00R. Intrdn. to Crse 01. the Oprtns Mgmnt Fnctn, and Its Rl or Sgnfcnce - Ud 22 Sep 2011

00. Operations Management– Pre-Mid Term

In

By Prof. N. Narayanan

“OPERATIONS MANAGEMENT”(PGP – Term II, Pre-Mid Term, 2011)

Reference (Text Book):

J. Heizer, B. Render and J. Rajashekhar, Operations

Management, 9th Edition, Pearson Education, 2009

Course Evaluation Plan

• Assignments/Quizzes: Pre-Mid Term: 15%– 8% for Quizzes.

– 5% for Assignments.

– 2% for Class Participation

Post-Mid Term: 15%

• Mid Term Exam: 30%

• End Term Exam: 40%

Pre-Mid Term: By Prof. N. Narayanan

Post-Mid Term: By Prof. Sushil Kumar

Sessions Plan – Pre-Mid Term

Sn.1

Nos. Date Topic Text ; Exercise/ Case

1 21 Sep (Wed)

Operations Management: Function and its Role/ Significance

Ch. 1: Operations and Productivity (pp 1 – 27)

1. Global Co. Profile: OM at Hard Rock Café (pp 2 – 3) [15]

2. Example 1: Examining options for increasing contribution (pp 6 ) [43]

3. Case: The Faltering Factory (Handout – PDF file) 3. Case: The Faltering Factory (Handout – PDF file) [50 – 57]

4. OM in Action: Improving Productivity at Starbucks (pp 15) [72]

5. Example 2: Computing Productivity at Collins Title (pp 16) [77 – 79]

6. OM in Action: Taco Bell Improves Productivity to Lower Costs (pp 20) [95 – 97]

1 Each session is of 1½ hours duration.

Sessions Plan – Pre-Mid Term (Continued)

Sn. Nos. Date Topic Text ; Exercise/ Case

2 22 Sep (Thu)

Operations Strategy and Competitiveness

Ch. 2: Operations Strategy in a Global Environment (pp 29 –58)

1. Global Co. Profile: Boeing’s Global Strategy Yields Competitive Advantage (pp 30 – 31) [4]

2. OM in Action: Going Global to Compete (pp 34) [40] *

3. OM in Action: Videocon—A True Indian Multinational Company (pp 35) [41] *

4. OM in Action: India—A Major Destination for Outsourcing (pp 36) [42]*Outsourcing (pp 36) [42]*

5. Figure 2.3: Sample Missions for a Company, OM Function, and Major OM Departments (pp 38) [43]*

6. OM in Action: Low Cost Strategy Wins at Franz Colruyt(pp 40)[30 – 31]

7. OM in Action: Response Strategy at Hong Kong’s Johnson Electric (pp 41) [35]

8. OM in Action: US Cartoons Production at Home in Manila (pp 33) [39]

9. Example 1: Strategy Development at Pierre Alexander (pp 43) [54]*

10. Strategy at Pirelli SpA (pp 53) [55 – 56]

Sessions Plan – Product Design and Development


3 23 Sep.(Fri.)

Product Design and development

Ch. 4: Design of Goods and Services (pp 1111 – 148)

1. Global Company Profile: Regal Marine (pp 112) [4]2. OM in Action: The Kano Model (pp 118) [12]3. ‘Product-by-Value Analysis’, to Help in ‘Variety Control’ for

a Company’s Product Profile [26 – 30]4. Example 1: Great Cameras Inc.: Constructing a House of

Quality (pp 120) [37 – 45]5. OM in Action: Designing Trident Splash (pp 122) [85]5. OM in Action: Designing Trident Splash (pp 122) [85]6. OM in Action: Sona Koya Steering and Maruti Alto (pp

123) [89]7. OM in Action: Mudra’s Lifestyle’s Success Story (pp 126)

[92]8. OM in Action: Chasing Fads in the Cell Phone industry (pp

130) [150 – 152]9. Example 2: First Bank Corp. – Delivery of Service to Drive-in

Customers at the drive-up window (pp 138)[153 – 155]

10.Case Study: The ‘Future Bank’ concept (handout)[156 – 157]

11.Case: De Mar’s Product Strategy (pp 146) [158 – 161]

Session Plan: 04 – 05: Process Design (incl. of ‘Service Process Design’)


4 –5

Oct. (Fri)

Oct. (Thu)

Process Design (including Service Process Design)

Ch 6: Process Strategy (pp 213 – 245)1. Global Co. Profile: Dell Computer Corp. (pp 214 – 215) [3]2. Example 1: Job Shop Process Focus at Standard Register (pp

217) [8, 9]3. Example 2: Repetitive Manufacturing at Harley-Davidson (pp

218) [10, 11]4. Example 3: Product Focused Prodn. at Nucor Steel (pp 219)

[12, 13]5. OM in Acton: Mass Customization at ‘Borders Books’ and at

(Thu)5. OM in Acton: Mass Customization at ‘Borders Books’ and at

‘Smooth FM Radio’ (pp 221)[17 – 28]6. Example 4: Kieber Enterprises: Cross-Over Chart for process

choice (pp 224 – 225) [62 – 63]7. OM in Action: OM at the Barber Shop (pp 238 – 39)[65 – 72]8. OM in Action: Technology Changes in the Hotel Industry (pp

237) [77 – 78]9. Case: Rochester Manufacturing Corporation (pp 243) [80 – 82]10. Case: Process Strategy at Wheeled Coach (pp 244 – 45) [83 –

85]Oct (Thu): Quiz – I

Sessions Plan – Pre-Mid Term (Continued)Sn. Nos. Date Topic Text ; Exercise/ Case

6 – 8 Oct. (Fri)

Process Analysis & Work Systems Design (incl. Method Study & Work Measurement) (2.5 hours)

Ch. 6: Process Strategy (pp 226 – 230) revisited; Ch. 9: Human Resources and Job Design (pp 349 – 371)) & Supplement 9: Work Measurement (pp 585 – 589)1. Service Blue-printing for Registration Process at Southern

University [24 – 26]2. OM in Action: Using Incentives to Unsnarl Traffic Jams in the

OR (pp 358) [48 – 50]3. OM in Action: Saving steps on the B-2 Bomber (pp 363) [51 –

55]4. Case: Infosys—Challenge of Attrition (pp 369)[56 – 58]

Oct (Thu)

Oct (Fri) Facilities Layout(2 hours)

4. Case: Infosys—Challenge of Attrition (pp 369)[56 – 58]5. Case: Hard Rock’s Human Resource Strategy (pp 370) [59 – 61]6. Example S1: Determining Normal and Standard Time (pp 376 –

77) [83]7. Example S2: Computing Standard Time (pp 377 – 378) [89]8. Example S3: Computing sample size for time study (pp 379)

[95]9. OM in Action: UPS: The Tightest Ship in the Shipping Business

(pp 380) [109]

Ch. 8: Facilities Layout Strategies (pp 305 – 348)

1. McDonald’s Looks for Competitive Advantage through Layout (pp 308 – 09) [10 – 11]


Sn. Nos.

Date Topic Text ; Exercise/ Case

6 – 8 Oct. (Fri)

Oct (Thu)

Oct

Process Analysis & Work Systems Design (incl. Method Study & Work Measurement) (2.5 hours)

[Continued]

Ch. 8: Facilities Layout Strategies (pp 305 – 348)Oct (Fri)

Facility Layout(2 hours)

1. McDonald’s Looks for Competitive Advantage through Layout (pp 308 – 09) [10 – 11]

2. Example 1: Walters Company: Designing a process layout (pp 319) [45 – 53]

3. OM in Action: Bengaluru International Airport—Modern and Functional Airport (pp 322) [56 – 58]

4. OM in Action: Work Cells at Rowe Furniture (pp 325) [69 – 70]5. Example 2: Staffing Work Cells (pp 326) [73]6. Examples 3, 4,and 5: Boeing: Assembly line design for assembly

of electrostatic wing component (pp 330 – 333) [85 – 92]

Oct (Thu): Quiz – II



9 –10

Oct. (Thu)

Scale & Capacity Planning (including Service Capacity Planning)

Sup. 6: Capacity Planning (pp 247 – 273)

1. Examples S1 and S2: Sara James Bakery – Utilization and Efficiency (pp 249 – 50) [13, 14]

2. OM in Actn.: Too Little Capacity at Dalrymple Bay (pp 252);

3. OMA: Too Much Capacity at GM and Ford (pp 253) [33 – 37]4. BE Analysis: Single Product Case (pp 258) [56 – 58]5. BE Analysis: Multiproduct Case (pp 258 – 260) [59 – 65]6. Problem No. S6.22: A & Z Lettuce Products (pp 270) –

Breakeven analysis for single product [do as practice problem]

Oct. (Fri)

Breakeven analysis for single product [do as practice problem]

7. Problem No. S6.23: Carter Manufacturing (pp 270) –Breakeven analysis for single product [do as practice problem]

8. Problem No. S6.24: Red Rose Club (pp 271) – Breakeven analysis for multiple products [do as practice problem]

9. Example S6: Southern Hospital Supplies (pp 266 – 67) [66 – 69]

10.Problem No. 6.28 (pp 271) – Holtz Furniture – Capacity Planning by Decision Tree Analysis [do as practice problem]

11.Capacity Planning at Arnold Palmr Hosptl (pp 272)[82 – 88]12.HBSP Case: 9-687-045: Chaparral Steel (Abridged), 19 pages.

[89 – 92]

1. The Operations Management Function, its Role and Significance


In

“OPERATIONS MANAGEMENT”

(PGP – Term II, 2011)


Reference: Ch. 1: Operations and Productivity (pp 1 – 24)

In: J. Heizer, B. Render and J. Rajashekhar, Operations

Management, 8th Edition, Pearson Education, 2009

Sessions Plan – Pre-Mid Term


1 22 Sep (Thu)

Operations Management: Function and its Role/ Significance

Ch. 1: Operations and Productivity (pp 1 – 27)

1. Global Co. Profile: OM at Hard Rock Café (pp 2 – 3) [15]

2. Example 1: Examining options for increasing contribution (pp 6 ) [43]

3. Case: The Faltering Factory (Handout – PDF file) 3. Case: The Faltering Factory (Handout – PDF file) [45]

4. OM in Action: Improving Productivity at Starbucks (pp 15) [69]

5. Example 2: Computing Productivity at Collins Title (pp 16) [80]

6. OM in Action: Taco Bell Improves Productivity to Lower Costs (pp 20) [91]

OverviewGlobal Co. Profile: Hard Rock Café (pp 2)

1. Basicsa. Classification in Industrial development

b. Classification of Manufacturing Industries

c. Classification of Basic Industries

d. Classification of Manufacturing based on:“Volumes of Products, and corresponding Plant Layout and Material Flow Pattern”

2. Manufacturing vs. Service

3. Basic Functions of an Organization

4. Operations Management as a Function

5. Productivity Measurement

6. Ten Critical Decision Areas in Operations Management

7. Exciting New Trends in Operations Management

8. Priorities for Operations Management

Global Company Profile:

Hard Rock Café (pp 2)

1. Products take the form of ‘food’.

2. Over 35 million guests worldwide each year.

3. Theme restaurant: rock music memorabilia

4. OM at HRC provides more than 3500 custom

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products (meals) everyday.

5. Products designed, tested and analyzed for cost, labor requirements and customer satisfaction.

6. Production process must be maintained to ensure a quality meal.

7. OM must ensure effective staff, layouts, etc.

1a. Classification in Industrial developmentdevelopment

Industrial Development over time,in three major steps

1. Primary industries (Extraction) – including Hunting, Agriculture, Fishing, Mining, Quarrying, Forestry, etc.

2. Secondary industries (Construction Manufacturing and public utility generation) –Manufacturing and public utility generation) –including Refinement, Conversion, Fabrication and Assembly

3. Tertiary Industries (Services) – including physical distribution, transportation, education, banking, health, retailing, catering, BPO, etc., etc.

1b. Classification of Basic IndustriesIndustries

Classification of Basic Industries

1. Process Industries – E.g., Beverages, Cement, Chemicals, Drugs, Food processing, Metals, Paper, Petroleum products, Textiles, Tires, etc.

2. Discrete Item Manufacturing Industries –E.g., Aerospace, Automobiles, Garments, Machinery, Computers, Appliances, etc. Computers, Appliances, etc.

3. Project Industries – E.g., Construction, Erection and Commissioning, Ship Building, etc.

4. Service and Other Industries – E.g., Advertising, Financial, Hospitality, Insurance, Mass Media, Retail, banking, BPO, Transportation, Utilities (Power, Gas, Telecommunications), etc.

1c. Classification of Manufacturing IndustriesManufacturing Industries

Classification of Manufacturing Industries

1. Basic Producer (Raw Material Extractor and Refiner) – E.g., steel ingots (from iron ore), rubber, glass –Usually involve heavy capital investment in specialized equipment

Natural Resources

Basic Producer

Converter FabricatorRaw Materials

Industrial Products

Consumer Goods

Consumer Goods

Usually involve heavy capital investment in specialized equipment

2. Converter (Material Processor) – E.g., bar stock from steel ingots, plastics from petroleum products – Usually involve uncomplicated physical products

3. Fabricator and Assembler – E.g., machined engine components (say bolts and nuts) from rods or bar stocks; assembled final products using the fabricated components –Usually involve complicated physical products—components or final products

1d. Classification of Manufacturing based on

“Volumes of Products, and “Volumes of Products, and corresponding

Plant Layout and Material Flow Pattern”

Increasing product

volumes

Classification of Manufacturing based on“Volumes of Products, and corresponding Plant Layout and Material Flow Patterns”

1. Job Sop Manufacturing – Usually engineer- or make-to-order items—High variety of low volume products—with general-purpose machines in process layouts

2. Batch (or Intermittent) Manufacturing – Usually for multiple products in continual demand—High variety

Increasing product

volumes

for multiple products in continual demand—High variety with low volume products may be with

—process layouts (for small batch production), or

—line layouts (for large-batch production)

3. Mass Production (‘Continuous Flow or ‘Discrete Repetitive’) – Usually for products in high continuous demand—with special purpose machines in line layouts

4. Cellular Production – Toward combining the best of Job Shop and Mass Manufacturing

Relevance of Cellular Production(Will be discussed in detail(Will be discussed in detailunder ‘Facilities Layout’)

From: To:

Process Layout Work Cell

SawSaw

Lathe

Lathe SawSaw

1

2

2SawSaw

PressPress

From Process Layout to Work Cell – For Flow

LatheLathe

GrinderGrinder

HeatHeatTreatTreat

LatheLatheHeatHeatTreatTreat

GrinderGrinder

GrinderGrinder

PressPress

PressPress 1

2

3

45

6

The traditional Organization of Operations

(with MRP-based Approaches)

Inventory (warehouse)

A storage of inventory in the warehouse may often be resorted to, with a “pond-draining” mindset!

Receiving Operation Operation Shipping

Suppliers

‘Lean’ Approach– The Relevance of Cellular Production

Cell 1 Cell 2 Cell 3

Point of use storage (Limited inventories)

Suppliers

2. Manufacturing vs. Service2. Manufacturing vs. Service

Characteristics of GoodsCharacteristics of Goods

�� Tangible productTangible product

�� Consistent product Consistent product definitiondefinition

�� Production usually Production usually �� Production usually Production usually separate from separate from consumptionconsumption

�� Can be inventoriedCan be inventoried

�� Low customer Low customer interactioninteraction

Characteristics of ServiceCharacteristics of Service

�� Intangible productIntangible product

�� Produced and consumed Produced and consumed at same timeat same time

��Often uniqueOften unique

��High customer High customer ��High customer High customer interactioninteraction

�� Inconsistent product Inconsistent product definitiondefinition

��Often knowledgeOften knowledge--basedbased

�� Frequently dispersedFrequently dispersed

Goods Versus ServicesGoods Versus Services

Can be resoldCan be resold

Can be inventoriedCan be inventoried

Some aspects of quality Some aspects of quality measurablemeasurable

Selling is distinct from Selling is distinct from

Attributes of GoodsAttributes of Goods(Tangible Product)(Tangible Product)

Attributes of Attributes of ServicesServices(Intangible (Intangible Product)Product)

Reselling unusualReselling unusual

Difficult to inventoryDifficult to inventory

Quality difficult to measureQuality difficult to measure

Selling is part of service Selling is part of service Selling is distinct from Selling is distinct from productionproduction

Product is transportableProduct is transportable

Site of facility important for costSite of facility important for cost

Often easy to automateOften easy to automate

Revenue generated primarily Revenue generated primarily from tangible productfrom tangible product

Selling is part of service Selling is part of service

Provider, not product, isProvider, not product, isoften transportableoften transportable

Site of facility important forSite of facility important forcustomer contactcustomer contact

Often difficult to automateOften difficult to automate

Revenue generated primarily Revenue generated primarily from the intangible servicefrom the intangible service

Differences Between ‘Goods’ and ‘Services’

1. Services are usually intangible (e.g., an empty airline seat, for travel between two cities)

2. Services are often produced and consumed simultaneously.

3. Services are often unique, for every individual customer.

3.customer.

4. Services have high customer interaction.

5. Services have inconsistent product definition.

6. Services are often knowledge-based.

7. Services are frequently dispersed.

Manufacturing Vs. Service S.

No. Manufacturing Services

1 Output is tangible Output is intangible

2 Output is inventoriable Output is not inventoriable

3 Time delay from production to consumption Simultaneous production and consumption

4 For standard products, ‘Mass Production’ is possible

Services more often unique, so ‘Mass Production’ may not be possible

5 Little or no interaction between manufacturer and customer

Lot of interaction between manufacturer and customer

6 Customers do not participate in Customers often participate in services6 Customers do not participate in manufacturing

Customers often participate in services

7 Factories are located away from customers Facilities located close to customers

8 Manufacturing may be largely automated Services are generally labour-intensive

9 Quality of goods is much easier to define and measure

Quality of services is more difficult to define and measure

10 Quality doesn’t depend upon a single person Quality often depends on a single person

11 The output can usually be measured or counted

Difficult to count or measure output

Even manufacturing is being required to assume many of the characteristics of service, to survive under the growing competition. The manufactured product may become just a part of the service offered.

Goods and ServicesGoods and Services

Automobile

Computer

Installed carpeting

Fast-food meal

Restaurant meal/auto repair

Hospital careHospital care

Advertising agency/investment management

Consulting service/teaching

Counseling

Percent of Product that is a GoodPercent of Product that is a Good Percent of Product that is a ServicePercent of Product that is a Service

100%100% 7575 5050 2525 00 2525 5050 7575 100%100%|| || || || || || || || ||

Goods Services

Most New ‘Creations’ and ‘Growth’ are in ‘Services’ Rather Than in ‘Products’

Automobiles

Computers

Installed carpeting

Fast-food mealFast-food meal

Restaurant meal/auto repair

Hospital care

Advertising agency/Investment management

Consulting Service/Teaching

Counseling

100% 75% 50% 25% 0% 25% 50% 75% 100%

Percent of product that is a good Percent of product that is a service

Similarities Between ‘Goods’ and ‘Services’

1. Even though ‘services’ differ from ‘goods’, the operation function continues to transform the input of resourcesinto the output of products.

2. The criteria for effective performance of activities of the operation function are often very similar for both goods and services. For example,

− Both goods and services must have quality standards established.

− Both must be designed and processed on a schedule, in a facility where human resources are employed.

3. In reality, almost all goods and all services are a mixture of a service and a tangible product. (There can be some instances of pure services, for example, ‘Counseling’.)

Relevance ofOperations Management and Operations Strategy,

Even in Service Industries

• What drives bottom-line performance in almost every industry—be it manufacturing or service—is “Competitive Advantages” through

– Quality,

– Cost,

– Delivery, and

– Service.

All these are ‘Operations’ issues.

Challenges to Improving Productivity in the Service Sector

1. Typically labour-intensive (for example, counseling, teaching).

2. Frequently focused on unique individual attributes or desires (for example, investment advice).

3. Often an intellectual task performed by professionals (for example, medical diagnosis).

4. Often difficult to mechanize and automate (for example, a 4. Often difficult to mechanize and automate (for example, a haircut).

5. Often difficult to evaluate for quality (for example, performance of a law firm).

Low productivity improvement in the service sector is also attributable to the growth low-productivity activities in the service sector (which may not have been part of the measured economy, such

as child care, food preparation, house cleaning, and laundry service).

3. Basic Functions of an 3. Basic Functions of an Organization

Organizing to Produce Goods and ServicesOrganizing to Produce Goods and Services

�Essential functions:

� Marketing – generates demand

� Production/operations – creates the product

Finance/accounting – tracks how well the � Finance/accounting – tracks how well the organization is doing, pays bills, collects the money. Also helps integrate the business with the rest of the economy,

� HRM

Basic Functions of an Organization

Finance

Operations

Marketing HRM

Organizational ChartsOrganizational Charts

Operations

Teller Scheduling

Check Clearing

Finance

Investments

Security

Marketing

Loans

Commercial

Commercial Bank

Check Clearing

Collection

Transaction processing

Facilities design/layout

Vault operations

Maintenance

Security

Security

Real estate

Accounting

Auditing

Commercial

Industrial

Financial

Personal

Mortgage

Trust Department

Example Examining options for Increasing Contribution

Doubling ‘Contribution’ at Fisher Technologies (all Figures in $)

Current

Marketing Option a

Increase Sales Revenue 50%

Financial/ Accounting

Option b

Reduce Finance Costs

50%

OM Option c

Reduce Production Costs 20%

Sales 100,000 150,000 100,000 100,000

Costs of goods – 80,000 – 120,000 – 80,000 – 64,000Costs of goods – 80,000 – 120,000 – 80,000 – 64,000

Gross Margin 20,000 30,000 20,000 36,000

Finance costs – 6000 – 6000 – 3000 – 6000

Subtotal 14,000 24,000 17,000 30,000

Taxes at 25% – 3,500 – 6,000 – 4,250 – 7,500

Contributiond 10,500 18,000 12,750 22,500a Increasing sales 50% increases contribution by $7,500, or 71% (7,500/10,500)b Reducing finance costs 50% increases contribution by $2,500 or 20% (2,250/10,500) c Reducing production costs 20% increases contribution by $12,000 or 114% (12,000/10,500)d Contribution to fixed cost (including finance costs) and profits

4. Operations Management as a 4. Operations Management as a Function

What Is Operations Management?What Is Operations Management?

Production/Operations is the creation of goods and services

Operations management (OM)Operations management (OM) is is Operations management (OM)Operations management (OM) is is the set of activities that creates value the set of activities that creates value in the form of goods and services by in the form of goods and services by transforming inputs into outputstransforming inputs into outputs

The Operations System (‘Manufacturing’ or ‘Service’) of an Organization – The Horizontal, “Value Stream ”

Monitor output

Adjustments needed?

Random Fluctuations

Inputs:

• Land• Labor• Capital• Management

Conversion Process

Outputs: xx

• Goods• Services

Feedback:Feedback:‘actual’ vs. ‘desired’

The ‘random fluctuations ’ above are the unplanned or uncontrollable influences that cause the actual output to differ from the expected

output. Reducing such fluctuations (or variations), and their effects, is a major management task.

The Horizontal ‘Input-Process-Output’ can be seen as made of multiple stages of ‘Value-Adding Stream’

The Vertical, ‘Macro-Micro’, Cyclical Management Process

A progressive1 sequence of

Purposes as processes, to be pursued at the ‘macro’ or ‘whole’ level, the ‘macro’ or ‘whole’ level,

followed by a matching progressive1

sequence of

Means as processes, to be pursued at the ‘micro’ or ‘parts’ level

1 Progressive in terms of fulfillment of ‘precedence requirements’ for each process.

Operations Management

• OM is focused on enabling ‘efficient’ and ‘effective’ processes for the creation of value, by right coordination of all the ‘inputs’, and by linking the ‘outputs ’ to actual customer requirements (which are the very basis for the definition of value).

• The conversion process is, by itself, assumed to be • The conversion process is, by itself, assumed to be determined by what is already available as inputs in the process technologies employed, or can be availablethrough R&D, and so can be treated as a ‘black box’ with its known design capacities, etc., and so as ‘not part of OM’.

• Thus OM is not determined by the technologies of products or processes, and is thus a common process for all kinds of operations.

Contributions FromContributions From

� Human factors

� Industrial engineering

� Management science� Management science

� Biological science

� Physical sciences

� Information science

Case: “The Faltering Factory”

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Caselet: The Faltering Factory• Issues Faced

i. Customer complaints:o Prices not competitiveo Deliveries sometimes seriously lateo Quality not up to expected standards

ii. Slow working tempo, under present factory manager’s charge:o Worker productivity slipping due to delays and slowing down

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o Worker productivity slipping due to delays and slowing down caused by uneven flow of work.• Uneven flow of work caused by substandard materials and

inadequate maintenance.• Misguided cost reduction efforts on purchases led to

deterioration in purchased materials • Further misguided efforts at cost reduction through cutback in

maintenance personnel.

iii. Owner’s failure to recognize need to and make distinct provision for effective ‘Operations Management, o When manufacturing competence still being established.

Caselet: The Faltering Factory (Continued)

• The common, underlying/ root cause:

Misguided/ undue/ excessive emphasis on cost-cutting alone, rather than first on the creation of

3

rather than first on the creation of customer value

Case 1: “The Vicious Cycle” at The Faltering Factoryand its conversion to “Virtuous Cycle”

The unbalanced, excessive emphasis placed at the factory on ‘Cost Cutting’ (i.e., without due attention to the primary purpose of “Creation of customer Value”) has been the trigger point that led to the operation of the vicious cycles at the company.

Existing Vicious cycles:

Macro-level root cause problem: An unbalanced, excessive emphasis on ‘cost cutting1’, without due primary attention to “value creation2”

Micro-level root cause problem: A cost reduction1 accompanied by un-

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Micro-level root cause problem: A cost reduction1 accompanied by un-acceptable ‘loss of value creation’, leading to also unanticipated cost increases

Possible Virtuous cycles:

Macro-level root cause solution: A balanced emphasis on ‘value creation’ as primary purpose, followed by emphasis on ‘cost reduction’

Micro-level root cause solution: Cost reduction in the long term to complement the uncompromised ‘value creation’, as the primary purpose.

1 Not incurring costs that don’t add customer value; 2 Giving customer what he requires.

Case 1: The Faltering FactoryOperations – A key functional area in the organization

Operations

Finance

Marketing H R M

Marketing – Emphasizes the viewpoint of ‘customer value’

3

Marketing – Emphasizes the viewpoint of ‘customer value’Finance – Emphasizes the viewpoint of ‘shareholder value’HRM – Emphasizes the viewpoint of employees’, i.e., ‘Quality of work life’

So, when ‘Operations’ emphasizes the productivity and hence cost reduction viewpoints, it must do so in harmony with the above viewpoints.

Operations must emphasize all the above values, but finally, in the long term, also, ‘Human Resource Value”.

Case 1: The Faltering Factory

Setting ‘precedence-wise priority’ in the pursuit of Purposes or Values,

from the ‘short term’ to ‘long term’

Shareholder Value

Human Resource

ValueCustomer

Value

‘Quality before

Productivity’

3

(Through Productivity of Operations, through

pursuit of ‘cost reduction’)

(Through Effectiveness of Operations—in

meeting customer needs)

(Through pursuit of ‘quality at source’—through prevention)

(Through emphasis of ‘employee

empowerment’ that wins their

involvement)

‘Customer Value’ must come before shareholder value can be realized. However, according to Vineet Nayar1 (2010), ‘employee value’ must come even before ‘customer value’.

1 Vineet Nayar, “Employees First, Customer Second”, Harvard Business School Press, 2011.

The Operation-to-Profit Chain

Revenue Growth

Profitability

Customer Loyalty

Customer Satisfaction

External Customer

ValueEmployee

Productivity

Employee Retention

Employee Satisfaction

Internal Operation Quality

Operations Strategy and Product Delivery System

3

• Retention

• Repeat business

• Referral• Product designed and delivered to meet customer needs

• Product concept results for customers

• Workplace design

• Job design

• Employee development

• Employee rewards & recognition

• Tools for serving customers

InputsTo, and by, the employees

ConsequencesFor the customers and the share-holders

Case 1: The Faltering Factory - Questions

The consultant’s in-depth investigation revealed a slippage in worker productivity caused by an uneven flow of work, caused, in turn, by a combination of substandard materials and inadequate maintenance, which were, in turn, caused by poor control of purchased materials (by usage of substitute materials to save on purchases, which were not up to standards). Further, to ‘compensate’ for this loss, a overhead cost reduction (inclusive of a cutback in maintenance personnel) ensued, resulting only in still more productivity loss.

Questions:

1. Draw a figure showing the two glaring errors in decision in ‘Operations’ at the

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1. Draw a figure showing the two glaring errors in decision in ‘Operations’ at the company and the chain of consequences of these errors in decision, with causal interrelationships between them.

2. Do you see any vicious cycle/s operating? What are the triggers of such vicious cycles? Is it possible to manage such trigger points so as to convert from vicious to virtuous cycles? What new decision making processes may be required?

3. Looking at ‘Operations Management’ as a function involving decision making at the functional level of ‘Operations’ as against other functions such as ‘Marketing’, ‘HRM’, etc., discuss how it will accommodate these newer decision making processes.

The Heritage of The Heritage of Operations Management

The Heritage of OMThe Heritage of OM

�� Division of labor (Adam Smith 1776; Charles Division of labor (Adam Smith 1776; Charles Babbage 1852)Babbage 1852)

�� Standardized parts (Whitney 1800)Standardized parts (Whitney 1800)

�� Scientific Management (Taylor 1881)Scientific Management (Taylor 1881)

�� Coordinated assembly line (Ford/ Coordinated assembly line (Ford/ �� Coordinated assembly line (Ford/ Coordinated assembly line (Ford/ Sorenson/Avery 1913)Sorenson/Avery 1913)

�� Gantt charts (Gantt 1916)Gantt charts (Gantt 1916)

�� Motion study (Frank and Lillian Motion study (Frank and Lillian GilbrethGilbreth 1922)1922)

�� Quality control (Quality control (ShewhartShewhart 1924; Deming 1950)1924; Deming 1950)

The Heritage of OMThe Heritage of OM

�� Computer (Computer (AtanasoffAtanasoff 1938)1938)

�� CPM/PERT (DuPont 1957)CPM/PERT (DuPont 1957)

�� Material requirements planning (Material requirements planning (OrlickyOrlicky1960)1960)

�� Computer aided design (CAD 1970)Computer aided design (CAD 1970)�� Computer aided design (CAD 1970)Computer aided design (CAD 1970)

�� Flexible manufacturing system (FMS 1975)Flexible manufacturing system (FMS 1975)

�� BaldrigeBaldrige Quality Awards (1980)Quality Awards (1980)

�� Computer integrated manufacturing (1990)Computer integrated manufacturing (1990)

�� Globalization (1992)Globalization (1992)

�� Internet (1995)Internet (1995)

Frederick W. TaylorFrederick W. Taylor

�� Born 1856; died 1915Born 1856; died 1915

�� Known as ‘father of scientific Known as ‘father of scientific management’management’

�� In 1881, as chief engineer for Midvale In 1881, as chief engineer for Midvale �� In 1881, as chief engineer for Midvale In 1881, as chief engineer for Midvale Steel, studied how tasks were doneSteel, studied how tasks were done

�� Began first motion and time studiesBegan first motion and time studies

��Created efficiency principlesCreated efficiency principles

Taylor’s PrinciplesTaylor’s Principles

� Matching employees to right job

� Providing the proper training

Management Should Take More Management Should Take More Responsibility for:Responsibility for:

� Providing the proper training

� Providing proper work methods and tools

� Establishing legitimate incentives for work to be accomplished

Frank & Lillian Frank & Lillian GilbrethGilbreth

�� Frank (1868Frank (1868--1924); Lillian (18781924); Lillian (1878--1972)1972)

��HusbandHusband--andand--wife engineering teamwife engineering team

�� Further developed work measurement Further developed work measurement methodsmethodsmethodsmethods

�� Applied efficiency methods to their Applied efficiency methods to their home and 12 children! home and 12 children!

�� Book & Movie: “Cheaper by the Dozen,” Book & Movie: “Cheaper by the Dozen,” book: “Bells on Their Toes”book: “Bells on Their Toes”


�� In 1903, created Ford Motor CompanyIn 1903, created Ford Motor Company

�� In 1913, first used moving assembly In 1913, first used moving assembly line to make Model Tline to make Model T

Henry FordHenry Ford

line to make Model Tline to make Model T

�� Unfinished product moved by conveyor Unfinished product moved by conveyor past work stationpast work station

�� Paid workers very well for 1911 Paid workers very well for 1911 ($5/day!)($5/day!)

W. Edwards DemingW. Edwards Deming


�� Engineer and physicistEngineer and physicist

�� Credited with teaching Japan quality Credited with teaching Japan quality control methods in postcontrol methods in post--WW2WW2control methods in postcontrol methods in post--WW2WW2

�� Used statistics to analyze processUsed statistics to analyze process

�� His methods involve workers in His methods involve workers in decisionsdecisions

Eli WhitneyEli Whitney

��Born 1765; died 1825Born 1765; died 1825

��In 1798, received government In 1798, received government contract to make 10,000 musketscontract to make 10,000 muskets

��Showed that machine tools could Showed that machine tools could make standardized parts to exact make standardized parts to exact specificationsspecifications

�� Musket parts could be used in any Musket parts could be used in any musketmusket

5. Productivity Measurement5. Productivity Measurement

Productivity ChallengeProductivity Challenge

Productivity is the ratio of outputs (goods Productivity is the ratio of outputs (goods and services) divided by the inputs and services) divided by the inputs

(resources such as (resources such as laborlabor and capital)and capital)

The objective is to improve this The objective is to improve this measure of efficiencymeasure of efficiency, over time., over time.

Important Note!

‘Production’ is a measure of output only, and not a measure of efficiency

OM in Action: Improving Productivity at Starbucks – case date: 2005

(pp 15)

1. Pursuit of productivity improvements as “a game of saving seconds” from various operations at Starbuck’s outlets.

2. Three examples:

a. Stop requiring signatures on credit card purchases under $25. This sliced 5 seconds off the transaction time at the cash register.

b. Redesign of scoop for ice for beverage helped reduce the number

4

b. Redesign of scoop for ice for beverage helped reduce the number of scoops required to one, saving 14 seconds in the operation involving one minute.

c. New espresso machine, grinding and brewing coffee with push of a button, helped free the server to do other things, saving 12 seconds per espresso shot.

3. These improvements helped increase average yearly volume at the outlets from $740,000 by $200,000 in 6 years (i,e., by 27%, or, by 4.5% per year).

ProductivityProductivity

Productivity =Productivity =Units producedUnits produced

Input usedInput used

��Measure of process improvementMeasure of process improvement

�� Represents output relative to inputRepresents output relative to input

��Only through productivity increases Only through productivity increases can our standard of living improvecan our standard of living improve

Productivity

• Partial measures– output/(single input)

Productivity = Units produced/Input (a single resource) used

• Multi-factor measures

Inputs

Outputs =ty Productivi

• Multi-factor measures– output/(multiple inputs)

Productivity = Output/(Labur + Material + Energy + Capital + Miscellaneous),

where the individual inputs (the denominator) can be expressed in Rs. and summed.

• Total measure– output/(total inputs)

Productivity CalculationsProductivity Calculations–– Single Factor (or, ‘Partial’) ProductivitySingle Factor (or, ‘Partial’) Productivity

Labor Productivity =Labor Productivity =Units producedUnits produced

LaborLabor--hours usedhours used

1,0001,000= = 4 units/labor= = 4 units/labor--hourhour

1,0001,000

250250

Single factor or Partial Productivities do not measure the efficiency of use of the factor considered; it only measures how much the particular factor has been leveraged – which is contributed to by all the factors involved.

Example – Labor Productivity

10,000 Units Produced

Sold for $10/unit

500 labor hours What is the 500 labor hours

Labor rate: $9/hr

Cost of raw material: $5,000

Cost of purchased material: $25,000

What is the labor productivity?

10,000 units/500hrs = 20 units/hour ...

... or we can arrive at a unit-less figure

Example--Labor Productivity

(10,000 unit*$10/unit)/(500hrs*$9/hr) =

22.22

Can you think of any advantages or disadvantages of each approach?

Multi-Factor Productivity

OutputOutput

Labor + Material + Energy Labor + Material + Energy + Capital + Miscellaneous+ Capital + Miscellaneous

Productivity =Productivity =

� Also known as total factor productivity, when all � Also known as total factor productivity, when all the resources that cost a company are included in the calculation

� Inputs are expressed, in a common unit for all factors, often in dollars

� If Outputs are multiple products, they also need to be in common units, which can be in dollars.

Service ProductivityService Productivity

�� Typically labor intensiveTypically labor intensive

�� Frequently focused on unique Frequently focused on unique individual attributes or desiresindividual attributes or desires

��Often an intellectual task performed Often an intellectual task performed by professionalsby professionals

��Often difficult to mechanizeOften difficult to mechanize

��Often difficult to evaluate for qualityOften difficult to evaluate for quality

A Case Example: “Collins Titles”(Example 2 – pp 26)

5

(Example 2 – pp 26)

(Evaluation of productivity before and after introduction of

a proposed new computerized search system)

Collins Titles – Labor Productivity

Staff of 4 works 8 hrs/dayStaff of 4 works 8 hrs/day 8 titles/day8 titles/dayPayroll cost = $640/dayPayroll cost = $640/day Overhead = $400/dayOverhead = $400/day

With the Old System at Collins Titles:With the Old System at Collins Titles:

14 titles/day14 titles/day Overhead = $800/dayOverhead = $800/day

With the New System at Collins Titles:With the New System at Collins Titles:

5

8 titles/day8 titles/day

32 32 laborlabor--hrshrs

==New New laborlabor

productivityproductivity

= .25 titles/= .25 titles/laborlabor--hrhr


32 32 laborlabor--hrshrs= .4375 titles/= .4375 titles/laborlabor--hrhr

The introduction of the new system lead to higher overhead, and the labor productivity has improved, but what about the multi-factor productivity?

Collins Titles – Multi-factor Productivity

Staff of 4 works 8 hrs/dayStaff of 4 works 8 hrs/day 8 titles/day8 titles/dayPayroll cost = $640/dayPayroll cost = $640/day Overhead = $400/dayOverhead = $400/day

With the Old System at Collins Titles:With the Old System at Collins Titles:

14 titles/day14 titles/day Overhead = $800/dayOverhead = $800/day

With the New System at Collins Titles:With the New System at Collins Titles:

5


$640 + 400$640 + 400


$640 + 800$640 + 800

==Old Old

multifactor multifactor productivityproductivity

==New New

multifactor multifactor productivityproductivity

= .0077 titles/dollar= .0077 titles/dollar

= .0097 titles/dollar= .0097 titles/dollar

The Multifactor Productivity has also improved.

Productivity Variables(as found to happen over a period of time

in the U.S. economy)

� Labor - contributes about 10% of the annual increase

� Capital - contributes about 32% of the annual increase

�Management - contributes about 52% of the annual increase

Applying Productivity Figures

You’ve just told your boss that the plant labor productivity is better than that of a plant in a related than that of a plant in a related business.

Why might he not be pleased with you (from this information)?

Item Checkpoints

Productivity(P)

Has the production output been lower lately? Can it be raised? Has the worker productivity been up to par?

Quality (Q) Has quality been declining? Has the defect rate risen? Can the yield be raised? Has there been an increase in customer complaints?

Cost (C) Have costs gone up? Have the units of materials and fuels

PQCDSM Checklist – Another form of evaluation of ‘Operations Management’ performance

risen?

Delivery (D) Have late delivery increased? Can the production lead times be shortened?

Safety (S) Have there been any safety problems? Has the number of accidents increased? Are people engaging in unsafe work practices?

Morale (M) Is morale up or down? Are there any interpersonal problems? Are people getting getting appropriate job assignments?

6. Ten Critical Decision Areas in 6. Ten Critical Decision Areas in Operations Management

Ten Critical DecisionsTen Critical Decisions

Ten Decision AreasTen Decision Areas Chapter (s)Chapter (s)

1.1. Service and product designService and product design 55

2.2. Quality managementQuality management 666 Supplement6 Supplement

3.3. Process and capacity Process and capacity 77design design 7 Supplement7 Supplement

4.4. LocationLocation 884.4. LocationLocation 88

5.5. Layout designLayout design 99

6.6. Human resources, Human resources, 1010job design job design 10 Supplement10 Supplement

7.7. SupplySupply--chain chain 1111managementmanagement 11 Supplement11 Supplement

8.8. Inventory managementInventory management 12, 14, 1612, 14, 16

9.9. SchedulingScheduling 13, 1513, 15

10.10.MaintenanceMaintenance 1717

The Critical DecisionsThe Critical Decisions

�Service and product design

� What good or service should we offer?

� How should we design these � How should we design these products and services?

�Quality management

� How do we define quality?

� Who is responsible for quality?


�Process and capacity design

� What process and what capacity will these products require?

� What equipment and technology is necessary for these processes?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?


�Layout design

� How should we arrange the facility and material flow?

� How large must the facility be to meet our plan?our plan?

�Human resources and job design

� How do we provide a reasonable work environment?

� How much can we expect our employees to produce?


�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 � Inventory, material requirements planning, and JIT

� How much inventory of each item should we have?

� When do we re-order?


� Intermediate and short–term scheduling

� Are we better off keeping people on the payroll during slowdowns?

� Which jobs do we perform next?� Which jobs do we perform next?

�Maintenance

� Who is responsible for maintenance?

� When do we do maintenance?

Significant Events in OMSignificant Events in OM

Figure 1.3Figure 1.3

6. Case: The LA Motor Pool6. Case: The LA Motor Pool(pp 15 in the 8th Edition of the book)

OM in Action:

Increasing Productivity in the L.A. Motor Pool (p 15 in the 8th Edn.)

The newly elected mayor of Los Angeles faced many problems. One of them was a 21,000 vehicle motor pool with bloated expenses and poor vehicle availability. On any given day, as many as 30% of the city’s 900 trash trucks and 11% of the police department cars were in the repair shop. The problems included too many vehicles in some agencies, vehicle sabotage and abuse, missed repairs, vehicles never serviced. The L.A. motor pool and its $120 million-a-year maintenance operation needed improved productivity.

The mayor implemented seven simple operations management interventions: (1) individual drivers were turned into team players who helped complete each other’s routes; (2) trucks were assigned specific parking places so they could easily be routes; (2) trucks were assigned specific parking places so they could easily be located each morning; (3) tire pressure was checked on every truck every night to avoid flat tires during the working hours; (4) all trucks were emptied every night to avoid such dangers as left over cinders igniting a fire; (5) standard customer pickups were established (this alone saved the city $12 million per year); (6) the utility department installed a computerized fleet management system (to track vehicle use and to charge departments); and (7) mechanics were moved to night shifts so the vehicles were not in the shop during the day.

As a result of these management changes, the department cut its total fleet by 500 vehicles; its inventory of parts dropped 20%, freeing up $5.4 million dollars a year; and out-of-service garbage trucks dropped from that embarrassing 30% to 18%.

Source: The Wall Street Journal (July 6, 1995)

Increasing Productivity Increasing Productivity –– The LA Motor PoolThe LA Motor Pool(pp 15 in the 8(pp 15 in the 8thth Edition of the book)Edition of the book)

Before:Before:

�� Cost $120 million annuallyCost $120 million annually

�� 21,000 vehicles21,000 vehicles

�� 30% of the 900 trash trucks were in repair30% of the 900 trash trucks were in repair

�� 11% of police cars were in repair11% of police cars were in repair

Actions:Actions:Actions:Actions:

�� Created team assignmentsCreated team assignments

�� Assigned parking places for trucksAssigned parking places for trucks

�� Tires checked and trucks emptied each nightTires checked and trucks emptied each night

�� Standard customer pickups establishedStandard customer pickups established

�� Computerized fleet managementComputerized fleet management

�� Mechanics moved to night shiftMechanics moved to night shift

Increasing Productivity Increasing Productivity –– The LA Motor PoolThe LA Motor Pool(pp 15 in the 8(pp 15 in the 8thth Edition of the book)Edition of the book)

Before:Before:

�� Cost $120 million annuallyCost $120 million annually

�� 21,000 vehicles21,000 vehicles

�� 30% of the 900 trash trucks were in repair30% of the 900 trash trucks were in repair

�� 11% of police cars were in repair11% of police cars were in repair

Actions:Actions:

Results:

�Total fleet reduced by 500 vehicles

�Parts inventory dropped 20% reducing cost by $5.4 million annuallyActions:Actions:

�� Created team assignmentsCreated team assignments

�� Assigned parking places for trucksAssigned parking places for trucks

�� Tires checked and trucks emptied each nightTires checked and trucks emptied each night

�� Standard customer pickups establishedStandard customer pickups established

�� Computerized fleet managementComputerized fleet management

�� Mechanics moved to night shiftMechanics moved to night shift

cost by $5.4 million annually

�Standardized pickups reduced costs by $12 million annually

�Out of service garbage trucks dropped to 18%

Case: Productivity at Taco Bell

6

Case: Productivity at Taco Bell

Case: Case: Productivity at Taco Bell Productivity at Taco Bell (pp 20)(pp 20)

Improvements:Improvements:

1)1) Revised the menu Revised the menu

6

2)2) Designed meals for easy preparationDesigned meals for easy preparation

3)3) Shifted some preparation to suppliersShifted some preparation to suppliers

4)4) Efficient layout and automationEfficient layout and automation

5)5) Training and employee empowermentTraining and employee empowerment

Case: Case: Productivity at Taco BellProductivity at Taco Bell(pp 20)(pp 20)

Results:

�Preparation time cut to 8 seconds

�Management span of control increased from 5 to 30

�In-store labor cut by 15

6

�In-store labor cut by 15 hours/day

�Stores handle twice the volume with half the labor

�Fast-food low-cost leader

The Economic SystemThe Economic System

OutputsOutputs

Goods andservices

ProcessesProcesses

The U.S. economic system transforms inputs to outputs at about an annual 2.5% increase

in productivity per year. The productivity increase is the

result of a mix of capital (38%

InputsInputs

Labor,capital,

management

FeedbackFeedback looploop

result of a mix of capital (38% of 2.5%), labor (10% of

2.5%), and management (52% of 2.5%).

7. Exciting New Trends in 7. Exciting New Trends in Operations Management

New Challenges in OMNew Challenges in OM

�� Global focusGlobal focus

�� JustJust--inin--timetime

�� Supply chain Supply chain partneringpartnering

ToToFromFrom

�� Local or national focusLocal or national focus

�� Batch shipmentsBatch shipments

�� Low bid purchasingLow bid purchasingpartneringpartnering

�� Rapid product Rapid product development, development, alliancesalliances

�� Mass customizationMass customization

�� Empowered Empowered employees, teamsemployees, teams

�� Lengthy product Lengthy product developmentdevelopment

�� Standard productsStandard products

�� Job specializationJob specialization

New Trends in OMNew Trends in OM

Local or Local or national national focusfocus

LowLow--cost, reliable cost, reliable worldwide communication worldwide communication and transportation networksand transportation networks

Global focusGlobal focus

Batch (large) Batch (large) Short product life cycles Short product life cycles JustJust--inin--time time

PastPast CausesCauses FutureFuture

Batch (large) Batch (large) shipmentsshipments

Short product life cycles Short product life cycles and cost of capital put and cost of capital put pressure on reducing pressure on reducing inventoryinventory

JustJust--inin--time time shipmentsshipments

LowLow--bid bid purchasingpurchasing

Quality emphasis requires Quality emphasis requires that suppliers be engaged in that suppliers be engaged in product improvementproduct improvement

SupplySupply--chain chain partners, partners, Enterprise Enterprise Resource Resource Planning, Planning, ee--commercecommerce


Lengthy Lengthy product product developmentdevelopment

Shorter life cycles, Shorter life cycles, Internet, rapid international Internet, rapid international communication, computercommunication, computer--aided design, and aided design, and international collaborationinternational collaboration

Rapid product Rapid product development, development, alliances, alliances, collaborative collaborative designsdesigns

Standardized Standardized Affluence and worldwide Affluence and worldwide Mass Mass


Standardized Standardized productsproducts

Affluence and worldwide Affluence and worldwide markets; increasingly markets; increasingly flexible production flexible production processesprocesses

Mass Mass customization customization with added with added emphasis on emphasis on qualityquality

Job Job specializationspecialization

Changing socioculture Changing socioculture milieu; increasingly a milieu; increasingly a knowledge and information knowledge and information societysociety

Empowered Empowered employees, employees, teams, and teams, and lean lean productionproduction


LowLow--cost cost focusfocus

Environmental issues, ISO Environmental issues, ISO 14000, increasing disposal 14000, increasing disposal costscosts

Environmentally Environmentally sensitive sensitive production, production, green green manufacturing, manufacturing, recycled recycled


recycled recycled materials, materials, remanufacturingremanufacturing

Exciting New Trends in Operation Management

1. Global focus, particularly because of the rapid decline in

communication and transport costs

2. Just-in-Time performance

3. Supply chain partnering

4. Rapid product development

5. Mass customization

6. Empowered employees

7. Environmentally sensitive production

8. Ethics

8. Priorities for Operations 8. Priorities for Operations Management

Ethics and Social ResponsibilityEthics and Social Responsibility

Challenges facing Challenges facing operations managers:operations managers:

�� Developing safe quality productsDeveloping safe quality products�� Developing safe quality productsDeveloping safe quality products

�� Maintaining a clean environmentMaintaining a clean environment

�� Providing a safe workplaceProviding a safe workplace

�� Honoring community commitmentsHonoring community commitments

Priorities for Operations Management

1. Acquire Capabilities to Tolerate Product Proliferation

2. Relate the Operations System to Customer/Market2. Relate the Operations System to Customer/Market

3. Develop Systems and Procedures that Promote Learning

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