Operations Management Module 1 : Introduction to Operations Management S.Balachandran December 2007.

Operations ManagementOperations Management

Module 1 : Module 1 : Introduction to Operations Introduction to Operations ManagementManagement

S.BalachandranS.Balachandran

December 2007December 2007

December 2007 © S.Balachandran 2 of 15

In this session . . .In this session . . .

• What is Operations Management ?What is Operations Management ?• Current Relevance of OMCurrent Relevance of OM• OM Function, Skills & DecisionsOM Function, Skills & Decisions• Transformation ProcessesTransformation Processes• Products vs ServicesProducts vs Services• Importance of Service SectorImportance of Service Sector• Core vs VA Services – OM RoleCore vs VA Services – OM Role• OM TimelineOM Timeline• Current Issues in OMCurrent Issues in OM


What is ‘Operations Management‘ ? - DefinitionWhat is ‘Operations Management‘ ? - Definition

• DesignDesign, , OperationOperation and and ImprovementImprovement of of systemssystems that that createcreate and and deliverdeliver firm’s primary firm’s primary products and servicesproducts and services


Current RelevanceCurrent Relevance• Success/failure & growth depend on Success/failure & growth depend on

Operational ExcellenceOperational Excellence

• Types of Organisations ?Types of Organisations ?– Business, Govt., NPO, NGOBusiness, Govt., NPO, NGO– Products & ServicesProducts & Services

• Career OpportunitiesCareer Opportunities

• Tools & Techniques for study & solution ofTools & Techniques for study & solution of– Operations ProblemsOperations Problems– Problems in other FunctionsProblems in other Functions

• Window to Organisational Processes Window to Organisational Processes


OM FunctionOM Function

60-80% of firm’sDirect expenses are inOperations area

60-80% of firm’sDirect expenses are inOperations area


OM SkillsOM Skills

Skill Areas• Quantitative

methods• Organizational

behavior• General management• Information systems• Economics• International

business• Business ethics

and law


Types of OM DecisionsTypes of OM Decisions

Opnl. DecisionsQA, Man, Machine & Task Assignment, Prioritisation

Tactical DecisionsLocation Assignment, Manning,Sourcing, Scheduling, Inventory

Strategic Decisions Location, Capacity, Product

Design, Process Design

Frontline

Middle Mgmt.

Sr.Mgmt.

ShortTerm

MediumTerm

LongTerm


The Operations SystemThe Operations System

Outputs• Services• Goods

Outputs• Services• Goods

Internal andexternal customers

Internal andexternal customers

Information on performance

Information on performance

TransformationProcesses

5

1

2

3

4

Inputs• Materials• Fin. Products• Customers

Resources• Equipment• Facilities• Land• Energy• Managers• Workers• Services

Inputs• Materials• Fin. Products• Customers

Resources• Equipment• Facilities• Land• Energy• Managers• Workers• Services

Exercise : Identify Inputs, Resources, Transformations & Outputs for1. Airline, 2. Jail, 3. Bank Branch and 4. Bank H/O.Exercise : Identify Inputs, Resources, Transformations & Outputs for1. Airline, 2. Jail, 3. Bank Branch and 4. Bank H/O.


Transformation Processes - TypesTransformation Processes - Types

• Physical--manufacturingPhysical--manufacturing

• Locational--transportationLocational--transportation

• Exchange--retailingExchange--retailing

• Storage--warehousingStorage--warehousing

• Physiological--health carePhysiological--health care

• Informational--telecommunicationsInformational--telecommunications


Product – Service ContunuumProduct – Service Contunuum

More like a manufacturing organization

More like a service

organization

•Physical, durable product•Output that can be inventoried•Low customer contact•Long response time•Regional, national, or international markets•Large facilities•Capital intensive•Quality easily measured

•Physical, durable product•Output that can be inventoried•Low customer contact•Long response time•Regional, national, or international markets•Large facilities•Capital intensive•Quality easily measured

• Intangible, perishable product

• Output that cannot be inventoried

• High customer contact• Short response time• Physical Dly. : Local markets Online Dly.: Global markets• Small facilities• Labor intensive• Quality not easily measured

• Intangible, perishable product

• Output that cannot be inventoried

• High customer contact• Short response time• Physical Dly. : Local markets Online Dly.: Global markets• Small facilities• Labor intensive• Quality not easily measured


Share & Growth of Services – Indian EconomyShare & Growth of Services – Indian Economy

Sectoral GDP

59%13%

28% Primary

Industry

Services1950-511950-51

26.4%55.1%

18.5%

2006-072006-07

Source: Economic Survey of India, February 2007

11.2%11.2%

10.0%10.0%

2.7%2.7%Trade, HotelsTransport &Communication 13.0%

Fin. Services 11.1%

Community, Social &Personal Services 7.8%

Trade, HotelsTransport &Communication 13.0%

Fin. Services 11.1%

Community, Social &Personal Services 7.8%

At present rates of Sectoral Growth5 Years Hence (2011-12):

At present rates of Sectoral Growth5 Years Hence (2011-12):

13.4%13.4% 27%27% 59.6%59.6%


Service Employment & ProductivityService Employment & Productivity

Sector Workforce(millions)

%GDP (2004-05)(Rs. ‘000 Cr.)

%GDP per worker

(Rs.)

InputEmphasis

1. Primary 295 62 681 24.0

23,085 Labour

2. Industry 76 16 695 24.5

91,447 Capital

3. Services 104 22 1462 51.5

1,40,576 Knowledge

TOTAL 475 100

2838 100

59,747

Source: Economic Survey of India, February 2005


Core & VA ServicesCore & VA Services

• Core servicesCore services : : basicbasic things that customers want things that customers want from products & servicesfrom products & services– C, Q, D, RC, Q, D, R11, F, R, F, R22

• VA ServicesVA Services : : differentiatedifferentiate the organization from the organization from competitorscompetitors and build and build relationshipsrelationships that bind that bind customers customers to the firm in a positive wayto the firm in a positive way– Problem SolvingProblem Solving– InformationInformation– Sales SupportSales Support– Field SupportField Support


OM TimelineOM Timeline

PeriodPeriod Concept/ToolConcept/Tool OriginOrigin

1910s1910s• Functional SpecialisationFunctional Specialisation• Time, Work & Motion studyTime, Work & Motion study• Activity schedulingActivity scheduling• Assembly LineAssembly Line

F.W. TaylorF.W. Taylor Frank & Lilian GilbrethFrank & Lilian Gilbreth L. GanttL. Gantt Henry FordHenry Ford

1930s1930s • SQC, SamplingSQC, Sampling• Worker MotivationWorker Motivation

VariousVarious Elton MayoElton Mayo

1940s1940s • Linear ProgrammingLinear Programming OR Groups in US & UKOR Groups in US & UK

1950-60s1950-60s • Network, Simulation, Waiting Line & Network, Simulation, Waiting Line & other OR Models, Decision Theoryother OR Models, Decision Theory

US Defence / NavyUS Defence / Navy OR Groups in US & UKOR Groups in US & UK

1970s1970s • Computer usage for business apps. In Computer usage for business apps. In scheduling, inv. Control, forecasting, scheduling, inv. Control, forecasting, Project Management, MRPProject Management, MRP• Service Quality & ProductivityService Quality & Productivity

IBMIBM MRP: Orlicky & Wight (US)MRP: Orlicky & Wight (US) McDonald’sMcDonald’s

1980s1980s • Toyota Mfg. SystemToyota Mfg. System• Factory AutomationFactory Automation• Synchronous ManufacturingSynchronous Manufacturing

Taichi Ohno (Japan)Taichi Ohno (Japan) Engineers - Diff. CountriesEngineers - Diff. Countries Eliyahu M. Goldratt (Israel)Eliyahu M. Goldratt (Israel)

1990s1990s • TQMTQM• Business Process ReengineeringBusiness Process Reengineering• Internet, WWWInternet, WWW• Supply Chain ManagementSupply Chain Management

Deming, Juran, Baldrige, ISODeming, Juran, Baldrige, ISO Michael HammerMichael Hammer US Govt., NS, MSUS Govt., NS, MS SAP, BAN, Oracle, SAP, BAN, Oracle, PeopleSoftPeopleSoft

2000s2000s • E-commerce & E-businessE-commerce & E-business Dell, Amazon, E-bay, AOL, Dell, Amazon, E-bay, AOL, Yahoo, Airlines, HotelsYahoo, Airlines, Hotels


Current Issues in OMCurrent Issues in OM

• Globalisation of Business : Products & Globalisation of Business : Products & ServicesServices

• Outsourcing – Supply ChainOutsourcing – Supply Chain

• Customisation of Products & ServicesCustomisation of Products & Services

• Co-Production by CustomersCo-Production by Customers

• Electronic Delivery ChannelsElectronic Delivery Channels

• Operations as Competitive weaponOperations as Competitive weapon

Operations Management Module 1 : Introduction to Operations Management S.Balachandran December 2007.

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