Operations Management

Production Management A production system is defined as a user of resources to transform inputs into some desired outputs. Goods and Services are outputs Production is the creation of goods and services

What Is Operations Management? Operations management (OM) is the set of activities that create value in the form of goods and services by transforming inputs into outputs Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services

Objectives of OM Effective Quality Right Quantity Reduce Time Increase profitability Strategic plans Reduce cost Optimize resources Increase productive Plan capital requirements

Essential Functions Marketing – generates demand, sales forecast, Plan SCM Production/operations – create the product, Materials planning, Capacity planning, Quality, etc., Finance/accounting – tracks how well the organization is doing, pays bills, collects the money Human Resources – provides labor, wage and salary administration and job evaluation

Characteristics of Goods Tangible product Consistent product definition Production usually separate from consumption Can be inventoried Low customer interaction

Characteristics of Service Intangible product Produced and consumed at same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed

Difference between Goods and Services Characteristics Goods Services Tangibility Tangible Intangible Perish ability / Inventory Not Perishable, Can be stocked Perishable Cannot be stocked Nature / Consistency Homogenous Heterogeneous Customer Interaction Less High Inseparability Production and consumption happens at different times Production and consumption happens simultaneously

OM Transformation Process

What Operations Managers Do Basic Management Functions Planning Organizing Staffing Leading Controlling

Tactical Decisions Strategic Decisions Quality Control Demand Forecasting Supply Chain Management Production Planning Inventory Control Scheduling Strategic Decisions Product/Service Design Process Selection Capacity Planning Facility Location Facility Layout Job Design

The Functions Design of goods and services Managing quality What good or service should we offer? How should we design these products and services? Managing quality How do we define quality? Who is responsible for quality?

Process and capacity design What process and what capacity will these products require? What equipment and technology is necessary for these processes? Location strategy Where should we put the facility? On what criteria should we base the location decision? Layout strategy How should we arrange the facility? How large must the facility be to meet our plan?

Human resources and job design How do we provide a reasonable work environment? How much can we expect our employees to produce? Supply-chain management Should we make or buy this component? Who should be our suppliers and how can we integrate them into our strategy? Inventory, material requirements planning, and JIT How much inventory of each item should we have? When do we re-order? Using this and subsequent slides, you might go through in more detail the decisions of Operations Management. While greater detail is provided by these slides than the earlier one, you may still decide to have the students contribute examples from their own experience.

Intermediate and short–term scheduling Are we better off keeping people on the payroll during slowdowns? Which jobs do we perform next? Maintenance How do we build reliability into our processes? Who is responsible for maintenance?

The Evolution First Phase – Factory Systems – Importance's to development of new machines, etc., Second Phase – Manufacturing systems – importance to principles of scientific management Third Phase – Operations Management – Importance to human resource and other resources involved Forth and Fifth Phase – Quality and mass customization – moving towards lean manufacturing

The Evolution Division of labor (Adam Smith 1776; Charles Babbage 1852) Standardized parts (Whitney 1800) Scientific Management (Taylor 1881) Assembly line (Ford/ Sorenson 1913) Gantt charts (Gantt 1916) Motion study (Frank and Lillian Gilbreth 1922) Quality control (Shewhart 1924; Deming 1950)

First Digital Computer (Atanasoff 1938) CPM/PERT (DuPont 1957, Navy 1958) Material requirements planning (Orlicky 1960) Computer aided design (CAD 1970) Flexible manufacturing system (FMS 1975) Baldrige Quality Awards (1980) Computer integrated manufacturing (1990) Globalization (1992) Internet (1995) Mass Customization (2000s)

New Challenges in OM From To Local or national focus Global focus Batch shipments Low bid purchasing Lengthy product development Standard products Job specialization Global focus Just-in-time Supply-chain partnering Rapid product development, alliances Mass customization Empowered employees, teams To

The Operation System Inputs Transformation Outputs Feedback loop Labor, capital, management Transformation Economic system transforms inputs to outputs /CONVERSITION PROCESS Outputs Goods and services Feedback loop

Operation System – Types

Intermittent Production System Intermittent Manufacturing system products and services at several intervals. Features Variety of products are produced in smaller quantities. Lesser machines and equipments involved Multi skill operators required Work in process inventory is high Process layout is adopted Examples: Machine shops, hospitals

Example: Foundry casting in lathe Example: Food products Project Production – Involves activities that are related with projects such as construction of roads, bridges, etc., Job Shop Production – One or few quantity of products are designed and produced based on the requirements of the customer or based on the job order Example: Foundry casting in lathe Batch Production – Limited quantity of products is produced at a time in batches based on the order Example: Food products

Continuous Production System Continuous Manufacturing system products high quantity of identical products Features Low variety Continuous flow of operation Heavy equipments Huge investment High degree to loss to occur in case of any change Mass quantity High standardisation Example: Electronic goods

Mass Production System – A continuous process system which produces more number of outputs at a time. Example Plastic goods Process Production System - Continuous process flow in which the flexibility is zero Example Cement, steel industry

Operation Strategy (OS) Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long-term corporate strategy.

Operation Strategy (OS) Operations strategy is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long-term corporate strategy.

Factors Affecting Globalization Technology Competitive Priorities Cost Quality Delivery Flexibility Service

Supply Chain Management Managing the supply of Inputs to achieve uninterrupted Production system Managing the supply of Outputs to increase the customer value Supply chain management (SCM) is the active management of supply chain activities to maximize customer value and achieve a sustainable competitive advantage

SCN Process

Significance of SCM Maximize customer value Reduce cost Effective production system Competitive advantage Goodwill & Image Market share Lean Manufacturing

Ethics and Social Responsibility Challenges facing operations managers: Developing and producing safe, quality products Maintaining a clean environment Providing a safe workplace Honoring stakeholder commitments

Recent Trends in OM Ethics Global focus Environmentally sensitive production Rapid product development Mass customization Empowered employees Supply-chain partnering Just-in-time performance