Purpose of a Business Organization

To meet a specific need of the Society through production making use of Human & Other resources

- to make profits year after year & create wealth to grow &

serve society better & better.

PRODUCTION

• PROCESS OF CONVERTING (RAW) MATERIALS TO SALEABLE FINISHED GOODS NEEDED BY SOCIETY (Manufacturing)

• CREATING & DISCHARGING OF A SERVICE WHICH HAS UTILITY TO SOCETY (Services)

OPERATIONS MANAGEMENT

Planning, Organizing, Executing and Controlling of all systems and activities connected with either Manufacturing or Services

ART (SCIENCE?) OF MANAGING ……

OPERATIONS MANAGEMENTIs an

PRODUCTS

PROCESSES

MATERIAL

MACHINES

PEOPLE

TIME

SITUATION

Hard skills

Soft skills

A CB

BUSINESS MANAGEMENT

A MARKETING

B OPERATIONS

C FINANCE

B

Why study of Operations Management ?

Scope

Essentiality

SCOPE OF PRODUCTION & OPERATIONS MANAGEMENT

SCOPE OF OPERATIONS MANAGEMENT

PRODUCT & SERVICE DESIGN SELECTION OF PROCESSES & TECHNOLOGY PLANT LOCATION & FACILITIES PLANNING PRODUCTION PLANNING PRODUCTIVITY & WORK FORCE MANAGEMENT PROJECT MANAGEMENT MATERIAL MANAGEMENT QUALITY MANAGEMENT MAINTENANCE MANAGEMENT

DIFFERENCES BETWEEN MANUFACTURING & SERVICES

Manufacturing (Car) Services (Education)

Tangible Intangible; consumed in the process of their creation

Can be produced for ‘off the-shelf availability

Availability achieved by keeping the system open for services

Minimal contact with ultimate consumer High contact with clients or customers

Complex and interrelated Technology Simple Technology

Markets served by production system are regional, national and international

Markets served by services system are usually local

Large units that can take advantage of economies of scale

Relatively small units to serve local markets

Location of system is in relation to regional, national and international markets

Location, dependent on location of local customers, clients and users

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Service – Product (Manufacturing) Continuum

Pure Product Pure Service

Ayurvedic Healing Treatment

Legal/Tax Consulting

Cyber Café – Telephone Booths

Emergency Maintenance Services

Facilities Maintenance

High quality restaurant meal

Fast food in a eat out joint

Customised durable goods

Fast moving commodities

Toys

Adopted from Hill, T. (2005), Operations Management (Palgrave Macmillan), 2nd Edition, pp 14.

OPERATIONS SYSTEM MODEL

External InputLegal/PoliticalSocialEconomyTechnology

INPUTCONVERSION

SYSTEM

OUTPUT

Market InputCompetitionProduct InformationCustomer Needs

Primary InputMaterials PersonnelLand,building,EquipmentFinance

Manufacturing

Transportation

Insurance,

Financing Health care Education

Direct OutputsProductsServices

Indirect OutputsTaxesEmployment generationTechnological Developments Impact on Environment Impact on Society

CONTROL SYSTEM

Feed backInformation

EXAMPLE 

PRIMARYINPUT

RESOURCES 

TRANSFORMATIONFUNCTION (S)

TYPICAL DESIRED OUTPUT

Automobile factory

Sheet steel,

engine parts

Tools, equipment,

workers

Fabrication and Assembly of cars

(physical)

High-quality cars

College or university

High school graduates

Teachers,

books, classroom

Imparting

Knowledge

and skills

Educated individuals

Department

store

Shoppers Displays, stock of

goods, sales clerks

Attract shoppers, promote products

Satisfied customers

CONVERSION PROCESS

EXAMPLE 

PRIMARYINPUT

RESOURCES 

TRANSFORMATIONFUNCTION (S)

TYPICAL DESIRED OUTPUT

Hospital Patients doctors, Nurses, Medical Supplies, Equipment

Health Care (physiological )

Healthy Individuals

Restaurant 

HungryCustomers

Food, Cook, waiters, Environment

Service

Satisfied Customers 

CONVERSION PROCESS

EVOLUTION OF POM IN 18th CENTURY

YEAR EVOLUTION

1764 Invention of Steam Engine by James Watt

1790 Interchangeability by Eli Whitney

Current issues in Operations Management

• Automated & computerized operations• “Services” orientation• Shrinking of factories• Thrust on “Total Quality”• Shift from Personnel Management to HR Development• Flexi time • Thrust on “Housekeeping”

(Recent trends)

IN HIGH-TECH MANUFACTURING FACILITY OF THE FUTURE, THE ONLY DIFFERENCE BETWEEN THE MANUFACTURING FLOOR & THE OFFICE IS THAT THE OFFIC WILL HAVE CARPETS

Mission, Vision

Operations Strategy

Business conditions SWOT analysisBusiness Strategy

DEVELOPING OPERATIONS STRATEGY

To retain Defence market at 70% & Civilian

market 30%

To give emphasis on In-house Development of

products

To get into Telecom & other electronics fields

To develop & supply world class products like

Simputer, Voting M/c etc

Home grown talents –No lateral Induction (Resources) Limiting operations to core competency (Outsourcing) Indigenize to the max. extent (Process) To keep Inventory very low (Resources) To have only Engineers & Diploma holders (Resources) To have a mix of indigenous design & collaborated projects (Product) To put IT to maximum use (Technology) To give stress on employee training & knowledge up gradation (Resources) To constantly Bench mark with best in class (Process) Re- organize for better empowerment (Facility) Establishing overseas procurement offices (Facility) Change over to Group Technology from Process lay out (Facility)

Is a long range plan of all operations, covering resources, processes, facilities, technology, product, outsourcing . to achieve the Business strategies of the company.

To serve the country through supply of electronic equipment to Indian Defence Services & other users

To reach a Turn Over of Rs.1000 crores by 2014-15

Finance strategy Marketing strategy

Organization structure (Typical)

Business head(CEO)

Head-R & D Head-Operations Head-Marketing Head-Finance

HeadProd. control

HeadInd. Engg.

HeadMaterial mgt.

HeadProduction

HeadQuality mgt.

HeadTesting

HeadAssembly

HeadMaintenance

HeadHardware mfg.

HeadOut sourcing

Head-HR

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Operations Management: Introduction Highlights

Operations Management is a systematic approach to address all issues pertaining to the transformation process that converts some inputs into useful outputs

Globally, India is emerging as an important manufacturing base. Several recent studies point to emerging opportunities for Indian manufacturing to grow and attain a global presence.

From an operations management perspective, the notion of a ‘pure product’ and ‘pure service’ is just the two ends of the spectrum. In reality, a vast majority of operations share a continuum of products and services.

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Manufacturing Systems & Break even Analysis

Manufacturing Systems

• Job manufacturing

• Batch manufacturing

• Mass manufacturing

• Continuous flow manufacturing

PRODUCT VARIETY

PR

OD

UC

T V

OL

UM

E

JOB

BATCH

MASSPRODUCTION

CONTINUOUS FLOW

CharacteristicsJob Batch Mass Continuous

Variety Very high Moderate Low Very low

Volume Very low Moderate High Very high

Product made to order made to stock

Skills Very high Moderate Low Very low

Fixed cost Very low Moderate High Very high

Unit cost Very high Moderate Low Very low

Mahadevan (2007), “Operations Management: Theory & Practice”, © Pearson Education

Break even analysis for decision makingGenerally Break even analysis is done between expenditure & income to find out at volume of output, the total costs will be equal to the income leading to ‘no profit, no loss’ situation. Break even analysis can also be done between two processes, two systems, two locations, two alternatives etc.

Three manufacturing systems A (Jobbing), B (Batch) & C (Mass manufacturing) have the following cost elements.

System Fixed cost Rs./ year Variable cost Rs./unit

A (Jobbing) 25,000 50

B (Batch) 50,000 25

C (Mass manufacturing) 80,000 15

1. Which is the most economical system for a volume of 2,000 units per year2. At what volume would each process be preferred?3. If the selling price is fixed at Rs.100 per unit what is the break even volume for each system4. Find the break even volume between A & B, B & C & A & C

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

A

B

C

80000

Jan-Feb 2003 NS

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

A

B

C

80000

Jan-Feb 2003 NS

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

A

80000

Jan-Feb 2003 NS

R

666

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

B

80000

R

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

C

80000

Jan-Feb 2003 NS

R

500 1000 1500 2000 2500 3000

25000

50000

75000

100000

125000

A

B

C

80000

Jan-Feb 2003 NS

15701000 3000

500 1000 1500 2000 2500 3000

2500

5000

7500

10000

12500

8000

900

BEP

1200 1800

900

June-July 2011

Break-even Analysis - Limitations 1. It assumes that fixed costs (FC) are constant.

Although this is true in the short run, an increase in the scale of production is likely to cause fixed costs to rise.

2. It assumes average variable costs are constant per unit of output, at least in the range of likely quantities of sales.

3. It assumes that the quantity of goods produced is equal to the quantity of goods sold (i.e., there is no change in the quantity of goods held in inventory at the beginning of the period and the quantity of goods held in inventory at the end of the period).

.