Ch 1 introduction_om


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  • Ch 1 introduction_om

    1. 1. OPERATIONS MANAGEMENT K. Mohanasundaram
    2. 2. OPERATIONS MANAGEMENT William J. Stevenson, 9th Edition, Tata Mcgraw Hill Reference books: 1. Operations Management, Theory and Practice - B. Mahadevan 2. Operations Management for competitive advantage – Chase, Jacobs 3. Production and Operations Management – Paneerselvam 4. Operations Management Russel & Taylor 5. Operations Management- Jay Heizer, Barry Render, Jagadeesh Rajashekhar
    3. 3. Assessment • INTERNAL (50) – MID TERM 20 – ATTENDANCE 05 – CASE STUDY (G) 10 – PRESENTATION (G) 05 – CLASS TEST 10 • EXTERNAL (50) (Tentative/ subject to change) – SECTION A 5x2 = 10 All – SECTION B 4x5 = 20 Choice – SECTION C 5x10 =50 Choice – SECTION D 1x20 = 20 Compulsory
    4. 4. Syllabus •Introduction •Forecasting •Product and service design •Capacity planning •Process selection •Facilities layout Location analysis Design of work system •SCM •inventory •APP •MRP/ERP •JIT / LEAN •Network analysis •Quality •Acceptance sampling •Maintenance •Scheduling •Productivity •Reliability
    5. 5. OBJECTIVES • Introduction • Definition – Management function – Organization’s core function – Decision making – System perceptive • Transformational • Value added • Product /service – difference / similarities • Goods and service continuum • Why to study OM • Importance of OM • Scope of OM • Performance Objectives • Evolution • Current trends in OM/ Challenges in OM
    6. 6. Introduction
    7. 7. Organization --> product  tangible/intangible Products are combination of both goods /services Heart of every organization are the activities that makes products.  OPERATIONS Operation describe what the organization does. Eg: IBM – make of computers BA fly passengers BBC radio/TV programmes
    8. 8. What is Operations Management? Can be viewed as 1) Management function 2) Organization’s core function 3) Decision Making 4) System
    9. 9. OM- Management function Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services
    10. 10. OM Across the Organization- core function • Most businesses are supported by the functions of operations, marketing, and finance • The major functional areas must interact to achieve the organization goals
    11. 11. OM Across the Organization - continued • Marketing is not fully capable of meeting customer needs if they do not understand what operations can produce • Finance cannot judge the need for capital investments if they do not understand operations concepts and needs • Information systems enables the information flow throughout the organization • Human resources must understand job requirements and worker skills • Accounting needs to consider inventory management, capacity information, and labor standards
    12. 12. OM- organization core function OperationsOperations Plant Manager Plant Manager Operations Manager Operations Manager DirectorDirector Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc Manufacturing, Production control, Quality assurance, Engineering, Purchasing, Maintenance, etc Finance Marketing
    13. 13. Functions - Airline Operations Finance/ Accounting Marketing Ground Support Flight Operations Facility Maintenance Catering Airline © 1984-1994 T/Maker Co.
    14. 14. Functions - Bank Operations Finance/ Accounting Marketing Check Clearing Teller Scheduling Transactions Processing Security Commercial Bank © 1984-1994 T/Maker Co.
    15. 15. Functions - Manufacturer Operations Finance/ Accounting Marketing Production Control Manufacturing Quality Control Purchasing Manufacturing
    16. 16. Typical role
    17. 17. 1-17 Business Operations OverlapBusiness Operations Overlap Operations FinanceMarketing
    18. 18. 1-18 Operations InterfacesOperations Interfaces Public Relations Accounting Industrial Engineering Operations Maintenance Personnel Purchasing Distribution MIS Legal
    19. 19. OM Decisions • All organizations are based on decisions • Decisions follow a similar path – First decisions very broad – Strategic decisions • Strategic Decisions – set the direction for the entire company; they are broad in scope and long-term in nature – Following decisions focus on specifics - Tactical decision and operational
    20. 20. OM Decisions • Tactical decisions focus on – Specific day-to-day issues • Resource needs, schedules, & quantities to produce – Tactical decisions are very frequent – Strategic decisions less frequent – Tactical decisions must align with strategic decisions
    21. 21. OM- decision making perspective
    22. 22. Classification of operations management decision/production management functions • Periodic/Continual Decision • Planning and designing of production systems/Operations and control of production system • Planning, organising and control decisions • Strategic ( long term) and operational ( Short term) Decision
    23. 23. Productions management decision Selection Products Processes Equipment Workforce Location Layout Design Products Process Equipment Jobs Methods Wage payment Operating and Control systems System & Procedures Updating Involves revision of production system in the light of changing environment Operating- controlling Setting targets Scheduling Sequencing Inventory control Quality control Production control Cost control Maintenance
    24. 24. Long Term ( STRATEGIC) • Product selection and design • Process selection and planning • Facilities location ( minimize total “delivered to customer” cost) • Facilities layout and material handling • Capacity planning
    25. 25. SHORT TERM (OPERATIONAL) • Production planning, Scheduling and control • Inventory planning and control • Quality Assurance • Work and Job Design • Maintenance and replacement • Cost reduction and control
    26. 26. OM Decisions
    27. 27. Operations Management – system based • OM Transforms inputs to outputs – Inputs are resources such as • People, Material, and Money – Outputs are goods and services
    28. 28. OM’s Transformation Process
    29. 29. Diagrammatical expression INPUTS PROCESS OUTPUTS •Human resources (Workers, managers) •Capital (Equipment,facilities) •Purchases (Materials, services) •Land •Energy Goods Services Transformation depends on type of facility
    30. 30. 1-30 OM – system perspectiveOM – system perspective The operations function involves the conversion of inputs into outputs Inputs Land Labor Capital Transformation/ Conversion process Outputs Goods Services Control Feedback FeedbackFeedback Value added
    31. 31. Food ProcessorFood Processor Inputs Processing Outputs Raw Vegetables Cleaning Canned vegetablesMetal Sheets Making cans Water Cutting Energy Cooking Labor Packing Building Labeling Equipment
    32. 32. Hospital ProcessHospital Process Inputs Processing Outputs Doctors, nurses Examination Healthy patientsHospital Surgery Medical Supplies Monitoring Equipment Medication Laboratories Therapy
    33. 33. Operations The process of changing input into output and thereby adding value to some entity
    34. 34. Value added by performing “operation” Function • Alter - change in the form or state of input: physical – manufacturing; sensual/psychological – feeling comfort or satisfaction • Transport - located somewhere other than where it currently is. Entity like people, garbage or goods. • Store - kept in a protected environment for some period of time ( ware house) • Inspect - value of the entity may be enriched through an inspection as we better understand its properties and then make a decision ( repair, decision regarding purchase)
    35. 35. OM’s Transformation Role • To add value – Increase product value at each stage – Value added is the net increase between output product value and input material value • Provide an efficient transformation – Efficiency – perform activities well at lowest possible cost
    36. 36. What is a Transformation Process? Defined A transformation process is defined as a use of resources to transform inputs into some desired outputs
    37. 37. Transformations • Physical--manufacturing • Locational--transportation • Exchange--retailing • Storage--warehousing • Physiological--health care • Informational--telecommunications
    38. 38. OM InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversion SubsystemSubsystem ConversionConversion SubsystemSubsystem ControlControl SubsystemSubsystem ControlControl SubsystemSubsystem •Product •Service • External – Legal, Economic, Social, Technological • Market – Competition, Customer Desires, Product Info. • Primary Resources – Materials, Personnel, Capital, Utilities • Physical (Manufacturing) • Locational Services (Transportation) • Exchange Services (Retailing) • Storage Services (Warehousing) • Other Private Services (Insurance) • Government Services (Federal, State, Local)
    39. 39. Monitoring and feedback control • Establish standards of performing or outputs • Measures actual performance • Compare the difference between the actual and planned • Take appropriate remedial actions by changing inputs revising plans, Changing priorities, Expediting the progress etc.,
    40. 40. Hybrid organizations • Some organizations are a blend of service/manufacturing/quasi- manufacturing (QM) organizations • QM characteristics include – Low customer contact & Capital Intensive
    41. 41. 1-41 Types of OperationsTypes of Operations Operations Examples Goods Producing Farming, mining, construction , manufacturing, power generation Storage/Transportation Warehousing, trucking, mail service, moving, taxis, buses, hotels, airlines Exchange Retailing, wholesaling, banking, renting, leasing, library, loans Entertainment Films, radio and television, concerts, recording Communication Newspapers, radio and television newscasts, telephone, satellites
    42. 42. Goods & Services • Services • Intangible product • Product cannot be inventoried • High customer contact • Short response time • Labor intensive • Manufacturing • Tangible product • Product can be inventoried • Low customer contact • Longer response time • Capital intensive
    43. 43. 1-43 Goods vs Service Characteristic Goods Service Customer contact Low High Uniformity of input High Low Labor content Low High Uniformity of output High Low Output Tangible Intangible Measurement of productivity Easy Difficult Opportunity to correct problems High Low Inventory Much Little Evaluation Easier Difficult Patentable Usually Not usual
    44. 44. Comparison: ContinuumComparison: Continuum Physical nature of product Inventories Customer contact Customer response time Quality Resource Size Location CATEGORIES
    45. 45. Comparison: Continuum Intangible, Perishable (ideas, concepts, information) Physical, durable PHYSICAL NATURE OF PRODUCTS TOWARDS SERVICESTOWARDS MANUFACTURING Output less able to be inventoried Output can be inventoried INVENTORY - ABLE
    46. 46. Comparison: Continuum CUSTOMER CONTACT WITH PRODUCTION Low or no contact Customer contacts with distributor / retailer High contact Customer as “special inputs” TOWARDS MANUFACTURING TOWARDS SERVICES Services industries with low customer contact ?
    47. 47. CUSTOMER RESPONSE TIME Long Short Difficulty matching capacity with demand – demands fluctuate. TOWARDS MANUFACTURING TOWARDS SERVICES Comparison: Continuum
    48. 48. Comparison: Continuum LOCATION Regional, national or international markets Local markets (near the customer) TOWARDS MANUFACTURING TOWARDS SERVICES SIZE Large facilities Small facilities RESOURCES Capital intensive (more automation) Labour intensive
    49. 49. Comparison: Continuum MEASUREMENT OF QUALITY Easy to measure – Quantitative nature Harder to measure – subjective assessments TOWARDS MANUFACTURING TOWARDS SERVICES
    50. 50. 1-50 Automobile assembly, steel making Home remodeling, retail sales Automobile Repair, fast food Goods-service ContinuumGoods-service Continuum Computer repair, restaurant meal Song writing, software development Goods Service Surgery, teaching
    51. 51. Similarities Process and the use of technology Concern for quality, productivity and customer Choices – capacity, location, layout of facilities Package offered - goods and services
    52. 52. On the other hand… • Both use technology • Both have quality, productivity, & response issues • Both must forecast demand • Both will have capacity, layout, and location issues • Both have customers, suppliers, scheduling and staffing issues • Manufacturing often provides services • Services often provides tangible goods
    53. 53. Core services are basic things that customers want from products they purchase Core Services Defined
    54. 54. Core Services Performance Objectives Operations Managemen t Flexibility Quality Speed Price (or cost Reduction)
    55. 55. Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way Value-Added Services Defined
    56. 56. Value-Added Service Categories Operations Management Information Problem Solving Sales Support Field Support
    57. 57. Definition : OM 57 Operations management is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. APICS The Association for Operations Management defines operations management as "the field of study that focuses on the effective planning, scheduling, use, and control of a manufacturing or service organization through the study of concepts from design engineering, industrial engineering, management information systems, quality management, production management, inventory management, accounting, and other functions as they affect the organization" Operations refers to the production of goods and services, the set of value-added activities that transform inputs into many outputs
    58. 58. MANUFACTURING AND SERVICES Manufacturing Organizations Use operations management in the transformation process of turning raw materials into physical goods. Service Organizations Use operations management in creating nonphysical outputs in the form of services (the activities of employees interacting with customers).
    59. 59. IMPORTANCE OF OM - It encompasses both services and manufacturing. - It is important in effectively and efficiently managing productivity. - It plays a strategic role in an organization’s competitive success. - Synergies must exist with other functional areas of the organization Operations account for 60-80% of the direct expenses that burden a firms profit.
    60. 60. Objective of OM • Produces the goods/service in required quantity and of quality as per schedule at a minimum cost that determine the extent of customer satisfaction. Performing objective • Efficiency “doing things right” • Effectiveness “doing the right things” • Quality conform to quality specification • Lead time time elapsed in the conversion process (minimize) - Q, Inventory • Capacity Utilization manpower/ machines etc. • Flexibility flexibility of producing a combination of o/p, satisfy the customers needs
    61. 61. objective of Production Management • to produce the desired product or specified product by specified methods so that the optimal utilization of available resources is met with. • production management is responsible to produce the desired product, which has marketability at the cheapest price by proper planning, the manpower, material and processes. • Production management must see that it will deliver right goods of right quantity at right place and at right price.
    62. 62. Why to Study Operations Management? Business Education Systematic Approach to Org. Processes Career Opportunities Cross-Functional Applications Operations Management
    63. 63. 1-63 • Operations Management includes: – Forecasting – Capacity planning – Scheduling – Managing inventories – Assuring quality – Motivating employees – Deciding where to locate facilities – Supply chain management – And more . . . Scope of Operations ManagementScope of Operations Management
    64. 64. HIGHLIGHTS
    65. 65. • Management technology • Ethical issues • OM in practice • Evolution/ History
    66. 66. 1-66 Management Technology • Technology: The application of scientific discoveries to the development and improvement of goods and services • Product and service technology • Process technology • Information technology
    67. 67. 1-67 Ethical Issues • Financial statements • Worker safety • Product safety • Quality • Environment • Community • Hiring/firing workers • Closing facilities • Worker’s rights
    68. 68. POMPOM MarketingMarketing MISMIS EngineeringEngineering HRMHRM QAQA AccountingAccounting SalesSales FinanceFinance
    69. 69. OM in Practice • OM has the most diverse organizational function • Manages the transformation process • OM has many faces and names such as; – V. P. operations, Director of supply chains, Manufacturing manager – Plant manger, Quality specialists, etc. • All business functions need information from OM in order to perform their tasks
    70. 70. • OM is the business function that is responsible for managing and coordinating the resources needed to produce a company’s products and services. • Its role of OM is to transform organizational inputs into company’s products or services outputs • OM is responsible for a wide range of decisions, ranging from strategic to tactical. • Organizations can be divided into manufacturing and service organizations, which differ in the tangibility of the product or service
    71. 71. • A number of historical milestones have shaped OM. Some of the more significant of these are the Industrial Revolution, scientific management, the human relations movement, management science, and the computer age • OM is highly important function in today’s dynamic business environment. Among the trends with significant impact are just-in-time, TQM, reengineering, flexibility, time-based competition, SCM, global marketplace, and environmental issues • OM works closely with all other business functions
    72. 72. Business Information Flow
    73. 73. Introduction to POM - The Origins Sakichi Toyoda receives a patent for a wooden loom philosophy of “KAIZEN” is born out of the need to compete. Henry Ford invents the moving assembly line •Toyoda Motor Company Ltd. is created. •Kiichiro Toyoda builds a plant at Koromo and through the imbalance caused by piece work, hangs a sign in his new production shop that reads “JUST IN TIME”. •Taichi Ohno moves to the Toyota Motor Company Ltd. •Ohno begins to perfect the “Just-in-Time” concepts introduced by Kiichiro Toyota brings the Toyota Production System to the United States in collaboration with GM Womack and Jones publish “The Machine that Changed the World “ 1890 Late 1890’s Central figures who originated the idea of "Eliminating Waste", Lillian Gilbreth brings psychology into the mix by studying the motivations of workers and how attitudes affected the outcome of a process. Frank Gilbreth develops Motion Study and invented Process Charting. Frederick W. Taylor develops the principles of Time Study and standardized work. 1937 194 3 1908 1980 1990 Before: cars were built in one spot and the workers moved from car to car. This was called the “gypsy production” system. After: Ford used a big rope and winch to pull the cars along the assembly line and kept the workers stationary 1990
    74. 74. Historical Events in Operations Management Era Events/Concepts Dates Originator Industrial Revolution Steam engine 1769 James Watt Division of labor 1776 Adam Smith Interchangeable parts 1790 Eli Whitney Scientific Managemen t Principles of scientific management 1911 Frederick W. Taylor Time and motion studies 1911 Frank and Lillian Gilbreth Activity scheduling chart 1912 Henry Gantt Moving assembly line 1913 Henry Ford
    75. 75. Historical Events in Operations Management (cont.) Era Events/Concept s Dates Originator Human Relations Hawthorne studies 1930 Elton Mayo Motivation theories 1940s Abraham Maslow 1950s Frederick Herzberg 1960s Douglas McGregor Operations Research Linear programming 1947 George Dantzig Digital computer 1951 Remington Rand Simulation, waiting line theory, decision theory, PERT/CPM 1950s Operations research groups MRP, EDI, EFT, CIM 1960s, 1970s Joseph Orlicky, IBM and others
    76. 76. Historical Events in Operations Management (cont.) Era Events/Concep ts Date s Originator Quality Revolutio n JIT (just-in-time) 1970s Taiichi Ohno (Toyota) TQM (total quality management) 1980s W. Edwards Deming, Joseph Juran Strategy and operations 1980s Wickham Skinner, Robert Hayes Business process reengineering 1990s Michael Hammer, James Champy Six Sigma 1990s GE, Motorola
    77. 77. Historical Events in Operations Management (cont.) Era Events/Concepts Date s Originator Internet Revolution Internet, WWW, ERP, supply chain management 1990s ARPANET, Tim Berners-Lee SAP, i2 Technologies, ORACLE E-commerce 2000s Amazon, Yahoo, eBay, Google, and others Globalizatio n WTO, European Union, and other trade agreements, global supply chains, outsourcing, BPO, Services Science 1990s 2000s Numerous countries and companies
    78. 78. Business Operations: Definition Early Concepts : 1776 – 1880 Scientific Management Era : 1880-1910 Mass Production Era: 1910-1980 Lean Production Era: 1980-1995 Mass Customization Era: 1995- present Cost Focus Quality Focus Customization Focus
    79. 79. Significant Events in OM • Division of labor (Smith, 1776) • Standardized parts (Whitney, 1800) • Scientific Management (Taylor, 1881) • Coordinated assembly line (Ford 1913) • Gantt charts (Gantt, 1916) • Motion Study (the Gilbreths, 1922) • Quality control (Shewhart, 1924) • CPM/PERT (DuPont, 1957) • MRP (Orlicky, 1960) • CAD • Flexible manufacturing systems (FMS) • Manufacturing Automation Protocol (MAP) • Computer Integrated Manufacturing (CIM)
    80. 80. Current Issues in OM • Coordinate the relationships between mutually supportive but separate organizations. • Optimizing global supplier, production, and distribution networks. • Increased co-production of goods and services
    81. 81. Current Issues in OM (cont’d) • Managing the customers experience during the service encounter • Raising the awareness of operations as a significant competitive weapon
    82. 82. POM in Global economy 82 • Product Architecture • Service Design – Current Vs Future • Industry Verticals • Centers of Excellence
    83. 83. 1-83 Challenges of Managing Services • Service jobs are often less structured than manufacturing jobs • Customer contact is higher • Worker skill levels are lower • Services hire many low-skill, entry-level workers • Employee turnover is higher • Input variability is higher • Service performance can be affected by worker’s personal factors
    84. 84. 1-84 Trends in Business • Major trends – The Internet, e-commerce, e-business – Management technology – Globalization – Management of supply chains – Outsourcing – Agility – Ethical behavior
    85. 85. Discussion • With regard to the type of businesses below, detail the: – Input, processes, output – Extent of client/customer participation – Nature and source of information • Types of business: – Educational institution – Factory manufacturing iron pipes – Jewellery store
    87. 87. SUMMARY Components of POM • Planning • Organizing • Controlling • Models and Behaviour
    88. 88. Summary • It is a management function • Organization’s core function • Every organization has OM function – Service or Manufacturing – For profit or Not for profit