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Amity International Business School

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Amity International Business School
PG Sem II
Production & Operations Management


Col Sharad Khattar

Amity International Business School Course Objectives

The aim of this course is to develop
understanding of the strategic and
functional issues in the operational
environment of any organization, of
the various decisions involving the
operational activities, and of the
methods which enable taking the best
possible alternative decision.
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Amity International Business School Group Project
Introduction of the subject and explanation of the assignments and
projects to be undertaken as part of the course.
Briefing on requirement of group assignment (to be done on own time,
outside college hours):
Each group to identify one company, in either manufacturing or
services sector that has gained major competitive advantage through
effective and efficient operations. Companies that have excelled on the
basis of their processes or quality management alone may also be
chosen for the study.
The short summary of the report (max 1000 words) will be presented to
the class on an assigned date.
Group projects are to be done as part of field work and would have
major impact on internal assessment and attendance
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Amity International Business School Text and References
Evans & Collier (2007), Operations Management: An Integrated Goods and
Service Approach, Cengage
Gaither & Frazer (2008), Operation Management, Cengage Publication.
Heizer, Render, Jagadeesh (2009), Operations Management, Pearson
Education, India
Mahadevan (2007), Operations Management: Theory and Practice,
Pearson Education, India
Martinich, J (2005), Production and Operations Management, Wiley
Publication
Russell and Taylor (2009), Operations Management along the Supply
Chain, Wiley
Meredith, Jack and Shafer, Scott M, Operations Management for MBAs ,
Wiley Asia (2004)
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Amity International Business School
Session Planning and Evaluation Scheme
34 sessions over 4 Modules
Examination Scheme:



Class Test will be held in mid term







5
Components Group
Study
Case
Presentation
and Discussion
Atte
nda
nce
CT EE
Weightage
(%)
5 5 5 10 70
Amity International Business School
Introduction to Operations
Management
Amity International Business School
Introduction
Operations management is the management of an
organizations productive resources or its production
system.
A production system takes inputs and converts them into
outputs.
The conversion or transformation process is the
predominant activity of a production system.
The primary concern of an operations manager is the
activities of the conversion process.
Material moves up the value chain during the process
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The operations function
Consists of all activities directly
related to producing goods or
providing services

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Scientific Management
Frederick Taylor is known as the father of scientific
management. His shop system employed these steps:
Each workers skill, strength, and learning ability were
determined.
Stopwatch studies were conducted to precisely set
standard output per worker on each task.
Material specifications, work methods, and routing
sequences were used to organize the shop.
Supervisors were carefully selected and trained.
Incentive pay systems were initiated.
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Scientific Management
In the 1920s, Ford Motor Companys
operation embodied the key elements of
scientific management:
standardized product designs
mass production
low manufacturing costs
mechanized assembly lines
specialization of labor
interchangeable parts


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Human Relations and Behavioralism
In the 1927-1932 period, researchers in the Hawthorne
Studies realized that human factors were affecting
production.
Researchers and managers alike were recognizing that
psychological and sociological factors affected
production.
From the work of behavioralists came a gradual change
in the way managers thought about and treated workers.


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Operations Research
During World War II, enormous quantities of resources
(personnel, supplies, equipment, ) had to be deployed.
Military operations research (OR) teams were formed to
deal with the complexity of the deployment.
After the war, operations researchers found their way
back to universities, industry, government, and
consulting firms.
OR helps operations managers make decisions when
problems are complex and wrong decisions are costly.
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The Service Revolution
The creation of services organizations accelerated
sharply after World War II.
Today, more than two-thirds of the US workforce is
employed in services.
About two-thirds of the US GDP is from services.
There is a huge trade surplus in services.
Investment per office worker now exceeds the
investment per factory worker.
Thus there is a growing need for service operations
management.
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The Computer Revolution
Explosive growth of computer and communication
technologies
Easy access to information and the availability of more
information
Advances in software applications such as Enterprise
Resource Planning (ERP) software
Widespread use of email
More and more firms becoming involved in E-Business
using the Internet
Result: faster, better decisions over greater distances

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Significant Events in POM
Coordinated assembly line (Henry Ford 1863 -
1947)
Gantt charts (Henry Gantt 1861-1919)
Motion studies (Frank and Lillian Gilbreth, 1922)
Quality control (Shewhart, Juran, Feigenbaum,
Deming, Taguchi, etc.)
CAD
Flexible manufacturing systems (FMS)
Computer integrated manufacturing (CIM)
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New Challenges in OM

Local or national focus
Batch shipments
Low bid purchasing
Lengthy product
development cycles
Standardized products
Job specialization
Global focus
Just-in-time
Supply chain
partnering
Rapid product
development
Strategic alliances
Mass customization
Empowered
employees
Teams
From
To
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Organizational Model
Marketing
MIS
Engineering
HRM
QA
Accounting
Sales
Finance
OM
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Interaction
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Operations
S
u
p
p
l
i
e
r
s

Finance/Accounting
M
a
r
k
e
t
i
n
g

Human resources
Production and
Inventory data
Capital Budgeting
requests
Capacity Expansion
Technology Plans
Budgets
Cost analysis
Capital Investments
Stockholder
requirements
Orders for material
Production and
delivery schedules
Quality requirements
Design/performance
specs
Material Availability
Quality data
Delivery schedules
Design collaboration
Sales forecasts
Customer
requirements
Customer feedback
Promotions and
Discounts
Product/service
availability
Lead time estimates
Status of orders
Delivery schedules
Personnel Needs
Skill sets
Performance
Evaluations
Job design
Work measurement
Hiring/ separation
Training
Legal requirements
Union contract
negotiations
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Operations as a System
Inputs
Material
Machines
Labor
Management
Capital
Outputs
Goods
Services
Transformation
Process
Production System
Control
Subsystem
Feedback
Requirements
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Studying Operations Management

Operations as a System Transformations are:-
Physical as in manufacturing
Locational as in transportation/warehousing
Exchange as in retail
Physiological as in healthcare
Psychological as in entertainment
Informational as in communication
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Types of Operations
Operations Examples
Goods Producing Farming, mining, construction ,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
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Decision Making in OM

Tech selection and mgt
Capacity mgt and resource
allocation
Scheduling/timing/time allocation
System maintenance

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Governing Dynamics of an Operations
System
External
PESTLE non controllable
Market
Competition, Customer Desires, Product Info.
Primary Resources
Materials, Personnel, Capital, Utilities
Over the years, the earlier product centric focus has shifted towards
people centric as the key differentiator. Today the combination of the
elements of people, process, technology, infrastructure (under the
overall influence of environment) determines the planning and
execution of operations.
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Outputs of an Operations
System
Direct
Products
Services
Indirect
Taxes
Salaries
Waste and Pollution
Technological Advances
Employee impact
Societal impact
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Decision Making in OM
Strategic Decisions
Operating Decisions
Control Decisions

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Strategic Decisions
These decisions are of strategic
importance and have long-term
significance for the organization.
Examples include deciding:
the design for a new products production
process
where to locate a new factory
whether to launch a new-product
development plan

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Operating Decisions
These decisions are necessary if the
ongoing production of goods and services
is to satisfy market demands and provide
profits.
Examples include deciding:
how much finished-goods inventory to carry
the amount of overtime to use next week
the details for purchasing raw material next
month
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Control Decisions
These decisions concern the day-to-day
activities of workers, quality of products
and services, production and overhead
costs, and machine maintenance.
Examples include deciding:
labor cost standards for a new product
frequency of preventive maintenance
new quality control acceptance criteria
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What Controls the Operations
System?
Information about the outputs, the conversions,
and the inputs is fed back to management.
This information is matched with managements
expectations
When there is a difference, management must
take corrective action to maintain control of the
system
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Scope of Operations
Management -- Airlines
Forecasting-weather & landing conditions, seat demand and growth in air travel
Capacity Planning essential for maintaining cash flow and make a profit
Scheduling-planes for flights and maintenance, pilots , cabin crew, ground staff for
duties
Managing Inventories of food and beverages, first aid equipment, pillows blankets
and other equipment
Assuring Quality- adhering to time plan, dealing with customers at check in
counters and In flight, quality in food etc
Motivating and training employees complete staff in their respective fields
Locating of Facilities- which city to provide service for, where to locate service and
maintenance Facilities, location of major/minor hubs

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Responsibilities of Operations Management
Products & services
Planning

Capacity

Location


Make or buy

Layout

Projects

Scheduling
Controlling/Improving

Inventory

Quality
Organizing

Degree of centralization

Process selection
Staffing

Hiring/laying off

Use of Overtime
Directing

Incentive plans

Issuance of work orders

Job assignments

Costs

Productivity
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Key Decisions of Operations Managers
What
What resources/what amounts
When
Needed/scheduled/ordered
Where
Work to be done
How
Designed
Who
To do the work
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The Critical Decisions
Quality management
Who is responsible for quality?
How do we define quality?
Service and product design
What product or service should we offer?
How should we design these products and
services?
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The Critical Decisions -
Continued
Process and capacity design
What processes will these products require
and in what order?
What equipment and technology is
necessary for these processes?
Location
Where should we put the facility
On what criteria should we base this
location decision?
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The Critical Decisions -
Continued
Layout design
How should we arrange the facility?
How large a facility is required?
Human resources and job design
How do we provide a reasonable work
environment?
How much can we expect our employees to
produce?
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The Critical Decisions -
Continued
Supply chain management
Should we make or buy this item?
Who are our good suppliers and how many
should we have?
Inventory, material requirements
planning,
How much inventory of each item should
we have?
When do we re-order?

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The Critical Decisions -
Continued
Intermediate, short term, and project
scheduling
Is subcontracting production a good idea?
Are we better off keeping people on the
payroll during slowdowns?
Maintenance
Who is responsible for maintenance?
When do we do maintenance?
Amity International Business School
Quantitative Methods
employ mathematical models to reach a wide
variety of business decisions.
They give modern managers a competitive edge
Managers do not need to have great mathematical
skills
Familiarity allows one to:
Ask the right questions
Recognize when additional analysis is necessary
Evaluate potential solutions
Make informed decisions
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Qualitative Methods
like more traditional methods, however,
qualitative methods come in many
varieties. Different researchers focus on
different sources of data:
One's own immediate experience
Others' experiences, which we might seek to
understand through:
their speech or writing,
their other behaviors,
their products - technology, artwork, footprints, etc.
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New Challenges in Operations
Management
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Today's Factors Affecting OM
Global Competition
Quality, Customer Service, and Cost
Challenges
Rapid Expansion of Advanced
Technologies
Continued Growth of the Service Sector
Scarcity of Operations Resources
Social-Responsibility Issues
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Other Important Trends
Ethical behavior
Operations strategy
Working with fewer resources
Cost control and productivity
Quality and process improvement
Increased regulation and product liability
Lean production

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Changing Challenges for the Operations Manager
Past Causes Future
Local or
national
focus
Low-cost, reliable worldwide
communication and
transportation networks
Global Focus
Batch (large)
shipments
Cost of capital puts pressure on
reducing investment in
inventory
Just-in-time
shipments
Low-bid
purchasing
Quality emphasis requires that
suppliers be engaged in product
improvement
Supply-chain
partners
Lengthy
product
development
Shorter life cycles, rapid
international communication,
computer-aided design, and
international collaboration
Rapid product
development,
alliances,
collaborative
designs

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Changing Challenges for the Operations Manager
Past Causes Future
Standardized
products
Affluence and worldwide markets;
increasingly flexible production
processes
Mass
customization
Job
specialization
Changing sociocultural milieu.
Increasingly a knowledge and
information society.
Empowered
employees,
teams, and lean
production
Low cost
focus
Environmental issues, ISO 14000,
increasing disposal costs
Environmentally
sensitive
production,
Green
manufacturing,
recycled
materials,
remanufacturing

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Amity International Business School
PG Sem II
Production & Operations Management




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Operations Viewed As a System
Operations should best be viewed as a system rather
than a process or series of processes. It is the system
and subsystems that link the various inputs including the
external environment and deliver the desired output(s).
Essentially there are four main systems (Processes) of
conversion/ transformation:
Alter
Transport
Store
Inspect
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Operations as a System
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Environment
Customers Competitors Suppliers
Govt regs Technology Economy
Output
Facilitating
goods
Services
Monitoring
&
Control
Inputs
Capital
Materials
Equipment
Facilities
Suppliers
Labour
Knowledge
Time

Transformation
System
Alteration
Transportation
Storage
Inspection
Action
Data
Action
Data
Data
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Conversion Subsystem
Physical (Manufacturing/ Alter)
Locational Services (Transportation)
Exchange Services (Retailing)
Storage Services (Warehousing/ Store)
Other Private Services (Insurance)
Government Services (Federal)
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A Process View
External environment
Information on
performance
Internal and external
customers
Processes and
operations
1
2
3
4
5
Inputs
Workers
Managers
Equipment
Facilities
Materials
Land
Energy
Outputs
Goods
Services

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A Process View
Physical, durable output
Output can be inventoried
Low customer contact
Long response time
Capital intensive
Quality easily measured
Intangible, perishable output
Output cannot be inventoried
High customer contact
Short response time
Labor intensive
Quality not easily measured
More like a
manufacturing
process
More like a
service
process

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The Supply Chain View
Support Processes
E
x
t
e
r
n
a
l

s
u
p
p
l
i
e
r
s

E
x
t
e
r
n
a
l

c
u
s
t
o
m
e
r
s

Supplier
relationship
process
New
service/
product
development
Order
fulfillment
process
Customer
relationship
management
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The Supply Chain View
Core processes are sets of activities that
deliver value to external customers

1. Supplier relationship process
2. New service/product development process
3. Order fulfillment process
4. Customer relationship process

Support processes provide vital
resources and inputs to the core
processes
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Support Processes
TABLE | EXAMPLES OF SUPPORT PROCESSES
Capital acquisition The provision of financial resources for the
organization to do its work and to execute its
strategy
Budgeting The process of deciding how funds will be
allocated over a period of time
Recruitment and hiring The acquisition of people to do the work of the
organization
Evaluation and compensation The assessment and payment of people for the
work and value they provide to the company
Human resource support and
development
The preparation of people for their current
jobs and future skills and knowledge needs
Regulatory compliance The processes that ensure that the company is
meeting all laws and legal obligations
Information systems The movement and processing of data and
information to expedite business operations
and decisions
Enterprise and functional
management
The systems and activities that provide
strategic direction and ensure effective
execution of the work of the business
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Competitive Priorities
TABLE | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE
PRIORITIES
COST Definition Process Considerations Example
1. Low-cost
operations
Delivering a service or a
product at the lowest
possible cost
Processes must be designed
and operated to make them
efficient
Costco
QUALITY
2. Top quality Delivering an
outstanding service or
product
May require a high level of
customer contact and may
require superior product
features
Ferrari
3. Consistent
quality
Producing services or
products that meet
design specifications on
a consistent basis
Processes designed and
monitored to reduce errors and
prevent defects
McDonalds
TIME
4. Delivery speed Quickly filling a
customers order
Design processes to reduce lead
time
Dell
5. On-time
delivery
Meeting delivery-time
promises
Planning processes to increase
percent of customer orders
shipped when promised
United Parcel
Service (UPS)
6. Development
speed
Quickly introducing a
new science or a product
Cross-functional integration and
involvement of critical external
suppliers
Li & Fung
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Competitive Priorities
TABLE | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF
COMPETITIVE PRIORITIES
FLEXIBILITY Definition Process Considerations Example
7. Customizatio
n
Satisfying the unique
needs of each
customer by changing
service or products
designs
Low volume, close customer
contact, and easily
reconfigured
Ritz Carlton
8. Variety Handling a wide
assortment of
services or products
efficiently
Capable of larger volumes
than processes supporting
customization
Amazon.com
9. Volume
flexibility
Accelerating or
decelerating the rate
of production of
service or products
quickly to handle
large fluctuations in
demand
Processes must be designed
for excess capacity
The United
States Postal
Service (USPS)
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Economics of Physical and Information Outputs
Physical Outputs Information Outputs
Seller no longer owns once sold Seller continues to possess and can
sell over and over again
Replication requires manufacturing Replication at negligible cost and
with no limits
Output exists in single location Output can exist in multiple locations
simultaneously
Subject to diminishing returns Subject to increasing returns
Wears out Does not wear out
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The Experience Economy -- Evolution of Offerings
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Org Inputs Transformat
ion system
Outputs Monitor/
Control
Environment
Post
office
Labour
Equipment
Trucks
Transportation
Printing
Mail delivery
Stamps
Weather
Mail Volumes
Sorting/ Loss
Errors
Transportation
network
Weather
Civil service
Bank Cheques
Deposits
Vault
ATM
Safekeeping
Investment
Statements
Interest
EFT
Loans
Statements
Interest Rates
Wage rates
Loan defaults
Regulatory
Economy
Cinema Films
Food
People
Theater
Film
projection
Food
Preparation
Entertainm
ent
Snacks
Film rating
Disposable
incomes
Economy
Entertainment
industry
Manufac
turer
Materials
Labour
Equipment
Technology
Cutting
Forming
Joining
Mixing
Machines
Chemicals
FMCG
Scrap
Material
flows
Production
volumes
Economy
Commodity
Prices
Consumer mkt
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Comparison of Alternative Economic offerings
Economic
offering
Commodities Goods Services Experiences
Value added
by
Extracting Producing Delivering Staging
Form of
output
Fungible Tangible Intangible Memorable
Key
characteristic
Natural Standardised Customized Personalised
Buyer Market User Client Guest
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Evolution of Offerings
Commodities
Goods
Services
Experiences
Commoditisation
Customisation
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Amity International Business School
PG Sem II
Production & Operations Management




Amity International Business School


Operations Strategy
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Competitive Advantage
Through Operations
Management

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Competitiveness:

How effectively an organization meets the
wants and needs of customers relative to
others that offer similar goods or services
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Competitive advantage is dependent
on:
Meaningful differentiation
Flexibility
Cost Leadership

Operations strategies dwell on:
Improved responsiveness
Reduced prices
Improved quality
.
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Businesses Compete Using
Marketing
?????


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Businesses Compete Using
Marketing
Identifying consumer wants and needs
Pricing
Advertising and promotion


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Businesses Compete Using
Operations
??????
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Businesses Compete Using
Operations
Product and service design
Cost
Location
Quality
Quick response

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Businesses Compete Using
Operations
Flexibility
Inventory management
Supply chain management
Service
Managers and work force

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Why Some Organizations Fail
Too much emphasis on short-term
financial performance
Failing to take advantage of strengths
and opportunities
Failing to recognize competitive threats
Neglecting operations strategy
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Why Some Organizations Fail
Too much emphasis in product and service
design and not enough on improvement
Neglecting investments in capital and human
resources
Failing to establish good internal
communications
Failing to consider customer wants and needs
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Strategy
Strategies
Plans for achieving organizational goals
Mission
The reason for existence for an organization
Mission Statement
Answers the question What business are we in?
Goals
Provide detail and scope of mission
Tactics
The methods and actions taken to accomplish
strategies
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Mission/Strategy/Tactics
How does mission, strategies and tactics relate to
decision making and distinctive competencies?
Strategy Tactics Mission
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Strategy
Is a common vision that unites an organization, provides
consistency in decisions, and keeps the organization moving
in the right direction. Strategy formulation consists of four
basic steps
1. Defining a primary task. The primary task represents
the purpose of a firm what the firm is in the business of
doing
2. Assessing the core competencies is what a firm
does better than anyone else, its distinctive competence. It
could be exceptional service, higher quality or lower cost
Core competencies are more likely to be processes , a
companys ability to do certain things better than a
competitor. It is not a product.
Core competencies are not static
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Strategy
3. Determining order winners and order qualifiers
Order qualifiers
Characteristics that customers perceive as
minimum standards of acceptability to be
considered as a potential purchase
Order winners
Characteristics of an organizations goods or
services that cause it to be perceived as better
than the competition
E.g., while purchasing a CD player , customer
may determine a price range (order qualifier)
and then choose the product with the most
features(order winner)within the price range

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Strategy
Or they may have a set of features in mind
(order qualifiers) and then select the least
expensive CD player (order winner) that has
all the required features
4. Positioning the firm . No firm can be all
things to all people. Strategic positioning
involves making choices i.e., choosing one or
more important things on which to concentrate
and doing them extremely well.
A firms positioning strategy defines how it will
compete in the ,market place, what unique
value it will deliver to the customer. An
effective positioning strategy will consider
strengths, weakness, opportunities and
threats
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COMPETITIVE PRIORITIES
Let us look at companies that have positioned
themselves to compete on cost, quality, flexibility
band speed
1. Competing on Cost . Companies that compete
on cost relentenlessly pursue the elimination of all
waste . In the past the companies in this
category produced standardized products for large
markets. They improved yield by stabilizing the
production process, tightening productivity
standards and investing in automation.
Today the entire cost structure is examined for reduction
potential, nor just labour costs. High volume production
may or may not provide most cost effective alternative
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COMPETITIVE PRIORITIES
E.g., South west Airlines strategy of low cost
and controlled growth is supported by carefully
designed service, efficient operations and
committed personnel.
It uses only one type of plane. This leads to
streamlining training, record keeping, less
maintenance costs and inventory costs.
Turn around time between flights is 15
minutes. Since flights are limited to short
routes ( about an hour), all flights are direct.
This means no baggage transfers, no meals.
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COMPETITIVE PRIORITIES
E.g., South west Airlines strategy of low cost contd
There are no assigned seats, no printed boarding
passes for flights. Passengers show their ID at
gate are checked off the reservation list, are issued
plastic boarding passes that the airlines can use
over and over again
There are no agents. The bookings are done direct
with company.
SW Airlines boasts the lowest cost per passenger
mile and the highest number of passengers per
employee in the industry as well as most arrivals
on time and negligible complaints about
mishandled baggage
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COMPETITIVE PRIORITIES
Companies that compete successfully on cost
realize that low cost cannot be sustained as a
competitive advantage if increases in
productivity are solely by short term cost
reductions.
A long term productivity portfolio is required
that trades off current expenditures for future
reductions in operating costs. This portfolio
consists of investments in updated facilities
and infrastructure, equipment, programs and
systems to streamline operations and training
and development that enhances the skills and
capabilities of people
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COMPETITIVE PRIORITIES
Competing on Quality
Most companies approach quality in a defensive or
reactive mode i.e., quality is confined to minimizing
defect rate or conforming to design specifications.
To compete on quality the companies must view it
as an opportunity to please the customer , nor just
a way to avoid problems or reduce rework costs
To please customer one must understand
customers attitude towards and expectation of
quality
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COMPETITIVE PRIORITIES
Competing on Quality
E.g., Ritz Carlton Hotels, is a recognized symbol of
quality. The entire service system is designed to
understand the individual expectations of more
than 5,00,000 customers and to move heaven
and earth to satisfy them
Every employee is empowered to take immediate
action to satisfy a guests wish or resolve a
problem. Teams of workers at all levels set
objectives and devise quality action plans. Each
hotel has a quality leader who serves as a
resource person and advocates for development
and implements of those plans.
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COMPETITIVE PRIORITIES
Competing on Quality.
Daily quality reports submitted from 720 work
systems track such measures as guest room
preventive maintenance cycles, percentage of
check ins with no waiting and to achieve industry
best clean room appearance.
Guest Incident action reports completed by every
employee help to identify patterns of problems so
that they can be resolved permanently.
Guest preference reports are recorded in a
sophisticated customer database for service
delivery throughout the company
Amity International Business School
COMPETITIVE PRIORITIES
Competing on Flexibility
Marketing always wants more variety to offer its
customers. Manufacturing resists this trend
because variety upsets this stability of a production
system and increases costs.
The ability to respond to variation has opened up a
new level of competition. Flexibility has become a
competitive weapon. It includes the ability to
produce a wide variety of products, to introduce
new products and modifying existing ones quickly
and to respond to customer needs
Amity International Business School
COMPETITIVE PRIORITIES
Competing on Flexibility
E.g., Custom Foot store offer custom sculpted
models called lasts. At Custom Foot Shoe store a
customers feet are scanned electronically to
capture 12 different 3-D measurements. These
measurements are then sent to a factory in Italy
where a library of 3000 computerized lasts can be
modified digitally instead of manually and then
milled by a machine out of plastic. Customs shoes
are mailed to customers home in weeks.
Sine the shoe store carries no inventory the prices
are competitive
Amity International Business School
COMPETITIVE PRIORITIES
Competing on Flexibility
E.g., National Bicycle Industrial Company fits
bicycles to exact customers measurements.
Bicycle manufacturers typically offer 20-30 models.
National offers 11,231,862 variations and delivers
within 2 weeks at costs only 10 5 above standard
models
Amity International Business School
COMPETITIVE PRIORITIES
Competing on Speed (Time)
Speed is fast becoming a source of competitive
advantage. The internet has conditioned customers
to expect immediate response and rapid product
shipment.
Service organizations like McDonalds, Fed Ex
have always competed on speed.
Citicorp advertises a 15 minute mortgage approval
Walmart replenishes its stock twice a week
instead of industry average of 2 weeks.

Amity International Business School
COMPETITIVE PRIORITIES
Competing on Speed (Time)
In the garment industry, Saks Fifth Avenue
has terminals from the French national
Videotex system that link retailers to
manufactures abroad. Tailors in New york
send suit measurements via satellite to
France, where a laser cuts the cloth and
tailors begin their work. The suit is
completed and shipped back to New York
within 4 days. Thats about the same time
required for alteration in most retailing store.
The standard for custom made suits is 10
weeks.
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Time-based Strategies
JAN FEB MAR APR MAY JUN
Planning
Processing
Changeover
On time!
Designing
Delivery
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OPERATIONS ROLE IN CORPORATE
STRATEGY
Effective strategy can be achieved in two ways
By performing different activities from those of
competitors OR
by performing the better than competitors same
activities better
Operations plays an important role in either
approach. It can provide for a differentiated
strategy and it can serve as a firms distinctive
competencies in executing similar strategies
The operations functions helps strategy evolve
by creating new and better ways of delivering a
firms competitive priorities to the customer
Amity International Business School
OPERATIONS ROLE IN CORPORATE
STRATEGY
Once a firms competitive priorities have been
established, its operating system must be
configured and managed to provide for those
priorities
This involves a whole series of interrelated
decisions e.g., moving to a low wage country
is not a sustainable advantage unless the firm
is skilled at setting up and managing such a
facility
Amity International Business School
OPERATIONS ROLE IN CORPORATE
STRATEGY
Strategic advantage built on operations
expertise are frequently underestimated or
ignored by competitors. Competencies that
take years to develop can emerge with
considerable force. Walmart built its skills in
retailing slowly over a dozen years in rural
areas of South before going head to head with
competition in large urban areas.
Amity International Business School
OPERATIONS ROLE IN CORPORATE
STRATEGY
United Airlines tried to emulate Southwest's
success by eliminating meals and baggage
service adding more direct routes, but they
could not replicate fast turnover, on time
arrivals, committed employees .Southwest had
built and nurtured this over time
Amity International Business School
OPERATIONS ROLE IN CORPORATE
STRATEGY
E.g Walmart
Mission Provide value for our customer
Competitive Priority Low prices everyday
Operations Strategy- Low inventory levels,
short flow times
Operations Structure- Linked
Communications between stores, Fast
transportation system
Enabling Processes and Technologies Cross
docking, Focused locations
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STRATEGIC DECISIONS IN OPERATIONS
These involve
1. Products and services
2. Process and Technologies
3.Capacity and Facilities
4. Human Resources
5. Quality
6. Sourcing
7. Operating Systems
Amity International Business School
STRATEGIC DECISIONS IN OPERATIONS

1. Products and services
Make to order . Products & services are made to
customer specifications after an order has been
received e.g., wedding invitation cards, custom
built houses.
Make to stock . Products and services are made in
anticipation of demand e.g., ready to wear apparel,
tvs
Assemble to order . Products and services add
options according to customers specifications e.g.,
computer systems, corporate training , industrial
systems
Amity International Business School
STRATEGIC DECISIONS IN OPERATIONS
2. Processes and Technologies
Project. Is a one time production of a product to
customer order e.g., ship building
Batch production . These systems process many
different jobs at the same time in gropus ( orders)
e.g. printers, bakeries, machine shops , furniture
shops
Mass production . Produces large volume of a
standard product for a mass market
Continuous Production . Is used for very high
volume commodity products e.g., refined oil,
treated water , paints.
Amity International Business School
STRATEGIC DECISIONS IN
OPERATIONS
3. Capacity and Facilities. Capacities
decisions affect
product and lead times,
customer responsiveness
operating costs and
firms ability to compete.
Inadequate capacities can lose customers
and limit growth . Excess capacity can drain a
companys resources and prevent
investments
Overall capacity must then be divide into
individual facilities
Amity International Business School
STRATEGIC DECISIONS IN
OPERATIONS
3. Capacity and Facilities. Capacities
decisions affect
Strategic decision must include whether
demand should be met with few large facilities
or several small facilities
4. Human Resources. Strategic issues
involve determining skills levels, degree of
autonomy rehired to operate the
production systems, outlining training
requirements etc..
Amity International Business School
STRATEGIC DECISIONS IN
OPERATIONS
5. Quality . This permeates every
strategic decision. What is the target level
of quality for products and services. How
will be employees be involved with quality
what is types of training necessary
Responsibility for quality teams
Whether to go for quality certifications etc?
Amity International Business School
STRATEGIC DECISIONS IN
OPERATIONS
6. Sourcing. A firm that sells products ,
assembles the product , makes all parts
and extracts raw material is completely
vertical integrated.
But most of companies cannot do all this
Hence major strategic decisions as to how
much of work will be done by outside firms?
Amity International Business School
STRATEGIC DECISIONS IN
OPERATIONS
7. Operating Systems. These execute
strategic decisions on a day to day basis
so it is important that they be designed to
support how the firm competes in market
place.
E.g., IT system must be able to support both
customer and worker demand for rapid
access , storage and retrieval of information
Amity International Business School
Planning and Decision Making
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Marketing
Strategies
Operations
Strategies
Tactics Tactics Tactics
Operating
procedures
Operating
procedures
Operating
procedures
Amity International Business School
Examples of Strategies
Low cost
Scale-based strategies
Specialization
Flexible operations
High quality
Service

Amity International Business School
Operations Strategy Framework
ENVIRONMENT
AND INDUSTRY
CORPORATE
RESOURCES
CORPORATE
STRATEGY
EFFICIENCY
DEPENDABILITY
QUALITY
FLEXIBILITY

Facility mission
Process
Automation
Product/service
Specificity
Interconnectedness
Capacity
Loading
Lead/Lag
Facilities
Size
Location
Vertical Integration
Supplier control
Customer Control
Interdependencies
Infrastructure
Planning and
Control
Work Force
Quality Control
Amity International Business School
The key success factors, SWOT analysis and 5 forces
model must be examined in relation to ones company to
decide Ops strategy
For detailed evaluation, companies have to examine their:
Primary tasks
Core competencies
Order qualifiers and order winners
Strategic positioning


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The strategic decisions are required to be taken
for:
Make to order/ make to stock/ assemble to
order
Classification of processes to be decided:
Projects
Batch
Mass
Continuous

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Strategy Formulation
Distinctive competencies
Environmental scanning
SWOT
Order qualifiers
Order winners
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Strategy and Tactics
Distinctive Competencies
The special attributes or abilities that give an
organization a competitive edge.
Price
Quality
Time
Flexibility
Service
Location

Amity International Business School
Banks, ATMs, Street food Convenience
Location
Disneyland

Superior customer
service
Service
Burger King
Supermarkets
Variety
Volume
Flexibility
Express Mail, Fedex,
One-hour photo,
Rapid delivery
On-time delivery
Time
Sony TV
Lexus, Cadillac

Pepsi, Nokia
High-performance design
or high quality

Consistent quality
Quality
low cost airlines, NANO
car
Low Cost
Price
Examples of Distinctive Competencies
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THREATS?
OPPORTUNITIES?
STRENGTHS?
WEAKNESSES?
Central / RBI Intervention
Population Characteristics
Interest Rates
Exchange Rates
Improved
Communications
Competitors Plans
Changes in Govt Policy
New Products
New markets
Motivation
Quality
Flexibility
Cost Structure
Resource Availability Technology
Skills Capacity
Industrial relations Management Systems
Employee Age
Equipment Age
New Technologies
New Competitors
SWOT
ANALYSIS
Amity International Business School
Economic conditions include general health & direction of
economy, inflation & deflation, interest rates etc
Political conditions favourable / unfavourable attitude
towards business
Legal environment includes govt regulations, trade
restrictions , labour laws etc
Technology-include rate at which product innovations are
occurring, current & future technologies
Key External Factors
Amity International Business School
Key External Factors
Competition includes number & strength
of competitors, basis of competition (price,
quality, special features)
Markets includes size, location, brand
loyalities, ease of entry, potential of
growth, long time stability

Amity International Business School
Products and services includes existing
products or services &potential for new
products or services
Technology includes existing technology,
ability to integrate new technology and
probable impact of technology on current &
future operations
Suppliers dependability, quality & flexibility
of suppliers

Key Internal Factors
Amity International Business School
Human Resources includes skills and abilities of
managers, loyalty to organisation
Facilities and equipment capacity, location ,age,
cost to maintain or replace
Financial resources cas flow, access to additional
funding, existing debt burden
Customers loyalty, existing relationship, and
understandings wants and needs of customers
Key Internal Factors
Amity International Business School
Porters Five Forces
Rivalry among
established firms
Risk of entry by
potential competitors
Bargaining Power of
suppliers
Bargaining Power of
buyers
Threat of substitute
products
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Strategy Formulation
Order qualifiers
Characteristics that customers perceive as
minimum standards of acceptability to be
considered as a potential purchase
Order winners
Characteristics of an organizations goods or
services that cause it to be perceived as better
than the competition
Amity International Business School
Order Winners and Qualifiers
S
a
l
e
s

(
$
)

Achievement of competitive priority
Low High
Order Winner
S
a
l
e
s

(
$
)

Achievement of competitive priority
Low High
Order Qualifier
Threshold
Amity International Business School
Comparison of mission , organizational strategy and operational strategy
Manage
ment
level
Time
horizon
Scope Level of
details
Relates to
The overall
organization
Mission

Strategy
Top

Senior
Long

Long
Broad

Broad
Low

Low
Survival ,Profitability
Growth rate, market
share
Production/
Operation
Strategic Senior Moderate to
long
Broad Low Product design,
location choice, tech
choice
Tactical

Middle

Moderate Moderate Moderate Employment levels ,
output levels ,
equipment selection ,
facility layout
Operatio
nal
Low Short narrow High Scheduling
personnel, adjusting
output rate ,
inventory mgmt
Amity International Business School
PRODUCTIVITY
120
Amity International Business School
Productivity
Productivity
A measure of the effective use of resources, usually
expressed as the ratio of output to input
Productivity is an index that measures output ( goods
& services ) relative to input used to produce them
(labour , materials, energy etc)
Productivity ratios are used for
Planning workforce requirements
Scheduling equipment
Financial analysis
Amity International Business School
Productivity
Partial measures
output/(single input)
Multi-factor measures
output/(multiple inputs)
Total measure
output/(total inputs)
Productiv ity =
Outputs
Inputs
Amity International Business School
Productivity Growth
Current Period Productivity Previous Period Productivity
Previous Period Productivity
Productivity Growth =
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Measures of Productivity

Partial Output Output Output Output
measures Labor Machine Capital Energy

Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced
measure All inputs used to produce them
Amity International Business School
Units of output per kilowatt-hour
Dollar value of output per kilowatt-hour
Energy
Productivity
Units of output per dollar input
Dollar value of output per dollar input

Capital
Productivity
Units of output per machine hour
machine hour
Machine
Productivity
Units of output per labor hour
Units of output per shift
Value-added per labor hour
Labor
Productivity
Examples of Partial Productivity Measures
Amity International Business School
Example 3
7040 Units Produced

Sold for $1.10/unit

Cost of labor of $1,000

Cost of materials: $520

Cost of overhead: $2000
What is the
multifactor
productivity?
Ans. 2.20
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Example 3 Solution
MFP = Output
Labor + Materials + Overhead
MFP = (7040 units)*($1.10)
$1000 + $520 + $2000
MFP = 2.20
Amity International Business School
Factors Affecting Productivity
Capital Quality
Technology Management
Amity International Business School
Standardization of processes wherever
possible to reduce variability
Quality quality in all fields across the
organisation can help
Use of Internet can lower wide range of
transactions
Searching for lost or misplaced items these
wastes time hence negatively affecting
productivity


Other Factors Affecting Productivity
Amity International Business School
Other Factors Affecting Productivity
Scrap rates have an adverse effect on productivity
signaling inefficient use of resources
New workers have lower productivity
Safety accidents take a toll on productivity
Shortage of skilled workers hampers ability of companies
to generate and sustain growth
Layoffs effect can be positive & negative. Initially
productivity may increase after a layoff as workload
remains same and fewer workers do same work. After a
while the workers may experience burnout. Good workers
may leave.


Amity International Business School
Labor turnover - has a negative effect,
replacements need time to catch up
Design of the workspace a well designed
workplace can have a positive impact
Incentive plans that reward productivity
Other Factors Affecting Productivity
Amity International Business School
Bottleneck Operation
Machine #2
Bottleneck
Operation
Machine #1
Machine #3
Machine #4
10/hr
10/hr
10/hr
10/hr
30/hr
Amity International Business School
Improving Productivity
Develop productivity measures
Determine critical (bottleneck) operations
Develop methods for productivity
improvements
Establish reasonable goals
Get management support
Measure and publicize improvements
Dont confuse productivity with efficiency
Amity International Business School
A Forced Choice Model of Ops
Strategic Planning
134
Amity International Business School
A Forced Choice Model of Ops Strategic Planning
Broad economic assumption
Key Govt/ regulatory threats
Major Technological forces
Significant marketing
opportunities / threats
Forecast of Operations: profits
and cash flows
Statement of strengths and
weaknesses
Interrelation set of financial and
non financial objectives
Statement of mission
Explicit competitive strategies
for each major competitor
Major Future Programs
STRATEGIC OPTIONS:
Strategic options (at least two)
Requirements for implementing each strategy
Contingency plans
ENVIRONMENTAL ASSESSMENT ORGANISATIONS POSITION
Amity International Business School
Criteria for Success
EFFICIENCY
QUALITY
EFFECTIVENESS
FLEXIBILITY
Fast introduction of new products and services
Wide product /service range
Low Price
High
Consistent
Availability (from stock)
Design competence
Technical capability
Delivery Reliable
Rapid
Low Cost
High productivity
Labour
Material
Energy
Amity International Business School
THANK YOU
Amity International Business School
Amity International Business School
PG Sem II
Production & Operations Management



Amity International Business School
4
Product and
Service Design
McGraw-Hill/Irwin
Amity International Business School
INTRODUCTION
New products & services are lifeblood of an org
Designs can provide competitive edge by bringing new
ideas to the market quickly , doing a better job of
satisfying customers needs or being easier to
manufacture ,repair
Design is a critical process for the firm. It defines a
firms customers as well its competitors

Amity International Business School
INTRODUCTION
Design capitalizes on a firms core
competencies & determines what core
competencies need to be developed

It is the most obvious driver of change-
new products & services can rejuvenate
an org, define new markets & inspire new
technologies
Amity International Business School
INTRODUCTION
Design is benefecial because it makes
organisation to look outside their
boundaries, bring in new ideas, challenge
convential thinking
Product & service design provide a natural
way of learning, breaking down barriers,
working in teams & integrating across
functions
Amity International Business School
Major factors in design strategy
Cost
Quality
Time-to-market
Customer satisfaction
Competitive advantage
Product and Service Design
Product and service design or redesign should be
closely tied to an organizations strategy
Amity International Business School
Translate customer wants and needs into product and service
requirements (marketing & operations)
Refine existing products and services (marketing)
Develop new products and services(marketing , operations)
Formulate quality goals(marketing,operations)
Formulate cost targets( finance , operation)
Construct and test prototypes (operations, marketing )
Document specifications (operations)
Product or Service Design Activities
Amity International Business School
Reasons for Product or Service Design
Economic (need to reduce cost)
Social and demographic( population shifts)
Political, liability, or legal (new regulations)
Competitive
Cost(cost components)
Technological (technology advancements)

Amity International Business School
Objectives of Product and Service Design
Main focus
Customer satisfaction
Secondary focus
Function of product/service
Cost/profit
Quality
Appearance
Ease of production/assembly
Ease of maintenance/service
Amity International Business School
Taking into account the capabilities of the
organization in designing goods and services
Failure to take this into considerationcan result in
reduced productivity , reduced quality and increased
costs
For this reason it is wise to solicit input from
operations people through out the design process
Design ,operations and marketing people must work
together
Designing For Operations
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Legal
FDA, OSHA
Product liability
Uniform commercial code
Ethical
Releasing products with defects
Environmental

Legal, Ethical, and Environmental Issues
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Regulations & Legal Considerations
Product Liability - A manufacturer is liable
for any injuries or damages caused by a
faulty product.
Uniform Commercial Code - Products carry
an implication of merchantability and fitness.
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Designers Adhere to Guidelines
Organisers want designers to adhere to
guidelines such as
Produce designs that are consistent with
the goals of the company
Give customers the value they expect
Make health and safety a primary concern
Consider potential harm to the environment
Amity International Business School
Other Issues in Product and Service Design
Product/service life cycles
How much standardization
Product/service reliability
Range of operating conditions


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Life Cycles of Products or Services
Time
Introduction
Growth
Maturity
Saturation
Decline
D
e
m
a
n
d

Amity International Business School
Mass customization:
A strategy of producing standardized
goods or services, but incorporating some
degree of customization
Delayed differentiation
Modular design
Mass Customization
Amity International Business School
Delayed differentiation is a
postponement tactic
Producing but not quite completing a
product or service until customer
preferences or specifications are known e.g
veh truck chassis, mens trousers as part of
apparel being sold
Delayed Differentiation
Amity International Business School
Phases in Product Development Process
1. Idea generation
2. Feasibility study
3. Form Design
4. Functional Design
5. Production Design
6. Pilot run and final Test
7. Final design and Process plan
8. Product introduction
9. Follow-up evaluation
Amity International Business School
PHASE 1 :Idea Generation
Ideas
Competitor based
Supply chain based
Research based
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Reverse Engineering
Reverse engineering is the
dismantling and inspecting
of a competitors product to
discover product improvements.
Amity International Business School
Research & Development (R&D)
Organized efforts to increase scientific
knowledge or product innovation & may
involve:
Basic Research advances knowledge about
a subject without near-term expectations of
commercial applications.
Applied Research achieves commercial
applications.
Development converts results of applied
research into commercial applications.
Amity International Business School
PHASE 2: FEASIBILITY STUDY
Marketing takes the ideas that are generated and the
customers needs that are identified from the first stage of
design process and formulates alternative product and
service concepts
The promising concept undergoes a series of studies
Market Analysis this assesses whether there is enough
demand in the market
Economic Analysis it looks at the estimate of
production and development costs and compares them
to estimated sales volume
Amity International Business School
FEASIBILITY STUDY
Technical and Strategic Analysis it answers the following
questions-
Does the new product require new technology?
Is the capital investment excessive ?
Does the company have sufficient labour and
management skills to support the required technology?
Is sufficient capacity available for production?
Does the new product provide competitive advantage to
the company?
Is it compatible with core business of the firm?
Amity International Business School
PHASE 3: FORM DESIGN
Refers to the physical appearance of the product
shape , colour, size,style
Aesthetics such as image, market appeal and
personal identification also form part of form design

Amity International Business School
PHASE4 : FUNCTIONAL DESIGN
Functional design is concerned with how the product
performs
It seeks to meet the performance specification of fitness
to use by the customer
Three performance characteristics considered during this
phase are reliability, maintainability and usability


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Reliability
Reliability: The ability of a product, part, or system to
perform its intended function under a prescribed set of
conditions
Failure: Situation in which a product, part, or system
does not perform as intended
Normal operating conditions: The set of conditions
under which an items reliability is specified
Amity International Business School
Improving Reliability
Fundamental question is how much reliability is
needed? Answer to this depends on potential benefits
and costs
Component design
Production/assembly techniques
Testing
Redundancy/backup
Preventive maintenance procedures
User education
System design
Amity International Business School
RELIABILITY
A products or systems reliability is a
function of reliability of the functions parts
and how are they arranged
R(sys)=R1xR2x...
Reliability can also be expressed as MTBF
MTBF=1/failure rate
Amity International Business School
MAINTAINABILITY
Also called serviceability refers to ease and/or
cost with which a product or service is
maintained or repaired
One quantitative measure of maintainability is
MTTR
Products can be made easier to maintain/repair
by placing them correctly, modular construction
System availability = MTBF/MTBF+MTTR
Amity International Business School
USABILITY
All of us have encountered products or services that are
difficult or cumbersome to use
Levers for popping the trunk of a car & unlocking the
gas cap located too close together
Unwieldy and big sized remotes
Cups with small handles
Usability is what makes a product easy to use and a
good fit for its targeted customer



Amity International Business School
PHASE 5: PRODUCTION DESIGN
Production design is concerned how products will be made.
Tendency to overdesign a product with too many features and
parts.
Lack of knowledge of manufacturing capabilities can result in
designs that are impossible to make and skills that are not
available
Many times production people have to redesign the product
Late changes in design are both costly & disruptive
Thats why production design is considered in preliminary stage
Amity International Business School
PRODUCTION DESIGN
Recommended approaches to production design
include simplification, standardisation, modularity, and
design for manufacture
Simplification-attempts to reduce number of parts,
subassemblies and options in a product. It also means
avoiding tools, fasteners and adjustments

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Standardization
Standardization
Extent to which there is an absence of
variety in a product, service or process
Standardized products are immediately
available to customers
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Advantages of Standardization
Fewer parts to deal with in inventory &
manufacturing
Design costs are generally lower
Reduced training costs and time
More routine purchasing, handling, and
inspection procedures
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Advantages of Standardization (Contd)
Orders fillable from inventory
Opportunities for long production runs
and automation
Need for fewer parts justifies increased
expenditures on perfecting designs and
improving quality control procedures.
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Disadvantages of Standardization
Designs may be frozen with too many
imperfections remaining.
High cost of design changes increases
resistance to improvements.
Decreased variety results in less
consumer appeal.
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Modular Design
Modular design is a form of standardization
in which component parts are subdivided
into modules that are easily replaced or
interchanged. It allows:
easier diagnosis and remedy of failures
easier repair and replacement
simplification of manufacturing and assembly
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Manufacturability
Manufacturability is the ease of
fabrication and/or assembly which is
important for:
Cost
Productivity
Quality


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Designing for Manufacturing
Beyond the overall objective to achieve customer
satisfaction while making a reasonable profit is:
Design for Manufacturing(DFM)
The designers consideration of the organizations
manufacturing capabilities when designing a product.
The more general term design for operations
encompasses services as well as manufacturing
Amity International Business School
Concurrent Engineering


Concurrent engineering
is the bringing together
of engineering design and
manufacturing personnel
early in the design phase.
Amity International Business School
Computer-Aided Design
Computer-Aided Design (CAD) is product
design using computer graphics.
increases productivity of designers, 3 to 10
times
creates a database for manufacturing
information on product specifications
provides possibility of engineering and cost
analysis on proposed designs
Amity International Business School
RECYCLING
Recycling-means recovering materials for
future use . This not only applies to
manufactured parts but also to oils and
lubricants. Reasons could be
Cost savings
Environmental concern
Environmental regulations
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PHASE 6: PILOT RUN AND FINAL TEST
A series of tests are required to be carried
out for testing all final specifications ,
functionality and other details .
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PHASE 7:FINAL DESIGN & PROCESS PLANS
This consists of detailed drawings &
specifications for the new product or service
The accompanying process plans are workable
instructions for manufacture including necessary
equipment and tooling, component sourcing
recommendations, job descriptions and
procedures for workers and computer programs
for automated machines
Amity International Business School
PHASE 8 :PRODUCT INTRODUCTION &
FOLLOWUP EVALUATION
Product introduction is the phase when it is
introduced in the market. Market response
analysis is very important at this stage
Follow up evaluation is based on the response
of the customers

Amity International Business School
THANK
YOU


Amity International Business School
Amity International Business School
PG Sem II
Production & Operations Management





Amity International Business School
Location Planning
and Analysis
Amity International Business School
Center-of-Gravity Method
Amity International Business School
Center-of-Gravity Method
Finds location of distribution center
that minimizes distribution costs
Considers
Location of markets
Volume of goods shipped to those
markets
Shipping cost (or distance)
Amity International Business School
Center-of-Gravity Method
Place existing locations on a
coordinate grid
Grid origin and scale is arbitrary
Maintain relative distances
Calculate X and Y coordinates for
center of gravity
Assumes cost is directly proportional
to distance and volume shipped
Amity International Business School
Center-of-Gravity Method
x - coordinate =
d
ix
Q
i

Q
i

i
i
d
iy
Q
i

Q
i

i
i
y - coordinate =
where d
ix
= x-coordinate of location i
d
iy
= y-coordinate of location i
Q
i
= Quantity of goods moved to or from
location i
n
n
Amity International Business School EXAMPLE 1
FIND A DISTRIBUTION CENTRE FOR
FOUR PRODUCING CENTRES
LOCATED AT CHICAGO, PITTSBURG,
NEW YORK AND ATLANTA .
COORDINATES ARE AS SHOWN

Amity International Business School
Center-of-Gravity Method
North-South
East-West
120
90
60
30

| | | | | |
30 60 90 120 150
Arbitrary
origin
Chicago (30, 120)
New York (130, 130)
Pittsburgh (90, 110)
Atlanta (60, 40)
Amity International Business School
Center-of-Gravity Method
Number of Containers
Store Location Shipped per Month
Chicago (30, 120) 2,000
Pittsburgh (90, 110) 1,000
New York (130, 130) 1,000
Atlanta (60, 40) 2,000
x-coordinate =
(30)(2000) + (90)(1000) + (130)(1000) + (60)(2000)
2000 + 1000 + 1000 + 2000
= 66.7
y-coordinate =
(120)(2000) + (110)(1000) + (130)(1000) + (40)(2000)
2000 + 1000 + 1000 + 2000
= 93.3
Amity International Business School
Center-of-Gravity Method
North-South
East-West
120
90
60
30

| | | | | |
30 60 90 120 150
Arbitrary
origin
Chicago (30, 120)
New York (130, 130)
Pittsburgh (90, 110)
Atlanta (60, 40)
Center of gravity (66.7, 93.3)
+
Amity International Business School
Example 2
The Burger Doodle Restaurant chain
purchases ingredients from four different
suppliers . The company wants to construct
a new central distribution centre to process
and package the ingredients before shipping
them to various restaurants . The suppliers
ingredient items in 40 foot truck trailers each
with a capacity of 38,000 kg.. The location of
4 suppliers A,B ,C and D and annual number
of trailers loads are shown
Amity International Business School
Example 2
100 200 300 400 500 600 700 800
800

700

600

500

400

300

200

100
A 75
B 105
C 160
C135
MILES
M
I
L
E
S
Amity International Business School
Example 2
A B C D
Xi 200 100 250 500
Yi 200 500 600 300
Qi 75 105 135 60
Amity International Business School
Example 2
X= (200)(75)+(100)(105)+(250)(135)+(500)(60)
75+105+135+60
= 238

Y =(200)(75)+(500)(105)+(600)(135)+(300)(60)
75+105+135+60
=444
Hence the location of the centre should have
these coordinates
Amity International Business School
Example 2
100 200 300 400 500 600 700 800
800

700

600

500

400

300

200

100
A 75
B 105
C 160
C135
MILES
M
I
L
E
S
Amity International Business School
LOAD DISTANCE TECHNIQUE
Amity International Business School
LOAD DISTANCE TECHNIQUE
A variation of centre of gravity method for
determining for determining coordinates of
facility location.
In this, a single set of location coordinates
is not identified. Instead various locations
are evaluated using a load distance value
that is a measure of weight and distance
Amity International Business School
LOAD DISTANCE TECHNIQUE
For a single potential location a load
distance value is computed as follows
LD = lidi
Where LD =load distance value
li= load expressed as a weight , number of
trips or units being shipped from the
proposed site to location I
di= distance between proposed site and
location
n

i=1
Amity International Business School
LOAD DISTANCE TECHNIQUE
The distance di in this formula can be the
travel distance, if that value is known or
can be determined from a map. It can also
be computed using the following formula
for the straight line distance between two
points which is the hypotenuse
di = (xi x) + (yi y)
Where (x,y) = coordinates of proposed site
(xi,yi) = coordinates of existing facility
Amity International Business School
LOAD DISTANCE TECHNIQUE
The load distance technique is applied by
computing a load distance value for each
potential facility location.
The implication is the location with lowest
value would result in minimum
transportation cost and thus would be
preferable
Amity International Business School
Example 1
Burger Doodle has to evaluate three
different sites it has identified for its new
distribution centre relative to four suppliers
identified in previous example The
coordination of three sites under
consideration are
Site 1: x1= 360, y1= 180
Site 2: x2=420, y2=450
Site 3; x3=250, y3= 400
Amity International Business School
Example 1
Solution
First the distances between the proposed
sites (1,2 and 3) and each existing facility
(A,B,C and D)are computed using the
straight formula)
Site 1: da = (xa-x1) + (ya -y1)
= (200-360) + (200-180) = 161.2
db = (xb- x1)+ ( yb y1)
= (100-360) + (500-180) = 412.3
205
Amity International Business School Example 1
Site 1: dc = (xc-x1) + (yc -y1)
= (250-360) + (600-180) = 434.2
dd = (xd- x1)+ ( yd y1)
= (500-360) + (300-180) = 184.4
Site 2: da= 333, db = 323.9, dc = 226.7, dd= 170
Site 3: da= 206, db = 180.3, dc = 200, dd= 269.3
Amity International Business School
Example 1
Next the formula for load distance for each
proposed site is calculated
LD(site1) = lidi
= (75)(161.2) + (105)(412.3) + (135)(434.4) +
(60)(184.4) = 1,25,063
LD(site2)
=(75)(333)+(105)(323.9)(135)(226.7)+(60)(170) =
99,789
LD(site 3)
=(75)(206.2)+(105)(180.3)+(135)(200)+60)(269.3)
= 77,555
D

I= A
Amity International Business School
Example 1
Since site 3 has the lowest LD value , this
location would minimize transportation cost
Notice site 3 is also close to location
determined using centre of gravity method in
previous example
Amity International Business School
Transportation Model
Amity International Business School
Transportation Model
Finds amount to be shipped from
several points of supply to several
points of demand
Solution will minimize total production
and shipping costs
A special class of linear programming
problems
Amity International Business School
Thank you
Amity International Business School
Amity International Business School
PG Sem II
Production & Operations Management



Amity International Business School
4
Product and
Service Design
McGraw-Hill/Irwin
Amity International Business School
SERVICE DESIGN
Amity International Business School
WHAT IS SERVICE
Service are acts , deeds ,performances or relationships that
produce time, place , form or psychological utilities for
customers.
Service can also be defined in contrast to goods. A good is a
tangible product that can be created or sold or used later. A
service is intangible and perishable
In reality almost all purchases of goods are accompanied by
facilitating services and almost every service purchased is
accompanied by facilitating goods
Amity International Business School
CHARACTERISTICS OF SERVICE
Services are intangible
Service output is variable
Service have higher customer contact
Services are perishable
Service and service provider are inseparable
Services tend to be decentralised & geographical
dispersed
Services are consumed more often than products
Services can be easily emulated
Amity International Business School
Service Design
Service is an act
Service delivery system
Facilities
Processes
Skills
Many services are bundled with products
Amity International Business School
Service Design
Service design involves
The physical resources needed
The goods that are purchased or consumed
by the customer
Explicit services
Implicit services
Amity International Business School
Service Design
Service
Something that is done to or for a customer
Service delivery system
The facilities, processes, and skills needed to
provide a service
Product bundle
The combination of goods and services provided to
a customer
Service package
The physical resources needed to perform the
service
Amity International Business School
Tangible intangible
Services created and delivered at the
same time
Services cannot be inventoried
Services highly visible to customers
Services have low barrier to entry
Location important to service
Differences Between Product
and Service Design
Amity International Business School
Phases in Service Design
1.Conceptualize
2.Identify service package components
3.Determine performance specifications
4.Translate performance specifications
into design specifications
5.Translate design specifications into
delivery specifications
Amity International Business School
PHASE 1 : SERVICE
CONCEPT
It defines the target customer and desired
customer experience
It also defines how our service is different
than others and how will it compete in the
market
Amity International Business School
PHASE 2 : SERVICE PACKAGE
From the concept a service package is created
The package consists of physical items, sensual benefits and
psychological benefits
In a restaurant...
The physical items consist of facility , food , drinks,
tableware, napkin etc
The sensual benefits include taste and aroma of tha food
and the sights and sounds
The psychological benefits are rest and relaxation, comfort,
status and a sense of well being
Amity International Business School
PHASE 3 : PERFORMANCE SPECIFICATION
From the service package , service
specifications are developed for performance
,design and delivery
Performance specifications outline expectations
and requirements for general and specific
customers
Performance specification are converted into
design specification and delivery specifications
Amity International Business School
PHASE 4 : DESIGN & DELIVERY
SPECIFICATIONS
Design specification must describe in detail the
desired service experience to be replicated for
different individuals at numerous locations
The specifications typically include activities to be
performed , skill requirement & guidelines for the
service provider & cost & time estimates
Also include are facility size ,location & layout &
equipment needs
Delivery specifications outline the steps required in
the work process including the work schedule,
deliverables , location etc
Amity International Business School
L
A
B
O
U
R

I
N
T
E
N
S
I
T
Y
CUSTOMISATION
SERVICE
FACTORY
LOW
LOW HIGH
HIGH
SERVICE PROCESS MATRIX
MASS SERVICE
SERVICE
SHOP
PROFESSIONAL SERVICE
Amity International Business School
Service Blueprinting
Service blueprinting
A method used in service design to describe
and analyze a proposed service
A useful tool for conceptualizing a service
delivery system
Amity International Business School
Service Blueprinting
In service blueprinting...
Line of influence shows activities designed to
influence the customer
Line of interactions where the customer
interacts with the service provider and other
customers
Line of visibility separates front office activities
from backstage
Line of support is where the service provider
interacts with backstage support personnel to
complete their tasks
Amity International Business School
Major Steps in Service Blueprinting
1. Establish boundaries
2. Identify steps involved
3. Prepare a flowchart
4. Identify potential failure points
5. Establish a time frame
6. Analyze profitability

Amity International Business School
LINE OF
INFLUENCE
LINE OF
INTERAC-
TION
LINE OF
VISIBILITY
LINE OF
SUPPORT
CUSTOMER PASSES
TODAYS SPECIAL SIGN
CUSTOMER
PLACES
ORDER
BARISTA READIES
ORDER
BARISTA GOES TO
STOCKROOM GETS LAST
BAGS OF CUPS
B TELLS MANAGER
HE IS OUT OF CUPS
B COMPLETES
ORDER
CUSTOMER
PAYS
TOUR BUS
STOPS
CUSTOMERS
POUR IN
B ASKS FOR
HELP UPFRONT
SERVCE BLUEPRINT FOR A COFFEE SHOP
Amity International Business School
Characteristics of Well Designed
Service Systems
1. Consistent with the organization mission
2. User friendly
3. Robust
4. Easy to sustain
5. Cost effective
6. Value to customers
7. Effective linkages between back operations
8. Single unifying theme
9. Ensure reliability and high quality
Amity International Business School
Challenges of Service Design
Variable requirements
Difficult to describe
High customer contact
Service customer encounter
Amity International Business School
THANK
YOU


Amity International Business School
234
Amity International Business School
MBA IB
Production & Operations Management





Amity International Business School

FACILITY LAYOUT
235
Amity International Business School We will Study......


Various types of layouts

Factors affecting layout decision

Qualities of a good Layout

236
Amity International Business School
Layout: the configuration of
departments, work centers, and
equipment, with particular emphasis on
movement of work (customers or
materials) through the system
Facilities Layout
Amity International Business School
Requires substantial investments of
money and effort
Involves long-term commitments
Has significant impact on cost and
efficiency of operations
Importance of Layout Decisions
Amity International Business School
Inefficient operations
For Example:
High Cost
Bottlenecks
Changes in the design
of products or services
The introduction of new
products or services
Accidents
Safety hazards
The Need for Layout Decisions
Amity International Business School
Changes in
environmental
or other legal
requirements
Changes in volume of
output or mix of
products
Changes in methods
and equipment
Morale problems
The Need for Layout Design (Contd)
Amity International Business School
Layout Strategies
Office Retail
Warehouse
(storage)
Examples
Allstate Insurance
Microsoft Corp.
Krogers
Supermarket
Walgreens
Bloomingdales
Federal-Moguls
warehouse
The Gaps
distribution center
Problems/Issues
Locate workers
requiring frequent
contact close to
one another
Expose customer
to high-margin
items
Balance low-cost
storage with low-
cost material
handling
Amity International Business School
Layout Strategies
Project
(fixed position)
J ob Shop
(process oriented)
Examples
Ingall Ship Building
Corp.
Trump Plaza
Pittsburgh Airport
Arnold Palmer Hospital
Hard Rock Caf
Olive Garden
Problems/Issues
Move material to the
limited storage areas
around the site
Manage varied material
flow for each product
Amity International Business School
Layout Strategies
Work Cells
(product families)
Repetitive/ Continuous
(product oriented)
Examples
Hallmark Cards
Wheeled Coach
Standard Aero
Sonys TV assembly
line
Toyota Scion
Problems/Issues
Identify a product family,
build teams, cross train team
members
Equalize the task time at each
workstation
Amity International Business School
Plant Layout Factors
1. Manpower factors
2. Machinery factors
3. Movement factors
4. Material factors
5. Waiting factors
6. Service factors
7. Factory building factors
8. Change related factors.
Amity International Business School
Types of Layout
Product layouts
Process layouts
Fixed-Position layout
Combination layouts
Office layout
Retail layout
Warehouse layout
Work-cell layout
Amity International Business School
Product layout
Layout that uses standardized processing
operations to achieve smooth, rapid, high-
volume flow
Process layout
Layout that can handle varied processing
requirements
Fixed Position layout
Layout in which the product or project
remains stationary, and workers, materials,
and equipment are moved as needed
Basic Layout Types
Amity International Business School
Raw
materials
or customer
Finished
item
Station
2
Station
3
Station
4
Material
and/or
labor
Station
1
Material
and/or
labor
Material
and/or
labor
Material
and/or
labor
Used for Repetitive or Continuous Processing
Product Layout
Amity International Business School
Product Layout
Amity International Business School Product Layout
Better known as assembly lines arrange
activities in a line according to sequence
of operations that need to be performed to
assemble a particular product
The flow of work is orderly and efficient
moving from one workstation to another
The product or service is standard one
made for a general market in which
demand is stable and volume high
Amity International Business School
High rate of output
Low unit cost
Labor specialization
Low material handling cost
High utilization of labor and equipment
Established routing and scheduling
Routing accounting and purchasing

Advantages of Product Layout
Amity International Business School
Creates dull, repetitive jobs
Poorly skilled workers may not maintain
equipment or quality of output
Fairly inflexible to changes in volume
Highly susceptible to shutdowns
Needs preventive maintenance
Individual incentive plans are
impractical
Disadvantages of Product Layout
Amity International Business School
Process Layout
Also known as functional layout
It groups similar activities together in
departments, or work centers e.g., all drills
, lathes located in same place. In an
apparel shop all womens clothes, all
childrens clothes is located at same place
A process layout is characteristic of
intermittent operations , service shops, job
shops, or batch production which serve
different customers with different needs.
Amity International Business School
Dept. A
Dept. B Dept. D
Dept. C
Dept. F
Dept. E
Used for Intermittent processing
Job Shop or Batch
Process Layout
(functional)
Process Layout
Amity International Business School
Can handle a variety of processing
requirements
Not particularly vulnerable to equipment
failures
Equipment used is less costly
Possible to use individual incentive
plans
Advantages of Process Layouts
Amity International Business School
In-process inventory costs can be high
Challenging routing and scheduling
Equipment utilization rates are low
Material handling slow and inefficient
Complexities often reduce span of
supervision
Special attention for each product or
customer
Accounting and purchasing are more
involved
Disadvantages of Process Layouts
Amity International Business School
Surgery
Radiology
ER
triage
room
ER Beds Pharmacy
Emergency room admissions
Billing/exit
Laboratories
Process-Oriented Layout
Patient A - broken leg
Patient B - erratic heart
pacemaker
Amity International Business School
E.G. Process Layout

Process Layout
Amity International Business School
Process-Oriented Layout
Arrange work centers so as to
minimize the costs of material
handling
Basic cost elements are
Number of loads (or people) moving
between centers
Distance loads (or people) move
between centers
Amity International Business School
Fixed-Position Layout
Product remains in one place
Workers and equipment come to site
Complicating factors
Limited space at site
Different materials
required at different
stages of the project
Volume of materials
needed is dynamic
Amity International Business School
Cellular Production
Layout in which machines are grouped into
a cell that can process items that have
similar processing requirements
Group Technology
The grouping into part families of items with
similar design or manufacturing
characteristics
Cellular Layouts
Amity International Business School
Work Cells
Reorganizes people and machines
into groups to focus on single products
or product groups
Group technology identifies products
that have similar characteristics for
particular cells
Volume must justify cells
Cells can be reconfigured as designs
or volume changes
Amity International Business School
Advantages of Work Cells
1. Reduced work-in-process inventory
2. Less floor space required
3. Reduced raw material and finished
goods inventory
4. Reduced direct labor
5. Heightened sense of employee
participation
6. Increased use of equipment and
machinery
7. Reduced investment in machinery and
equipment
Amity International Business School
Improving Layouts Using
Work Cells
Current layout - workers in
small closed areas. Cannot
increase output without a
third worker and third set of
equipment.
Improved layout - cross-trained
workers can assist each other. May
be able to add a third worker as
additional output is needed.
Amity International Business School
Improving Layouts Using
Work Cells
Current layout - straight lines
make it hard to balance tasks
because work may not be
divided evenly
Improved layout - in U shape,
workers have better access.
Four cross-trained workers
were reduced.
U-shaped line may reduce employee movement
and space requirements while enhancing
communication, reducing the number of workers,
and facilitating inspection
Amity International Business School
Requirements of Work Cells
1. Identification of families of products
2. A high level of training, flexibility and
empowerment of employees
3. Being self-contained, with its own
equipment and resources
4. Test (poka-yoke) at each station in the
cell
Amity International Business School Advantages of Cellular Layout
Reduced material handling and transit
time
Reduced setup time
Reduced WIP inventory
Better use of human resources
Easier to control
Easier to automate
Amity International Business School Disadvantages of Cellular
Layout
Inadequate part families
Poorly balanced cells
Expanded training and scheduling of
workers
Increased capital investment

Amity International Business School
Systematic Layout Planning (SLP)
Procedure
Amity International Business School
Other Layouts
1. Office layout: Positions workers, their
equipment, and spaces/offices to
provide for movement of information
2. Retail layout: Allocates shelf space and
responds to customer behavior
3. Warehouse layout: Addresses trade-
offs between space and material
handling
Amity International Business School
Office Layout
Grouping of workers, their equipment,
and spaces to provide comfort, safety,
and movement of information
Movement of
information is main
distinction
Typically in state of
flux due to frequent
technological
changes
Amity International Business School
Supermarket Retail Layout
Objective is to maximize
profitability per square foot of floor
space
Sales and profitability vary directly
with customer exposure
Amity International Business School
Five Helpful Ideas for
Supermarket Layout
1. Locate high-draw items around the periphery of the
store
2. Use prominent locations for high-impulse and high-
margin items
3. Distribute power items to both sides of an aisle and
disperse them to increase viewing of other items
4. Use end-aisle locations
5. Convey mission of store through careful positioning
of lead-off department
Amity International Business School
E.g. Store Layout
Amity International Business School
THANK YOU
Amity International Business School
275
Amity International Business School
MBA IB
Production & Operations Management




Amity International Business School
5
Capacity Planning
For Products and Services
Amity International Business School
Capacity Planning
Capacity is the upper limit or ceiling on
the load that an operating unit can
handle.
The basic questions in capacity handling
are:
What kind of capacity is needed?
How much is needed?
When is it needed?
Amity International Business School
Capacity
The throughput, or the number of units
a facility can hold, receive, store, or
produce in a period of time
Determines
fixed costs
Determines if
demand will
be satisfied
Three time horizons
Amity International Business School
1. Impacts ability to meet future demands
2. Affects operating costs
3. Major determinant of initial costs
4. Involves long-term commitment
5. Affects competitiveness
6. Affects ease of management
7. Globalization adds complexity
8. Impacts long range planning
Importance of Capacity Decisions
Amity International Business School
Strategy Formulation
Capacity strategy for long-term demand
Demand patterns
Growth rate and variability
Facilities
Cost of building and operating
Technological changes
Rate and direction of technology changes
Behavior of competitors
Availability of capital and other inputs
Amity International Business School
Determinants of Effective Capacity
Facilities
Product and service factors
Process factors
Human factors
Operational factors
Supply chain factors
External factors
Amity International Business School
Key Decisions of Capacity
Planning
1. Amount of capacity needed
2. Timing of changes
3. Need to maintain balance
4. Extent of flexibility of facilities
Capacity cushion extra demand intended to offset uncertainty
Amity International Business School
Modify capacity Use capacity
Planning Over a Time Horizon
Intermediate-
range
planning
Subcontract Add personnel
Add equipment Build or use inventory
Add shifts
Short-range
planning
Schedule jobs
Schedule personnel
Allocate machinery *
Long-range
planning
Add facilities
Add long lead time equipment
*
* Limited options exist
Amity International Business School
Capacity
Design capacity
maximum output rate or service capacity an
operation, process, or facility is designed for
Effective capacity
Design capacity minus allowances such as
personal time, maintenance, and scrap
Actual output
rate of output actually achieved--cannot
exceed effective capacity.
Amity International Business School
Efficiency and Utilization
Actual output
Efficiency =
Effective capacity


Actual output
Utilization =
Design capacity
Both measures expressed as percentages
Amity International Business School
Actual output = 36 units/day
Efficiency = = 90%
Effective capacity 40 units/ day


Utilization = Actual output = 36 units/day
= 72%
Design capacity 50 units/day
Efficiency/Utilization Example
Design capacity = 50 trucks/day
Effective capacity = 40 trucks/day
Actual output = 36 units/day
Amity International Business School
Capacity Considerations
Forecast demand accurately
Understand the technology and
capacity increments
Find the optimum
operating level
(volume)
Build for change
Amity International Business School
Economies of Scale
Economies of scale
If the output rate is less than the optimal level,
increasing output rate results in decreasing
average unit costs
Diseconomies of scale
If the output rate is more than the optimal
level, increasing the output rate results in
increasing average unit costs
Amity International Business School
Economies and Diseconomies
of Scale
Economies
of scale
Diseconomies
of scale
25 - room
roadside motel
50 - room
roadside motel
75 - room
roadside motel
Number of Rooms
25 50 75
A
v
e
r
a
g
e

u
n
i
t

c
o
s
t

(
d
o
l
l
a
r
s

p
e
r

r
o
o
m

p
e
r

n
i
g
h
t
)

Amity International Business School
Steps for Capacity Planning
1. Estimate future capacity requirements
2. Evaluate existing capacity
3. Identify alternatives, including outsourcing
4. Conduct financial analysis
5. Assess key qualitative issues
6. Select one alternative
7. Implement alternative chosen
8. Monitor results
Amity International Business School
Developing Capacity Alternatives
1.Design flexibility into systems
2.Take stage of life cycle into account
3.Take a big picture approach to capacity
changes
4.Prepare to deal with capacity chunks
5.Attempt to smooth out capacity
requirements
6.Identify the optimal operating level
Amity International Business School
Evaluating Alternatives
Minimum
cost
A
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t

0
Rate of output
Production units have an optimal rate of output for minimal cost.
Minimum average cost per unit
Amity International Business School
Evaluating Alternatives
Minimum cost & optimal operating rate are
functions of size of production unit.
A
v
e
r
a
g
e

c
o
s
t

p
e
r

u
n
i
t

0
Small
plant
Medium
plant Large
plant
Output rate

Amity International Business School
Need to be near customers
Capacity and location are closely tied
Inability to store services
Capacity must be matched with timing of
demand
Degree of volatility of demand
Peak demand periods
Planning Service Capacity
Amity International Business School
Cost-Volume Relationships
A
m
o
u
n
t

(
$
)


0
Q (volume in units)
Fixed cost (FC)
Amity International Business School
Cost-Volume Relationships
A
m
o
u
n
t

(
$
)


Q (volume in units)
0
Amity International Business School
Cost-Volume Relationships
A
m
o
u
n
t

(
$
)


Q (volume in units)
0
BEP units
Amity International Business School
Break-Even Problem with Step Fixed Costs
Quantity
Step fixed costs and variable costs.
1 machine
2 machines
3 machines
Amity International Business School
Break-Even Problem with Step Fixed Costs
$
TC
TC
TC
BEP
2
BEP
3
Quantity
1
2
3
Multiple break-even points
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Thank You
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FACILITY LAYOUT
301
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Retail Slotting
Manufacturers pay fees to retailers to
get the retailers to display (slot) their
product
Contributing factors
Limited shelf space
An increasing number of new products
Better information about sales through
POS data collection
Closer control of inventory
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Servicescapes
Ambient conditions - background characteristics
such as lighting, sound, smell, and temperature
Spatial layout and functionality - which involve
customer
circulation path planning,
aisle characteristics, and
product grouping
Signs, symbols, and
artifacts - characteristics
of building design that
carry social significance
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Warehousing and Storage
Layouts
Objective is to optimize trade-offs
between handling costs and costs
associated with warehouse space
Maximize the total cube of the
warehouse utilize its full volume
while maintaining low material
handling costs
Amity International Business School
Warehousing and Storage
Layouts
All costs associated with the transaction
Incoming transport
Storage
Finding and moving material
Outgoing transport
Equipment, people, material, supervision, insurance,
depreciation
Minimize damage and spoilage
Material Handling Costs
Amity International Business School
Warehousing and Storage
Layouts
Warehouse density tends to vary inversely
with the number of different items stored
Automated Storage and
Retrieval Systems (ASRSs)
can significantly improve
warehouse productivity by
an estimated 500%
Dock location is a key
design element
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Cross-Docking
Materials are moved directly from
receiving to shipping and are not placed
in storage
in the warehouse
Requires tight
scheduling and
accurate shipments,
bar code or RFID
identification used for
advanced shipment
notification as materials
are unloaded
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Random Stocking
Typically requires automatic identification
systems (AISs) and effective information
systems
Random assignment of stocking locations
allows more efficient use of space
Key tasks
1. Maintain list of open locations
2. Maintain accurate records
3. Sequence items to minimize travel, pick time
4. Combine picking orders
5. Assign classes of items to particular areas
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Shipping and receiving docks
Office
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Conveyor
Storage racks
Staging
E.G. Warehouse Layout
Traditional Layout
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Warehouse Layout
Cross-Docking Layout
Shipping and receiving docks
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Shipping and receiving docks
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Alternative Strategy
As much of the project as possible is
completed off-site in a product-oriented
facility
This can
significantly
improve efficiency
but is only
possible when
multiple similar
units need to be created
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313
Amity International Business School
MBA IB
Production & Operations Management




Amity International Business School
5
Capacity Planning
For Products and Services
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1.One product is involved
2.Everything produced can be sold
3.Variable cost per unit is the same
regardless of volume
4.Fixed costs do not change with volume
5.Revenue per unit constant with volume
6.Revenue per unit exceeds variable cost
per unit
Assumptions of Cost-Volume
Analysis
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Financial Analysis
Cash Flow - the difference between
cash received from sales and other
sources, and cash outflow for labor,
material, overhead, and taxes.
Present Value - the sum, in current
value, of all future cash flows of an
investment proposal.
Amity International Business School
Calculating Processing Requirements
Product
Annual
Demand
Standard
processing time
per unit (hr.)
Processing time
needed (hr.)
#1
#2
#3
400
300
700
5.0
8.0
2.0
2,000
2,400
1,400
5,800
Amity International Business School
Managing Demand
Demand exceeds capacity
Curtail demand by raising prices, scheduling longer lead time
Long term solution is to increase capacity
Capacity exceeds demand
Stimulate market
Product changes
Adjusting to seasonal demands
Produce products with complementary demand patterns
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Tactics for Matching Capacity
to Demand
1. Making staffing changes
2. Adjusting equipment
Purchasing additional machinery
Selling or leasing out existing equipment
3. Improving processes to increase throughput
4. Redesigning products to facilitate more
throughput
5. Adding process flexibility to meet changing
product preferences
6. Closing facilities
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Demand and Capacity Management in
the Service Sector
Demand management
Appointment, reservations, FCFS rule
Capacity
management
Full time,
temporary,
part-time
staff
Amity International Business School
Approaches to Capacity
Expansion
(a) Leading demand with
incremental expansion
D
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d

Expected
demand
New
capacity
(b) Leading demand with
one-step expansion
D
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New
capacity
Expected
demand
(d) Attempts to have an average
capacity with incremental
expansion
D
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d
New
capacity Expected
demand
(c) Capacity lags demand with
incremental expansion
D
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m
a
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New
capacity
Expected
demand
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Approaches to Capacity
Expansion
(a) Leading demand with incremental
expansion
Expected
demand
New
capacity
D
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Time (years)
1 2 3
Amity International Business School
Approaches to Capacity
Expansion
(b) Leading demand with one-step
expansion
New
capacity
Expected
demand
D
e
m
a
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d

Time (years)
1 2 3
Amity International Business School
Approaches to Capacity
Expansion
(c) Capacity lags demand with incremental
expansion
Expected
demand
D
e
m
a
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d

Time (years)
1 2 3
New
capacity
Amity International Business School
Approaches to Capacity
Expansion
(d) Attempts to have an average capacity with
incremental expansion
Expected
demand
New
capacity
D
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Time (years)
1 2 3
Amity International Business School
Decision Trees
1
Low demand [0.40]
High demand [0.60]
Low demand [0.40]
High demand [0.60]
$70,000
$220,000
$40,000
$135,000
$90,000
Dont expand
Expand
2
Fig A Decision Tree for Capacity Expansion
$135,000
$109,000
$148,000
$148,000
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Thank You
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FACILITY LAYOUT
328
Amity International Business School
Warehousing and Storage
Layouts
All costs associated with the transaction
Incoming transport
Storage
Finding and moving material
Outgoing transport
Equipment, people, material, supervision, insurance,
depreciation
Minimize damage and spoilage
Material Handling Costs
Amity International Business School
Computer Software
Three dimensional visualization software
allows managers to view possible
layouts and assess process, material
handling,
efficiency,
and safety
issues
Amity International Business School
McDonalds Assembly Line
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DESIGNING PROCESS
LAYOUTS
Aim To minimize material handling costs
1. Block Diagramming
Firstly we draw a flow chart and work out the
unit load(unit load is quantity in which material
is normally moved). Unit load can be a single
pellet, a bin of material etc.
Next step is to calculate composite
movements from departments to departments
and rank them from most to least movements
Finally trial layouts are placed on a grid that
graphically represents relative distance
between departments
Amity International Business School DESIGNING PROCESS
LAYOUTS
2.Relationship Diagram . Is a format for
displaying manager preferences for
departments
In situations for which quantitative data are
difficult to obtain , this method is used.
A relationship diagram is made showing
preferences and layout is done
Amity International Business School DESIGNING PRODUCT
LAYOUT
Aim To balance the assembly line
Product layouts or assembly lines are
used for high volume production. To
obtain the required output rate jobs are
broken down into smallest parts called
work elements
A workstation is any area along the
assembly line that requires
workstations so products flow through
the assembly line smoothly
This is a done by line balancing
Amity International Business School DESIGNING PRODUCT
LAYOUT
If workstation on the assembly line
takes the same amount of time to
perform the work elements that have
been assigned then products will move
successively from one work station to
workstation with no need for a product
to watt or a worker to be idle
The process of equalizing the amount
of work at each workstation is called
line balancing
Amity International Business School
Assembly-Line Balancing
Objective is to minimize the imbalance
between machines or personnel while
meeting required output
Starts with the precedence relationships
1. Determine cycle time
2. Calculate theoretical
minimum number of
workstations
3. Balance the line by
assigning specific
tasks to workstations
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Line Balancing is the process of assigning
tasks to workstations in such a way that
the workstations have approximately
equal time requirements.
Line Balancing
Amity International Business School
Cycle time is the maximum time
allowed at each workstation to
complete its set of tasks on a unit.
Cycle Time
Amity International Business School
Work Balance Charts
Used for evaluating operation times in
work cells
Can help identify bottleneck
operations
Flexible, cross-trained employees can
help address labor bottlenecks
Machine bottlenecks may require
other approaches
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Relationship Chart
Amity International Business School Flexible Manufacturing System
This consists of numerous programmable
machines tools connected by a automated
handling system and controlled by a
common computer network
It is different from traditional automation
which is fixed for a specific task
Fixed automation is very efficient and can
produce a very high volume but is not
flexible
Amity International Business School Flexible Manufacturing System
FMS combines flexibility and efficiency
Tools change automatically from a large
carousels at each machine which holds of
tools
The material handling system carries work
pieces on pallets which can be locked on a
machine for processing
Pallets are transferred onto machines
automatically
Amity International Business School
THANK YOU
Amity International Business School
Quality Function
Deployment
Amity International Business School Quality Function Deployment
Introduction
Imagine two engineers are working on two
different components of a car
simultaneously . The insulation and
sealing engineer develops a new seal that
will keep out rain, even during a blinding
rainstorm.
The handle, knob and levers engineer is
working on a simpler lever that will make
the roof easier to open
345
Amity International Business School
Quality Function Deployment
The new lever is tested and works well
with the old seal. Neither engineer is
aware of the activities of activities of other
As it turns out the combination of heavier
roof (because of insulation)and lighter
lever means driver can no longer open the
sunroof with one hand.!!!!
Hopefully this problem will be detected in
prototype testing
Amity International Business School
Quality Function Deployment
Otherwise cars already produced will have
to be reworked and cars already sold
would have to be recalled.
Could these problems could have been
avoided .
Even in design teams it is not sot sure that
all decisions will be coordinated
Amity International Business School
Voice of the customer
Quality Function Deployment
House of quality
Quality Function Deployment
QFD: An approach that integrates the voice of the
customer into the product and service development
process.
Amity International Business School
Quality Function Deployment
QFD is a series of of matrix diagrams (
also called quality tables) that resemble
connected houses.
The first matrix dubbed the house of
quality converts customer requirements
into product design characteristics
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The House of Quality
Correlation
matrix
Design
requirements
Customer
require-
ments
Competitive
assessment
Relationship
matrix
Specifications
or
target values
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351
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STEPS IN MAKING OF A QFD
352
Amity International Business School
353
Step Function
1
Enter the WHAT Customer VOC (Voice of the Customer) into the VOC
Prioritized Comments fields - Add rows as needed (Note: Check formula totals
to ensure added field weights are calculated for added fields)
2
Enter the Critical Customer Requirements (CCR's) on HOW the customer VOC
(WHAT) will be measured - Add columns as needed (Note: Check formula
totals to ensure added field weights are calculated for added fields)
3
Quantify the VOC requirements into a measurable CCR - enter values into the
process requirements field for each VOC captured
4
Complete the VOCPrioritization rating by using a 1-5 scale where 5 is the
highest and 1 is the lowest - enter values into the VOC Prioritization Rating
Fields - these ratings should come from the customer
5
Using the Importance Rating Legend where 9 = High Impact, 3 = Moderate
Impact, 1 = Low Impact and Blank = No Impact - rate each WHAT's (VOC)
impact with each How (CCR)
6 Target values can be entered for each CCR (For example SLA's or CCR goals)
7
The correlation matrix can be used to identify CCR relationships that can for
example, strongly or negatively impacts customer requirements
8
The competitor comparison can be used to determine how your current
product/services compare in your customers perspective to other competitors

Amity International Business School
Customer
Requirements
Easy to close
Stays open on a hill
Easy to open
Doesnt leak in rain
No road noise
Importance weighting
Engineering
Characteristics
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Correlation:
Strong positive
Positive
Negative
Strong negative
X
*
Competitive evaluation
X = Us
A = Comp. A
B = Comp. B
(5 is best)
1 2 3 4 5
X AB
X AB
XAB
A X B
X A B
Relationships:
Strong = 9
Medium = 3
Small = 1
Target values
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(5 is best)
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House of Quality Example
Amity International Business School
Quality Function Deployment
In comparison with traditional design
approaches, QFD forces management to
spend more time defining the new product
changes and examining the ramifications
of those changes
More time spemnt early in design means
less time is required later to revise the
design and make it work
Amity International Business School
Quality Function Deployment
In summary QFD is a communications and
planning tool that
promotes better understanding of customer
demands
Promotes better understanding of design
interactions,
involves manufacturing in design process
Provides documentation of design process
Amity International Business School
Kano Model
Customer Needs
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S
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Excitement
Expected
Must Have
The Kano Model
Amity International Business School
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