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7/29/2019 Intro Opn Mangt
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Introduction to Operations Management
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What is production management?
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What is a product?
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Satisfies someone's need
Some one is willing to buy!
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Product is a result of a process, a set of
activities which creates a sellable output
Such a process is called production
Production is a process and product is the
result
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Types of Products
Tangible/Intangible
Consumer /Industrial
Consumer durable & Non-durable
Discrete/Continuous
Standard/Customized
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Products and services
• Expanded concept of product and activity
that creates it - operation
• Factory and facility
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When does someone buy a product?
Need experience and satisfaction
Choice of a particular product from variety?
Concept of value
How can we create value [function/cost]?
Can we define operation now?
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VA/NVA
Value is created by value adding activities
Wastes are created by non-value addingactivities
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What activities add value?
(Such activities are operations)
Alter physical state-water to ice
Alter form-blacksmith
Alter chemical composition-chemical
products
Alter metallurgical condition-alloys
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Store, preserve-refrigerate deep freeze
Impart knowledge-teach, train, give
information
Give advice-medical advice, legal opinion
Give medical treatment
Transport – mangoes from Ratnagiri to
Mumbai
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What is the result of such activities?
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Result of operations (value adding
activities) is a product which may be tangible
or intangible
Product or service
Why do customers buy a product?
Every product is finally a service!
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What is core service?
Products meeting QCD expectations of
customer
What is Value added service?Help external customers use the core
service effectively
Help internal customers perform effectively
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1. Information on product and product
performance-safety, cost etc.
2. Problem solving-product support, workers
visiting customers works to learn product
performance for C/CA/PA
3. Sales support- technology demonstration4. Field support-parts replacement, stock
replenishment
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Product Vs Service
• Result of a process
• Tangible
• Inventoriable
• Customer is away,
product is to be
delivered to the
customer
• A process itself
• Intangible
• Non inventoriable
• Customer is on the
shop floor and
involved in creation
of service
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What is management?
Important features of management
Facilitation
Resource allocation
Accountability
Review – PDCA
Efficiency & Effectiveness
Visualization & Planning
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What is Operations Management? A function of Corporate Management
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CORPORATE MANAGEMENT
OPERATIONS HRD FINANCE MARKETING ENGINEERING LOGISTICS
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What is a function?
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Function is a set of goal focused activities
Goals are subsets of corporate objectives
Corporate objectives are aimed at
customer satisfaction
customer satisfaction is the result of
meeting customer’s expectations
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What are customer’s expectations?
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QCD of the product
How are they fulfilled?
P,Q,C,D,E,F,S,H,E, the Objectives of
Operations Management
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Definition of Operations Management
Design, operation and improvement of
systems that create and deliver the firms
primary products and services
O/M is a function of general management
O/M is a line function
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O/M uses tools of OR (Operations
Research), MS (Method Study) & IE
(Industrial Engineering), hence closely
associated with these functions
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Functions of production management
Planning
Product-selection, design, development
Location, layout
Capacity planning
Production planning
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Organizing
Work-study
Staffing
Materials management
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Controlling
Stores management
Value analysis
Quality control
Maintenance management
Inventory management
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Operations Management Objectives
Performance Objectives
Efficiency & Effectiveness
Quality
Lead times
Capacity utilizationFlexibility
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Cost Objectives
Explicit [visible] costs: material, labor, scrap,
rework, maintenance
Implicit [invisible]costs: inventory, stock-outs,
shortages, delayed deliveries, mat.handling,
inspection, grievances, dissatisfaction,opportunity
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Importance of Operations Management
1. Important part of Business education
Central to every business activity
Knowledge of issues in the field is critical in
manufacturing or service, private or public
2. Government is moving towards customer
service models
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‘Reinventing Government’ in the US -
1990
(David Osborne and Ted Gaebler-1992 book
Reinventing Government)
It applies the customer service
model to government and the PSUs
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In India many of the PSUs are either
getting privatized or following the customer service model as in the US
• Customer sensitiveness
• Productivity orientation
• Importance of conservation
• Process focus for result
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This approach focuses on results and
promotes competition inside and outside
government
‘Reinventing Government’ initiatives draw
from the concepts of Supply Chain
Management, TQM, BPR and JIT delivery,
concepts that fall under OM umbrella
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3. Operations Management provides a
systematic way of looking at organizationalprocesses
Analytical approach to a situation
Problem solving
Respect for standards
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4. O/M presents interesting carrier
opportunitiesLine positions-direct supervision of
operations
Staff positions-Supply Chain Management,
Quality Assurance
Consulting opportunities-BPR, ERP, JIT,
TQM
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5. Concepts and tools of O/M are used in all
functions of management
Quality Control (prevention of defectives)
Productivity improvement(resource
utilization)
Internal customer concept, who is customer?
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6. Competitive edge through O/M to business
and to management professionalsHuge potential to boost the productivity of
the process, offer products at lower cost and
high quality
Meeting the ‘QCD’ expectations of the
customers with improved flexibility
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History of Operations Management
Concept of O/M - an evolution: House hold
trades to factories as investment
opportunities
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1910s
Frederic Taylor
Principles of scientific management
Concept of productivity, time study
Frank and Lillian Gilbreth
Motion study
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Henry Ford and Henry Gantt
Moving assembly line and activity scheduling,
Gantt Chart
F.W. Harris
Inventory Control, concept of EOQ
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1930s
Walter Shewhart & H.F. Dodge and H.G.Romig
Quality control, sampling inspection &
statistical tables for quality control
Elton Mayo & L.H.C. Tippet
Hawthorne studies of worker motivation
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1940
George B. DantzigSimplex method of linear programming to
solve complex multidisciplinary problems
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1950s -1960s
Many researchers in US & Western Europe
Extensive development of OR tools like
simulation, waiting line theory, decision theory,
mathematical programming, PERT & CPM
1970
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1970
Many computer manufacturers lead by IBM
in US
Wide spread use of computers in business for
production scheduling, inventory control,
forecasting, project management, MRP
Mc Donald's restaurants in US
Service Quality and Productivity, mass
production in service sector
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1980
Harvard Business School Faculty
Manufacturing as a competitive weapon
Tai-ichi Uhno of Toyota Motors,D E Deming & J E Juran
Kanban, Pokayoke, CIM, FMS, CAD/CAM,
robots etc.
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Eliyahu M. Goldratt
Synchronous manufacturing-Lean principles
to variety production, Theory Of Constraints:
bottleneck analysis-methodology for solving
problems, goal-performance-constraints
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1990
National Institute of Standards and
Technology, American Society of Quality
Control and International Organization for
Standardization
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Total Quality Management, Balridge quality
award, ISO 9000, Quality FunctionalDeployment, value engineering and
concurrent engineering-modern approach to
product development
Michael Hammer and other major
consulting firms
Business Process Re-engineering
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US government, Netscape Communication
Corporation and Microsoft CorporationSAP (Germany), Oracle (US)
Supply chain management, SAP/R3,
client/server software
2000
Amazon, eBay, American Online, Yahoo
E-commerce, Internet, World Wide Web
What is Operations Strategy?
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What is Operations Strategy?
Evaluating most Cost effective methodology
of producing goods while achieving desired
Quality and Delivery objectives
A planning process to organize the resources
to fulfill the long term objectives of operations,
which are focused on organizational objectives
Organizational objectives are dynamic as
they are competitive - post war US and Japan
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Objectives are flexible to meet changing
expectations of customers
Operations strategy is a process by which
key operations decisions are made that are
consistent with overall strategic objectives of
the firm
Operations Strategy leads to operational
excellence
Wh t ti l d i i ?
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What are operational decisions?
Decisions are at the core of a strategy.
Operational Decisions are the strategic
options selected by the organization.
Product & Process
Product portfolio- products, product line,
extent of customization
Product design
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Process design
Technology selection
Capacity planning
Inventory decisions
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Infrastructure
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Infrastructure
Plant and equipment
Process location
Planning systems, MRP? DRP? ERP?
Control systems, Manual? Automatic?
Computerized?
Quality assurance and control
Work payment structure
Organization of Operations function
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Relevance of Operations Strategy
1.Changing expectations of customers due to
the competitive dynamics
2. Need for a cost effective plan to respond to
these changes
3. Need for adaptation to competitive
priorities, Quality? Cost? Delivery?
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4. Competitive pressure on price line, lead
time and quality
5. Challenges of modern business- pushes
and pulls, customers, suppliers, investors,
workers, government, NGOs
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COMPETITIVE DIMENTIONS IN
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COMPETITIVE DIMENTIONS IN
OPERATIONS STRATEGY
‘Make it cheap’- cost reduction, post war
demand for volumes
‘Make it good’- quality and reliability as a
dimension, competition from Japanese
products
‘Make it quick’- lead time reduction
‘Deliver it when promised’-OTD
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‘Change its volume’-Meeting rising demand
and scaling down
‘Change it’-new product introduction
‘Support it’-competitive dimensions related
to service
COMPETITIVE ADVANTAGE
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COMPETITIVE ADVANTAGE
Competitive Advantage creates value for the
customer
Firm’s profit exceeds the competition
average
Cost advantages-core service is delivered at
lower cost
Differentiation advantage (service advantage)
-benefits delivered are superior
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Resources
DistinctiveCompetencies
Cost Advantage
or
Differentiation
Advantage
ValueCreation
Capabilities
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Resources
Firm’s resources and capabilities are to be
superior to competition- Without this superiority,
any advantage quickly would disappear
Patents and trademarks
Proprietary know-how
Installed customer base
Reputation of the firm
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Brand equity-is the value that customers
PERCEIVE in a brand. It is measured based
on how much trust a customer has in the
brand.
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Capabilities Firm's ability to utilize its resources
effectively
Aspects that are difficult to document
Embedded strengths of the company
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Distinctive Competencies
The firm's resources and capabilities
together form its distinctive competencies
competencies enable innovation, efficiency,
quality, and customer responsiveness, all of
which can be leveraged to create a costadvantage or a differentiation advantage.
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TIME BASED COMPETITION
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TIME BASED COMPETITION
Business organizations seek competitive
advantage to attract customers
Focus of the competition changed with time
post war focus in the US was cost (concept
of 'make it cheap')
Japanese introduced quality focus in 1980s
(concept of 'make it better')
A th t d lit b lifi
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As the cost and quality become qualifiers
in competitive business. Now focus comes on
time. (concept of 'make it quick')
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Classical ILO approach to work talks about
work content and ineffective timeTBC as an initiative puts the focus on NVA
elimination/reduction
As the NVAs shrink changes occur in O/S
Productivity goes up, Output rises,
Business prospers
S ti f i 'D' t ti b th
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Satisfying 'D' expectation became the
winner characteristic in competitive business
Lead-time came under the scanner of
business managers
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TBC has a methodology for implementation
Value stream mappingProcess mapping
Prioritization with respect to product delivery
Selecting focus area
Reduce NVAs
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Tools used: SMED, KANBAN, 5S, Process
mapping, layout change, Technology,Logistical Management, Supply Chain
Management