cl1 om intro

8/17/2019 Cl1 OM Intro

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Dr. R K Singh

Delhi Technological University

(DCE)

Formerly Associate Professor

IIFT, Delhi

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Production and OperationsProduction and OperationsManagementManagement


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What IsWhat Is Production andProduction and

OperationsOperations Management?Management?

Production is the creation of goods

and servicesOperations management (OM)Operations management (OM) isisthe set of activities that createsthe set of activities that createsvalue in the form of goods andvalue in the form of goods and

services by transforming inputsservices by transforming inputsinto outputsinto outputs


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The Organization The Organization

The Three Basic Functions

Organization

Finance Operations Marketing

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Business Operations OverlapBusiness Operations Overlap

Operations

FinanceMarketi

ng

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MarketingSales

promotion

Advertising

Sales

Marketresearch

Organizational ChartsOrganizational Charts

OperationsFacilities

Construction; maintenance

Production and inventory controlScheduling; materials control

Quality assurance and controlSupply chain management

ManufacturingTooling; fabrication; assembly

DesignProduct development and designDetailed product specifications

Industrial engineeringEfficient use of machines, space,and personnel

Process analysisDevelopment and installation of

production tools and equipment

Finance/accountingDisbursements/

credits

Receivables

PayablesGeneral ledger

Funds Management

Money marketInternational

exchange

Capital requirements

Stock issueBond issueand recall

Manufacturing

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The operations function involves the conversion ofinputs into outputs

Inputs

LandLabor

Capital

Transformation/ Conversion

process

OutputsGoods

Services

Control

Feedback

FeedbackFeedback

Value added

Operations as a Transformation Process

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Hospital ProcessHospital Process

Inputs Processing Outputs

Doctors, nurses Examination HealthypatientsHospital Surgery

Medical Supplies MonitoringEquipment MedicationLaboratories Therapy

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ProductProduct--Process MatrixProcess Matrix

Source: Adapted fromRobert Hayes andSteven Wheelwright,Restoring the

Competitive Edge:

Competing Through

Manufacturing (NewYork: John Wiley &Sons, 1984), p. 209

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Characteristics of GoodsCharacteristics of Goods

Tangible productTangible product

Consistent productConsistent productdefinitiondefinition

Production usuallyProduction usuallyseparate fromseparate fromconsumptionconsumption

Can be inventoriedCan be inventoried

Low customerLow customerinteractioninteraction


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Characteristics of ServiceCharacteristics of Service

Intangible productIntangible product

Produced and consumedProduced and consumedat same timeat same time

Often uniqueOften unique

High customer interactionHigh customer interaction

Inconsistent productInconsistent productdefinitiondefinition

Often knowledgeOften knowledge--basedbased Frequently dispersedFrequently dispersed


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Manufacturing or Service?Manufacturing or Service?

Tangible Act

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Goods and ServicesGoods and Services

AutomobileComputer

Installed carpeting

Fast-food meal

Restaurant meal/auto repair

Hospital care Advertising agency/

investment management

Consulting service/teaching

Counseling

Percent of Product that is a GoodPercent of Product that is a Good Percent of Product that is a ServicePercent of Product that is a Service

100%100% 7575 5050 2525 00 2525 5050 7575 100%100%|| || || || || || || || ||

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Goods vs ServiceGoods vs Service

Characteristic Goods ServiceCustomer contact Low High

Uniformity of input High Low

Labor content Low High

Uniformity of output High LowOutput Tangible Intangible

Measurement of productivity Easy Difficult

Opportunity to correct problems High Low

Inventory Much Little

Evaluation Easier Difficult

Patentable Usually Not usual


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Ten Critical DecisionsTen Critical Decisions

Ten Decision AreasTen Decision Areas

Design of goods and servicesDesign of goods and services Managing qualityManaging quality Process and capacityProcess and capacity

designdesign

Location strategyLocation strategy Layout strategyLayout strategy Human resources andHuman resources and

job design job design Supply chainSupply chain

managementmanagement Inventory managementInventory management SchedulingScheduling MaintenanceMaintenance


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Operations ManagementOperations ManagementFunctionsFunctions

Product Design & Development Forecasting

Process Design Production Planning and Control

Quality Management Supply Chain ManagementLocation and Layout of facilities Maintenance Management

Capacity Planning Continuous improvement of operations

Design of Operations Operational Control of Operations

• Design issues in Operations Management lay down overall

constraints under which the operations system functions.• Operational Control issues focuses on optimising the use of

available resources in the short-term while delivering goodsand services as per plan.

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Operations ManagementOperations ManagementImpact of Economic Reforms in IndiaImpact of Economic Reforms in India

Tariff reduction has exposed Indian companies to globalcompetition

Chelliah Committee tax reforms proposed during 1992 – 94triggered this process

Abolition of licensing policies had enabled several new

players to enter into business increasing domesticcompetition and capacity build up

Examples include liberalisation of two wheelers and LCVsegment in early 1980’s and passenger car segment in early1990’s

Indian customers are more demanding in terms of quality,cost and delivery of goods & services


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New Trends in OM

Local ornational focus

Reliable worldwidecommunication andtransportation networks

Global focus,movingproductionoffshore

Batch (large)

shipments

Short product life cycles and

cost of capital put pressureon reducing inventory

Just-in-time

performance

Low-bidpurchasing

Supply chain competitionrequires that suppliers beengaged in a focus on the

end customer

Supply chainpartners,collaboration,

alliances,outsourcing

PastPast CausesCauses FutureFuture

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New Trends in OM

Lengthyproductdevelopment

Shorter life cycles, Internet,rapid internationalcommunication, computer-aided design, andinternational collaboration

Rapid productdevelopment,alliances,collaborativedesigns

Standardizedproducts

Affluence and worldwidemarkets; increasingly flexibleproduction processes

Masscustomizationwith addedemphasis onquality

Job

specialization

Changing socioculture

milieu; increasingly aknowledge and informationsociety

Empowered

employees,teams, and leanproduction


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New Trends in OM

Low-costfocus

Environmental issues, ISO14000, increasing disposalcosts

Environmentallysensitiveproduction, greenmanufacturing,recycled materials,

remanufacturing

Ethics notat forefront

Businesses operate moreopenly; public and globalreview of ethics; opposition tochild labor, bribery, pollution

High ethicalstandards andsocial responsibilityexpected


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Measure of process improvement

Represents output relative to input

Productivity

Productivity =Productivity =Units producedUnits produced

Input usedInput used


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Measures of ProductivityMeasures of Productivity

Partial Output Output Output Output

measures Labor Machine Capital Energy

Multifactor Output Outputmeasures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure All inputs used to produce them

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Productivity Calculations

Productivity =Productivity =

Units producedUnits produced

Labor Labor--hours usedhours used

= == = 44 units/labor units/labor--hour hour 1,0001,000

250250

Labor ProductivityLabor Productivity

One resource inputOne resource input singlesingle--factor productivi tyfactor productivi ty

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Collins Title Productivity

Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day

Old System:Old System:

==Old laborOld labor

productivityproductivity

88 titles/daytitles/day

3232 labor labor--hrshrs

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3232 labor labor--hrshrs==

Old laborOld laborproductivityproductivity == .25.25 titles/labor titles/labor--hr hr

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1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day

New System:New System:



Old laborOld laborproductivityproductivity

==New laborNew labor


= .25 tit les/labor = .25 tit les/labor--hr hr


3232 labor labor--hrshrs

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Old laborOld laborproductivityproductivity == .25.25 titles/labor titles/labor--hr hr



New laborNew laborproductivityproductivity

== .4375.4375 titles/labor titles/labor--hr hr

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==Old multifactorOld multifactor



$640 + 400$640 + 400

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$640 + 400$640 + 400==

Old multifactorOld multifactorproductivityproductivity

== .0077.0077 titles/dollar titles/dollar

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$640 + 400$640 + 400==

Old multifactorOld multifactorproductivityproductivity

==New multifactorNew multifactor




$640 + 800$640 + 800

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$640 + 400$640 + 400


$640 + 800$640 + 800

==Old multifactorOld multifactor


==New multifactorNew multifactor




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Service ProductivityService Productivity

Typically labor intensiveTypically labor intensive

Frequently focused on unique individualFrequently focused on unique individualattributes or desiresattributes or desires

Often an intellectual task performed byOften an intellectual task performed byprofessionalsprofessionals

Often difficult to mechanizeOften difficult to mechanize

Often difficult to evaluate for qualityOften difficult to evaluate for quality


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Productivity at RestaurantProductivity at Restaurant

Improvements:Improvements:

Revised the menuRevised the menu

Designed meals for easy preparationDesigned meals for easy preparation Shifted some preparation to suppliersShifted some preparation to suppliers

Efficient layout and automationEfficient layout and automation

Training and employee empowermentTraining and employee empowerment

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Results:

Preparation time cut to 8 seconds

Management span of control increasedfrom 5 to 30

In-store labor cut by 15 hours/day

Stores handle twice the volume withhalf the labor

Fast-food low-cost leader

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THANK YOU

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