OPERATION/PRODUCTIONOPERATION/PRODUCTION

The processes and The processes and methods used to used to transform transform tangible inputs ( inputs (raw materials, , semi-finished goods, , subassemblies) and ) and intangible inputs ( inputs (ideas, , information, , knowledge) into ) into goods or or services. . Resources are used in this are used in this process to to create an an output that is suitable for use that is suitable for use or has or has exchange value. .

OPERATIONS MANAGEMENT DEFINEDOPERATIONS MANAGEMENT DEFINED

Operations management is defined as the process of Operations management is defined as the process of designing, operating, and controlling a productive designing, operating, and controlling a productive system capable of transforming physical resources system capable of transforming physical resources and human talent into needed goods and services.and human talent into needed goods and services.

THE PRODUCTION SYSTEM AND ITS ENVIRONMENTTHE PRODUCTION SYSTEM AND ITS ENVIRONMENT

innovation

The The process of translating an of translating an idea or or invention into a good or into a good or service that that creates value or for which or for which customers will will pay. To . To be called an innovation, an idea must be replicable at an be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific and must satisfy a specific need. Innovation . Innovation involves deliberate application of involves deliberate application of information, imagination , imagination and and initiative in deriving greater or different in deriving greater or different values from from resources, and includes all processes by which new , and includes all processes by which new ideas are are generated and converted into useful generated and converted into useful products. In . In business, , innovation often innovation often results when ideas are applied by the when ideas are applied by the company in in order to further satisfy the to further satisfy the needs and and expectations of the customers. In a social of the customers. In a social context, innovation helps , innovation helps create new new methods for for alliance creation, joint venturing, creation, joint venturing, flexible work hours, and creation ... hours, and creation ...

Examples of Conversion ProcessExamples of Conversion Process

 

Input-Output in a Dental Clinic

Input-Output in a fast-food Shop

Input:

Patient

Through put in

Conversion process:

Patient

Output:

Patient receiving Medical service

Input:

Bread, meat,

mayonnaise

Through put in

Conversion process:

Items being cooked

Output:

Burgers

Operations SystemsOperations Systems

Operations systems for a Department store

Random fluctuations:

Late deliveries, Recessions, labor turnover

Conversion process

Feedback: inventory levels, labor efficiency, sales volume

Outputs:

Serviced customer with desired merchandise

Inputs:

Land, Labor, building, equipment, merchandise, store managers

Operations SystemsOperations Systems

Operations systems for a farm

Feedback: observation of soil and crop conditions, prices received

Inputs:

Land, farmer labor, building, equipment, tractors, plows, etc.

Outputs:

Grain, beef, milk, etc.

Random fluctuations:

Weather, inflation, govt. controls, equipment breakdown

Conversion process

PRODUCTPRODUCT

• ProductsProducts or or thingsthings are outputs converted from are outputs converted from inputs that satisfy consumer needs & offers inputs that satisfy consumer needs & offers benefits to customers in forms benefits to customers in forms ofof financial, financial, medical, legal, educational, etc. medical, legal, educational, etc.

• A product can be either a A product can be either a goodgood (i.e., a physical (i.e., a physical object) or it may be a object) or it may be a servicservice (i.e., an e (i.e., an intangible product). intangible product).

• In operational terms, In operational terms, goodsgoods are are produced/ produced/ manufacturedmanufactured and and services services are are generatedgenerated. .

Characteristic Differences between Goods & ServicesCharacteristic Differences between Goods & Services

CharacteristicsCharacteristics GoodsGoods ServicesServices

1.1. Output Output Tangible Tangible Intangible Intangible

2.2. Customer contact Customer contact LowLow HighHigh

3.3. Uniformity of inputUniformity of input HighHigh LowLow

4.4. Labor contentLabor content LowLow HighHigh

5.5. Measurement of productivityMeasurement of productivity EasyEasy DifficultDifficult

6.6. to correct quality problems to correct quality problems HighHigh LowLow

7.7. Input variabilityInput variability LowerLower GreaterGreater

8.8. Perishable CharacterPerishable Character LessLess MoreMore

PeriodicPeriodic

Selecting

Involves the

selection

of products,

processes,

equipment,

work force

Designing

Involves the design of products, processes, equipment, jobs, methods & wage payment, operating & control system

Updating

Involves the revision of the productive

system in light of new products and process,

technological breakthroughs, shifts

in demand, new managerial

techniques, research findings, failures in

the existing products, processes or operating and control systems

OPERATIONS MANAGEMENT ACTIVITIES

Continual

Operating–ControllingIs concerned with setting production

levels, scheduling

production and work force, inventory

management and quality assurance

Process TechnologyProcess Technology

1. Job shop technology is a process technology suitable for a variety of custom-designed products in small volume, e.g., Consulting firms.

2. Batch technology is a process technology suitable for a variety of products in varying volumes, e.g., Bakery.

3. Assembly line is a process technology suitable for a narrow range of standardized products in high volumes, e.g., Ready made garments manufacturing.

4. Continuous flow technology is a process technology suitable for producing a continuous flow of products, e.g., Beverage.

5. Project technology is a unique & not repetitious activity with a well defined objective that cuts across many organizational and functional lines involving cost & time, e.g., Jamuna Bridge project.

Product Life CycleProduct Life Cycle

Job Shop

BatchTechnology

Continuous flow

Assembly Line

Start up Rapid Maturation Commodity Growth

Time →

Figure: Process Costing

IMPORTANT FEATURES OF DIFFERENT STAGES IN THE PRODUCT LIFE IMPORTANT FEATURES OF DIFFERENT STAGES IN THE PRODUCT LIFE CYCLECYCLE

Stages R&D Introduction Growth Maturity Decline

Basic Strategies Innovate Infiltrate Advance Defend Withdraw

Product Variety Great Variety Great Variety Increasing standardization

Emergence of a ‘dominant design’

High standardization,

‘commodity characteristics’

Product Volume - Low Volume Increasing Volume High Volume High Volume

Form of Competition

- Product Characteristics

Product Quality & Availability

Price & Dependability Price

Strategic Concerns

1. R&D for

new products

& services

2. Forecast sales & key

trends

1. Plan financing for

negative cash flow

period

2. Scale up production &

marketing operations

1. R&D competitive innovations for

present products

2. Seek economies of scale in production

1. Cut costs in production &

marketing to fight declining profit

2. Consider extending product life cycle via

reintroduction or product update

1. Scale down production &

marketing

2. Trim inventories

Product Design & Development SequenceProduct Design & Development SequenceKey Activities Steps Key Outputs

Search for consumer needsScreening of alternatives

Idea generation Selection & ranking of best ideas

Market analysis Economic analysis General feasibility

Product selection Choice of specific product features

Preliminary designEvaluation of alternative designs with regard to reliability, maintainability, & service life

Selection of best design

Development & testing of process compatibility& simulation studies

Final designFinal specifications in the form of assembly drawings, processing formulas, procedure statements, etc.

Facilities exist New facilities required

Process selection

Downstream production decisions i/c:

Capacity planningProduction planning

Scheduling

Evaluation of alternative technologies & methodsMajor & minor technological choice Choice of specific equipment &

process flow

PRODUCT SCREENING TECHNIQUESPRODUCT SCREENING TECHNIQUES

Performance Performance FeaturesFeatures

Relative Relative WeightWeight

RatingRating FactorFactorScoreScore

Very Very GoodGood(40)(40)

GoodGood(30)(30)

FairFair(20)(20)

PoorPoor(10)(10)

Very Very PoorPoor(0)(0)

SalesSales 0.200.20 xx 88

CompetitionCompetition 0.100.10 xx 44

Patent protectionPatent protection 0.100.10 xx 11

Technical opportunityTechnical opportunity 0.150.15 xx 4.54.5

Materials availabilityMaterials availability 0.150.15 xx 66

Effect on present productEffect on present product 0.100.10 xx 33

Labor availabilityLabor availability 0.150.15 xx 4.54.5

Value addedValue added 0.050.05 xx 22

TotalTotal 1.001.00 3333

A. PRODUCT EVALUATION SHEET

PRODUCT SCREENING TECHNIQUES (Cont.)PRODUCT SCREENING TECHNIQUES (Cont.)

B. PROJECT VALUE INDEX (PVI)

Where

PVI : Project Value IndexCTS : Chances for technical success on an arbitrary rating

scale, say 0 to 10CCS : Chances for commercial success on an arbitrary rating

scale, say 0 to 10AV : Annual volume (total sales of product in units)P : Profit in dollars per unit (i.e., price minus cost)L : Life of products (in years)TPC : Total Project Cost

TPC

LPAVCCSCTSPVI

HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENTHISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT

DateDate ContributionContribution ContributorContributor

17761776 Specialization of labor in manufacturingSpecialization of labor in manufacturing Adam SmithAdam Smith

17991799 Interchangeable parts, cost accountingInterchangeable parts, cost accounting Eli Whitney & othersEli Whitney & others

18321832 Division of labor by skill; assignment of jobs by skill; basics of time studyDivision of labor by skill; assignment of jobs by skill; basics of time study Charles BabbageCharles Babbage

19001900 Scientific management; time study and work study developed; dividing, planning and doing of workScientific management; time study and work study developed; dividing, planning and doing of work Frederick W. TaylorFrederick W. Taylor

19001900 Motion study of jobsMotion study of jobs Frank B. GilbrethFrank B. Gilbreth

19011901 Scheduling techniques for employees, machines, jobs in manufacturingScheduling techniques for employees, machines, jobs in manufacturing Henry L. GanttHenry L. Gantt

19151915 Economic lot sizes for inventory controlEconomic lot sizes for inventory control F. W. HarrisF. W. Harris

19271927 Human relations; the Hawthorne studiesHuman relations; the Hawthorne studies Elton MayoElton Mayo

19311931 Statistical inference applied to product quality; quality control chartsStatistical inference applied to product quality; quality control charts Walter A. ShewartWalter A. Shewart

19351935 Statistical sampling applied to quality control; inspection sampling plansStatistical sampling applied to quality control; inspection sampling plans H.F. Dodge & H.G. RomigH.F. Dodge & H.G. Romig

19401940 Operations research applications in World War IIOperations research applications in World War II P.M.S. Blacket & othersP.M.S. Blacket & others

19461946 Digital computerDigital computer John Mauchly & J.P. EckertJohn Mauchly & J.P. Eckert

19471947 Linear programmingLinear programming George B. Dantzig, William Orchard-George B. Dantzig, William Orchard-

Hays, & othersHays, & others

19501950 Mathematical programming, nonlinear and stochastic processesMathematical programming, nonlinear and stochastic processes A. Charnes, W.W. Cooper, H. Raiffa A. Charnes, W.W. Cooper, H. Raiffa

& others & others

19511951 Commercial digital computer; large-scale computations availableCommercial digital computer; large-scale computations available Sperry UnivacSperry Univac

19601960 Organizational behavior; continued study of people at workOrganizational behavior; continued study of people at work L. Cummings, L. Porter & othersL. Cummings, L. Porter & others

19701970 Integrating operations into overall strategy and policyIntegrating operations into overall strategy and policy W. SkinnerW. Skinner

19701970 Computer applications to manufacturing, scheduling, and control, material requirements planning (MRP)Computer applications to manufacturing, scheduling, and control, material requirements planning (MRP) J. Orlicky & O. WrightJ. Orlicky & O. Wright

19801980 Quality and productivity applications from Japan; robotics, computer-aided design and manufacturing Quality and productivity applications from Japan; robotics, computer-aided design and manufacturing

(CAD/CAM)(CAD/CAM)

W.E. Deming & J. JuranW.E. Deming & J. Juran

19901990 Time based competition and information highwayTime based competition and information highway NumerousNumerous

ETHICSETHICS • The basic The basic conceptsconcepts and and fundamentalfundamental

principlesprinciples of decent human of decent human conductconduct. . It includes It includes studystudy of universal of universal valuesvalues such as the essential equality of all such as the essential equality of all menmen and women, human or and women, human or natural natural rightsrights, obedience to the , obedience to the lawlaw of of landland, , concernconcern for for healthhealth and and safetysafety and, and, increasingly, also for the increasingly, also for the natural natural environment. environment.

MORALITYMORALITY

• Conformance to a recognized to a recognized code, , doctrine, or , or system of of rules of what is of what is right or wrong and to behave or wrong and to behave accordingly. No system of morality is accepted as accordingly. No system of morality is accepted as universal, and the answers to the question "What is universal, and the answers to the question "What is morality?" differ sharply from place to place, group morality?" differ sharply from place to place, group to group, and time to time. For some it means to group, and time to time. For some it means conscious and deliberate effort in guiding one's conscious and deliberate effort in guiding one's conduct by reason based on fairness and religious conduct by reason based on fairness and religious beliefs. For others it is, in the words of the UK beliefs. For others it is, in the words of the UK mathematician and philosopher Alfred North mathematician and philosopher Alfred North Whitehead (1861-1947), "... what the majority then Whitehead (1861-1947), "... what the majority then and there happen to like, and immorality is what and there happen to like, and immorality is what they dislike.they dislike.