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HISTORICAL EVOLUTION OF PRODUCTION AND OPERATIONSMANAGEMENT

For over two centuries operations and production management has been

recognised as an important factor in a countrys economic growth.

The traditional view of manufacturing management began in eighteenthcentury when Adam Smith recognised the economic benefits of specialisation of labour. He recommended breaking of jobs down intosubtasks and recognises workers to specialised tasks in which they would

become highly skilled and efficient. In the early twentieth century, F.W.Taylor implemented Smiths theories and developed scientificmanagement. From then till 1930, many techniques were developed

prevailing the traditional view. Brief information about the contributions tomanufacturing management is shown in the Table 1.1.

Production management becomes the acceptable term from 1930s to1950s. As F.W. Taylors works become more widely known, managersdeveloped techniques that focussed on economic efficiency inmanufacturing. Workers were studied in great detail to eliminate wastefulefforts and achieve greater efficiency. At the same time, psychologists,socialists and other social scientists began to study people and human

behaviour in the working environment. In addition, economists,mathematicians, and computer socialists contributed newer, moresophisticated analytical approaches.

With the 1970s emerges two distinct changes in our views. The mostobvious of these, reflected in the new name operations management wasa shift in the service and manufacturing sectors of the economy. As servicesector became more prominent, the change from production tooperations emphasized the broadening of our field to serviceorganizations. The second, more suitable change was the beginning of an

emphasis on synthesis, rather than just analysis, in management practices.


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SHEENASheena had worked for the same Fortune 500 Company for most 15years. Although the company had gone through some tough times,

things were starting to turn around. Customer orders were up, andquality and productivity had improved dramatically from what theyhad been only a few years earlier due company wide qualityimprovement program. So, it comes as a real shock to Sheena andabout 400 of her co-workers when they were suddenly terminatedfollowing the new CEOs decision to downsize the company.

After recovering from the initial shock, Sheena tried to findemployment elsewhere. Despite her efforts, after eight months of

searching she was no closer to finding a job than the day she started.Her funds were being depleted and she was getting more discouraged.There was one bright spot, though: She was able to bring in a littlemoney by mowing lawns for her neighbors. She got involved quite bychance when she heard one neighbor remark that now that hischildren were on their own, nobody was around to cut the grass.Almost jokingly, Sheena asked him how much hed be willing to pay.Soon Sheena was mowing the lawns of five neighbors. Other neighborswanted her to work on their lawns, but she didnt feel that she could

spare any more time from her job search.However, as the rejection letters began to pile up, Sheena knew shehad to make an important decision in her life. On a rainy Tuesdaymorning, she decided to go into business for herself taking care of neighborhood lawns. She was relieved to give up the stress of jobhunting, and she was excited about the prospects of being her ownboss. But she was also fearful of being completely on her own.Nevertheless, Sheena was determined to make a go of it.At first, business was a little slow, but once people realized Sheena wasavailable, many asked her to take care of their lawns. Some peoplewere simply glad to turn - the work over to her; others switched fromprofessional lawn care services. By the end of her first year in business,Sheena knew she could earn a living this way. She also performedother services such as fertilizing lawns, weeding gardens, andtrimming shrubbery. Business became so good that Sheena hired twopart-time workers to assist her and, even then, she believed she couldexpand further if she wanted to.


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Questions

1. In what ways are Sheenas customers most likely to judge the quality of her lawn care services?2. Sheena is the operations manager of her business. Among her responsibilities are forecasting, inventorymanagement, scheduling, quality assurance, and maintenance.What kinds of things would likely require forecasts?(b) What inventory items does Sheena probably have? Name one inventory decision she has to make

periodically.(c) What scheduling must she do? What things might occur to disrupt schedules and cause Sheena toreschedule?(d ) How important is quality assurance to Sheenas business? Explain.(e) What kinds of maintenance must be performed?3. What are some of the trade-offs that Sheena probably considered relative to:(a) Working for a company instead of for herself?(b) Expanding the business?4. The town is considering an ordinance that would prohibit putting grass clippings at the curb for

pickup because local landfills cannot handle the volume. What options might Sheena consider if the ordinance is passed? Name two advantages and two drawbacks of each option.


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PLANT LOCATION AND LAYOUT

Plant location or the facilities location problem is an important strategic level decision-making for an organisation. One of the key features of a conversion process (manufacturingsystem) is the efficiency with which the products (services) are transferred to the customers.This fact will include the determination of where to place the plant or facility.The selection of location is a key-decision as large investment is made in building plant andmachinery. It is not advisable or not possible to change the location very often. So an improper location of plant may lead to waste of all the investments made in building and machinery,equipment.Before a location for a plant is selected, long range forecasts should be made anticipating futureneeds of the company. The plant location should be based on the companys expansion plan and

policy, diversification plan for the products, changing market conditions, the changing sourcesof raw materials and many other factors that influence the choice of the location decision. The

purpose of the location study is to find an optimum location one that will result in the greatestadvantage to the organization.

NEED FOR SELECTING A SUITABLELOCATION

The need for selecting a suitable location arises because of three situations.

I. When starting a new organisation, i.e ., location choice for the first time.II. In case of existing organisation.III. In case of Global Location.

I. In Case of Location Choice for the First Time or New OrganisationsCost economies are always important while selecting a location for the first time, but shouldkeep in mind the cost of long-term business/organisational objectives. The following are thefactors to be considered while selecting the location for the new organisations:

1. Identification of region: The organisational objectives along with the various long-termconsiderations about marketing, technology, internal organisational strengths and weaknesses,region- specific resources and business environment, legal-governmental environment, social

environment and geographical environment suggest a suitable region for locating the operationsfacility.

2. Choice of a site within a region: Once the suitable region is identified, the next step ischoosing the best site from an available set. Choice of a site is less dependent on theorganisations long -term strategies. Evaluation of alternative sites for their tangible andintangible costs will resolve facilities-location problem.The problem of location of a site within the region can be approached with the following cost-oriented non-interactive model, i.e., dimensional analysis.3. Dimensional analysis: If all the costs were tangible and quantifiable, the comparison andselection of a site is easy. The location with the least cost is selected. In most of the casesintangible costs which are expressed in relative terms than in absolute terms. Their relative

merits and demerits of sites can also be compared easily. Since both tangible and intangiblecosts need to be considered for a selection of a site, dimensional analysis is used.


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Dimensional analysis consists in computing the relative merits (cost ratio) for each of the costitems for two alternative sites.

The existing firms will seek new locations in order to expand the capacity or to place theexisting facilities. When the demand for product increases, it will give rise to followingdecisions:l l l

Whether to expand the existing capacity and facilities. Whether to look for new locations for additional facilities. Whether to close down existing facilities to take advantage of some newlocations.

II. In Case of Location Choice for Existing OrganisationIn this case a manufacturing plant has to fit into a multi-plant operations strategy. That is,additional plant location in the same premesis and else were under following circumstances:1. Plant manufacturing distinct products.2. Manufacturing plant supplying to specific market area.3. Plant divided on the basis of the process or stages in manufacturing.4. Plants emphasizing flexibility. The different operations strategies under the abovecircumstances could be:

1. Plants manufacturing distinct products: Each plant services the entire market area for the organization. This strategy is necessary where the needs of technological and resourceinputs are specialized or distinctively different for the different product-lines.For example, a high quality precision product-line should not be located along with other

product-line requiring little emphasis on precision. It may not be proper to have too manycontradictions such as sophisticated and old equipment, highly skilled and semi-skilled

personnel, delicates processes and those that could permit rough handlings, all under one roof and one set of managers. Such a setting leads to much confusion regarding the requiredemphasis and the management policies.Product specialization may be necessary in a highly competitive market. It may be necessary toexploit the special resources of a particular geographical area. The more decentralized these

pairs are in terms of the management and in terms of their physical location, the better would bethe planning and control and the utilization of the resources.

2. Manufacturing plants supplying to a specific market area: Here, each plant manufacturesalmost all of the companys products. This type of strategy is useful where market proximityconsideration dominates the resources and technology considerations. This strategy requiresgreat deal of coordination from the corporate office. An extreme example of this strategy is thatof soft drinks bottling plants.

3. Plants divided on the basis of the process or stages in manufacturing: Each production

process or stage of manufacturing may require distinctively different equipment capabilities,labour skills, technologies, and managerial policies and emphasis. Since the products of one plant feed into the other plant, this strategy requires much centralized coordination of themanufacturing activities from the corporate office that are expected to understand the varioustechnological aspects of all the plants.

4. Plants emphasizing flexibility: This requires much coordination between plants to meet thechanging needs and at the same time ensure efficient use of the facilities and resources.Frequent changes in the long-term strategy in order to improve be efficiently temporarily, arenot healthy for the organization. In any facility location problem the central question is: Is thisa location at which the compan y can remain competitive for a long time?


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For an established organization in order to add on to the capacity, following are the ways:(a) Expansion of the facilities at the existing site: This is acceptable when it does not violate the

basic business and managerial outlines, i.e., philosophies, purposes, strategies and capabilities.For example, expansion should not compromise quality, delivery, or customer service.(b) Relocation of the facilities (closing down the existing ones): This is a drastic step which can

be called as Uprooting and Transplanting. Unless there are very compelling reasons,relocation is not done. The reasons will be either bringing radical changes in technology,resource availability or other destabilization.All these factors are applicable to service organizations, whose objectives, priorities andstrategies may differ from those of hardcore manufacturing organizations.

III. In Case of Global LocationBecause of globalisation, multinational corporations are setting up their organizations in Indiaand Indian companies are extending their operations in other countries. In case of globallocations there is scope for virtual proximity and virtual factory.

V IRTUAL P ROXIMITY

With the advance in telecommunications technology, a firm can be in virtual proximity to itscustomers. For a software services firm much of its logistics is through the information/communication pathway. Many firms use the communications highway for conducting a large

portion of their business transactions. Logistics is certainly an important factor in deciding on alocation whether in the home country or abroad. Markets have to be reached. Customers haveto be contacted. Hence, a market presence in the country of the customers is quite necessary.

V IRTUAL F ACTORYMany firms based in USA and UK in the service sector and in the manufacturing sector oftenout sources part of their business processes to foreign locations such as India. Thus, instead of ones own operations, a firm could use its business associates operations facilities. The IndianBPO firm is a foreign- based companys virtual service factory. So a location could be onesown or ones business associates. The location decision need not always necessarily pertain toown operations.

R EASONS FOR A G LOBAL /F OREIGN L OCATION

A. Tangible ReasonsThe tangible reasons for setting up an operations facility abroad could be as follows:

Reaching the customer: One obvious reason for locating a facility abroad is that of capturing ashare of the market expanding worldwide. The phenomenal growth of the GDP of India is a bigreason for the multinationals to have their operations facilities in our country. An importantreason is that of providing service to the customer promptly and economically which islogistics-dependent. Therefore, cost and case of logistics is a reason for setting upmanufacturing facilities abroad. By logistics set of activities closes the gap between productionof goods/services and reaching of these intended goods/services to the customer to hissatisfaction. Reaching the customer is thus the main objective. The tangible and intangible gainsand costs depend upon the company defining for itsel f as to what that reaching means. Thetangible costs could be the logistics related costs; the intangible costs may be the risk of operating is a foreign country.

The tangible gains are the immediate gains; the intangible gains are an outcome of what the


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company defines the concepts of reaching and customer for itself.

The other tangible reasons could be as follows:(a) The host country may offer substantial tax advantages compared to the home country.(b) The costs of manufacturing and running operations may be substantially less in that foreigncountry. This may be due to lower labour costs, lower raw material cost, better availability of the inputs like materials, energy, water, ores, metals, key personnel etc.(c) The company may overcome the tariff barriers by setting up a manufacturing plant in aforeign country rather than exporting the items to that country.

B. Intangible ReasonsThe intangible reasons for considering setting up an operations facility abroad could be asfollows:

1. Customer-related Reasons(a) With an operations facility in the foreign country, the firms customers may feel secure thatthe firm is more accessible. Accessibility is an important service quality determinant.

(b) The firm may be able to give a personal tough. ( c) The firm may interact more intimatelywith its customers and may thus understand their requirements better. ( d ) It may also discover other potential customers in the foreign location.

2. Organisational Learning-related Reasons(a) The firm can learn advanced technology. For example, it is possible that cutting-edgetechnologies can be learn by having operations in an technologically more advanced country.The firm can learn from advanced research laboratories/universities in that country. Suchlearning may help the entire product-line of the company.(b) The firm can learn from its customers abroad. A physical location there may be essentialtowards this goal.(c) It can also learn from its competitors operating in that country. For this reason, it may have

to be physically present where the action is.(d ) The firm may also learn from its suppliers abroad. If the firm has a manufacturing plantthere, it will have intensive interaction with the suppliers in that country from whom there may

be much to learn in terms of modern and appropriate technology, modern management methods,and new trends in business worldwide.

3. Other Strategic Reasons(a) The firm by being physic ally present in the host country may gain some local boy kind of

psychological advantage. The firm is no more a foreign company just sending its productsacross international borders. This may help the firm in lobbying with the government of thatcountry and with the business associations in that country.(b) The firm may avoid political risk by having operations in multiple countries. (c) By being in the foreign country, the firm can build alternative sources of supply. The firmcould, thus, reduce its supply risks.

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lectura del sábado 1 junio