OperationsManagement Part1
OperationsManagement Part1
Reference books
Operations Management for competitive advantage- Chase, R.B., Jacob et al., 11th Edition, McGraw-Hill Companies Production and Operations Management-S N Chary, 3rd Edition, McGraw-Hill Companies Operations Management- Process & Value Chain, 8e,L Krajewski, L Rizwan, M Malhotra, Pearson Education, 2008
OBJECTIVE
Introduction to the Field Operations Strategy and Competitiveness Facility Layout Product and Process Design Quality Inventory, and JIT Time and Motion Study
Analytical thinking
Business Education
Operations Management
Career Opportunities
Cross-Functional Applications
Assembly Process
Efficiency
Doing something at the lowest possible cost Goal of an efficient process is to produce a good or provide a service by using the smallest input In customer service counter in bankBeing efficient means using fewest people possible at the counter Productivity indices is a measure of efficiency
Effectiveness
Doing right thing to create most value for the customer There is often a tradeoff with efficiency In bank customer service counter-being effective means minimizing the amount of time customer needs to wait in line
TRANSFORMATION PROCESS
TRANSFORMATION PROCESS
Feedback
System (Hospital)-Inputs (patient)Resources (Doctors, Nurses, medical supplies, equipments)-Primary Transformation function (Healthcare or physiological)-Desired output (healthy individual) System (Airlines)-Inputs (travelers)Resources (Plane, Crews, ticketing system etc)-Primary Transformation function (Move to destination)-Desired output (ontime, safe delivery to destination) Check Transformation for restaurant, educational institute, petrol pump
Transformation
Transformation Processes
Physical Locational warehouse) Exchange Physiological Psychological Informational (as in manufacturing) (as in transportation/ (as in retail shop) (as in health care) (as in entertainment) (as in communications)
Processes
Processes should add value (We will discuss this in next slide). Processes can be broken down into subprocesses, which in turn can be broken down further. Any process that is part of a larger process is considered a nested process. Each process and each nested process has inputs and outputs.
Value
It is quality divided by price If we can provide a better car without change in price, value goes up. If we can provide a better car with reduced price, value goes way up
Service Production
Intangible Cant be inventoried High customer contact Labor Intensive Quality hard to measure
2.
3.
4.
Select suppliers of services, materials and information and facilitate the timely and efficient flow of these items into the firm.
Marketing
Suppliers
Operations
Material availability Quality data Delivery schedules Designs Personnel needs Skill sets Performance evaluations Job design/work measurement Hiring/firing Training Legal requirements Union contract negotiations Sales forecasts Customer orders Customer feedback Promotions
Human Resources
Historical Events in OM
Scientific Management
Time and motion studies Lillian Gilbreth Activity scheduling chart Gant Moving assembly line 1911 1912 1913 Frank & Henry Henry Ford
Historical Events in OM
Management Science
Linear programming PERT/CPM, Waiting line theory MRP 1947 George Dantzig 1950s 1960s
Historical Events in OM
Quality Revolution
JIT TQM 1970s 1980s Taiichi Ohno, Toyota W. Edwards Deming, Joseph Juran, et. al.
Historical Events in OM
Information Age/ Internet Revolution
www, ERP Supply chain management, E-commerce 1990s SAP, i2 Technologies, ORACLE, PeopleSoft, Amazon, Yahoo, eBay, and others
OM: Milestones
Individual efficiency
Work study
Collective efficiency
Production control, Assembly line balancing
Operations Research
Queuing models, Game theory, LPP, NLP
Computer era
ERP
Manufacturing Systems
Continuous flow Mass production Batch production Job-shop production
Batch Production
Service
Every organization is in the service business, whether it makes plane or food Airlines, Hotel, hospital
Services never include goods and goods never include services. (True or false?)
Core Services Defined Core services are basic things that customers want from products they purchase Quality, flexibility, speed and price
Flexibility
Operations Managemen t
Speed
Value-Added Services Defined Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way
Synergies must exist with other functional areas of the organization Operations account for 60-80% of the direct expenses that burden a firms profit.
Technology selection Capacity (available capacity for demand fluctuation) Scheduling (timing of various activities) System maintenance (quality checks, technology selection, corrective action)
People-centric: Relationship with people interacting with firm (customer, supplier, employee)
HR (Employees) Supply (Associates or suppliers) Timing (Customer timeliness of delivery) Spatial (location of business associate, plant, layouts etc)
Value Chains
Value chains are an interrelated series of processes that produce a service or product to the satisfaction of customers.
Value chains may have core processes or support processes.
Core processes deliver value to external customers. Support processes provide vital inputs for the core processes.
Value Chain
A process view of firm Processes must add value for customer The cumulative work of processes of a firm is a value chain Core process-Chain of activities that delivers value to external customer Support Process-Provide vital resources to support core process. E.g. budgeting, recruiting, scheduling
Customer
Manufacturer
Supplier
Customer
Manufacturer
Supplier
Current Issues in OM
Coordinate the relationships between mutually supportive but separate organizations. Optimizing global supplier, production, and distribution networks. Lean Manufacturing, JIT Inventory System
Question Bowl
A major objective of OM is 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
Operations Strategy Project Management Process Strategy Process Analysis Process Performance and Quality Constraint Management Process Layout Lean Systems JIT Philosophy
Supply Chain Strategy Location & Facility Design Inventory Management Forecasting Sales and Operations Planning Resource Planning Scheduling
OBJECTIVES
Operations Strategy Competitive Dimensions Order Qualifiers and Winners Productivity Measures
DHL or DTDC
Why are they successful?
Fast On-time deliveries Relatively low cost Technology in shipment tracking
Progressive Insurance
Grew from $1.3 billion to $11 in 13 years. How did they do it? Operational Innovation (Designing new processes)
Immediate Response Claims Handling (24 hours a day). Streamlined claims processing, from 7-10 days to 9 hours. Web site for agents only. Web site for customer information, inquiries and routine processing. Agents quickly go to scene of accident.
Definition
Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and allocation of resources for carrying out these goals
Business/Functional Strategy
Operations strategy is to ensure all tasks performed are the right tasks
Strategy Formulation
1. 2. 3. 4.
Define a primary task Assess core competencies Determine order winners & order qualifiers Positioning the firm
Operations Strategy
Strategy Process
Customer Needs
Example
More Product
Corporate Strategy
Operations Strategy
Operation Strategies
Improved responsiveness -minimize time to respond
-better accessibility -wider product/service choice through
product performance technology leadership new product introduction access to key decision-makers/influencers delivery service
Competitive Dimensions
Cost or Price Quality
Make the Product or Deliver the Service Cheap Make a Great Product or Deliver a Great Service Make the Product or Deliver the Service Quickly Deliver It When Promised Change Its Volume
Delivery Speed
Delivery Reliability
Coping with Changes in Demand Flexibility and New Product Introduction Speed Other Product-Specific Criteria
Support It Change It
Competing on Cost
Eliminate all waste Invest in
Updated facilities & equipment Streamlining operations Training & development
Competing on Cost?
Offering product at a low price relative to competition Typically high volume products Often limit product range & offer little customization May invest in automation to reduce unit costs Can use lower skill labor Probably use product focused layouts Low cost does not mean low quality
Competing on Quality
Please the customer
Understand customer attitudes toward and expectations of quality
Competing on Quality?
Quality is often subjective Quality is defined differently depending on who is defining it Two major quality dimensions include
High performance design:
Superior features, high durability, & excellent customer service Meets design specifications Close tolerances Error free delivery
Product design quality product/service meets requirements Process quality error free products
Competing on Time?
Time/speed one of most important competition priorities First that can deliver often wins the race Time related issues involve
Rapid delivery:
Focused on shorter time between order placement and delivery
On-time delivery:
Deliver product exactly when needed every time
Competing on Flexibility
Produce wide variety of products Introduce new products Modify existing products quickly Respond to customer needs
Competing on Flexibility?
Company environment changes rapidly Company must accommodate change by being flexible
Product flexibility:
Easily switch production from one item to another Easily customize product/service to meet specific requirements of a customer
Volume flexibility:
Ability to ramp production up and down to match market demands
Cost
Flexibility Quality
Delivery
Order Qualifiers and Winners Defined Order qualifiers are the basic criteria that permit the firms products to be considered as candidates for purchase by customers Order winners are the criteria that differentiates the products and services of one firm from another
Service Breakthroughs
A brand name car can be an order qualifier Repair services can be order winners
Examples: Warranty, Roadside Assistance, Leases, etc
Which priorities are Order Qualifiers? e.g. Must have excellent quality since everyone expects it
Which priorities are Order Winners? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonalds competes on consistency FedEx competes on speed Custom tailors compete on flexibility
Enterprise capabilities Operations andSupplier capabilities Operations & Supplier Capabilities R&D R&D Technology Systems Technology Systems People People Distribution Distribution
Productivity
Productivity is the value of outputs (services and products) produced, divided by the value of input resources(wages, costs of equipment, etc.) Productivity = Output Input
Chapter 3 Measuring Performance in Operations Productivity Productivity = Quantity of Output/Quantity of Input Productivity is expressed in one of three forms: 1. Total Productivity = Total Output/Total Input 2. Multifactor Productivity = Total Output/Subset of Inputs 3. Partial Factor Productivity = Total Output/Single Input
or
= Goods and services produced All resources used
Productivity Calculation
Example
1. Single factor Three employees process 600 insurance policies in a week. They work 8 hours per day, 5 days per week. Calculate the productivity in policies per hour. Labor productivity = Policies Processed Employee Hours
Output
Labor + Capital +
.
Materials
Questions
A criterion that differentiates the products and services of one firm from another can be which of the following?
a. b. c.
Choosing a Site
Choosing a country, state or region is a strategic decision as mentioned earlier.
But, choosing a site could be based on costs-objective.
Important Aspect for plant Layout Design A) Size or plant capacity B) Location (Customer, Raw material, and Key personal accessibility) C) Arrangements within plant Easy and uninterrupted flow of material Reduced time to manufacture, Low inventory and WIP Easy for working, maximum safety, and minimum health hazard Minimum material handling Minimum damage or spoil of material Reduce congestion of man, material and machine Flexibility for change (volume or technology)
Plant Layout
A Product Layout
In
Out
Womens Salwar
Childrens Dress
Womens sportswear
Mens Dress
Process Characteristics (1) Complex and highly customized process, unique sequence of tasks
ess roc P
es
Lij = number of loads per unit time moved between departments i and j cij = cost per load per unit time between departments i and j
Block Diagrams
(a) Initial block diagram
Figure 5.4
Block Diagrams
(a) Initial block diagram (b) Final block diagram
1 2
175
50
0 17
30 200 75 90 88 125 20 5
20 80 99 0
0 100
0 180 374
Problem (Contd.)
Each Department 40 ft X 40 ft; Total building 160 ft X 80 ft; Cost : Rs 1 for adjacent dept. and Rs 1 extra for dept. in between
Shipping & Rec (1) Plastic Moulding (2) Metal Forming (3) Sewing (4) Small Toy Assembly (5) Large Toy Assembly (6) Painting (7) Mechanism Assembly (8)
175 (Rs 1X 17 5)
50 0
Problem
Interchanged Department 4 with Department 6
Find cost and see if you can reduce cost by this feasible change
CRAFT needs inputs: load summary (frequency of movement form one department to the other) existing layout and distances between different departments floor area requirements of different departments
CRAFT additionally considers costs of material handling between different pairs of departments.
Breakthrough Improvement
Process Flowchart
Date: 9-30-07 Analyst: TLR Operation Transport Inspect Delay Storage Location: Graves Mountain Process: Apple Sauce Description of process Unload apples from truck Move to inspection station Weigh, inspect, sort Move to storage Wait until needed Move to peeler Apples peeled and cored Soak in water until needed Place in conveyor Move to mixing area Weigh, inspect, sort Total 30 480 190 ft 15 20 5 20 ft 360 20 ft 30 50 ft Distance (feet) 100 ft Step Time (min) 20
1 2 3 4 5 6 7 8 9 10 11