Subject Operations ManagementSubject Code12MBA32

Module IIntroduction to Operations Management What is operations management Production system conceptTransformation processDifference between products and services OM in the organizational chart Operations as serviceHistorical development of OM Current issues in operations managementOperations strategyCompetitive dimensionsOperations strategy in manufacturingDeveloping manufacturing strategyOperations strategy in services

Car assembly line a classical production system Car assembly line a classical production system studied in operations management

Cinema queue Operations Management studies both manufacturing and services

What is operations management

bull Operations Management deals with the design and management of products processes services and supply chains It considers the acquisition development and utilization of resources that firms need to deliver the goods and services their clients want

bull The purvey of OM ranges from strategic to tactical and operational levels Representative strategic issues include determining the size and location of manufacturing plants deciding the structure of service or telecommunications networks and designing technology supply chains

bull Tactical issues include plant layout and structure project management methods and equipment selection and replacement Operational issues include production scheduling and control inventory management quality control and inspection traffic and materials handling and equipment maintenance policies

Production System

Manufacturing subsystem that includes all functions required to design produce distribute and service a manufactured product

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Car assembly line a classical production system Car assembly line a classical production system studied in operations management

Cinema queue Operations Management studies both manufacturing and services

What is operations management

bull Operations Management deals with the design and management of products processes services and supply chains It considers the acquisition development and utilization of resources that firms need to deliver the goods and services their clients want

bull The purvey of OM ranges from strategic to tactical and operational levels Representative strategic issues include determining the size and location of manufacturing plants deciding the structure of service or telecommunications networks and designing technology supply chains

bull Tactical issues include plant layout and structure project management methods and equipment selection and replacement Operational issues include production scheduling and control inventory management quality control and inspection traffic and materials handling and equipment maintenance policies

Production System

Manufacturing subsystem that includes all functions required to design produce distribute and service a manufactured product

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

What is operations management

bull Operations Management deals with the design and management of products processes services and supply chains It considers the acquisition development and utilization of resources that firms need to deliver the goods and services their clients want

bull The purvey of OM ranges from strategic to tactical and operational levels Representative strategic issues include determining the size and location of manufacturing plants deciding the structure of service or telecommunications networks and designing technology supply chains

bull Tactical issues include plant layout and structure project management methods and equipment selection and replacement Operational issues include production scheduling and control inventory management quality control and inspection traffic and materials handling and equipment maintenance policies

Production System

Manufacturing subsystem that includes all functions required to design produce distribute and service a manufactured product

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull The purvey of OM ranges from strategic to tactical and operational levels Representative strategic issues include determining the size and location of manufacturing plants deciding the structure of service or telecommunications networks and designing technology supply chains

bull Tactical issues include plant layout and structure project management methods and equipment selection and replacement Operational issues include production scheduling and control inventory management quality control and inspection traffic and materials handling and equipment maintenance policies

Production System

Manufacturing subsystem that includes all functions required to design produce distribute and service a manufactured product

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Production System

Manufacturing subsystem that includes all functions required to design produce distribute and service a manufactured product

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Productionoperations management is the process which combines and transforms various resources used in the productionoperations subsystem of the organization into value added productservices in a controlled manner as per the policies of the organization Therefore it is that part of an organization which is concerned with the transformation of a range of inputs into the required (productsservices) having the requisite quality level The set of interrelated management activities which are involved in manufacturing certain products is called as production management If the same concept is extended to services management then the corresponding set of management activities is called as operations management

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Production ConceptProduction function is that part of an organization which is concerned

with the transformation of a range of inputs into the required outputs (products) having the requisite quality level Production is defined as ldquothe step-by-step conversion of one form of material into another form through chemical or mechanical process to create or enhance the utility of the product to the userrdquo Thus production is a value addition process

At each stage of processing there will be value addition Edwood Buffa defines production as lsquoa process by which goods and services are createdrsquo Some examples of production are manufacturing custom-made products like boilers with a specific capacity constructing flats some structural fabrication works for selected customers etc and manufacturing standardized products like car bus motor cycle radio television etc

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Production system

bull The production system of an organization is that part which produces products of an organization It is that activity whereby resources flowing within a defined system are combined and transformed in a controlled manner to add value in accordance with the policies communicated by management

A simplified production system is shown ashellip

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

The production system has the following characteristics

bull 1 Production is an organized activity so every production system has an objective

bull 2 The system transforms the various inputs to useful outputs

bull 3 It does not operate in isolation from the other organization system

bull 4 There exists a feedback about the activities which is essential to control and improve system performance

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Production management is a process of planning organizing directing and controlling the activities of the production function It combines and transforms various resources used in the production subsystem of the organization into value added product in a controlled manner as per the policies of the organization

ES Buffa defines production management as ldquoProduction management deals with decision making related to production processes so that the resulting goods or services are produced according to specifications in the amount and by the schedule demanded and out of minimum costrdquo

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Objectives of Production Management

The objective of the production management is lsquoto produce goods services of right quality and quantity at the right time and right manufacturing costrsquo

bull 1 RIGHT QUALITY The quality of product is established based upon the customers

needs The right quality is not necessarily best quality It is determined by the cost of the product and the technical characteristics as suited to the specific requirements

bull 2 RIGHT QUANTITYbull The manufacturing organization should produce the products in

right number If they are produced in excess of demand the capital will block up in the form of inventory and if the quantity is produced in short of demand leads to shortage of products

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull 3 RIGHT TIMEbull Timeliness of delivery is one of the important

parameter to judge the effectiveness of production department So the production department has to make the optimal utilization of input resources to achieve its objective

bull 4 RIGHT MANUFACTURING COSTbull Manufacturing costs are established before the

product is actually manufactured Hence all attempts should be made to produce the products at pre-established cost so as to reduce the variation between actual and the standard (pre-established) cost

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Transformation Process Organisations are managed systems that are generally made up of interrelated and

interdependent parts that process inputs raw material time equipment information technology labour personnel capital money etc

into outputs usable plans contingency plans strategies controls action efficient operations processes

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull This is achieved through the transformational process

Input - processes - outputs - outcomes (goal achievement customer amp stakeholder satisfaction)

The core processes (how do you plan your output) would be through Consultation (daily service briefings weekly meetings) Collaboration (teamwork consulting with staff) Goal setting (management to see if improvements changes need

to be made) KPIs (employee appraisals) Transformation of information (eg Hygiene laws and OHampS

change in such a way that it is easily understood by everyone else Posters up the wall sign over hand wash basin on how to properly wash your hands etc)

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

In other words

bull The Transformation Processbull All operations produce products and services by

changing inputs into outputs They do this by using the lsquoinput-transformation-output process In other words operations are processes that take in a set of input resources which are used to transform something or are transformed themselves into outputs of products and services

bull There are two categories of inputs in any operations processes transformed and transforming resources

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Transformed resources are the resources that are treated transformed or converted in the process The three main types of transformed resources include

bull Materials involves transforming either physically (eg manufacturing) by location (eg transportation) by ownership (eg retail) or by storage (eg warehousing)

bull Information This can be transformed by property (eg accountants) by possession (eg market research) by storage (eg libraries) or by location (eg telecommunications)

bull Customers They can be transformed either physically (eg hairdressers) by storage (eg hotels) by location (egairlines) by physiological state (eg hospitals) or by psychological state (eg entertainment)

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull The other set of inputs to any operations process are transforming resources These are the resources which act on or carry out the transformation process There are two main types of transforming resources

bull Facilities - the buildings equipment plant and process technology of the operation

bull Staff - includes all the people involved in the operations process

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull The exact nature of both facilities and staff will differ between operations For example most staff employed in a factory assembling air conditioners may not need a very high level of technical skills In contrast most staff employed by an accounting firm will require a higher level skills and qualifications Similarly the facilities in both types of work would differ quite significantly

bull Although products and services are different sometimes it can be hard to differentiate between the two Therefore as a general guideline products are usually tangible while services are intangible That is you can physically touch a product such as a computer but you cannot touch a consultancy advice Also services usually have a shorter stored life while products can usually be stored for a period of time

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Transformation in simplest termsbull Transformation processesbull A transformation process is any activity or group of activities that takes one

or more inputs transforms and adds value to them and provides outputs for customers or clients Where the inputs are raw materials it is relatively easy to identify the transformation involved as when milk is transformed into cheese and butter Where the inputs are information or people the nature of the transformation may be less obvious For example a hospital transforms ill patients (the input) into healthy patients (the output)

Transformation processes includebull changes in the physical characteristics of materials or customersbull changes in the location of materials information or customersbull changes in the ownership of materials or informationbull storage or accommodation of materials information or customersbull changes in the purpose or form of informationbull changes in the physiological or psychological state of customers

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Often all three types of input ndash materials information and customers ndash are transformed by the same organisation For example withdrawing money from a bank account involves information about the customers account materials such as cheques and currency and the customer Treating a patient in hospital involves not only the lsquocustomersrsquo state of health but also any materials used in treatment and information about the patient

One useful way of categorising different types of transformation is into

bull manufacture ndash the physical creation of products (for example cars)bull transport ndash the movement of materials or customers (for example

a taxi service)bull supply ndash change in ownership of goods (for example in retailing)bull service ndash the treatment of customers or the storage of materials

(for example hospital wards warehouses)

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Several different transformations are usually required to produce a good or service The overall transformation can be described as the macro operation and the more detailed transformations within this macro operation as micro operations For example the macro operation in a brewery is making beer (see Figure) The micro operations include

bull milling the malted barley into gristbull mixing the grist with hot water to form wortbull cooling the wort and transferring it to the fermentation vesselbull adding yeast to the wort and fermenting the liquid into beerbull filtering the beer to remove the spent yeastbull decanting the beer into casks or bottles

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Differences Between Services and

bull Information Asymmetrybull Intangiblebull Inventorybull Customer Contactbull Response Timebull Labor Intensity

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Typical Characteristics of Services and Goods Producers

Primarily Service Producersbull Intangible nondurable

bull Output canrsquot be inventoried

bull High customer contact

bull Short response time

bull Labor intensive

Primarily Goods Producers

bull Tangible durable

bull Output can be inventoried

bull Low customer contact

bull Long response time

bull Capital intensive

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

characteristics distinguishing between manufacturing operations with service operations

bull 1 TangibleIntangible nature of outputbull 2 Consumption of outputbull 3 Nature of work (job)bull 4 Degree of customer contactbull 5 Customer participation in conversionbull 6 Measurement of performance Manufacturing is characterised by tangible outputs (products)

outputs that customers consume overtime jobs that use less labour and more equipment little customer contact no customer participation in the conversion process (in production) and sophisticated methods for measuring production activities and resource consumption as product are made

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Service is characterised by intangible outputs outputs that customers consumes immediately jobs that use more labour and less equipment direct consumer contact frequent customer participation in the conversion process and elementary methods for measuring conversion activities and resource consumption Some services are equipment based namely rail-road services telephone services and some are people based namely tax consultant services hair styling

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Function of Production DepartmentManagement

bull (i) Materials The selection of materials for the product Production manager must have sound Knowledge of materials and their properties so that he can select appropriate materials for his product Research on materials is necessary to find alternatives to satisfy the changing needs of the design in the product and availability of material resumes

bull (ii) Methods Finding the best method for the process to search for the methods to suit the available resources identifying the sequence of process are some of the activities of Production Management

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull (iii) Machines and Equipment Selection of suitable machinery for the process desired designing the maintenance policy and design of layout of machines are taken care of by the Production Management department

bull (iv) Estimating To fix up the Production targets and delivery dates and to keep the production costs at minimum production management department does a thorough estimation of Production times and production costs In competitive situation this will help the management to decide what should be done in arresting the costs at desired level

bull (v) Loading and Scheduling The Production Management department has to draw the time table for various production activities specifying when to start and when to finish the process required It also has to draw the timings of materials movement and plan the activities of manpower The scheduling is to be done keeping in mind the loads on hand and capacities of facilities available

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull (vi) Routing This is the most important function of Production Management department The Routing consists of fixing the flow lines for various raw materials components etc from the stores to the packing of finished product so that all concerned knows what exactly is happening on the shop floor

bull (vii) Despatching The Production Management department has to prepare various documents such as Job Cards Route sheets Move Cards Inspection Cards for each and every component of the product These are prepared in a set of five copies These documents are to be released from Production Management department to give green signal for starting the production The activities of the shop floor will follow the instructions given in these documents Activity of releasing the document is known as dispatching

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull (viii) Expediting or Follow up Once the documents are dispatched the management wants to know whether the activities are being carried out as per the plans or not Expediting engineers go round the production floor along with the plans compare the actual with the plan and feed back the progress of the work to the management This will help the management to evaluate the plans

bull (ix) Inspection Here inspection is generally concerned with the inspection activities during production but a separate quality control department does the quality inspection which is not under the control of Production Management This is true because if the quality inspection is given to production Management then there is a chance of qualifying the defective products also For example Teaching and examining of students is given to the same person then there is a possibility of passing Production and Operations Management all the students in the first grade To avoid this situation an external person does correction of answer scripts so that the quality of answers are correctly judged

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull (x) Evaluation The Production department must evaluate itself and its contribution in fulfilling the corporate objectives and the departmental objectives This is necessary for setting up the standards for future What ever may be the size of the firm Production management department alone must do Routing Scheduling Loading Dispatching and expediting This is because this department knows very well regarding materials Methods and available resources etc If the firms are small all the above-mentioned functions (i to x) are to be carried out by Production Management Department In medium sized firms in addition to Routing Scheduling and Loading Dispatching and expediting some more functions like Methods Machines may be under the control of Production Management Department In large firms there will be Separate departments for Methods Machines Materials and others but routing loading and scheduling are the sole functions of Production Management All the above ten functions are categorized in three stage that is Preplanning Planning and control stages as

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

ORGANISATION CHART FOR PRODUCTION DEPARTMENT

PRODUCTION DEPARTMENTProduction Production InventoryPlanning Control Control1048698 Order Booking 1048698 Despatching 1048698 Stores management1048698 Production budget1048698 Material Records 1048698 Expediting 1048698 Quality Control1048698 Methods1048698 Machines 1048698 Handling1048698 Receiving1048698 Tools and Jigs1048698 Operation Layout 1048698 Simplification1048698 Time estimating 1048698 Standardisation1048698 Scheduling An organization chart for production management department

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Product development Planning for 4 resources Routingdarr

Process design Materials Estimatingdarr darr

Sales forecasting and estimating Methods Scheduling Plant location darr darr Plant layout and Machines and Despatching Layout of facilities | Equipment policy | Inspection darr darr Preplanning Manpower Expediting production darr Evaluation Feedback =-------------------------- |larr Pre Planning Stage rarr | larr Planning Stagerarr | larrControl Stage rarr|

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Historical Evolution of OM

bull Industrial Revolutionbull Scientific Managementbull Human Relations Movementbull Decision Models and Management Sciencebull Influence of Japanese Manufacturers

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Pre-Industrial Revolutionndash Craft production - System in which highly skilled workers use simple flexible

tools to produce small quantities of customized goodsbull Some key elements of the industrial revolution

ndash Began in England in the 1770sndash Division of labor - Adam Smith 1776ndash Application of the ldquorotativerdquo steam engine 1780sndash Cotton Gin and Interchangeable parts - Eli Whitney 1792

bull Management theory and practice did not advance appreciably during this period

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Movement was led by efficiency engineer Frederick Winslow Taylorndash Believed in a ldquoscience of managementrdquo based on observation

measurement analysis and improvement of work methods and economic incentives

ndash Management is responsible for planning carefully selecting and training workers finding the best way to perform each job achieving cooperate between management and workers and separating management activities from work activities

ndash Emphasis was on maximizing output

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Frank Gilbreth - father of motion studiesbull Henry Gantt - developed the Gantt chart scheduling system

and recognized the value of non-monetary rewards for motivating employees

bull Harrington Emerson - applied Taylorrsquos ideas to organization structure

bull Henry Ford - employed scientific management techniques to his factories

bull Moving assembly linebull Mass production

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull The human relations movement emphasized the importance of the human element in job designndash Lillian Gilbrethndash Elton Mayo ndash Hawthorne studies on worker motivation 1930ndash Abraham Maslow ndash motivation theory 1940s hierarchy of needs

1954ndash Frederick Hertzberg ndash Two Factor Theory 1959ndash Douglas McGregor ndash Theory X and Theory Y 1960sndash William Ouchi ndash Theory Z 1981

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull FW Harris ndash mathematical model for inventory management 1915

bull Dodge Romig and Shewart ndash statistical procedures for sampling and quality control 1930s

bull Tippett ndash statistical sampling theory 1935bull Operations Research (OR) Groups ndash OR

applications in warfarebull George Dantzig ndash linear programming 1947

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Refined and developed management practices that increased productivityndash Credited with fueling the ldquoquality revolutionndash Just-in-Time production

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Historical Development of OM

bull For over two centuries operations and production management has been recognised as an important factor in a countryrsquos economic growth The traditional view of manufacturing management began in eighteenth century when Adam Smith recognised the economic benefits of specialisation of labour He recommended breaking of jobs down into subtasks and recognises workers to specialised tasks in which they would become highly skilled and efficient In the early twentieth century FW Taylor implemented Smithrsquos theories and developed scientific management From then till 1930 many techniques were developed prevailing the traditional view Brief information about the contributions to manufacturing management is shown below

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Historical summary of Operations Management

Date Contribution Contributorbull 1776 Specialization of labour in manufacturing Adam Smithbull 1799 Interchangeable parts cost accounting Eli Whitney and

othersbull 1832 Division of labour by skill Charles Babbage assignment of jobs by skill basics of time studybull 1900 Scientific management time study Frederick W Taylor and work study developed dividing planning and doing of work bull 1900 Motion of study of jobs Frank B Gilbrethbull 1901 Scheduling techniques for employees Henry L Gantt machines jobs in manufacturing

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull 1915 Economic lot sizes for inventory control FW Harrisbull 1927 Human relations Elton Mayo the Hawthorne studiesbull 1931 Statistical inference applied to product WA Shewart quality quality control charts bull 1935 Statistical sampling applied to quality HF Dodge amp HG

control inspection sampling plans Roming

bull 1940 Operations research applications in PM Blacker and World War II others

bull 1946 Digital computer John Mauchlly and JP Eckert

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull 1947 Linear programming GB Dantzig Williams ampothers

bull 1950 Mathematical programming A Charnes WW Cooper on-linear and stochastic processes amp othersbull 1951 Commercial digital computer Sperry Univac large-scale computations available bull 1960 Organizational behaviour continued L Cummings L Porter study of people at workbull 1970 Integrating operations into overall W Skinner J Orlicky strategy and policy and Computer applications to manufacturing Scheduling G Wright and control Material requirement planning (MRP)bull 1980 Quality and productivity applications from Japan WE Deming and J Juran robotics CAD-CAM

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Current issues in OM

bull Economic conditionsbull Innovatingbull Quality problemsbull Risk managementbull Competing in a global economy

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Environmental Concerns

bull Sustainabilityndash Using resources in ways that do not harm ecological

systems that support human existencebull Sustainability measures often go beyond traditional

environmental and economic measures to include measures that incorporate social criteria in decision making

bull All areas of business will be affectedndash Product and service designndash Consumer education programsndash Disaster preparation and responsendash Supply chain waste managementndash Outsourcing decisions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Ethical Issues in Operations

bull Ethical issues arise in many aspects of operations management

Financial statementsWorker safetyProduct safetyQualityThe environmentThe communityHiring and firing workersClosing facilitiesWorkers rights

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

The Need for Supply Chain Management

bull In the past organizations did little to manage the supply chain beyond their own operations and immediate suppliers which led to numerous problemsndash Oscillating inventory levelsndash Inventory stockoutsndash Late deliveriesndash Quality problems

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Supply Chain Issues

1 The need to improve operations2 Increasing levels of outsourcing3 Increasing transportation costs4 Competitive pressures5 Increasing globalization6 Increasing importance of e-business7 The complexity of supply chains8 The need to manage inventories

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Element of SCbull Customers ndash what productsservices do customers wantbull Forecasting ndash predicting timing and volume of customer demandbull Design ndash incorporating customer wants manufacturability and time to

marketbull Capacity planning ndash matching supply and demandbull Processing ndash controlling quality scheduling workbull Inventory ndash meeting demand requirements while managing costsbull Purchasing ndash evaluating potential suppliers supporting the needs of

operations on purchased goods and servicesbull Suppliers ndash monitoring supplier quality on-time delivery and flexibility

maintaining supplier relationsbull Location ndash determining the location of facilitiesbull Logistics ndash deciding how to best move information and materials

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

More on current issues of OM

bull Technologyrsquos Role in Manufacturingndash Increased automation and integration of

production facilities with business systems to to control costsbull Predictive maintenance remote diagnostics and utility

cost savings

bull Quality

bull Mass Customization

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Qualityndash The ability of a product or service to reliably do what

itrsquos supposed to do and to satisfy customer expectations

bull How is Quality Achievedndash Planning for qualityndash Organizing and leading for qualityndash Controlling for quality

bull Quality Goalsndash ISO900 certification and Six Sigma standards

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

bull Mass Customizationndash A design-to-order concept that provides consumers with

a product when where and how they want itndash Makes heavy use of technology in developing flexible

manufacturing techniques and engaging in continual dialogue with customers

bull Benefits of Mass Customizationndash Creates an important relationship between the firm and

the customer in providing loyalty-building value to the customer and in garnering valuable market information for the firm

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

CRITERIA OF PERFORMANCE Three aims of performance of the Production and Operations Management

system may be identifiedThey are(a) Effectiveness (b) Customer satisfaction (c) EfficiencyThe case of Efficiency is productive utilization of resources is clear Whether

the organization is in lsquoprivate sectorrsquo or in the lsquopublic sectorrsquo is a lsquomanufacturing or lsquonon-manufacturingrsquo organization or a lsquoprofitrsquo or a lsquonon-profitrsquo organization the optimal utilization of resource inputs is always a desired objective The effectiveness has more dimensions to it It involves optimality in the fulfillment of multiple objectives with a possible prioritization within the objectives Modern production and operations management has to serve the target customers the people working within as also the region country or society at large Thus Production Operations Management system has not only to be profitable and or efficient but must necessarily satisfy many more customers This effectiveness has to be again viewed in terms of the short and long-term horizons depending upon the operations system

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Optimum Good Better operations management can improve(i) Efficiency of operation system to do things right and broader

concept(ii) Effectiveness of operation system refers to doing right things that

is seven rights they areRight operation Right Quantity Right Quality Right Supplier or Right

Vendor Right Time Right Place and Right PriceBasically efficiency and effectiveness of the operations system can

be measured by four dimensionsThey are (i) Cost (ii) Quality (iii) Dependability and (iv) Reliability

In fact these directly relate to the competitiveness of the organization both nationally and internationally Modern developments in better tools and techniques methods and systems like Automation Flexible manufacturing CAD

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Operations Strategybull Defining a primary task

ndash What is the firm in the business of doingbull Assessing core competencies

ndash What does the firm do better than anyone elsebull Determining order winners and order qualifiers

ndash What wins the order ndash What qualifies an item to be considered for purchase

bull Positioning the firmndash How will the firm compete

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions

Competitive dimensions

bull Costbull Qualitybull Flexibilitybull Speed

• Subject Operations Management Subject Code12MBA32 Module I
• Car assembly line a classical production system
• What is operations management
• Slide 4
• Production System
• Slide 6
• Production Concept
• Production system
• The production system has the following characteristics
• Slide 10
• Objectives of Production Management
• Slide 12
• Transformation Process
• Slide 14
• In other words
• Slide 16
• Slide 17
• Slide 18
• Transformation in simplest terms
• Slide 20
• Slide 21
• Differences Between Services and
• Typical Characteristics of Services and Goods Producers
• characteristics distinguishing between manufacturing operation
• Slide 25
• Function of Production DepartmentManagement
• Slide 27
• Slide 28
• Slide 29
• Slide 30
• ORGANISATION CHART FOR PRODUCTION DEPARTMENT
• Slide 32
• Historical Evolution of OM
• Slide 34
• Slide 35
• Slide 36
• Slide 37
• Slide 38
• Slide 39
• Historical Development of OM
• Historical summary of Operations Management
• Slide 42
• Slide 43
• Current issues in OM
• Environmental Concerns
• Ethical Issues in Operations
• The Need for Supply Chain Management
• Supply Chain Issues
• Element of SC
• More on current issues of OM
• Slide 51
• Slide 52
• CRITERIA OF PERFORMANCE
• Slide 54
• Operations Strategy
• Competitive dimensions