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◦ Introduction to Operations Management, ◦Why Study Operations Management?◦Organizational Model/OM in the Organizational Chart, ◦Why study OM?◦Operations/Production Systems, ◦Historical Development of OM, ◦Current Issues in Operations Management

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Operations management is the management of an organization’s productive resources or its production system.

A production system takes inputs and converts them into outputs. The conversion process is the predominant activity of a production

system. The primary concern of an operations manager is the activities of the

conversion process.

Nirmal_i@yahoo.com +919867570665

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Operations Management (OM)is the process, which combines and transforms various resources (inputs) used in the production/operations subsystem of the organization into value added product/services in a controlled manner as per the policies of the organizationis that function of an organization, which is concerned with the transformation of a range of inputs into the required products/services having the requisite quality levelIs the set of interrelated management activities, which are involved in this transformation processis defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services

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Operations & Supply Management (OSM) is defined as the design, operations and improvement of the system that create and deliver the firm’s primary products and serviceslike other line functions viz. Marketing, Finance, is also a functional field with clear line management responsibilities

Operations & Supply Management (OSM) Vs. Operations Research (OR), Management Science (MS) and Industrial Engineering (IE)While OSM is a field of Management whereas OR/MS is the applications of quantitative methods to decision making in all the fields and IE is an engineering disciplineWhile OSM managers uses decision making tools of OR/MS (Critical path scheduling) and are concerned with many of the issues of IE (factory automation), OSM’s distinct management role distinguishes it from others

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MarketingMarketing

MISMISEngineeringEngineering

HRMHRM

QAQA

AccountingAccounting

SalesSales

FinanceFinance

OMOM

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OM in the Organization Chart

OperationsOperations

Plant Manager

Plant Manager

OperationsManager

OperationsManager

DirectorDirector

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Manufacturing, Production control, Quality assurance, Engineering,

Purchasing, Maintenance, etc

Finance Marketing

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Business Education

Systematic Approach to Org. Processes

Career Opportunities

Cross-Functional Applications

OperationsManagement

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Purchasing planner/buyer Production (or operations) supervisor Production (or operations) scheduler/controller Production (or operations) analyst Inventory analyst Quality specialist

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Operations as a System Decision Making in OM

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InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversionSubsystemSubsystemConversionConversionSubsystemSubsystem

Production SystemProduction System

ControlControlSubsystemSubsystem

ControlControlSubsystemSubsystem

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External◦Legal, Economic, Social, Technological

Market◦Competition, Customer Desires, Product Info.

Primary Resources◦Materials, Personnel, Capital, Utilities

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A transformation process uses resources to convert inputs into some desired outputs

Inputs may be raw material, efforts, knowledge or finished product from some other system

Categories of Transformation Process◦ Physical (as in manufacturing)◦ Locational (as in transportation)◦ Exchange (as in retail)◦ Storage (as in distribution)◦ Physiological (as in health care)◦ Informational (as in Telecommunication)

These Transformations are not mutually exclusive (Example : Departmental Store – allows price comparison by shoppers(informational), Stores SKUs (Storage), Sells goods (exchange)

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Direct◦Products◦Services

Indirect◦Waste◦Pollution◦Technological Advances

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Companies cannot compete with marketing, finance, accounting, and engineering alone

We focus on OM as we think of global competitiveness, because that is where the vast majority of a firm’s workers, capital assets, and expenses reside

To succeed, a firm must have a strong operations function teaming with the other organization functions

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Strategic DecisionsThese decisions are of strategic importance and have long-term significance for the organization.Examples include deciding:

◦ the design for a new product’s production process

◦ where to locate a new factory◦ whether to launch a new-product

development plan

Operating DecisionsThese decisions are necessary if the ongoing production of goods and services is to satisfy market demands and provide profits

Examples include deciding:◦ how much finished-goods inventory to

carry◦ the amount of overtime to use next

week◦ the details for purchasing raw material

next monthControl Decisions These decisions concern the day-to-

day activities of workers, quality of products and services, production and overhead costs, and machine maintenance

Examples include deciding:◦ labor cost standards for a new product◦ frequency of preventive maintenance◦ new quality control acceptance criteria

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Information about the outputs, the conversions, and the inputs is fed back to management.

This information is matched with management’s expectations When there is a difference, management must take corrective action

to maintain control of the system

Set Goals (Management Expectations-

Targets)

Measure (Info on O/P,I/P &

Conversion)

Compare with Goals & Identify

Gaps

Implement Corrective Actions for Variances

Closed LoopControl Process

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Example : Typical SystemsSystem Primary Input Resources Primary Transformation

Function(s)Typical desired Output

Hospital Patients Doctors, Nurses, Medical Supplies, Equipment

Health care (physiological) Healthy Individual

Restaurant Hungry Customer

Food, Chef, Waiters, Environment

Well prepared, well served food, good environment (Physiological & exchange)

Satisfied Customers

College or University

High school Grads

Teachers, Books, classrooms

Imparting Knowledge & skills (Informational)

Educated Individuals

Distribution Center

Stock keeping units (SKUs)

Storage bins, stock pickers

Storage & redistribution(Storage)

Fast Delivery, Availability of SKUs

Airlines Travelers Airplanes, Crews, Scheduling/ticketing system

Move to destination(Locational)

On-time, safe delivery to destination

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Five differencesFirst, Service is an intangible process that cannot be weighed or measured while good is a physical output of a process that has physical dimensions

◦ Service innovation unlike product innovation can not be patented imposing threat of competition replicating it

◦ Intangibility is a problem for customer as service can not be tried out and tested before it is purchased

Second, Service requires some interaction with customers for it to be a service and must be designed to handle customer presence. Goods, however are a re generally produced in facilities separate from customerThird, Services are inherently heterogeneous, they vary from day to day and even hour by hour, as a function of attitude of customers and the servers.. Thus even the highly scripted work such as that in call centers can produce unpredictable results. Goods however can be produced with very tight specifications and with essentially zero variability w.r.t. timeService as a product are perishable and time dependent unlike Goods and can not be storedSpecifications of a service are defined and evaluated as a package of features that effect the five senses (Perception)

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Core services are basic things that customers want from products they purchase

Core Services Performance Objectives

OperationsManagement Flexibility

Quality

Speed

Price (or cost Reduction)

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Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way

Value-Added Service Categories

OperationsManagement Information

Problem Solving

Sales Support

Field Support

221-22

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JIT and TQC Manufacturing Strategy Paradigm Service Quality and Productivity Total Quality Management and Quality Certification Business Process Reengineering Six-Sigma Quality Supply Chain Management Electronic Commerce Service Science

1-23

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Service science, Management & Engineering (SSME) is a term introduced by IBM to describe service science, an interdisciplinary approach to the study, design, and implementation of services systems – complex systems in which specific arrangements of people and technologies take actions that provide value for others

SSME has been defined as the application of science, management, and engineering disciplines to tasks that one organization beneficially performs for and with another

Today, SSME is a call for academia, industry, and governments to focus on becoming more systematic about innovation in the service sector, which is the largest sector of the economy in most industrialized nations, and is fast becoming the largest sector in developing nations as well

SSME is also a proposed academic discipline and research area that would complement – rather than replace – the many disciplines that contribute to knowledge about service

The interdisciplinary nature of the field calls for a curriculum and competencies to advance the development and contribution of the field of SSME

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Year Concept Tool Originator

1910's Principles of scientific mgmt Formalized time-study and work-study Frederick Taylor

  Industrial psychology Motion study Frank & Lillian Gilbreth

  Moving assembly line Activity scheduling chartHenry Ford & Henry Gantt

  Economic lot size EOQ applied to inventory control F.W. Harris

1930's Quality controlSampling inspection & statistical tables for quality control

Walter Shewhart, H.F. Dodge, & H.G. Romig

 Hawthorne Studies of worker motivation

Activity sampling for work analysisElton Mayo & L.H.C. Tippett

1940'sMultidisciplinary team approaches to complex system problems

Simplex method of lineary programmingOperations research groups and George B. Dantzig

1950's-60's

Extensive development of operations research tools

Simulation, waiting-line theory, decision theory, mathematical programming, project scheduling & CPM

Many researchers

1970'sWidespread use of computers in business

Shop scheduling, inventory control, forecasting, project management, MRP

Led by computer manufacturers

  Service quality & productivity Mass production in the service sector McDonalds

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Year Concept Tool Originator

1980's Manufacturing strategy paradigm Manufacturing as a competitive weapon Harvard Business

  JIT, TQC, and factory automationKanban, poka-yokes, CIM, FMS, CAD/CAM, robots, et

Tai-Ichi Ohno, W.E. Deming, J.M. Juran

  Synchronous manufacturingBottleneck analysis, OPT, theory of constraints

Eliyahu M. Goldratt

1990's Total quality managementBaldrige quality award, ISO 9000, QFD, value & concurrent engineering, continuous improvement

NIST, ASQ, ISO

  Business process reengineering Radical changeM. Hammer & major consulting firms

  Electronic enterprise Internet, WWWUS Government, Netscape, Microsoft

  Supply chain management SAP/R3, client/server SAP, Oracle

2000's E-commerce Internet, WWWAmazon, eBay, AOL, Yahoo

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Synergies must exist with other functional areas of the organization

Operations account for 60-80% of the direct expenses that burden a firms profit.

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Global Competition Quality, Customer Service, and Cost Challenges Rapid Expansion of Advanced Technologies Continued Growth of the Service Sector Scarcity of Operations Resources Social-Responsibility Issues

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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

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OM important in any organization Global competition forces rapid evolution of OM Decision based framework focus of course

◦Strategic, Operating, and Control

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A major objective of today’s topic 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

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In the Input-Transformation-Output Relationship, a typical “input” for a Department Store is which of the following?a.Displaysb.Stocks of goodsc.Sales clerksd.All of the abovee.None of the above

Answer: e. None of the above (The above are considered “Resources” of a department store. The correct answer is “Shoppers”.)

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In which of the following decades did the concept of quality control originate?

a. 1920’sb. 1930’sc. 1940’sd. 1950’se. 1970’s

Answer: b. 1930’s (Tools such as sampling inspection and statistical tables where first developed by Walter Shewhart, H. F. Dodge, and H. G. Romig.)