1.+Intro Opn+Mangt (2)
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Transcript of 1.+Intro Opn+Mangt (2)
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Introduction to Operations Management
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What is a function?
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Function is a set ofgoal foc
used activities
Goals are subsets of corporate objectives
Corporate objectives are aimed at
customer satisfaction
customer satisfaction is the result of
meeting customers expectations
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What are customers expectations?
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QCD of the product
How are they fulfilled?
P,Q,C,D,E,F,S,H,E, the Objectives of
Operations Management
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What is an operation?
Operation is a process of creating a product
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What is a product?
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Satisfies someone's need
Some one is willing to buy!
When does some one buy?
Value?
How value is created or added?
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VA/NVA
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What activities add value?
Alter physical state-water to ice
Alter form-blacksmith
Alter chemical composition-chemical
products
Alter metallurgical condition-alloys
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Store, preserve-refrigerate deep freeze
Impart knowledge-teach, train, information
Give advice-medical advice, legal opinion
Give medical treatment
Transport mangoes from Ratnagiri to
Mumbai
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Production & Operation
Concept ofProduction & Operation
Types ofProducts
Consumer /Industrial
Consumer durable & Non-durable
Discrete/Continuous
Standard/Customized
Tangible/Intangible
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What is operation?
Product? Service?
Production? Operation?
Factory? Facility?
What is core service?
Products meeting QCD expectations of
customer
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What is Value added service?
Help external customers use the core
service effectively
Help internal customers perform effectively
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1. Information on product and product
performance-safety, cost etc.
2. Problem solving-product support, workers
visiting customers works to learn product
performance for CCA/PA
3. Sales s
upport- technology demonstration
4. Field support-parts replacement, stock
replenishment
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Product Vs Service
Result of a process
Tangible
Inventoriable
Customer is away,
product is to be
delivered to the
cu
stomer
A process itself
Intangible
Non inventoriable
Customer is on the
shop floor and
involved in creation
of service
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What is management?
Important features of managementFacilitation
Resource allocation
Accountability
Review PDCA
Efficiency & Effectiveness
Visualization & Planning
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What is Operations Management?
Definition: Design, operation and
improvement of systems that create and
deliver the firms primary products and
services
O/M is a function of general management
O/M is a line function
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O/M uses tools of OR (Operations
Research), MS (Method Study) & IE
(Industrial Engineering), hence closely
associated with these functions
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Operations Management Objectives
Performance Objectives
Efficiency & Effectiveness
Quality
Lead times
Capacity utilization
Flexibility
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Cost Objectives
Explicit [visible] costs: material, labor, scrap,
rework, maintenance
Implicit [invisible]costs: inventory, stock-outs,
shortages, delayed deliveries, mat.handling,
inspection, grievances, dissatisfaction,opportunity
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Importance of Operations Management
1.Business education is incomplete without the
study of Operations Management
Central to every business activity
Knowledge of issues in the field is critical for
a manager whether the business ismanufacturing or service, private or public
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2. Reinventing Government in the US -1990
David Osborne and Ted Gaebler-1992 book
Reinventing Government
It applies the business customer servicemodel to government and the PSUs
In India many of the PSUs are either getting
privatized or following the Business
customer service model as in the US
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This approach focuses on results and
promotes competition inside and outside
government
Reinventing Government initiatives draw
from the concepts ofSupply Chain
Management, TQM, BPR and JIT delivery,
concepts that fall under OM umbrella
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3. Operations Management provides a
systematic way of looking at organizational
processes
Analytical approach to a situation
Strategizing
Problem solving
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4. O/M presents interesting carrier
opportunities
Line positions-direct supervision of
operations
Staff positions-Supply Chain Management,
Quality AssuranceConsulting opportunities-BPR,ERP
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5. Concepts and tools of O/M are used in all
functions of management
Quality Control
Productivity improvement
Internal customer focus
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6. Competitive edge through O/M to business
and to management professionals
Huge potential to boost the productivity of
the process, offer products at lower cost andhigh quality
Meeting the QCD expectations of the
customers with improved flexibility
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History of Operations Management
Concept ofO/M - an evolution: House hold
trades to factories as investment
opportunities
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1910s
Frederic Taylor
Principles of scientific management
Concept of productivity, time study
Frank and Lillian Gilbreth
Motion study
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Henry
Ford and
Henry Gantt
Moving assembly line and activity scheduling,
Gantt Chart
F.W.Harris
Inventory Control, concept ofEOQ
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1930s
Walter Shewhart & H.F. Dodge and H.G.
Romig
Quality control, sampling inspection &
statistical tables for quality control
Elton Mayo & L.H.C. Tippet
Hawthorne studies of worker motivation
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1940
George B. Dantzig
Simplex method of linear programming to
solve complex multidisciplinary pro
blems
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1950s -1960s
Many researchers in US & Western Europe
Extensive development of OR tools like
simulation, waiting line theory, decision theory,
mathematical programming,PERT & CPM
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1970
Many computer manufacturers lead by IBM
in US
Wide spread use of computers in business for
production scheduling, inventory control,
forecasting, project management, MRP
Mc Donald's restaurants in US
Service Quality and Productivity, mass
production in service sector
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1980
Harvard Business School Faculty
Manufacturing as a competitive weapon
Tai-ichi Uhno of Toyota Motors,
D E Deming & J E Juran
Kan
b
an,P
okayoke,
CIM,F
MS,
CAD/CAM,
robots etc.
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Eliyahu M. Goldratt
Synchronous manufacturing-Lean principles
to variety production, Theory Of Constraints:
b
ottleneck analysis-methodology for solvingproblems, goal-performance-constraints
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1990
National Institute of Standards and
Technology, American Society of Quality
Control and International Organization for
Standardization
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Total Quality Management, Balridge quality
award, ISO 9000,Quality Functional
Deployment, value engineering and
concu
rrent engineering-modern approach toproduct development
Michael Hammer and other major
consulting firms
Business Process Re-engineering
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US government, Netscape Communication
Corporation and Microsoft Corporation
SAP (Germany), Oracle (US)
Su
pply chain management,SAP/R3,
client/server software
2000
Amazon, eBay, American Online, Yahoo
E-commerce, Internet,World Wide Web
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What is Operations Strategy?
Evaluating most Cost effective methodology
of producing goods while achieving desired
Quality and Delivery objectives
A planning process to organize the resources
to fulfill the long term objectives of operations,
which are focused on organizational objectives
Organizational objectives are dynamic as
they are competitive - post war US
and Japan
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Objectives are flexible to meet changing
expectations of customers
Operations strategy is a process by which
key operations decisions are made that are
consistent with overall strategic objectives of
the firm
Operations Strategy leads to operational
excellence
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What are operational decisions?
Decisions are at the core of a strategy.
Operational Decisions are the strategic
options selected by the organization.
Product & Process
Product portfolio- products, product line,
extent of customization
Product design
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Process design
Technology selection
Capacity planning
Inventory decisions
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Infrastructure
Planning systems
Control systems
Quality assurance and control
Work payment structure
Process location
Organization of Operations function
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Relevance of Operations Strategy
1.Changing expectations of customers due to
the competitive dynamics
2. Need for a cost effective plan to respond to
these changes
3. Need for adaptation to competitive
priorities,Quality? Cost? Delivery?
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4. Competitive pressure on price line, lead
time and quality
5. Challenges of modern business- pushes
and pu
lls, cu
stomers, su
ppliers, investors,workers, government, NGOs
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COMPETITIVE DIMENTIONS IN
OPERATIONS STRATEGY
Make it cheap- cost reduction, post war
demand for volumes
Make it good- quality and reliability as a
dimension, Competition from Japanese
products
Make it quick- lead time reduction
Deliver it when promised-OTD
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Change its volume-Meeting rising demand
and scaling down
Change it-new product introduction
Support it-competitive dimensions related
to service
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COMPETITIVE ADVANTAGE
Competitive Advantage creates value for
the customer
Firms profit exceeds the competition
average
Cost advantages-core service is delivered
at lower cost
Differential advantage-benefits delivered are
su
perior
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Resources
Distinctive
Competencies
Cost Advantage
orDifferentiation
Advantage
Value
Creation
Capabilities
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Resources
Firms resources and capabilities are to be
superior to competition- Without this superiority,
any advantage quickly would disappear
Patents and trademarks
Proprietary know-how
Installed customerbase
Reputation of the firm
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Brand equity-is the value that customers
PERCEIVE in a brand. It is measured based
on how much trust a customer has in the
brand.
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Capabilities
Firm's ability to utilize its resources
effectivelyAspects that are difficult to document
Embedded strengths of the company
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Distinctive Competencies
The firm's resources and capabilities
together form its distinctive competencies
competencies enable innovation, efficiency,
quality, and customer responsiveness, all of
which can be leveraged to create a costadvantage or a differentiation advantage.
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TIME BASED COMPETITION
Business organizations seek competitiveadvantage to attract customers
Focus of the competition changed with time
post war focus in the US was cost (concept
of 'make it cheap')
Japanese introduced quality focus in 1980s
(concept of 'make it better')
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As the cost and quality become qualifiers
in competitive business. Now focus comes ontime.(concept of 'make it quick')
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Classical ILO approach to work talks about
work content and ineffective time
TBC as an initiative puts the focus on NVA
elimination/reduction
As the NVAs shrink changes occur in O/S
Productivity goes up, Output rises,
Business prospers
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Satisfying 'D' expectation became the
winner characteristic in competitive business
Lead-time came under the scanner of
business managers
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TBC has a methodology for implementation
Value stream mapping
Process mapping
Prioritization with respect to prod
uct delivery
Selecting focus area
Reduce NVAs
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Tools used: SMED, KANBAN,5S,Process
mapping, layout change, Technology,
Logistical Management,Supply Chain
Management
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