1. Operations Management Module 1 : Introduction to Operations Management S.Balachandran December 2007

2. © S.Balachandran2 of 15 In this session... What is Operations Management ?What is Operations Management ? Current Relevance of OMCurrent Relevance of OM OM Function, Skills & DecisionsOM Function, Skills & Decisions Transformation ProcessesTransformation Processes Products vs ServicesProducts vs Services Importance of Service SectorImportance of Service Sector Core vs VA Services – OM RoleCore vs VA Services – OM Role OM TimelineOM Timeline Current Issues in OMCurrent Issues in OM

3. December 2007© S.Balachandran3 of 15 What is ‘Operations Management‘ ? - Definition Design, Operation and Improvement of systems that create and deliver firm’s primary products and servicesDesign, Operation and Improvement of systems that create and deliver firm’s primary products and services

4. December 2007© S.Balachandran4 of 15 Current Relevance Success/failure & growth depend on Operational ExcellenceSuccess/failure & growth depend on Operational Excellence Types of Organisations ?Types of Organisations ? –Business, Govt., NPO, NGO –Products & Services Career OpportunitiesCareer Opportunities Tools & Techniques for study & solution ofTools & Techniques for study & solution of –Operations Problems –Problems in other Functions Window to Organisational ProcessesWindow to Organisational Processes

5. December 2007© S.Balachandran5 of 15 OM Function 60-80% of firm’s Direct expenses are in Operations area 60-80% of firm’s Direct expenses are in Operations area

6. December 2007© S.Balachandran6 of 15 OM Skills Skill Areas Quantitative methods Organizational behavior General management Information systems Economics International business Business ethics and law

7. December 2007© S.Balachandran7 of 15 Types of OM Decisions Opnl. Decisions QA, Man, Machine & Task Assignment, Prioritisation Tactical Decisions Location Assignment, Manning, Sourcing, Scheduling, Inventory Strategic Decisions Location, Capacity, Product Design, Process Design Frontline Middle Mgmt. Sr. Mgmt. Short Term Medium Term Long Term

8. December 2007© S.Balachandran8 of 15 The Operations System Outputs Services Goods Outputs Services Goods Internal and external customers Internal and external customers Information on performance Transformation Processes 5 1 2 3 4 Inputs Materials Fin. Products Customers Resources Equipment Facilities Land Energy Managers Workers Services Inputs Materials Fin. Products Customers Resources Equipment Facilities Land Energy Managers Workers Services Exercise : Identify Inputs, Resources, Transformations & Outputs for 1. Airline, 2. Jail, 3. Bank Branch and 4. Bank H/O. Exercise : Identify Inputs, Resources, Transformations & Outputs for 1. Airline, 2. Jail, 3. Bank Branch and 4. Bank H/O.

9. December 2007© S.Balachandran9 of 15 Transformation Processes - Types Physical--manufacturingPhysical--manufacturing Locational--transportationLocational--transportation Exchange--retailingExchange--retailing Storage--warehousingStorage--warehousing Physiological--health carePhysiological--health care Informational--telecommunicationsInformational--telecommunications

10. December 2007© S.Balachandran10 of 15 Product – Service Contunuum More like a manufacturing organization More like a service organization Physical, durable product Output that can be inventoried Low customer contact Long response time Regional, national, or international markets Large facilities Capital intensive Quality easily measured Physical, durable product Output that can be inventoried Low customer contact Long response time Regional, national, or international markets Large facilities Capital intensive Quality easily measured Intangible, perishable product Output that cannot be inventoried High customer contact Short response time Physical Dly. : Local markets Online Dly.: Global markets Small facilities Labor intensive Quality not easily measured Intangible, perishable product Output that cannot be inventoried High customer contact Short response time Physical Dly. : Local markets Online Dly.: Global markets Small facilities Labor intensive Quality not easily measured

11. December 2007© S.Balachandran11 of 15 Share & Growth of Services – Indian Economy 1950-51 2006-07 Source: Economic Survey of India, February 2007 11.2% 10.0% 2.7% Trade, Hotels Transport & Communication 13.0% Fin. Services 11.1% Community, Social & Personal Services 7.8% Trade, Hotels Transport & Communication 13.0% Fin. Services 11.1% Community, Social & Personal Services 7.8% At present rates of Sectoral Growth 5 Years Hence (2011-12): At present rates of Sectoral Growth 5 Years Hence (2011-12): 13.4% 27% 59.6%

12. December 2007© S.Balachandran12 of 15 Service Employment & Productivity Sector Workforce (millions ) % GDP (2004-05) (Rs. ‘000 Cr.) % GDP per worker (Rs.) Input Emphasis 1. Primary 2956268124.023,085 Labour 2. Industry 761669524.591,447 Capital 3. Services 10422146251.51,40,576 Knowledge TOTAL 475 100 2838 100 59,747 Source: Economic Survey of India, February 2005

13. December 2007© S.Balachandran13 of 15 Core & VA Services Core services : basic things that customers want from products & servicesCore services : basic things that customers want from products & services –C, Q, D, R 1, F, R 2 VA Services : differentiate the organization from competitors and build relationships that bind customers to the firm in a positive wayVA Services : differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way –Problem Solving –Information –Sales Support –Field Support

14. December 2007© S.Balachandran14 of 15 OM Timeline PeriodConcept/ToolOrigin 1910s 1910s Functional Specialisation Functional Specialisation Time, Work & Motion study Time, Work & Motion study Activity scheduling Activity scheduling Assembly Line Assembly Line  F.W. Taylor  Frank & Lilian Gilbreth  L. Gantt  Henry Ford 1930s 1930s SQC, Sampling SQC, Sampling Worker Motivation Worker Motivation  Various  Elton Mayo 1940s 1940s Linear Programming Linear Programming  OR Groups in US & UK 1950-60s 1950-60s Network, Simulation, Waiting Line & Network, Simulation, Waiting Line & other OR Models, Decision Theory other OR Models, Decision Theory  US Defence / Navy  OR Groups in US & UK 1970s 1970s Computer usage for business apps. In Computer usage for business apps. In scheduling, inv. Control, forecasting, scheduling, inv. Control, forecasting, Project Management, MRP Project Management, MRP Service Quality & Productivity Service Quality & Productivity  IBM  MRP: Orlicky & Wight (US)  McDonald’s 1980s 1980s Toyota Mfg. System Toyota Mfg. System Factory Automation Factory Automation Synchronous Manufacturing Synchronous Manufacturing  Taichi Ohno (Japan)  Engineers - Diff. Countries  Eliyahu M. Goldratt (Israel) 1990s 1990s TQM TQM Business Process Reengineering Business Process Reengineering Internet, WWW Internet, WWW Supply Chain Management Supply Chain Management  Deming, Juran, Baldrige, ISO  Michael Hammer  US Govt., NS, MS  SAP, BAN, Oracle, PeopleSoft PeopleSoft 2000s 2000s E-commerce & E-business E-commerce & E-business  Dell, Amazon, E-bay, AOL, Yahoo, Airlines, Hotels Yahoo, Airlines, Hotels

15. December 2007© S.Balachandran15 of 15 Current Issues in OM Globalisation of Business : Products & ServicesGlobalisation of Business : Products & Services Outsourcing – Supply ChainOutsourcing – Supply Chain Customisation of Products & ServicesCustomisation of Products & Services Co-Production by CustomersCo-Production by Customers Electronic Delivery ChannelsElectronic Delivery Channels Operations as Competitive weaponOperations as Competitive weapon