ch01 o.m.-introduction

OPERATIONSMANAGEMENT

FACULTYProf. M.H.Varma

B.E.(Mech.),DMS,PGDMM,

MBA(SCM)

Scope of Discussions / Objectives

Understanding the basic Concepts of Operational Activities of Organisations in Manufacturing and Services Sectors

Learning Outcomes

On successful completion of the Course, the Students should be able to do the following : -

• Student should be able to differentiate how different Operations

Strategies lead to achieve Competitiveness

• Ability to demonstrate differences between Manufacturing and

Service Processes

• Discuss the Process of Product and Service Design

• Ability to describe the Concepts of SCM, TQM, JIT Tools and

Techniques and it’s overall purpose in the Organisation

• Demonstrate understanding of Planning and Control Processes

of Project Management

5

Operations Management- Introduction

6

Customer Retention - Key Issues

A Recent Survey says –

•“More than 90 % of unsatisfied customers do not complain”

•“It costs 5 times more to get a new customer than it does to keep a current customer”

7

What is Operations Management?Defined

Operations management (OM) is defined as the design, execution and improvement of the systems that create and deliver the firm’s primary products and services

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Why Study Operations Management?

Business Education

Systematic Approach to Org. Processes

Career Opportunities

Cross-Functional Applications

OperationsManagement

9

What is a Transformation Process?

Defined A transformation process is defined

as a user of resources to transform inputs into some desired outputs

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Operations as a Process

Transformation(Conversion)

Process

Input Output

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TransformationFabrication

Input OutputTransformationAssembly

Fabrication: making the parts

Assembly: putting the parts together

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Transformation(Conversion)

Process

EnergyMaterials

LaborCapital

Information

Goods orServices

Feedback information forcontrol of process inputsand process technology

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Transformations

Physical--manufacturing

Locational--transportation

Exchange--retailing

Storage--warehousing

Physiological--health care

Informational--telecommunications

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What is a Service and What is Goods?

“If you drop it on your foot, it won’t hurt you.” (Goods or service?)

“Services never include goods and goods never include services.” (True or false?)

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OM in the Organization Chart

OperationsOperations

Plant Manager

Plant Manager

OperationsManager

OperationsManager

DirectorDirector

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Finance Marketing

Functional Integration

Production/ Operations

Management

Materials Management

Management Information

SystemResearch and Development

Human Resource

Management

Marketing Management

Financial Management

Relation of Operations to its Relation of Operations to its EnvironmentEnvironment

Operations transformation systemSuppliers

HumanResources

Marketing

Accounting Finance MIS

Engineering

SOCIETY

GOVERNMENT

ExternalEnvironment

CUSTOMERS

COMPETITORS

Functions of Operations Managers

Planning

• Plan product and service mix

• Location & Capacity Planning

• Plan equipment procurement

• Generate Master Schedule – What products to make and when

• Decide number of shifts/ number of hours

Organizing

• Centralized or Decentralized operations

• Design hierarchical structure

• Assign responsibility for every activity

• Organize supplier/ subcontractor networks

• Establish maintenance policies


Controlling

• Compare costs to budget

• Inspect the Quality levels

• Compare work progress to schedule

• Compare actual labor hours to standards

Directing

• Establish provisions of union contracts

• Establish personnel policies

• Establish employment contracts

• Issue Job assignments and instructions


Motivating

• Provide specific objectives/ Goals & challenges

• Encourage through praise, recognition of job achieved

• Motivate through tangible Reward System

Coordinating

• Coordinate through use of forecasts and master schedule

• Recommend corrective actions/ necessary improvement on performance achieved

• Report, inform and communicate (through MIS Reports)

Training and development

• Support employees in training programs

• Encourage suggestion schemes

• Facilitate people involvement/ empowerment

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Core services are basic things that customers want from products they purchase

Core ServicesDefined

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Core Services Performance Objectives


Flexibility

Quality

Speed

Price (or cost Reduction)

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Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way

Value-Added ServicesDefined

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Value-Added Service Categories


Information

Problem Solving

Sales Support

Field Support

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The Importance of Operations Management

Synergies must exist with other functional areas of the organization

Operations account for 60-80% of the direct expenses that burden a firms profit.

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Historical Evolution of Operations Management

Scientific Management

– F. W. Taylor – “ The Principles of Scientific Management”

Moving Assembly Line

– In 1911- Henry Ford applied the principles of Scientific Management

(Model T)

Hawthorne Studies

– Research Team from HBS – under the leadership of Elton Mayo-

study conducted at Western Electric Company’s Hawthorne Plant

(Chicago)

Operations Research

– Operations Research teams formed in military operations to smoothen

the complex logistics issues (USA & Europe)

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Historical Development of OM

• JIT and TQC

• Manufacturing Strategy Paradigm

• Service Quality and Productivity

• Total Quality Management and Quality Certification

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Historical Development of OM (cont’d)

• Business Process Reengineering

• Supply Chain Management

• Electronic Commerce

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Current Issues in OM

• Coordinate the relationships between mutually supportive but separate organizations.

• Optimizing global supplier, production, and distribution networks.

• Increased co-production of goods and services

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Current Issues in OM (cont’d)

• Managing the customers experience during the service encounter

• Raising the awareness of operations as a significant competitive weapon

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Question Bowl

A major objective of this book is to show how smart

managers can do which of the following?

a. Improve efficiency by lowering costs

b. Improve effectiveness by creating value

c. Increasing value by reducing prices

d. Serving customers well

e. All of the above

Answer: e. All of the above

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Question Bowl

In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following?

a. Displaysb. Stocks of goodsc. Sales clerksd. All of the abovee. None of the above

Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”.)

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Question Bowl

In which of the following decades did the concept of quality control originate?

a. 1920’sb. 1930’sc. 1940’sd. 1950’se. 1970’s

Answer: b. 1930’s (Tools such as sampling inspection and statistical tables where first developed by Walter Shewhart, H. F. Dodge, and H. G. Romig.)