Subject: Operations Management

(OM)

Dr. Rajani Shah

Text Books/Reference Books
Operations management along the supply chain
Russell & Taylor
Wiley India
Operations Management for competitive
advantage (12th Edition)
Chase, Jacob, Aquilano, Agarwal
Tata McGrawHill
Production and Operations Management (12 th
Edition)
Kanishka Bedi
Contents of Module-I
 Introduction to POM
 Nature & scope of POM
 Goods V/s Services
 Production as Transformation Process
 History of POM
 Current Issues and Current Trends in POM
 Duties, Responsibilities and Role of Production &
Operations Managers
Introduction to operations functions
Operations management in manufacturing and service
industry
Types of operations processes
Operations strategies
 Production as Operations is the
process by which raw materials and
other inputs (Resources employed by a
firm) are converted into finished
products desired by customers.
 Supply refers to how materials and
services are moved to and from the
transformation processes of the firm.
Introduction to Production & Operations
Management
“ the design, operation and improvement of the systems that create
and deliver the firm’s primary products and services”

“Production management is concerned with those processes which

convert the inputs into the outputs. The inputs are various resources
like raw materials, men, machines, methods, etc and the outputs are
goods and services” - H.A. Harding

“Production management deals with decision making related to

production process so that the resulting goods or service is produced
according to specification, in the amounts and by the schedule
demanded and at minimum cost” - E. S. Buffa

“Production management is the process of effectively planning and

regulating that part of an enterprise which is responsible for the
actual transformation of material into finished products” - E. F. L.
Brech
Production & Operations Management (POM)
Defined

“Production & Operations Management is defined as the

design, operation, and improvement of the
transformation process, which converts the various
inputs into desired outputs of products and services.”

 Production management refers to the application of

management principles to the production function in a
factory. In other words, production management involves
application of planning, organizing, directing and
controlling to the production process.
 Operations management is the process in which
resources/inputs are converted into more useful products
Efficiency, Effectiveness and Value

 Efficiency means doing something at the lowest possible

cost. Or to provide the maximum output by using
minimum resources .
 Effectiveness means doing the right things to create the
value for the company.
 Value is to provide more benefits with similar price. (Ratio
of Quality to Price Paid)

 i.e. At the customer service counter at a Bank, being

efficient means using the fewest people possible at the
counter.
 Being Effective means minimizing the amount of time
customers need to wait in line.
 If you can give a better car with lower price to customer,
Value goes up of the company. i.e Tata Nano Car
 1-8

Why Study Operations & Supply Management?

Systematic
Approach
to Org. Processes
(Analytical Thinking
to Problems)

Business Career Opportunities

Education Operations (Plant Manager,
Supply chain
(Modern Management Manager, Purchasing
Approaches to
managing Manager)
operations)

Cross-Functional
Applications
(Manage the
Operations by
integrated way of
all departments.
Cont…
Systematic approach to org. processes:
POM uses analytical thinking to deal with real-
world problems. Sharpens our understanding of
the world.
Career opportunities: staff positions in
specialties such as SCM, purchase, quality
assurance, ERP and process reengineering.
Cross-functional applications: managers
plan work, control quality and ensure
productivity of individuals to effectively perform
their jobs.
Business education: students must be
exposed to modern approaches for doing
operations effectively. Business expect business
 1-10

Importance of Operations Management

To study how people organize themselves for

productive enterprise.
To know how goods and services are produced.
To understand what operations managers do.
OM in the Organization Chart

Finance Operatio
Operatio Marketi
ns
ns ng

Plant
Plant Operatio
Operatio Director
Director
Manage
Manage ns
ns
rr Manager
Manager
Manufacturing,
Manufacturing, Production
Production
control,
control, Quality
Quality assurance,
assurance,
Engineering,
Engineering, Purchasing,
Purchasing,
Maintenance,
Maintenance, etc
etc
Objectives of POM
 Maximum customer satisfaction through quality, reliability, cost
and delivery time
 Minimum scrap resulting in better product quality
 Minimum possible inventory levels
 Maximum utilization of all kinds of resources needed
 Minimum cash outflows
 Maximum employee satisfaction
 Maximum possible production
 Higher operating efficiency
 Minimum production cycle time
 Maximum possible profit or return on investment
 Concern for protection of environment
 Maximum possible productivity
Functions/ Activities of POM
 Production techniques
 Capacity management
 Industrial engineering
 Production planning and control
 Inventory control
 Quality control
 Maintenance
Nature of POM
Nature:
Production/ operations as a Production system
Model
Production/ operations as an organizational function
Production/ operations as a transformation process
Production/ operations as a means of creating utility
Production/ operations as a means of Decision
making
Cont’d…
Production system model comprises

i. Production system: a system whose function

is to convert inputs into desired outputs.

ii. Conversion sub-system (Transformation): a

sub-system of larger production system
where inputs are converted into outputs

iii. Control sub-system: a portion of output is

maintained in the control sub-system to
determine if it is applicable in terms of
quality, cost and quantity.
Cont’d…
Production as an organizational function

 Every organization has a production function where

departments and personnel play a central role in
achieving the objectives of the organization.
Decision-making in Production

 Strategic decisions: related to products, processes

and manufacturing facilities. (Process Design, Job
Design, Facility Location, Capacity Decision, Facility
Layout etc.)
 Operating decisions: related to planning production
to meet demand.
 Control decisions: related to planning and
controlling operations.
Scope of POM
 Application of operations management to service operations
 Growing importance of quality
 Expansion of operations management concepts to other
functions such as marketing and human resources
 A new paradigms for operations management
 Selection of location
 Acquisition of land
 Constructing building
 Procuring & installing machines
 Purchasing & storing raw materials
 Conversion into saleable products
 Quality management
 Maintenance management
 Production planning and control
 Methods improvement
Importance of production function
Production function can offer competitive
advantage to a firm in the following areas:
• Shorter new-product-lead time
• More inventory turns
• Shorter manufacturing lead time
• Higher quality
• Greater flexibility
• Better customer service
• Reduced wastage
What is a Service and What is a Good? Or Differences Between
Goods & Services

Goods Services
Tangible Intangible
Homogeneous Heterogeneous
Non-Perishable (Not Time Perishable (Time Dependent)
Dependent) (Storable) (Just In Time)
Interaction with Customer is not Interaction With Customer is
needed needed
Products can be inventoried Outputs cannot be inventoried

Little customer contact Extensive customer contact

Long lead times Short lead times

Capital intensive Labor intensive

Product quality easily Service quality determined with

determined difficulty
Core Services and Value-Added Services

Core services are basic things that customers

want from products they purchase i.e. in Voice
messaging Service Facility enough space for
storing voice message is core.

Value-added services differentiate the

organization from competitors and build
relationships that bind customers to the firm in a
positive way
What is a Transformation Process?

Defined

A transformation process is defined

as a user of resources to transform
inputs into some desired outputs
Production as Transformation Process

Random
Disturban
ces

INPUT Transformati OUTPUT

on
process

Material Feedback Goods

Machines or
Labor Services
Management Feedback Mechanism
Capital
 Types of Inputs, Transformations and
Outputs
INPUTS TRANSFORMATIONS OUTPUTS

Material Physical Products

Raw Materials
Manpower Locational Services
Workers, Managers
Equipments Exchange Factors affecting
Land, building, outputs are
Machines Price, Quality,
Delivery, Profit
Money Storage Return, Profit
Technology Exchange Feedback Mechanism
includes:
Quality, Cost,
Inventory Control
Planning Informational Services
Types of Transformations with
Examples

 Physical manufacturing (Oil Refinery, Automobile)

 Locational transportation (Airlines, Railways, Trucking

etc.)
 Exchange retailing & wholesaling

 Storage warehousing

 Physiological health care (Hospitals)

 Informational telecommunications (TV News Channels,

News Papers)
 Attitudinal Entertainment Industry, Theme Parks, Movie

Companies, Theaters
 Continue…
System Inputs Resources Transformat Desired
ion Process Output
Hospital Patients MDs, Health Care Healthy
Nurses, (Physiologic Individuals
Drugs, al)
Equipments
Restauran Hungry Food, chef, Well- Satisfied
ts Customers Staff Prepared Customers
Food
(Physical &
Exchange)
College or High School Teachers, Imparting Educated
University Graduates Books, Knowledge Individuals
Classrooms, & skills
Projectors (Information
al
Airline Travelers Airplanes, Move to On-time &
Crews, Destination Safe landing
Ticketing (Locational) at
Systems Destination
The Transformation Process For a Purely Manufacturing
Organization
(A Refrigerator Manufacturer)
Random disturbances
• High turnover of
Quality of
Machines Quality of workers outputs
& inputs and managers
Building monitored
Equipmen monitored • Recession
ts
Components, • Government’s taxation
parts, sub- policy
• Strikes instigated by Customers satisfied with
assemblies, Transformatio • Good cooling
Workers
etc. trade
n unions
Process performance
Office (Physical) • Less consumption with
infrastructure electricity
(computers, • Good after-sales servic
furniture,
Packagingetc.) • New advanced feature
material Feedback Mechanisms
Capital • Rising sales volume
Managers • Lesser customer
complaints
INPUTS • Positive response of OUTPUTS
customers in
the feedback forms
The Transformation Process
For a Service Organization (An MBA Institute)

Random
disturbances Quality of
Quality of
• Strikes of outputs
inputs
Raw students, monitored
monitored
minds teachers or staff
Teacher
(studen • Undue
s
C lass Enlightened
ts) interference
Transformatof
rooms students with:
Computer ionthe government
Process • Good
lab
Library in the
(Informatio communication
Projectors working of
nal) skills
institutions
Feedback Mechanisms • Pleasant
Administrat
(OHP, • Success at placement personalities
ive
LCDstaff
etc)
interviews • Leadership
INPUT • Grades obtained in qualities
S examinations • Good analytical
OUTPUT
• Rising career graph of alumni ability
in S
the industry • Team spirit
The Transformation Process For a Hybrid Service &
Manufacturing Organization (A Restaurant)

Random disturbances
• High turnover of Quality of
Customer Quality of chefs, outputs
Building
s inputs waiters, etc.
Chef monitored
monitored • Inflation
Vegetable • Government’s
F
surniture taxation Customers satisfied
Mutton, policy
Transformatio with:
n Process • Good preparation of
chicken, (Physical & the
Cooking
oil, Exchange) food
etc. • Pleasant behavior
Waiters
Spices,
etc. and
Manager
personality of the
Feedback Mechanisms
• Rising Revenues waiter
INPUTS OUTPUTS
• Genuine prices
• Repeat Customers
• Appreciation of customers charged
History of POM
Year Concept
1910s Principles of Scientific management
Industrial psychology
Moving assembly line
Economic lot size
1930s Quality control
Hawthorne studies of worker motivation
1940s Multidisciplinary team approaches
1950-60s Extensive development of operations research tools
1970s Widespread use of computers in business
Service quality and productivity
1980s Manufacturing strategy paradigms
JIT, TQC and factory automation
Synchronous manufacturing
1990s Total quality management
Business process reengineering
Electronic enterprise
Supply chain management
2000s E-commerce
 1-30

Current Issues in OM
 Coordinate the relationships between mutually
supportive but separate organizations.
 Optimizing global supplier, production, and
distribution networks.
 Increased co-production of goods and services

 Managing the customers experience during the

service encounter
 Raising the awareness of operations as a
significant competitive weapon
Recent Trends in Production/Operations
management

1. Global Market Place

2. Production/Operations Strategy
3. Total Quality Management (TQM)
4. Flexibility
5. Time Reduction
6. Technology
7. Worker Involvement
8. Re-engineering
9. Environmental Issues
10. Corporate Downsizing (or Right Sizing)
11. Supply-Chain Management
12. Lean Production
Duties & Responsibilities of Production & Operation
Managers
 Planning the Geographical Location of the Factory
 Purchasing Production Equipment
 Layout of Equipment within the factory
 Designing production processes and Equipment
 Product Design
 Designing production work and establishing production standards
 Capacity Planning
 Production Planning and Scheduling
 Production control
 Inventory Management
 Supply Chain Management
 Quality Control
 Production Equipment Maintenance and Repair
 Measurement and Monitoring of Productivity
 Industrial Relations and Personnel Matters
 Health and Safety
 Staff Selection and Training
 Budgeting and Capital Planning
Emerging Role of the Production &
Operations Manager in India today
To act as internal To take part in
quality auditors strategic To implement
in certification decision total productive
programes like making of the maintenance
ISO 9000 organization (TPM)
programme
To take part in
Increased attention to the
technology implementation
management in view of & use of ERP
JVs of MNCs with software in the
New To automate the
domestic companies organization
To act as supply Responsibilitie processes
chain managers in s according to the
forging long-term of Operations requirements of
strategic Managers the
Toorganization
enhance the R & D
relationships with
effort of the
To actsuppliers
as a member of
organization for
the concurrent
becoming self-reliant
engineering team in
in developing new
new product design
To implement the To oversee timely technologies
To take care of
To take environmental implementation of issues relating
decisions and pollution projects to services
regarding norms established (like operations
outsourcing/ by the commissioning of management
off-shoring of government from facilities, launching
business time to time of new products/
 1-34

Question 1

A major objective of this book is to show how

smart managers can do which of the following?
a. Improve efficiency by lowering costs
b. Improve effectiveness by creating value
c. Increasing value by reducing prices
d. Serving customers well
e. All of the above

Answer: e. All of the above

 1-35

Question 2

In the Input-Transformation-Output Relationship,

a typical “input” for a Department Store is
which of the following?
a. Displays
b. Stocks of goods
c. Sales clerks
d. All of the above
e. None of the above

Answer: e. None of the above (The above are

considered “Resources” of a department store.
The correct answer is “Shoppers”.)
 1-36

Question 3

In which of the following decades did the

concept of quality control originate?
a. 1920’s
b. 1930’s
c. 1940’s
d. 1950’s
e. 1970’s

Answer: b. 1930’s
Questions
1. Define Operations Management. Where OM stands in the organization?
2. Explain scope of Operations Management.
3. Define production & operations management and explain
functions/Activities of operations management
4. What do you mean by ‘Operations Management’? Explain the history of
operations management and how it has evolved to the present state.
Explain each concept in brief.
5. Describe input-transformation-output relationship in an automobile
factory, a restaurant, and a super market.
6. What Activities are involved in the operations Function? How does an
operation interact with other functional areas?
7. Explain the role of the Production and Operations Manager.
8. Is the DVD Accompanying this book a Good or Service? Explain.
9. Emerging Role of the Operation Manager in India today?
10. Describe the input-transformation-output relationship in the following
systems:
1) An Airline 2) A Hospital 3) A Branch Office of Bank
To be Continued..