UNIT – I

PART - A

1. What are value added services? (May 2018)

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

2. What are efficient supply chains? (May 2018)

An efficient supply chain is distinguished by longer production lead-times, high set-up costs, and
larger batch sizes that allow the efficient firm to produce at a low unit cost, but often at the expense
of market responsiveness.

3. Distinguish between goods and services. (May 2017)

Goods are the material items that can be seen, touched or felt and are ready for sale to the customers
and are tangible while services are amenities, facilities, benefits or help provided by other people which
are intangible.

____________________________________________________________________________________

4. List two milestones of OM. (May 2017)

 The Industrial Revolution

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

5. What key concepts are included in the definition of operations management?(May/June 2016)

Production and operations management talks about applying business organization and management
concepts in creation of goods and services. It is a process which creates value for customers and solves
their problems.
____________________________________________________________________________________

6. What is positioning strategy? (May/June 2016)

A positioning strategy is when a company chooses one or two important key areas to concentrate
on and excels in those areas. A firm's positioning strategy focuses on how it will compete in the market.

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An effective positioning strategy considers the strengths and weaknesses of the organization, the needs
of the customers and market and the position of competitors. The purpose of a positioning strategy is
that it allows a company to spotlight specific areas where they can outshine and beat their competition.

____________________________________________________________________________________

7. What is operations management?(May /June 2014)

Operations management is concerned with the design, execution, and control of operations that
convert resources into desired goods and services, and implement a company's business strategy.
Operations management focuses on carefully managing the processes to produce and distribute
products and services. Major, overall activities often include product creation, development, production
and distribution.
____________________________________________________________________________________

8. Write down different characteristics of services. (May /June 2014)

 Perishability
 Intangibility
 Variability
 Inseparably and
 Non-ownership
____________________________________________________________________________________

9. What is supply chain management? (April/May 2015)

Supply chain management (SCM) is the oversight of materials, information, and finances as they
move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain
management involves coordinating and integrating these flows both within and among companies. It is
said that the ultimate goal of any effective supply chain management system is to reduce inventory (with
the assumption that products are available when needed).

____________________________________________________________________________________

10. What are competitive priorities? (April/May 2015)

In operations management, competitive priorities are a crucial decision variable for operations
managers. Competitive priorities signify a strategic focus on building specific manufacturing capabilities
that can improve a plant’s position in the market. Such focus may guide decisions with regards to the
capacity, technology, production process, planning, control, etc. In fact the strength of an operations
strategy is dependent on the level of consistency between emphasized competitive priorities and
matching decisions concerning operational structure and infrastructure. Fitting a plant’s practices to the
competitive priorities is important to developing operations as a competitive advantage.

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 According to Porter, there are two primary routes for competitiveness: cost leadership or
differentiation. In contrast, according to Leong, within manufacturing there are actually 5 dimensions of
competitive priorities: cost, flexibility, quality, delivery performance and innovativeness.
____________________________________________________________________________________
11. State the importance of productions system.(Dec 2013)
The importance of production management to the business firm:
 Accomplishment of firm's objectives
 Reputation, Goodwill and Image
 Helps to introduce new products
 Supports other functional areas
 Helps to face competition
 Optimum utilization of resources
 Minimizes cost of production
 Expansion of the firm
The importance of production management to customers and society:
 Higher standard of living
 Generates employment
 Improves quality and reduces cost
 Spread effect
 Creates utility
 Boosts economy
____________________________________________________________________________________
12. What are the elements of operations management?(Dec 2013)
1. Customer: Knowledge of the customer allows a manager to accurately describe the
firm’s customer, what they want, what they are willing to pay, what they do not consider
acceptable and what they view as minimum acceptable levels of performance. This information
helps the operations manager to design and run the OM system by identifying:
 Order winners
 Order qualifiers
 Order loser
2. Process: A process draws together inputs, transformation activities and outputs into
a unified system it identifies the resources that activities need and specific stages at which the
resources are needed and in what quantities.
3. Capacity: Capacity means how much output of a firm can produce, often defined as
a level of output per unit of time. This view of capacity, while important, is not comprehensive.
It ignores the specific capabilities of the OM system and of the firm as a whole. The type of
capacity which results from a combination of equipment, workflows and employee skill levels,
determines what the firm can do efficiently and effectively and what it can do only poorly and
not at all.
____________________________________________________________________________________
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 13. What is lean production?(June 2013)
Lean Manufacturing, or Lean Production, refers to a business concept wherein the goal is to
minimize the amount of time and resources used in the manufacturing processes and other
activities of an enterprise, with emphasis on eliminating all forms of wastage. It is basically the
fusion of various management philosophies designed to make operations as efficient as possible.
Business philosophies invoked by lean manufacturing include Just-in-Time (JIT) Manufacturing,
Kaizen, Total Quality Management (TQM), Total Productive Maintenance (TPM), Cellular
Manufacturing, and the like. The roots of lean manufacturing can be traced to Japan, or more
specifically, Toyota.
Lean manufacturing operates on three principles:
1) That 'muda', or waste, is bad;
2) That the manufacturing processes must be closely tied to the market's
requirements; and
3) That a company should be seen as a continuous and uniform whole that
includes its customers and suppliers, a concept known as 'value stream'.
Lean manufacturing is not merely a tool - it is a way of life that all members of an organization
must appreciate, and practice.
The basic elements of lean manufacturing are:
1) Just-in-time, higher efficiency manufacturing through the principle of
'continuous product flow' (also known as 'single piece workflow’);
2) Continuous improvement of processes along the entire value chain, primarily in
terms of quality and cost; and
3) Setting up of multi-functional and multi-skilled teams at all levels to achieve its
goals. Lean manufacturing is, in essence, the 21st century's upgraded version of
the 20th century's 'mass-production' philosophy.
____________________________________________________________________________________
14. What is bottleneck in production?(June 2013)
It is a situation where demand for your product or service exceeds your ability to make the products
or deliver the service, then you want to find ways to increase your production so you can sell more.
Effective management of your bottleneck, or constraint — resources that limit a process’s output — is a
key to productivity and profitability.
____________________________________________________________________________________
15. List out the major components of a production system./ System Concept of production.
(June 2012)
Input, Transformation Process, and Output
____________________________________________________________________________________
16. Define Operations Strategy. (June & Dec’ 12)
It is the pattern of decisions and the course of action taken either by the individual functions within a
business or the whole organization, in order to create goods and services which will satisfy the business
strategy.

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____________________________________________________________________________________
17. What do you mean control decisions? (JUNE 2010)
It refers to decisions about planning and controlling operations. These decisions concern the day-to-
day activities of workers, quality of products and services, production and overhead costs, and
maintenance of equipment. Examples of this type of planning decisions are
i. Deciding what to do about a department’s failure to meet the planned labour cost target
ii. Developing labour cost standards for a revised product design that is about to go into
production
iii. Deciding what the new quality control acceptance criteria should be for a product that has
had a change in design
iv. Deciding how often to perform preventive maintenance on a key piece of equipment.
____________________________________________________________________________________
18. Define the term Production sharing. (JUNE 2010)
It means that a product may be designed and financed by one country, raw materials may be
produced in many countries and shipped to other countries for further processing, parts may be shipped
to yet another country for assembly, and the product may hbe sold throughout world markets. The
country that is the highest-quality and least-cost producer for a particular activity would perform that
portion of the product.
____________________________________________________________________________________
19. What is an operations system? (Dec 2010)
Operation system is either manufacturing sector or service sector. The inputs requirement are
capital men ,material and information. The transformation process in which part of the value addition
takes place to get the required quantity of product or services with the targeted quality within the
specified time period. All these are in a most economical way. Operation management plan, coordinate
and control all the activities in an operation system to achieve the stated objectives.

Input Transformation Output Objectives

Process 1. To produce the required quantity.

Capital
2. To achieve the required quality.
Men Goods
Power
Material 3. To meet the delivery time.
Information Services 4. Economical way of doing

Operations Management

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___________________________________________________________________________________
20. What are the five basic elements of operational excellence? (Dec 2010)
Good business strategies plot changes in where a company is going. A winning operational strategy
translates that direction into operational reality, creating strategic competitive advantage in the process.
Operational strategy finds new ways to structure your business operations and economics to create
breakout results in top-line growth, earnings, and valuation as a competitive advantage.
1. Transform Market Forces into Operational Advantage
2. Do One Thing Extraordinarily Well
3. Think End-to-End, Continuous, Real-Time, and Horizontally
4. Drive Innovation in Your Operations and Business Model
5. Execute Relentlessly
____________________________________________________________________________________
21. Define productivity. (Dec 2008)(June 2013)
Productivity is a relationship between the output (products and services) and the input (resources
consumed in providing them)
Productivity = Output/ Input.
Strategies for improving productivity
 Increased output for the same input
 Decreased input for the same output.
 Proportionate increase in the output is more than the proportionate increase in the input.
 Proportionate decrease in the input is more than the proportionate decrease in the output.
 Simultaneous increase in the output with decrease in the input.
22. How is service systems classified? (Dec 2008)
The service sector does not consist of a homogeneous group of services. The industries within the
service sector are too heterogeneous for a common frame of analysis. The services can be classified into
four categories:
1. Service factory:
 Airlines
 Trucking
 Hotels
 Resorts and recreation
2. Service shop
 Hospitals
 Auto repair
 Other repair services
3. Mass service
 Retailing
 Wholesaling
 Schools
 Retail aspects of commercial banking

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 4. Professional service:
 Doctors
 Lawyers
 Accountants
 Architects
____________________________________________________________________________________

23. Define a production system. (June 2007)

Production system receives inputs in the form of materials, personnel, capital, utilities and
information. These inputs are changed into finished product.
____________________________________________________________________________________
24. List out the advancements of international operations management. (June 2011)

The scope of Technology and operation management has evolved over a period of time and has
moved from development of products into design, management and improvement of operating system
and processes.

Usage of technology in operation management has ensured that organizations are able to reduce the
cost, improve the delivery process, standardize and improve quality and focus on customization, thereby
creating value for customers.
____________________________________________________________________________________
25. State the principles of agility. (June 2011)

Agile is a work management philosophy generally used in the IT and software development
industry. It was originally devised as an alternative to Software Development Lifecycle methodologies,
and offers an iterative approach to software delivery.

Although agile was originally created to help businesses in an IT and software development context,
the basic framework is applicable across every industry. While these are the basics of agile, the
methodology follows a set of principles that dictate how businesses can become more streamlined via
these guidelines. Here are three of the top principles of agile.

1. Welcome Late Changes

2. Empower Employees
3. Take Time to Reflect

____________________________________________________________________________________

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 PART – B

1. Explain the job of production and operations management with respect to long,
intermediate and short time horizons. (May 2018)

The activities of production department of an organisation are grouped into two broad
categories:

1. The activities that convert the available capital in to physical resources required for production

2. The activities that convert the physical resources in to saleable goods and services.

In carrying out the above activities, the production department must perform the following
activities:

A. Production of goods at the right time and in sufficient quantity to meet the demand

B. Production of goods at minimum possible cost.

C. Production of goods of acceptable quality.

Thus, the functions of production personnel are:

1. Forecasting the demand for the products and using the forecast to determine the requirements
of various factors of production.

2. Arranging for the procurement of required factors of production.

3. Arranging for the services such as maintenance, store keeping material handling, inspection
and quality control etc. that would be required to attain the targeted level of production.

4. Utilizing effectively the factors of production and service facilities available to produce the
product.

Scope of Production Management:

The objectives of production management are aimed at satisfying the needs of the customers
through offering organisations products/services. The scope of production management can be
considered from the point of view of both strategic decisions influencing the production system and at
the operation level. The strategic level decisions are mainly concerned with the design of product and
production system. These decisions involve decisions, which have long terms implications.

The strategic level decisions are:

1. New Product Identification and Design: The success of an organisation depends upon the product
mix that it offers to the customer. There exists a demands for the products if the product has good

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market acceptability. The products should be designed in such way as to meet the expectations of
customers. The tools like value analysis should be applied at the design stage to avoid unnecessary cost
building up in to the product.

2. Process Design and Planning: This involves the appropriate technology for conversion of raw
materials in to products. The choice of technology depends upon several factors such as demand,
investment capability, labour availably and degree of automation required. This is followed by selection
of the process of conversion and determining the workstations and the flow of work. At this stage,
macro level process planning is done.

3. Facilities Location and Layout Planning: The facilities location is a strategic decision and facilities
once located will not be altered in near feature. So due considerations should be given to all the factors
that affect the location.

4. Design of Material Handling System: As per the principle of Material handling, the handling should
be kept at minimum though it is not possible to avoid handling. The selection of particular flow pattern
and material handling equipment is dependent on the distance between the workstations, intensity of
flow or traffic and size, shape and nature of materials to be handled.

5. Capacity Planning: This decision is concerned with the procurement of fixed assets like plant and
machineries. The decision regarding the size of the plant, output etc. are decided at this stage. The
capacity planning activity is again a function of volume of demand. The operational level decisions are
short-term decisions. These are mainly concerned with planning and control of production activities.

The operational level decisions are:

1. Production planning: It is concerned with determining the future course of action regarding
production to achieve the organisation objectives.

2. Production control: It is a management technique, which aims to see that the activities are carried
out as per the plan. Production control activity is concerned with comparing actual output with standard
output and to take corrective action if there exists a deviation between actual and standard.

3. The other activities include: Inventory control, maintenance and replacement, cost reduction and
cost control and work system design.

____________________________________________________________________________________

2. Explain the pyramid of supply chain management (May 2018)

Supply chain (SC) decisions are categorized into three levels.

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At the base of the SC decision pyramid, which corresponds to SC operations, decisions are made on a
daily or weekly basis, while, half way up the pyramid, SC managers adopt an appropriate inventory
policy and network flow planning over a multi-period planning horizon. However, at the peak of this
pyramid, strategic long-term design decisions (e.g., those related to facility location and customer
allocation) are made for the whole period in the SC network.

When the SC network is designed, tactical decisions are made at the planning level (e.g., inventory
policy) on a monthly to yearly basis, and the relevant daily operational decisions are implemented
accordingly. In our recent research study, we formulate a new model aimed at integrating the inventory
planning decisions and the location-allocation design decisions, and at analysing the impact of inventory
optimization in a multi-period and multi-echelon SC network design.

To test our model, we consider networks scattered over the American Northeast and over a 12-month
planning period.

Below are listed some important managerial insights that we draw from our study:

 The impact of the uncertain market demand on SC network design and planning :

SC managers should consider a dynamic demand forecasting approach when designing a SC network.

1. When market demand is fairly constant or shows a minor fluctuation, a similar inventory policy
may be adopted at the same DCs; conversely, when market demand shows some significant
variations or follows a seasonal pattern, a specific inventory policy should be implemented at
each DC in order to avoid overstocking or stock-out of items.
2. The results of our model indicate that, when demand is constant or shows less variation over
time, sourcing from fewer suppliers is profitable; conversely, sourcing from multiple suppliers is
recommended when demand shows some high variations or follows a seasonal trend.

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 3. The more uncertain the market demand, the higher the SC planning costs, including those related
to inventory holding, shortage, order flows.
4. The risk of running out of stock is high when demand shows some high variations or follows a
seasonal pattern. Hence, to avoid shortage penalty costs due to customer unsatisfactory
situations, more DCs may be opened, and located closer to customers. This measure is highly
recommended when product holding costs are high.

 The impact of inventory control on SC design and planning

SC managers should take into account the inventory control and management when designing a SC
network.

1. If inventory costs are high, decentralized DCs and multiple-sourcing can be a good strategy to
keep low inventory levels at DCs, with more product flows in transit, although this may slightly
increase total transportation costs. When inventory costs are low, inventory centralization and
single sourcing are suitable approaches.
2. When inventory costs rise, there should be more suppliers, items should be stocked at closer
regional DCs.
3. The inventory policy should be well-defined at the strategic level using demand forecasting
techniques in order to capture the maximum market share and to reduce the risk of customer
unsatisfactory.
4. When demand uncertainty is high, the (s, S) inventory control policy, also called reorder-point
and order-up-to level system, makes DCs more responsive to meet the required throughput
capacity.

As a conclusion, we argue that the inclusion of inventory planning and policy that consider demand
forecastings at the strategic level can improve the quality of design decisions.
___________________________________________________________________________________

3. Discuss in detail about the challenges and current priorities in operations management.
(May 2017)

There are multiple challenges that operations managers face on a daily basis; new trends emerging in
OM and challenges waiting the organizations are listed by Heizer etal., [1999] as follows:

 Global focus,
 JIT performance,
 Supply chain partnering,
 Rapid product development,
 Mass customization,
 Empowered employees.

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Krajewski et al., [1996] expresses the trends in OM in a different way:

 Growing service sector

 Productivity changes
 Global competitiveness
 Quality, time, technology, change

It is possible to add green markets and e-business to these lists as well.

Globalization

Globalization is “a process of interaction and integration among the people, companies, and
governments of different nations.” It is driven by a reduction in trade barriers, advancements in
information technology, and transportation technology. Operation managers face competition from the
company across the street, as well as, from across the country and across the world. Tishta Bachoo,
Accounting Professor at Curtin University in Australia, explains that companies who compete with
others abroad will have to improve quality while lowering prices to remain competitive. This falls on the
operations manager as he or she is the one who “engages in the four functions of planning, organizing,
leading, and controlling to ensure that the product or service remains competitive in the market.”
Batchoo adds that the operations manager must tap into their creative skills as innovation will be a key
factor of success as will knowledge about international business and the myriad cultures of the
businesses around the globe.

Sustainability

Business operational sustainability is a “method of evaluating whether a business can maintain

existing practices without putting future resources at risk.” When discussing the concept of
sustainability, it is often referred to as the Three Pillars of Sustainability which are social,
environmental, and economic. Operations managers must concern themselves with the outcomes of each
of the pillars including how their work affects safety, welfare, communities, the environment and
economic sustainability.

Effective operations managers must implement best practices with a concern for all three pillars
of sustainability. They also need to initiate and verify corrective action when any outcome of one of the
three pillars becomes jeopardized.

Ethical Conduct

Ethics is defined as a subset of business ethics that is “meant to ensure that the production
function and/or activities are not damaging to either the consumer or the society.” In particular
organizations should consider the effects new technologies, defective services, animal testing and
business deals have on people, safety, and the environment.

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 Unethical behavior has significantly contributed to the demise of successful corporations like
Enron, Tyco, and many varied firms doing business on Wall Street. Being ethical across all business
functions such as accounting, human resource management, marketing and sales, and production are
clearly within the purview of the operations manager. Unethical behavior, regardless of its origin,
becomes a stain on the company as a whole. The recently noted ethics breach at Wells Fargo is just one
poignant example.

Effective Communication

Being consistent and effective when communicating can be difficult anyone in any position
within an organization. The challenge for the operations manager is to be able to communicate
effectively with all internal and external stakeholders. Whether they are talking to someone on the
factory floor, or in the boardroom, they must be able to effectively communicate their message as well
as process the messages being directed to them. Mastering oral, written, and non-verbal communication
is integral to making day-to-day operations run smoothly. Effective and efficient communication is also
necessary for building employee morale and deepening trust with management. Operations managers
who take the time to be self-reflective, the initiative to be authentic, and the effort to work on their
communication skills are bound to be both productive and successful. The development of these skills
are frequently the most requested of upper level management of their new and mid-level managers and
required to be successful in any company.

System Design

Oganizations must develop systems capable of “producing quality goods and services in demanded
quantities in acceptable time frames.” Designing the system, planning the system, and managing the
system present a wide variety of challenges to even the most savvy operations managers.

As operations managers work in multidisciplinary environments, they must be aware of and

effectively respond to the challenges presented by globalization, sustainability, ethical conduct, effective
communication, and system design. Doing this calls for operations managers to excel in the business,
technical, and interpersonal aspects of their work as they actively support the mission and vision of their
organization.

____________________________________________________________________________________

4. Discuss the scope of production and operations management. (May/June 2016) (June 2011)

Due to the dynamic change in the business environment, the scope of production and operation
management has increased. Following are the activities which are included under production and
operations management functions:

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 Facility Location - Selecting appropriate location for the production

Plant layouts and material handling - Deciding upon the machines, equipment and necessary
devices which could lead to effectual and desired production in the most economic way. It is concerned
with the preparation of plant layout for the establishment of machines in the required sequence. Storage
of material and handling it in most effective way to avoid the wastage and delivery at the work centers
as and when required.

Product design - Designing the product and conceive the idea about its production.

Process design - Determination of the production process which is most relevant and efficient in the
given state of affairs.

Production and planning control - Planning the production and its various aspects how, when and
where producing a particular product or its assembly will be done.

Quality control - Controlling the production and ensuring the quality by setting the check points and
taking the periodic measurements of the current performance.

Materials management - Managing the inventories of raw material, semi-finished and finished
goods in a way that neither excessive money may block in this non-productive operation nor the
required material.

Maintenance management - Analysis the deviations and formulating the corrective measures to stay
in track with planned quality, time-schedule and predetermined cost schedules.

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____________________________________________________________________________________

5. “Operations strategies provide the road map for achieving the operations objectives”. –
Justify the statement. (May/June 2016)
What are the strategic actions possible from Operations Function? List and discuss each of
them.(May/June 2014)

‘Operations strategy concerns the pattern of strategic decisions and actions which set the role,
objectives and activities of operations’. Their use of the term ‘pattern’ implies a consistency in strategic
decisions and actions over time. This concept is consistent with management guru Henry Mintzberg’s
view of strategy as being a ‘pattern in a stream of actions’

Strategy is concerned with the actions an organization takes in order to survive and prosper in its
environment over the long-term. Strategy can exist at three levels in an organization: corporate, business
and functional. An organization’s operations strategy comprises the totality of the actions and decisions
taken within the operations function.
The decisions and actions taken have a direct impact on an organization’s business and corporate
strategy. An organization’s operations can be a source of competitive advantage if they are managed
strategically in pursuit of a clear goal for operations. There are five possible operations objectives (cost,
quality, speed, dependability and flexibility). It is unlikely that any operation can excel at all of these
simultaneously, so competitive priorities must be determined on which to base the operations strategy.
The process of operations strategy concerns the way in which an organization develops its operations
strategy. This might be top-down (i.e. formed in pursuit of its business and corporate strategy), bottom-
up (i.e. formed from the actions and decisions taken with operations), market-led (i.e. formed in
response to market requirements) or operations-led (based on the resources and capabilities within its
operations).
The content of operation strategy consists of the key decision areas concerned with the structure
(i.e. the physical attributes of facilities, capacity, process technology and supply network) and
infrastructure (i.e. planning and control, quality, organization, human resources, new product
development and performance measurement) of operations.

Facilities: the location, size and focus of operational resources. These decisions are concerned
with where to locate production facilities, how large each facility should be, what goods or services
should be produced at each location, what markets each facility should serve, etc.
Capacity: the capacity of operations and their ability to respond to changes in customer demand.
These decisions are concerned with the use of facilities, for example through shift patterns, working
hours and staffing levels. Decisions about capacity will affect the organization’s ability to serve
particular markets from a given location.
Process technology: the technology of the equipment used in operations processes. For example,
the degree of automation used, the configuration of equipment, and so on.

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 Supply network: the extent to which operations are conducted in-house or are outsourced.
Decisions about vertical integration are also concerned with the choice of suppliers, their location, the
extent of dependence on particular suppliers, and how relationships with suppliers are managed.
Structural decisions often involve major capital investment decisions, which once made will set the
direction of operations for many years to come. They invariably impact the resources and capabilities of
an organization, determining its potential future output. It may be prohibitively expensive to change
such decisions once implemented, and hence these must be considered to be truly strategic decisions for
the organization. It may be much easier to change the organization’s marketing strategy (e.g. its target
markets, or its promotional activities) than it is to change its operations strategy with respect to the
structural decision areas.
Infrastructure decision areas comprise:
Planning and Control: the systems used for planning and controlling operations.
Quality: quality management policies and practices.
Work Organization: organizational structures, responsibilities and accountabilities in
operations.
Human Resources: recruitment and selection, training and development, management style.
New Product Development: the systems and procedures used to develop and design new
products and services.
Performance Measurement: financial and non-financial performance management and its
linkage to recognition and reward systems.

Strategy Formation Process

OPERATIONS STRATEGY – PROCESS

Operations strategy has a vertical relationship in the corporate hierarchy with business and
corporate strategies, and horizontally with the other functional strategies, most notably with marketing
strategy. Operations strategy might come about in a top-down or a bottom-up process with regard to
business and corporate strategies. Similarly, an operations strategy might be developed in response to

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market requirements (i.e. market-led) or be based on the capabilities of its operations resources (i.e.
operations-led)

The Four Perspectives of Operations Strategy

Top- Down
The top-down perspective is one in which the operations strategy is derived from, and is
supportive of the organization’s business strategy; an operations strategy that the organization uses to
realize its business strategy.

Bottom up
The bottom-up perspective is one which sees operations strategy emerging through a series of
actions and decisions taken over time within operations. These actions and decisions might at first sight
appear somewhat haphazard, as operations managers respond to customer demands, seek to solve
specific problems, copy good practices in other organizations, etc. The bottom-up perspective is one in
which the organization learns from its experiences, developing and enhancing its operational capabilities
as operations managers try new things out in an almost experimental fashion using their workplaces as a
kind of ‘learning laboratory’

Market-led

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 The market-led perspective is one in which the operations strategy is developed in response to
the market environment in which the organization operates. There are a number of approaches in the
operations strategy literature that suggest how this might be done.
Operations-led
The operations-led perspective is one in which its excellence in operations is used todrive the
organization’s strategy. This is in line with the resource-based view (RBV) of strategy that currently
dominates the strategic management literature.

Operations Strategy – Content

What then are the key decision areas of operations management that need to be considered when
an organization is developing an operations strategy? Although there are a number of classifications in
use, operations management scholars generally agree that the major strategic decision areas in
operations can be conveniently divided into ten categories under two broad headings: structure (the
physical attributes of operations; the hardware) and infrastructure (the people and systems of operations;
the software).

In conclusion operations strategy can be linked to corporate strategy and marketing strategy as to
facilities the overall achievement of the company strategic goals. Operations strategy has a vertical
relationship in the corporate hierarchy with business and corporate strategies, and horizontally with the
other functional strategies, most notably with marketing strategy.
____________________________________________________________________________________
6. Explain in detail the various elements of operation strategy. (June 2010) (April/May 2015)
(or) Explain in detail about the operations strategy and strategic fit with example. (May
2017).

An operations strategy for a business is the company's plan for how the business will operate to
achieve a set of goals. Compare it to a machine; the machine is used to achieve a certain purpose or
function, but all components of the machines must operate correctly and in conjunction with each other
for the machine to work successfully. An operations strategy in a business is essentially the same thing.
It defines how different components of the business will work together to achieve success. Companies
define operations strategies differently, based on the management style and needs of the company.

i) Positioning the production system: selecting the type of product design, type of production
processing system, and type of finished goods inventory policy for each product group in the business
strategy.

ii) Product/ service plans: Stages of product life cycle- introduction, growth, maturity and decline
stage.

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 iii) Out sourcing plans: It refers to hiring out or subcontracting some of the work that a company
needs to do.

iv) Process and Technology plans: It involves planning every detail of production processes and
facilities.

v) Strategic allocation of resources: The resources like capital, labour, experts, machines, materials
and other resources must be divided among, or allocated to , products, business units, projects, or profit
opportunities in ways that maximize the achievement of the objectives of operations.

vi) Facility plans: It involves the planning of Capacity, location and layout. The long range capacity
to produce the products/ services has long lasting effects and is subject to great risk.

Retail

Wal-Mart is one of the most successful and largest retailers in U.S. history. It's operations
strategy is to use low inventory levels and prices to generate faster sales based on low prices and value.
Keeping inventory low allows the company to keep prices low for their customers, as well as replace
products with new items once inventory is gone. This also increase demand. High demand combined
with low prices leads to increased sales for the company.

Online

Online merchants typically have very different operations strategies than brick-and-mortar
retailers. For example, the operations strategy for an online merchant likely involves creating and
maintaining a website that is easy to use and reliable, so when customers come to the site, they can
easily navigate through it to make a purchase. An online merchant's operations strategy puts a lot of
emphasis on the design and usability of the site, which includes product photos and descriptions that
entice visitors to make a purchase. The checkout process also must be easy and fast.

B2B

B2B, or business to business, companies sell products and services to other businesses and also
have different operations strategies than retailers, who sell products and services to consumers. An
operations strategy for a B2B company might be to establish the company or management team as
industry experts and thought leaders. This is done in a variety of ways, including obtaining speaking
engagements at trade shows, publishing articles on different angles within the industry and expanding
the company's professional network as much as possible. Companies that have a reputation as the
experts in a certain industry are more likely to get business than companies with no reputation in the
industry.

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Non-Profit

Non-profit companies often operate similarly to other companies, though the ultimate goal of a
non-profit is not about making as much money as possible. Thus, the operations strategy for a non-profit
is different than a for-profit company. Non-profit company operations strategies might include
fundraising efforts to pay employee salaries and partnering with local organizations to improve or
resolve a situation. For example, in an area with high population of homeless people, a non-profit
agency might arise to help create free meal service and shelter to help those in need.

Operational Fit:

Operational Fit arises when different businesses work along in order to explore opportunities for
cost-sharing or skill transfer.

Types of Operational Fits are:

1.Procurement of purchased inputs

2.R&D/technology

3.Manufacture & assembly

4.Administrative support functions

5.5.Marketing & distribution

Benefits of Operating Fits.

As both businesses tend to work together they often save lot on cost. The companies are able to
tap into more economy of scale and/or economies of scope. Both the businesses often tend to increase
operation efficiency through sharing of related activities.

___________________________________________________________________________________

7. Briefly discuss the historical development of operations management. (April/May 2015)

Operations in some form have been around as long as human endeavor itself but, in manufacturing at
least, it has changed dramatically over time, and there are three major phases - craft manufacturing,
mass production and the modern period. Let's look at each of these briefly in turn.

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Craft manufacturing

Craft manufacturing describes the process by which skilled craftspeople produce goods in low
volume, with a high degree of variety, to meet the requirements of their individual customers. Over the
centuries, skills have been transmitted from masters to apprentices and journeymen, and controlled by
guilds. Craftspeople usually worked at home or in small workshops. Such a system worked well for
small-scale local production, with low levels of competition. Some industries, such as furniture
manufacture and clock making, still include a significant proportion of craft working.

Mass production

In many industries, craft manufacturing began to be replaced by mass production in the 19th
century. Mass production involves producing goods in high volume with low variety – the opposite of
craft manufacturing. Customers are expected to buy what is supplied, rather than goods made to their
own specifications. Producers concentrated on keeping costs, and hence prices, down by minimising the
variety of both components and products and setting up large production runs. They developed
aggressive advertising and employed sales forces to market their products.

An important innovation in operations that made mass production possible was the system of
standardised and interchangeable parts known as the ‘American system of manufacture’ (Hounshell,
1984), which developed in the United States and spread to the United Kingdom and other countries.

A second innovation was the development by Frederick Taylor (1911) of the system of 'scientific
management’, which sought to redesign jobs using similar principles to those used in designing
machines. Taylor argued that the role of management was to analyse jobs in order to find the ‘one best
way’ of performing any task or sequence of tasks, rather than allowing workers to determine how to
perform their jobs.

A third innovation was the development of the moving assembly line by Henry Ford. Instead of
workers bringing all the parts and tools to a fixed location where one car was put together at a time, the
assembly line brought the cars to the workers. Ford thus extended the ideas of scientific management,
with the assembly line controlling the pace of production.

The modern period

Mass production worked well as long as high volumes of mass-produced goods could be produced
and sold in predictable and slowly changing markets. However, during the 1970s, markets became
highly fragmented, product life cycles reduced dramatically and consumers had far greater choice than
ever before.

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 More recently, the mass production paradigm has been replaced, but there is as yet no single
approach to managing operations that has become similarly dominant. The different approaches for
managing operations that are currently popular include:

 Flexible specialisation (Piore and Sabel, 1984) in which firms (especially small firms) focus on
separate parts of the value-adding process and collaborate within networks to produce whole
products. Such an approach requires highly developed networks, effective processes for
collaboration and the development of long-term relationships between firms.
 Lean production (Womack et al., 1990) which developed from the highly successful Toyota
Production System. It focuses on the elimination of all forms of waste from a production system.
A focus on driving inventory levels down also exposes inefficiencies, reduces costs and cuts lead
times.
 Mass customisation (Pine et al., 1993) which seeks to combine high volume, as in mass
production, with adapting products to meet the requirements of individual customers. Mass
customisation is becoming increasingly feasible with the advent of new technology and
automated processes.
 Agile manufacturing (Kidd, 1994) which emphasises the need for an organisation to be able to
switch frequently from one market-driven objective to another. Again, agile manufacturing has
only become feasible on a large scale with the advent of enabling technology.

For over two centuries, operations and production management has been recognized as an
important factor in a country’s economic growth. The traditional view of manufacturing management
began in eighteenth century when Adam Smith recognized the economic benefits of specialization of
labor. He recommended breaking of jobs down into subtasks and recognizes workers to specialized tasks
in which they would become highly skilled and efficient. In the early twentieth century, F.W. Taylor
implemented Smith’s theories and developed scientific management. From then till 1930, many
techniques were developed prevailing the traditional view. Brief information about the contributions to
manufacturing management is shown in the following table.

Historical summary of operations management:

Production management becomes the acceptable term from 1930s to 1950s. As F.W. Taylor’s
works become more widely known, managers developed techniques that focused on economic
efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts and
achieve greater efficiency. At the same time, psychologists, socialists and other social scientists began to
study people and human behavior in the working environment. In addition, economists, mathematicians,
and computer socialists contributed newer, more sophisticated analytical approaches.

With the 1970s emerge two distinct changes in our views. The most obvious of these, reflected in
the new name operations management was a shift in the service and manufacturing sectors of the
economy. As service sector became more prominent, the change from ‘production’ to ‘operations’

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emphasized the broadening of our field to service organizations. The second, more suitable change was
the beginning of an emphasis on synthesis, rather than just analysis, in management practices.

____________________________________________________________________________________

8. Discuss the difference between service and goods. (April/May 2015)

Basis for
Goods Services
Comparison
Goods are the material items that can be Services are amenities, facilities,
Meaning seen, touched or felt and are ready for sale to benefits or help provided by other
the customers. people.
Nature Tangible Intangible
Transfer of
Yes No
ownership

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Basis for
Goods Services
Comparison
Evaluation Very simple and easy Complicated
Services cannot be returned back
Return Goods can be returned.
once they are provided.
No, services cannot be separated
Separable Yes, goods can be separated from the seller.
from the service provider.
Variability Identical Diversified
Goods can be stored for use in future or
Storage Services cannot be stored.
multiple use.
Production and There is a time lag between production and Production and Consumption of
Consumption consumption of goods. goods occurs simultaneously.
____________________________________________________________________________________

9. Elaborate on the types of production systems. (Dec 2008) (June 2007)(June 2013)
(May/June 2014)

Production Management: Production management means planning, organising, directing and

controlling of production activities.

Production management deals with converting raw materials into finished goods or products. It
brings together the 6M's i.e. men, money, machines, materials, methods and markets to satisfy the wants
of the people.

The job of coordinating and controlling the activities required to make a product, typically
involving effective control of scheduling, cost, performance, quality, and waste requirements.

The type of Operation System to be adopted should be known to people, and then only you may
choose the system based on the nature of the product that you are going to manufacture. The types of
operation system are classified based on the following criteria.
 Product flow pattern in conversion system
 Output of the product
 Specification of the output

Types of operation system

Production Flow Pattern Output of the product Specification of the output

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Customized Standard

Flow shop Job shop Project

 1. Flow Shop
In this kind of production, the productive resources are arranged according to the sequence of
operation required by the product design.
Assume that you are engaged in the ready to wear clothing, if you want to adopt the flow shop
production, then the productive resources are kept according to the sequence of operations required by
the product like
 Cutting
 Joining by sewing
 Adding, buttons, zippers etc
 Quality checking
 Packaging
Mostly Flow shop production are adopted when there is untapped market for the product,
customers are price sensitive and more competition in the market.
Flow shop production as shown in the figure is further divided into continuous production,
Mass production and Batch production.

1.1 Continuous Production

The industries involved in the following activities are classified as continuous production
 Oil refining
 Fertilizer production
 Chemical processing etc
 In this type of production the product flows continuously without much interruption.
This type of production lacks in flexibility.
1.2 Mass Production
The industries involved in the following activities are classified as the mass production industries:
 Auto Manufacturing
 TV Manufacturing
 Cigarettes

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This kind of flow shop produces the same type of output, it has little flexibility compared to continuous
production.
1.3 Batch Production:
The industries involved in the following activities are classified as the intermittent production.
 Shoe manufacturing
 Bottling plant
 Cloth manufacturing
Here the basic design of the product is same but the specification of the product differs. The
production gets interrupted when the system switches over to other type of product specification. The
products are similar in nature but not identical.

The Characteristics of Flow shop Production

Product The products are standardized
Conversion Special purpose equipments, designed for the specific process of the product
Resources
Work force Specialized people, doing the repetitive jobs
Workforce Job satisfaction among the employee is low because of the repetitive nature of
Job satisfaction job, results in boredom, more turnover and absentees.
Work-in-progress Productive resources are balanced that result in less work in progress inventory
inventory
Cycle time Cycle time per unit is relatively low
Cost of production Cost of production per unit is relatively low
Quantity of Comparatively quantity of production is more
production
Varieties Products to be produced of less variety.
Flexibility This kind of production lacks in flexibility.
Small change in the product design needs the change in production system
abnormally.
Production Since less varieties of product are produced for longer period, the production
planning and planning and control activities are inbuilt in the system itself, so the production
control planning and control activities are not a complex one.

2. Job Shop
In the case of job shop production, the products are mostly customized products. Based on the
customer requirements, the products are produced. The productive resources are kept according to the
function.
The industries involved in the following activities are classified as the job shop production:
 Auto repairing
 Hospital
 Machine shop

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The characteristics of job shop production.
Product The products are of order based mostly non standardized.
Conversion Resources General purpose equipment, grouped according to their
functions.
Work Force Skilled people, doing multi skilled work.
Work force Job satisfaction among the employee is high because the
satisfaction operator role is multifaceted.
Work in Progress There is lot of waiting time for the product to be manufactured
Inventory in the system that results in more in process inventory.
Cycle time Because of more waiting time for the product in the production
line that results more manufacturing cycle time comparatively.
Cost of Production Cost of production per unit is relatively high.
Quantity of production Since it is order based production, quantity produced per unit
type is relatively less
Varieties The production system capable of producing more type of
products.
Flexibility This system has more flexibility any change in the design of the
product could be incorporated without much problem
Production Planning The arrival, the operations demanded and the operations time
and Control required by the order mostly uncertain. This makes the jobs of
production planning and control difficult

3. Project Production:
The industries involved in the production of one of type, complex products like ship
construction, dam construction, bridge construction, Research and development etc.
Project production consists of many activities, the activities are interlinked, time phased and
resources committed.
In this kind of production, scheduling the activities is important so that you can complete the
project within the time and budget constraint. The resources namely manpower, machines, material are
brought to the workplace where the product is manufactured. There is no movement of product.

10. Explain the functions of operations management (June 2007) (Dec 2010)
 Production planning: (i) preparation of long term and short term production
programmes (ii) routing, scheduling and preparation of orders (iii) preparation of demand
schedules for various kinds of materials, manpower and production facilities. production
control
 Production control: Utilizing various factors of production efficiently.

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  Quality control: produce the goods according to the specification and to minimize the
amount of defective work.
 Industrial engineering: determination of methods and process of manufacturing
activities.
 Purchasing: (i) make or buy decisions (ii) decisions relating to supplier, price, delivery
date etc:-
 Plant engineering: maintaining the plant and equipment and other services.
 Manufacturing: coordination of all the above activities to manufacture the product.
 Method analysis: analyzing the alternative way of doing things to improve productivity.
 Inventory control: determination of economic lot size, economic ordering quantity, re-
order levels etc:- to control over production cost.
 Plant layout and material handling: arrangement of machines and other equipment in
such a manner so as to maintain the flow of production uninterruptedly.
 Work measurement: control and reduce the labour cost per unit.

____________________________________________________________________________________
11. What are the most important factors affecting operations management today? (June 2007)

 Reality of global competition

 Quality, customer service, and cost challenges
 Rapid expansion of advanced technologies.
 Continued growth of the service sector
 Scarcity of operations resources
 Social – responsibility issues.
A key impact of these factors on operation managers is that a country’s borders no
longer provide protection from foreign imports. Competition has become intense and is
increasing. To succeed in global competition, companies must make a commitment to customer
responsiveness and continuous improvement toward the goal of quickly developing innovative
products and services that have the best combination of exceptional quality, fast and on-time
delivery, and low prices and costs. And this competition dictates that operations managers use
more sophisticated methods made possible by rapidly expanding advanced technologies.

12. Explain the systems concept of production. (June 2011)

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____________________________________________________________________________________

13. Explain the recent trends in production and operations management. (June 2011)(June
2012)

 Flexibility: The ability to adapt quickly to changes in volumes of demand, in the product mix
demanded, and in product design or delivery schedules, has become a major competitive

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 strategy and a competitive advantage to the firms. This is sometimes called as agile
manufacturing.
 Total Quality Management: TQM approach has been adopted by many firms to achieve
customer satisfaction by a never ending quest for improving the quality of goods and
services.
 Time Reduction: Reduction of manufacturing cycle time and speed to marker for a new
product provide a competitive edge to a firm over other firms. When companies can provide
products at the same price and quality, quicker delivery (short lead time) provide one firm
competitive edge over the other.
 Worker Involvement: The recent trends is to assign responsibility for decision making and
problem solving to the lower levels in the organization. This is known as employee
involvement and empowerment. Examples of employees empowerment are quality circle and
use of work teams or quality improvement teams.
 Business Process Re-engineering: BPR involves drastic measures or break-through
improvements to improve the performance of a firm. It involves the concept of clean-state
approach or starting from a scratch in redesigning in business processes.
 Global Market Place: Globalization of business has compelled many manufacturing firms
to gave operations in many countries where they have certain economic advantage. This has
resulted in a steep increase in the level of competition among manufacturing firms
throughout the world.
 Operations Strategy: More and more firms are recognizing the importance of operations
strategy for the overall success of their business and the necessity for relating it to their
overall business strategy.
 Lean production: Production system have become lean production systems which have
minimal amount of resources to produce a high volume of high quality goods with some
variety. These systems use flexible manufacturing systems and multi-skilled workforce to
have advantages of both mass production and job production.
 Just in time production: JIT is a ‘pull’ system of production, so actual orders provide a
signal for when a product should be manufactured. Demand-pull enables a firm to produce
only what is required, in the correct quantity and at the correct time. This means that stock
levels of raw materials, components, work in progress and finished goods can be kept to a
minimum. This requires a carefully planned scheduling and flow of resources through the
production process. For example, a car manufacturing plant might receive exactly the right
number and type of tyres for one day’s production, and the supplier would be expected to
deliver them to the correct loading bay on the production line within a very narrow time slot.
 Computer Aided Manufacturing: Computer-aided manufacturing (CAM) is the use of
computer-based software tools that assist engineers and machinists in manufacturing or
prototyping product components. CAM is a programming tool that makes it possible to
manufacture physical models using computer-aided design (CAD) programs. CAM creates

30
 real life versions of components designed within a software package. CAM was first used in
1971 for car body design and tooling.
 Computer Aided Design: Computer-aided design (CAD) is the use of computer technology
to aid in the design and particularly the drafting (technical drawing and engineering drawing)
of a part or product, including entire buildings. It is both a visual (or drawing) and symbol-
based method of communication whose conventions are particular to a specific technical
field.
 E-Supply Chain Management: Supply chain management is the management of supply
chain from suppliers to final customers reduces the cost of transportation, warehousing and
distribution throughout the supply chain. But SCM was a traditional concept which is now
being replaced by E-SCM. E-Supply chain management is a series of Internet enabled value-
adding activities to guarantee products created by a manufacturing process can eventually
meet customer requirements and realize returns on investment. Supply chains have advanced
in the last two decades with improved efficiency, agility and accuracy. The recent
advancement of Internet technology has brought more powerful support to improving supply
chain performance. In this context, e-supply chain management becomes a new term that
distinguishes itself by net-centric and real-time features from traditional supply chain
management.
 Enterprise Resource Planning: Enterprise resource planning (ERP) is an enterprise-wide
information system designed to coordinate all the resources, information, and activities
needed to complete business processes such as order fulfillment or billing.
 Environmental Issues: Today’s production managers are concerned more and more with
pollution control and waste disposal which are key issues in protection of environment and
social responsibility. There is increasing emphasis on reducing waste, recycling waste, using
less-toxic chemicals and using biodegradable materials for packaging.

____________________________________________________________________________________
14. Explain the characteristics of modern production and operations function.(Dec 2013)
(a) Flow shop Production- Characteristics
Product The products are standardized
Conversion Special purpose equipments, designed for the specific process of the product
Resources
Work force Specialized people, doing the repetitive jobs
Workforce Job satisfaction among the employee is low because of the repetitive nature of
Job satisfaction job, results in boredom, more turnover and absentees.
Work-in-progress Productive resources are balanced that result in less work in progress inventory
inventory
Cycle time Cycle time per unit is relatively low
Cost of production Cost of production per unit is relatively low
Quantity of Comparatively quantity of production is more

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 production
Varieties Products to be produced of less variety.
Flexibility This kind of production lacks in flexibility.
Small change in the product design needs the change in production system
abnormally.
Production Since less varieties of product are produced for longer period, the production
planning and planning and control activities are inbuilt in the system itself, so the production
control planning and control activities are not a complex one.

(b). Job shop production - Characteristics

Product The products are of order based mostly non standardized.
Conversion Resources General purpose equipment, grouped according to their functions.

Work Force Skilled people, doing multi skilled work.

Work force satisfaction Job satisfaction among the employee is high because the operator
role is multifaceted.

Work in Progress There is lot of waiting time for the product to be manufactured in the
Inventory system that results in more in process inventory.

Cycle time Because of more waiting time for the product in the production line
that results more manufacturing cycle time comparatively.

Cost of Production Cost of production per unit is relatively high.

Quantity of production Since it is order based production, quantity produced per unit type is
relatively less

Varieties The production system capable of producing more type of products.

Flexibility This system has more flexibility any change in the design of the
product could be incorporated without much problem

Production Planning and The arrival, the operations demanded and the operations time
Control required by the order mostly uncertain. This makes the jobs of
production planning and control difficult

(c ). Project Production
Project production consists of many activities, the activities are interlinked, time
phased and resources committed.

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 15. Elucidate the role of operations in strategic management with example.(Dec 2013)(June
2013)
The role of the operations function
"The role of the operations function means something beyond its obvious responsibilities
and tasks – it means the underlying rationale of the function, the very reason that the function
exists."

There are three roles for operations management. They are not exclusive in the sense that an
operation has to be one of them, but they all contribute to making up the way an operation behaves. The
three roles are:

 The implementer of business strategy.

 The supporter of business strategy.
 The driver of business strategy.

Two things are important in understanding these roles. First, they are stated in order of difficulty and
in order of importance. Implementing business strategy is a very basic responsibility for operations,
supporting business strategy is what most operations should aspire to, but driving business strategy is
only possible if the operation really does have unique capabilities. Second, they are cumulative in the
sense that an operation cannot be a supporter of business strategy unless it has skills as an implementer,
and cannot drive business strategy unless it has the skills to support the business strategy.
___________________________________________________________________________________

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