used include:<br />Moving production to low-labor-cost countries<br />Negotiating lower labor rates with unions and workers<br />Automating processes to reduce the amount of labor needed, particularly processes that are labor intensive.<br />
  103. 103. ADVANCED TECHNOLOGIES<br />The use of automation is one of the most far-reaching developments to affect manufacturing and services in the past century.<br />The initial cost of these assets is high.<br />The benefits go far beyond a reduction in labor costs.<br />Increased product/service quality<br />Reduced scrap and material costs<br />Faster responses to customer needs<br />Faster introduction of new products and services<br />
  104. 104. CONTINUED GROWTH OF SERVICE SECTOR <br />A robust service sector helps support the manufacturing sector.<br />There is much opportunity for quality improvement in service firms all round the globe.<br />Many operations managers are being employed in services.<br />Planning, analyzing, and controlling approaches from manufacturing are being adapted to service systems.<br />The service sector, like the manufacturing sector, must streamline and improve operations if it is to survive.<br />
  105. 105. SCARCITY OF OPERATIONS RESOURCES<br />Raw materials like titanium, nickel, coal, natural gas, water, and petroleum products are periodically unavailable or in short supply.<br />A shortage of any necessary input to a conversion subsystem, including skilled personnel, can be a challenge for an operations manager.<br />An important issue in the formation of business strategy is how to allocate scarce resources among business opportunities.<br />
  106. 106. SOCIAL-RESPONSIBILITY ISSUES<br />Corporate attitudes are evolving from doing what companies have a legal right to do, to doing what is right.<br />Factors influencing this evolution include:<br />Consumer attitude -- Consumers are expressing their likes/dislikes by such means as stockholder meetings, liability suits, and buying preferences.<br />Regulation – The EPA, OSHA (Occupational Safety and Health Administration Act), Clean Air Act, and Family Leave Act place constraints on businesses.<br />Self-interests -- Companies realize that profits will be greater if they act responsibly.<br />
  107. 107. SOCIAL-RESPONSIBILITY ISSUES<br />Environmental Impact<br />Product-Safety Impact<br />Employee Impact<br />
  108. 108. Social-Responsibility Issues<br />Environmental Impact<br /> Concerns about the global environment include:<br />Landfill waste reduction<br />Recycling<br />Energy conservation<br />Chemical spills<br />Acid rain<br />Radioactive waste disposal<br />… and more<br />
  109. 109. Social-Responsibility Issues<br />Environmental Impact<br />There is a need for standardizing government regulations of the environment.<br />Otherwise, companies will gravitate to the less-regulated countries.<br />The International Organization for Standardization has developed a set of environmental guidelines called ISO 14000.<br />
  110. 110. Social-Responsibility Issues<br />Product-Safety Impact<br /> Harm to people or animals that results from poor product design can:<br />Damage a company’s reputation<br />Require a large expense to remedy<br />Cause governments to impose more regulations<br />
  111. 111. Social-Responsibility Issues<br />Employee Impact<br /> Employee benefits and policies include:<br />Safety and health programs<br />Fair hiring and promotion practices<br />Day-care<br />Family leave<br />Health care<br />Retirement benefits<br />Educational assistance<br />… and more<br />
  112. 112. Social-Responsibility Issues<br />Employee Impact<br /> Employee benefits and policies impact long-term profitability due to their effect on:<br />Employee morale and productivity<br />Recruitment and retention of employees<br />Demand for a company’s products<br />Cost of defending against lawsuits and boycotts<br />
  113. 113. DEVELOPING OPERATIONS STRATEGY<br />Corporate Mission<br />Assessment<br />of Global<br />Business<br />Conditions<br />Distinctive<br />Competencies<br />or<br />Weaknesses<br />Business Strategy<br />Product/Service Plans<br />Competitive Priorities<br />Operations Strategy<br />
  114. 114. Corporate Mission<br />A corporate mission is a set of long-range goals and including statements about:<br />the kind of business the company wants to be in<br />who its customers are<br />its basic beliefs about business<br />its goals of survival, growth, and profitability<br />
  115. 115. Business Strategy<br />Business strategy is a long-range game plan of an organization and provides a road map of how to achieve the corporate mission.<br />Inputs to the business strategy are<br />Assessment of global business conditions - social, economic, political, technological, competitive<br />Distinctive competencies or weaknesses - workers, sales force, R&D, technology, management<br />
  116. 116. Competitive Priorities<br />Low Production Costs<br />Definition<br /> Unit cost (labor, material, and overhead) of each product/service<br />Some Ways of Creating<br />Redesign of product/service<br />New technology<br />Increase in production rates<br />Reduction of scrap/waste<br />Reduction of inventory<br />
  117. 117. Competitive Priorities<br />Delivery Performance<br />Definition<br />a) Fast delivery b) On-time delivery<br />Some Ways of Creating<br /> a) larger finished-goods inventory<br /> a) faster production rates<br /> a) quicker shipping methods <br /> b) more-realistic promises<br /> b) better control of production of orders<br /> b) better information systems<br />
  118. 118. Competitive Priorities<br />High-Quality Products/Services<br /> Definition<br /> Customers’ perception of degree of excellence exhibited by products/services<br />Some Ways of Creating<br />Improve product/service’s<br />Appearance<br />Performance and function<br />Wear, endurance ability<br />After-sales service<br />
  119. 119. Competitive Priorities<br />Customer Service and Flexibility<br /> Definition<br /> Ability to quickly change production to other products/services. Customer responsiveness.<br />Some Ways of Creating<br />Change in type of processes used<br />Use of advanced technologies<br />Reduction in WIP through lean manufacturing<br />Increase in capacity<br />
  120. 120. OPERATIONS STRATEGY<br />Operations strategy is a long-range game plan for the production of a company’s products/services, and provides a road map for the production function in helping to achieve the business strategy.<br />
  121. 121. ELEMENTS OF OPERATIONS STRATEGY<br />Positioning the production system<br />Product/service plans <br />Outsourcing plans <br />Process and technology plans<br />Strategic allocation of resources<br />Facility plans: capacity, location, and layout<br />
  122. 122. POSITIONING THE PRODUCTION SYSTEM<br />Select the type of product design<br />Standard<br />Custom<br />Select the type of production processing system<br />Product focused<br />Process focused<br />Select the type of finished-goods inventory policy<br />Produce-to-stock<br />Produce-to-order<br />
  123. 123. Product/Service Plans<br />As a product is designed, all the detailed<br />characteristics of the product are established.<br />Each product characteristic directly<br /> affects how the product can be made.<br />How the product is made determines<br /> the design of the production system.<br />
  124. 124. Stages in a Product’s Life Cycle<br />Introduction- Sales begin, production and marketing are developing, profits are negative.<br />Growth - sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin.<br />Maturity - production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak.<br />Decline - declining sales and profit; product might be dropped or replaced.<br />
  125. 125. Outsourcing Plans<br />Outsourcing refers to hiring out or subcontracting some of the work that a company needs to do.<br />This strategy is being used more and more as companies strive to operate more efficiently.<br />Outsourcing has many advantages and disadvantages. <br />Companies try to determine the best level of out-sourcing to achieve their operations & business goals.<br />More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.<br />
  126. 126. Outsourcing Plans<br />A company might outsource any of the following manufacturing related functions:<br />Designing the product<br />Purchasing the basic raw materials<br />Processing the subcomponents, subassemblies, major assemblies, and finished product<br />Distributing the product<br />
  127. 127. Outsourcing Plans<br />Many companies even outsource some service functions such as:<br />Payroll<br />Billing<br />Order processing<br />Developing/maintaining a website<br />Employee recruitment<br />Facility maintenance<br />
  128. 128. Process and Technology Plans<br />An essential part of operations strategy is the determination of how products/services will be produced.<br />The range of technologies available to produce products/services is great and is continually changing.<br />
  129. 129. Strategic Allocation of Resources<br />For most companies, the vast majority of the firm’s resources are used in production/operations.<br />Some or all of these resources are limited.<br />The resources must be allocated to products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.<br />
  130. 130. Facility Plans<br />How to provide the long-range capacity to produce the firm’s products/services is a critical strategic decision.<br />The location of a new facility may need to be decided.<br />The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.<br />
  131. 131. Competitive Priorities for Services<br />The competitive priorities listed earlier for manufacturers apply to service firms as well<br />Low production costs<br />Fast and on-time delivery<br />High-quality products/services<br />Customer service and flexibility<br />Providing all the priorities simultaneously to customers is seldom possible.<br />
  132. 132. Positioning Strategies for Services<br />Type of Service Design<br />Standard or custom products <br />Amount of customer contact<br />Mix of physical goods and intangible services<br />Type of Production Process<br />Quasi manufacturing<br />Customer-as-participant<br />Customer-as-product<br />
  133. 133. Positioning Strategies for Services<br />EXAMPLE: MCDONALD’S<br />Highly standardized service design<br />Low amount of customer contact<br />Physical goods dominating intangible services<br />Quasi-manufacturing approach to back-room production process<br />
  134. 134. Forming Operations Strategies<br />Support the product plans and competitive priorities defined in the business strategy.<br />Adjust to the evolving positioning strategies.<br />Link to the marketing strategies.<br />Look at alternative operations strategies.<br />
  135. 135. Evolution of Positioning Strategies<br />The characteristics of production systems tend to evolve as products move through their product life cycles.<br />Operations strategies must include plan for modifying production systems to a changing set of competitive priorities as products mature.<br />The capital and production technology required to support these changes must be provided.<br />
  136. 136. Evolution of Positioning Strategies<br />Life<br />Stage<br />Intro.<br />Early<br />Growth<br />Late<br />Growth<br />Maturity<br />Product<br />Custom<br />Slightly<br />Standard<br />Standard<br />Highly<br />Standard<br />Volume<br />Very<br />Low<br />Low<br />High<br />Very<br />High<br />Focus<br />Process<br />Process<br />Product<br />Product<br />Fin.Gds.<br />To-Order<br />To-Order<br />To-Stock<br />To-Stock<br />Batch<br />Size<br />Very<br />Small<br />Small<br />Large<br />Very<br />Large<br />
  137. 137. Linking Operations and Marketing Strategies<br />Operations Strategy<br />Product-focused<br />Make-to-stock<br />Standardized products<br />High volume<br />Marketing Strategy<br />Low production cost<br />Fast delivery of products<br />Quality<br />Example: TV sets<br />
  138. 138. Linking Operations and Marketing Strategies<br />Operations Strategy<br />Product-focused<br />Make-to-order<br />Standardized products<br />Low volume<br />Marketing Strategy<br />Low production cost<br />Keeping delivery promises<br />Quality<br />Example: School buses<br />
  139. 139. Linking Operations and Marketing Strategies<br />Operations Strategy<br />Process-focused<br />Make-to-stock<br />Custom products<br />High volume<br />Marketing Strategy<br />Flexibility<br />Quality<br />Fast delivery of products<br />Example: Medical instruments<br />
  140. 140. Linking Operations and Marketing Strategies<br />Operations Strategy<br />Process-focused<br />Make-to-order<br />Custom products<br />Low volume<br />Marketing Strategy<br />Keeping delivery promises<br />Quality<br />Flexibility<br />Example: Large supercomputers<br />
  141. 141. No Single Best Strategy<br />Start-up and Small Manufacturers<br />Usually prefer positioning strategies with:<br />Custom products<br />Process-focused production<br />Produce-to-order policies<br />These systems are more flexible and require less<br />capital.<br />
  142. 142. No Single Best Strategy<br />Start-up and Small Services<br />Successfully compete with large corporations by:<br />Carving out a specialty niche<br />Emphasizing close, personal customer service<br />Developing a loyal customer base<br />
  143. 143. No Single Best Strategy<br />Technology-Intensive Business<br />Production systems must be capable of producing new products and services in high volume soon after introduction<br />Such companies must have two key strengths:<br />Highly capable technical people<br />Sufficient capital<br />
  144. 144. Wrap-Up: World-Class Practice<br />Put customers first<br />Get new products/services to market faster<br />Are high quality producers<br />Have high labor productivity & low production costs<br />Carry little excess inventory<br />. . . more<br />
  145. 145. World-Class Practice<br />Think more globally in purchasing and selling<br />Quickly adopt and develop new technologies<br />Trim organizations to be lean and flexible<br />Are less resistant to strategic alliances/joint ventures<br />Consider relevant social issues when setting strategies<br />

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