OM Basics

Chapter
1
OM Basics
Copyright 2007, Upendra Kachru
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Excel Books
Industry classification by clock speed
Fast clock speed

Personal computer Toys , Games Athletic footwear Software Semiconductors
Moderate clock speed

Bicycles Automobiles Computer Operating System Agriculture Fast Food
Slow clock speed

Commercial Air Craft Tobacco Military Air Craft Ship building Steel
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Production And Operations Management Text and cases, Upendra Kachru Excel Books
Historical Back Ground

Scientific Management - Time and Motion Study
Scientific Management This school was based on the concept of economic efficiency and scientific analysis of work tasks. Human Relations School This School was based on the behavior of individuals in a work environment, or scientific analysis of organizational behavior.
World War II to the 1960s operations Research

Operations Research School This School was based on identifying interrelationships and quantifying decision problems through modelling for decision making. Cont.
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The 1970s and 1980s The Japanese Challenge Toyota Production System
The system was based on lean manufacturing. The concept is to identify

wastes and eliminate them for implementing process improvements. The 1990s and After Managerial Approach This approach was based on a focus on system design and information based on developing new initiatives in business to consumer communications and business to business supply chains, and installing enterprise resource planning systems.
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Historical Milestones in Operations Management
Date 1875 1899 1900 1900 1901 1905 1905 1927 1931 1935 1940 1947 1950 1970 1980
Initiator James Watt Eli Whitney Frederick W. Taylor Frank & Lillian Gilbreth Henry H. Gantt Henry Ford Alfred P. Sloan Elton Mayo Walter A. Shewart; H.F. Dodge & H.G. Romig P.M.S. Blacket et al George B. Dantzig et al A. Charnes, W.W. Cooper & H. Raiffa J. Orlicky & O. Wright W.E. Deming, Philip Crosby & J. Juran General Motors & IBM Netscape, US Department of Defense Michael Hammer, James Champy Amazon, eBay, Yahoo, America Online Dr. Daniel Whitney and Professor Charles Fine, MIT
Event The Steam Engine was commercially manufactured Introduced mass production and the concept of standard interchangeable parts Scientific Management Time & Motion Studies Scheduling Assembly Line Organizational Management Human Resources Movement Quality Control Charts Statistical Sampling applied to quality control Operations Research Applications Linear Programming Non-linear and Stochastic Processes Programming Computer applications to Manufacturing Material Requirement Planning (MRP) Quality and productivity applications from Japan; Computer aided Design and Manufacturing (CAD /CAM); Robotics, Internet, Electronic Enterprise Business Process Reengineering
1990
2000
E-commerce, Agile Manufacturing, High performance Work systems

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Operation Management Themes
1970 and earlier
1980
1990
2000 and beyond Value
Cost
Mass production
Lean Manufacturing
Agile Manufacturing Mass Customization Service Excellence
Functional Specialization
Cross-Functional Co-ordination
High-Performance System
Cont.
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Operation management OM is the business function that manages that part of the business that transforms raw materials and human inputs into goods and services of higher value.
Cont.
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OM as Transformation Process
Inputs = Transformation = Outputs
INPUTS
PROCESS
OUTPUTS
PERFORMANCE MANAGEMENT
Cont.
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Process Approach
Businesses are organized not on the basis of business functions, but on the basis of business processes. Business processes are outward looking and are based on providing greater value to customers by providing fast responses and exceptional services.
SUPPORTING BUSINESS PROCESSES Determine Customer Needs Monitor Competitive Environment Market Products & Provide AfterSales Service Measure Customer Satisfaction Understand Customers, Market Segments & the Competitive Environment Develop New Products or Product Improvements Manage the Supply Chain Process Enterprise Management & Business Support Activities
CORE PROCESSES
Develop Product Strategy
Evaluate Product Concept
Secure Processes & Materials to Satisfy Demand Manage Strategic Planning Processes
Operations Planning & Control Processes Manage Human Resources
Create New Products Design or Product Improvements Manage Product Transformation Processes Manage Information Systems
Build and Test Prototypes Manage Business Logistics Manage Financial Resources
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OPERATIONS MANAGEMENT BASICS

The value driven approach focuses on the value provided to the customer. Customers are those who purchase final goods and services. Those who ultimately use the products are called consumers. The consumer and the customer may not be the same person. For example, it is known that wives generally buy their husband's wardrobe. Here, the consumer is the man while the customer is the woman. Similarly, the recipients of goods and services from external suppliers are called external customers, while the recipients of goods and services from internal suppliers are called internal customers. For example, in Escorts Ltd. the engine plant of the Tractor Division in 'Plant I' purchases engine castings from Menon & Menon in Kohlapur, the engine plant is an external customer of the casting company. In turn, the engine plant supplies the machined engine block to the Tractor Assembly in 'Plant III'. 'Plant III' is an internal customer to 'Plant I'.
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The value seesaw

The Value Model
Short & long Term costs
Order Loser value Delivered Performance Sale Made
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The Operation Managers Role

Feedback
Inputs: Materials Capital Equipment People Power Information Processes Output
suppliers
customers
Goods Or Services
Operation management
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Decision Areas of Operations Managers
Category Structure
Decision Area Products (What?)
Typical Questions Do we produce standard or custom products and services? Do we make to order or make to stock? What kind of equipment should we use? How much of the process should be automated? How should processes be configured? How much is needed? What type? When should capacity be increased or decreased?
Contemporary Challenges How do we design products and services that are easy to make? How ca n we coordinate design teams that are scattered across the world? How do we exploit new IT developments such as the In ternet for rapid and flexible response to customer needs?
Processes (How?)
Capacity (How much?)
How do we use flexible capacity options (such as temporary workers) and economies of scope for c ompetitive advantage? How do we manage and exploit global opportunities for locating facilities? How can we better learn from customers? How can we improve quality to world - class standards? How do we use available cost and financial information in scheduling? How do we integrate enterprise resource planning systems into operations? How do we manage the supply chain for increased value to the customer? What effect does the Internet have? How can we develop truly high performance work systems? How can we better align work systems with long - range plans and objectives? What structures are best suited for operations in different countries? Should we flatten the organization? Lean Manufacturing How can we develop a learning organization in a globalized environment? How can we best look at the organization across functional boundaries?
Facilities (Where?) Infra structure Quality Management (How to improve?) Schedule Management (When?)
Where are they located? What products should be produced in each? How do we preven t defects and errors? How do we improve products and processes? Should scheduling be centralized or decentralized? How do we prioritize work and/or customer orders?
Inventory and Supply Chain Management (How to acquire and deliver?) People and organi zation Workforce and Productivity (Who?)
What products should we outsource? How many suppliers should we use? What skill level and tr aining should employees have? What types of compensation and reward systems are best? Is a hierarchical or team - based work structure better? Should we train in - house or outsource? How to respond to customers special needs? What information do we need to effectively manage growth?
Organization (What structure?)
Strategy (How to manage growth?)
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Interface with other functions

Operation Management Marketing Interface Operation Management- Finance Interface Operation Management- Design Interface Operation Management- Human Resource Interface Operation Management- Information System Interface
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OMS FUTURE CHALLENGES

Market Challenges Market fragmentations Vocal Customers Customers supplier relationships Disruptive Power
Cont.
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Factors of Production Challenges Process Design and Improvements Employee Diversity Human Resource Scarcity
The Global Workforce

Declining Raw Material Prices
Cont.
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Technological Challenges Technological Change
Bio-genetic
Miniaturization
Societal Challenges The Environment Intellectual Property Financial Reporting
Cont.
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Geopolitical Challenges China: Ever since Marco Polo, Western entrepreneurs have dreamt of selling millions of products to the world's most populous nation. With a few minor exceptions, these dreams have remained unfulfilled. China's rising industrial base will result in major economic changes as it will not be willing to remain solely as the source of low-cost, labour-intensive products. Japan: Even though Japan's economic problems seem intractable, it remains a formidable manufacturing threat. Toyota continues to extend its manufacturing advantage as it hones its ability to make vehicles desired by Americansat the expense of Detroit's Big Two's market share. This will extend into other areas of business too.
India: With a GDP growth approximating 7 per cent, India is emerging as a potential economic power. The growth today is based on the availability of skilled labour. The country is progressing into higher value added products in areas such as software development, biotechnology and pharmaceuticals.
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Chapter

Copyright 2007, Upendra Kachru

Industry classification by clock speed

Fast clock speed

Moderate clock speed

Slow clock speed

Copyright 2007, Upendra Kachru

Historical Back Ground

World War II to the 1960s operations Research

The system was based on lean manufacturing. The concept is to identify

Copyright 2007, Upendra Kachru

Historical Milestones in Operations Management

E-commerce, Agile Manufacturing, High performance Work systems

Operation Management Themes

1970 and earlier

2000 and beyond Value

Agile Manufacturing Mass Customization Service Excellence

Inputs = Transformation = Outputs

Develop Product Strategy

Evaluate Product Concept

Operations Planning & Control Processes Manage Human Resources

Copyright 2007, Upendra Kachru

OPERATIONS MANAGEMENT BASICS

The value seesaw

Short & long Term costs

Order Loser value Delivered Performance Sale Made

Copyright 2007, Upendra Kachru

The Operation Managers Role

Inputs: Materials Capital Equipment People Power Information Processes Output

Decision Areas of Operations Managers

Decision Area Products (What?)

Capacity (How much?)

Organization (What structure?)

Strategy (How to manage growth?)

Copyright 2007, Upendra Kachru

Interface with other functions

Copyright 2007, Upendra Kachru

OMS FUTURE CHALLENGES

The Global Workforce

Technological Challenges Technological Change

Societal Challenges The Environment Intellectual Property Financial Reporting

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