Manufacturing Strategy & Operations

(Production Strategies & Operations)

Saad Ahmed JavedNational College of Business Administration & Economics

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Tentative Course Outline

• Introduction to Production & Operation Management• Manufacturing Strategies & The Japanese Way• Operations Strategy and Deployment• Factory and Facility Material Flow and Equipment

Design• Quality Control• Supply Chain Design• Current Trends in International Operations• New Ideas In Manufacturing Strategy• The Research Project

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Chapter 1Chapter 1

Production and OperationsManagement (POM):

An Introduction

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Overview

• Introduction• Historical Milestones in POM• Factors Affecting POM Today• Different Ways of Studying POM• Wrap-Up: What World-Class Producers Do

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Introduction• Production and operations management (POM)

is the management of an organization’s production system.

• A production system takes inputs and converts them into outputs.

• The conversion process is the predominant activity of a production system.

• The primary concern of an operations manager is the activities of the conversion process.

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Organizational Model

POM

Marketing

MISEngineering

HRM

QA

Accounting

SalesFinance

Organization Chart-Major Elements

FacilitiesP roduc tion &Inventory ontrolQ uality Assurance& C ontro lP rocurem entE ngineering DesignIndustrial EngineeringP rocess Engineering

O perations

Disbursements& C reditsF unds Managem entC apital R equirem ents

F inance/Accounting

Sales Prom otionA dvertis ingSalesM arket Research

M arketing

M anufacturing Organization

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Entry-Level Jobs in POM

• Purchasing planner/buyer/Procurement Officer

• Production (or operations) supervisor• Quality specialist• Production (or operations)

scheduler/controller• Production (or operations) analyst• Inventory analyst

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Historical Milestones in POM

• The Industrial Revolution• Post-Civil War Period• Scientific Management• Human Relations and Behaviorism• Operations Research• The Service Revolution

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The Industrial Revolution• The industrial revolution developed in England in the

1700s. The Colonial Factor.• The steam engine, invented by James Watt in 1764,

largely replaced human and water power for factories.• The rocket technology - from Mysore Rockets (1972) to

Congreve rockets (1804) - technology drain & innovation

• Adam Smith’s The Wealth of Nations in 1776 touted the economic benefits of the specialization of labor.

• Thus the late-1700s factories had not only machine power but also ways of planning and controlling the tasks of workers.

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The Industrial Revolution• The industrial revolution spread from England to other

European countries and to the United Sates.• In 1790 an American, Eli Whitney, developed the

concept of interchangeable parts.• The first great industry in the U.S. was the textile

industry.• In the 1800s the development of the gasoline engine

and electricity further advanced the revolution.• By the mid-1800s, the old cottage system of production

had been replaced by the factory system

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Post-Civil War Period• During the post-Civil War period (after 1860s, in

US) great expansion of production capacity occurred. Era of Railroads began when the Civil War ended.

• 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 U.S. markets– an effective national transportation system

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Scientific Management• Frederick Taylor (1856 – 1915) is known as the

father of scientific management. His shop system employed these steps:– Each worker’s skill, strength, and learning ability

were determined.– Stopwatch studies were conducted to precisely set

standard output per worker on each task.– Material specifications, work methods, and routing

sequences were used to organize the shop.– Supervisors were carefully selected and trained.– Incentive pay systems were initiated.

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Scientific Management

• In the 1920s, Ford Motor Company’s operation embodied the key elements of scientific management:– standardized product designs– mass production– low manufacturing costs– mechanized assembly lines– specialization of labor– interchangeable parts

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Human Relationsand Behavioralism

• In the 1927-1932 period, researchers in the Hawthorne Studies (Western Electric Company, US) realized that human factors were affecting production.

• Researchers and managers alike were recognizing that psychological and sociological factors affected production.

• From the work of behavioralists came a gradual change in the way managers thought about and treated workers.

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Operations Research• During World War II, enormous quantities of resources

(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.

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The Service Revolution• The creation of services organizations accelerated

sharply after World War II.• Today, more than two-thirds of the U.S. workforce is

employed in services.• About two-thirds of U.S. GDP is from services.• There is a huge trade surplus in services.• Investment per office worker now exceeds the

investment per factory worker.• Thus there is a growing need for service operations

management.

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Today's Factors Affecting POM

• Global Competition• U.S. Quality, Customer Service, and Cost

Challenges• Computers and Advanced Production

Technology• Growth of Indian Service Sector• Scarcity of Production Resources• Issues of Social Responsibility

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Different Ways to Study POM

• Production as a System• Production as an Organization Function• Decision Making in POM

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Production as a System

InputsInputs OutputsOutputsConversionSubsystemConversionSubsystem

Production System

ControlSubsystem

ControlSubsystem

Examples of Production Systems

System Inputs Conversion Output(desired)

Hospital PatientsMDs, NursesMedical SuppliesEquipment

Health Care HealthyIndividuals

Restaurant Hungry CustomersFood, ChefServersAtmosphere

Prepare FoodServe Food

SatisfiedCustomers

AutomobilePlant

Sheet SteelEngine PartsTools, EquipmentWorkers

Fabricationand Assemblyof Cars

High QualityAutomobiles

University High School GradsTeachers, BooksClassroom

Transferringof Knowledgeand Skills

EducatedIndividuals

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Inputs of a Production System

• External– Legal, Economic, Social, Technological

• Market– Competition, Customer Desires, Product Info.

• Primary Resources– Materials, Personnel, Capital, Utilities (Goods)

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Conversion Subsystem

• Physical (Manufacturing)

• Locational Services (Transportation)

• Exchange Services (Retailing)

• Storage Services (Warehousing)

• Other Private Services (Insurance)

• Government Services (Federal, State, Local)

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Outputs of a Production System

• Direct– Products– Services

• Indirect– Waste– Pollution– Technological Advances

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Production as an Organization Function

• Companies cannot compete using marketing, finance, accounting, and engineering alone.

• We focus on POM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside.

• To succeed, a firm must have a strong operations function teaming with the other organization functions.

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Decision Making in POM

• Strategic Decisions• Operating Decisions• Control Decisions

Operations Decision Making

People Plants Parts Processes

Planning and Control

Materials &Customers

Products &Services

Input Output

Operations Management

Marketing StrategyFinance Strategy

Marketplace

Corporate Strategy

Operations Strategy

The Transformation Process (value adding) 4

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Strategic Decisions

• These decisions are of strategic importance and have long-term significance for the organization.

• Examples include deciding:– the design for a new product’s production process– where to locate a new factory– whether to launch a new-product development

plan

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Operating Decisions• These decisions are necessary if the ongoing

production of goods and services is to satisfy market demands and provide profits.

• Examples include deciding:– how much finished-goods inventory to carry– the amount of overtime to use next week– the details for purchasing raw material next

month

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Control Decisions

• These decisions concern the day-to-day activities of workers, quality of products and services, production and overhead costs, and machine maintenance.

• Examples include deciding:– labor cost standards for a new product– frequency of preventive maintenance– new quality control acceptance criteria

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What Controls the Operations System?

• Information about the outputs, the conversions, and the inputs is fed back to management.

• This information is matched with management’s expectations

• When there is a difference, management must take corrective action to maintain control of the system

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Wrap-Up: World Class Practice

• POM important in any organization• Global competition forces rapid evolution of

POM • Decision based framework focus of course

– Strategic, Operating, and Control

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THANK YOU!See you in next lecture…

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For Students’ Help

• Instructor’s Email: saad.ahmed.javed@live.com

• Learning Resources (Slides, Text Books, Course Outlines etc) may be made available at https://saadajaved.wordpress.com/management/