1 introduction pom

8/11/2019 1 Introduction POM

1/43

BM201- Management Concepts and Practices

A. Ramesh PhD

Department of Management StudiesIndian Institute of Technology Roorkee

[email protected]

Lecture 1: Introduction to Operations Management

Spring 2012-13


2/43

Syllabus

Lecture

No

Topic

1 Introduction to operations management

2 Operations strategies3 Product, process, and service design

4 Facility capacity, location, layout design

5 Inventory management

6 Current trends in operations management


3/43

Evaluation Scheme

12.5 % Mid Term Evaluation

7.5 % Term Paper


4/43

Reference Books

Jay Heizer, Barry

Render and Jagadees

Rajashekhar: Operations

Management (Prentice

Hall India)


5/43

Reference Books

Nornam Gaither and

Greg Frazier: Operations

Managmeent, 9th

Edition, Cengage

Learning India PrivateLimited


6/43

Overview

1. Introduction

2. Historical Milestones in OM

3. Factors Affecting OM Today

4. Different Ways of Studying OM


7/43

1.Introduction

Operations management is the

management of an organizationsproductive resources or its

production system.

A production system takes inputs

and converts them into outputs.

The conversion process is thepredominant activity of a

production system.

The primary concern of an

operations manager is the

activities of the conversionprocess.


8/43

8

Typical Organization Chart


9/43

2.Historical Milestones in OM


10/43

2.1 The Industrial Revolution

The industrial revolution

developed in England in the1700s.

The steam engine, invented by

James Watt in 1764, largely

replaced human and water power

for factories. Adam Smiths The Wealth of

Nationsin 1776 touted the

economic benefits of the

specialization of labor.

Thus the late-1700s factories hadnot only machine powerbut also

ways of planning and controlling

the tasks of workers.


11/43

2.1 The Industrial Revolution

The industrial revolution spread

from England to other Europeancountries and to the United Sates.

In 1790 an American, Eli

Whitney, developed the concept of

interchangeable parts.

The first great industry in the USwas the textile industry.

In the 1800s the development of

the gasoline engine and electricity

further advanced the revolution.

By the mid-1800s, the old cottagesystem of production had been

replaced by the factory system.


12/43

2.2 Post-Civil War Period

During the post-Civil War period great expansion of

production capacity occurred.

By post-Civil War the following developments set the

stage for the great production explosion of the 20th

century: increased capital and production capacity

the expanded urban workforce

new Western US markets

an effective national transportation system


13/43

2.3 Scientific Management

Frederick Taylor is known as the

father of scientific management.His shop system employed these

steps:

Each workers skill, strength, and

learning ability were determined.

Stopwatch studies were conductedto precisely set standard output

per worker on each task.

Material specifications, work

methods, and routing sequences

were used to organize the shop.

Supervisors were carefullyselected and trained.

Incentive pay systems were

initiated.


14/43

2.3 Scientific Management

In the 1920s, Ford Motor

Companys operationembodied the key elements

of scientific management:

standardized product designs

mass production low manufacturing costs

mechanized assembly lines

specialization of labor

interchangeable parts


15/43

2.4 Human Relations and Behavioralism

In the 1927-1932 period, researchers in the

Hawthorne Studies realized that human factors were

affecting production.

Researchers and managers alike were recognizing

thatpsychological and sociological factors affectedproduction.

From the work of behavioralists came a gradual

change in the way managers thought about and

treated workers.


16/43

2.5 Operations Research

During World War II, enormous quantities ofresources (personnel, supplies, equipment, ) had to

be deployed.

Military operations research (OR) teams were formed

to deal with the complexity of the deployment.

After the war, operations researchers found their way

back to universities, industry, government, and

consulting firms. OR helps operations managers make decisions when

problems are complex and wrong decisions are costly.


17/43

2.6 The Service Revolution

The creation of services

organizations acceleratedsharply after World War II.

Today, more than two-thirds

of the US workforce is

employed in services. About two-thirds of the US

GDP is from services.

There is a huge trade surplus

in services. Thus there is a growing need

for service operations

management.


18/43

2.7 The Computer Revolution

Explosive growth of computer and

communication technologies Easy access to information and the

availability of more information

Advances in software applications

such as Enterprise Resource

Planning (ERP) software Widespread use of email

More and more firms becoming

involved in E-Business using the

Internet faster, better decisions

over greater distances


19/43

3.Today's Factors Affecting OM

Global Competition

Quality, Customer Service, and Cost Challenges

Rapid Expansion of Advanced Technologies

Continued Growth of the Service Sector

Scarcity of Operations Resources

Social-Responsibility Issues


20/43

4. Studying Operations Management

4.1 Operations as a System4.2 Decision Making in OM


21/43

4.1 Operations as a System

Inputs Outputs

Conversion

Subsystem

Production System

Control

Subsystem


22/43

4.1 Input-transformation-output relationship for typical systems

System Primary inputs Resources Primary

transformation

function(s)

Typical desired

output

Hospital Patients Doctors, nurses,

medical supplies,

equipment

Health care

(physiological)

Healthy individuals

Restaurant Hungry customers Food, cook, waiters,

environment

Well prepared, well

served food,

agreeableenvironment

Satisfied customers

Automobile factory Sheet steel, engine

parts

Tools equipment,

workers

Fabrication and

assembly of cars

High quality cars

College or

university

High school

graduates

Teachers, books,

class rooms.

Imparting

knowledge and

skills

Educated

individuals

Department store Shoppers Displays, stocks of

goods, sales clerks

Attract shoppers,

promote producers,

fill orders

Sales or satisfied

customers

Distribution

center

Stock keeping

units(SKUs)

Storage bins,

stock pickers

Storage and

redistribution

On-time, safe

delivery to

destination


23/43

4.1 Inputs of an Operations System

External

Knowledge about the conditions outside the production

system

Legal- constraints

Economic-recession

Social-

Technological- trade journals

Market

Competition, Customer Desires, Product Info.

Primary Resources

Materials, Personnel, Capital, Utilities


24/43

4.1 Conversion Subsystem

Physical (Manufacturing)

Locational Services (Transportation)

Exchange Services (Retailing)

Storage Services (Warehousing)

Other Private Services (Insurance)

Government Services (Federal)


25/43

4.1 Outputs of an Operations System

Direct

Products

Services

Indirect

WastePollution

Technological Advances


26/43

Production as an Organization Function

Companies cannot compete with marketing, finance,

accounting, and engineering alone.

We focus on OM as we think of global

competitiveness, because that is where the vast

majority of a firms workers, capital assets, andexpenses reside.

To succeed, a firm must have a strong operations

function teaming with the other organization

functions.


27/43

4.2 Decision Making in OM

4.2.1 Strategic Decisions

4.2.2 Operating Decisions

4.2.3 Control Decisions


28/43


29/43

4.2.2 Operating Decisions

These decisions are necessary if the ongoing

production of goods and services is to satisfy marketdemands and provide profits.

Examples include deciding:

how much finished-goods inventory to carrythe amount of overtime to use next week

the details for purchasing raw material next month


30/43

4.2.3 Control Decisions

These decisions concern the day-to-day activities of

workers, quality of products and services, productionand overhead costs, and machine maintenance.

Examples include deciding:

labor cost standards for a new product frequency of preventive maintenance

new quality control acceptance criteria


31/43

What Controls the Operations System?

Information about the outputs, the conversions, and

the inputs is fed back to management.

This information is matched with managements

expectations

When there is a difference, management must takecorrective action to maintain control of the system


32/43

Comparison of manufacturing & service- differences

Manufacturing organizations

Physical durable product

Output can be inventoried

Low customer contact

Long response time

Regional, national,

international markets

Large facilities

Capital intensive

Quality easily measured

Service organizations

Intangible, perishable

products

Output can not be inventoried Higher customer contact

Short response time

Local markets

Small facilities

Labour intensive

Quality not easily measured


33/43

Efficiency Vs Effectiveness

Strategy (doing the right things)

Tactics

(doing things

right)

Ineffective Effective

Efficient Die(quickly)

Thrive

Inefficient Die

(slowly)

Survive


34/43

Efficiency vs Effectiveness

Efficiency

Efficiency refers to quantity

or speed

Efficiency is all aboutfocusing on the process,

importance is given to the

means of doing things

Doing things right Efficiency will look at

avoiding mistakes or errors

Effectiveness

Effectiveness refers to

quality.

Effectiveness focuses onachieving the end goal.

Doing right things

Effectiveness is about

gaining success.


35/43

Operations Management Functions Product design and development

Process design

Quality management

Location and layout of facilities

Capacity planning

Forecasting

Production planning & control

Supply chain management

Maintenance management Continues improvement of operations


36/43

Core servicesare basic things that

customers want from productsthey purchase

Core Services of OM


37/43

Core Services Performance Objectives

Operations

ManagementFlexibility

Quality

Speed

Price (or cost

Reduction)


38/43

OM Performance indicators

Price or Cost

Quality Short Run: Conformance, Design (Fitness for Use)

Long Run: Continuous Improvement Thru the Learning

Flexibility Product Mix: make various products and adjust mix

Handle volume Surge

Time - Dependability Speed of Delivery (Lead Time)

Speed to Market (New Product Development Time) Service Delivering a comprehensive solution


39/43

Theory of Slack Ropes

Quality

Flexibility Price

Service

Time

By pulling on one priority,

the others tend to get

pulled along with it.

Source: Duncan McDougall


40/43

Value-added servicesdifferentiate the

organization from competitors and

build relationships that bindcustomers to the firm in a positive way

Value-Added Services of OM


41/43

Value-Added Service Categories

Operations

ManagementInformation

Problem Solving

Sales Support

Field Support


42/43

Current Issues in OM

Effectively consolidating the operations resulting frommergers

Developing flexible supply chains to enable masscustomization of products and services

Managing global supplier, production and distributionnetworks


43/43

Current Issues in OM (contd)

Achieving the Service Factory Enhancing value added services

Making efficient use of Internet technology

Achieving good service from service firms

1 introduction pom

Documents