Om ibs-1


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Om ibs-1

  1. 1. What is Operations Management? The direction and control of the processes that transform inputs into products and services 2
  2. 2. Operations Management Operations Management is a set of decisions that the Operations Manager makes these could be strategic & tactical namely: • Strategic • Process • Quality • Capacity, Location and Layout • Operating decision 3
  3. 3. Operations Management as a Function 4
  4. 4. OM Decisions 1. Strategic Choices These decisions affect the company’s future direction. Operations Managers help determine the company’s global strategy and competitive priorities. How the OM’s will best design the process to fit with its competitive priorities. 5
  5. 5. OM Decisions 2. Process The Operations Managers make process decisions about the types of work to be done in-house, the amount of automation to be used, methods to improve current processes and technologies to pursue to become market leaders. 6
  6. 6. OM Decisions 3. Quality Quality issues underlie all processes and work activity. Operations Managers help in establish quality objectives and seek ways to improve the quality of the firms products/services and use various statistical methods to monitor the quality produced by various processes. 7
  7. 7. OM Decisions 4. Capacity, Location and Layout The types of decisions in this category require long term commitments. Operations Managers help to determine the systems capacity, location of new facility including global locations and organizing of the departments physical layout. 8
  8. 8. OM Decisions 5. Operating Decisions These deal with operating the facility after it is built, this requires Operations Managers to help co-ordinate with internal and external supply chain, manage inventory, control output and staffing levels, do resource planning, implement new techniques etc. 9
  9. 9. Manufacturing v/s Services Manufacturing Services Physical Product Intangible product Output can be inventoried Output cannot be inventoried Low customer contact High customer contact Long response time Short response time Regional, national or international markets Local Markets Large facilities Small facilities Capital intensive Labor intensive Quality easily measured Quality not easily measured 10
  10. 10. Operations Strategy a Competitive Weapon • An Organization that wants to succeed in a competitive business needs needs a sound strategy. • A strategy is a broad long term plan conceived in order to achieve business objectives. • Strategies are developed at 3 levels: • Corporate level • Business level • Functional level 11
  11. 11. Operations Strategy a Competitive Weapon Key objective of any business organization is to attract more customers than its competitors and they do that with: • Product/Process Expertise • E.g. Intel Corp using superior chip technology • Quick Delivery – An organization with flexible capacity, an adaptive production process and satisfy customer needs • E.g. 1 hour photo • “Same-day” dry-cleaning 12
  12. 12. Elements of Operations Strategy • Designing the production system. • Product/Service design and development. • Technology selection and process development. • Allocation of resources to strategic alternatives • Facility planning 13
  13. 13. Designing the Production System • Product Design • Customized product design: high level of customization and quantity produced is low. E.g. Rolls Royce, Handmade watches etc. • Standard Product design: Production of limited variety of products but produced in large batches. E.g. Ford Model T, coolers, fan, televisions etc. 14
  14. 14. Designing the Production System • Production System • Product-focused systems: used generally employed in mass production units where there are groups of machines, tools and workers arranged according to tasks. E.g. cars, televisions etc. • Process-focused systems: Designed to support departments that perform a single task like painting or packing . 15
  15. 15. Finished Good Inventory Policy • Produce-to-stock: Products are produced well in advance and are stored in warehouses from where they are dispatched as per customer orders • Produce-to-order: This allows production to start only after the company receives customer orders and halts production until another order is received 16
  16. 16. Product/Service Design and Development The following are the important steps in the development of new products: • Idea Generation • Feasibility Studies • Prototype Design • Prototype Testing • Initial Design of Production Model • Economic Evaluation • Market Testing • Final Design of Production Model 17
  17. 17. Product/Service Life Cycle 18
  18. 18. Product/Service Life Cycle Once Product Design is finalized: • Technology selection and process development: This involves thorough analysis and planning or the production process and facilities • Allocation of resources to strategic alternatives: Minimizing wastage and optimal use of resources • Facility Planning: Set up facility with adequate capacity and proximity to raw materials 19
  19. 19. Developing Operations Strategy 20
  20. 20. Financial and Economic Analysis Productivity = Output --------------------Input Two types of Productivity: • Labor Productivity – Index of output per person or per hour worked • Multifactor Productivity – output provided by more than 1 resource used in input 21
  21. 21. Productivity Calculations Calculate the productivity for the following operations: 1. Three employees process 600 insurance policies in a week. They work 8 hours per day and 5 days per week 2. A team of workers make 400 units of a product, which is valued by its standard cost of $10 each. The accounting department reports that for this job the actual costs are $400 for labor, $1000 for material and $300 for overhead 22
  22. 22. Productivity Calculations Policies Processed ------------------------Employee hours Labor Productivity = Labor Productivity = 600 policies ------------------------- (3 employees)(40hrs/empl oyee) = 5 policies/hour 23
  23. 23. Productivity Calculations Quantity at standard cost Multifactor Productivity = ------------------------- Labor cost+Material cost+overhead cost (400 units)($10/unit) Multifactor Productivity = ------------------------$400+$1000+$300 = $4000/$1700 = 2.35 24
  24. 24. Productivity Calculations Calculate the productivity for the following operations: 1. 5 employees create 800 units of chairs in a week. They work 10 hours per day and 6 days per week 2. A team of workers make 500 units of television, which is valued by its standard cost of $150 each. The accounting department reports that for this job the actual costs are $300 for labor, $800 for material and $400 for overhead 25
  25. 25. Financial and Economic Analysis Two methods to evaluate the effectiveness of an investment: • Payback Method • Net Present Value (NPV) method cost 26
  26. 26. Financial and Economic Analysis Payback Method: Payback period = Net Investment --------------------Net Annual income 27
  27. 27. Productivity Calculations Calculate the productivity for Payback Method: 1. The initial investment for a factory is 12 lakhs and is expected to generate an income of 3 lakhs per annum what is the payback period 2. The initial investment in a call center is 45 lakhs and is expected to generate a revenue of $20,000/- per annum, what is the payback period. 28
  28. 28. Financial and Economic Analysis Net Present Value (NPV): 29
  29. 29. Financial and Economic Analysis Net Present Value (NPV): If the NPV is greater than 1 then the project is acceptable. If the NPV is less than zero the project is rejected. The greater the NPV of a project the better the profitability When multiple projects are being considered then project with highest NPV is selected 30