Operations Management - Acheiving Competitive Advantage
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Transcript of Operations Management - Acheiving Competitive Advantage
8/13/2019 Operations Management - Acheiving Competitive Advantage
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Operations
Management
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Achieving Competitiveadvantage(Cost)
Cost:
Ability to produce products at a cheaper cost
(and offer at a cheaper price) than theircompetitors .
How to cut Cost? ( 5 P’s of Cost reduction)
a) Product or service b) Process c) Plantd) Programmes & e) Personnel
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Achieving Competitiveadvantage(Cost)
a) Product or Service:
product Design -> to reduce cost
value engineering -> providing the samefunctionality at a lower price.
b) Process:
Choice of manufacturing process that is cost
effective -> Choice of plant & machinery ->
Automation
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Achieving Competitiveadvantage(Cost)
c) Plant:
Plant Location; Plant capacity; machine layout
d) Programmes:
Inventory management; inventory control; correct
scheduling of orders; effective production schedules
e) personnel:
employing personnel with requisite skills & training ->
less wastage -> fewer machine fault/breakdown ->
lesser maintenance cost ->lesser warranty costs
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Achieving Competitiveadvantage(Cost)
Next to Cost, we have to concentrate on
Quality
Time Flexibility
Operations Strategy
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Achieving Competitive advantage(Quality)
Quality:
Def:
1) Quality is fitness for the use.
2) Quality is conformance to requirements
3) Quality is the value perceived by the customer
** Use of extra finishes, unnecessary close tolerances,
expensive materials, extra features etc., add only to the
cost & not to the quality.
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Achieving Competitiveadvantage(Quality)
Customers are concerned with quality,
price and after-sales-service; customers
are not interested in production cost orproductivity.
Two aspects of Quality:
Quality of DesignQuality of Conformance
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Achieving Competitiveadvantage(Quality)
Quality of Design:
Identification of the right product ->
selection of appropriate features (like enduse, ease of operation, ease of
maintenance, durability, reliability, strength,
appearance etc., ) -> to ensure that the
product renders satisfactory service to the
customer at the optimal cost.
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The production manager should put
continual effort in the development of the
product Should have in-depth knowledge of
alternative materials, manufacturing
processes
Should have access to the latest
technology/process
Achieving Competitiveadvantage(Quality)
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Achieving Competitiveadvantage(Quality)
Quality of Conformance:
Good design features are of little use unless they
are reflected in the final product. This is possibleonly if the pre-determined quality is built into the
final product during the production process.
Since, apart from design, quality depends upon
raw materials, equipments and workmen, allthese must be tied up for ensuring quality.
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Achieving Competitiveadvantage(Time)
Time:
Organizations can compete on their ability to
deliver faster than others.Examples:…………………
Timely Delivery should be the AIM.
Organizations should deliver exactly whenexpected – neither too early, nor too late.
Discussion:………………………….
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Achieving Competitiveadvantage(Flexibility)
Customers wants keep changing
Flexibility is the ability to respond to
changing circumstance in terms of productimprovement and product innovation
Flexibility to switch over from one
production process to another & flexibility tochange quantity of output are the two key
issues.
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Achieving Competitiveadvantage(Operations strategy)
An operations strategy should be designed
within the overall business strategy of the
organization An operations strategy should be designed
on the basis of the competitive priorities of
the organization.
Competitive priorities????
Product or Service… Process….Plant….
Programmes…. Personnel
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Achieving Competitiveadvantage(Operations Strategy)
Product or Service:
Made-to-order product ( Ex: Boilers
manufactured by BHEL )Made-to-stock product(Ex: toothpaste,
detergent, readymade garments…..etc)
Assembled-to-order product: (Ex: Computers,furniture, training courses …)
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Achieving Competitiveadvantage(Operations Strategy)
Processes:
In-house production
Out-sourcing
Combination of in-house production &out-sourcing
Under in-house production:
Continuous production and Batch production (suitable for
made-to-stock products)
Job Shop production (or project approach) – suitable for
made-to-order products
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Achieving Competitiveadvantage(Operations strategy)
Plant:
Capacity
Locationlayout
(apart from cost, will help achieving flexibility,
speed of delivery)
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Achieving Competitiveadvantage(Operations strategy)
Programmes:
Inventory management; inventory control;
correct scheduling of orders; effectiveproduction schedules
Apart from reducing cost, will help in
reducing time of delivery
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Achieving Competitiveadvantage(Operations strategy)
Personnel:
Skilled & motivated employees
Job Analysis, Job redesign, job enrichment, job rotation, job enlargement
Safety and welfare measures for
employees
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Job Analysis
Def: It is the process of determining the
facts related to the jobs.
Data to be collected:Work Performed: 1. Major Duties
2. Minor Duties
Equipments used: 1. Types of machines2. Degree of Automation
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Job Analysis…
Employee skills involved:
1. Responsibility
2. Job knowledge
3. Mental Application
4. Dexterity & Accuracy
Physical Demands of the job:
1. Physical activities involved2. Surroundings at the place of work
3. Hazards involved
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Job Analysis..
Job Analysis defines the job and it helps in
recruiting the right kind of personnel suited for the
job, training required to be imparted to the existing
employees and finding out the scope for improvingthe job conditions.
Job Descriptions:
A concise statement of the duties, responsibilities,
working conditions and other essential facts abouta job. Prepared after carrying out Job Analysis
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Job Re-Design
Def: Revising/altering the job content,
reforming the Job Description, reallocating
altered tasks/functions to employees, withthe objective of placing the right person at
the right job and getting maximum output
and at the same time improving the level of
satisfaction of employees.
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Job Enrichment
It is a Vertical restructuring of the job, by
giving the employees additional authority,
autonomy and control over the way the jobis accomplished. It is an attempt to
motivate the employees, by giving them an
opportunity to use their range of abilities.
Job enrichment is to make work more
challenging and rewarding.
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Job Enlargement
It is a horizontal restructuring of the job by
adding related tasks. It is meaningful addition of
similar tasks. It is a Job Redesign technique
aimed at reducing monotony in work andincreasing work flexibility ( i.e., increasing the
scope of the carrying out tasks that are versatile
and yet similar in certain aspects.) Does not
require additional skills on the part of the
employees.
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Value Engineering;Value Analysis
Value?
Value = Function÷ Cost
i.e, Worth to the customer÷Price paid
by the customer
How to Improve Value?
By Improving the Functions of the product, keeping the
cost same
By keeping the function the same & reducing the cost
By improving the function & Reducing the cost
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Value Engineering & ValueAnalysis
Value analysis looks at a function that the
product or service fulfils and explores the
possibilities of performing that function in
cheaper ways.
Both Terms (VE & VA) are synonymous terms
with minor differences
VE is applied while designing a product; VA isused for the product that is already in the
market.
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Value Engineering & ValueAnalysis
VE has its role before the product is born;
VA has its role after the product is born.
VE is applied to Direct material cost andDirect Labour cost; VA is applied to all
kinds of costs
Objectives of VE&VA: To make a productmore valuable & less costly.
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Cost Reduction vs. Cost Control
Cost Reduction: Reducing the cost to the company ->
Cost of Production - cost of after-sale service - Cost of
sales – Improves competitiveness of the company.
Cost Control: A system of maintaining performance at ornear the Standard. Cost is controlled using tools like
Standard Costing, Budgetary control and Reporting –
Actual costs are compared with Standards fixed,
variances are analysed and reported to the
management
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Cost Reduction vs. Cost Control
Areas of Cost reduction: Products
Processes
Procedures
Men
Materials
Establishments R&D
Selling & Distribution etc.
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Value Analysis (a comprehensivedefinition)
It is the organized, systematic study of the
function of a material, part, component, product
or system to identify areas of unnecessary cost
that can be eliminated without impairing thecapacity of the item to satisfy its objective or to
identify areas of greater functional utility with
least possible increase in cost or to achieve
both cost-reduction and improvement of
functional utility.
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Strategic and Tactical decisions inOperations Management
Levels of Decision making:
1. Strategic
2. Tactical
3. Operational
Strategic Decisions: Deal with the broader aspect of
business and answers questions like: What is the vision
for your business?-Which direction is the business
headed?-How will your business compete in themarket?- What is your business identity? Etc., Strategic
decision making is the domain of Vision Statements.
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Strategic Decisions……
They set the Direction for the entire
company
They are broad in scope & long term innature
Examples:
Competitive priority -What shall be theUnique features of our product that make
us competitive?
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Strategic Decisions
Examples:
Location strategy
Plant CapacityLong Term partnership
Approach towards Quality
STRATEGIC DECISIONS ARE MADE ATTHE SENIORMANAGEMENT LEVEL
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Tactical Decisions….
They focus on specific day-to-day issues like resource
needs, schedules, Quantities to be produced etc.,
Examples:
Job Design/ Job redesignFacility layout
Process design
Work force management
Technology Management
TACTICAL DECISIONS ARE MADE BY MIDDLE LEVEL
MANAGERS
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Operational Decisions
They are grass root decisions about who is going to do
what, when and how.
Operational decisions are often made in ‘Real-time’
Ex: Who will be put in charge of Quality control?How can we service a client?
When will we place orders for raw materials?
Production Scheduling, inventory management etc.
OPERATIONAL DECISIONS ARE MADE BY FLOOR
LEVEL/SHOP LEVEL MANAGERS
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Order Qualifiers & order winners
Order Qualifiers: Those product/service
features provided by all the manufacturers
which make the product to be consideredfor purchase by the customers.
Order Winners: That feature which
influences the final buying decision