Introduction To Operation Management
Introduction To Operation Management
Operations
Describe OM as function
6/ 2/ 2015 pr.by H. D 2
Learning Outcomes
6/ 2/ 2015 pr.by H. D 3
LO1: Develop operational plan
Production/manufacturing is the process of
converting raw materials or semi-finished
products into finished products that have value
in the market place. This process involves the
contribution of labor, equipment, energy, and
information.
6/ 2/ 2015 pr.by H. D 4
production as ‘a process by which goods and
services are created’. Some examples of
production are: manufacturing custom-made
products like, boilers with a specific capacity,
constructing flats, some structural fabrication
works for selected customers, etc., and
manufacturing standardized products like, car,
bus, motor cycle, radio, television, etc
6/ 2/ 2015 pr.by H. D 5
OPERATIONS MANAGEMENT
CONCEPTS
1.1 INTRODUCTION
Operation is that part of as organization, which is concerned with
the transformation of a range of inputs into the required output
(services) having the requisite quality level.
The set of interrelated management activities, which are involved
in manufacturing certain products, is called as production
management. If the same concept is extended to services
management, then the corresponding set of management
activities is called as operations management.
6/ 2/ 2015 pr.by H. D 6
Operation Management as Process
Operation Management deal with PROCESS that produce
“Goods” & “Service”
?
IN PUT
OUT PUT
ADD VALUE ?
6/ 2/ 2015 pr.by H. D 7
CON.
6/ 2/ 2015 pr.by H. D 8
Concept of Operations
Operations in an organization can be categorizedInto
manufacturing operations and service operations.
Manufacturing operations is a conversion Process that includes
manufacturing yields a tangible output: a product, whereas,
service operation a conversion process that includes service
yields an intangible output: a deed, a performance, an effort.
6/ 2/ 2015 pr.by H. D 9
Objectives of Production Management
The objective of the production management is ‘to produce goods services of
right quality and quantity at the right time and right manufacturing cost ’
6/ 2/ 2015 pr.by H. D 10
Operation Management as Process
PROCESS should be design with according to customer
“Needs” and “Wants”
Internal
Customer
External
6/ 2/ 2015 pr.by H. D 11
Operation Management as Process
Manufacturing vs. Service Process
6/ 2/ 2015 pr.by H. D 12
Operation Management as Process
Manufacturing and Service is difficult to distinguish
6/ 2/ 2015 pr.by H. D 13
Operation Management as Process
Manufacturing and Service some other example:
6/ 2/ 2015 pr.by H. D 14
Operation Management as Process
Manufacturing and Service some other example:
6/ 2/ 2015 pr.by H. D 15
Operation Management as Process
Manufacturing and Service some other example:
6/ 2/ 2015 pr.by H. D 16
Operation Management as Process
Manufacturing and Service some other example:
6/ 2/ 2015 pr.by H. D 17
Operation Management as Process
The service management system
External environment
The way service concept Internal environment
is delivered.
5. Service
3. Service
Delivery
Image
System
1. Culture
& Who we target for?
Philosophy Where we choose to be
Specification that and not to be?
describe the benefit
offered by service.
4. Service 2. Market
Concept Segment
6/ 2/ 2015 pr.by H. D 19
The production system
The production system The production system is a
system whose function is to transform an input into a
desired output by means of a process (the production
process) and of resources. Of an organization is that
part, which produces products of an organization.
The definition of a production system is thus based on
four main elements: the input, the resources, the
production process and the output. It is that activity
whereby resources, flowing within a defined system, are
combined and transformedin a controlled manner to add
value in accordance with the policies communicated by
management.
6/ 2/ 2015 pr.by H. D 20
The production system has the following characteristics:
1. Production is an organized activity, so every production system has
an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to
control and improve System performance.
6/ 2/ 2015 pr.by H. D 21
Types of Production Systems
6/ 2/ 2015 pr.by H. D 22
6/ 2/ 2015 pr.by H. D 23
JOB SHOP PRODUCTION
6/ 2/ 2015 pr.by H. D 24
Characteristics
The Job-shop production system is followed when there is:
1. High variety of products and low volume.
2. Use of general purpose machines and facilities.
3. Highly skilled operators who can take up each job as a challenge
because of uniqueness.
4. Large inventory of materials, tools, parts.
6/ 2/ 2015 pr.by H. D 25
Advantages
6/ 2/ 2015 pr.by H. D 26
6/ 2/ 2015 pr.by H. D 27
BATCH PRODUCTION
6/ 2/ 2015 pr.by H. D 28
Characteristics
6/ 2/ 2015 pr.by H. D 29
Advantages
6/ 2/ 2015 pr.by H. D 30
Limitations
6/ 2/ 2015 pr.by H. D 31
MASS PRODUCTION
6/ 2/ 2015 pr.by H. D 32
Characteristics
6/ 2/ 2015 pr.by H. D 33
Advantages
6/ 2/ 2015 pr.by H. D 34
Limitations
6/ 2/ 2015 pr.by H. D 35
CONTINUOUS PRODUCTION
Characteristics
Continuous production is used under the following circumstances:
1. Dedicated plant and equipment with zero flexibility.
2. Material handling is fully automated.
3. Process follows a predetermined sequence of operations.
4. Component materials cannot be readily identified with final
product..
6/ 2/ 2015 pr.by H. D 36
Advantages
6/ 2/ 2015 pr.by H. D 37
Objectives of Production Management
6/ 2/ 2015 pr.by H. D 38
3. RIGHT TIME
Timeliness of delivery is one of the important parameter to judge the
effectiveness of production
Department. So, the production department has to make the optimal utilization
of input resourcesto achieve its objective.
6/ 2/ 2015 pr.by H. D 39
Distinction between Manufacturing Operations and Service
Operations
6/ 2/ 2015 pr.by H. D 40
Objectives of Production Management
The objective of the production management is ‘to produce goods services
of right quality and quantity at the right time and right manufacturing cost’.
6/ 2/ 2015 pr.by H. D 41
2. RIGHT QUANTITY
The manufacturing organization should
produce the products in right number. If
they are produced
in excess of demand the capital will block
up in the form of inventory and if the
quantity is produced in short of demand,
leads to shortage of products
6/ 2/ 2015 pr.by H. D 42
3. RIGHT TIME
Timeliness of delivery is one of the
important parameter to judge the
effectiveness of production
Department. So, the production
department has to make the optimal
utilization of input resources
to achieve its objective.
6/ 2/ 2015 pr.by H. D 43
4. RIGHT MANUFACTURING COST
Manufacturing costs are established
before the product is actually
manufactured. Hence, all attempts should
be made to produce the products at pre-
established cost, so as to reduce the
variation between actual and the standard
(pre-established) cost.
6/ 2/ 2015 pr.by H. D 44
Distinction between Manufacturing
Operations and Service Operations
Following characteristics can be considered
for distinguishing manufacturing operations with
service operations:
1. Tangible/Intangible nature of output
2. Consumption of output
3. Nature of work (job)
4. Degree of customer contact
5. Customer participation in conversion
6. Measurement of performance.
6/ 2/ 2015 pr.by H. D 45
Manufacturing is characterized by tangible outputs (products),
outputs that customers consumeOvertime, jobs that use less labor
and more equipment, little customer contact, no customer
participation in the conversion process (in production), and
sophisticated methods for measuringProduction activities and
resource consumption as product are made.
Service is characterized by intangible outputs, outputs that
customers consumes immediately, jobs that use more labor and
less equipment, direct consumer contact, frequent customer
participation in the conversion process, and elementary methods for
measuring conversion activities and resource consumption. Some
services are equipment based namely rail-road services, telephone
services and some are people based namely tax consultant
services, hair styling.
6/ 2/ 2015 pr.by H. D 46
6/ 2/ 2015 pr.by H. D 47
6/ 2/ 2015 pr.by H. D 48
6/ 2/ 2015 pr.by H. D 49
6/ 2/ 2015 pr.by H. D 50
A Framework for Managing Operations
PLANNING
Activities that establishes a course of action and guide future decision-making is
planning.
ORGANIZING
Activities that establishes a structure of tasks and authority
CONTROLLING
Activities that assure the actual performance in accordance with planned performance
. BEHAVIOUR
Operation managers are concerned with how their efforts to plan, organize, and control affect
human behavior.
MODELS
As operation managers plan, organize, and control the conversion process, they encounter many
problems and must make many decisions
6/ 2/ 2015 pr.by H. D 51
SCOPE OF PRODUCTION AND OPERATIONS
MANAGEMENT
Operations management functions:
1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.
6/ 2/ 2015 pr.by H. D 52
LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision which involves a long term
commitment about the geographically static factors that affect a business organization. It is an
important strategic level decision-making for an organization.
PLANT LAYOUT AND MATERIAL HANDLING
Plant layout refers to the physical arrangement of facilities.
PRODUCT DESIGN
Product design deals with conversion of ideas into reality
PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the raw
material into finished goods
6/ 2/ 2015 pr.by H. D 53
PRODUCTION PLANNING AND CONTROL
6/ 2/ 2015 pr.by H. D 54
con
6/ 2/ 2015 pr.by H. D 55
QUALITY CONTROL
Quality Control (QC) may be defined as ‘a system that is used to maintain a
desired level of quality in a product or service’
The main objectives of quality control are:
To improve the companies income by making the production more acceptable to the
customers i.e., by providing long life, greater usefulness, maintainability, etc.
To reduce companies cost through reduction of losses due to defects.
To achieve interchangeability of manufacture in large scale production.
To produce optimal quality at reduced price.
To ensure satisfaction of customers with productions or services or high quality level, tobuild
customer goodwill, confidence and reputation of manufacturer.
To make inspection prompt to ensure quality control.
To check the variation during manufacturing.
6/ 2/ 2015 pr.by H. D 56
MATERIALS MANAGEMENT
6/ 2/ 2015 pr.by H. D 57
con
The main objectives of materials management are:
To minimize material cost.
To purchase, receive, transport and store materials efficiently and to reduce the related
cost.
To cut down costs through simplification, standardization, value analysis, import
substitution, etc.
To trace new sources of supply and to develop cordial relations with them in order to
ensure continuous supply at reasonable rates.
To reduce investment tied in the inventories for use in other productive purposes and
to develop high inventory turnover ratios.
6/ 2/ 2015 pr.by H. D 58
MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total
productive effort. Therefore, their idleness or downtime becomes are very expensive.
Hence, it is very important that the plant machinery should be properly maintained.
6/ 2/ 2015 pr.by H. D 59
Factory Level Production management
1. Planning
2. Production Management
3. Manufacturing production scheduling (MPS)
4. Material requirement planning (MRP)
5. Just in time (JIT)
6. Bill of Materials
7. Capacity Planning
8. Inventory Control
6/ 2/ 2015 pr.by H. D 60
Operational Plans
6/ 2/ 2015 pr.by H. D 61
There are three types of plan used at different levels within an
organization:
1. Thestrategic plan; is developed for long-term planning and covers a period of aboutfive
years. The strategic plan specifies the missions and goals of the organization including
decisions on how resources, both capital and human, will be allocated to meetorganizational
goals.
2. Business plans; sit between the highest-level plan (the strategic plan) and the operationa
lplan. A business plan is a formal statement of a set of business goals and objectives thatare
to be achieved to meet the strategic objectives of the organization. The business
planincludes the reasons why the goals and objectives are believed to be attainable, the
planfor reaching those goals inclusive of relevant information about the organization.
3 An operational plan; focuses on the short-term objectives: what needs to be accomplishedin
the near future in order that the company can progress towards achieving its strategic objectives.
Operational plans generally have a focus of less than one year and are quitedetailed in terms of
what needs to be implemented and how
6/ 2/ 2015 pr.by H. D 62
LO2: Plan and manage resource acquisition
6/ 2/ 2015 pr.by H. D 64
Resource Acquisition (gaining)
• Specify the plan for acquiring the resources and assets, in addition to
personnel, needed to successfully complete the project.
• Describe the resource acquisition process.
• Specify the assignment of responsibility for all aspects of resource acquisition.
• Specify acquisition plans for equipment, computer hardware and software,
training, service contracts, transportation, facilities, and administrative and
janitorial services.
• Specify when in the project schedule the various acquisition activities will be
required.
• Specify any constraints on acquiring the necessary resources.
6/ 2/ 2015 pr.by H. D 65
Resource Acquisition (gaining)
• Specify the plan for acquiring the resources and assets, in
addition to personnel, needed to successfully complete the project.
• Describe the resource acquisition process.
• Specify the assignment of responsibility for all aspects of
resource acquisition.
• Specify acquisition plans for equipment, computer hardware
and software, training, service contracts, transportation, facilities,
and administrative and janitorial services.
• Specify when in the project schedule the various acquisition
activities will be required.
• Specify any constraints on acquiring the necessary
resources.
6/ 2/ 2015 pr.by H. D 66
The following participants form the structure of the Lookup pattern:
A resource user uses a resource.
A resource is an entity such as a service that provides some
type of functionality.
A resource provider offers resources and advertises them via
the lookup service.
A lookup service provides the capability for resource providers
to advertise resources via references to themselves, and for resource
users to find these references
6/ 2/ 2015 pr.by H. D 67
The following class diagram illustrates the structure of the Look up
pattern.
6/ 2/ 2015 pr.by H. D 68
Strategic HRM is developed through three
steps:
1. Decide on the strategic goals
2. Identify employee skills and behaviors
necessary for success
3. Formulate HR management policies and
practices that will produce these required
skills
6/ 2/ 2015 pr.by H. D 69
6/ 2/ 2015 pr.by H. D 70
Step 1: Define the current business
Begin by asking these questions:
– What products do we sell?
– Where do we sell these products?
– How do our products or services differ from our
competitors?
Step 2: Perform External and Internal Situational Audits
• The key to success is adaptation
• Situational audits require SWOT (strengths, weaknesses,
opportunities, and threats) analysis
6/ 2/ 2015 pr.by H. D 71
Step 3: Formulate a New Business Direction
• What should our new business be in terms of product, placement and
competitive advantage?
• The vision statement describes the following:
What do we want to become?
• The mission statement explains the following:
Where are we now?
6/ 2/ 2015 pr.by H. D 72
Step 5: Formulate Strategies to Achieve the Strategic Goals
• What is the game plan?
• Decide on a course of action
– Best strategies are concise
–Easily communicated
Step 6: Implement the Strategies
• Get the game plan going
• Do what needs to be done
– Hire or fire people
– Build or close plants
–Adding or eliminating products and product lines
Step 7: Evaluate Performance
• Evaluate, evaluate, evaluate
• Ongoing process vis-à-vis strategic control
•Addresses the following questions:
–Are resources being utilized as planned?
–Are inconsistency explained?
– Do changes in our situation suggest change?
6/ 2/ 2015 pr.by H. D 73
Contents Map
6/ 2/ 2015 pr.by H. D 74
Value Chain Management
What is value chain?
6/ 2/ 2015 pr.by H. D 75
Value Chain Management
It is about management of “value added activities” in the
whole supply chain (supply chain management)
A business is profitable if the value it creates exceeds the cost of performing the value activities (Porter,
2001)
6/ 2/ 2015 pr.by H. D 76
The Value Chain (Porter, M. 2001)
Linkages exist when the way in which one activity is performed affects the cost or
effectiveness of other activities. Therefore need to be trade-off & coordination!
6/ 2/ 2015 pr.by H. D 77
Contents Map
6/ 2/ 2015 pr.by H. D 78
Definition of Operation Management
Systematic design, direction, and control of process that
transforming input into product/service for external & internal
customers
6/ 2/ 2015 pr.by H. D 79
Contents Map
6/ 2/ 2015 pr.by H. D 80
Scope of responsibility of OM
Decision COO makes both Strategic and Tactics
6/ 2/ 2015 pr.by H. D 81
Scope of responsibility of OM
Strategic vs. Tactics decision
Strategic decision include:
• Development of new capabilities
• Maintaining of existing ones
• Process design
• Value chain linkage development
• KPIs development (finance and non finance matrices)
Tactics decision include:
• Process improvement
• Performance measurement & management (see: Kaplan & Norton, Davenport-
analytical performance management)
• Managing projects
• Planning
• Inventory
6/ 2/ 2015 pr.by H. D 82
Scope of responsibility of OM
2 Principles must be kept in mind as COO:
6/ 2/ 2015 pr.by H. D 83
Contents Map
6/ 2/ 2015 pr.by H. D 84
Trends & Challenges in managing operation
Productivity
Global competition
Technologies changes
Environmental issues
Ethical
Diversity
6/ 2/ 2015 pr.by H. D 85
Trends & Challenges in managing operation
Productivity
Value of output
(services or
products)
6/ 2/ 2015 pr.by H. D 86
Trends & Challenges in managing operation
Global competition
It is agreed that to “prosper & survive” business have to view
customers, suppliers, facilities location, and competitor in global terms
Feature articles:
“What it take to compete in flat world”
“Global competition for resources”
6/ 2/ 2015 pr.by H. D 87
Trends & Challenges in managing operation
Technological changes:
Thus, the first and critical point about why we fail to see the need for
change stems from the fact that we stand blinded by the light of
successful past mental maps (Black & Gregerson,2008).
Feature articles:
“strategy & the internet”
“It is all start with ones”
“How information gives you competitive advantages”
LFC vs KFC
6/ 2/ 2015 pr.by H. D 88
Trends & Challenges in managing operation
Environmental issues:
Companies that persist in treating climate change solely as a corporate
social responsibility issue, rather than a business problem, will risk the
greatest consequences (Porter & Reinhardt, 2007).
Feature articles:
“business climate and climate business”
“Impact of Climate Changes on future business strategy adoption”
“Virtual Matrix of Corporate Social Responsibility”
6/ 2/ 2015 pr.by H. D 89
Trends & Challenges in managing operation
Business ethic:
Raising the bar of rules or standards governing the conduct of doing
business
Feature articles:
http://en.wikipedia.org/wiki/Business_ethics
http://www.scu.edu/ethics/
6/ 2/ 2015 pr.by H. D 90
Trends & Challenges in managing operation
Workplace diversity:
Managing diversity is comprehensive process for creating work
environment that includes everyone
There is single recipe for success!
Feature articles:
Harvard Business Review on “Managing Diversity”
Harvard Business Review on “Culture Changes”
Diversity as strategy – Harvard Business Review
Diversity at workplace: benefits , challenges, and required material too
ls
6/ 2/ 2015 pr.by H. D 91
Trends & Challenges in managing operation
Feature articles: “5 Competitive Forces that Shape Strategy”
6/ 2/ 2015 pr.by H. D 92
Question…
6/ 2/ 2015 pr.by H. D 93
Class activities
Objectives:
To get deeper understand of business present & future trends & challenges
Increase level of competences in business research
Team work in practices
Business presentation skill
Topics:
1. Productivity improvement challenges
2. Globalization – The competition for resources. Try to answer “why companies
are competing with everyone from everywhere for everything?
3. Climate changes – threats and opportunities for business in the future (to
include case studies)
4. Management of workplace diversity
5. Using Service Management Model developed by Norman, compare service
offer by The Pizza Company, Lucky Burger, KFC, Pizza World, and Soksabby.
6/ 2/ 2015 pr.by H. D 94
Class activities
Team
A – Lead by:
Member:
B – Lead by:
Member:
C – Lead by: TO BE EFFECTIVE
Member:
D – Lead by:
DEADLINE MUST BE SET
Member:
E – Lead by:
Member:
Requirements: Ba
Presentation 20 – 30 min
Q&A < 15 min
Each team member must present
6/ 2/ 2015 pr.by H. D 95