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Om lect 01(r0-may08)_operations strategy_mms_bharti_sies

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  • 1.    Operations Strategy/  Competitive Advantage N.K.Agarwal
  • 2. Production Function • Operation/Production function essential to every business • Operations create wealth in a global economy • Operation function responsible to make four key decisions – – – – Process Quality Capacity Inventory
  • 3. Production Function • Production function in manufacturing involves – Transforming a set of inputs through a process into a predetermined set of outputs
  • 4. Production Manager • Production / operations manager is the wealth creator in the company • Operations managers make – Decisions regarding the operations function, – Its interaction with other functions within the organisation and the external environment, and – Plan and control the production process • In an efficient and effective manner
  • 5. Major Decisions at Pizza USA A Framework for OM • Process – How to produce & deliver • Quality – Criteria, measurement & process for achieving • Capacity – Physical facilities & labor • Inventory – What, when & how much?
  • 6. Productive System  Means by which Input resources Are transformed to create Useful goods (products) & services As outputs.
  • 7. AN OPERATING SYSTEM Control (Feedback) subsystem Transformation Output Material Products Labour Energy Capital Production process (Converter) Information Information Processor (controller) Services Information Environment Conversion subsystem Inputs
  • 8. Products and Services • Products – Tangible things that can be carried away with the person • Services – Intangible and perishable and are consumed in the process of their production.
  • 9. Characteristics of Products Vs Services Products Services Intangible & perishable; consumed in the process of their production Can be produced to inventory for off-the- Availability achieved by keeping the shelf availability productive system open for services Complex and interrelated processing Simple processing Tangible Minimal contact with ultimate consumer High contact with clients/customers Demand on system varies on weekly, monthly or seasonal basis Demand commonly variable on hourly, daily and weekly basis Markets served by productive systems are regional,national or international Markets served are usually local Large units that can take advantage of economies of scale Location of system is in relation to regional, national and international markets Relatively small units to serve local markets Location dependent on location of local customers, clients & users
  • 10. Production / Operation Management (POM) • Defined as – Decision making in the operations function – Integration of these decisions with other functions – A transformation system that converts inputs into outputs • In an efficient and effective manner
  • 11. Interfacing with other systems • Basic functional groups: – Marketing • Generates demand – Finance • Generates the capital – Production • Generates the supply of outputs.
  • 12. Marketing and POM • Marketing system – Discovers and transmits the need of consumers to the total organisation including the POM system • Which supplies these needs. – Translates the demand for future into units of production & desired delivery schedules.
  • 13. POM-Marketing interface • Marketing furnishes data on: – Size of market – Volume of production needed to meet anticipated market needs – Desired inventories – Anticipated changes in production of other products – Anticipated delivery schedules: amount,location,timing – Packaging needs
  • 14. Conflicts between Marketing and POM • Unreasonable commitment to customers regarding – Customisation – Delivery schedule – Order quantity
  • 15. Production/Operation Management • POM system generally consists of: – – – – – – – – Forecasting facility requirement Designing total production facility Planning output levels Planning inventory levels Controlling work input Controlling work output Feedback Replanning
  • 16. Production/ Operation Management • POM – Provides production facilities-plants,equipment and personnel. – Provides statistical quality control – Sustains technological growth and improvement & economic viability.
  • 17. POM- Finance & Accounting interface • F&A Function – Responsible for all cash flows between the organisation and external environment. – Interfaces from the inception of the idea of product through its development stages till it is sold
  • 18. POM-F&A Interfacing • Important areas – Accumulation of operating data to form a starting point for standards – Accumulation of cost data of a job, a time period or a process – Assignment of general costs to profit centres – Determination of profit/loss of profit centres – Determination of value of work-in-process (w-i-p) – Determination of financial value of raw material & finished goods inventories – Providing status of jobs or w-i-p
  • 19. POM- Information system • Information function – – – – Incorporates policy information flow from management Feedback information to management Information from external environment, as well as Internal systems within the organisation
  • 20. POM-Information interfacing • Information function interfaces in respect of – – – – – – – – – – Inventory control Cost control Reporting status on orders Production schedules Forecasting & scheduling material requirement Control of w-i-p Quality control Preventive maintenance planning Make or buy decision Labour efficiency records
  • 21. Operations Strategy • Strategy formulation a process by which a firm determines how it will compete in its industry • It involves goal determination and the development of policies for achieving these goals • Some of these functional areas to define key operating policies are – – – – – – Marketing Sales Target markets Product line Finance & control Engineering and R&D
  • 22. Operations Strategy – – – – Labour Purchasing Production Distribution • Purchasing, Production and Distribution must be carefully related for the operation function • Production stand alone can not work – Purchasing provides the material inputs – Physical distribution system actually involves additional processing steps in the product flow – Engineering, R&D and labour provide key inputs to the operations function • Product design and key process technology comes from R&D function – Labour provides a crucial input to the production
  • 23. Operations Strategy • All the activities in the line of material flow from suppliers through fabrication and assembly and culminating in product distribution must be integrated for a sensible operational strategy formulation • There are six major components to operations strategy – – – – – – Strategic implications of operating decisions Matching the productive system design to market needs Capacity and location Technological choices The work force and job design Suppliers and vertical integration
  • 24. Enterprise Competitiveness and the Operations Function • Four dimensions of competitiveness that measure the effectiveness of the operations function – – – – Cost Quality Dependability as a supplier Flexibility/ service • Cost – Profitability is related to the difference between price and cost – To compete on the basis of price requires an operations function capable of manufacturing at low cost
  • 25. Enterprise Competitiveness and the Operations Function • The effects of location, product design, equipment use and replacement, labour productivity, good inventory management, employment of process technology etc.,all contribute to the resulting costs • Unit costs are usually reduced as experience is gained through production • However, a number of additional sources contribute to this – Improved production methods and tools, improved product design, standardisation, improved material utilisation, reduction of system inventories, improved layout and flow, economics of scale and improved organisation
  • 26. Enterprise Competitiveness and the Operations Function • Quality • Product quality has often been cited as a reason for preferring the products purchased by the customers – Dominance by Japanese products • Customers are often willing to pay more for or wait for delivery of superior quality products • Dependability of a Supplier – Reputation for dependability of supply or even off-the-shelf availability is often strong competitive weapon – Customers may compromise on cost or even quality in order to obtain on-time delivery when they need an item – The scheduling and coordination of all elements of the productive system determine its ability to produce on time
  • 27. Enterprise Competitiveness and the Operations Function • Flexibility / Service • Ability to be flexible will depend upon the design of the productive system and the process technology employed • For large volume production of a standardised item, perhaps it is not worthwhile • A competitor could offer such flexibility and there may a substantial market for him • Ready availability of good service facility, spare parts can be winners in the competitive market
  • 28. Reference • Production & Operations Management: Aswathappa / Bhat • Modern Production/Operations Management: Buffa / Sarin • Operations Management: Roger G. Schroeder
  • 29. Thank You