What is Operations Management?
The direction and control of the processes
that transform inputs into products and
services...
Operations Management
Operations Management is a set of
decisions that the Operations Manager
makes these could be strateg...
Operations Management as a
Function

4
OM Decisions
1. Strategic Choices
These decisions affect the company’s future
direction.
Operations
Managers
help
determin...
OM Decisions
2. Process
The Operations Managers make process
decisions about the types of work to be done
in-house, the am...
OM Decisions
3. Quality
Quality issues underlie all processes and work
activity. Operations Managers help in establish
qua...
OM Decisions
4. Capacity, Location and Layout
The types of decisions in this category require
long term commitments. Opera...
OM Decisions
5. Operating Decisions
These deal with operating the facility after it is
built, this requires Operations Man...
Manufacturing v/s Services
Manufacturing

Services

Physical Product

Intangible product

Output can be inventoried

Outpu...
Operations Strategy a
Competitive Weapon
• An Organization that wants to succeed in a
competitive business needs needs a s...
Operations Strategy a
Competitive Weapon
Key objective of any business organization
is to attract more customers than its
...
Elements of Operations Strategy
• Designing the production system.
• Product/Service design and development.
• Technology
...
Designing the Production System
• Product Design
• Customized product design: high level of
customization and quantity pro...
Designing the Production System
• Production System
• Product-focused systems: used generally
employed in mass production ...
Finished Good Inventory Policy
• Produce-to-stock: Products are produced
well in advance and are stored in
warehouses from...
Product/Service Design and
Development
The following are the important steps in
the development of new products:
• Idea Ge...
Product/Service Life Cycle

18
Product/Service Life Cycle
Once Product Design is finalized:
• Technology
selection
and
process
development: This involves...
Developing Operations Strategy

20
Financial and Economic Analysis
Productivity =

Output
--------------------Input

Two types of Productivity:
• Labor Produ...
Productivity Calculations
Calculate the productivity for the following
operations:
1. Three employees process 600 insuranc...
Productivity Calculations
Policies Processed
------------------------Employee hours

Labor Productivity =

Labor Productiv...
Productivity Calculations
Quantity at standard cost
Multifactor Productivity =

-------------------------

Labor cost+Mate...
Productivity Calculations
Calculate the productivity for the following
operations:
1. 5 employees create 800 units of chai...
Financial and Economic Analysis
Two methods to evaluate the
effectiveness of an investment:
• Payback Method
• Net Present...
Financial and Economic Analysis
Payback Method:

Payback period =

Net Investment
--------------------Net Annual income

2...
Productivity Calculations
Calculate the productivity for Payback
Method:
1. The initial investment for a factory is 12
lak...
Financial and Economic Analysis
Net Present Value (NPV):

29
Financial and Economic Analysis
Net Present Value (NPV):
If the NPV is greater than 1 then the project is
acceptable. If t...
Forecasting

31
Forecasting
Forecasting is the scientific process of
estimating without having all the necessary
information.
For Operatio...
Forecast Components
For forecasting we need to take into
consideration various factors or components.
• Base Demand
• Seas...
Forecast Components
• Base Demand
Base Demand is the average sales over a
given time period. This figure can be taken
as t...
Forecast Components
• Seasonal Component
This refers to the repeated pattern of
increase and decrease in the demand over
a...
Forecast Components
• Trend Component
The trend component refers to the long
term pattern of movement of demand over
a per...
Forecast Components
• Cyclic Component
This refers to changes in the demand
patterns, which exist for more than one
year. ...
Forecast Components
• Promotional Component
This component is one of the key factors
that impact demand. This refers to th...
Forecast Components
• Irregular Component
This component refers to all the changes
in demand that cannot be attributed to
...
Forecast Components
The next steps in Forecasting are:
• Identify major factors that influence the
Demand Forecast
• Under...
Forecasting Methods

41
Forecasting Methods

42
Project Management

43
Project Management
Project Management can be defined as
planning, directing and controlling resources
(people, equipment, ...
Project Management

45
Types of Projects
• Pure Projects
• Functional Projects
• Matrix Projects

46
Types of Projects
Pure Project: is where a self sustained team
works full time on the project. Here each one is
autonomous...
Types of Projects
Pure Projects
Advantages

Disadvantages

The Project manager has full
authority over the project

Duplic...
Types of Projects
Functional Project: This is where a project is
housed within a functional area
President

R&D

Project
A...
Types of Projects
Functional Projects
Advantages

Disadvantages

A team member can work on
several projects

Aspects of th...
Types of Projects
Matrix Project: This attempts to blend the
properties of a functional and pure project
structure. Each p...
Types of Projects
Matrix Project Structure
President

R&D

Engg

Mnfrng

Mktng

Manager
Project A
Manager
Project b
Manage...
Types of Projects
Matrix Projects
Advantages

Disadvantages

Communication between
functional divisions is enhanced

There...
Work Break Structure
Project starts with Statement of Work which
gets further broken down into tasks and sub
tasks.
The wo...
Work Break Structure
Level

1
2

3

4

Program
Project 1

Project 2

Task 1.1

Task 1.2

Subtask 1.1.1

Work package
1.1.1...
Work Break Structure
Please list down the complete Work Break
down structure for the following Projects
• Going to office ...
Project Control Charts

57
Project Control Charts

58
Project Control Charts

59
Network Planning Models
The best known Network Planning Models
were developed in the 1950’s, they are:
• Critical Path Met...
Critical Path Method
The steps involved in CPM
• Identify each activity to be done in the
project and how long it will tak...
Critical Path Method
Example: A group assignment that requires a
decision on whether you should invest in a
company. Analy...
Critical Path Method
Steps:
1. Identify each activity to be done in the
project and estimate how long it will take
to comp...
Critical Path Method
Activity

Designation

Immediate
predecessors
None

Time
1

Select a Company

A

Obtain annual
Report...
Critical Path Method

B(2)

A (1)

D(1)

C(1)

65
Critical Path Method
Steps:
3. Determine the Critical Path: take the sum
of activities in A-B-D and A-C-D and the
longest ...
Critical Path Method
Slack Time
Early
Start

Early
Finish
Activity(Du
ration)

Late
Start

Late
Finish

67
Critical Path Method
Slack Time – Early Start/Finish
1

3
B(2)

1

0

4

3
A (1)

D(1)
2

1

C(1)

68
Critical Path Method
Slack Time – Late Start/Finish
1

3
B(2)

1

0

1

3
4

3
A (1)
0

D(1)
1

2

1

C(1)
2

3

4

3

69
Critical Path Method

70
Critical Path Method

71
Critical Path Method

72
Critical Path Method

73
Product and Service Design

74
Product Development
Process

75
Product Development Process
The generic product development process is
done in six phases:
Phase 0: Planning
Phase 1: Conc...
Product Development Process

77
Product Development Process

78
Product Development Process
• Technology-Push Products: In developing
Technology-Push products, a firm looks for
an approp...
Product Development Process
• Process- Intensive Products: Examples of
these include semi-conductors, chemicals,
paper. Fo...
Product Development Process
• High Risk Products: These products
usually entail large uncertainties, this
involves complet...
Product Development Process
Designing for the Customer

82
Product Development Process
Quality Function Deployment Exhibit 4.6

83
Product Development Process
Quality Function Deployment Explain

84
Process Planning and Design
Major Factors
Decisions

affecting

Process

Design

85
Process Planning and Design
Factors affecting
integration

Degree

of

backward

86
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Om ibs-2

  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
  30. 30. Forecasting 31
  31. 31. Forecasting Forecasting is the scientific process of estimating without having all the necessary information. For Operations Managers forecasting provides the basis for making decisions with regards to independent demand planning and scheduling and for mitigating risk and uncertainty. 32
  32. 32. Forecast Components For forecasting we need to take into consideration various factors or components. • Base Demand • Seasonal Component • Trend Component • Cyclic Component • Promotional Component • Irregular Component 33
  33. 33. Forecast Components • Base Demand Base Demand is the average sales over a given time period. This figure can be taken as the right forecast if the products demand is not impacted by the other forecast components 34
  34. 34. Forecast Components • Seasonal Component This refers to the repeated pattern of increase and decrease in the demand over a period if time. E.g. Demand for ice cream and cold drinks goes up in summer. Demand for umbrella’s goes up in rains etc. 35
  35. 35. Forecast Components • Trend Component The trend component refers to the long term pattern of movement of demand over a period of time. The trend could be positive, negative or neutral. Positive trend means that the demand is increasing. Negative trend means the demand is decreasing. 36
  36. 36. Forecast Components • Cyclic Component This refers to changes in the demand patterns, which exist for more than one year. These changes could either show and upward or a downward movement. 37
  37. 37. Forecast Components • Promotional Component This component is one of the key factors that impact demand. This refers to the changes in demand that occur due to a promotional activity like a discount or a sale etc. 38
  38. 38. Forecast Components • Irregular Component This component refers to all the changes in demand that cannot be attributed to any of the above five factors. This is of random nature and difficult to predict. All forecasting exercise is done to try and reduce the impact due to this to a minimum. 39
  39. 39. Forecast Components The next steps in Forecasting are: • Identify major factors that influence the Demand Forecast • Understand and identify customer segments • Determine the appropriate forecasting technique 40
  40. 40. Forecasting Methods 41
  41. 41. Forecasting Methods 42
  42. 42. Project Management 43
  43. 43. Project Management Project Management can be defined as planning, directing and controlling resources (people, equipment, material) to meet the technical, cost and time constraints of the Project. 44
  44. 44. Project Management 45
  45. 45. Types of Projects • Pure Projects • Functional Projects • Matrix Projects 46
  46. 46. Types of Projects Pure Project: is where a self sustained team works full time on the project. Here each one is autonomous, entrepreneurial and the essence here is speed and flexibility. It keeps away from hierarchical management structures. 47
  47. 47. Types of Projects Pure Projects Advantages Disadvantages The Project manager has full authority over the project Duplication of resources. Equipment and people are not shared across projects Team members report to one boss they do not have to worry about dividing loyalty with a functional and area manager Organization goals are ignored, as team is often physically and logically removed from the headquarters Lines of communication are shortened and decisions are made quickly The organization falls behind in its knowledge due to weakened functional divisions Team pride, motivation and commitment are high As the team has no functional area home they worry about life after the project 48
  48. 48. Types of Projects Functional Project: This is where a project is housed within a functional area President R&D Project A Project B Project C Engineering Project D Project E Manufacturing Project F Project G Project H Project I 49
  49. 49. Types of Projects Functional Projects Advantages Disadvantages A team member can work on several projects Aspects of the project are not directly related to the functional area get shortchanged Technical expertise is maintained within the functional area even if the individuals leave the project or organization Motivation of the team members is often weak The functional area is a home Needs of the clients are secondary after the project is completed. and are responded to slowly Functional specialists can advance vertically A critical mass of specialized functional area experts creates synergystic solutions to a projects technical problem 50
  50. 50. Types of Projects Matrix Project: This attempts to blend the properties of a functional and pure project structure. Each process utilizes people from different functional areas. The Project manager decides what tasks and when they will perform. 51
  51. 51. Types of Projects Matrix Project Structure President R&D Engg Mnfrng Mktng Manager Project A Manager Project b Manager Project c 52
  52. 52. Types of Projects Matrix Projects Advantages Disadvantages Communication between functional divisions is enhanced There are two bosses. Often the functional manager will be listened to before the project manager The Project manager is held responsible for the completion of the project It is a doomed a failure unless the PM has strong communication skills The team members have a functional home after project is completed Sub optimization is a danger, as PM hoard resources for their own project thus harming other projects A critical mass of specialized functional area experts creates synergystic solutions to a projects technical problem 53
  53. 53. Work Break Structure Project starts with Statement of Work which gets further broken down into tasks and sub tasks. The work break down structure defines the hierarchy of project tasks, sub tasks and work packages. Completion of one or more work packages results in the completion of a sub task, the completion of one or more sub tasks results in completion of a task and completion of all tasks results in the completion of the project. 54
  54. 54. Work Break Structure Level 1 2 3 4 Program Project 1 Project 2 Task 1.1 Task 1.2 Subtask 1.1.1 Work package 1.1.1.1 Subtask 1.1.2 Work package 1.1.1.2 55
  55. 55. Work Break Structure Please list down the complete Work Break down structure for the following Projects • Going to office from waking up in the morning • Purchasing a new car • Travel from Mumbai to Delhi in a car • Construction of a new house with ground + 2 floors 56
  56. 56. Project Control Charts 57
  57. 57. Project Control Charts 58
  58. 58. Project Control Charts 59
  59. 59. Network Planning Models The best known Network Planning Models were developed in the 1950’s, they are: • Critical Path Method or CPM • The Program Evaluation and Review Technique (PERT) As the time passed and features that distinguished the two faded we now just use the CPM 60
  60. 60. Critical Path Method The steps involved in CPM • Identify each activity to be done in the project and how long it will take to complete each activity • Determine the required sequence of the activities and construct a network reflecting the precedence relationships • Determine the Critical Path 61
  61. 61. Critical Path Method Example: A group assignment that requires a decision on whether you should invest in a company. Analysis to be done in 4 steps A. Select a Company B. Obtain the company’s annual report C. Collect the technical stock price data and construct charts D. Individually review the data and make a team decision on whether to buy the stock 62
  62. 62. Critical Path Method Steps: 1. Identify each activity to be done in the project and estimate how long it will take to complete each activity 2. Determine the required sequence of activities and construct a network reflecting the precedence and relationship 63
  63. 63. Critical Path Method Activity Designation Immediate predecessors None Time 1 Select a Company A Obtain annual Report and perform Ratio analysis B A 2 Collect stock price Data and perform tech. analysis C A 1 Review data & Make decision D B and C 1 64
  64. 64. Critical Path Method B(2) A (1) D(1) C(1) 65
  65. 65. Critical Path Method Steps: 3. Determine the Critical Path: take the sum of activities in A-B-D and A-C-D and the longest duration here is taken as the critical path. Here the critical path is A-BD as any activity that is delayed in this path will result in delaying the project. 66
  66. 66. Critical Path Method Slack Time Early Start Early Finish Activity(Du ration) Late Start Late Finish 67
  67. 67. Critical Path Method Slack Time – Early Start/Finish 1 3 B(2) 1 0 4 3 A (1) D(1) 2 1 C(1) 68
  68. 68. Critical Path Method Slack Time – Late Start/Finish 1 3 B(2) 1 0 1 3 4 3 A (1) 0 D(1) 1 2 1 C(1) 2 3 4 3 69
  69. 69. Critical Path Method 70
  70. 70. Critical Path Method 71
  71. 71. Critical Path Method 72
  72. 72. Critical Path Method 73
  73. 73. Product and Service Design 74
  74. 74. Product Development Process 75
  75. 75. Product Development Process The generic product development process is done in six phases: Phase 0: Planning Phase 1: Concept Development Phase 2: System level design Phase 3: Design Detail Phase 4: Testing and refinement Phase 5: Production Ramp up 76
  76. 76. Product Development Process 77
  77. 77. Product Development Process 78
  78. 78. Product Development Process • Technology-Push Products: In developing Technology-Push products, a firm looks for an appropriate market in which to apply the technology( that is the technology “pushes” the development. E.g. Teflon sheets manufactured by Gore-Tex • Platform Products: A platform product is built around a pre-existing technological sub system. E.g. the Hybrid car Prius built by Toyota, Mircosoft Vista 79
  79. 79. Product Development Process • Process- Intensive Products: Examples of these include semi-conductors, chemicals, paper. For these products the production process has an impact on the properties of the product • Customized Products: Products which are created with slight variations for each customer. Modular Kitchens, Cars, Furniture, Batteries 80
  80. 80. Product Development Process • High Risk Products: These products usually entail large uncertainties, this involves completing design and testing activity in the initial stages. E.g. Precast structure for bridges etc. • Quick Build Products: For development of products like Software and many technical products, building and testing prototype has become a rapid process. This fast prototyping cycle results in the product reaching the market faster 81
  81. 81. Product Development Process Designing for the Customer 82
  82. 82. Product Development Process Quality Function Deployment Exhibit 4.6 83
  83. 83. Product Development Process Quality Function Deployment Explain 84
  84. 84. Process Planning and Design Major Factors Decisions affecting Process Design 85
  85. 85. Process Planning and Design Factors affecting integration Degree of backward 86
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