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Introduction
to
Operations Management
Suhas Rane
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Business
Whats the purpose of business ?
Why are we in business ?
. to create wealth (Adam Smith )
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SIX BASIC FUNCTIONS OF BUSINESS
1. CREATION : Product Selections / Idea Generation
2. FINANCE : Managing Resources, Capital Acqn.,keeping Financial Records.
5. PERSONNEL : H.R., Labour Relations.
7. PURCHASING : Buying of required
(Eqpt. + Material + Services)
5. CONVERSION/ : Changing Raw Materials
(PRODUCTION) to Economic Goods.
6. DISTRIBUTION : Selling & Marketing (reaching theCustomer) .
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O. M. Definition
Operations Management is the effective
and efficient management of processes.
A PROCESS has an input and value addedoutput.
The objective of a process is to add valueby conversion from input to output.
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INPUTMaterialMachinesLaborManagementCapital
TRANSFORMATIONPROCESS
OUTPUTGoodsServices
Feedback
Operations as aTransformation Process
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Physical : as in manufacturing operations
Locational : as in transportation operations
Exchange : as in retail operationsPhysiological: as in health care
Psychological: as in entertainment
Informational: as in communication
Is there any Business / Industry /Enterprise
where an operation is not involved?
Transformation Diff. forms
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Scope of Operations Mgmt.
Long Term / Strategic Decisions
Product Selection & Design Process Selection & Planning
Facilities Location
Facilities Layout
Capacity Planning
Short Term / Operational Decisions
1. Production Planning & Control
2. Inventory Control
3. Quality Control
4. Method Study / Work Study
5. Maintenance & Replacement
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Agenda
OM what ? Why should I know ?
Six Basic Functions of Business
O M. Definition
Scope of Operations Management
Historical Development of OM
Taylor, Henry Ford, Hawthorne Studies
Operations Research, Computers & Adv. Opn. Technology.
Mfg. Industry v/s Service Industry
Production Systems
Input Transformation Output Relationships
Productivity Measurements
Decisions & Activities in OM
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Historical Development of OM
In olden days, did Production Systems exist ?Egyptian Pyramids,
Taj Mahal
Village Potter-man, Carpenter .
Features of Old production activities
Cottage System
Hand WorkUnorganized
Unique.
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Evolution of OM
Phases in evolution of OM
Craft Production
Mass Production
Lean Management
Mass Customisation
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Features of Diff. Prod.Systems
CRAFT System : Skill based, Manual,
Small Qty., Customisation,
Low Cap. Investmt., but high unit cost of prodn.
(MH Husain Painting, DC Car, Space-Lab)
Mass Production : Low skill, More automation,
Large Qty. Standardisation,
High Cap Invst., but low unit cost of prodn.
(Tata Salt, HUL Lux, Nano, SSC Course)
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Features of Diff. Prod.Systems
LEAN System : All muscle, No fat (of mainly inventory) : Leopard
Multi-skilled staff,
TQM, Quick change-over (SMED),
Single Pc. Flow, Kanban(Toyota Prod. System)
Mass Customization : High Flexibility
Limited Customization at affordable extra cost
(Dell, Asian Paints, Godrej Furniture)
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Historical Evolution of OM
F.W. Taylor (1856-1915)
Father of Sc. Management
Each worker to be trained for suitable job
(according to his skill, strength, and learning ability
Divn. of Labour Synergy Effect )
Standard Output Norms set per worker.
Instructions Card, Routing Sheets, Material Specs
-All Standardized.
Supervision . Not for keeping watch, but to arrange facilities.
Incentive for motivation & increasing productivity
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Historical Evolution of OM
Henry Ford (1913)
Moving Assembly Line concept
Standardized product design
Mechanized assembly line
Specialized labour
Interchangeable parts
Result : Av. labour per chassis
reduced from 12.5 hrs to 93 min.
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Mfg. v/s Services Whats the
difference?
Mfg. Industry ServiceIndustry
Creationof Goods
ProvidingServices
Production Mgmt
OperationsMgmt
Business Organization
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Maximizing Value Addition in Operations
Click to edit Master text stylesSecond level
Third level Fourth level
Fifth level
Inp t Transformation O tp t Relationships
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Input Transformation Output Relationships
System PrimaryInputs
Resources Transformation Fn.(s) Typical Desired Output
Automobile
Factory
Sheet steel,
engine parts
Tools,
equipment,workers
Fabrication and Assy. of cars
(physical)
High-quality cars
Hospital Patients MDs, nurses,medicalequipment
Health care (physiological) Healthy individuals
Restaurant Hungry
customers
Food, chef, wait-
staff,environment
Well-prepared,
Well-served food; Stimulatingenvironment
Satisfied customers
College oruniversity
High schoolgraduates
Teachers, books,classrooms
Imparting knowledge andskills (informational)
Educated individuals
Departmentstore
Shoppers Displays of goods, salesclerks
Attract shoppers, Promoteproducts, Fill orders(exchange)
Satisfied customers
DistributionCentre
SKUs Storage bins,stock-pickers
Storage and redistribution Fast delivery, availability ofSKUs
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Strategic issues
in
Operations Management
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Operations 80-90%Hidden
Click to edit Master text stylesSecond level
Third level
Fourth level Fifth level
Clickto edit Master text stylesSecond level
Third level
Fourth level Fifth level
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The Value Equation
price
ePerformancValue =
price
InnovationyFlexibilitTimelinessQualityValue
+++=
P
IFTQValue
+++=
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Strategic Priorities
Type Priority
Cost Providing low price products.Controlling costs across the board.
Quality Providing high quality products.Focus is on product and process quality.
Delivery Providing products reliably and quickly.
Flexibility Providing a wide variety of products (masscustomization).
How fast a firm can produce a new product line.
Service Providing value-added service.How products are delivered and supported.
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Productivity Concepts
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Production & Productivity
Production Output (in No of Units)
Output
Productivity ------------ No. of pcs./hr.
Input
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Three Main ProductivityIndices
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Productivity Measures
( Output in terms of Input)
Machines - Out put per Machine Hour
Men - Out put per Man Hour
Materials - No of units produced per input of R.M.
(e.g. - No of Screws per Kg of wire)
Power - No of Pcs. per KW Unit of El. Power
Boiler - Kgs. of Rubber cured / Kg of steam used
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Productivity of an Organization
Sugar Mill - Kg. of sugar produced /
Ton of sugar-cane crushed
Fabrication - Tons of Fabrication /
Kg. of Welding Rod
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Service Industry : ProductivityMeasures
Business Productivity Measure
Restaurant Customers (meals) per hour
Retail Store Sale per Sq. foot
Chicken farm Kg. of meat per kg. of feed
Utility plant Kilowatts per ton of coal
Paper mill Tons of paper per ton of wood