Purpose of a Business Organization

To meet a specific need of the Society through production making use of Human & Other resources - to make profits year after year & create wealth to grow & serve society better & better.

PRODUCTION
PROCESS OF CONVERTING (RAW) MATERIALS TO SALEABLE FINISHED GOODS NEEDED BY SOCIETY (Manufacturing)

CREATING & DISCHARGING OF A SERVICE WHICH HAS UTILITY TO SOCETY (Services)

OPERATIONS MANAGEMENT

Planning, Organizing, Executing and Controlling of all systems and activities connected with either Manufacturing or Services

OPERATIONS MANAGEMENT Is an
ART (SCIENCE?) OF MANAGING PRODUCTS PROCESSES MATERIAL MACHINES PEOPLE TIME SITUATION

Hard skills

Soft skills

Why study of Operations Management ?

BUSINESS MANAGEMENT

A A MARKETING

OPERATIONS

FINANCE

Essentiality Scope

SCOPE OF PRODUCTION & OPERATIONS MANAGEMENT

SCOPE OF OPERATIONS MANAGEMENT

PRODUCT & SERVICE DESIGN SELECTION OF PROCESSES & TECHNOLOGY PLANT LOCATION & FACILITIES PLANNING PRODUCTION PLANNING PRODUCTIVITY & WORK FORCE MANAGEMENT PROJECT MANAGEMENT MATERIAL MANAGEMENT QUALITY MANAGEMENT MAINTENANCE MANAGEMENT

DIFFERENCES BETWEEN MANUFACTURING & SERVICES Manufacturing (Car)

Tangible Can be produced for off the-shelf availability Minimal contact with ultimate consumer Complex and interrelated Technology

Services (Education)
Intangible; consumed in the process of their creation Availability achieved by keeping the system open for services High contact with clients or customers Simple Technology

Markets served by production system are regional, national and international Large units that can take advantage of economies of scale Location of system is in relation to regional, national and international markets

Markets served by services system are usually local Relatively small units to serve local markets Location, dependent on location of local customers, clients and users

Service Product (Manufacturing)

Continuum
Pure Product Pure Service
Ayurvedic Healing Treatment Legal/Tax Consulting Cyber Caf Telephone Booths Emergency Maintenance Services Facilities Maintenance High quality restaurant meal Fast food in a eat out joint Customised durable goods Fast moving commodities Toys
Adopted from Hill, T. (2005), Operations Management (Palgrave Macmillan), 2nd Edition, pp 14.
Mahadevan (2007), Operations Management: Theory & Practice, Pearson Education

OPERATIONS SYSTEM MODEL

INPUT
CONVERSION SYSTEM

OUTPUT
Primary Input
Materials Personnel Land,building,Equipment Finance

Manufacturing Transportation Insurance, Financing Health care Education

Direct Outputs
Products Services

Market Input
Competition Product Information Customer Needs

Indirect Outputs
Taxes Employment generation Technological Developments Impact on Environment Impact on Society

External Input
Legal/Political Social Economy Technology

Feed back Information

CONTROL SYSTEM

CONVERSION PROCESS
EXAMPLE PRIMARY INPUT RESOURCES TRANSFORM ATION FUNCTION (S) TYPICAL DESIRED OUTPUT

Automobile factory

Sheet steel, engine parts

High school graduates Shoppers

Tools, equipment, workers

Fabrication and Assembly of cars (physical)

Imparting Knowledge and skills

Highquality cars

College or university Department store

Teachers, books, classroom

Educated individuals Satisfied customers

Displays, stock of Attract shoppers, goods, sales promote clerks products

CONVERSION PROCESS
EXAMPLE PRIMARY INPUT RESOURCES TRANSFORMA TION FUNCTION (S) doctors, Nurses, Medical Supplies, Equipment Food, Cook, waiters, Environment Health Care (physiological ) TYPICAL DESIRED OUTPUT Healthy Individuals

Hospital

Patients

Restaurant

Hungry Customers

Service

Satisfied Customers

EVOLUTION OF POM IN 18th CENTURY

YEAR EVOLUTION

1764

Invention of Steam Engine by James Watt

1790

Interchangeability by Eli Whitney

Current issues in Operations Management (Recent trends)

Automated & computerized operations Services orientation Shrinking of factories Thrust on Total Quality Shift from Personnel Management to HR Development Flexi time Thrust on Housekeeping

IN HIGH-TECH MANUFACTURING FACILITY OF THE FUTURE, THE ONLY DIFFERENCE BETWEEN THE MANUFACTURING FLOOR & THE OFFICE IS THAT THE OFFIC WILL HAVE CARPETS

DEVELOPING OPERATIONS STRATEGY

To serve the country through supply of electronic equipment to Indian Defence Services & other users

Mission, Vision

To reach a Turn Over of Rs.1000 crores by 2014-15

Business conditions

Business Strategy

SWOT analysis

To retain Defence market at 70% & Civilian market 30% To give emphasis on In-house Development of products To get into Telecom & other electronics fields To develop & supply world class products like Simputer, Voting M/c etc

Home grown talents No lateral Induction (Resources) Limiting operations to core competency (Outsourcing) Indigenize to the max. extent (Process) To keep Inventory very low (Resources) To have only Engineers & Diploma holders (Resources) To have a mix of indigenous design & collaborated projects (Product) To put IT to maximum use (Technology) To give stress on employee training & knowledge up gradation (Resources) To constantly Bench mark with best in class (Process) Re- organize for better empowerment (Facility) Establishing overseas procurement offices (Facility) Change over to Group Technology from Process lay out (Facility)

Is a long range plan of all operations, covering resources, processes, facilities, technology, product, outsourcing . to achieve the Business strategies of the company.

Operations Strategy

Finance strategy

Marketing strategy

Organization structure (Typical)

Business head (CEO) Head-R & D Head-HR Head-Operations Head-Marketing Head-Finance

Head Prod. control

Head Material mgt.

Head Production

Head Quality mgt.

Head Ind. Engg.

Head Hardware mfg.

Head Assembly

Head Testing

Head Maintenance

Head Out sourcing

Operations Management: Introduction Highlights

Operations Management is a systematic approach to address all issues pertaining to the transformation process that converts some inputs into useful outputs Globally, India is emerging as an important manufacturing base. Several recent studies point to emerging opportunities for Indian manufacturing to grow and attain a global presence. From an operations management perspective, the notion of a pure product and pure service is just the two ends of the spectrum. In reality, a vast majority of operations share a continuum of products and services.
Mahadevan (2007), Operations Management: Theory & Practice, Pearson Education

Manufacturing Systems & Break even Analysis

Mahadevan (2007), Operations Management: Theory & Practice, Pearson Education

Manufacturing Systems
Job manufacturing

Batch manufacturing
Mass manufacturing Continuous flow manufacturing

CONTINUOUS FLOW MASS PRODUCTION

PRODUCT VOLUME

BATCH

JOB

PRODUCT VARIETY

Characteristics
Job Variety Volume
Very high

Batch
Moderate

Mass
Low

Continuous
Very low

Very low

Moderate

High

Very high

Product

made to order

made to stock

Skills Fixed cost Unit cost

Very high

Moderate

Low

Very low

Very low Very high

Moderate Moderate

High Low

Very high Very low

Break even analysis for decision making

Generally Break even analysis is done between expenditure & income to find out at volume of output, the total costs will be equal to the income leading to no profit, no loss situation. Break even analysis can also be done between two processes, two systems, two locations, two alternatives etc.

Mahadevan (2007), Operations Management: Theory & Practice, Pearson Education

Three manufacturing systems A (Jobbing), B (Batch) & C (Mass manufacturing) have the following cost elements.

System
A (Jobbing)
B (Batch)

Fixed cost Rs./ year

25,000
50,000

Variable cost Rs./unit

50
25 15

C (Mass manufacturing) 80,000

1. Which is the most economical system for a volume of 2,000 units per year 2. At what volume would each process be preferred? 3. If the selling price is fixed at Rs.100 per unit what is the break even volume for each system 4. Find the break even volume between A & B, B & C & A & C

125000

Jan-Feb 2003 NS

100000

80000 75000

A B

50000

25000

500

1000

1500

2000

2500

3000

125000

Jan-Feb 2003 NS

100000

80000 75000

A B

50000

25000

500

1000

1500

2000

2500

3000

125000

Jan-Feb 2003 NS

100000

80000 75000

R
50000

25000

500

1000

1500

2000

2500

3000

125000

100000

80000 75000

50000

B R

25000

666 500 1000 1500 2000 2500 3000

125000

Jan-Feb 2003 NS

100000

80000 75000

50000

C R

25000

500

1000

1500

2000

2500

3000

125000

Jan-Feb 2003 NS

100000

80000 75000

A B

50000

25000 1000 1570 3000

500

1000

1500

2000

2500

3000

12500

June-July 2011

10000

8000 7500

5000

BEP

2500 900 900 500 1000 1200 1500 1800 2000

2500

3000

Break-even Analysis - Limitations

1. It assumes that fixed costs (FC) are constant. Although this is true in the short run, an increase in the scale of production is likely to cause fixed costs to rise. 2. It assumes average variable costs are constant per unit of output, at least in the range of likely quantities of sales. 3. It assumes that the quantity of goods produced is equal to the quantity of goods sold (i.e., there is no change in the quantity of goods held in inventory at the beginning of the period and the quantity of goods held in inventory at the end of the period). .