PRODUCTION
MANAGEMENT
Prepared by
V.PRABAKARAN
What is Production?
Production…
 “It is the step-by-step conversion of one form of
material into another form through chemical or
mechanical ...
Why should we study?
Objectives of any
business?
Profit Making
&
Sustainable growth
Profit = Price - cost
Cond…
 Which involves
 Planning
 Organizing
 Controlling
How?
Model of production system…
Supplier
Input
Conversion/
Creation
process
Output
Customer
Men,
Machine,
Money &
Method
Goods...
Goods Services
Tangible Intangible
Can be stored Cannot be stored
Low customer contact High customer contact
Longer respon...
Objectives of pm…
 Right quality
 Right quantity
 Optimal time
 Optimal cost
Classifications of production system…
Output / Product Variety
Production
Volume
Continuous
Production
Mass Production
Bat...
Continuous production…
 Production facilities are arranged as per the
sequence of production operations
 The items are m...
Characteristics…
 Material handling is fully automated.
 Process follows a predetermined sequence of
operations.
 Plann...
Advantages..
 Standardization of product and process sequence.
 Higher rate of production with reduced cycle
time.
 Man...
Disadvantages…
 Very high investment for setting flow lines.
 Product differentiation is limited
Mass production…
 Manufacture of discrete parts or assemblies
using a continuous process
 The technique was first implem...
Characteristics…
 Dedicated special purpose machines having
higher production capacities and output rates.
 Large volume...
Advantages…
 Higher rate of production with reduced cycle
time.
 Less skilled operators are required.
 Low process inve...
Limitations…
 Breakdown of one machine will stop an entire
production line.
 Line layout needs major change with the cha...
Batch production…
 It is the manufacturing technique of creating a
group of components at a workstation before
moving the...
Advantages…
 Better utilization of plant and machinery.
 Promotes functional specialization.
 Cost per unit is lower as...
Limitations…
 Material handling is complex because of irregular
and longer flows.
 Production planning and control is co...
Job shop production…
 Manufacturing of one or few quantity of products
designed and produced as per the specification of
...
Characteristics…
 High variety of products and low volume.
 Highly skilled operators who can take up each
job as a chall...
Limitations…
 Higher cost due to frequent set up changes.
 Production planning is complicated.
 Larger space requiremen...
Operations functions…
 Location of facilities
 Plant layouts and material handling
 Product design
 Process design
 P...
1. Location facilities…
 It’s a geographical factor
 3M have their corporate activity including R & D
in Texas
 BMW ass...
Texas…
 Place for high intellectual capital
 Approximately $4.0 billion of federal R&D funds
are spent each year in Texa...
Cond…
 Proximity of customer
 Business climate
 Total cost
 Infrastructure
 Quality of labour
 Competitive advantage...
2. Plant Layout & Material Handling
 “Plant layout is a plan of an optimum
arrangement of facilities including personnel,...
3. Product Design…
 Conversion of idea into reality
 It’s a survival and growth strategy
 Need identification
 Marketi...
4, Process design…
 Process design is a macroscopic decision-making
of an overall process route for converting the raw
ma...
5. Production Planning & Controlling
 Planning - what to do, how to do it, when to do
it and who is to do it. Planning br...
Cond…
 Aggregate planning
 Master Production Schedule
 Materials Requirement Planning
 Capacity Planning
 Scheduling ...
6. Quality Control…
 ‘a system that is used to maintain a desired
level of quality in a product or service’.
 It is a sy...
7. Maintenance Management…
 To achieve minimum breakdown and to keep the
plant in good working condition at the lowest
po...
Concept of Productivity
 Different things to different person
 Universal concept: Output to Input
Significance of productivity
 Importance towards economic growth &
development
 Three sources of growth
1. Traditional s...
Impact of productivity
 Large supply of consumer goods and capital
goods
 High earnings
 Strengthening the economic fou...
Model of low productivity trap
Measurement of productivity
 productivity measurement is the quantification of
both the output and input resources of a
p...
Cond…
 Latest Methodology: Total Factor Productivity
(TFP)
 Aggregate of all inputs & outputs
Improve productivity…
 Increase output for the same input
 Decreased input for the same output
 Proportionate increase ...
Evolutions of OM
 From craft or job shops to conventional mass
production and then to flexible design and
production syst...
Cond…
 Craft production
- non standard input/output/process
- high skilled labour
- produced unique product
 Later 1800’...
Cond…
 Difficult to change
 the experience of Ford and its Model T
production facilities in the 1920s to demonstrate
how...
Cond..
 Moved from Economies of scale to Economies of
scope
- developing interchangeable components
- dividing and specia...
Lean manufacturing…
 Lean is about doing more with less
 Taiichi Ohno
 focused on eliminating waste and empowering
work...
10 rules of lean production…
1. Eliminate waste 
2. Minimize inventory 
3. Maximize flow 
4. Pull production from customer...
Types of waste…
 Defects
 Waiting
 Over production
 Transportation
 Inventory
 Complexity
 Unused creativity
Operations Strategy
Definition…
 Strategy specifying how the firm will employ its production
capabilities to support its corporate strategy.
...
Order – Winners & Qualifiers
To be present in the
market
Quality
Price
Reputation
Reliability
To be a winner in
the market...
Competing Priorities
 Quality
 Lead Time
 Cost
 Flexibility
Dimensions of Quality
 Performance
Does the product or service do what it is
supposed to do, within its defined tolerance...
Cond…
 Durability
How long will the product perform or last, and
under what conditions?
 Serviceability
Is the product r...
Cond…
 Perception
Perception is reality. The product or service
may possess adequate or even superior dimensions
of quali...
Time…
 Manufacturing Lead Time
 Product Introduction
 Delivery Lead Time
 Frequency of Delivery
Price & Cost
 producing high volumes of standardized products
in hopes of taking advantage of economies of
scale and expe...
Flexibility…
 Customization
 Variety
 Volume Flexibility
 Material quality - ability to cope with incoming
materials o...
Developing
Operations
Strategy…
Corporate Mission
Product/Service Plan
Competitive Priorities
Cost, Time, Quality,
and Fle...
Positioning the Production System
 Select the type of product design
 Standard
 Custom
 Select the type of production ...
Product/Service Plans
As a product is designed, all the detailed
characteristics of the product are established.
Each prod...
Outsourcing Plans
 Outsourcing refers to hiring out or subcontracting some of
the work that a company needs to do.
 This...
Cond…
 A company might outsource any of the following
manufacturing related functions:
 Designing the product
 Purchasi...
Cond…
 Many companies even outsource some service
functions such as:
 Payroll
 Billing
 Order processing
 Developing/...
Strategic Allocation of Resources
 For most companies, the vast majority of the firm’s
resources are used in production/o...
Facility Plans
 How to provide the long-range capacity to
produce the firm’s products/services is a critical
strategic de...
Operations Strategy in Global Economy
Case
 KMART & WALL MART
 1987 Kmart was clearly dominating the discount
chain race
 sales of $25.63 billion to Wal-Mart...
Cond…
 dominant discount chain, with sales of $188.1
billion to Kmart’s $36.4 billion
 During 1995 Kmart’s market share ...
Reason for Success…
 Invest heavily in national television campaigns
using high-profile spokespeople
 invested heavily i...
Cond…
 Kmart adopted a new strategy to compete with
Wal-Mart—merging with Sears, Roebuck & Co.
in March 2005 to gain pote...
Strategy & Competetiveness
 Competitiveness for a nation is the degree to
which it can, under free and fair market
condit...
Factors Affecting Today’s
Global Business Conditions
 Reality of global competition
 Quality, customer service, and cost...
Reality of Global Competition
 Changing nature of world business
 Multinational companies
 Strategic alliances and prod...
Changing Nature of World Business
 The US gross domestic product (GDP) is, at $10
trillion, the largest in the world.
 C...
Strategic Alliances
 Strategic alliances are joint ventures among
international companies to exploit global business
oppo...
Strategic Alliances
General Motors (US) &
Kia Motor Corp. (S.K.)
Kia might help sell
and market GM cars
in South Korea
Ren...
Strategic Alliances
 Japanese companies have long practiced
keiretsu, the linking of companies into industrial
groups.
 ...
Production Sharing
 Production sharing means that a product might
be designed and financed in one country, its
materials ...
Production Sharing
 The Mercury Capri automobile is an example:
 Designed in Italy
 most of its components made in Japa...
Pros and Cons of Globalization
 Pros (Pluses)
 Productivity grows more quickly (living standards
can go up faster)
 Glo...
Pros and Cons of Globalization
 Cons (Minuses)
Jobs lost due to imports or production shifts
abroad
Most displaced work...
International Financial Conditions
 International financial conditions are complex
due to:
 inflation
 fluctuating curr...
International Financial Conditions
 The Dollar Versus the Yen and the Mark
Year Yen per Dollar Mark per
Dollar
1975 305 2...
International Financial Conditions
 Example of Currency Exchange Rate Changes
 A product produced and sold in the US for...
International Financial Conditions
 Due, in part, to the fall in the value of the dollar
between 1975 and 1995, the follo...
Quality, Service, and Cost Challenges
 Quality
 The goal of adequate quality must be replaced with
the objective of perf...
Quality, Service, and Cost Challenges
 Customer Service
 Companies must quickly develop innovative products
and respond ...
Quality, Service, and Cost Challenges
 Cost
Cost-cutting measures being used
include:
Moving production to low-labor-co...
Advanced Technologies
 The use of automation is one of the most far-
reaching developments to affect manufacturing
and se...
Advanced Production Technology
 Computer-aided design (CAD) - allows engineers to design
products directly on computer te...
Continued Growth of Service Sector
 A robust service sector helps support the
manufacturing sector.
 There is much oppor...
Scarcity of Operations Resources
 Raw materials like titanium, nickel, coal, natural
gas, water, and petroleum products a...
Social-Responsibility Issues
 Corporate attitudes are evolving from doing what
companies have a legal right to do, to doi...
Social-Responsibility Issues
 Environmental Impact
 Product-Safety Impact
 Employee Impact
Social-Responsibility Issues
 Environmental Impact
Concerns about the global environment include:
 Landfill waste reduct...
Social-Responsibility Issues
 Environmental Impact
 There is a need for standardizing government
regulations of the envi...
Social-Responsibility Issues
 Product-Safety Impact
Harm to people or animals that results from
poor product design can:
...
Social-Responsibility Issues
 Employee Impact
Employee benefits and policies include:
 Safety and health programs
 Fair...
Linking Operations and Marketing
Strategies
 Operations Strategy
 Product-focused
 Make-to-stock
 Standardized product...
Linking Operations and Marketing
Strategies
 Operations Strategy
 Product-focused
 Make-to-order
 Standardized product...
Linking Operations and Marketing
Strategies
 Operations Strategy
 Process-focused
 Make-to-stock
 Custom products
 Hi...
Linking Operations and Marketing
Strategies
 Operations Strategy
 Process-focused
 Make-to-order
 Custom products
 Lo...
Strategy
Formulation &
Implementation
organization’s business strategy
 set of objectives, plans, and policies for the
organization to compete successfully
 T...
Strategy Formulation
Cond…
 Vision statements are used to express the
organization’s values and aspirations
 Mission statements express the o...
COCA-COLA COMPANY’S MISSION
STATEMENT
We exist to create value for our share owners on a long-term basis by building a
bus...
Strategy…
 Mintzberg identifies five major strategy schools of thought:
1. Strategy as a plan - the required choices rela...
Business Model…
 A business model can be viewed as a
representation of an organization’s core logic and
strategic choices...
Haloid Xerox Inc
 It was Haloid Company
 Model 914 was used
 Followed low cost method with latest technology
Product Life Cycle…
 Introductory State
 Growth Stage
 Maturity Stage
 Decline Stage
 One approach to categorizing an...
Cond…
 First to Market
 Second to Market
 Cost Minimization or Late to Market
 Market Segmentation
Stages of a Product’s Life Cycle
Introduction Growth Maturity Decline
B&W TV
Video Recorder
CD PlayerColor Copier
Cell Pho...
Innovation
 Something new to market
 anything which is new to the business and its
product range is counted as innovatio...
You Can't Innovate Like Apple
 APPLE = INNOVATION
 Two types of people in this world
1. There are those who open their p...
Success Strategy
 10 to 3 to 1
 Paired design meetings
 Brainstorm meeting
 Apple does not do market research
  Apple...
Products..
 MAC PRODUCTS : 6
 iPOD PRODUCTS : 5
 iPHONE PRODUCTS : 2
 SOFTWARE PRODUCTS : 17
 ACCSESSORIES : 16
TOTAL...
What drives innovation
 Research & Development
 Engineer as – King - Customer is king concept
 Reason for failure of so...
to classify the innovations by type
 A modified version of an existing product range
 A new model in the existing produc...
Process Focus
 Process: Is any part of an organization that takes
inputs and transforms them into outputs
 Cycle Time: I...
Process Planning
 Process planning is the systematic determination
of methods by which a product is to be
manufactured, e...
Information Required to do Process Planning
 Qty of work to be done along with product
specifications.
 Quality of work ...
Process Flow Design
 A process flow design can be defined as a
mapping of the specific processes that raw
materials, part...
Process Flowcharting
 Process flowcharting is the use of a diagram to
present the major elements of a process
 The basic...
Process Charts Symbols
Event Symbol
1. Operation
2. Storage
3. Delay (or)
Temporary Storage
4. Transport
5. Inspection
Cond…
6. Operation -cum - Transportation
7. Inspection –cum - Operation
Process Chart – Refill of a Ball Point Pen
 Unscrew cap
 Unscrew neck
 Remove old refill
 Place the refill in the barr...
Polishing a material
 Start polishing machine
 Sprinkle solution of polishing Compound on the rotating table
 Hold the ...
Flow Diagram
A flow diagram is a drawing or a diagram which is
drawn to scale. It shows the relative position of
productio...
STRING DIAGRAM
String Diagram is a model or a scale plan of the shop, in which
every machine or equipment is marked and a ...
Types of Processes
Single-stage Process
Stage 1
Stage 1 Stage 2 Stage 3
Multi-stage Process
Types of Processes (Continued)
Stage 1 Stage 2
Buffer
Multi-stage Process with Buffer
A buffer refers to a storage area be...
Other Process Terminology
 Blocking
 Occurs when the activities in a stage must stop
because there is no place to deposi...
Other Process Terminology (Continued)
 Bottleneck
Occurs when the limited capacity of a process
causes work to pile up o...
Process Performance Metrics
 Operation time = Setup time + Run time
 Throughput time = Average time for a unit to
move t...
Process Performance Metrics (Continued)
 Cycle time = Average time between
completion of units
 Throughput rate = 1 .
Cy...
Process Performance Metrics (Continued)
 Productivity = Output
Input
Product-Flow Characteristics
 Types of Product Flow
 Line Flow
 Batch Flow
 Project Flow
Line Flow
WS 1 WS 2 WS 3
WS Task or work st at ion
Product f low
Batch Flow
WS 1 WS 3 WS 5
WS Task or work st at ion
Product f lows
WS 2 WS 4
Project Flow
St art
Task 1 Task 3
Task Task or act ivit y
Precedence relat ionship
Task 2 Task 4
End
Factors Affecting Process Choice
 Market conditions and competition
 Capital requirements
 Labor supply and cost
 Mana...
Product-Process Strategy
 Product-Process Matrix
 Product Life Cycle (PLC) stages
 Process Life Cycle stages
 Modified...
Product Life Cycle Stages
 Low volume-low standardization, one of a kind
 Multiple products, low volume
 Few major prod...
Process Life Cycle Stages
 Jumbled flow (job shop)
 Disconnected line flow (batch)
 Connected line flow (assembly line)...
PROCESS LIFE CYCLE
Process life cycles are related to product life cycles as shown
in
the following figure.
Over a period ...
production
production
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  • production

    1. 1. PRODUCTION MANAGEMENT Prepared by V.PRABAKARAN
    2. 2. What is Production?
    3. 3. Production…  “It is the step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the user”
    4. 4. Why should we study?
    5. 5. Objectives of any business?
    6. 6. Profit Making & Sustainable growth
    7. 7. Profit = Price - cost
    8. 8. Cond…  Which involves  Planning  Organizing  Controlling How?
    9. 9. Model of production system… Supplier Input Conversion/ Creation process Output Customer Men, Machine, Money & Method Goods & Services Who control/monitor this?
    10. 10. Goods Services Tangible Intangible Can be stored Cannot be stored Low customer contact High customer contact Longer response time Shorter response time Production may be separate from consumption Produced & consumed at same place Ownership can be transfer ? Some aspects of quality is measurable Quality of service is difficult to measure
    11. 11. Objectives of pm…  Right quality  Right quantity  Optimal time  Optimal cost
    12. 12. Classifications of production system… Output / Product Variety Production Volume Continuous Production Mass Production Batch Production Job Shop Production
    13. 13. Continuous production…  Production facilities are arranged as per the sequence of production operations  The items are made to flow through the sequence of operations through material handling devices such as conveyors, transfer devices  chemical and petrochemical industries
    14. 14. Characteristics…  Material handling is fully automated.  Process follows a predetermined sequence of operations.  Planning and scheduling is a routine action  Dedicated plant and equipment with zero flexibility
    15. 15. Advantages..  Standardization of product and process sequence.  Higher rate of production with reduced cycle time.  Manpower is not required for material handling as it is completely automatic.  Person with limited skills can be used on the production line.  Unit cost is lower due to high volume of production.
    16. 16. Disadvantages…  Very high investment for setting flow lines.  Product differentiation is limited
    17. 17. Mass production…  Manufacture of discrete parts or assemblies using a continuous process  The technique was first implemented by US automobile pioneer Henry Ford in 1908, for the manufacture of the Model T Ford automobile.
    18. 18. Characteristics…  Dedicated special purpose machines having higher production capacities and output rates.  Large volume of products.  Shorter cycle time of production.  Flow of materials, components and parts is continuous  Production planning and control is easy.  Material handling can be completely automatic.
    19. 19. Advantages…  Higher rate of production with reduced cycle time.  Less skilled operators are required.  Low process inventory.  Manufacturing cost per unit is low.
    20. 20. Limitations…  Breakdown of one machine will stop an entire production line.  Line layout needs major change with the changes in the product design.  High investment in production facilities
    21. 21. Batch production…  It is the manufacturing technique of creating a group of components at a workstation before moving the group to the next step in production  It is characterized by the manufacture of limited number of products produced at regular intervals  Eg:-beverages, pharmaceutical products, paint, fertilizer, and cement
    22. 22. Advantages…  Better utilization of plant and machinery.  Promotes functional specialization.  Cost per unit is lower as compared to job order production.  Lower investment in plant and machinery.  Flexibility to accommodate and process number of products.  Job satisfaction exists for operators
    23. 23. Limitations…  Material handling is complex because of irregular and longer flows.  Production planning and control is complex  Higher set up costs due to frequent changes in set up.
    24. 24. Job shop production…  Manufacturing of one or few quantity of products designed and produced as per the specification of customers within prefixed time and cost  The distinguishing feature of this is low volume and high variety of products
    25. 25. Characteristics…  High variety of products and low volume.  Highly skilled operators who can take up each job as a challenge because of uniqueness.  Large inventory of materials, tools, parts.  Detailed planning is essential for sequencing the requirements of each product, capacities for each work centre and order priorities
    26. 26. Limitations…  Higher cost due to frequent set up changes.  Production planning is complicated.  Larger space requirements
    27. 27. Operations functions…  Location of facilities  Plant layouts and material handling  Product design  Process design  Production and planning control  Quality control  Materials management  Maintenance management.
    28. 28. 1. Location facilities…  It’s a geographical factor  3M have their corporate activity including R & D in Texas  BMW assembles the Z3 sports car in South Carolina What made them to choose it?
    29. 29. Texas…  Place for high intellectual capital  Approximately $4.0 billion of federal R&D funds are spent each year in Texas  One of the top 50 states in terms of the amount of federal R&D dollars received annually  US geological survey  The Southern Plains Agricultural Research Center  The Brazos Field Research Station is a unit of the Columbia Environmental Research Center…etc
    30. 30. Cond…  Proximity of customer  Business climate  Total cost  Infrastructure  Quality of labour  Competitive advantage  Political issues/involvement "We deliberately chose a country within the EU with a politically and economically stable climate ...the good relationship we have with the NFIA (Netherlands Foreign Investment Agency)and the Dutch government is very much appreciated and respected by Eastman!"  Godefroy A. Motte, Vice President and Managing Director, Eastman Chemical (EMEA)
    31. 31. 2. Plant Layout & Material Handling  “Plant layout is a plan of an optimum arrangement of facilities including personnel, operating equipment, storage space, material handling equipments and all other supporting services along with the design of best structure to contain all these facilities”.
    32. 32. 3. Product Design…  Conversion of idea into reality  It’s a survival and growth strategy  Need identification  Marketing  Product development  Manufacturing
    33. 33. 4, Process design…  Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods  selection of a process, choice of technology, process flow analysis
    34. 34. 5. Production Planning & Controlling  Planning - what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are, to where we want to go  Scheduling - determines the programme for the operations. Scheduling may be defined as ‘the fixation of time and date for each operation’ as well as it determines the sequence of operations
    35. 35. Cond…  Aggregate planning  Master Production Schedule  Materials Requirement Planning  Capacity Planning  Scheduling & Control
    36. 36. 6. Quality Control…  ‘a system that is used to maintain a desired level of quality in a product or service’.  It is a systematic control of various factors that affect the quality of the product  Quality control aims at prevention of defects at the source, relies on effective feed back system and corrective action procedure
    37. 37. 7. Maintenance Management…  To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost.  To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption.  To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment
    38. 38. Concept of Productivity  Different things to different person  Universal concept: Output to Input
    39. 39. Significance of productivity  Importance towards economic growth & development  Three sources of growth 1. Traditional source of growth 2. Institutional innovation 3. Technological progress
    40. 40. Impact of productivity  Large supply of consumer goods and capital goods  High earnings  Strengthening the economic foundation of human well being  Improvement in working and living conditions
    41. 41. Model of low productivity trap
    42. 42. Measurement of productivity  productivity measurement is the quantification of both the output and input resources of a productive system  Problem here is : input – aggregate one  Traditional method: index-number approach - A measure or index of aggregate output divided by the observed quantity of a single input thus became the earliest approach to productivity measurement
    43. 43. Cond…  Latest Methodology: Total Factor Productivity (TFP)  Aggregate of all inputs & outputs
    44. 44. Improve productivity…  Increase output for the same input  Decreased input for the same output  Proportionate increase in the output is more than the proportionate increase in the input  Proportionate decrease in the input is more than the proportionate increase in the output  Simultaneous increase in the output with decrease in the input
    45. 45. Evolutions of OM  From craft or job shops to conventional mass production and then to flexible design and production systems  In two directions 1. Variety in Product design 2. Use of automation
    46. 46. Cond…  Craft production - non standard input/output/process - high skilled labour - produced unique product  Later 1800’s – economies of scale - standard input/output/process - less skilled labour - less production cost - similar kind of product
    47. 47. Cond…  Difficult to change  the experience of Ford and its Model T production facilities in the 1920s to demonstrate how a company can face bankruptcy by pushing process rationalization and scale economies too far -- for example  NIRMA washing powder
    48. 48. Cond..  Moved from Economies of scale to Economies of scope - developing interchangeable components - dividing and specializing labor - automating tasks - Use of CAD/CAM, FMS, CIM - Production cost is reduced
    49. 49. Lean manufacturing…  Lean is about doing more with less  Taiichi Ohno  focused on eliminating waste and empowering workers, reduced inventory and improved productivity
    50. 50. 10 rules of lean production… 1. Eliminate waste  2. Minimize inventory  3. Maximize flow  4. Pull production from customer demand  5. Meet customer requirements  6. Do it right the first time  7. Empower workers  8. Design for rapid changeover  9. Partner with suppliers  10. Create a culture of continuous improvement (Kaizen)
    51. 51. Types of waste…  Defects  Waiting  Over production  Transportation  Inventory  Complexity  Unused creativity
    52. 52. Operations Strategy
    53. 53. Definition…  Strategy specifying how the firm will employ its production capabilities to support its corporate strategy.  Operations strategy is the total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources.  Operations strategy is the total patterns of decisions and actions which set the role, objectives and activities of the operation so that they contribute to, and support, the organisation’s business strategy
    54. 54. Order – Winners & Qualifiers To be present in the market Quality Price Reputation Reliability To be a winner in the market Best Quality Low Price Consistant Reliability Timely delivery
    55. 55. Competing Priorities  Quality  Lead Time  Cost  Flexibility
    56. 56. Dimensions of Quality  Performance Does the product or service do what it is supposed to do, within its defined tolerances?  Features Does the product or services possess all of the features specified, or required for its intended purpose?  Reliability Will the product consistently perform within specifications?
    57. 57. Cond…  Durability How long will the product perform or last, and under what conditions?  Serviceability Is the product relatively easy to maintain and repair?  Aesthetics The way a product looks is important to end- users
    58. 58. Cond…  Perception Perception is reality. The product or service may possess adequate or even superior dimensions of quality, but still fall victim to negative customer or public perceptions
    59. 59. Time…  Manufacturing Lead Time  Product Introduction  Delivery Lead Time  Frequency of Delivery
    60. 60. Price & Cost  producing high volumes of standardized products in hopes of taking advantage of economies of scale and experience curve effects  Involves Manufacturing Cost  Running cost  Service cost  Value added
    61. 61. Flexibility…  Customization  Variety  Volume Flexibility  Material quality - ability to cope with incoming materials of varying quality.  New product - ability to cope with the introduction of new products.  Modification - ability to modify existing products.
    62. 62. Developing Operations Strategy… Corporate Mission Product/Service Plan Competitive Priorities Cost, Time, Quality, and Flexibility Elements of Operations Strategy • Positioning the Production System • Product/Service plans • Outsourcing Plans • Process and technology Plans • Strategic allocation of Resources • Facility Plans: Capacity, Location, and Layout Business Strategy
    63. 63. Positioning the Production System  Select the type of product design  Standard  Custom  Select the type of production processing system  Product focused  Process focused  Select the type of finished-goods inventory policy  Produce-to-stock  Produce-to-order
    64. 64. Product/Service Plans As a product is designed, all the detailed characteristics of the product are established. Each product characteristic directly affects how the product can be made. How the product is made determines the design of the production system.
    65. 65. Outsourcing Plans  Outsourcing refers to hiring out or subcontracting some of the work that a company needs to do.  This strategy is being used more and more as companies strive to operate more efficiently.  Outsourcing has many advantages and disadvantages.  Companies try to determine the best level of out-sourcing to achieve their operations & business goals.  More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.
    66. 66. Cond…  A company might outsource any of the following manufacturing related functions:  Designing the product  Purchasing the basic raw materials  Processing the subcomponents, subassemblies, major assemblies, and finished product  Distributing the product
    67. 67. Cond…  Many companies even outsource some service functions such as:  Payroll  Billing  Order processing  Developing/maintaining a website  Employee recruitment  Facility maintenance
    68. 68. Strategic Allocation of Resources  For most companies, the vast majority of the firm’s resources are used in production/operations.  Some or all of these resources are limited.  The resources must be allocated to products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.
    69. 69. Facility Plans  How to provide the long-range capacity to produce the firm’s products/services is a critical strategic decision.  The location of a new facility may need to be decided.  The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.
    70. 70. Operations Strategy in Global Economy
    71. 71. Case  KMART & WALL MART  1987 Kmart was clearly dominating the discount chain race  sales of $25.63 billion to Wal-Mart’s $15.96 billion – Twice as many as supply chain/stores  January 1991, Wal-Mart had overtaken Kmart, with sales of $32.6 billion to Kmart’s sales of $29.7 billion  At this stage WALL MART had 1721 to Kmart’s 2330
    72. 72. Cond…  dominant discount chain, with sales of $188.1 billion to Kmart’s $36.4 billion  During 1995 Kmart’s market share declined from 34.5 percent to 22.7 percent, while Wal-Mart’s increased from 20.1 percent to 41.6 percent Reason…Guess?
    73. 73. Reason for Success…  Invest heavily in national television campaigns using high-profile spokespeople  invested heavily in operations in an effort to lower costs  Wal-Mart developed a companywide computer system to link cash registers to headquarters,  Further, the use of scanners at the checkout stations eliminated the need for price checks
    74. 74. Cond…  Kmart adopted a new strategy to compete with Wal-Mart—merging with Sears, Roebuck & Co. in March 2005 to gain potential synergies through cross-selling and other retail sales techniques  Nothing was worked out  By year-end 2007, Wal-Mart rang up sales of $379 billion while Sears sales were $51 billion  Wal-Mart had 7262 while Sears stayed at 3800
    75. 75. Strategy & Competetiveness  Competitiveness for a nation is the degree to which it can, under free and fair market conditions, produce goods and services that meet the test of international markets
    76. 76. Factors Affecting Today’s Global Business Conditions  Reality of global competition  Quality, customer service, and cost challenges  Rapid expansion of advanced technologies  Continued growth of the service sector  Scarcity of operations resources  Social responsibility issues
    77. 77. Reality of Global Competition  Changing nature of world business  Multinational companies  Strategic alliances and production sharing  Fluctuation of international financial conditions
    78. 78. Changing Nature of World Business  The US gross domestic product (GDP) is, at $10 trillion, the largest in the world.  Companies all over the globe are aggressively exporting their products/services to the US  Many US companies are targeting foreign markets to shore up profits.  The global economy that interconnects the economies of all nations has been termed the global village.  One of the most important new markets is China.
    79. 79. Strategic Alliances  Strategic alliances are joint ventures among international companies to exploit global business opportunities.  Alliances are often motivated by  Product or production technology  Market access  Production capability  Pooling of capital
    80. 80. Strategic Alliances General Motors (US) & Kia Motor Corp. (S.K.) Kia might help sell and market GM cars in South Korea Renault (France) & City of Moscow Manufacture 100,000 vehicles annually near Moscow Sino Aerospace Invest- ment Corp. (Taiwan) & Swearingen Aircraft (US) Forming Texas-based Sino Swearingen Aircraft Co.
    81. 81. Strategic Alliances  Japanese companies have long practiced keiretsu, the linking of companies into industrial groups.  A financial keiretsu links companies together with cross-holding of shares, sales and purchases within the group, and consultation.  A production keiretsu is a web of interlocking relationships between a big manufacturer (Toyota) and its suppliers.
    82. 82. Production Sharing  Production sharing means that a product might be designed and financed in one country, its materials produced in other countries, assembled in another country, and sold in yet other countries.  The country that is the highest-quality, lowest- cost producer for a particular activity would perform that portion of the production of the product.
    83. 83. Production Sharing  The Mercury Capri automobile is an example:  Designed in Italy  most of its components made in Japan  assembled in Australia  sold in the U.S  NOKIA
    84. 84. Pros and Cons of Globalization  Pros (Pluses)  Productivity grows more quickly (living standards can go up faster)  Global competition and cheap imports keep a lid on prices  Open economy spurs innovation (with fresh ideas from abroad)  Export jobs often pay more than other jobs  US has more access to foreign investment (keeps interest rates low)
    85. 85. Pros and Cons of Globalization  Cons (Minuses) Jobs lost due to imports or production shifts abroad Most displaced workers find new jobs that pay less Workers face pay-cuts demands from employers Service and white-collar jobs are increasingly vulnerable
    86. 86. International Financial Conditions  International financial conditions are complex due to:  inflation  fluctuating currency exchange rates  turbulent interest rates  volatility of international stock markets  huge national debts of some countries
    87. 87. International Financial Conditions  The Dollar Versus the Yen and the Mark Year Yen per Dollar Mark per Dollar 1975 305 2.7 1980 215 2.0 1985 210 2.4 1990 135 1.6 1995 85 1.4 2000 108 2.2
    88. 88. International Financial Conditions  Example of Currency Exchange Rate Changes  A product produced and sold in the US for $1 would have sold in Japan for 135 yen in 1990 and 85 yen in 1995, a price decrease of 37%.  A product produced and sold in Japan for 135 yen in 1990 and sold for $1 in the US would have sold in the US for $1.57 in 1995, a 57% price increase.
    89. 89. International Financial Conditions  Due, in part, to the fall in the value of the dollar between 1975 and 1995, the following occurred:  Prices of US products/services abroad fell and demand increased  Japan and other countries built factories in US  Japanese manufacturers moved upscale toward higher priced products
    90. 90. Quality, Service, and Cost Challenges  Quality  The goal of adequate quality must be replaced with the objective of perfect product and service quality.  The entire corporate culture must be redirected and committed to the ideal of perfect quality.  All employees must be empowered to act.  A commitment to continuous improvement has to be organization-wide.
    91. 91. Quality, Service, and Cost Challenges  Customer Service  Companies must quickly develop innovative products and respond quickly to customers’ needs.  Organizational structures must be made more horizontal to quickly accommodate change.  Multidisciplined teams must have decision-making authority, responding better to the marketplace.  Large, unwieldy companies are spinning off whole business units making them autonomous businesses that can compete with small, aggressive competitors.  Agilent Technologies spun out of Hewlett-Packard in 1999, formed from HP's former test-and- measurement equipment division
    92. 92. Quality, Service, and Cost Challenges  Cost Cost-cutting measures being used include: Moving production to low-labor-cost countries Negotiating lower labor rates with unions and workers Automating processes to reduce the amount of labor needed, particularly processes that are labor intensive.
    93. 93. Advanced Technologies  The use of automation is one of the most far- reaching developments to affect manufacturing and services in the past century.  The initial cost of these assets is high.  The benefits go far beyond a reduction in labor costs.  Increased product/service quality  Reduced scrap and material costs  Faster responses to customer needs  Faster introduction of new products and services
    94. 94. Advanced Production Technology  Computer-aided design (CAD) - allows engineers to design products directly on computer terminals  Computer-aided manufacturing (CAM) - translates CAD information into machinery instructions  Flexible manufacturing systems (FMS) - clusters of automated machinery produce a variety of products  Automated storage & retrieval systems (ASRS) - computer- controlled warehouses  Automatic identification systems (AIS) - data is “read” into computers using bar coding and the like
    95. 95. Continued Growth of Service Sector  A robust service sector helps support the manufacturing sector.  There is much opportunity for quality improvement in US service firms.  Many operations managers are being employed in services.  Planning, analyzing, and controlling approaches from manufacturing are being adapted to service systems.  The US service sector, like the manufacturing sector, must streamline and improve operations if it is to survive.
    96. 96. Scarcity of Operations Resources  Raw materials like titanium, nickel, coal, natural gas, water, and petroleum products are periodically unavailable or in short supply.  A shortage of any necessary input to a conversion subsystem, including skilled personnel, can be a challenge for an operations manager.  An important issue in the formation of business strategy is how to allocate scarce resources among business opportunities.
    97. 97. Social-Responsibility Issues  Corporate attitudes are evolving from doing what companies have a legal right to do, to doing what is right.  Factors influencing this evolution include:  Consumer attitude -- Consumers are expressing their likes/dislikes by such means as stockholder meetings, liability suits, and buying preferences.  Self-interests -- Companies realize that profits will be greater if they act responsibly.
    98. 98. Social-Responsibility Issues  Environmental Impact  Product-Safety Impact  Employee Impact
    99. 99. Social-Responsibility Issues  Environmental Impact Concerns about the global environment include:  Landfill waste reduction  Recycling  Energy conservation  Chemical spills  Acid rain  Radioactive waste disposal  … and more
    100. 100. Social-Responsibility Issues  Environmental Impact  There is a need for standardizing government regulations of the environment.  Otherwise, companies will gravitate to the less- regulated countries.  The International Organization for Standardization has developed a set of environmental guidelines called ISO 14000.
    101. 101. Social-Responsibility Issues  Product-Safety Impact Harm to people or animals that results from poor product design can:  Damage a company’s reputation  Require a large expense to remedy  Cause governments to impose more regulations
    102. 102. Social-Responsibility Issues  Employee Impact Employee benefits and policies include:  Safety and health programs  Fair hiring and promotion practices  Family leave  Health care  Retirement benefits  Educational assistance  … and more
    103. 103. Linking Operations and Marketing Strategies  Operations Strategy  Product-focused  Make-to-stock  Standardized products  High volume  Marketing Strategy  Low production cost  Fast delivery of products  Quality  Example: TV sets
    104. 104. Linking Operations and Marketing Strategies  Operations Strategy  Product-focused  Make-to-order  Standardized products  Low volume  Marketing Strategy  Low production cost  Keeping delivery promises  Quality  Example: School buses
    105. 105. Linking Operations and Marketing Strategies  Operations Strategy  Process-focused  Make-to-stock  Custom products  High volume  Marketing Strategy  Flexibility  Quality  Fast delivery of products  Example: Medical instruments
    106. 106. Linking Operations and Marketing Strategies  Operations Strategy  Process-focused  Make-to-order  Custom products  Low volume  Marketing Strategy  Keeping delivery promises  Quality  Flexibility  Example: Large supercomputers
    107. 107. Strategy Formulation & Implementation
    108. 108. organization’s business strategy  set of objectives, plans, and policies for the organization to compete successfully  The business strategy specifies what an organization’s competitive advantage will be and how this advantage will be achieved and sustained markets
    109. 109. Strategy Formulation
    110. 110. Cond…  Vision statements are used to express the organization’s values and aspirations  Mission statements express the organization’s purpose or reason for existence
    111. 111. COCA-COLA COMPANY’S MISSION STATEMENT We exist to create value for our share owners on a long-term basis by building a business that enhances the Coca-Cola Company’s trademarks. This also is our ultimate commitment. As the world’s largest beverage company, we refresh the world. We do this by developing superior soft drinks, both carbonated and noncarbonated, and profitable nonalcoholic beverage systems that create value for our Company, our bottling partners and our customers. In creating value, we succeed or fail based on our ability to perform as steward of several key assets:  Coca-Cola, the world’s most powerful trademark, and other highly valuable trademarks.  The world’s most effective and pervasive distribution system.  Satisfied customers, who make a good profit selling our products.  Our people, who are ultimately responsible for building this enterprise.  Our abundant resources, which must be intelligently allocated.  Our strong global leadership in the beverage industry in particular and in the business world in general
    112. 112. Strategy…  Mintzberg identifies five major strategy schools of thought: 1. Strategy as a plan - the required choices relate to the paths or courses of action 2. Strategy as a pattern - view focuses on the consistency of the choices made over time 3. Strategy as a position - focuses on choices about products and markets 4. Strategy as a perspective - view is concerned about choices related to the way activities are accomplished 5. Strategy as a ploy – relates to choices made to outmaneuver the competition
    113. 113. Business Model…  A business model can be viewed as a representation of an organization’s core logic and strategic choices for creating value and capturing returns from the value created  strategy is primarily concerned with making sets of choices and the resulting business models that reflect the choices made are tools to help further analyze the strategy and communicate the strategy
    114. 114. Haloid Xerox Inc  It was Haloid Company  Model 914 was used  Followed low cost method with latest technology
    115. 115. Product Life Cycle…  Introductory State  Growth Stage  Maturity Stage  Decline Stage  One approach to categorizing an organization’s business strategy is based on its timing of introductions of new outputs. Two researchers, Maidique and Patch (1979), suggest the following four product development strategies
    116. 116. Cond…  First to Market  Second to Market  Cost Minimization or Late to Market  Market Segmentation
    117. 117. Stages of a Product’s Life Cycle Introduction Growth Maturity Decline B&W TV Video Recorder CD PlayerColor Copier Cell Phone Internet Radio Fax Machine Dot-Matrix Printer
    118. 118. Innovation  Something new to market  anything which is new to the business and its product range is counted as innovation, even if similar products are available elsewhere  Innovation is frequently defined as an iterative process aiming at the creation of new products, processes, knowledge or services by using new or existing scientific or technological knowledge.
    119. 119. You Can't Innovate Like Apple  APPLE = INNOVATION  Two types of people in this world 1. There are those who open their presents before Christmas morning. 2. There are those who wait. They set their presents under the tree and, like a child, agonize over the enormous anticipation of what will be in the box when they open it on Christmas morning.
    120. 120. Success Strategy  10 to 3 to 1  Paired design meetings  Brainstorm meeting  Apple does not do market research   Apple has a very small team who designs their major products  Apple owns their entire system  Apple focuses on a select group of products
    121. 121. Products..  MAC PRODUCTS : 6  iPOD PRODUCTS : 5  iPHONE PRODUCTS : 2  SOFTWARE PRODUCTS : 17  ACCSESSORIES : 16 TOTAL Products: 46
    122. 122. What drives innovation  Research & Development  Engineer as – King - Customer is king concept  Reason for failure of some product in the market  Technology
    123. 123. to classify the innovations by type  A modified version of an existing product range  A new model in the existing product range  A new product outside the existing range but in a similar field of technology  A totally new product in a new field of technology.
    124. 124. Process Focus  Process: Is any part of an organization that takes inputs and transforms them into outputs  Cycle Time: Is the average successive time between completions of successive units
    125. 125. Process Planning  Process planning is the systematic determination of methods by which a product is to be manufactured, economically and competitively.  Process planning has been defined as the subsystem responsible for the conversion of design data to work instruction
    126. 126. Information Required to do Process Planning  Qty of work to be done along with product specifications.  Quality of work to be completed.  Availability of equipments, tools and personnel.  Sequence in which operations will be performed on the raw material.  Name of the machine and equipments on which the operations will be performed.  Standard time for each operation.  When the operation will be performed?
    127. 127. Process Flow Design  A process flow design can be defined as a mapping of the specific processes that raw materials, parts, and subassemblies follow as they move through a plant  The most common tools to conduct a process flow design include assembly drawings, assembly charts, and operation and route sheets
    128. 128. Process Flowcharting  Process flowcharting is the use of a diagram to present the major elements of a process  The basic elements can include tasks or operations, flows of materials or customers, decision points, and storage areas or queues  It is an ideal methodology by which to begin analyzing a process
    129. 129. Process Charts Symbols Event Symbol 1. Operation 2. Storage 3. Delay (or) Temporary Storage 4. Transport 5. Inspection
    130. 130. Cond… 6. Operation -cum - Transportation 7. Inspection –cum - Operation
    131. 131. Process Chart – Refill of a Ball Point Pen  Unscrew cap  Unscrew neck  Remove old refill  Place the refill in the barrel  Screw the neck  Check if ball pen writes  Screw the cap
    132. 132. Polishing a material  Start polishing machine  Sprinkle solution of polishing Compound on the rotating table  Hold the specimen in hand  Place the specimen gently on the Rotating table and polish it  Wait for few seconds  Take away specimen to wash basin  Wash the specimen  Etch the specimen  Wash the specimen again  Dry it  Check under microscope  Keep specimen in the container
    133. 133. Flow Diagram A flow diagram is a drawing or a diagram which is drawn to scale. It shows the relative position of production machineryand marks the paths followed by men and materials. B A C D STORE 1 1 12 2 3 1 4 1 5 A Flow Diagram
    134. 134. STRING DIAGRAM String Diagram is a model or a scale plan of the shop, in which every machine or equipment is marked and a peg or pin is struck by or in the area representing a facility. A continuous coloured thread or string traces the path taken up by the materials or workers while performing a particular operation. The thread when measured gives approximately the total distance traveled by a worker or the material. M-1 M-2 M-3 M-4 M-5 M-6 Stock Room Stores String Peg String Diagram
    135. 135. Types of Processes Single-stage Process Stage 1 Stage 1 Stage 2 Stage 3 Multi-stage Process
    136. 136. Types of Processes (Continued) Stage 1 Stage 2 Buffer Multi-stage Process with Buffer A buffer refers to a storage area between stages where the output of a stage is placed prior to being used in a downstream stage
    137. 137. Other Process Terminology  Blocking  Occurs when the activities in a stage must stop because there is no place to deposit the item just completed  If there is no room for an employee to place a unit of work down, the employee will hold on to it not able to continue working on the next unit  Starving  Occurs when the activities in a stage must stop because there is no work  If an employee is waiting at a work station and no work is coming to the employee to process, the employee will remain idle until the next unit of work comes
    138. 138. Other Process Terminology (Continued)  Bottleneck Occurs when the limited capacity of a process causes work to pile up or become unevenly distributed in the flow of a process If an employee works too slow in a multi-stage process, work will begin to pile up in front of that employee. In this is case the employee represents the limited capacity causing the bottleneck.  Pacing Refers to the fixed timing of the movement of items through the process
    139. 139. Process Performance Metrics  Operation time = Setup time + Run time  Throughput time = Average time for a unit to move through the system
    140. 140. Process Performance Metrics (Continued)  Cycle time = Average time between completion of units  Throughput rate = 1 . Cycle time  Efficiency = Actual output Standard Output
    141. 141. Process Performance Metrics (Continued)  Productivity = Output Input
    142. 142. Product-Flow Characteristics  Types of Product Flow  Line Flow  Batch Flow  Project Flow
    143. 143. Line Flow WS 1 WS 2 WS 3 WS Task or work st at ion Product f low
    144. 144. Batch Flow WS 1 WS 3 WS 5 WS Task or work st at ion Product f lows WS 2 WS 4
    145. 145. Project Flow St art Task 1 Task 3 Task Task or act ivit y Precedence relat ionship Task 2 Task 4 End
    146. 146. Factors Affecting Process Choice  Market conditions and competition  Capital requirements  Labor supply and cost  Management skills  Materials supply and cost  State of technology
    147. 147. Product-Process Strategy  Product-Process Matrix  Product Life Cycle (PLC) stages  Process Life Cycle stages  Modified Product-Process Matrix  Cross functional decision making and product- process strategy
    148. 148. Product Life Cycle Stages  Low volume-low standardization, one of a kind  Multiple products, low volume  Few major products, higher volume  High volume-high standardization, commodity product
    149. 149. Process Life Cycle Stages  Jumbled flow (job shop)  Disconnected line flow (batch)  Connected line flow (assembly line)  Continuous flow
    150. 150. PROCESS LIFE CYCLE Process life cycles are related to product life cycles as shown in the following figure. Over a period of time, manufacturing cost per unit diminishes in mature products. The product life cycle starts from the stage of ‘start up’ and ends in the stage of ‘decline’. From product start-up to decline, manufacturing processes undergo a change from job shop production through batch production, assembly line production and continuous flow production. The through-put volume, rates of process innovation and degree of automation will also change from the Stage of start-up to the stage of decline. Through-put volumes and automation are low at start-up and high during the Maturity stage.

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