Operations Strategy• What is a strategy• Corporate strategy vs operational• General, tactical, short term strats• Methodoly of building Op Strats• Dynamic markets-lined to Op Strats• Product/service profiling• Op Strats Implementation
Production & Operations Management • What’s operations? • What is production? • What are the prerequisites • What are the functions (Departments) required for production • Line Function/Service function? Objectives of production?? Strategic operation mgt- Operational strategies
Manufacturing and Service• What is the difference? Say a dental clinic and Wheat production?• Tangible output and intangible output- Like a deed a performance, an effort, like Healthcare,Hotels,Training,consulting etc• Operations management is applicable for both Manufacturing and service• Combination of Mftg and Service organisations? Give Examples?
Manufacturing ServicesWhat is manufacturing Service?Is it different from Service or Operations/productions?Is it service or operations?-Hospitals, contract forming, doctors, hotels
Manufacturing Service..Eg• Rice mill• Contract Farming• Automation-Tractors• Extraction of pulses• Ploughing• Forestation??-Lease-25 to 99 years• BOT( Build,Operate, transfer)
Definition• OPERATIONS MANAGEMENT is the effective Management of the Conversion process which converts Land, Labour, Capital(resources) and Management inputs into desired output, goods or services• OPERATION MANAGER’s job is to manage the process of converting inputs to Desired outputs. The definition of OM is then the Management of the conversion process.
Importance of Strategies• Strategies are made based on Basic choices of primary Basis for competition amongst the following Four Charecteristics:• Quality• Cost Efficiency• Dependability• Flexibility(Response, innovation)
Startegies for Operations• Importance of strategies: All Operation Managers in different fields face common challenges- to Improve operations and to do with Planning, organising and controlling the operation system and the conversion process (Boston University study)• Startegies-Where is the Industry now/? Where will it be in future? What are the exisiting potential markets? What Gaps in Market does exist? Do we have the strengths in filling the gaps?
• Operational Strategy means adding Value to customersThree Stages of Strategies• Starategic Planning- Long term• Tactical Planning- Medium term• Op Planning & control- Short Term
Steps to Strategic mgt• Scan-Ext and int environment• Formulation-Corporate strategy;Business unit(SBU) startegy; Functional strategy• Strategy implementation- Procedures;programs;Budgets• Review and Control-Plan vs Actuals- midcourse corrections-Alternative strategies?
Operational Strategies• Operations Management Decisions-• Strategic (long-term) decisions• Well the relevant points over here are-• How will we make the product?• Where do we locate the facility or facilities?• How much capacity do we need?• When should we add more capacity?• Should we invest? when?
Tactical (intermediate-term) decisions• How many workers do we need?• When do we need them?• Should we work overtime or put on a second shift?• When should we have material delivered?• Should we carry out 100% inspection?• Should we have a finished goods inventory?• Outsourcing?
Short term strategies(Functional)• What jobs do we work on today or this week?• Who do we assign to what tasks?• What jobs have priority?• Leave replacement?• Overtime for the day?• Sudden M/c breakdown/Bundh?
Op strategy-link to Corporate Strategy• An operations strategy can be viewed as part of a planning process that coordinates operational goals with those of the larger organizational Goals(Corporate,Vision,Mission) Since the goals of the larger organization change over time, the operations strategy must be designed to anticipate future needs.
Strategy focus- process• An operations strategy involves decisions that relate to:• the design of a process; and,• the infrastructure needed to support the process.• Process design includes: – 1) the selection of appropriate technology; – 2) sizing the process over time; – 3) the role of inventory in the process; and, – 4) locating the process. –
Strategy wrt Infrastructure• Infrastructure decisions involve:• 1) the logic associated with the planning and control systems;• 2) quality assurance and control approaches;• 3) work payment structures; and,• 4) the organization of the operations function.
Methodology of Op Strats• Checking The Markets• Out come of a Market debate- Marketing meets, product launch, Road shows• Linked to market-Trends/Analysis• Linked to seasons• Analysis-Why product sells?(Focus on aspect after analysis)• Order winners, Order qualifiers
Dynamic markets/General Strats• Technology strategies• Time to Market• Issues in NPI/NPD• Strategic nature of process(Restrictions)• Business Implications of process choice• Hybrid processExternal, Internal, Environmental, Legal, Safety considerations-Input to General strategies
Product/Service profiling• Company based/plant based profile• Extension of product to Service to build USPs• Downsizing• Capacity Decisions
Op Strategy Implementation• Evaluating Various Trade offs, Alternate• Focused Manufacturing• Product focus/process focus• Make or Buy Merits/Demerits• Value chain approach• JIT, Lean• CAD/Cam, CIM• Delivering Value to customer
Strategy Concept• Order qualifiers- Charecteristics of a firm or products to be considered as a source of purchase• Order Winners- Charecteristics of a firm that distinguish it from its competition so that it is selected as a source of purchase
Focus on core Capabilities• While making Strategies-Core strengths..• These Core capabilities allow the firm to establish its competitive priorities in the market• These are skill sets in operations that differentiate itself from competitors• Integration of Manufacturing and service “Create Value to customers” CAC concept-Customer activity cycle
Criteria for Buy• High investment reqd to make.• Longer time for creation of new facility• Cost considerations-costlier inside• No skill sets available-longer gestation• Better top line/bottom line with existing facility• Customized earlier by customer• Approvals against standards already.• Deviation from core strengths.• Better demands on flexibility on cost delivery• Lower inventory/working capital costsApproach: Cost analysis, economic analysis, break even
Packaging as a Op strategy• Design• Statutory markings• Ease of handling and Usage• Reheat/Repack• Health & safety+ Food safety & standards Authority reqts,• Transportation• Recyclable?• Automated/semiautomatic- Cost,Health,shelflife,sealing(N2, Vaccum)
Aspects of OP Strategies• Inventory control• Quality Control• Production schedule/control• Productivity/op cost control• Constructing control systems• Implementing and operating control systems• Modifying policies and designs
Strategic Sourcing• Difference b/w Strategic sourcing and Normal Sourcing- Strategic function is Dynamic decision making based on inputs- more inputs and info-better decision making• Long term, Medium Term and short term• Long term-policies, cost down, make or buy decisions etc.- Done on annualised, and or 2 to 3years basis
Long term, mid and short term• Midterm strats- Qtrly, half yearly, even monthly,-linked to Annual strats• Short term- Daily, weekly, within a month, keeps changing depending on dynamic situations- cash purchase, alternate transport, anticipate strikes bundh etc, Keep updated news on a daily basis, more input info required, more dynamic to meet short term targets etc..
Objectives of sourcing mgt• Profit maximization• Maximization of Customer service• Technology innovations to overcome resistance to growth and competition• Good employer employee relations• Meet social objectives
Policies and Procedures• Policies to be in line with Vision and Mission of company• Supplier friendly• Provide for improving relationship• To keep users and Suppliers happy• Procedures- Systematic way-transactions, Negotiations, P.O reviews, Vendor rating, Receipts, Inspection, Handling rejections, CAPAs, Selection of vendors, completion of records…
Soucing Mgt-Main Objectives • The five R s(material, Qty, Place, cost, time) • Continuity of supplies • Reducing overall cost of buying-use scientific tools and techniques • Establish Buyer-supplier relationship(partner) • Maintain ethical practices/standards • Effective control of Inventory-smooth cash flow
Sourcing/Purchase Function • Selection of suppliers • Analysis of costs/bid/tenders • Price negotiations-Structure of cost..?- Invoice+transportation+inspection+ordering costs • Purchase order process • Follow up- communications- schedule/ECOs,modifications,stoppages,insp ection arrangements • IQC follow up-storing • Post buying activities/Master BOMs/MIS generation
Purchase order Review• P.O/Contract!rate contract, Work orders• Conditions of contract• FOB,CIF,FOR,DDP, DDU, taxation structure, Payment terms, delivery date, breach/cancellation, damages, Claims,Inspection terms, Acceptance criteria, Vendor rating, Amendments, Samples, Forms for transit….
Sourcing Process• Selection of Suppliers• Analyzing Bids, Enquiries float process• Price Negotiations• Budgeting and Master creation• Issuance of PO-What is needed? Terms?• Follow up Actions• Cost Analysis and Market study• Price catalogs information library
Selection of Suppliers• Financial Capability• Manufacturing Capability/Capacity• Total Value of Business• Service Facility• Business reputation and other customers• Production processes and Specifications to which manufactured• Rating-Quality, Delivery, Ethics, promptness, Competitive bids• Sustenance capacity-Scale up capability
Critical Success Factors• Selection• Old supplier or new• Long term association• Price negotiations/ Transparency• Systems and processes from either side• Consolidation?• Logistics improvement• Avoid/reduce premium cost
Objectives, Scope, Responsibility, Limitations• Centralized Buying- Advantages – Develops specialized Knowledge – Better performance – Diverts influence and domination of other depts lead to greater profitability – Rate contracts can be handled easily Disadvantages- - Slower process for distributed production units - Local buying increases - No flexibility for design/development and cause delays
Limitations/Challenges for Smooth• Resource function• Support from other depts for evaluation, Quality Impr etc• Cash Flow/Supplier satisfaction/Advance payments• Supplier payments in time• No proper credits from supplier• Establish relationship-till such time constrained conditions• Strikes/Holidays? Weather conditions, floods, communication breakdowns/Hurricanes??• Price limitations• Last minute rush?? By departments• Closures of trading agencies, suppliers• Tier 3/4, buying from unknown sources• One time requirements/Small quantum requirements
SCM/Sourcing/purchase is an Emerging Profession• Important function• Intelligence is required• Market knowledge• Cost consciousness• Business Acumen• Knowledge of Technology & updates• Ability to get along with people• Negotiating skills• Analytical skills• Project management knowledge• Lean Management skills
Stores and Inventory Mgt• Storage devices/methods• Part no-codification• Material handling• What’s inventory and why manage?• Production inventory, MRO(maintenance,repair&Operating supplies), In process inventory,FG Inventory, In transit• VMI ? Inventory liability?
Codification• Why codification/classification• Grouping and clear gradings/sub classifications• Levels in Product file• Avoids duplicate stocks• Help standardisation and substitute• Reduction of varieties and sizes• Faster retrieval/Aggregate planning• Proper accounting of issues & inventory control• Accuracy in commn and better communication with vendors• Easy Computerisation/parts search, MRP/ERP
Various MEANS of inventory control• Fixed order Quantity(MOL)• Fixed interval system• Two Bin system• Optional replenishment• MRP- monthly/qtrly• ABC Analysis• Forecasting based on Trends• JIT, Kanban, Pull System• Safety stock/Buffer stock incl VMI
Role of IT in SCM• EDI network-Vendor, customer, Branch office, Distributors, Transportation, Retailer, Govt agencies etc,• ERP• E- procurement• E-Commerce-Online mktg, e-auctions, e- bid, online servicing, on line inventory status etc- Go Global !• Support systems-RFID, Barcode, Smartcard, GPS, Condition monitoring…
Safety Management• Safety policy• Safe work procedures (Precautions/care), storage/handling• Safety Training, Group Meetings, first aid trg• Accident/incident reporting/analysis-Also Near Miss accidents logging/analysis• In house safety rules/regulations/guide for Sub contractors, service providers, safety week, PPEs, Dos/Donts-posters• Safety promotion, Facilitation of proper tools/equipment• Safety Audit/inspection• Maintenance regime• Hazard analysis/control, mitigation• Occupational health/safety procedures/programs• Emergency preparedness,& Documentation and control