production and operations strategies

8/7/2019 Production and Operations Strategies

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A PRESENTATION ON

PRODUCTION AND OPERATIONSSTRATEGIES



Team Members

Anitha B (11)

Devanshu Mehta (29)

Dion DSa (30)

Gayathri Asaithambi (34)

Aditya Jain (39)

Kalyani Barman (46)



INTRODUCTION



Any form of business involves either productionof component/machine or the delivery of aservice

Either way, the objective is to deliver fullsatisfaction to the customer at full organisationalefficiency

Operations Management is the systematicanalysis and implementation of processes toachieve these goals



According to E. S. Buffa, design and control

of production systems are the two most

important functions of ProductionsManagement.

These functions can be planned for both,

The Short Term

The Long Term



Design strategies in the Long Range

- These are strategies that are typically developedbefore the product or service is launched.

- The aim is to plan for efficiency over the entire lifecycle of the product or service

The decision involved would be in terms of

Type and Design of the product/service

Selection of Equipment, Process and Job design

Location and Layout of the facility



Design Strategies in the Short Range

These decisions are typically operational in nature

These are used improve operational efficiency andreduce costs

The decisions involved in the Short Range wouldbe

Inventory, Production and Quality Control

Maintenance and Reliability

Labour, Cost Control and improvement



The success of POM is evaluated based on thefollowing criteria

Customer Satisfaction

Effectiveness If the process is applicable as

required by a going concern

Efficiency If the process is cost effective



In his book, Competitive Strategy: Techniques for Analysing Industries and Competitors (1980),

Michael A. Porter introduced three generic

strategies which businesses use to maintain acompetitive advantage

Overall Cost Leadership Differentiation

Focus

Porters Generic Strategy



Overall Cost Leadership the organisation worksto achieve the lowest cost for the product or service

These products are usually freely available and found off the shelf

Economies of Scale are used

Learning and Experience Curves are employed

Product Differentiation The organisation makesproducts and services of high quality and innovative

design These products and services are highly customised as per

requirements



The strategies used in the above methods are

completely independent of each other

i.e. If an organisation goes in for Overall Cost

Leadership, then it can not parallely work

towards product differentiation

Both the above methods are used for the broad

market scope



Focus Focus is when the above cost anddifferentiation strategies are used for narrow or nichesegments

The offshoot of this is Cost Focus and

Differentiation Focus

Cost Focus is when an organisation employs a Overall CostStrategy for a narrow market segment

Differentiation Focus is when an organisation employs ahighly customised strategy for a very small marketsegment Eg. BugattiVeron



An organisation may choose any of the above

strategies

However, the overall success of the organisation

depends on how the various departments within

the organisation streamlines itself to fit that

model

The following presenters will describe theprocess required to implement these strategies



6 ELEMENTS

OF OPERATIONS STRATEGY



Positioning the production system

Product/Service plans, Process and

technology plans Facility plans: capacity, location, and layout

Workforce and Job design

Making operating decisions strategic Strategies regarding suppliers and vertical

integration



1.Positioning the Production

System Select the type of product design

Standard

Custom

Select the type of production processingsystem

Product focused

Process focused

Select the type of finished-goods inventory

policy

Produce-to-stock

- -



Competitive Priorities for

Services The competitive priorities listed earlier for

manufacturers apply to service firms as well

Low production costs

Fast and on-time delivery High-quality products/services

Customer service and flexibility

Providing all the priorities simultaneously tocustomers is seldom possible.



Positioning Strategies for

Services Type of Service Design

Standard or custom products

Amount of customer contact

Mix of physical goods and intangible services Type of Production Process

Quasi manufacturing

Customer-as-participant

Customer-as-product



Evolution of Positioning

Strategies The characteristics of production systems tend to

evolve as products move through their product life

cycles.

Operations strategies must include plan for modifying

production systems to a changing set of competitive

priorities as products mature.

The capital and production technology required to

support these changes must be provided.



Evolution of Positioning

Strategies

VolumeVolumeVeryVery

LowLowLowLow HighHigh

VeryVery

HighHigh

FocusFocus ProcessProcess ProcessProcess ProductProduct ProductProduct

Fin.Gds.Fin.Gds. ToTo--Order Order ToTo--Order Order ToTo--Stock Stock ToTo--Stock Stock

BatchBatch

SizeSize

VeryVery

SmallSmallSmallSmall LargeLarge

VeryVery

LargeLarge

ProductProduct CustomCustomSlightlySlightly

StandardStandardStandardStandard

HighlyHighly

StandardStandard

LifeLife

StageStageIntro.Intro.

EarlyEarly

GrowthGrowth

LateLate

GrowthGrowthMaturityMaturity



Linking Operations and

Marketing Strategies Operations Strategy

Product-focused

Make-to-stock

Standardized products

High volume

Marketing Strategy

Low production cost

Fast delivery of products

Quality

Example: TV sets





Product-focused

Make-to-order

Standardized products

Low volume

Marketing Strategy

Low production cost

Keeping delivery promises

Quality

Example: School buses





Process-focused

Make-to-stock

Custom products

High volume

Marketing Strategy

Flexibility

Quality

Fast delivery of products

Example: Medical instruments





± Process-focused

± Make-to-order

± Custom products

± Low volume

Marketing Strategy

± Keeping delivery promises

± Quality

± Flexibility

Example: Large supercomputers



2.Product/Service Plans And

Process Technology

As a product is designed, all the detailedAs a product is designed, all the detailed

characteristics of the product are established.characteristics of the product are established.

Each product characteristic directlyEach product characteristic directly

affects how the product can be made.affects how the product can be made.

How the product is made determinesHow the product is made determines

the design of the production system.the design of the production system.



Stages in a Products Life Cycle

Introduction- Sales begin, production and marketingare developing, profits are negative.

Growth - sales grow dramatically, marketing effortsintensify, capacity is expanded, profits begin.

Maturity - production focuses on high-volume,

efficiency, low costs; marketing focuses oncompetitive sales promotion; profits are at peak.

Decline - declining sales and profit; product might be

dropped or replaced.



3.Facility Plans

How to provide the long-range capacity to producethe firms products/services is a critical strategic

decision.

The location of a new facility may need to be decided.

The internal arrangement (layout) of workers,

equipment, and functional areas within a facilityaffects the ability to provide the desired volume,

quality, and cost of products/services.



Capacity strategic decisions include:When, how much, and in what form to alter capacity

Facility strategic decisions include:

Whether demand should be met with a few largefacilities or with several smaller ones

Whether facilities should focus on serving certaingeographic regions, product lines, or customers

Facility location can also be a strategic decision



4.Workforce and Job design

Labour is an important aspect of operation strategy and should beintegrated with other elements of a coordinated operationsstrategy.

Sidelined as a staff function with the development of organizedlabour in 1930s.

Crucial issues of wage determination, design of work rules and jobdesign were ignored.

Process detrimental for both labour and management; firms lostmarkets and jobs to foreign competitors.

employment in manufacturing will decline in 10 20 years inabsolute numbers.



SOLUTION

A.COLLECTIVE BARGAINING

Process by which workers collectively bargain withemployers regarding workplace.

Allows both workers and managers to discuss specific termsthat can depending on the national law:

1. determine the rules that govern their relationship

2. determine wages

3. deal with other matters of mutual relationship like hiring

prices, layoffs, promotions, safety, worker termination etc.

Collective bargaining should be the focus of top

management



B. JOB DESIGN

SITUATION TILL NOW:

Considerable variation in policies towards job designwere noted and in the responsibilities of job design.

In some companies industrial engineers were

responsible. In others, personnel and in otherssupervisors.

Overall, no systematic approach was noted or thatany alternative principles were being evaluated. Theprimary objective set in each instance was the

minimization of costs of performing a task.



Criteria used in job design included:

Economic considerations the desire to minimize costs

Technical considerations relating to process requirements

Time and Space limitations imposed by time and space

Skill requirements availability of labor with the right skills

Machinery equipment needed

Industrial relations management / union agreements relating to staffing

levels and wages

traditions, customs and norms of the plants



A better way?

Research, indicates that there are no clear rules to design jobs.

People bring a diverse range of skills and abilities to theworkplace, together with a diverse range of experiences,

aspirations and expectations.

The task facing responsible organizations would be to strike

a balance between the needs of the organization to achieve

it's goals and the creation of a working environment whichresults in the job satisfaction for employees.



5.Making operating decisions

strategicOperational decisions determine how activities actuallyget done. They are the 'grass roots' decisions about whois going to do what and when. It includes:

How will the firm spend its money this month?

How will it service that client?

What would be their procedure for delivering an order?

Who will be doing quality control?

These operating decisions should be made strategic asthey have a significant impact in reducing cost andcontrolling quality.



Driver of operating system : Reduction of set-up cost

Effect of reducing set-up cost lower EOQ( EconomicOrder quantity)

Set up costs can be reduced by:

Effective tool design

quick clamping devices

Carefully worked out procedures etc.

Benefits of lowering EOQ:

In process inventories reduce

Flexibility to change production from one product to othermaximized

Improves focus on scrap and JIT( Just In Time) method



JIT production- small lot sizes worker produces andpasses it on to second worker. Second worker reports onthe defect immediately. First worker is motivated todiscover the cause and further scrap accumulation isavoided. Each pair of operation is highly linked andawareness of interdependence of two workers isenhanced.

Constant improvements improves quality and reduces cost

There should be no distinction between long termstrategic issues and short term operating issues.REASON: quality, cost, on-time delivery extremelyimportant in the basic strategy of firm.



6. Strategies regarding suppliers

and vertical integrationSupplier effectiveness affects operation functions as a whole.

Strategic issues to be considered while choosing alternative suppliers:

1. How does the supplier view the firm as a customer?2. Is the business significant to the supplier?

3. Is the firm a costly customer for the supplier?

4. Is the supplier strategy one of low cost or product differentiation ?

To achieve strategic goals, there has to be a fit of compatibility between supplier and firm goals.



Different supplier strategies:

American way : based on arms-length negotiations; useof threat of withdrawal

Japanese way: JIT purchasing; development of long term

,stable relationships with suppliers.

Manufacturers should analyze when to use verticalintegration as an appropriate strategy for long term and

short term economic benefits.



Vertical integration

The degree to which a firm owns its upstream suppliersand its downstream buyers is referred to as verticalintegration.

The vertical scope of the firm is an importantconsideration in corporate strategy as it can have a

significant impact on a business unit's position in itsindustry with respect to cost, differentiation, and otherstrategic issues

Expansion of activities downstream is referred to as forward integration, and expansion upstream is referred

to as backward integration.



Benefits of Vertical Integration

Reduces transportation costs if common ownershipresults in closer geographic proximity.

Improves supply chain coordination.

Provides more opportunities to differentiate by

means of increased control over inputs. Captures upstream or downstream profit margins.

Increases entry barriers to potential competitors, forexample, if the firm can gain sole access to a scarceresource.

Facilitates investment in highly specialized assets inwhich upstream or downstream players may bereluctant to invest.



Drawbacks of Vertical Integration

Capacity balancing issues.

Potentially higher costs due to low efficienciesresulting from lack of supplier competition.

Decreased flexibility due to previous upstream ordownstream investments

Decreased ability to increase product variety if significant in-house development is required.

Developing new core competencies maycompromise existing competencies.

Increased bureaucratic costs.



PRODUCTION SYSTEMS STRATEGIES



A variety of products are available in the market, each of theserequire a manufacturing system to be produced.

We need to understand the nature of product

from its introduction to maturity stage of its

life cycle and by relating to the competitivecriteria like Cost, quality, on time delivery and

flexibility we can develop logical types of

manufacturing system that the market needs.

In order to define types of manufacturing

systems , we need to understand

Product Strategies



Need to design production facility

based on product/process

Size of the production facility depends on the size of theproduct. For eg, size of a facility manufacturing an aircraft would be bigger than that of a car manufacturingfacility.

Size also depends on the type of manufacturingprocess, job production facility would be smaller than amass production facility.

In a job manufacturing facility most of the machineswould be bought to the job, where as in massproduction the job is bought to the machine.

In projects, the production facility is the site of theproduct. For eg, construction of a building or a bridge.



Product Life Cycle

PLC shows that products sell in relatively lowvolume, intermediate volume and high volume inrelation to stages of product introduction, growth ,maturity and decline.

Introduction low volume, good number of variety.

Growth when volume goes on increasing & varietybec0mes limited

Maturity - when variety becomes even more limited

as product becomes a commodity. Decline substitutes came in with superior function

, quality, cost or availability, thus volume starts tofall.



Two dimensions of positioning Product or

process & Production to order or stock

Production to stock: To offer better service in terms of availability, cost reduction, increase in market share bymaking the product available off the shelf.

Production to order: To offer product design flexibilityto customers, to minimize risks associated with carryinginventories & to allow closer control on quality.

The decision to produce to stock or to order may bedue to varying reasons /factors as producing for boththe purposes are feasible.

The choice between to produce to stock or to orderdoes not necessarily depend on whether a productfocused or process focused physical system that hasbeen adopted.



Two dimensions of positioning

Types of system F.G.InventoryPolicy tostock

F.G.InventoryPolicy toorder

Product focused Office copiers

T V SetsCalculatorsGasoline

Cameras

Construction Equipment

Buses, TrucksExperimental ChemicalsTextiles

Wire and CableElectronic Components

Process Focused Medical InstrumentsTest equipmentsSpare PartsSome steel products

Molded plastic parts

Machine toolsNuclear pressure vesselsSpace shuttleShips

Construction projects



Production Systems



TYPES OF PRODUCTION SYSTEMS

A manufacturing production system is classified

into

Continuous Production

Intermittent Production



INTERMITTENT PRODUCTION

Production is performed on a start-and-stopbasis, such as for the manufacture of made-to-order product

Intermittent production is classified into:

Job Production

Batch Production



JOB PRODUCTION / PROCESS

FOCUSSED SYSTEMS Products are manufactured to meet the

requirements of a specific order

Quality involved is small

Manufacturing of the product will take placeas per the specifications given by the

customer



CLASSIFICATIONS

JOB PRODUCED ONLY ONCE:

Customer books an order and gets it delivered

May not book an order with the firm again

The firm has to plan for material, process andmanpower only after receiving the order from

the customer

The firms has no scope for pre-planning theproduction of the product.



JOB PRODUCED AT IRREGULAR

INTERVALS Customer visits the firm to place orders forthe same type of the product at irregularintervals

Here also planning for materials, processand manpower will start only after takingthe order from the customer

In case the firm maintains the record of theJobs produced by it, it can refer to theprevious plans



JOBS PRODUCED PERIODICALLY AT

REGULAR INTERVALS The customer places orders for the same typeof product at regular intervals.

Firm can plan for materials, and process andmanpower and have them in a master file

If the volume of the order is considerably large

and the number of regularly visiting customersare large in number, the Job Productionsystem slowly transform into Batch Productionsystem



BATCH PRODUCTION / PROJECT

SYSTEMS

Batch Production is the manufacture of number of identical products either to meet the specific orderor to satisfy the demand

Large scale

Classified into:

A batch produced only once

A Batch produced at irregular intervals

A Batch Produced periodically at known Intervals



CONTINUOUS PRODUCTION / PRODUCT

FOCUSSED SYSTEMS Specialized manufacture of identical

products on which the machinery and

equipment is fully engaged

Associated with large quantities and with

high rate of demand

Advantage of automatic production istaken



CLASSIFICATIONS

Mass Production

Flow Production



MASS PRODUCTION

Same type of product is produced to meetthe demand of an assembly line or the

market

System needs good planning for material,

process, maintenance of machines andinstruction to operators

Purchases of materials in bulk quantities is

advisable



FLOW PRODUCTION

The plant and equipment is designed for a

specified product

Hence if the demand falls for the product or

ceases, the plant cannot be used for

manufacturing other products



EXAMPLES

Job Production Shop: Tailors shop; cycleand vehicles repair shops, small Workshops

Batch Production Shop: Tyre Production

Shops, Readymade dress companies,Cosmetic manufacturing companies.etc

Mass Production Shops: Components of industrial products

Flow Production: Cement Factory, Sugarfactory, Oil refineries.etc.



MIXED SYSTEMS

Both process focused and product focused

Parts fabrication is often organized on abatch intermittent basis

Final assembly is organized on a continuousbasis



PROCESS LIFE CYCLES AND

TECH

NOLOGY

Automation was not available for

intermittent systems where the volume is low

and variety is more

But with technology development,

numerically controlled machines promise to

change this situation



RELATIONSHIP BETWEEN PLC AND PRODUCTIVE SYSTEMS



ORGANIZATION OF THE OPERATIONSFUNCTIONS



The nature of the organizational structure

that a company selects.

It is based on its strategic choices for theproductive system.

Factors : quality, volume of output and cost,

flexibility and dependability of supply to its

consumers.



TYPES OF ORGANIZATION

Process focused :

Product design, flexibility and quality.

Product focused :

Dependability of supply to its consumers,

cost and price competitiveness.



PROCESS-FOCUSED ORGANIZATION

STRUC

TURE



PROCESS-FOCUSED ORGANIZATION

1. Physical departmentation.

2. Have highly developed staff functions at higherlevels in the organization.

First level supervisor :

They are also experts in productiontechnology.

Co-ordinate the utilization of people, machineand material.



Plant manger level- functions that support

production like materials control, quality control,

industrial engineering and plant maintenance,

and purchases.

Plant manager for single plant- productengineering, finance and accounting, marketing

and personal and industrial relations.



PRODUCT-FOCUSED ORGANIZATION

Process is highly decentralized.

Supervisors supported by support experts.

Support staff are directly responsible to production

manager. Higher level staff provide co-ordination but it has

less influence on operating decisions.

Disadvantages:

Lack of flexibility in the specialized personnel. Inability to accommodate customer needs for

variations in product design.



PRODUCT-FOCUSED ORGANIZATION

STRUC

TURE



CONCLUSION

Organization structure is selected to give productive

system design

Impact on managers:

Integral positioning of productive system in relationto markets.

Decide on whether to produce the stock or to order. Match the productive system to their position on

the product life cycle. Investment in improved process technology either

through direct purchases or by allocation to R&D.

production and operations strategies

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