Operations Management_Prof. V.A.Pawar

8/7/2019 Operations Management_Prof. V.A.Pawar

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OPERATIONSOPERATIONS

MANAGEMENTMANAGEMENT

By Prof. Vivekanand PawarBy Prof. Vivekanand Pawar



Introduction to Concept of Introduction to Concept of

OperationsOperations

AndAnd

Operations ManagementOperations Management



Prof. Vivekanand Pawar 3

Production and Production Management

Production is a process by which goods and servicesare produced.

Production management deals with decision making

related to production process so that the resultinggoods and services are produced as per desiredspecifications, schedule, quality and quantitydemanded at a minimum cost.

Management activities performed include selecting,designing, operating, controlling and updating productive systems




Automobile Factory




Television Factory




Paper Factory




Cement Factory




Refinery




Paint Factory




Drug Factory ( Pharmaceutical Company)




Biscuit Factory




Types of Decisions

Strategic or long-range decisions

Tactical or medium- range decisions

Operational planning and control or short-

range decisions




Questions Raised

At Strategic Level: 1. How well we make theproduct? 2. Where do we locate facilities? 3. Howmuch capacity is needed? and 4. When shouldcapacity be added?

At Tactical Level: 1. How many workers do weneed? 2. When do we need them? 3. Is overtimeneeded or perhaps an additional shift? 4. When todeliver material? and 5. Is a finished goods inventoryneeded?

At Operational Level: 1. Jobs to be done today or this week? 2. To whom tasks are assigned? and 3.Which jobs have priority?




History of Production Management

History of production managementthough not very old but it has passed

through various stages to reach it¶s

present formidable stage.




Major Contributors

Adams Smith (1776)

F.W.Taylor (1859 ± 1915)

Henry Ford (1913)

Henry Gantt (1913)




Major Contributors

F.W.Taylor (1859 ± 1915)

Frederick Taylor is known as the father of scientificmanagement. His shop system employed thesesteps:

Each worker¶s skill, strength, and learning abilitywere determined.

Stopwatch studies were conducted to precisely setstandard output per worker on each task.

Material specifications, work methods, and routing

sequences were used to organize the shop. Supervisors were carefully selected and trained.

Incentive pay systems were initiated.




Major Contributors

Frank B Gilbreth

Founder of Work Study

Envisioned the Motion Study

Classified motion into seventeen divisions.




What is Operations Management?

The business function responsible for

planning, coordinating, and

controlling the resources needed to

produce a company¶s products and

services.




OM¶s Transformation Role




Transformation Process

Obviously, operations can take many differentforms. The transformation process can be

Physical: as in manufacturing operations.

Locational: as in transportation or warehouseoperations.

Exchange: as in retail operations.

Physiological: as in health care.

Psychological: as in entertainment.

Informational: as in communication.




Goal of Operations Management

For all operation systems the generalgoal is to create some kind of value

addition so that the outputs are worth

more to consumers than just the sum of the individual inputs.




Types of Value Addition

Alteration : Change in the state of the input.

Examples:

Physical as in manufacturing. Psychological as in comfort felt after getting

cured in a hospital.




Manufacturing

Input Conversion Output

R aw

M

aterials

Fabrication &

Assembling

Automobiles




Health Industry


Doctors,

medicines,

patients

Health ServicesCured

patients





Transportation : Movement of goods,people or garbage.

These have more value if they are

transferred somewhere else rather than

its current position.




Airline


Planes, pilots,

staff,

scheduling

Air

transportation

Passengers

transported




Film Industry


Actors, Director,

technicians Making of the filmCompleted Film





Storing : The process of keeping an entity ina protected environment.

Examples : Storing food grains in a warehouse.





Inspection :-

The process of verification of entity for its

properties and thereby taking more informeddecisions concerning their purchase, use and

repair etc.




Differences between Manufacturers and Service

Operations

Services:

Intangible product

Service cannot beinventoried

High customer contact

Short response time

Labor intensive

Manufacturers:

Tangible product

Product can beinventoried

Low customer contact

Longer response time

Capital intensive




Manufacturers and Service Operations : Similarities

All use technology

Both have quality, productivity, & response

issues

All must forecast demand Each will have capacity, layout, and location

issues

All have customers and suppliers

All have scheduling and staffing issues




Objectives of Operations Management

Efficiency :

Maximizing output of goods and services with

minimum resource inputs

Effectiveness :

Producing the right kinds of goods and services

that satisfy customer need¶s.





Quality objectives :

Ensuring that goods and services produced

conform to preset quality specifications.

Lead time objective :

Minimizing residence time by reducing

unnecessary delays, waiting time and idle time.





Utilization objectives :

Maximizing utilization of manpower and

machines.

Cost objective :

Minimizing cost of producing goods or

rendering a service.




Current Issues in OM

Effectively consolidating the operationsresulting from mergers.

Even though mergers show great promise of

operations efficiency the reality is quitedifferent due to the differences in culture and

technological infrastructure.

Managing global supplier, production anddistribution networks.





Developing flexible supply chains to enablemass customization of products and services.

The present day challenge is not only to supply

what the customer wants but also to distributethe products to a global distributor base.





Increased ³commoditization´ of suppliers.

With globalization suppliers are plenty and one

is not obliged to maintain long term contracts

with a single supplier but can choose fromplenty of suppliers.





Achieving the ³Service Factory´

There is a growing movement towards

personalized service to each and every

customer even though the company mayhave millions of customers.





Enhancing value added services

Business customers today not only expect good

products but also expect to be informed aboutproduction progress, change in design, help in

commissioning of equipment and access to well

staffed help lines.





Making efficient use of Internet technology.

Achieving good service from service firms

In service operations the operations manager

must be concerned about managing the

customer¶s experience during a service

encounter keeping in mind strict resource

allocation.



Development of Development of Production FunctionProduction Function




Components Of Production Function

Product selection and design.

Process selection and planning.

Facilities (plant) location.

Plant layout and materials handling.

Capacity planning.




Components Of Production Function

Inventory control

Production planning and control.

Quality assurance and control.

Work study and job design.

Maintenance and replacement.

Cost reduction and cost control.



Relation of ProductionRelation of Productionwith other Functionswith other Functions




Relation of Production with other FunctionsRelation of Production with other Functions

Training and

Manpower

Development

Costing and

Accounting

Product

Planning

AndDevelopment

R & D

Marketing

Personnel

Procurement

Finance

Production

Function




Relationship of Production and Marketing

Production function gets feedback from the marketingfunction. This relates to consumer needs, their reactions and

expectations.

Prediction about future demand (sales forecast) by the

marketing department facilitates long-term production.

Information provided by the marketing department is also

useful for product development, product modification and

quality improvement.

Marketing department achieves its sales targets only when

the production department provides attractive, agreeable

and competitive products for marketing in a regular manner.




Relationship of Production and Finance

Finance department provide huge funds that arerequired for the conduct of production activities.

The production schedule is likely to come in

difficulties if adequate and timely finance is not

made available.

Updated accounting information facilitates quick

and correct decisions by the production

department.




Relationship of Production and Purchase

Purchase department helps the production

department to purchase right quality, at the right

price , at the right time and from the right source.

The purchase department procures material as per

the production and delivery schedules of the

production department.




Relationship of Production and Personnel

The personnel department provides suitable staff to

the production department and looks after the

personnel matters (salary payment, promotions and

transfers, provision of welfare facilities, etc.) inrelation to the staff working in the production

department.




Relationship of Production and HR D

The HRD department is concerned with the

training and manpower development.

It provides training and other facilities to the

employees working at different levels in the

production department.




Relationship of Production and R&D

The R &D department provides special services to

production department in regard to product

modification, product development, introduction of

new products in the existing product line,improvement in the existing products, product

design, packaging, branding, etc.



Production CycleProduction Cycle




Meaning of Production Cycle

Production function is basically concerned with theproduction / manufacturing of goods and services for

the satisfaction of wants of customers.

Production is a lengthy and time-consuming activity.

Production process involves movement of

information, instructions and materials from one

position to the next one in a logical order.




Meaning of Production Cycle

The circulatory flow of materials, information andinstructions in the production process is called the³Production Cycle´.

The production cycle starts and ends with thecustomer.

The customer is the cause and purpose of allproduction activities.

Production is always as per the needs, requirementsand expectations of customers.







Procedure of Production Cycle

Step 1 :

Companies conduct marketing research activities andfind out the products which consumers need.

The marketing research will also be conducted in order

to find out the possible reaction and support of consumers to the new product which the companydesires to introduce and which can act as the base of the whole production cycle to be introduced.

The conclusions drawn from the research work will be

used for decision-making in the subsequent stages of production cycle.





Step 2 :

The information collected by the sales department andmarketing research department will be used as the baseby the sales department.

Sales forecast with necessary projections will beprepared by the sales department.

The information will be submitted to the top levelmanagement for decision on the production to be

conducted in the proposed production cycle.





Step 3 :

The sales forecast prepared by the sales department will beused for preparing production budget by the financedepartment.

For such preparation, the production/manufacturingdepartment will be consulted for information and other details.

By considering the sales forecast and the productionbudget, the top level management will take the finaldecision regarding the annual or semiannual quantity to be

produced by the production department. The sales forecasting will be converted into production

planning in this stage.





Step 4 :

After deciding the production quantity, theengineering department will be instructed toprepare detailed drawings, parts lists and

specifications of the proposed product. Inaddition, the department will have to check andmodify existing parts, if required.

The production budget which has been alreadyprepared, will be adjusted as per the requirementsof the engineering department.





Step 5 :

The engineering department will submit the

prepared detailed drawings, parts lists and

specifications of the proposed product at the

appropriate management level.

The same will be passed to production planningand control department for follow-up steps.





Step 6 :

Vice-president production or head of the productiondepartment will be authorized to start with the productiontarget decided by the top management.

The production planning and control department will beinstructed to make necessary arrangements as per thequantity of production, schedules, etc.

This enables the production planning and controldepartment to go ahead with the production work as per thequantity decided.





Step 7 :

The production planning and control departmentwill have to verify and inform about the

availability of materials for the new productioncycle to be undertaken and also the expecteddelivery dates of materials already ordered.

Detailed production schedules are also preparedby the production planning and controldepartment in this stage of production cycle.





Step 8 :

The inventory levels of materials arechecked in order to determine theplacement orders for new procurement of materials and standard parts.

The orders are also placed by the purchasedepartment for the materials required.





Step 9 :

As per the orders placed, materials will start

coming and the purchase department has to make

necessary arrangements for inspection of

materials prior to acceptance.

The accepted materials will be stored in thestores until instructions are obtained to release

the materials to the shops for production purpose.





Step 10 :

The production planning section sends complete

data on methods, machine loading, production

schedules, etc. to the production control section

for dispatching purpose.

This prepares proper background for productioncontrol operations.





Step 11 :

The production control section will release orders

for materials, tools, fixtures, etc. to respective

section for production purpose.

Step 12 :

The orders are issued to the shops in regard to

materials and production work.





Step 13 :

The detailed production orders are prepared by theproduction control section and send to the shop.

The details of what, how, when and where operations should

be performed are also communicated. The control on the production is carried out by the control

section throughout the manufacturing process.

Actual progress of production is constantly compared with theplanning schedules.

For this, quick and correct flow of information andinstructions between control section and manufacturingdepartments is necessary.





Step 14 :

In this stage of production cycle, inspection work for

quality control is undertaken. Inspection orders are

released.

The purpose of quality control during the production

process is to see that specifications as laid down are

confirmed with.

Final inspection of parts is made before the product leaves

the shop and moves to the finished parts or products store.





Step 15 :

Production control function will be effective whenproduction operations are evaluated during and

after these operations. Inspection reports areprepared after the evaluations.

Such reports for the basis for corrective

measures/actions in the processes/methods andeven for modifications in the specifications of rawmaterials, if required.





Step 16 :

Production planning and control department submit thereports on the progress of the work to the vice-president,incharge of manufacturing.

Such reports are also studied by the financial controldepartment.

The control section also evaluates data obtained from theshops about operation times, idle time for men andmachines, causes and effects of breakdowns, etc.

Actions initiated by the control section, as a result of suchreports, has to be followed up.

The evaluation should also be reported to the vice-president, incharge of manufacturing .





Step 17 :

The vice-president, incharge of manufacturing submitsinterim and final reports on the production activityundertaken to the top level management.

Step 18 :

The top level management also receives a report from thefinancial department on the production work undertaken.

Final evaluation is done by the management on the basisof the reports received from the vice-president,manufacturing and the financial department.





Step 19 :

The finished product ( duly inspected) is transferred to stock for marketing.

The finished product is then sent out to dealers in due course for givingdelivery to customers.

Step 20 :

In this final stage of the production cycle, the finished product is sold tocustomer for actual use.

The customer compares the features and plus points of the said productwith those of its competitors and also with his needs and expectations.The customer is in a position to communicate his views and reactionsimpartially to market researchers.



Product ClassificationProduct Classification




Manufacturing IndustriesManufacturing Industries

PrimaryPrimary that are those that cultivate andexploit natural resources

SecondarySecondary that take the outputs of theprimary industries and convert them intoconsumer or capital goods

TertiaryTertiary that constitute the service sector of economy.

i ?




What is a Product?

The term ³product´ is often used as a catch-allword to identify solutions a marketer providesto its target market.

The term ³product´ may fall into one of thefollowing categories:

Goods

Services

Ideas

P d G d




Product as Goods

A good is a tangible item, something that is felt,tasted, heard, smelled or seen.

For example, bicycles, cell phones, and donutsare all examples of tangible goods.

T f G dT f G d




Types of GoodsTypes of Goods

Consumer GoodsConsumer Goods that are products purchaseddirectly by consumers, such as cars, computers,

TVs.

Capital GoodsCapital Goods that are those purchased by

other companies to produce goods and supply

services.

P d t S i




Product as Services

Product is considered a service if it is an offering acustomer obtains through the work or labor of someone

else.

Services can result in the creation of tangible goods.

For example, a publisher of business magazines hires afreelance writer to write an article.

Unlike goods, services are not stored, they are only

available at the time of use (e.g., hair salon) and the

consistency of the benefit offered can vary from onepurchaser to another (e.g., not exactly the same hair

styling each time).

P d t Id




Product as an Idea

Something falls into the category of an idea if the marketer attempts to convince the customer

to alter their behavior or their perception in

some way.

Marketing ideas is often a solution put forth by

non-profit groups or governments in order to

get targeted groups to avoid or change certainbehavior.

M i f P d t




Meaning of a Product «

In business : a product is a good economicsand accounting good or service which can bebought and sold.

In marketing : a product is anything that canbe offered to a market that might satisfy a wantor need.

In manufacturing : products are purchased asraw materials and sold as finished goods.



Product SelectionProduct Selection

P d ti D i i




ProductionDecisions

In decisions on producing or providing productsand services in the market it is essential that the

production of the product or service is well planned

and coordinated, both within and with other

functional area of the firm, particularly marketing.

The main elements to consider are the production

process itself, specifications, culture, the physical

product, packaging, labeling, branding, warranty

and service.

P d t S l ti




Product Selection

Selecting which products to manufacture can beone of the most challenging parts.

Selection can be:

a preference based on knowledge of the product or service

world trends in the industry or

the intuition about potential new markets.

It makes sense to test and confirm your preferenceusing a mix of formal and informal measures.

P d t S l ti




Product Selection

The Product Selection Process requires :

Collection of information about potential

markets

Making comparisons

Making decisions

Prod ct Selection




Product Selection

Idea for New Product or Service

Someone has an idea for a new product or service.Ideas can come from many sources.

Sources of Ideas :

Customer Service and Customer Satisfaction : Complaintsfrom current customers

Requests for Proposals : from large businesses, governmentagencies, etc.

Product Selection




Product Selection

Sources of Ideas :

Innovation : Modifications to current products

Creative Thinking : Suggestions from employees, customers,suppliers, etc.

Distributors

Competitors

Research and Development

Consultants

Brainstorming : The process of getting a group to think of unlimited ways to vary a product or solve a problem.



Product DevelopmentProduct Development

Categories of new products




Categories of new products

Incremental or Derivative Products: products with least

amount of innovation. These products are often cost-reduced versions of existing products or with some addedminor features, e.g. waterproof Walkman CD player.

Next Generation or Platform Products: these productsprovide a broad base for a product family that can beleveraged over several years requiring more resource thanincremental products, e.g. major model changeovers in theauto industry.

Breakthrough or Radical Products: these productsrequire substantial product design and process change, e.g.first TV, cellular phone, etc.

The Product Development Process




The Product Development Process

The product development process begins withknowledge in the base technology and science ± such

as thermodynamics, fluid mechanics, or electronics ±

and ends with products or services available for

purchase in the marketplace.

The critical point in this process is the intersection of

knowledge and a recognized social need, which begins

the product development phase. This critical point iscalled iterative synthesis.

Product Development




Product Development

PRODUCT

DEVELOPMENT

Introduction of new product Improvement of existing product

Short term objectives Long term objectives

Introduction of New Product




Introduction of New Product

Give practical shape to the ideas.

Utilize the ideal resources.

Meet new requirements of the market.

Project cooperate image of the company.

Improvement of Existing Product





Short term objectives :

to provide new look.

to satisfy immediate need of customer.

to stimulate sales by providing new advantage.

to utilize the existing machine and manpower.






Long term objectives :

to monopolies market.

to make product on quality basis

to reduce the cost of manufacturing.

to ensure long term growth by tying the customer to

the brand.

The New Product Development Process




The New Product Development Process

1. Idea generation

2. ConceptDevelopment or initial design & analysis of customer requirements and market demand.

3. Quality function Deployment (QFD) translating customer requirements into engineering specifications.

4. Design for Manufacturability: material choices, processselection, efficiency, quality and safety consideration all

needed to mass produce the product.

Product Life Cycle and Processes




Product Life Cycle and Processes

Annual

Sales

Volume

Start-up Growth Maturity Decline

Volume low growing high declining

Innovation high medium medium low

Industry Structure small consolidation few large survivors

companies companies

Competitive Priority flexibility quality / flex cost / delivery cost

Process proj./ job shop small batch line flow line flow

Stages in Product Development Process




Stages in Product Development Process

Idea Stage

Idea

Evaluate

Concept

Stage

Evaluate

Laboratory

Development

Product

Development

Stage

Evaluate

Pilot Production

Run

Test

Marketing

Stage

Semicommercial

Plant Trials

Evaluate

Commercialization Stage

Product Life Cycle

Start-up Growth Maturity Decline



Importance of Research,Importance of Research,

Development and DesignDevelopment and Design

of a Productof a Product

New Product Design & Development




Customers Generation of idea R&D activities

Advance product planning

Advance design

Detailed engineering design

Final design

Production process design and development

New Product Design & Development

Importance Of Product Design





Production or operations strategy is directly influenced byproduct design for the following reasons :

1. As products are designed, all the detailed characteristics of each product are established.

2. Each product characteristics directly affects how theproduct can be made or produced (i.e. process technologyand process design)

3. How the product is made determines the design of theproduction strategy (production design) which is the heartof production and operation strategy.






Product design directly affects product quality,production and customer satisfaction. Hence,

the design of product is crucial to stay intoday¶s global competition.

A good product design can improve themarketability of a product making it easier tooperate or use, upgrading its quality, improving

appearance, and/or reducing manufacturingcosts.

The Activities and Responsibilities of Product Design




The Activities and Responsibilities of Product Design

Translating customer needs and wants into product andrequirements (marketing).

Refining existing products (marketing).

Developing new products (marketing & product design).

Formulating quality goals (quality assurance, production).

Formulating cost targets (Accounting).

Documentary specifications (product design).

Objectives Of Product Design




Objectives Of Product Design

The overall objective is profit generation in thelong run.

To achieve the desired product quality.

To reduce the development time and cost to the

minimum.

To reduce the cost of product.

Characteristics Of Good Product Design





� Function or Performance

� Appearance or Aesthetics

� R eliability

� Maintainability

� Availability� Producibility

� Simplification

� Standardisation

� Specification

� Safety






Function or Performance:- The function or performance

is what customer expects the product to do solve his/her

problem or for certain benefits leading to satisfaction.

Appearance or Aesthetics:- This includes the style, colour,

look, feel, etc. which appeals to the human sense and addsvalue to the product.

Reliability:- This refers to the length of time a product can

be used before it fails.






Maintainability:- This refers to the restoration of a product

once it has failed.

Availability:- This refers to the continuity of service to the

customer. Availability is a combination of reliability and

maintainability. High reliability and maintainability ensureshigh availability.

Producibility:- This refers to the ease of manufacture with

minimum cost (economic production).






Simplification:- It refers to the elimination of the complex features so

that the intended function is performed with reduced costs, higher quality or more customer satisfaction.

Standardisation:- It refers to the design activity that reduces variety

among a group of products or parts.

Specification:- A specification is a detailed description of a material

part or product, including physical measures such a dimensions,

volume, weight, surface finish etc.

Safety:- The product must be safe to the user and should not cause anyaccident while using or should not cause any health hazard to the user.

Relationship between Research, Development

and Design



and Design

Product

R esearch generates basic informationwhich gets converted into practical ends during

development and into final physical form oncompletion of design.

Product development involves improvement of existing product.

Product design involves the development of specification of a product.

Documents

Operations Management_Prof. V.A.Pawar