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Operation management summary of presentation



Representative slides of the presentation made during the session on Operation Management for Goldman Sachs 10k WE Development Program, bangalore on 1st Mar, 2012. Its background paper is available at ...

Representative slides of the presentation made during the session on Operation Management for Goldman Sachs 10k WE Development Program, bangalore on 1st Mar, 2012. Its background paper is available at http://www.cvmark.com/blog/?p=457.



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Operation management summary of presentation Presentation Transcript

  • 1. Operation ManagementRepresentative Slides of Presentation made for Goldman Sach ISB AIMS 10k WE Development Program, 1Mar2012, Bangalore 1
  • 2. Business Excellence• Every business has an Objective• With time, a business must reach closer to its Objective• Every business sets its Goals on an ongoing basis to measure its progress towards Objective. For Entrepreneurs: What is the Objective of your business? How do you Measure progress (Goal)? 2
  • 3. Business Strategy• While there would be several opportunities and options to pursue, resources of the organization would be limited.• For a sustainable business, the company must have a unique value proposition, (other things remaining the same).• Business strategy – provides intent and exercises topmost decision for the organization – it foresees the business over a longer horizon. – uses internal and external factors and makes a choice on available options. • Offerings, Technology, Product,/ Service customer segment, geography, resources • Low cost, High Variety, High Quality, Fast Response, High Availability, Innovativeness For Entrepreneurs: What do you offer ? Name Product or Service. What is the Unique Value Proposition of your business? Who are your customers ? How do you create Value ? 3
  • 4. Definition• Operations – Management of Value Creation Process – A systematic approach to transform input into useful revenue generating output 4
  • 5. Building Blocks of Operations Innovation Suppliers and Customer End Core Process Partners Operation SupportReference: Operation Management, Mahadevan 5
  • 6. Operation Strategy• What situation we want to be – To deliver as per overall strategy• What is it ? The Choice made from the available Options for Operations• Input – Product or Service – Type, variety, geography, customer segment• Options Exercised – Process Design – Supply Chain – Technology – Capacity 6
  • 7. Operation Management• An Objective – To deliver product or service – Under certain Design Constraints • Products, technology, supply chain, geography, Capacity – Under certain boundary conditions • Quality, Safety, Health, Environment, Cost, Regulations, Value system For Entrepreneurs: What are the Boundary Conditions of your Operations 7
  • 8. Operation Management FunctionsDesign Issue Operational Control IssueProduct / Service Design ForecastingProcess Design Production Planning and ControlQuality Management Supply Chain ManagementLocation and Layout of facilities Maintenance ManagementCapacity Planning Continuous Improvement of OperationsReference: Operation Management, Mahadevan 8
  • 9. Elements of Operations 9
  • 10. Conversion Process• Factors Affecting Process Design – Volume, Variety – Flow: • Continuous For Entrepreneurs: Draw the Value Creation Process • Intermittent Is your process Volume driven or • Mixed Flow Variety driven – Layout• Group of activities organized in a way – Flow Chart
  • 11. Conversion Process FG Raw Blending Compression Coating Packing WarehouseMaterial 11 Manufacturing of TabletsRequire Design Analysis Coding Testing Deployment ments 11 Software development
  • 12. Product/ Service• Development Process – Concept – Design – Development – Operation For Entrepreneurs: Write 3 proposed improvements in your product or services. 12
  • 13. Capacity• The rate of throughput, #s per unit time• Measurement – Capacity: Throughput – Process Time – Cycle Time – Lead Time For Entrepreneurs: What is design capacity of your process ? What is the rough utilization ? 13
  • 14. Supply Chain Management• Chain of Activities in creating and delivering value• Flow of Raw Material, Components, Service – Inbound, In house , Outbound For Entrepreneurs: Who are your key partners?. Draw your supply Chain. 14
  • 15. Supply Chain Management RM RegionalWarehouse n:1 Plant Warehouse 1:n 1:n Distributors 1:n Retailers Warehouse Consumer Goods Inspec RetailSuppliers n:1 Warehouse 1:n 1:n Consumer tion Outlet Pizza Delivery For Entrepreneurs: Who are your key partners?. Draw your supply Chain. 15
  • 16. Supply Chain: Performance• Availability• Reliability• Responsiveness• Flexibility• Cost• Asset For Entrepreneurs: What is your supply chain designed for ? 16
  • 17. Location• Factor Advantage• Distance• Regulatory & Policy Issues• Infrastructure• Cost Structure For Entrepreneurs: Why are you located where you are located? 17
  • 18. Inventory Planning and Control• Work Waiting anywhere is Inventory.• Why Inventory is needed – Customer tolerance time is more than supply / service time – Uncertainty For Entrepreneurs:• Types of Inventory Where are your material or work • Pipeline Inventory waiting ? • Safety Inventory What is the size of your inventory ? • Decoupling Inventory • Cyclic Inventory • Seasonal Inventory 18
  • 19. Planning and Control• Demand Forecasting• Aggregate Planning• Resource Planning• Scheduling and Control• Operation Improvements 19
  • 20. Planning Premise -Response time• Type of Orders – Made to Stock For Entrepreneurs: – Made to orders What are the type of Orders you fulfill? – Assemble to Order What promise do you make to customers on delivery? – Made to Availability What is your peak order season or time. – Time n Material How do you deal with peak or – Project large orders. – SAS 20
  • 21. Quality management• Definitions – Conformance to Specification – Fulfilling Customer Needs – Fitness to Use – Service Levels• Total Quality Management – Organization wide effort – Everyone, everywhere and every time 21
  • 22. Maintenance• Infrastructure – Machines Measure: – People OEE: Overall Resource Efficiency – Information System Availability x Efficiency x Quality• Maintenance Options – Inspection – Preventive Maintenance – Predictive Maintenance – Breakdown Maintenance – Planned Shutdown / overhauls – Equipment replacement 22
  • 23. ProjectManagement 23
  • 24. When do you Need• Capacity Addition• Capacity Improvement• Business Plan• And :Market expansion, Funds Infusion, Sales Expansion, Building Distribution Channels, New Product Development. 24
  • 25. Interdependent Set of Activities Conducted to Deliver an Objective within a Time and Cost Figure Missing For Entrepreneurs: What’s your next project. An improvement work can also be a project. 25
  • 26. Project Scope• Scope• Schedule• Resources Project Resource Time For Entrepreneurs: Which of the three elements is the most critical? 26
  • 27. Why 80% projects fail• Estimations are estimations – People are measured on Estimates• Bad Multitasking – Switching Between Tasks• Project Review – Review each activity 27
  • 28. Better Project Management• Separate and Aggregate Uncertainty A B C A B C Buffer• Limit Number of Projects and Tasks• Monitor and Control Uncertainty 28
  • 29. Integrating the Operating System 29
  • 30. Linking Operation Strategy and Operation Management• Business Model – The Logic of Creating, Delivering, Capturing Value of a Business For Entrepreneurs: Identify One Customer Segment Identify significant need Identify the Offer Identify process of value creation Identify key infrastructure Who are your key partners supplier + sales + distribution 30
  • 31. Building the Business Model Create DeliverInfrastructure Value Proposition Customer Segment Value Value For Entrepreneurs: Do you already have your business model visualized? 31
  • 32. Building the Business ModelKey Partners Key Activities Value Proposition Customer Customer 7 Relationship Segment 1 4 2 Key Resources Sales and 6 Distribution 5 Channels 3 32
  • 33. Capitalizing Operations 33
  • 34. Capitalize• Assumption : There are enough sales and we need to manage operations better, i.e. constraint is inside the company.• Otherwise:• The capability built and the excess capacity revealed must be capitalized• At appropriate time, signal must be given to sales to increase orders flow• Sales must use the new found capability and capacity as its key sales pitch and must make effort to increase margins• The sales practice need to change due to new capability of the plant. 34
  • 35. Completing the Business Model Create Deliver Infrastructure Value Proposition Customer Segment Value Value Invest Capture Value Value FinanceReference: The Business Model Generation, Alex Osterwalder 35
  • 36. The Complete Business ModelKey Partners Key Activities Value Proposition Customer Customer 9 Relationship Segment 1 5 2 Key Resources Sales and 7 Distribution 6 Channels 3Key Costs Revenue 8 4 For Entrepreneurs: Fill in Key attributes in each block of the Business Model Canvas 36
  • 37. Operating the System 37
  • 38. Revisit: Fundamentals of business• Objective: To offer and grow the offering with time (Sustainable growth) – The quantum of offering is always with time. • The value must be captured and reinvested – Only then a business is sustainable i.e. the business must make profit, more profit and faster profit. For Entrepreneurs: What is your order to cash time? What is your process lead time? 38
  • 39. Revisit: Fundamentals of business• Prime Goal: Faster # Units/time• Speed / efficiency/ productivity is essence• But efficiency without Effectiveness is unsustainable• Effectiveness is doing what is needed NOW. For Entrepreneurs: What does effectiveness mean in your business. How do you know which work order to process. How do you prioritize work orders. 39
  • 40. Limitations to Flow• There are too many things…• Material Not available, people not availability, absenteeism, no capacity, defective parts, insufficient skills, break downs, holidays, quality problems, no orders, too much of orders, shut down, strike, long testing time, rework, pending for decision, management bandwidth, traffic jam, fllood• hence we need a methodology, that gives us ever flourishing company, without confusion, easily, without exhausting costly resources, without taking risk, without creating imbalance in work- life. 40
  • 41. Laws of OperationsStanding On the Shoulders of Giant: Eli Goldratt• Law-1: – Objective of Operations is to ever improve flow• Law-2 – Do not over produce or over create before time• Law-3 – Have single priority system• Law-4 – Have a focused mechanism to deal with disruptions. 41
  • 42. For Entrepreneurs• How do you prevent doing of work that is not needed.• How do you set priority• How do you identify where to improve ? 42
  • 43. Dealing with Limitations to Flow• Flow Blockers and Disruptions – Systemic • Cause and Effect Analysis • Identification of Root Cause • Building of Solution • Implementation of Solution • Transformation – Assignable • Segregation of Causes • Pareto • Actions 43
  • 44. Practices in World Class Organizations• Principles – TQM : Quality – TPM: Maintenance – Just in Time (JIT) – Extreme Programming – Agile Operations – Employee involvement – Simplicity• Methodology – Lean : Waste Reduction – Six Sigma : Variation – TOC : System Improvement – Extreme / Agile Programming 44
  • 45. Your way to Operation Excellence• Commit to Change• Lead Change• Follow a Focusing Mechanism (Theory of Constraints)• Identify the weakest link• Synchronize your organization around the weakest link• Acquire skills needed to strengthen the weakest link.• Move to the next weakest link 45
  • 46. Summary• Checklist – Defined Business Objective and Goal – Decided Products, Service and Value Proposition – Designed Process, Capacity, Supply Chain – Decided Operational Performance Parameters – Decided Infrastructure – Decided the type of Orders – Designed Planning and Control Process – Decided when to not work – Got a priority system to handle orders – Got a method to identify big problems – Built a process of ongoing improvement 46
  • 47. Summary• Operations Management – Creating and Delivering Value – Designing and Operating System – Improving Performance with time• Sustainability is about sustaining a decisive competitive edge in an ever changing and unpredictable business environment.• Sustainability means Excellence 47
  • 48. Background transcript of presentation• How do you Conduct One Day Session on Operation Management for Entrepreneurs- without wasting their time• at• http://www.cvmark.com/blog/?p=457 48
  • 49. Shridhar Lolla lolla@cvmark.comhttp://www.cvmark.com +91 94480 70081 49