Cl1 OM Intro
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Transcript of Cl1 OM Intro
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Dr. R K Singh
Delhi Technological University
(DCE)
Formerly Associate Professor
IIFT, Delhi
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Production and OperationsProduction and OperationsManagementManagement
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What IsWhat Is Production andProduction and
OperationsOperations Management?Management?
Production is the creation of goods
and servicesOperations management (OM)Operations management (OM) isisthe set of activities that createsthe set of activities that createsvalue in the form of goods andvalue in the form of goods and
services by transforming inputsservices by transforming inputsinto outputsinto outputs
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The Organization The Organization
The Three Basic Functions
Organization
Finance Operations Marketing
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Business Operations OverlapBusiness Operations Overlap
Operations
FinanceMarketi
ng
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MarketingSales
promotion
Advertising
Sales
Marketresearch
Organizational ChartsOrganizational Charts
OperationsFacilities
Construction; maintenance
Production and inventory controlScheduling; materials control
Quality assurance and controlSupply chain management
ManufacturingTooling; fabrication; assembly
DesignProduct development and designDetailed product specifications
Industrial engineeringEfficient use of machines, space,and personnel
Process analysisDevelopment and installation of
production tools and equipment
Finance/accountingDisbursements/
credits
Receivables
PayablesGeneral ledger
Funds Management
Money marketInternational
exchange
Capital requirements
Stock issueBond issueand recall
Manufacturing
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The operations function involves the conversion ofinputs into outputs
Inputs
LandLabor
Capital
Transformation/ Conversion
process
OutputsGoods
Services
Control
Feedback
FeedbackFeedback
Value added
Operations as a Transformation Process
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Hospital ProcessHospital Process
Inputs Processing Outputs
Doctors, nurses Examination HealthypatientsHospital Surgery
Medical Supplies MonitoringEquipment MedicationLaboratories Therapy
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ProductProduct--Process MatrixProcess Matrix
Source: Adapted fromRobert Hayes andSteven Wheelwright,Restoring the
Competitive Edge:
Competing Through
Manufacturing (NewYork: John Wiley &Sons, 1984), p. 209
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Characteristics of GoodsCharacteristics of Goods
Tangible productTangible product
Consistent productConsistent productdefinitiondefinition
Production usuallyProduction usuallyseparate fromseparate fromconsumptionconsumption
Can be inventoriedCan be inventoried
Low customerLow customerinteractioninteraction
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Characteristics of ServiceCharacteristics of Service
Intangible productIntangible product
Produced and consumedProduced and consumedat same timeat same time
Often uniqueOften unique
High customer interactionHigh customer interaction
Inconsistent productInconsistent productdefinitiondefinition
Often knowledgeOften knowledge--basedbased Frequently dispersedFrequently dispersed
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Manufacturing or Service?Manufacturing or Service?
Tangible Act
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Goods and ServicesGoods and Services
AutomobileComputer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care Advertising agency/
investment management
Consulting service/teaching
Counseling
Percent of Product that is a GoodPercent of Product that is a Good Percent of Product that is a ServicePercent of Product that is a Service
100%100% 7575 5050 2525 00 2525 5050 7575 100%100%|| || || || || || || || ||
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Goods vs ServiceGoods vs Service
Characteristic Goods ServiceCustomer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High LowOutput Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
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Ten Critical DecisionsTen Critical Decisions
Ten Decision AreasTen Decision Areas
Design of goods and servicesDesign of goods and services Managing qualityManaging quality Process and capacityProcess and capacity
designdesign
Location strategyLocation strategy Layout strategyLayout strategy Human resources andHuman resources and
job design job design Supply chainSupply chain
managementmanagement Inventory managementInventory management SchedulingScheduling MaintenanceMaintenance
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Operations ManagementOperations ManagementFunctionsFunctions
Product Design & Development Forecasting
Process Design Production Planning and Control
Quality Management Supply Chain ManagementLocation and Layout of facilities Maintenance Management
Capacity Planning Continuous improvement of operations
Design of Operations Operational Control of Operations
• Design issues in Operations Management lay down overall
constraints under which the operations system functions.• Operational Control issues focuses on optimising the use of
available resources in the short-term while delivering goodsand services as per plan.
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Operations ManagementOperations ManagementImpact of Economic Reforms in IndiaImpact of Economic Reforms in India
Tariff reduction has exposed Indian companies to globalcompetition
Chelliah Committee tax reforms proposed during 1992 – 94triggered this process
Abolition of licensing policies had enabled several new
players to enter into business increasing domesticcompetition and capacity build up
Examples include liberalisation of two wheelers and LCVsegment in early 1980’s and passenger car segment in early1990’s
Indian customers are more demanding in terms of quality,cost and delivery of goods & services
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New Trends in OM
Local ornational focus
Reliable worldwidecommunication andtransportation networks
Global focus,movingproductionoffshore
Batch (large)
shipments
Short product life cycles and
cost of capital put pressureon reducing inventory
Just-in-time
performance
Low-bidpurchasing
Supply chain competitionrequires that suppliers beengaged in a focus on the
end customer
Supply chainpartners,collaboration,
alliances,outsourcing
PastPast CausesCauses FutureFuture
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New Trends in OM
Lengthyproductdevelopment
Shorter life cycles, Internet,rapid internationalcommunication, computer-aided design, andinternational collaboration
Rapid productdevelopment,alliances,collaborativedesigns
Standardizedproducts
Affluence and worldwidemarkets; increasingly flexibleproduction processes
Masscustomizationwith addedemphasis onquality
Job
specialization
Changing socioculture
milieu; increasingly aknowledge and informationsociety
Empowered
employees,teams, and leanproduction
PastPast CausesCauses FutureFuture
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New Trends in OM
Low-costfocus
Environmental issues, ISO14000, increasing disposalcosts
Environmentallysensitiveproduction, greenmanufacturing,recycled materials,
remanufacturing
Ethics notat forefront
Businesses operate moreopenly; public and globalreview of ethics; opposition tochild labor, bribery, pollution
High ethicalstandards andsocial responsibilityexpected
PastPast CausesCauses FutureFuture
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Measure of process improvement
Represents output relative to input
Productivity
Productivity =Productivity =Units producedUnits produced
Input usedInput used
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Measures of ProductivityMeasures of Productivity
Partial Output Output Output Output
measures Labor Machine Capital Energy
Multifactor Output Outputmeasures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure All inputs used to produce them
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Productivity Calculations
Productivity =Productivity =
Units producedUnits produced
Labor Labor--hours usedhours used
= == = 44 units/labor units/labor--hour hour 1,0001,000
250250
Labor ProductivityLabor Productivity
One resource inputOne resource input singlesingle--factor productivi tyfactor productivi ty
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
==Old laborOld labor
productivityproductivity
88 titles/daytitles/day
3232 labor labor--hrshrs
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
88 titles/daytitles/day
3232 labor labor--hrshrs==
Old laborOld laborproductivityproductivity == .25.25 titles/labor titles/labor--hr hr
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
88 titles/daytitles/day
3232 labor labor--hrshrs==
Old laborOld laborproductivityproductivity
==New laborNew labor
productivityproductivity
= .25 tit les/labor = .25 tit les/labor--hr hr
1414 titles/daytitles/day
3232 labor labor--hrshrs
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
88 titles/daytitles/day
3232 labor labor--hrshrs==
Old laborOld laborproductivityproductivity == .25.25 titles/labor titles/labor--hr hr
1414 titles/daytitles/day
3232 labor labor--hrshrs==
New laborNew laborproductivityproductivity
== .4375.4375 titles/labor titles/labor--hr hr
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
==Old multifactorOld multifactor
productivityproductivity
88 titles/daytitles/day
$640 + 400$640 + 400
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
88 titles/daytitles/day
$640 + 400$640 + 400==
Old multifactorOld multifactorproductivityproductivity
== .0077.0077 titles/dollar titles/dollar
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
88 titles/daytitles/day
$640 + 400$640 + 400==
Old multifactorOld multifactorproductivityproductivity
==New multifactorNew multifactor
productivityproductivity
== .0077.0077 titles/dollar titles/dollar
1414 titles/daytitles/day
$640 + 800$640 + 800
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Collins Title Productivity
Staff ofStaff of 44 worksworks 88 hrs/dayhrs/day 88 titles/daytitles/dayPayroll cost =Payroll cost = $640$640/day/day Overhead =Overhead = $400$400/day/day
Old System:Old System:
1414 titles/daytitles/day Overhead =Overhead = $800$800/day/day
New System:New System:
88 titles/daytitles/day
$640 + 400$640 + 400
1414 titles/daytitles/day
$640 + 800$640 + 800
==Old multifactorOld multifactor
productivityproductivity
==New multifactorNew multifactor
productivityproductivity
== .0077.0077 titles/dollar titles/dollar
== .0097.0097 titles/dollar titles/dollar
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Service ProductivityService Productivity
Typically labor intensiveTypically labor intensive
Frequently focused on unique individualFrequently focused on unique individualattributes or desiresattributes or desires
Often an intellectual task performed byOften an intellectual task performed byprofessionalsprofessionals
Often difficult to mechanizeOften difficult to mechanize
Often difficult to evaluate for qualityOften difficult to evaluate for quality
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Productivity at RestaurantProductivity at Restaurant
Improvements:Improvements:
Revised the menuRevised the menu
Designed meals for easy preparationDesigned meals for easy preparation Shifted some preparation to suppliersShifted some preparation to suppliers
Efficient layout and automationEfficient layout and automation
Training and employee empowermentTraining and employee empowerment
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Results:
Preparation time cut to 8 seconds
Management span of control increasedfrom 5 to 30
In-store labor cut by 15 hours/day
Stores handle twice the volume withhalf the labor
Fast-food low-cost leader
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THANK YOU
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