pom 1 - intro

Upendra Kachru OPERATIONS MANAGEMENT

An Introduction to Operations

Management


MY NAME IS:PROF. UPENDRA KACHRU

I have got a degree in engineering from NIT, Durgapur and a MBA from the University of Illinois, USA.

I have over 39 years of work experience out of which I spent nearly 30 years in the corporate world.

I am an author and have over 30 titles to my credit and the text that you will be using is one of them.

I was teaching at Goa Institute of Management last year. Before that I was teaching at Fore School of Management and at both campuses of IILM.


WELCOME TO POM 1.

I hope that this course will not only give you some learning experience but you will at the same time also

enjoy this course.


Historical Back Ground

• Scientific Management: 1890s• Time and Motion Study 1907• Administrative Management Theory Weber & Fayol• Behavioral Management Theory Elton Mayo• World War II to the 1960: Operation Research • The 1970 And 1980: Japanese Challenge • The 1990 and After: Operations Management


Date Initiator Event1875 James Watt The Steam Engine was commercially manufactured1899 Eli Whitney Introduced mass production and the concept of standard

interchangeable parts

1900 Frederick W. Taylor Scientific Management1901 Henry H. Gantt Scheduling1905 Henry Ford Assembly Line1905 Alfred P. Sloan Organizational Management1907 Frank & Lillian Gilbreth Time & Motion Studies1927 Elton Mayo Human Resources Movement1931 Walter A. Shewart Quality Control Charts 1935 H.F. Dodge & H.G. Romig Statistical Sampling applied to quality control1940 P.M.S. Blacket et al Operations Research Applications1947 George B. Dantzig et al Linear Programming1950 A. Charnes, W.W. Cooper & H. Raiffa Non-linear and Stochastic Processes Programming

1970 J. Orlicky & O. Wright Computer applications to Manufacturing – Material Requirement Planning (MRP)

1975 Taiichi Ohno Toyota Production System

1980 W.E. Deming, Philip Crosby & J. Juran, General Motors & IBM

Quality and productivity applications from ;Computer aided Design and Manufacturing (CAD / ); Robotics,

1990 US Defense,Deptt, Michael Hammer, James Champy

Internet, Electronic Business Process Reengineering

2000 Amazon, eBay, OnlineDr. Daniel Whitney and Professor Charles Fine, MIT

E-commerce, Agile Manufacturing, High performance Work systems


Operation Management Themes

Cost

Mass production

FunctionalSpecialization

Lean & Agile Manufacturing

Cross-Functional Co-ordination

Value

Mass Customization Service Excellence

High-PerformanceSystem


ThemesThe earlier slide shows three key shifts in emphasis in Operations Management over time:

– From cost and efficiency to value creation.– From mass production to agility and customization.– From functional specialization to a systems approach to

achieving high performance.


OM as a Transformation Process

Production Management was traditionally, i.e. until the early 1980s, defined as:

“the 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 user.”

In the 1980s ‘Production’ changed to ‘Operations’. Now Operations Management, once viewed primarily as a manufacturing function, became applicable to manufacturing, services and contracts, as a ‘transformation process’.

As a transformation process, the tremendous competitive potential for both Service and Contract firms, of Operations Management was now recognized.


OM as Transformation process Inputs = Transformation = Outputs

The change in definition reflects a change in focus. Instead of the traditional focus on cost, the focus now encompasses performance management.

Inputs = Transformation = Outputs

The change in definition reflects a change in focus. Instead of the traditional focus on cost, the focus now encompasses performance management.

INPUTS PROCESS OUTPUTS

PERFORMANCE

MANAGEMENT


OM as Transformation process

Inputs = Transformation = OutputsInputs = Transformation = Outputs

Outputs Inputs Transformation

Manufacturing:Automobile

Services:Restaurant

Services:Insurance

Agriculture:Wheat


OM as Transformation process

Inputs = Transformation = OutputsInputs = Transformation = Outputs

Outputs Inputs Transformation

Manufacturing:Automobile

Roadworthy Car

Labor, Capital, Energy, Raw materials, Components, Sub-assemblies and Assemblies

Assembled Car, Components, Sub-assemblies and Assemblies

Services:Restaurant

Food, Customer Labor, Capital, Energy, Vegetables, Meat, Spices, Cooking medium etc.

and Customer

Semi-cooked and Cooked food

Services:Insurance

Insurance Policy

Labor, Payment, Actuarial Data Processing of data, money, and Policies

Agriculture:Wheat

Wheat, Grain Labor, Capital, Seeds, Water, Fertilizer and Energy

Preparation of land, Seeds in different stages of evolution,

Harvesting and threshing


Outputs

In manufacturing tangible goods are produced where there is little or no customer interaction during the production process and the customer has little impact on the system.

Services can be either tangible or intangible. Tangible services behave similar to that in manufacturing, but intangible services have different degrees of customer contact.


Transformation

Transformation processes can be quite varied. In different types products, there could be different types of transformation processes. Generally, these are categorized as follows:

– Manufacture – the physical creation of products (for example cars)

– Transport – the movement of materials or customers (for example a taxi service)

– Supply – change in ownership of goods (for example in retailing)

– Service – the treatment of customers or the storage of materials (for example insurance).


InputsThere are two types of inputs that go into the transformation process. Some inputs are used up in the process of creating goods or services; others play a part in the creation process but are not used up. Inputs always include both types. To distinguish between these, input resources are usually classified as:

– Transformed Resources – It is those resources that are transformed in some way by the operation to produce the goods or services that are its outputs

– Transforming Resources – It is those resources that are used to perform the transformation process. They are generally in the form of labor or capital.


Value Driven Approach

The current view of Operations Management is that it not just about saving on costs but also about creating revenue. This makes Operations Management as a ‘value creation’ center within the organization. – The traditional view perceives it as a system that is involved

with the manufacture and production of goods and services. – The value driven view perceives it as a system designed to

deliver value.


OM - Value ApproachValue is defined as performance by the cumulative benefits that will result if

the product is purchased and used as intended. Functionality is a measure of the extent the product, when properly used, is

able to accomplish the intended feat. Quality is broadly defined as the extent to which a product or service is

delivered in consistence with what the customer has been lead to expect. An organization’s speed is often measured in two dimensions: How long a customer must wait for the product once it is requested, and How long its

takes to design, develop, and introduce new products. Timeliness is the ability of a firm to get the right product to targeted

customers at the most desirable time. Flexibility is the input to the value equation relating to the ability of the

Operations Management system to give the customer the desired product.


Operation Management Performance

Com

petit

iven

ess

Quality Being RIGHT

Speed Being FAST

Timeliness Being ON TIME

Cost Being PRODUCTIVE

Being ABLE TO CHANGEFlexibility


OM - Value Approach

There are two approaches to organizing Operations Management:

– Functional Approach– Process Approach


Functional View

The functional view sees the system as a number of departmental activities. Therefore, a business function is:

A group of business activities that together completely support one aspect of furthering the mission of the business.

It is ongoing and continuous.It reflects the organizational component responsible for the

activities.It is concerned with what has to be done to operate the

business. A business function does not include how the work is carried out.

Examples are purchasing, stores, receipt, materials management, etc.


Process ViewA Business Process is:

A task or group of tasks carried out to furthering the mission of the business.

It is executed repeatedly.It has a beginning and an end.

It is only concerned with what has to be done. It is described in terms of inputs and outputs.

A business process addresses the question of how work is organized and managed across the organization i.e. grouping similar activities together. A business process does not include

the organizational component responsible. Examples are Aggregate Planning, Material Requirement Planning, and Supply

Chain Management, etc.


Functions vs Processes

The distinct differences between these approaches are as follows:

A process produces results through work being done in the process i.e. completing the task, whereas a function produces

results through the interaction of processesProcesses produce outputs whereas functions create outcomesProcess owners manage activities to produce required outputs whereas functional managers manage interactions to produce

desired outcomes.


OM - Functional ApproachThere are five drivers that determine the nature of transformation process:

– Product: The role of Operations Management is to ensure that the product is manufactured as per specifications and the plan.

– Plant: In order to make the product, plant and equipment is required; Operations Management has to consider that the plant meets specifications and is in keeping with the requirements.

– Process: There are many ways of producing the product and Operations Management has the responsibility to choose the best way.

– Program: The production programme ensures that the schedules of production are met.

– People: Production depends on people and their skills and motivation. Operations Management has to ensure that skilled and motivated workers are available.


OM – Functional Approach

ManufacturingEngineeringQualityProduction PlanningProcurementInventory ControlLogistics & Services


Operation management – Defined as a Function

OM is the business function that manages that part of the business that transforms raw materials and

human inputs into goods and services of higher value.


OM - Process ApproachThe Process approach to Operations Management recognizes it as a ‘set of processes’, each of which has inputs, outputs, and structure.Each process has a job to do and each process should be measured on how effective it is in achieving the desired outcomes by redesigning processes to improve quality, cut costs, reduce cycle times, or otherwise enhance operating performance.There are two types of processes: Core processes are those processes that create, produce, and deliver

products and services that customers want. Supporting processes are those processes that do not produce outputs that

customers want, but that are still necessary for running the business.


Operation Management can be defined as a Process:

Operations Management constitutes all of the activities that an organization conducts in order to

deliver value to its customers. It's the set of processes that transforms either materials or

information into a product or service.

Operation management – Defined as a Process


Core Processes Model SUPPORTING BUSINESS PROCESSES

CORE OM PROCESSES

Determine Customer Needs

Monitor Competitive Environment

Market Products & Provide After-Sales Service

Measure Customer Satisfaction

Understand Customers, Market Segments & the Competitive Environment

Develop Product Strategy

Evaluate Product Concept

Create New Products Design or Product Improvements

Build and Test Prototypes

Develop New Products or Product Improvements

Secure Processes & Materials to Satisfy Demand

Operations Planning & Control Processes

Manage Product Transformation Processes

Manage Business Logistics

Manage the Supply Chain Process

Manage Strategic Planning Processes

Manage Human Resources

Manage Information Systems

Manage Financial Resources

Management & Business Support Activities


Core Processes ModelProduct

Development

Process Management

Process Design Supply

Chain

Though POM is involved in all the core activities, it is particularly involved in activities revolving around processes the second and third core activities.

These are activities that create, produce, and deliver products and services that customers want.


DriversThere are ten major drivers to success in Operations Management:• Customer needs: Customer needs form the basis to support the

firm’s demand, its forecasting needs and its product design and development activities.

• Product Strategy: This involves creating products that customer’s desire, evaluating product concepts so that there is support to design new products or introduce product improvements.

• Processes & Materials to Satisfy Demand: Management activities involve selection of raw materials from vendors and the ultimate delivering and servicing of the product for the customer. These activities include operations planning and control processes and managing the product transformation processes.


Drivers• Information: Operations need information. No process operates

completely independently. To make decisions requires information.• Price: Potential customers who perceive the price to be too high will

either not buy or switch to an alternative. High prices are justified by high quality and/or high functional utility to attract customers.

• Quantity: Organizations must provide enough goods or services to satisfy their customers’ needs. Quantity demands require attention to customer needs and the timing of those needs.

• Service: Service includes advice on how to operate or maintain a product, financing arrangements, checkups, availability of parts, provision of qualified labor, etc.


Drivers

• People: Production depends on people and their skills and motivation. • Energy: Normally, energy is a major operations factor. All products and

services require energy. In some industries, operations need huge amounts of energy, such as aluminum smelters, which are typically located near an electricity generation facility.

• Strategic Planning Processes: What the firm must do to achieve its corporate goals and the firm’s objectives for the POM function.


Operations

Organizations, generally are still organized on the basis of functions. Therefore, in view of the Process Approach it is essential to understand the role of the Operations Manager and the interfaces with other departments.


The Operation Manager’s Role

There are six main decision areas in which the operations manager has responsibility. These relate to:• Processes by which goods and services are produced• Quality of goods or services• Quantity of goods or services (the capacity of operations)• Stock of materials (inventory) needed to produce goods or services• Management of human resources• Coordination.


The Operation Manager’s Role

Feedback

Inputs:

MaterialsCapital

Equipment People Power

Information

Output

GoodsContracts

OrServices

Operationmanagement

customerssuppliers

Processes


Interface with other functions

• Operation Management – Marketing Interface • Operation Management - Finance Interface • Operation Management - Design Interface• Operation Management - Human Resource Interface• Operation Management - Information System Interface


OM’S FUTURE CHALLENGES

Market Challenges

– Market fragmentations – Vocal Customers – Customers supplier relationships – Disruptive Power


Production Challenges • Process Design and improvement • Employee Diversity• Human Resource scarcity • The global work force• Dealing raw material prices

OM’S FUTURE CHALLENGES


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pom 1 - intro

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