SEWP ZC 241:

PRINCIPLES OF
MANAGEMENT
Productivity,
Operations
Management, and
Total Quality
Management
After studying this chapter, you
should understand:
1. The nature of productivity issues and ways to
improve effectiveness and efficiency.
2. Production and operations management as an
applied case of managerial planning and control.
3. Techniques for improving productivity including
JIT and outsourcing.
4. The importance of quality, the nature of a variety
of techniques for improving quality, and lean
manufacturing.
What is Productivity?
Productivity is the input-
output ratio within a time
period with due
consideration
for quality
 Production and Operations
Management: Manufacturing
and Service
Production management was the
term used to refer to those
activities
necessary to
manufacture
products
 Production and Operations
Management: Manufacturing
and Service
Operations management refers to
activities necessary to produce and
deliver a service
as well as a
physical product
WHAT IS OPERATIONS MGMT?
• Business Function that:
PLANS
ORGANIZES
COORDINATES
CONTROLS
the RESOURCES needed to provide
company’s GOODS and SERVICES.

• OPERATIONS MANAGEMENT is a
MANAGEMENT FUNCTION.
WHAT IS OPERATIONS MGMT?
Definitions of tasks:
• PLANNING:
 Activities that establish a course of
action. Guides future decision making.
• ORGANIZING:
 Activities that establish a structure of
tasks and authority.
• CONTROLLING:
 Activities that ensure that actual
performance is in accordance with
planned performance.
WHAT IS OPERATIONS MGMT?
• Operations management
INVOLVES:
People
Equipment
Technology
Information

• OPERATIONS MANAGEMENT
is a CORE FUNCTION of any
company.
 ROLE OF OPERATIONS MGMT:
OPERATIONS SYSTEM
RANDOM
FLUCTUATIONS OUTPUTS
INPUTS

CONVERSION/ MONITOR
ADJUSTMENT TRANSFORMATION
NEEDED PROCESS OUTPUT

COMPARISON:
ACTUAL
VERSUS
DESIRED

To TRANSFORM company’s INPUTS into FINISHED

GOODS or SERVICES
ROLE OF OPERATIONS MGMT:
COMPONENT DEFINITIONS
• INPUTS:
Human Resource
Facilities and processes
Materials
Technology
Information
• OUTPUTS:
Physical Goods
Services
 ROLE OF OPERATIONS MGMT:
COMPONENT DEFINITIONS

• OPERATION SYSTEMS:
Part of orgn. That produces organizations
physical goods and services.
• CONVERSION/ TRANSFORMATION
PROCESS:
The process of changing INPUTS to
OUTPUTS.
• TECHNOLOGY:
The level of scientific sophistication in
plant/ equipement or skills in the
CONVERSION PROCESS..
ROLE OF OPERATIONS MGMT:
COMPONENT DEFINITIONS
• RANDOM FLUCTUATIONS:
Unplanned/ Uncontrollable influences
that cause differences between
ACTUAL and EXPECTED output.
Can be EXTERNAL or INTERNAL.

• VALUE ADDED:
Net increase between FINAL VALUE
of outputs compared to SUM of
VALUE OF INPUTS.
Greater the value, more profitable the
business.
ROLE OF OPERATIONS MGMT:
COMPONENT DEFINITIONS
• FEEDBACK:

INFORMATION in the control process

that allows management to decide
whether organizational activities
require ADJUSTMENT.
DEFINITION OF OPERATIONS
MANAGEMENT:

OPERATIONS MANAGEMENT:
THE MANAGEMENT OF THE
CONVERSION PROCESS
WHICH CONVERTS INPUTS
INTO DESIRED OUTPUTS OF
GOODS AND SERVICES.
DISTINCTIONS BETWEEN
MANUFACTURING & SERVICE
OPERATIONS
• Organizations divided into 2 broad
categories based on their OUTPUTS.
• Primary distinctions
Manufacturing organizations Service organizations

Produces physical tangible Produces intangible goods

goods. (Services)
Can be stored as Cannot be produced
INVENTORY before they AHEAD of time.
rae needed.
Customers have no Customers are present
DIRECT CONTACT with the during CREATION or
conversion process. DELIVERY of SEVICES.
 TYPE OF GOODS

MANUFACTURING SERVICES-
- TANGIBLE INTANGIBLE
DEGREE OF CUSTOMER
CONTACT
MANUFACTURING
- LOW SERVICES- HIGH
 INVENTORY

MANUFACTURING
- STORED AHEAD SERVICES- REAL
OF USAGE TIME
CHARACTERISTICS: MFG &
SERVICES ORGANIZATIONS
OVERLAPS
• In many organizations, there is an overlap of
manufacturing and services:
 Computer + Service
 Car+ Service

• There are certain organizations, which

have:
Low Customer Contact.
Highly Capital Intensive.
Yet, they provide a SERVICE.
•These are called QUASI
MANUFACTURING ORGANIZATIONS
QUASI MANUFACTURING
ORGANIZATION: EXAMPLE
 INDIA POSTS

• Provides SERVICE- sppedy, reliable delivery

of letters, documents & packages.
• Output is intangible and cant be stored in
inventory.
• Customer not present during creation of
service.
• Highly capital intensive- 1,20,000+ Post
Offices, telecom equipment, delivery trucks.

MANY ORGANIZATIONS FALL IN

BETWEEN MANUFACTURING & SERVICES
Operations Management Systems
 Steps in Product and Production
Design
1. Create product ideas by searching for
consumer needs and screening the various
alternatives
2. Select the product on the basis of various
considerations, including data from market
and economic analyses, and make a
general feasibility study
3. Prepare a preliminary design by
evaluating various alternatives, taking into
consideration reliability, quality, and
maintenance requirements
 Steps in Product and Production
Design
4.Reach a final decision by developing,
testing, and simulating the processes to see if
they work
5. Decide whether the enterprise's current
facilities are adequate or if new or modified
facilities are required
6. Select the process for producing the
product; consider the technology and the
methods available
7. After the product is designed, prepare the
layout of the facilities to be used, plan the
system of production, and schedule the
various things that must be done
 PROCESS OF
CONVERTING AN IDEA
INTO A PRODUCT OR A
SERVICE
INNOVATION: DEFINITION
• Innovation means a new way of doing
something.

• Something new must be substantially

different to be innovative, NOT an
insignificant change.

• Linked to performance and growth

through improvements in efficiency,
productivity, quality,
competitive positioning, market share
.
COMPONENTS OF INNOVATION
• BASIC RESEARCH

• APPLIED RESEARCH

• DEVELOPMENT

• IMPLEMENTATION
COMPONENTS OF INNOVATION

• BASIC RESEARCH
Research for advancement
of scientific knowledge that
has no specific commercial
use.
Maybe, of present or potential interest
• APPLIED RESEARCH
Research for advancement of
scientific knowledge that has specific
commercial uses.
COMPONENTS OF INNOVATION

• DEVELOPMENT
Technical activity concerned
with translating basic and
applied research results into
products or processes.
• IMPLEMENTATION
Activities involved with designing and
building pilot models, equipment and
facilities, and initiating marketing
channels for products or services
emerging from R & D
DECAY CURVE FOR NEW PRODUCT
IDEAS

Screening

Economic
Analysis
Development

Testing

Commercial
Use
TYPES OF PROCESS TECHNOLOGIES
• PROJECTS

• JOB SHOP

• BATCH

• ASSEMBLY LINE

• CONTINOUS PLANTS
CHARACTERISTICS: PROJECT
TECHNOLOGY
• Unique Product
• Requirement of customer tailor
made
• Products not standardized.
• Flexible conversion process.
• High degree of problem solving
required.
• Teamwork and coordination
essential.
EXAMPLES: PROJECT TECHNOLOGY
CHARACTERISTICS: JOB SHOP
TECHNOLOGY
• Small batches of different products.
• High degree of customization.
• Unique process steps or ‘Routing’
• Each product uses small portion of
resources.
• Elaborate job tracking and control systems
required.
• High lead time for access to machines.
• Equipment overloaded or under loaded.
EXAMPLES: JOB SHOP
TECHNOLOGY
CHARACTERISTICS: BATCH
TECHNOLOGY
• Higher standardization than job shop.
• Several products produced repeatedly
and in large volumes.
• Certain parts/ components/ items
produced and stocked without
customers orders.
• System flexibility for small volume/
high variety products.
• No product sufficiently dominant to
warrant dedicated equipment
processes.
EXAMPLES: BATCH TECHNOLOGY
 CHARACTERISTICS: ASSEMBLY LINE
TECHNOLOGY
• Narrow range of specialized products.

• Relatively stable product designs.

• Specialized equipment, human skills

and management systems.

• Beyond a range, manufacturing system

is inflexible.
EXAMPLES: ASSEMBLY LINE
TECHNOLOGY
CHARACTERISTICS: CONTINOUS FLOW
TECHNOLOGY
• Products manufactured in continuous,
endless flows.

• Highly standardized products.

• Normally highly capital intensive.

• High degree of automation and process

controls required.

• High start up costs.

EXAMPLES: CONTINOUS FLOW
TECHNOLOGY
 SERVICE PROCESS TECHNOLOGIES
• As diverse as product
process technologies.

• Services vary:
 In amount of customer
contact.

In intensiveness of labour

versus capital.
 CUSTOMER CONTACT

• Occurs in TWO ways:

Involvement during
designing or customizing
service
During creation of service.
 CUSTOMER CONTACT
• Basis for categorizing services (high
to low)
• Trade off between flexibility and
operational effectiveness.
• High contact process technology:
More flexible, efficiency low since
conversion process cant be
standardized.
• Low contact process technology:
Less flexible, but operations more
standardized and efficient..
 TYPES OF SERVICE PROCESS
TECHNOLOGIES
HIGH CUSTOMER
LOW CUSTOMER CONTACT
CONTACT

QUASI CUSTOM SHOP

CAPITAL
INTENSIVE MANUFACTURING SERVICES

LABOUR MASS SERVICES PROFESSIONAL

INTENSIVE SERVICES
 CHARACTERISTICS: SERVICE
PROCESS TECHNOLOGIES
• QUASI MANUFACTURING:
 Rigidly standardized service.
 Concerned with reliable delivery schedule.
 Major capital intensive decisions.

• MASS SERVICES:
 Scheduling of human resource critical.
 Standardized services.
 Emphasis on training & development..
 CHARACTERISTICS: SERVICE
PROCESS TECHNOLOGIES
• CUSTOM SHOP SERVICE:
 Professional staff, customized service.
 Relatively capital intensive conversion
technology..
 Emphasis on cost containment and capital
investment decisions.

• MASS SERVICES:
 Customized service.
 Intensive interaction between customer and
professional personnel.
 Professional skills critical.
 LABOUR VERSUS CAPITAL
INTENSIVENESS
CAPITAL INTENSIVE LABOUR INTENSIVE

Dominant concerns: Dominant concerns:

Employee scheduling & Technological
training advancements & capital
investments
Tools and Techniques for
Improving Productivity
• Inventory Planning and Control
• Just-in-Time Inventory System
 In the just-in-time (JIT) inventory method, the
supplier delivers the components and parts to
the production line "just in time" to be
assembled
• Outsourcing
 Outsourcing means that production and
operations are contracted to outside vendors
that have expertise in specific areas
What is Operations
Research?
Operations research is the
application of scientific
methods to the study of
alternatives in a problem
situation, with a view to
obtaining a quantitative basis
for arriving at a best solution
What is Operations
Research?
An interdisciplinary branch
of applied mathematics and
formal science that uses
methods such as
mathematical modeling,
statistics, and algorithms to
arrive at optimal or near
optimal solutions to complex
problems.
What is Operations
Research?
 OR APPLICATIONS

• statistics,
• optimization,
• probability theory,
• queuing theory,
• game theory,
• graph theory,
• decision analysis, and simulation
What is Value Engineering?
Value engineering, is the
process of analyzing the
operations of the product or
service, estimating the value
of each operation, and
attempting to improve that
operation by trying to keep
costs low at each step or part
 What is Work Simplification?
• Work simplification is the
process of obtaining the
participation of workers
in simplifying their work
 What is a Quality Circle?
• A quality circle (QC) is a
group of people from the
same organizational area
who meet regularly to solve
problems they experience at
work
Total Quality Management
(TQM)
Total quality management (TQM)
is the organization's long-term
commitment to the continuous
improvement of quality,
throughout the organization and
with the active participation of all
members at all levels, to meet
and exceed customer
expectations
 Mass Production vs
Lean Production
MASS PRODUCTION LEAN PRODUCTION

• Sporadic and • Continuous

inconsistent improvements
(“kaizen”) with
improvements strategic
breakthroughs
• Aim at zero defects
• Satisfied with
“good enough”
• High inventory • Just-in-time
inventory system
acceptable
 Mass Production vs
Lean Production
MASS PRODUCTION LEAN PRODUCTION

• “Me” management • “We” or

with emphasis on team
individual management
performance
• Workers
• Everyone is
considered the
the problem;
cause of poor
especially
quality
management
 CAD/CAM
• CAD/CAMs help engineers design
products much more quickly than they
could with the traditional paper-and-pencil
approach
 THANK YOU!!!

HAVE A
GREAT
WEEKEND