1,2-Introduction Operation Mgmt

8/6/2019 1,2-Introduction Operation Mgmt

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CHAPTER 1 - INTRODUCTION TO

OPERATIONS MANAGEMENT


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PRODUCT

From Consumers prospective : Soap can beidentified by complexion, cleanliness of body,freshness, fragrance or health.... etc. Because

of this, many producers advertise that they areselling health, or they are selling Cine starComplexion or they are selling freshness.

From Production Managers prospective :Product is the combination of processes

(or operations).


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Production Manager has to produce the given product by

using the best and cheapest method so as to make the

product to face competition in the market.

From a Financial Managers prospective : product is amix of various cost elements as he is responsible for the

profitability of the product.

From a Personnel Managers prospective : For him theproduct is a mix of various skills, as he is the person

who selects and trains the personnel to meet thedemand of the skill to produce the product.


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PRODUCTION

Production means application of processes (Technology) to the rawmaterial to add the use and economic values to arrive at desiredproduct by the best method, with out sacrificing the desired quality.We have three ways ofProduction, they are:

Production by Disintegration: By separating the contents of Crude oil

or a mixture the desired products are produced. For example thecrude oil is disintegrated into various fuel oils.

Similarly salt production is also an example for product produced bydisintegrated. We can use Mechanical or Chemical or bothtechnologies to get the desired product, so that it will have desireduse value.

Production by Integration: In this type ofProduction variousComponents of the products are assembled together to get thedesired product.


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Production by Service: Here the Chemical andMechanical Properties of materials are

improved without any physical change. The example forthis is Heat Treatment of metals. In real world, a

combination of above methods is used. MANAGEMENT :

Management can be explained as an art or science, (infact it is a combination of art and science) of getting

things done by the people, by planning, coordinating,organizing, directing and controlling the activities tomeet specified goals, with in the frame work of agreedpolicies.


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WHAT IS OPERATIONS

MANAGEMENT? The business function responsible for planning,

coordinating, and controlling the resources needed to

produce a companys products and services.

Operations management (OM) is defined is defined as

the design, operation, and improvement of the systems

that create and deliver the firms primary products and

services

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OM is management ofprocesses that produce and distribute

products and/or services to customers.

OM objective is make sure that the processes work effectively

and efficiently.


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TYPICAL OPERATIONS DECISIONS AND

THEIR HIERARCHY

Strategic level

Broad scope, long term

Tactical level

Moderate scope, medium term

Operational level

Narrow scope, short term


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TYPICAL ORGANIZATION CHART


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OMS TRANSFORMATION PROCESS


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TRANSFORMATION PROCESSES

INPUTS USE RESOURCES OUTPUTS


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McDonalds is in Service or Manufacturing

sector?


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DIFFERENCES BETWEEN

MANUFACTURERS AND SERVICE

ORGANIZATIONSServices: Manufacturers:

Intangible product Tangible product

Services cannot be inventoried Product can be inventoried

High customer contact Low customer contact

Short response time Longer response time

Labor intensive Capital intensive


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SIMILARITIES-

SERVICE/MANUFACTURERS

All use technology

Both have quality, productivity, & response

issues All must forecast demand

Each will have capacity, layout, and location

issues All have customers, suppliers, scheduling and

staffing issues


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SERVICE - MANUFACTURING

Manufacturing often provides services

Services often provides tangible goods

Some organizations are a blend ofservice/manufacturing

Using customers as a labor: Self servicesituation like supermarkets and ATMs


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CORE SERVICES

Core services are the basic things that customers (internal or

external) want from products they purchase (quality, on time

delivery, price (cost), etc.)

Some what easier to emulate or copy

OperationsManagement

lexibility

Quality

Speed

Price (or cost

Reduction)

Performance Objectives


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VALUE ADDED SERVICES

Value-added services differentiate the organization from

competitors and build relationships that bind customers to the

firm in a positive way (sales and field support, problem solving,

etc.) ------Significantly more difficult to copy and implement

OperationsManagement

Information

Problem

Solving

SalesSupport

Field Support

Value-Added Service Categories


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SCOPE OF PRODUCTION AND OPERATION

MANAGEMENT

Operation management covers such activities as

acquisition of land, constructing building ,procuring

and installing machinery ,purchasing and storing raw

material and converting them into saleable products,quality management ,maintenance management

,production planning and control, methods

improvement and work simplification and other

related areas.


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OPERATIONS FUNCTION

Operations function is much broader than

activities occur in a factory.

Products must be developed,

Materials must be purchased,

Facilities must be maintained,

Products must be distributed, and so on.


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OPERATIONS FUNCTION

Inputs Operations Function

Output Customers


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OPERATIONS FUNCTION

Operations function must also be wellintegrated with other parts of business.

Operations function is one of 3 primary

functions within a business: Finance,Marketing, and Operations.

Work of 3 primary functions overlaps each

other and all 3 must work to reach the fullpotential of the system.


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FUNCTIONS OF PRODUCTION PLANNING

& CONTROL

Cost estimation

Work measurement (checking technical

feasibility, availability of work force) Sub contracts

Capacity planning

Demand forecasting


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OPERATIONS FUNCTION

Therefore, operations function pla s asignificant role in success of usinesses.


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EVOLUTION OF OPERATIONS

MANAGEMENT

Until the 19th century, the world was mostly rural and

agricultural.

Most of the products were made by highly skilled

people called artisans (skilled manual worker orcraftsman) .

Under the apprenticeship system, an artisan

supervised the work of several apprentices during

long training period.


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MANAGEMENT

In the 18th century, most manufacturing wasperformed by rural families in their own homes underthe domestic or cottage industry system.

Merchants supplied families in small towns with raw

materials and later found markets for the finishedproducts.

The development of steam power and the introductionof labor-saving equipment (or automation) early in the

18th century led to the development of the factorysystem.


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MANAGEMENT

The principle of the factory systems was simple:

Assign workers a small set of tasks that they repeatover and over.

This reduces the time spent by workers in switchingtasks and they become specialized.

The result is improved labor productivity and lowerproduction costs.

Technological developments in 1850s transformedfactory system into mass-production.

Factories became larger. They produced hugevolumes of identical products.


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MANAGEMENT

Manufacturing costs were reduced because no timewas needed for setting machines and people toproduce other types of products.

As the sizes of the factories increased, management

of these operations became a major problem. Frederick Taylor introduced systematic approaches to

operations management at the turn of 19th century.

His intent was to eliminate waste, especially the

wasted effort, in order to minimize costs.


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MANAGEMENT

Henry Ford combined the teachings of Taylor with the concepts of labor

specialization and interchangeable parts to design the first moving

assembly line in 1913. the large-scale mass production technology

pioneered by Henry Ford. Ford employed a system called "continuous-flow

manufacture," in which production is arranged so materials move smoothly

through successive processing stages. Making use of interchangeable parts,

this system established what came to be called an "assembly line." Spurred

on by the industrial challenges of two world wars, U.S. factories mastered

the art of mass production, and the nation's manufacturing system became

the world standard.

In 1920s and 1930s, a series of studies were conducted at the HawthorneWorks of Western Electric by Elton Mayo.

The results showed that psychological factors were as important as

scientific job design.


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MANAGEMENT

The Hawthorne Studies stimulated the development of

human relations movement by demonstrating that

worker motivation is a crucial element in improving

productivity. As the complexity of operations increased,

sophisticated decision-making tools were needed.


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MANAGEMENT

Some of the quantitative models and statistical

techniques used by modern operations managers are:

1- Statistical Quality Control: Uses statistics in the

control of product quality by controlling the processesby which products are made.

2- Economic Order Quantity: Used for finding the least

cost inventory ordering


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MANAGEMENT

3- Gantt charts for sequencing operations and Critical

Path Method for finding optimum completion time of

operations.

4- Linear programming: A management tool for optimumresource allocation given some restrictions of the

resources.


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MANAGEMENT

The 1950s was the beginning of the information

technology era.

The discovery of transistor by Shockley led to the

ability process data and information at continuouslydecreasing costs.

Today, you can imagine the difficulty of monitoring

inventories of hundreds of units OR managing a large

project without a computerized system.


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MANAGEMENT

In the late 1950s and early 1960s scholars began to

write books dealing specifically with the problems

faced by operations managers.

These books also contained information regarding theapplication of quantitative models to operations

management.


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RESPONSIBILITIES OF A OPERATION MANAGER

Forecast requirement of factors of production to meet target of

production.

Utilize factors of production in most efficient manner.

Reduce cost and improve quality by periodical analysis and by

taking corrective and preventive actions.

Reduce material handling cost by using efficient material

handling systems and correctly developed plant layouts.

Device efficient methods of manufacturing based on method

study.

Improve labour productivity by providing them training.

Build team spirit and motivate work force.


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MANUFACTURING SYSTEM

Inputs : Men, machines, materials, instructions,

drawings, paper work

Transformation process: Involves operations,

mechanical or chemical process to convert inputs intooutput.

Output: Goods or services

Combination of operational activities employed to

create goods & services, are known as manufacturing

systems or methods.


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Factors Influencing choice of manufacturing system: It

must be able to meet the specifications of the final

product and it must be cost effective.

Various factors which determine the choice of themanufacturing process are as follows:

A) Effect of volume/variety: High product variety i.e.

many products in one or few numbers requires highly

skilled labour, general purpose machines and detailedand sophisticated production planning & control

systems.


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Low product variety i.e. one or few products produced

in large volumes requires less skilled labours, highly

automated mass production processes using special

purpose machines and simple production planningand control systems.

B) Capacity of the plants : If manufacturing process

will be intermittent or not continuous, it will be

cheaper to install and operate at low volumes andcontinuous process will be economical to use at high

volumes.


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C) Flexibility: Implies ability of the company to satisfy

varied customers requirement. Flexibility and product

variety are inter-related. If more variety is to be

manufactured the operation department should bemore flexible.

D) Lead time: Time within which customer is expecting

the product and the faster deliveries are expected in

the competitive market therefore lead time plays animportant in choosing manufacturing process or

system.


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E) Efficiency: It measures speed and cost of

manufacturing system. Efficiency should be greatest

when the product will have to be mass produced

therefore manufacturing system with the bestefficiency in terms of machine and manpower

utilization will have to be selected.

F) Environment: It brings new technologies and forces

the adoption of new process of manufacturing. Forexample wooden furniture is now replaced by metals

and plastics(Change in fashion).


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CLASSIFICATION OF MANUFACTURING SYSTEM

Project production: Where single assignment of a complex

nature is undertaken for completion within given period

and estimated expenditure.

Jobbing production: Where one or few units of product areproduced to satisfy customers requirement within the

given date and within the price fixed prior to contract.

Batch production: where limited quantity of each type of

product is authorized for manufacturer at a time. Mass & flow production: Where production is done either

on single machine or number of machines, arranged


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CLASSIFICATION OF MANUFACTURING

SYSTEM

according to the sequence of operations and several number

of a product are manufactured at a time and stocked in a

warehouse awaiting sales.

Process production: Where production is conducted for an

infinite period.

What is Mass Customization?

Mass Customization is the customization and

personalization of products and services for individual

customers at a mass production price (Variety at commonprice).


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WHAT IS MASS CUSTOMIZATION?

Variety = Customization = Increase in cost

Mass production = Low cost

Mass customization = Variety at low costs

Traditionally customization and low cost have beenmutually exclusive. Mass production provided low cost but at

the expense of uniformity. Customization was the product of

designers and craftsman. Its expense generally made it the

preserve of the rich. To-day, new interactive technologies, like

the Internet, allow customers to interact with a company and

specify their unique requirements which are then

manufactured by automated systems.


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DR.W. EDWARDS DEMING (19001993)

Deming argued that higher quality leads to

higher productivity, which, in turn, leads to long-

term competitive strength.

Improvements in quality

lower costs

higher productivity


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DR.W. EDWARDS DEMING (1900

1993)

The theory is that improvements in quality lead

to lower costs and higher productivity because

they result in less rework, fewer mistakes, fewer

delays, and better use of time and materials.

With better quality and lower prices, a firm can

achieve a greater market share and thus stay in

business, providing more and more jobs.


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PHILIP CROSBY (19262001)

Quality Is Free : In his book Quality Is Free, Crosby

makes the point that it costs money to achieve quality,

but it costs more money when quality is not achieved.

When an organization designs and builds an item rightthe first time (or provides a service without errors),

quality is free. It does not cost anything above what

would have already been spent. When an organization

has to rework or scrap an item because of poorquality, it costs more.


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DR. GENICHI TAGUCHI (B. 1924)

The Taguchi Method (Design of Experiments),

and other methodologies have made major

contributions in the reduction of variation and

greatly improved engineering quality and

productivity.


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TYPES OF INDUSTRIES

TYPE OF

INDUSTRY

PRODUCTION

PROCESS

(what/How)

EST. NO OF

EMPLOYEES

CAPITAL

REQUIREMET

EXAMPLE

Cottage

Industries

ediu ale

Industry

Large ale

Industry


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TYPES OF INDUSTRIES

Cottage Industries/Small scale industries fewworkers, uses simple tools, may work at home, smallcapital requirement, workers do not exceed 100

Medium scale Industries 100-200 employees,

bigger capital requirement but does not exceedmuch, use simple machines and equipment

Large-scale Industries 200 employees and above,invest in plants for mass production, use of complexmachinery, huge capital requirement, reliance onfinancial institutions


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Manufacturing industry can be divided into 3

divisions:

1. Heavy

2. Light

3. High-tech


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HEAVY INDUSTRY

Perform a variety of roles. For example, they may:

Refine minerals such as crude oil, into many different products

Smelt metals such as iron ore, into steel

The works usually cover a large area of land; pollution from their

chimneys may be obvious many kilometres away.

They do not add to the scenic beauty of the landscape, but theyare necessary because they provide the materials many light

industries use for consumer goods.


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LIGHT AND HIGH-TECH INDUSTRIES

They are combined under one heading footloose industries.

The termfootloose refers to their greaterfreedomto choosealocation

compared with heavy industries. This freedom comes from having low raw

material demands and the need only for small factories, which means that

suitable sites are widely available

Final products are high in value and low in weight, can be easily distributed by

road.

New factories have pleasant locations on the rural-urban fringe surrounded bygreen areas.


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INTEGRATION OF MANUFACTURING &

SERVICES

Pure products :

Manufacturing inputs materials to produce products during the

process of transformation. As for the process of manufacturing

itself, theres nearly no services involved, but just producing the

goods.

For example, the car manufacturing, for such particular field,

the manufacturer only produces cars with slight services

included. In other words, it is the industry which produces pure

product.


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Pure services

In some of the industries, there is only service provision, such

as the clinic or hospital.

Mixture of products and services

There are many different sorts of industries all over the world.

Some industry is the mixture of providing products as

well as providing services.

Restaurant which we are fairly familiar with is a typical mixed

industry. The restaurant not only provides the food which can

be considered as product, but also the service.


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METHODS OF MANUFACTURING

Job Shop

Batch

Repetitive

Continuous

(Project)


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JOB SHOP

Relatively small scale

Low volume of high-variety goods or services

Processing is intermittent

High flexibility of equipment

Manufacturing example: A tool and die shop that is able to

produce one-of-a-kind tools.

Service example: A veterinarians office, which is able toprocess a variety of animals and a variety of injuries and

diseases.


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BATCH

Moderate volume of moderate variety products or services.

The equipment need not be as flexible as in a job shop, but

processing is still intermittent.

The skill level of workers doesnt need to be as high as in a job

shop because there is less variety in the jobs being processed.

Manufacturing example: Bakeries, which make bread, cakes, or

cookies in batches

Service example: Movie theaters, which show movies to groups

(batches) of people, and airlines, which carry planeloads

(batches) of people from airport to airport.


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REPETITIVE/PROCESS PRODUCTION

Higher volumes of more standardized goods or services

Slight flexibility of equipment

Skill of workers is generally low.

Manufacturing example: Automobiles, television sets, pencils,

and computers.

Service example: Automatic carwash, cafeteria lines and ticketcollectors at sports events and concerts.


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PROJECT

Nonroutine work

Unique set of objectives

Limited time frame

Equipment flexibility and worker skills can range from low tohigh.

Example: Consulting, making a motion picture, launching a new

product or service, publishing a book, building a dam, and

building a bridge.


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CONTINUOUS

Very high volume of nondiscrete, highly standardized output is

desired

No variety in output

No need for equipment flexibility.

Manufacturing example: Petroleum products, steel, sugar, flour,

and salt.

Service example: Air monitoring, supplying electricity to homes

and businesses, and the Internet.


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