Comprehensive ppt for Introduction and history of Operations Management

1. Let’s Learn Operations Management
- Dr. Karishma Chaudhary

3. Operations Management
Books for Reference
1. Heizer / Render -Principles of Operations Management, 6e
Operations Management, 8e ( Prentice Hall Publication)
2. Operations Management by Norman Gaither & Greg Frazier (
Cengage Learning Publication)
3. Operations Management – B Mahadevan ( Pearson
Publication)
4. Production & Operations Management - Everett E Adam, Jr
Ronald J Ebert. ( PHI Publication)
Text Book
Dan Reid R. Sanders Nada, Operations Management – An
Integrated Approach
1 – 3

4. Recognize this
Body Organ???

5. transport of oxygen, carbon dioxide and nutrients.

6. What Is Operations
Management?
Production is the creation of goods
and services
Operations management (OM) is
the set of activities that creates
value in the form of goods and
services by transforming inputs
into outputs
1 – 6

7. The main purpose of the operations management is to run the
business operations successfully, smoothly and effectively by
using the minimum resources and meeting customer
expectations.

8. Let's start with some basics ...
The application of operations management to our every day
activities is illustrated in the following quotation:
'Operations management is about the way organizations produce
goods and services.
Everything you wear, eat, sit on, use, read or knock about on the
sports field comes to you courtesy of the operations managers who
organized its production.
Every book you borrow from the library, every treatment you
receive at the hospital, every service you expect in the shops and
every lecture you attend at university - all have been produced.
This definition reflects the essential nature of Operations
Management: it is a central activity in organizing things. Another
way of looking at an operation, is to consider it as a transformation
process ...

9. As a Transformation Process

10. Operations are a transformation process: they convert a set of resources (INPUTS) into
services and goods (OUTPUTS).
These resources may be raw materials, information, or the customer itself.
These resources are transformed into the final goods or services by way of other
'transforming' resources - the facilities and staff of the operation.
An obvious example is a cabinet maker, who takes some wood, cuts and planes it, and
then polishes it until a piece of furniture is produced.

11. Information
A tourist office gathers and provides information to holiday makers, and assists in
advising on places to stay or visit.
Customers
At an airport, you are one of the many resources being processed. The operation you are
involved in is about processing your ticket and baggage, moving from ticket desk through
the customs and duty-free areas, to deliver you to the awaiting plane. The next time you
stand on a moving walkway, think of yourself as a tin of baked beans moving along a
factory conveyor!

12. extending the process ...
If we add a few more parts to the transformation process, we can
see the key elements that operations managers need to consider.
Operations is about:
designing services, products and delivery systems;
managing and controlling the operations system; and
finding ways to improve operations.

14. Case Study- The PowerSki
Jetboard

15. https://www.youtube.com/watch?v=kEo3VP5wDT0

16. The product development process can be complex and lengthy.
It took sixteen years for Bob Montgomery and others at his company
to develop the PowerSki Jetboard, and this involved thousands of
design changes.
It was worth it, though: the Jetboard was an exciting, engine-
propelled personal watercraft – a cross between a high-performance
surfboard and a competition water-ski/wakeboard that received
extensive media attention and rave reviews.
It was showered with honors, including Time magazine’s “Best
Invention of the Year” award.
Stories about the Jetboard appeared in more than fifty magazines
around the world, and it was featured in several movies, over
twenty-five TV shows, and on YouTube.

17. Montgomery and his team at PowerSki enjoyed taking their well-
deserved bows for the job they did designing the product, but having
a product was only the beginning for the company. The next step was
developing a system that would produce high-quality Jetboards at
reasonable prices. Before putting this system in place, PowerSki
managers had to address several questions.
• What kind of production process should they use to make the
Jetboards?
• How large should their production facilities be, and where should
they be located?
• Where should they buy needed materials?
• What systems will be needed to control the production process
and ensure a quality product?

18. Answering these and other questions helped PowerSki set up a
manufacturing system through which it could accomplish the most
important task that it had set for itself: efficiently producing
quality Jetboards.

19. Operations Management in
Manufacturing
Like PowerSki, every organization—whether it produces goods or provides services—
sees Job 1 as furnishing customers with quality products.
Thus, to compete with other organizations, a company must convert resources
(materials, labor, money, information) into goods or services as efficiently as possible.
The upper-level manager who directs this transformation process is called an operations
manager.
The job of operations management (OM) consists of all the activities involved in
transforming a product idea into a finished product. In addition, operations managers
are involved in planning and controlling the systems that produce goods and services. In
other words, operations managers manage the process that transforms inputs into
outputs. Figure 10.2 illustrates these traditional functions of operations management.

21. Like PowerSki, all manufacturers set out to perform the same basic function: to transform
resources into finished goods. To perform this function in today’s business environment,
manufacturers must continually strive to improve operational efficiency. They must fine-
tune their production processes to focus on quality, to hold down the costs of materials and
labor, and to eliminate all costs that add no value to the finished product. Making the
decisions involved in the effort to attain these goals is another job of operations managers.
Their responsibilities can be grouped as follows:
Production planning. During production planning, managers determine how goods will be
produced, where production will take place, and how manufacturing facilities will be laid
out.
Production control. Once the production process is under way, managers must continually
schedule and monitor the activities that make up that process. They must solicit and
respond to feedback and make adjustments where needed. At this stage, they also oversee
the purchasing of raw materials and the handling of inventories.
Quality control. The operations manager is directly involved in efforts to ensure that goods
are produced according to specifications and that quality standards are maintained.

22. Operations Management for
Service Providers
As the U.S. economy has changed from a goods producer to a service
provider over the last sixty years, the dominance of the manufacturing
sector has declined substantially. Today, only about 8 percent of U.S.
workers are employed in manufacturing,in contrast to 30 percent in 1950.
Most of us now hold jobs in the service sector, which accounts for 80
percent of U.S. jobs.
In 2013, Wal-Mart was America’s largest employer, followed by
McDonald’s, United Parcel Service (UPS), Target and Kroger. Not until we
drop down to the ninth-largest employer—Hewlett Packard—do we find a
company with a manufacturing component.

23. Operations Planning as Service Industry
When starting or expanding operations, businesses in
the service sector must make a number of decisions
quite similar to those made by manufacturers:
• What services (and perhaps what goods) should they
offer?
• Where will they locate their business, and what will
their facilities look like?
• How will they forecast demand for their services?

24. Examples of Logistics
Operation Flow

25. https://www.ibef.org/industry/manufacturing-sector-india/showcase

26. Organizing to Produce Goods and
Services
1 – 26
• Essential functions:
• Marketing – generates demand
• Production/operations – creates the
product
• Finance/accounting – tracks how well the
organization is doing, pays bills, collects
the money

27. Organizational Charts
Operations
Teller
Scheduling
Check Clearing
Collection
Transaction
processing
Facilities
design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
Commercial Bank
1 – 27

28. Organizational Charts
Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Airline
Marketing
Traffic
1 – 13
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising

29. Marketing
Sales
promotion
Advertising
Sales
Market
research
Organizational Charts
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Manufacturing

30. Why Study OM?
 OM is one of three major functions (marketing,
finance, and operations) of any organization
• We want (and need) to know how
goods and services are produced
• We want to understand what
operations managers do
• OM is such a costly part of an
organization
1 – 30

31. Options for Increasing
Contribution
Finance/
Marketing
Option
Accounting
Option
OM
Option
Increase Reduce Reduce
Sales Finance Production
Current Revenue 50% Costs 50% Costs 20%
Sales $100,000 $150,000 $100,000 $100,000
Cost of Goods – 80,000 – 120,000 – 80,000 – 64,000
Gross Margin
Finance Costs
20,000
– 6,000
30,000
– 6,000
20,000
– 3,000
36,000
– 6,000
Subtotal
Taxes at 25%
14,000
– 3,500
24,000
– 6,000
17,000
– 4,250
30,000
– 7,500
Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500
1 – 31

32. What Operations
Managers Do
 Planning
 Organizing
 Staffing
 Leading
 Controlling
1 – 32

33. • Service and product design
• Quality management
• Process and capacity design
• Location
• Layout design
• Human resources, job design
• Supply-chain management
• Inventory management
• Scheduling
• Maintenance
Ten Critical Decisions

34. The Critical Decisions
 Service and product design
 What good or service should we offer?
 How should we design these products and services?
 Quality management
 How do we define quality?
 Who is responsible for quality?

35. The Critical Decisions
 Process and capacity design
 What process and what capacity will these products
require?
 What equipment and technology is necessary for
these processes?
 Location
 Where should we put the facility?
 On what criteria should we base the location
decision?

36. The Critical Decisions
 Layout design
 How should we arrange the facility and material
flow?
 How large must the facility be to meet our plan?
 Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our employees to
produce?

37. The Critical Decisions
 Supply-chain management
 Should we make or buy this component?
 Who are our suppliers and who can integrate into our e-
commerce program?
 Inventory, material requirements planning, and JIT
 How much inventory of each item should we have?
 When do we re-order?

38. The Critical Decisions
 Intermediate and short–term scheduling
 Are we better off keeping people on the payroll
during slowdowns?
 Which jobs do we perform next?
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?

39. Where are the OM Jobs?

40. https://www.google.com/search?client=firefox-b-
e&q=operations+manager+jobs+in+India&ibp=htl;jobs&sa=X&ved=2ahUKEwj8mZfal8ru
AhWL7HMBHbWrCK4QudcGKAJ6BAgCECg&sxsrf=ALeKk02aP_VHeppD6cOcCsSfZYMqijHF
JA:1612234006849#htivrt=jobs&htidocid=TFzjpouunP_TJVjcAAAAAA%3D%3D&fpstate=tl
detail

41. Where are the OM Jobs?
1 – 41
• Technology/methods
• Facilities/space utilization
• Strategic issues
• Response time
• People/team development
• Customer service
• Quality
• Cost reduction
• Inventory reduction
• Productivity improvement

42. George Santayana: “To know your
future you must know your past”
The present position where the operations management
finds itself today has gone through a large number of stages
to reach the present formidable stage.
Although the history of operations management is not very
old—the roots of this type of management can be easily
linked with the concept which deals with the phenomenon of
division of labor.
This concept was given by Adam Smith in his very
famous book ‘The Wealth of Nations’ in 1776.
Experts in the field, from the time of Adam Smith and F.W.
Taylor, leading to Dodge and Tippet, have contributed to the
important present status of operations management in
today’s world.

43. Significant Events in OM
Figure 1.3
1 – 43

44. EVOLUTION with Industrial REVOLUTION
 Began in the 1770s in England and spread
to the rest of Europe and to the United
States during the 19th century.
 Substituted machine power for human
power.
 Most significant machine was steam engine.

45. Who invented Steam Engine?

46. Who invented Steam Engine?
- James Watt

47. What did take place
 Production became fast and low costly one
 Economies of scale
 Development of standard gauging system
 Factories grew rapidly
 Provided countless jobs

48. The Heritage of OM
• Division of labor (Adam Smith 1776;
Charles Babbage 1852)
• Standardized parts (Whitney 1800)
• Scientific Management (Taylor 1881)
• Coordinated assembly line (Ford/
Sorenson/Avery 1913)
• Gantt charts (Gantt 1916)
• Motion study (Frank and Lillian Gilbreth
1922)
• Quality control (Shewhart 1924; Deming
1950)
1 – 48

49. The Heritage of OM
• Computer (Atanasoff 1938)
• CPM/PERT (DuPont 1957)
• Material requirements planning (Orlicky 1960)
• Computer aided design (CAD 1970)
• Flexible manufacturing system (FMS 1975)
• Baldrige Quality Awards (1980)
• Computer integrated manufacturing (1990)
• Globalization (1992)
• Internet (1995)
• Current- Digitilization, Information and
communication, Quality, Green Operations 1 – 49

50. Adam Smith- Division of Labor

51. Adam Smith was a Scottish economist, philosopher as well as a moral philosopher, a
pioneer of political economy, and a key figure during the Scottish Enlightenment, also
known as ''The Father of Economics'’ or ''The Father of Capitalism''.
Smith wrote two classic works, The Theory of Moral Sentiments (1759) and
An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus
and the first modern work of economics.

52.  Concept of division of labor, which Adam Smith wrote
about in the wealth of Nations (1776) was used by Ford.
 An operation is divided up in to a series of many small
tasks, individual workers are assigned to one of those
tasks.

53. https://www.youtube.com/watch?v=ZtWkGfKhsG8

54. Eli Whitney
• Born 1765; died 1825
• In 1798, received government contract to make 10,000 muskets
• Showed that machine tools could make standardized parts to exact
specifications
– Musket parts could be used in any musket
Fact- Invented Cotton Gin machine

55. https://www.youtube.com/watch?v=sLb9QGWK8TA

56. Frederick Winslow Taylor
• Father of Scientific Management
• His pioneering work in applying engineering
principles to the work done on the factory floor
was instrumental in the creation and development
of the branch of engineering that is now known as
industrial engineering.
• Taylor made his name, and was most proud of his
work, in scientific management; however, he made
his fortune patenting steel-process improvements.
• Taylor was also an athlete who competed
nationally in tennis.

57. Frederick W. Taylor
• Born 1856; died 1915
• Known as ‘father of scientific
management’-
• In 1881, as chief engineer for
Midvale Steel, studied how tasks
were done
– Began first motion and time studies
• Created efficiency principles
1 – 57

58. Taylor’s Principles
Management Should Take More
Responsibility for:
• Matching employees to right job
• Providing the proper training
• Providing proper work methods and tools
• Establishing legitimate incentives for work to
be accomplished
1 – 58

60. Today, an updated version of his original theory is used by such companies as FedEx and
Amazon.
Digital Taylorism is based on maximizing efficiency by standardizing the tools and
techniques for completing each task involved with a given job.
Every task is broken down to the smallest motion and translated into an exact procedure
that must be followed to complete that task.
Because everyone is operating in the same mechanistic way, it increases predictability
and consistency while reducing errors.
It is relatively easy for managers to replace workers and retain the same productivity.
The criticism of this type of management approach is similar to that of Taylor’s original
theory: It reduces worker creativity; it requires management to monitor all aspects of
employee behavior; and it is unforgiving to workers who don’t meet the standard.

61. Frank and Lillian Gilbreth

62. Frank & Lillian Gilbreth
• Frank (1868-1924); Lillian (1878-
1972)
• Husband-and-wife engineering team
• Further developed work
measurement methods
• Applied efficiency methods to their
home and 12 children!
• Book & Movie: “Cheaper by the
Dozen,” book: “Bells on Their Toes”
1 – 62

63. Taylor and the Gilbreths belonged to the classical school of management, which
emphasized increasing worker productivity by scientific analysis.
They differed, however, on the importance of the worker. Taylor’s emphasis was on
profitability and productivity; the Gilbreths were also focused on worker welfare and
motivation.
They believed that by reducing the amount of motions associated with a particular task,
they could also increase the worker’s well-being.
Their research, along with Taylor’s, provided many important principles later
incorporated into quality assurance and quality control programs begun in the 1920s
and 1930s.
Eventually, their work led to the science of ergonomics and industrial psychology.
(Ergonomics is the study of people in their operating environment, with the goal of
increasing productivity and reducing risk of work-related injury.)

64. https://www.youtube.com/watch?v=lDg9REgkCQk

66. Henry Ford- Game Changer of
Automobile World
https://www.youtube.com/watch?v=f5_mQpR2_Uo
https://www.youtube.com/watch?v=gglrbduPbQ0

67. • Born 1863; died 1947
• In 1903, created Ford Motor
Company
• In 1913, first used moving assembly
line to make Model T
– Unfinished product moved by
conveyor past work station
• Paid workers very well for 1911
($5/day!)
Henry Ford
1 – 67

68. W.EdwardsDeming
• Born 1900; died 1993
• Engineer and physicist
• Credited with teaching Japan
quality control methods in post-
WW2
• Used statistics to analyze process
• His methods involve workers in
decisions
1 – 68

69. SCIENTIFIC MANAGEMENT
 Widely changed the management of factories.
 Developed by Frederick Winslow Taylor, the
father of scientific management.
 Based on observation, measurement,
analysis and improvement of work methods
and economic incentives.
 Studied to identify the best method for doing
each job.

70. Cont….
 Henry Ford practically adopted the scientific management
principles for Taylor.
 Introduced the moving assembly line, which affected to
many industries.
 Introduced mass production to the automotive industry.

72.  The concept of “Interchangeable Parts” was applied by Eli
Whitney, an American inventor.
 The basis for interchangeable parts was to standardize
parts.
 Any part in a batch of parts would fit any automobile coming
down the assembly line.
 Result was a high decrease in assembly time and cost.

73. Henry Gantt - recognized the value of
nonmonetary rewards to motivate workers, and
developed a widely used system for scheduling, called
Gantt charts.

74.  Harrington Emerson - applied Taylor’s ideas to
organization structure and encouraged the use of
experts to improve organizational efficiency. He
testified in a congressional hearing that railroads
could save a million dollars a day by applying
principles of scientific management.

75. DECISION MODELS AND MANAGEMENT SCIENCE
Accompanied by the development of several
quantitative techniques.
 F.W. Harris developed a mathematical model for
inventory order size in 1915.
 H.F. Dodge, H.G. Romig and W. Shewhart
developed statistical procedures for sampling and
quality control in 1930.
 L.H.C. Tippett conducted studies that provided the
groundwork for statistical sampling theory In 1935.

76.  Those qualitative models were widely used in world war
2.
 These decision models were also used for forecasting,
inventory management, project management and other
areas of operations management

77. THE INFLUENCE OF JAPANESE MANUFACTURERS
 Japanese manufactures developed management
practices that increased the productivity and quality.
 Companies which were outside Japan was
interested in their approaches.
 The influence of Japanese companies is continuing
for the foreseeable future.

79. Contributions From
1 – 79
 Human factors
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information science

80. New Challenges in OM
To
 Global focus
 Just-in-time
 Supply chain
partnering
 Rapid product
development,
alliances
 Mass
customization
 Empowered
employees, teams
From
 Local or national focus
 Batch shipments
 Low bid purchasing
 Lengthy product
development
 Standard products
 Job specialization
1 – 80

81. Characteristics of Goods
• Tangible product
• Consistent product
definition
• Production usually
separate from
consumption
• Can be inventoried
• Low customer
interaction
1 – 81

82. Characteristics of Service
• Intangible product
• Produced and
consumed at same time
• Often unique
• High customer
interaction
• Inconsistent product
definition
• Often knowledge-based
• Frequently dispersed
1 – 82

84. 1 – 40
Goods Versus Services
Attributes of Goods
(Tangible Product)
Can be resold
Can be inventoried
Some aspects of quality
measurable
Selling is distinct from
production
Product is transportable
Site of facility important for cost
Often easy to automate
Revenue generated primarily
from tangible product
Attributes of Services
(Intangible Product)
Reselling unusual
Difficult to inventory
Quality difficult to measure
Selling is part of service
Provider, not product, is
often transportable
Site of facility important for
customer contact
Often difficult to automate
Revenue generated primarily
from the intangible service
Table 1.3

85. Goods and Services
Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
Percent of Product that is a Good Percent of Product that is a Service
100% 75 50 25 0 25 50 75 100%
| | | | | | | | |
1 – 85

86. New Trends in OM
Local or
national
focus
Low-cost, reliable
worldwide communication
and transportation
networks
Global focus
Batch (large)
shipments
Short product life cycles
and cost of capital put
pressure on reducing
inventory
Just-in-time
shipments
Low-bid
purchasing
Quality emphasis requires
that suppliers be engaged
in product improvement
Supply-
chain
partners,
Enterprise
Resource
Planning,
e-commerce
Past Causes Future

87. New Trends in OM
Lengthy
product
development
Shorter life cycles,
Internet, rapid international
communication, computer-
aided design, and
international collaboration
Rapid product
development,
alliances,
collaborative
designs
Standardized
products
Affluence and worldwide
markets; increasingly
flexible production
processes
Mass
customization
with added
emphasis on
quality
Job
specialization
Changing socioculture
milieu; increasingly a
knowledge and information
society
Empowered
employees,
teams, and
lean
production
Past Causes Future
1 – 87

88. New Trends in OM
Low-cost
focus
Environmental issues, ISO
14000, increasing disposal
costs
Environmentally
sensitive
production,
green
manufacturing,
recycled
materials,
remanufacturing
Past Causes Future
Figure 1.6
1 – 88

89. 1 – 89
MANAGING GLOBAL OPERATIONS
The term ‘globalization’ describes businesses’ deployment of
facilities and operations around the world.
Globalization can be defined as a process in which geographic
distance becomes a factor of diminishing importance in the
establishment and maintenance of cross border economic,
political and socio- cultural relations.
It can also be defined as worldwide drive toward a globalized
economic system dominated by supranational corporate trade
and banking institutions that are not accountable to democratic
processes or national governments.

90. 1 – 90
There are four developments, which have spurred the trend toward
globalization.
These are:
Improved transportation and communication technologies;
Opened financial systems;
Increased demand for imports;
Reduced import quotas and other trade barriers.
When a firm sets up facilities abroad it involves some added
complexities in its operation. Global markets impose new standards on
quality and time. Managers should not think about domestic markets
first and then global markets later, rather it could be think globally and
act locally. Also, they must have a good understanding of their
other important
competitors. Some
multinational operations include other
challenges of managing
languages and customs,
different management style, unfamiliar laws and regulations, and
different costs.

91. 1 – 91
Managing global operations would focus on the following key
issues:
To acquire and properly utilize the following concepts and
those related to global operations, supply chain, logistics, etc.
To associate global historical events to key drivers in global
operations from different perspectives.
To develop criteria for conceptualization and evaluation of
different global operations.
To associate success and failure cases of global operations to
political, social, economical and technological environments.To
envision trends in global operations.
To develop an understanding of the world vision regardless of
their country of origin, residence or studies in a respectful way
of perspectives of people from different races, studies,
preferences, religion, politic affiliation, place of origin, etc.