1. Productions Operations Management
Chapter 1
Book: Principles of Operations Management
By Raturi and Evans

2. Introduction Operation Management
A business activity that involves design, development, maintenance of systems and processes that transforms raw materials, technology and labor into Goods and Services
An auto mobile factory
A hospital serving patients

3. OM’s Purpose
OM purpose is to support the organization’s business strategy and help create and sustain competitive advantage.

4. Principles of OM
Designing the VALUE CHAIN for manufacturing goods and delivering services
Design and manage processes to support the value chain e-g product design, purchasing, materials management, storage, customer support, transportation, Tech development

5. Principles of OM (Continued)
Control and improve the value chain and support processes to achieve and sustain high level of business and organization performance
Managing interface with other functional areas such as marketing, finance an HR to derive competitive Operations functions

6. OM and Competitiveness
OM is there to develop unique competencies for the company e-g creative workforce, strong distribution network or ability to develop a new product rapidly
OM is linked directly with Product Development, Process Improvement, TQM, Supply chain management Technology and Innovation
OM function is to contribute to Organization by achieving lower costs, ever improving quality, shorter time and increased responsiveness

7. Case Study: BMW BMW’s plant in South Carolina
Established in 23 months for X5 and Z3
First X5 in 35 Months
22 Color Options for Z3
123 Center Consoles options
26 Wheel Options
Aim to reduce Product Development Cycles by 30 Percent

8. Case Study: BMW How was it possible BMW a master of logistics
Flexibility raising up to management and people
Two 10 hours shifts
Attention to quality
Tech Innovation
SAP R3’s beta test site
Guidance from HONDA

9. Products Products Services Contracts Tangible items
Can be transferred or stored
Can be consumed after a while
Services
Intangible
Cannot be transferred or stored
Perishable
Contracts
Business Exchange
Neither services nor goods are transferred
Goods and services will be provided on a need basis.

10. Case Study: Ritz Carlton
One of the largest hotels in United States
Uses more than one source to get information
Travel partners, focus groups, credit card companies
Customer satisfaction and performance date are gathered daily
Complaints, claims, feedback from sales force
Travel publications and even psychological studies on customers.
Each production and support process has an executive owner at head office and at the hotel.
Responsible for the improvement and success of the process

11. Case Study: Ritz Carlton
What it achieves
Minute attention to detail is achieved e-g language preference, customer’s culture etc.
Error free products and services
Opportunities for improvement
Sense of authority for the employees
Increased morale for employees; satisfaction for the customer.

12. Comparison Operation Factor Goods Services Contract Value
Provided by physical manufacturing
Provided by availability
The promise of service delivery when exercised
Tangibility
Goods are inspect able
Difficult to inspect before usage
Intangibility is often accompanied by manufacturing
Process Design
Isolated process design
Must occur in presence of customer
Accommodate demand surge and batches
Inventory
Can be stored
Consumer as created
Off line as well as online modes
Capacity
Can be designed for average demand
For maximum demand
Flexible for high and low demand
Quality
High level of precision and repeatability can be achieved
Consistency is hard to maintain; customer perception can differ
may be influenced by time and availability.
Location
Facilities can be located to minimize costs
Must be located near customer
Centralization and economies of scale are likely

13. Processes and Supply chain
Process is a set of linked activities that perform some manufacturing or service task to add value
Basic unit for defining and managing operations
Key processes
Primary processes; Value Creation process. Benefits for customers and company by creating products. Such as design, manufacturing and service delivery
Support Process which does not add direct value to the product.
One core process can be secondary process for another

14. Operations as the Technical Core
Finance/Accounting
Human Resources
Marketing
Suppliers
Production and
Inventory data
Capital budgeting requests
Capacity expansion and
Technology plans
Budgets
Cost analysis
Capital investments
Stockholder
requirements
Orders for materials
Production and delivery
Schedules Quality
Requirements Design/
Performance specs
Material availability
Quality data
Delivery schedules
Designs
Product/Service
Availability
Lead-time estimates
Status of order
Sales forecasts
Customer orders
Customer feedback
Promotions
Personnel needs
Skill sets
Performance evaluations
Job design/work
measurement
Hiring/firing
Training
Legal requirements
Union contract negotiations

15. The Value Chain Inputs Processes Outputs Feedback-Internal and
external customers
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy
Processes 5 1 2 3 4
Outputs
Services
Goods
Feedback-Information on performance

16. Key concepts External Suppliers Internal Suppliers
Make or buy Decision
Backward Integration
Forward Integration
Supply Chain
Procure, Transform, Deliver
Make to Order : Pull System
Make to Stock : Push System

17. Case Study Merrill Lynch
Primary Processes
Support Processes
Business Development
Marketing
Client Services
Under Writing
Lending Services
Post Closing/Secondary marketing
Loan Administration
Technology
Information Systems
Human Resources
Administrative Services
Legal Services
Business Services

18. Key Decisions in OM Structural Decisions Infrastructural Decisions
Product and Service Design
Process Design and Technology
Capacity
Facilities
Infrastructural Decisions
Quality
Inventory and Supply Chain
Schedules
Project Management

19. Structural Decisions Decision Area Typical Questions
Contemporary Challenges
Products
(What)
Standard or Custom Products?
Make to order or make to stock?
Product design?
Ease of make?
Coordination among design teams?
Processes
(How)
What kind of equipment to use?
Automation possibility?
How to configure?
How to integrate new IT and Internet developments?
Capacity
(How Much)
How much is needed?
Why type?
Increase or decrease?
Flexible options available?
Competitive advantage?
Facilities
(Where)
Where are the located?
What products to be produced there?
How to manage and exploit global opportunities?

20. Infrastructural Decisions
Decision Area
Typical Questions
Contemporary Challenges
Quality Management
How to prevent Defects?
How to improve products?
Customer Experience?
Achieve world class standards?
Inventory and Supply chain management
What products to outsource?
How many suppliers to use
How to increase value from supply chain?
Effects of IT and internet?
Schedule Management
Centralized or Decentralized scheduling?
How to prioritize work or customer orders?
How to imply finance and cost information to scheduling?
Integration or ERP with operations?

21. Infrastructural Decisions (Contd.)
Decision Area
Typical Questions
Contemporary Challenges
Project Management
How to respond to special needs?
Info needed to effectively manage a project?
To develop a learning organization?
Manage projects through functional boundaries
Workforce
Skills and training needed by workers?
How to appraise and reward?
How to develop high performance work systems?
How to align work systems for long range objectives?
Organization
Hierarchal or Team Based?
Train in house or outsource?
Structures best suited in different cultures?
Flatten the organization?

22. Evolution of OM Lean Manufacturing 1950 introduced by Toyota
Focuses on
Getting the product right the first time,
Minimum inventories
Continuous improvement
High Quality
Flexible productions
Minimizing all sorts of waste

23. Evolution of OM (Contd.)
Agile Manufacturing
Pre Requisite is Lean Manufacturing
Blends automation and IT
Economically produce a variety of products in any quantity
Adaptable to rapid changeovers

24. Challenges in OM To improve quality eight factors are considered
Partnering
Learning Systems
Adaptability and Speed of Change
Environmental Sustainability
Globalization
Knowledge Focus
Customization and Differentiation
Shifting Demographics