Operations Management

Facilitator: Pramod Shetty

Introduction

Major sectors in a country Agriculture

Manufacturing , Service and

In India Manufacturing and Services constitute 75% of the GDP

Definition Production and Operations Management ("POM") is about the transformation of production and operational inputs into "outputs" that, when distributed, meet the needs of customers.

Operations as a Transformation Process Operations Management

Feedback for control

Inputs
Flow Units
(Material, Information, Knowledge, etc.)

Transformation: Network of activities

Outputs
Goods Services

Labor & Capital

Resources

Transformations


Manufacturing Transformations  Machine tool mfg Service Transformations  Bank, garage, restaurant Differences in terms of  Tangibility  Simultaneous production & consumption  Perishability

OM incorporates many tasks that are interdependent, but which can be grouped under five main headings:

PRODUCT Marketers in a business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business actually makes the required products in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as: - Performance - Aesthetics - Quality - Reliability - Quantity - Production costs - Delivery dates

PLANT To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as: - Future demand (volume, timing) - Design and layout of factory, equipment, offices - Productivity and reliability of equipment - Need for (and costs of) maintenance - Heath and safety (particularly the operation of equipment) - Environmental issues (e.g. creation of waste products)

PROCESSES There are many different ways of producing a product. Management must choose the best process, or series of processes. They will consider: - Available capacity - Available skills - Type of production - Layout of plant and equipment - Safety - Production costs - Maintenance requirements

PROGRAMMES The production PROGRAMME concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about programme will be influenced by factors such as: - Purchasing patterns (e.g. lead time) - Cash flow - Need for / availability of storage - Transportation

PEOPLE Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas: - Wages and salaries - Safety and training - Work conditions - Leadership and motivation - Unionisation - Communication

Importance of Operations Management



During the past couple of decades, many domestic companies saw their market share decline due to their inability to compete with foreign firms in terms of product design, cost, or quality. Theories to explain this development:  Cultural differences  Government policies  Neglect of human resources  Insufficient investment in technology World-class performance by operations in delivering highquality, cost-competitive products and services is essential to survival in today's global economy. Of late Auto components, pharma, IT and ITES sectors are showing signs of global competitiveness.

THE DRAGON VS THE ELEPHANT

India 1947 1991 5-6% 100 Cr + $100 $3-5 bn Rs. 5-7/unit 100 units Very Strong Factor Economic race started Liberalisation initiated GDP Growth Population Per Capita Income FDI Electric Power Productivity Trade Unions China 1947 1978 9-10% 130 Cr $450 $45-60bn Rs. 3/unit 300 units No TU rights
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THE DRAGON VS THE ELEPHANT

India 10 million 56 mn tons $30 bn $15 bn 2 million Factor TV sets produced Steel production Textiles production Textiles exports Automobiles production China 40 million 578 mn tons $145 bn $80 bn 5.5 million

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What to Produce? The Design of Products & Services Where to Produce? Facility Location How Much to Produce? Capacity Planning for Manufacturing & Service Systems How to Produce? Process Design; Work Analysis, Design & Measurement; Layout & Safety.

Customer focus.

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Core Services

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

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

Dealing with Trade-Offs

Cost (Value) Flexibility Delivery (Speed)

Quality
WCM -companies adopt TQM, Pull systems, JIT,TPM
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How do Firms Add Value? Greater productivity

Lower costs and expenses Lower prices for the customer

Higher quality
Better performance Greater durability, reliability, aesthetics.

Better timeliness
Faster response and turnaround On-time delivery, meet promises

Greater flexibility
greater variety customization for customer needs / desires

OM Deals With
         

Operations - Strategy Product/Service Design Process Selection Site Selection Facility Layout Capacity Planning Demand Management MRP/ERP Production Planning and Scheduling Inventory Management Quality control

OM and Other Business Functions Marketing

What operations can do relative to meeting due dates, product customization, new product introduction.

OM and Other Business Functions - Finance Understand inventory management, capacity utilization and labour standards to develop accurate cost data, perform audits, and prepare financial reports. Cost accountants must be aware of how JIT works. Need for capital investments. Forecast cash flows. Make-or-buy decision. Plant expansion and/or relocation.

OM and Other Business Functions Human Resources

How jobs are designed? Compensation and incentive programs. Skills of work force.

OM and Other Business Functions - IT

Design and develop software. Major business applications of computers is in production control.

Current Issues in OM
Effectively consolidating the operations resulting from mergers. Developing flexible supply chains to enable mass customisation of products and services. Managing global supplier, production and distribution networks.

Current Issues in OM (contd) Increased commoditization of suppliers. Achieving the Service Factory. Achieving good service from service firms.