1. Introduction-Operation Strategy - Competitive Advantage
Transcript of 1. Introduction-Operation Strategy - Competitive Advantage
Introduction to POM
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Purpose of Business
What is the goal / purpose of any business?
To make money
now and in future
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Success factors for any business
• Innovation
• Product Performance
• Technology Leadership
• Product Mix
• Delivery Service
• Access to key decision makers (e.g Kirloskar)
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Management
Management – Doing things effectively & efficiently
Management Functions
• Marketing
• Finance
• Human Resource
• Operations
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Cross-Functional Decision Making
• Marketing
Who is the customer? What does the customer need?o Quality management
Market size?o Capacity, Type of processes
Distribution channel?o Inventory, Where to stock
New product development?o Cross-functional teams
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Cross-Functional Decision Making
• Finance and Accounting
Capitalo Capacity, Automation, Process selection, Inventory
Efficiencyo Process selection, Value-added
Cash Flowo Inventory
Performance Measuremento Costing system
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Cross-Functional Decision Making
• Human Resources
Skill level of employeeso Process type selection, Automation
Number of employeeso Capacity, Scheduling decisions
Job designo Process, Technology choice
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Cross-Functional Decision Making
• Information Systems
Software Developmento Forecasting, Capacity, Quality, Inventory control, Scheduling,
Material Accounting
Hardware Acquisitiono Automation support, Software operation
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What is a Product?
Solution to customer problems
• Commodity • Product • Brand
• Potential Customers judge product offerings according to three elements
Product Features & Quality Services Matrix & Quality Value-based prices
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Forms of Product
•Physical Goods
•Services
•Experiences
•Events
•Persons
•Places
•Properties
•Organisations
•Information
•Ideas
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Outputs
Pure Goods Pure Services
Crude oil production
Specialist machines manufacturer
Fast food restaurant
Computer systems
Auto maintenance
Haircut
Management consultancy
Psychotherapy clinic
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Outputs
Pure Goods Pure Services
Tangible Intangible
Output can be stored Output cannot be stored
Output can be resold No resale possible
Output can be transported Cannot be transported
Production precedes usage Simultaneous usage
Low customer contact High customer contact
Output can be demonstrated Output does not exist
Quality is evident Quality is judged
Capital intensive Labour intensive
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Characteristics of Outputs (Product & Service)
• Volume
• Variety
• Variation in demand
• Degree of customer contact
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Production Process
Production – conversion of one form of material into another
Production Process
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Operations as a System
Operation Inputs Outputs
Bank Tellers, Staff, Equipment, Facilities
Loans, Deposits, Safekeeping
Restaurant Cooks, Waiters, Equipment, Food, Facilities
Meals, Entertainment, Satisfied Customers
Hospital Doctors, Nurses, Staff, Equipment, Facilities
Health Services, Healthy Patients
Airline Planes, Facilities, Pilots, Attendants, Maint Staff, Energy
Transportation of People and Goods
University Faculty, Staff, Library, Equipment
Educated Students, Research
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Operations as a System
Mktg Engg
HR
Finance
Accounts MIS
Transformation System
Suppliers
Customers
CompetitorsGovernment
Society
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The Role of Operations Function
• As the implementer of business strategy• As a support to business strategy• As the driver of business strategy
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Judging Operation’s Contribution
Stop holding the organisation back
Be as good as competitors
Be the Best in the industry
Redefine industry’s expectations
Externallysupportive
Internallysupportive
Externallyneutral
Internallyneutral
Stage 1 Stage 2 Stage 3 Stage 4 Implementer Supporter Driver
Operations Advantage
LinkStrategy
Adopt Bestpractices
Correct worstproblems
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Hayes-Wheelwright 4-Stage Model
• Stage 1 : Internal neutrality Inward looking, reactive No originality, flair, competitive drive Avoiding bigger mistakes Necessary evil
• Stage 2 : External neutrality Begin comparing itself Not yet creative Not holding the company back
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Hayes-Wheelwright 4-Stage Model
• Stage 3 : Internally supportive Broadly up with the Best Aspire to be the Best Organise and develop resources to excel and compete
• Stage 4 : Externally supportive “One step ahead” of competitors Creative and proactive Capable of adaptation as markets change
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Basic in POM
1 2 3 4
t-01 t-04t-03t-02
t - cycleT-O
CT
Lead Time (LT) = Commitment made to customer
Cycle Time / Flow Time (CT) = Actual time taken to meet the customer requirement
Raw Material Process Time (T-O) = sum(t-oi)
If CT > LT, On Time delivery (OTD) is impossible
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Production & Operations Management (POM)
Production & Operations management
Managing resources to convert inputs to outputs, when delivered satisfies consumer (customer) needs, attaining organisational goals
Why POM ? ? Consumerism Transition - product centric to customer centric Competitive Advantage (USP) Product – Service combination (e.g Consumer durables &
Telecommunication) Outsourcing (e.g Back office of American bank in India)
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Historical Summary of OM
• 1910s : Principles of Scientific Management – Taylor, Gilbreth, Ford
• 1930s : Quality Control – Shewart Hawthorne Studies – Mayo
• 1950s : Operations Research – Many researchers• 1970s : Use of Computers in business – IBM• 1980s : JIT – Ohno
Quality Circles – JUSE TQM – Deming, Juran, Crosby FMS, CAD/CAM/Automation – US, Europe OPT – Goldratt
• 1990s : TQM, ISO, Kaizen, QFD – Many practitioners BPR – Hammel Electronic Enterprise – Microsoft, Netscape SCM – SAP, Oracle
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Attributes of POM
5 P’s Product – performance, quality, quantity, cost Plant – demand, reliability, safety, environment Process – job, batch, flow, group Programmes – purchase, cash flow, storage, transportation People – salary, training, motivation, communication
5 M’s Men – Labour performing operations Materials – To be transformed Machines – Conversion / Transformation tool Methods – Way of transformation Money – Generated & saved
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Objectives of POM
• Customer satisfaction o Good qualityo Acceptable priceo On time
• Effectivenesso Innovationo Cost of productiono Improved quality
• Efficiencyo Optimum utilisation of resourceso Remove unwanted processes (Lean Production)o Improved processes
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Decisions of POM
• Long termo Product & process designo Quality policyo Technology
• Intermediateo Forecastingo Inventoryo Health & safety
• Short termo Allocationo Maintenanceo Scheduling
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Role of Operations Manager
Oversee the work of people and machinery to convert inputs (materials and resources) into finished goods and services
Functions of Operations Manager1. Planning the production process
o Begins by choosing what goods or services to offer customerso Convert original product ideas into final specificationso Design the most efficient facilities to produce those products
2. Implementing the Production Plano Determining the facility layouto Make, Buy or Lease Decisionso Selection of men, machine, materials & methods
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Role of Operations Manager . . . contd
3. Directing (Leading)o Work towards organisational goalso Training & motivationo Business Innovation
4. Control & Monitoro Plans are executed as decidedo Unwanted processeso Quality and time schedules
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Results of effective POM
Effective production and operations management can:• Generate money • Lower a firm’s costs of production• Boost the quality of its goods and services• Allow it to respond dependably to customer demands• Enable it to renew itself by providing new products• Capacity utilisation