OPETATIONS MANAGEMENT

UNIT-1
INTRODUCTION

Dr. VIRENDRA BALON

NICMAR, PUNE

National Institute of Construction Management and Research (NICMAR), Pune

What is Operations Management?

• Definitions
• A systematic approach to address all the issues pertaining
to the transformation process that converts some inputs into
output that are useful, and could fetch revenue to the
operations system
• Design, operation and improvement of the systems that
create and deliver the firm’s primary products and services
• OM deals with transformation of inputs into outputs through
appropriate process

National Institute of Construction Management and Research (NICMAR), Pune

An Operations System

• One in which several activities are performed to transform a set

of inputs into useful output using a transformation process.

• A transformation process is defined as a use of resources to

transform inputs into some desired outputs

• The conversion process is the predominant activity of a

operation system

National Institute of Construction Management and Research (NICMAR), Pune

Operations as a Transformation Process

INPUT
Material OUTPUT
Machines TRANSFORMATION Goods
Labor PROCESS and
Management Services
Capital

Feedback & Requirements

National Institute of Construction Management and Research (NICMAR), Pune

Operations as a Transformation Process
Adjustment Monitor
needed Output
CONVERSION
INPUTS OUTPUTS
PROCESS
Equipment Goods &
Labour Capacity Services
Flexibility
Material Reliability
Transformation
Workers
Equipment Work Assignment • Physical-manufacturing
Performance
Reliability • Locational-transportation
Capital Energy • Storage-warehousing
Type
Management Reliability
• Exchange-retailing
Inventory • Physiological-health care
Function
Form Reliability
• Informational-
Communication
FEEDBBACK
Comparison
(Actual V/s Planned)
National Institute of Construction Management and Research (NICMAR), Pune
Why Study Operations Management?

OM Provides a Systematic
Approach for
Observing Organizational
Processes

Business Education
(understanding of OM is
essential to the student’s
development as a
manager)
Interesting Career
Operations Opportunities in OM such
Management
as supply chain consulting
and operations analyst

OM Tools have
Cross-Functional
Applications

National Institute of Construction Management and Research (NICMAR), Pune

Objectives of Operations Management
• Effectiveness objective
• Producing the right kind of goods & services
• Efficiency objective
• Maximizing output of goods & services
• Quality objective
• Ensuring that items conform to quality specifications
• Lead time objective
• Minimizing throughput time
• Capacity utilization objective
• Maximizing utilization of manpower, machines etc
• Cost objective
• Minimizing cost of producing goods or services
National Institute of Construction Management and Research (NICMAR), Pune
Operations Function

• Operations
• Marketing
• Finance and
Accounting
• Human Resources
• Suppliers

National Institute of Construction Management and Research (NICMAR), Pune

Components of Production Function

• Product selection & design

• Process selection & planning
• Facility location
• Facility layout & materials handling
• Capacity planning
• Forecasting
• Production planning
• Work study &job design
• Production control
• Inventory (or stock) control
• Quality control
• Maintenance & replacement
• Cost reduction & cost control
National Institute of Construction Management and Research (NICMAR), Pune
Evolution of Operations Management

Extended enterprise

SCM, Alliances

JIT, TQM, BPR

FMS, MRP, Inventory

Management/Cost
Optimization
Traditional Mass Production

1950s 1960s 1970s 1980s 1990s 2000s Beyond

National Institute of Construction Management and Research (NICMAR), Pune

Historical Events in Operations Management

Era Events/Concepts Dates Originator

Steam engine 1769 James Watt
Industrial
Division of labor 1776 Adam Smith
Revolution
Interchangeable parts 1790 Eli Whitney
Principles of scientific
1911 Frederick W. Taylor
management
Scientific Time and motion studies 1911 Frank and Lillian Gilbreth
Management Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford

National Institute of Construction Management and Research (NICMAR), Pune

Historical Events in Operations Management

Era Events/Concepts Dates Originator

Hawthorne studies 1930 Elton Mayo
1940s Abraham Maslow
Human Relations
Motivation theories 1950s Frederick Herzberg
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
Operations
line theory, decision 1950s Operations research groups
Research
theory, PERT/CPM
Joseph Orlicky, IBM
MRP, EDI, EFT, CIM 1960s, 1970s
and others

National Institute of Construction Management and Research (NICMAR), Pune

Historical Events in Operations Management

Era Events/Concepts Dates Originator

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality W. Edwards Deming,
1980s
management) Joseph Juran
Quality Strategy and Wickham Skinner,
1980s
Revolution operations Robert Hayes
Michael Hammer,
Reengineering 1990s
James Champy
Six Sigma 1990s GE, Motorola

National Institute of Construction Management and Research (NICMAR), Pune

Historical Events in Operations Management

Era Events/Concepts Dates Originator

Internet Revolution Internet, WWW, ERP, supply 1990s ARPANET, Tim
chain management Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and others
Globalization WTO, European Union, Global 1990s China, India, Emerging
supply chains, Outsourcing, 2000s economies
Service Science

National Institute of Construction Management and Research (NICMAR), Pune

Historical Events in Operations Management

Era Events/Concepts Dates Originator

Sustainability Global warming Today Numerous companies,
Carbon footprint statesmen, governments,
Green products United Nations, World
Corporate social Economic Forum
responsibility (CSR)
UN Global Compact

National Institute of Construction Management and Research (NICMAR), Pune

Classifications of Operations System

• Based on tangibility
• Manufacturing Operation
• Service Operations
• Based on stages of holding the inventory
• Make to stock
• Make to order
• Assemble to order
• Operation Types (Volume and Variety)
• Project
• Job shop
• Batch manufacturing
• Repetitive manufacturing
• Process industries

National Institute of Construction Management and Research (NICMAR), Pune

Operation Types

• Project
• Long-duration activities of a team for low volume goods and
services
• Building a bridge, dam, house or a special machine
• Job Shop
• Short duration activities to provide custom goods or services
• Making custom industrial hardware, printing personalized
stationary, making drapes
• Batch Manufacturing
• Processing of group of similar standard items
• Similar standard item made periodically in batches like hand
tools, components of assembly line

National Institute of Construction Management and Research (NICMAR), Pune

Operation Types

• Repetitive manufacturing
• High volume processing of standard goods and services that
are discrete units
• Light bulbs, refrigerators, etc
• Process industries
• High volume processing of unit goods that flows together (non-
discrete units)
• Chemicals, refining oil, paper

National Institute of Construction Management and Research (NICMAR), Pune

Volume and Variety Funnel

Volume Variety

Mass Mid volume Project

Production Mid variety Organisations
Petrochemicals, Motor Manufacturing Turnkey Project
Light bulbs Pharmaceuticals Execution

National Institute of Construction Management and Research (NICMAR), Pune

Evolution of Operations & SCM

Supply chain management

• management of the flow of information, products, and services across a
network of customers, enterprises, and supply chain partners

National Institute of Construction Management and Research (NICMAR), Pune

Globalization

Why “go global”?

• Favorable cost
• Access to international markets
• Response to changes in demand
• Reliable sources of supply
• Latest trends and technologies

Increased globalization
• Results from the Internet and falling trade barriers

National Institute of Construction Management and Research (NICMAR), Pune

Hourly Compensation

National Institute of Construction Management and Research (NICMAR), Pune

Productivity and Competitiveness

• Competitiveness
• degree to which a nation can produce goods and services that meet the
test of international markets
• Productivity
• ratio of output to input
• Output
• sales made, products produced, customers served, meals delivered, or
calls answered
• Input
• labor hours, investment in equipment, material usage, or square footage

National Institute of Construction Management and Research (NICMAR), Pune

Measures of Productivity

National Institute of Construction Management and Research (NICMAR), Pune

Strategy and Operations

• How the mission of a company is accomplished

• Provides direction for achieving a mission

• Unites the organization

• Provides consistency in decisions

• Keeps organization moving in the right direction

National Institute of Construction Management and Research (NICMAR), Pune

Strategy Formulation

1. Defining a primary task

• What is the firm in the business of doing?
2. Assessing core competencies
• What does the firm do better than anyone else?
3. Determining order winners and order qualifiers
• What qualifies an item to be considered for purchase?
• What wins the order?
4. Positioning the firm
• How will the firm compete?
5. Deploying the strategy

National Institute of Construction Management and Research (NICMAR), Pune

Strategic Planning

Mission
and Vision

Corporate
Strategy

Marketing Operations Financial

Strategy Strategy Strategy

National Institute of Construction Management and Research (NICMAR), Pune

Positioning the Firm

• Cost
• Speed
• Quality
• Flexibility

National Institute of Construction Management and Research (NICMAR), Pune

Positioning the Firm: Cost

• Waste elimination
• relentlessly pursuing the removal of all waste

• Examination of cost structure

• looking at the entire cost structure for reduction potential

• Lean production
• providing low costs through disciplined operations

National Institute of Construction Management and Research (NICMAR), Pune

Positioning the Firm: Speed

• Fast moves, Fast adaptations, Tight linkages

• Internet
• Customers expect immediate responses
• Service organizations
• always competed on speed (McDonald’s, LensCrafters, and Federal
Express)
• Manufacturers
• time-based competition: build-to-order production and efficient supply
chains
• Fashion industry
• two-week design-to-rack lead time of Spanish retailer, Zara

National Institute of Construction Management and Research (NICMAR), Pune

Positioning the Firm: Quality

• Minimizing defect rates or conforming to design specifications

• Ritz-Carlton - one customer at a time
• Service system designed to “move heaven and earth” to satisfy
customer
• Employees empowered to satisfy a guest’s wish
• Teams set objectives and devise quality action plans
• Each hotel has a quality leader

National Institute of Construction Management and Research (NICMAR), Pune

Positioning the Firm: Flexibility

• Ability to adjust to changes in product mix, production volume, or

design

• Mass customization
• mass production of customized parts

• National Bicycle Industrial Company

• offers 11,231,862 variations
• delivers within two weeks at costs only 10% above standard models

National Institute of Construction Management and Research (NICMAR), Pune

Operations Strategy

Process
Services and
Products Technology

Human
Capacity Resources
Quality

Facilities Sourcing Operating

Systems

National Institute of Construction Management and Research (NICMAR), Pune

Operations Management

1. Intro. to Operations and Supply Chain Management

2. Quality Management
3. Statistical Quality Control
4. Product Design
5. Service Design
6. Processes and Technology
7. Capacity and Facilities Design
8. Human Resources
9. Project Management

National Institute of Construction Management and Research (NICMAR), Pune

Supply Chain Management

10. Supply Chain Strategy and Design

11. Global Supply Chain Procurement and Distribution
12. Forecasting
13. Inventory Management
14. Sales and Operations Planning
15. Resource Planning
16. Lean Systems
17. Scheduling

National Institute of Construction Management and Research (NICMAR), Pune

Learning Objectives of this Course

• Gain an appreciation of strategic importance of operations and supply chain

management in a global business environment

• Understand how operations relates to other business functions

• Develop a working knowledge of concepts and methods related to

designing and managing operations and creating value along the supply
chains

• Develop a skill set for continuous improvement

National Institute of Construction Management and Research (NICMAR), Pune

 Thank You

National Institute of Construction Management and Research (NICMAR), Pune