om materials jpm -1

8/2/2019 OM Materials JPM -1

1/19

What is meant byOperation?

OPERATION is the System of processes which mainlydeals with the conversion of various Input Resources intouseful Outputs with efficiency, effectiveness, flexibility &adaptability.

Operation is a part of Production [ All activities includedin Operation are included also in Production but all activitiesincluded in Production are not necessarily included inOperation.

Exception : PROJECT ACTIVITIES are included in Operationbut not included in Production (because, only after Projectactivities are completed, Production activities start).


2/19

What are Input Resources for Operation?

Materials :Raw materials & Components

Man power (HR) : Operators/ Laborers (Skilled and/or Semi-skilled and/or

Unskilled)

Supervisors Managers

Machineries (Plants & Equipment) for : Processing

Measuring Instrumentation Instrumentation & Control

Material-handling

Testing & Inspection

Water & Effluent Treatment, Prevention of Occupational

Hazard, Environment-control, etc.


3/19

Resources for production & operation (contd)

Utilities :1. Electric Power (for Drive, Heating, Lighting, Fan, etc)2. Fuel (generating heat in Furnace or Kiln))

3. Water (for Cooling, Hydraulic m/cs, Instrument,

Conveying, washing, Cleaning, etc)4. Air (for Cooling, Pneumatic-control Instrument,

Conveying, Cleaning, etc)

5. Steam ( for Heating, Drying, etc)6. Illumination System7. Sanitation & Occupational Safety

Technologies (Process know-how) :

- Process Sequence (Process Flow diagram)- Procedure & Work Instructions- Process Control Parameters- Material requirement (Material Balance)- Equipment Requirement (Capacity Balance)

- Utility Requirement (Utility Balance : water, energy, etc)


4/19

Functional Activitiesof

Production - Operation Management

1. Selection of Location of facilities (Plant / operational Site)

2. Selection of Technology / Process know-how , Plant Capacity,Plant & Machineries

3. Plant Layout Design, Materials Balancing, Capacity Balancing4. Project Planning & Scheduling, Monitoring, Coordination and

Control5. Product Design & Product Development6. Process Design / Planning

7. Job Design8. Materials Management (Procurement, Storage & Inventory Control)9. Material Handling10. Materials Allocation

11. Plant & Machines Loading and Balancing12. Production Scheduling13. Production activities (Manufacturing or Service activities)14. Maintenance15. Occupational Safety and Environmental Safety

16. Inspection, Testing, Quality Control and Quality Management


5/19

MANUFACTURING Vs SERVICE OPERATIONMANUFACTURING SERVICE

1. Output is physically tangible

2. Output is durable

3. Output can be inventoried

4. Capital intensive

5. Pricingis based mainly onmaterials and labour

6. Generally low Customer-contact

7. Response-time is long

8. Time schedule is Market-based

9. Quality can be measured easilyand directly

10. Market may be regional, nationalor international

Output is physically intangible

Output is not durable

Output can not be inventoried

Labour intensive

Pricing is based mainly onlabour only

Generally high Customer-contact

Response-time is short

Time schedule is customers

requirement-based

Quality can not be measuredeasily

Market is usually (preferably)

local


6/19

VALUE CHAIN

Suppliers

PURCHASE INVENTORY PRODUCTIONMaterials Materials

INVENTORY

INVENTORYMARKETINGCustomers

Products

Products

Suppliers Customers

Purchase Inventory Production Inventory Marketing

Activity Stages

Value

a

b

c

b > c > a

VALUE MAPPING

Slope = Value Addition


7/19

VALUE CHAIN

The link among the set of activities in the business that create value or add

value to the products and services to be delivered to the consumer/customer.

Suppliers Production Distribution Retailers Customer

V

Marketing


8/19

Objectives of Operation Management

1. Customer Satisfaction

2. Increased Efficiency (higher Productivity)3. Higher Effectiveness to achieve the Objectives of the

organization

PRODUCTIVITY

PRODUCTIVITY = Value of Output Products (Goods/ Services)

Cost of Input Resources (Materials, Manpower,

Utilities, Machines,, Engineering, Technology, OH, etc)


9/19

WAYS TO IMPROVE PRODUCTIVITY

1. Increase in value of output with same cost of resource

input2. Decrease in cost of input resources for the same Value

of output

3. Simultaneous increase in value of output and decrease

in cost of input resources4. Proportionately more increase in value of output than

the increase in cost of resource input

5. Proportionately less decrease in value of output than

the decrease in cost of resource input


10/19

Problem 1 Productivity

Marpet Corporation is producing 10,000 items per week, using 5 M.T. of

raw materials of unit cost $ 1000 per M.T. The labour-hour being used to

accomplish the job is 500 per week. The labour cost is $ 9 per labour-hour

while the proportionate over-head cost for the product is $ 25000 per week.If the selling price of the product is $ 10 per item, find

(i) Labour Productivity and

(ii) Multifactor Productivity (Overall Productivity).

Solution

Input Labour Cost =500 labour-hour x $ 9 per labour-hour= $ 4,500Input Raw materials cost = 5 MT x $1000 per MT = $ 5,000

Total cost of Inputs = Lab cost + Mat cost + OH cost

= 4500 + 5000 + 25000 = $ 34,500

Value of Output = 10,000 items x $ 10 per item = $ 100,000

(i) Labour Productivity = Value of output = 100,000 = 22.22Cost of Lab input 4,500

(ii) Overall Productivity = Value of output = 100,000 = 2.9

Total Cost of input 34,500


11/19

Problem 2 Productivity

Walcot Industry Ltd. was producing 50 pieces of bushes per day,

using 150 kg of gunmetal per day having unit cost Rs 100 per kg

and 20 semi-skilled labours & 2 skilled labours. The Utility cost

was Rs 2000 per day.

The labour rate is Rs 2100 per week for semi skilled labour and

Rs 3500 per week for skilled labour. The overhead cost of the unit

is Rs 70,000 per week. The selling price of the bush is Rs 1400

per item.

Recently the company changed the labour strength to 24 semi-

skilled and 1 skilled labour and thereby achieved production of 70

pieces of bushes per day, using 210 kg of gunmetal per day and

utility of Rs 2300 per day.

Compare the present Labour Productivity and Multifactor

Productivity with those previous values.

S l ti 2


12/19

Solution-2Semiskilled Labour rate = 2100 / 7 = Rs 300 per day,Skilled Labour rate = 3500 / 7 = Rs 500 per day,OH cost = Rs 70,000/ 7 = Rs 10,000 per day,Previously,

Labour Cost per day=(20 x Rs 300) + (2 x Rs 500) = Rs 6000 + 1000 = Rs 7,000Raw materials cost per day = 150 kg x Rs100 per kg = Rs 15,000Utility Cost = Rs 2,000 /day (given)Total cost of Inputs = Lab cost + Mat cost + Utility cost + OH cost

= 7,000 + 15,000 + 2,000 + 10,000 = Rs 34,000 per dayValue of Output = 50 items x Rs 1400 per item = Rs 70,000 per day

(i) Labour Productivity = Value of output = 70,000 = 10Cost of Lab input 7,000

(ii) Overall Productivity = Value of output = 70,000 = 2.059Total Cost of input 34,000

Recently,Labour Cost per day=(24 x Rs 2100/ 7) + (1 x Rs 3500/7) = Rs 7,700

Raw materials cost per day = 210 kg x Rs100 per kg = Rs 21,000Utility Cost = Rs 2,300 /day (given)Total cost of Inputs = Lab cost + Mat cost + Utility cost + OH cost

=7,700 + 21,000 + 2,300 + 10,000 = Rs 41,000 per dayValue of Output = 70 items x Rs 1400 per item = Rs 98,000 per day(i) Labour Productivity = = 98,000 / 7,700 = 12.727

(ii) Overall Productivity = 98,000 / 41,000 = 2.39


13/19

INFLUENCING FACTORS / WAYS for

PRODUCTIVITY IMPROVEMENT

1. Standardizing the process

2. Improvement of Product Design

3. Reduction of SCRAP generation by improved product & processdesign

4. Reduction (eliminating) of DEFECTS by effective Quality Control

5. Reducing INVENTORY (avoiding over-inventory)6. Avoiding under-utilization or un-utilization of RESOURCES

(manpower, materials, machines, etc)

7. Reducing BREAK-DOWN time (idle time) of equipment by effectivelyimproving Maintenance

8. Improved Motivation andEffective Incentive Plan9. Using Improved TECHNOLOGY.

10. All-out Participation& Involvement of employees

11. Using multi-skill labour in place of single-skill labour

12. Total Quality Management


14/19

Inter-relationship of Operations with other Areas :

FINANCE

SUPPLIERSMARKETINGOPERATION

HR

1) Budget (Fund)2) Cost Analysis3) Capital Investment4) Share Capital

1) Production & Inventory data

2) Capital Budget Requirement3) Expansion Program4) Technology Plan

1) Material Availability 2) Quality Data

3) Delivery Schedule 4) Design details

1) Material Purchase Order

2) Production & Delivery Schedule3) Enquiry (Quantity & Quality Requirement)4) Design & Performance Spec

1) Personal need

2) Skill set3) Performance Evaluation4) Job Design5) Work Measurement

1) Hiring & Firing

2) Training Requirement3) Legal requirement4) Trade Union

1) Production & Service Availability 2) Lead Time

3) Status of Order processing 3) Delivery Schedul

1) Sales Forecast

2) Customer Order3) Customer Feed back4) Marketing Promotions

OPERATIONS STRATEGY


15/19

OPERATIONS STRATEGY

Strategies are the Road-maps & Plans for achieving organizational goals.Strategies provide focus for decision making.

Strategy is time and situation based. Strategy is confidentialplanandnot open document.Strategy is not long term decision.

Tactics are the methods and actions tobe taken up to accomplish strategies.

Operations Strategies is the approach, consistent with organizationalstrategies, that is used to guide the operational functions of theorganization.

Operations Strategies may be(i) Quality-based :which focuses mainly on quality of products and

services in all phases of the organization.(ii) Cost-based(ii) Time-based : which focuses on reduction of the following time forproducts & services, needed to accomplish tasks,1) Planning time, 2) Design time, 3) Processing time,4) Change-over time, 5) Delivery time, 6) Complaint

Response time

B i T f O ti St t


16/19

Basic Type of Operation Strategy :1. QUALITY BASED Operation Strategy :focuses onquality in all phases

of operation. Mainly two types of quality issues are

(i) ORDER QUALIFIER : Characteristics those the customer perceives as

minimum quality standards of Acceptability to be considered as apotential aspect for the purchase.

(ii) ORDER WINNER : Characteristics of products those cause them tobe perceived by the customer as better & attractive than those of thecompetitors.

2. COST BASED Operation Strategy: focuses mainly on reduction of

production cost by the way of reducing the wastes. eg Lean Production3. TIMED BASED Operation Strategy: focuses on reduction of time

needed to accomplish tasks. It may be time reduction in,

(i) Planning, (ii) Processing, (iii) Product Design,

(iv) Change-over time between the lots, (v) Delivery,

(vi) Response time to complaints and calls from end users.[Adopting ;- Group Technology (GT), Flexible Manufacturing System(FMS), Quick Changeovers or Single Minute Exchange of Die (SMED)Technique, selecting Distribution Channel, Call Center for receiving andreacting Customer Calls, etc]

St f O ti St t F l ti


17/19

Steps of Operation Strategy Formulation:1. Defining the Primary Task (the purpose) in accordance with the vision

and mission of the organization.

2. Assessing Core Competency (expertise, knowledge, skill, experience,

technology & know-how, other strength).3. Determining the basic Strategy on path & characteristics Issues :Order-Winner or Order-Qualifier.

[ Order-Qualifiercharacteristic means those the customer perceives asminimum standards of acceptability to be considered as a potential for theirpurpose.

Order-Winner characteristic of an organization's goods and services whichcause it to be perceived by the customer as better than those of the competitors inthe market.]

4. Environment Scanning (Considering all the existing events and trendsthat present as threats and opportunities for the organization. It includesExternal : (i) Economic condition, (ii) Political condition, (iii) Legalenvironment, (iv) Technology development, (v) External Customer,(vi) Market competition, potential & trend.

Internal : (i) Human Resource, (ii) Facilities & Equipment, (iii) FinancialResources, (iv) Existing Products & Services, (v) Existing Technology,(vi) Suppliers.

Steps of Strategy Formulation


18/19

Steps of Strategy Formulation

5. Determining the Position of the firm in the market competition (bySWOT analysis).

6. Decision on Competition Priority : Competition on (i) Cost,(ii) Quality, (iii) Delivery, (iv) Speed & Timeliness, and (v) Flexibility

[ability to adjust with the change in : (a) Product Mix, (b) ProductionVolume, (c) Product Design, (d) Process Design, (e) TechnologyDevelopment, (f) Delivery Time, (g) Service Requirement.]

A f St t i D i i i O ti M t


19/19

Areas of Strategic Decisions in Operations Management :

Strategic Decisions in Operations Management are generally on,

1. Products : like (i) Make or Buy, (ii) Make-to-Order (Pull System) orMaketo-Stock (Push System), (iii) Product Design modification /

improvement2. Process & Technology : (i) Process Technology Improvement,

(ii) Adopting advanced Technology,

(iii) Job-shop or Batch or Continuous/Mass or Assembly-line production

3. CAPACITY : (i) Capacity Lead strategy, (ii) Capacity Lag strategy, or(iii) Average Capacity strategy

4. Sourcing : Extent of Vertical Integration (ie degree to which the firmproduces input material/parts that go into its final products)

5. Quality: (i) Order Winning or (ii) Order Qualifying

6. Operating System :

7. (i) Inventory, (ii) Job Scheduling, (iii) Job Sequencing

7. Human Resource: (i) Incentive plan, (ii) Motivation & Involvement,(iii) Skill Level, (iv) Multi-skill or Single-skill, (v) Training

om materials jpm -1

Documents