OPC

Lecture 1

K J Somaiya Institute of Management, India 1

 Team
Members Peers Bosses
Ou
Be rse
st Pra lv Family
ctic es
es Members Vision,Mission,Values
Com
p lian SWOT
c e

What all do we as Customers

Efficiency Managers need to
learn about? Competitors
History
Sk ess

Indu
Managing
sin

s
il l
Bu

ryst
Leading

Motivating
Networking Changes in the Industry
Communicating Regulations
Developing Regulators
Influencing PESTLE Analysis
 Find The Comfort Zone
purpose

Deal with Live your

Challenges & dreams
Lack Self problems
Confidence

COMFORT FEAR LEARNING GROWTH

ZONE ZONE ZONE ZONE
L
Feel safe &
In control Find Acquire Set new
excuses new skills Goals
Be affected
by others’ opinion
Extend your Conquer
comfort zone objectives
K J Somaiya Institute of Management, India
OPC SESSION PLAN
1..Introduction to OP&C. Imp. of alignment to Org Goals/Objectives (4/8)

2. .Batch Sizing Models/ Cake Batch (7/8)

3..Process/Equipment Selection/ROI. Process Flow Chat (Mon 10/8)

 
4.. Demand Mgt Tools. Chandan Creations Case Study (Fri 14/8)

5.Capacity Planning. Excel Printers & Gen Motors Case Study. (Mon 24/8)

6.Aggregate Sales & Ops Planning. Halo Case Study (Fri 28/8)

7.Make vs Buy Decisions. Problem (Fri 11/9)

  
8..Advanced Mfg Methods/Japan. Ishikawa Case Study ( Mon 14/9)

9.Basics of Env Mgt (Fri 18/9)

10. Assignment Presentation (Mon 21/9)

K J Somaiya Institute of Management, India
 RECOMMENDED BOOKS etc
 
  Text Books:
  1. Elements of Production Planning & Control……Samuel Elion
2. Production Planning and Control …………………..Mukherji
 
Reference Books:
1. Production Planning and Inventory Control Seetharama Narasimhan et al
2. Manufacturing Planning and Control for Supply Chain Management.. Volkmann
et al
3. Built to Last……James Collins & Jerry Porras
 
Magazines:
1. HBR
2. Fortune
3. Economist
 
 
  

K J Somaiya Institute of Management, India

 EVALUATION
1. Final Exam……………………………………………..50 marks

2. Internal Evaluation…………………………………….50 marks

a) Class Participation (incl quiz)…………………20 marks

b) Individual Presentation…………………………10 marks

c) Group Presentation……………………………..10 marks

d) Attendance……………………………………….10 marks

3. Attendance……..75% required to be eligible for final exam.

 
 
 

K J Somaiya Institute of Management, India

EVOLUTION OF OPC

Lecture 1

K J Somaiya Institute of Management, India

1)
EVOLUTION of OPC…..
18th century

…….Agro based economy with indiv farmers/laborers

2) Early 19th century..

………Feudal system..Hierarchical ..Land owners/laborers

3) 20th century…

….....Industrial Rev..European economy… Mass Production (Henry Ford)

4) USA….

……….Interchangeable parts…Assy Line

5) Today…

………Comp. Env. – Mkt driven – Short Production cycle…leading to

challenges for PPC/OPC

 Therefore development of MRP/ERP, CNC’s & other advancements.

K J Somaiya Institute of Management, India
Roots of Operations Management
• Industrial revolution (1770’s) – Europe
• Scientific management (1911) – USA
– Mass production
– Standardization
– Division of labor
• Human relations (HR) movement (1920-
60)
• Decision models (1915, 1960-70’s)
• Influence of Japanese management
philosophy and techniques
Roots of Operations Management
 Production management
 Production: creation of finished goods (and services) using
the factors of production: land, labor, capital
(+ enterpreneurship, knowledge)

 Production magagement: Planning, implementation, and

control of industrial production processes to ensure smooth
and efficient operation (the activites managers do to help
their firms create goods). Ensures that goods (and services)
are produced efficiently; that they are of the right quality,
quantity, cost; and that they are produced on time.

 When service sector becomes larger, concepts of (industrial)

production management become influenced by it.

K J Somaiya Institute of Management, India

Operations management

Includes the production of services.

The term production has been replaced by
operations.

Specialized area in management that converts or

transforms resources into goods and services.
It manages systems and processes as well.

K J Somaiya Institute of Management, India

Differences between products and services
Characteristic Manufacturing Service
Output
Customer contact
Uniformity of input
Labor content
Uniformity of output
Measurement of productivity
Opportunity to correct
quality problems
K J Somaiya Institute of Management, India
Differences between products
and services

Characteristic Manufacturing Service

Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
K J Somaiya Institute of Management, India
 Goods-service Continuum

Steel production Home remodeling Auto Repair Maid Service Teaching

Automobile fabrication Retail sales Appliance repair Manual car wash Lawn mowing

High percentage goods Low percentage goods

Low percentage service High percentage service
Operations interfaces

Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS

Operations overlap??
K J Somaiya Institute of Management, India
Operations overlap

Operations

Marketing Finance

K J Somaiya Institute of Management, India

Key decisions

What
to produce / amount to produce.............................Demand Mgt

When
to produce / to order / to supply.............................Scheduling

Where
Is the best location for work / process / store etc.....Location Selection

How Designed………………………………………….Eqpt Selection/PD

Who to do the work (or which team)........................Batch Sizing Models

K J Somaiya Institute of Management, India

 Operations
Measures research (mathematical basis)
& methods

Models and abstraction

Performance metrics (Measures/Targets)

Trade-off analysis

System approach

K J Somaiya Institute of Management, India

The Operations function

Adding value
(source of value-added)
Consists of all activities directly
Business related to producing goods or
environment
providing services
Organization

Inputs
Transformational Outputs
processes

Feedback

K J Somaiya Institute of Management, India

Definitions of PPC/OPC….

“Process” which combines & transforms various

“Resources” into value added

“Products/Services”, as per

“Organisation Policy/Objectives”

K J Somaiya Institute of Management, India

DEFINITIONS…..

 Production

Raw Material ….. FG

Info/Data………….Desired Output
Planning

Looking ahead, anticipating

difficulties & planning required steps.
Control

Ensuring actual as per plan.

K J Somaiya Institute of Management, India

Production Planning & Control
Three stages in PPC
Planning : The choice from several alternatives of the best
utilizing the available resources to achieve the desired objective
….who?
( Plan effectively)
Operations: Performance in accordance with details set out in
production plan…..who?
(Operate efficiently)
Control: The monitoring of performance through a feed
back by comparing the results achieved with planned
targets so that performance can be improved…..who?
 (Metrics……Plan vs Actual……Benchmarking)

K J Somaiya Institute of Management, India

Effectiveness vs Efficiency

Effectiveness……doing right things

Efficiency…………Doing things right

K J Somaiya Institute of Management, India 25

PDCA..(Deming)

P: PLAN..Identifying/Analysing problem

D: DO…….Develop and test potential solns.
C: CHECK…Verify effectiveness of solution
A: ACT……….Implement

SIX SIGMA….(DMAIC)
Define, Measure, Analyse, Improve, Control

K J Somaiya Institute of Management, India

Levels of Planning
Managers plan at three levels
Strategic planning (upper management)
 Long term
 Provides broad goals & direction for the entire business

Operational (mid-level management)

 Mid term
 Identifies specific activities for EACH area of the business

• Functional (lower level management)

Short term
--Tactical
--Monthly/Daily planning
K J Somaiya Institute of Management, India
Operation Planning

Determines the:
 How it will be done
 Who will do it
 What resources are needed to do it

Operational plans direct the day-to-day activities of a

business

K J Somaiya Institute of Management, India

Planning Tools

 Budgets – most widely used tool

 Schedules – deadlines
 Standards – Quality, Quantity, Time, Cost
 Policies – general rule for the whole business
 Procedure – steps followed to perform certain work
 Research – Gathering information

K J Somaiya Institute of Management, India

Setting Goals

You will never know when you have arrived if you don’t
know where you are going.

Goal – Is a specific statement of a result the business expects

to achieve

Characteristics of Effective Goals:

1. Specific & Meaningful
2. Clearly Communicated
3. Achievable (realistic)
4. Consistent with each other and overall company
K J Somaiya Institute of Management, India
Setting Goals

Concise statements that provide direction

employees and set standards for achieving
the company’s strategic plan
Established in many areas
Goals must be reevaluated as the
environment and opportunities change
Multiple goals are used to reflect the desired
performance

K J Somaiya Institute of Management, India

Operation Planning & Control Recap

Operation planning and control is the organization and

planning of manufacturing/service process.

It co-ordinates supply and movement of materials and

labor, ensures economic and balanced utilization of
machines, equipment & personnel as well as other
activities related with production/service to achieve the
desired results in terms of quantity, quality, time and
place.

K J Somaiya Institute of Management, India

Objectives of OPC

 To deliver goods/servixes in required quantities to customers as

per required delivery schedule
 To ensure maximum utilization of all resources
 To ensure production/service of desired quality
 To minimize the process throughput time
 To maintain optimum level inventory
 To maintain flexibility in operations
 Coordinate between labour and other recources of various
supporting departments

K J Somaiya Institute of Management, India

Functions of PPC

Routing
Estimating
Scheduling
Loading
Dispatching
Expediting
Evaluating
Inventory Control
K J Somaiya Institute of Management, India
Benefits of OPC

OPC coordinates all the phases of production /

operating system

An efficient plan results in higher quality, better

utilization of resources, reduced inventories, better
customer services.

An efficient plan enables the firm to improve its sales

turnover , market share and profitability.

K J Somaiya Institute of Management, India

Limitations of OPC
 OPC function is based on certain assumptions or forecasts of
customer’s demand, plant capacity, availability of materials etc

 Employees may resist change in production levels/norms set as

per production plans.

 Process is time consuming when we need to carry out routing

and scheduling function for large products.

 Function becomes difficult when environmental factors change

rapidly.

K J Somaiya Institute of Management, India

PROCESS...

Inputs Transf. Process Output

Men
Prod Design
Machine Products
Process Plan
Materials By-products
Prod Control
Info Services
Maintenance
Capital

Continuous

Inventory
Quality
Cost

What is Missing?
K J Somaiya Institute of Management, India
Root Source…Org Goals

Preserve the Stimulate

Core Progress

Core Ideology Envisioned Future

VISION/BHAGS
Core Values Core Purpose
5/3 Year Business Plans (OPC)
(Mission)
(Guiding Principles (Fundamental Reason Annual Business Plan
No Compromise) For Existence)
OPC for next FY
Culture
(James Collins..Built to Last) K J Somaiya Institute of Management, India
VISIONARY COMPANIES

 1837…..P&G
 1847…..PMI
 1850…..Amex
 1886…..J&J
 1903…..Ford
 1911…..IBM
 1923…..Walt Disney
 1945…..Sony
 1945…..Walmart

( Indian Companies ??)

K J Somaiya Institute of Management, India

PROFITABILITY
Profitability

Is a necessary condition for existence & a means to more

important ends

BUT it is not the end in itself for many of the visionary companies

Profit is like oxygen, food, water and blood for the body;

They are NOT the point of life, but without them there is no life

K J Somaiya Institute of Management, India

Core Ideologies of Visionary
Comapnies
o 3M Innovation, “thou shalt not kill a new product idea”
Absolute integrity
Tolerance for honest mistakes
Product quality and reliability
“Our real business is solving problems”

o Amex Heroic customer service

Worldwide reliability of service
Encouragement of individual initiative

o J&J Company exists to “ alleviate pain & disease”

Individual opportunity & reward based merit
Decentralization = Creativity = Productivity

o Sony To experience the sheer joy from advancement,

application & innovation of tech. that benefits general public
To elevate the Japanese culture & national status
Respecting & encouraging each individual’s ability & creativity
K J Somaiya Institute of Management, India
CORE PURPOSE (Mission)

3M To solve unsolved problems innovatively

McKinsey To help leading corporations & govts be more successful

Nike To experience the emotion of competition, winning &

crushing competitors

Sony To experience the joy of advancing & applying tech for the
benefit of public

Wal-Mart To give ordinary folk the chance to buy the same things
as rich people

Walt Disney To make people happy

Israel To provide a secure place on Earth for Jewish people

K J Somaiya Institute of Management, India

BHAG

General Electric Westinghouse

 Become # 1 or # 2 in every  Total Quality

market we serve & revolutionise
this company to have the speed &  Market Leadership
agility of a small enterprise  Technology Driven
 Global
 Focused Growth
 Diversified

K J Somaiya Institute of Management, India

VISION level BHAG’s

Wal-Mart 1990 Become a $125 Bn company by the year 2000

PMI 1950’s Knock off RJR as the number one tob. company in the world

Nike 1960’s Crush Adidas

Stanford Univ 1940’s Become the Harvard of the West

Sony 1950’s Become the company that most changes the worldwide
image of Japanese products being of poor quality

Boeing 1950 Become the dominant player in commercial aircraft, and

bring the world into the jet age

K J Somaiya Institute of Management, India

Complete Vision..Merck 1930’s

CORE IDEOLOGY

Core Values Corporate Social Responsibility

Science based innovation
Honesty & integrity
Profit, but profit from work that benefits humanity

Core Purpose To preserve & improve human life

ENVISIONED FUTURE

BHAG To transform this company from a chemical manufacturing into

one of the pre-eminent drug making companies in the world

Vivid Description With the tools we have supplied, science will be advanced,
knowledge increased, and human life win ever a greater
freedom from suffering and disease. We pledge our every
aid that this enterprise shall merit the faith we have in it.
Let your light so shine……………………..
K J Somaiya Institute of Management, India
Complete Vision…Sony 1950’s

CORE IDEOLOGY

Core Values Elevation of Japanese national culture & status

Being a pioneer – not following others, but doing the impossible
Respect and encouragement of individual ability & creativity

Core Purpose To experience the sheer of innovation and application of tech.

for the benefit & pleasure of general public

ENVISIONED FUTURE

BHAG Become the company most known for changing the worldwide
image of Japanese products as being of poor quality

Vivid Description We will create products that become pervasive around the world
…..We will be the first Japanese company to go into the American
& distribute directly…..We will succeed with innovations like the
transistor radio that American companies failed at………..
K J Somaiya Institute of Management, India
Root Source…Org Goals

Preserve the Stimulate

Core Progress

Core Ideology Envisioned Future

Core Values
(Guiding Principles
No Compromise)
(James Collins..Built to Last)
VISION/BHAGS
Core Purpose
5/3 Year Business Plans (PPC)
(Fundamental Reason
For Existence)
Annual Business Plan
OPC for next FY
K J Somaiya Institute of Management, India
Major Components of the
Strategic Plan / Down to Action

Strategic Plan……..FORMULATION

Action Plans………IMPLEMENTATION

Evaluate Progress……..EVALUATION
Mission Why we exist

Vision What we want to be

Goals What we must achieve to be successful

Objectives O1 Specific outcomes expressed in

O2
measurable terms (NOT
activities)
Initiatives Planned Actions to
AI1 AI2 AI3 Achieve Objectives

Measures Indicators and

M1 M2 M3 Monitors of success
Targets T1 T1 T1 Desired level of
performance and
timelines
K J Somaiya Institute of Management, India
Strategic Management – Defined

Art & science of formulating,

implementing, and evaluating, cross-
functional decisions that enable an
organization to achieve its long term
objectives

K J Somaiya Institute of Management, India

Integrating Intuition and Analysis

The strategic management process attempts to organize

quantitative and qualitative information under conditions
of uncertainty

Intuition is based on:

– Past experiences
– Judgment
– Feelings

Intuition is useful for decision making in:

 Conditions of great uncertainty
 Conditions with little precedent

K J Somaiya Institute of Management, India

Process…

Strategy Formulation

Strategy Implementation

Strategy Evaluation

K J Somaiya Institute of Management, India

Strategic Management Process…Formulating,
Implementing
Step 1
Evaluating

Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

K J Somaiya Institute of Management, India

Strategic Management Process…Formulating,
Implementing
Evaluating
Step 2

Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
K J Somaiya Institute of Management, India
Strategic Management Process…
Formulating, Implementing Evaluating

Step 3

Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
K J Somaiya Institute of Management, India
Alternative Strategic
Management Structures

K J Somaiya Institute of Management, India

Definitions of PPC/OPC….

“Process” which combines & transforms various

“Resources” into value added

“Products/Services”, as per

“Organisation Policy/Objectives”

K J Somaiya Institute of Management, India

RESOURCES, CAPABILITIES,
& CORE COMPETENCIES
Resources and superior
Resources
•Tangible capabilities that are sources of
•Intangible competitive advantage over a
firm’s rivals

An integrated and coordinated set of

actions taken to exploit core
Capabilities
competencies and gain competitive
advantage
Providing value to customers and
Core gaining competitive advantage by
Competencies exploiting core competencies in
individual product markets
K J Somaiya Institute of Management, India
RESOURCES, CAPABILITIES,
AND CORE COMPETENCIES
Resources
•Tangible RESOURCES
•Intangib
le
• Are the source of a firm’s capabilities
• Are broad in scope
• Cover a spectrum of individual, social, and
organizational phenomena
Capabilities
• Represent inputs into a firm’s production
process
• Alone, do not yield a competitive
Core
advantage, i.e., by themselves do not allow
Competencies firms to create value that results in above-
average returns
K J Somaiya Institute of Management, India
RESOURCES, CAPABILITIES,
& CORE COMPETENCIES

TYPES OF RESOURCES
Tangible Resources
• Assets
that can be seen, touched, and
quantified
Intangible Resources
• Assetsrooted deeply in the firm’s history,
accumulated over time
• In comparison to ‘tangible’ resources, usually
Compared to tangible resources, intangible resources
can’t
are be seen or source
a superior touchedof core competencies
K J Somaiya Institute of Management, India
RESOURCES, CAPABILITIES
& CORE COMPETENCIES

TYPES OF RESOURCES
Tangible Resources
• FINANCIAL RESOURCES - the firm’s capacity to
borrow and generate internal funds
• ORGANIZATIONAL RESOURCES - formal reporting
structures
• PHYSICAL RESOURCES - sophistication and location
of a firm’s plant and equipment; distribution facilities;
product inventory
• TECHNOLOGICAL RESOURCES - stock of
technology, such as patents, trademarks, copyrights, and
trade secrets
K J Somaiya Institute of Management, India
RESOURCES, CAPABILITIES
& CORE COMPETENCIES

TYPES OF RESOURCES
Intangible Resources
• HUMAN RESOURCES - knowledge; trust;
skills; collaborative abilities
• INNOVATION RESOURCES - scientific
capabilities; capacity to innovate
• REPUTATIONAL RESOURCES - brand name;
perceptions of product quality, durability, and
reliability; positive reputation with
stakeholders, e.g., suppliers/customers

K J Somaiya Institute of Management, India

 RESOURCES, CAPABILITIES
& CORE COMPETENCIES

Resources
•Tangible CAPABILITIES
•Intangible ■ Emerge over time through complex interactions
among tangible and intangible resources
■ Stem from employees
• Unique skills and knowledge
Capabilities
• Functional expertise
■ Are activities that a firm performs
exceptionally well relative to rivals
Core ■ Are activities through which the firm adds
Competencies
unique value to its goods or services over an
extended period ofKtime
J Somaiya Institute of Management, India
 RESOURCES, CAPABILITIES
& CORE COMPETENCIES

Resources
•Tangible CAPABILITIES (cont’d)
•Intangib
■ Exist when resources have been purposely
le
integrated to achieve a specific task or set of tasks
■ Are often developed in specific functional areas
• Distribution
Capabilities • Human resources
• Management information systems
• Marketing
• Management
• Manufacturing
Core • Research & Development
Competencies

K J Somaiya Institute of Management, India

BUILDING CORE
COMPETENCIES
Resources TWO TOOLS FIRMS USE TO IDENTIFY
•Tangible
•Intangib AND BUILD CORE COMPETENCIES:
le • Four Specific Criteria of Sustainable Competitive
Advantage that can be used to determine which
capabilities are core competencies
Capabilities • Value Chain Analysis - this tool helps select the
value-creating competencies that should be
maintained, upgraded, or developed and those that
should be outsourced
Core
Competencies

K J Somaiya Institute of Management, India

BUILDING CORE
COMPETENCIES
The Four Criteria of Sustainable Competitive
Advantage
Capabilities must fulfil four specific criteria in order to be
CORE COMPETENCIES

1. Valuable
2. Rare
3. Costly-to-imitate
4. Nonsubstitutable capabilities

K J Somaiya Institute of Management, India

BUILDING CORE
COMPETENCIES
SUSTAINABLE COMPETITIVE
ADVANTAGE

1. Exists only when competitors cannot duplicate a

firm’s strategy or when they lack the resources to
attempt imitation
2. Exists until competitors can successfully imitate a
good, service, or process
3. Lasts for a relatively long period of time if all
four of the criteria discussed are satisfied
K J Somaiya Institute of Management, India
BUILDING CORE COMPETENCIES

FOLLOW-UP
SERVICE
SCM

CUSTOMER
VALUE

DISTR. OPS

MKTG
K J Somaiya Institute of Management, India
 BUILDING CORE
COMPETENCIES
HR

FINANCE MIS

CUSTOMER
VALUE

K J Somaiya Institute of Management, India

Articulate your personal

Core Values

Core Purpose

Vision

5 Year Goals

K J Somaiya Institute of Management, India

Thank You
simsr.somaiya.edu

K J Somaiya Institute of Management, India 70