Summary Of Course of OM

Anish Diwadkar
Ankit Gupta
Aditya Kiran
 1. Introduction to OM
Operations Management:
 The management of systems or
processes
that create goods and/or provide
services.


• Line functions: Primary line; directly

related to production process. Eg:
Marketing, Operations
• Staff Functions: Indirect relation to
 Responsibility centre
• A responsibility centre is an
organization unit headed by a
manager who is responsible for its
activities.
• All responsibility centre produce
outputs (they do something) and all
have inputs (they use resources).
• Types: Revenue centres, Cost or
expense centres, profit centres and
investment centres
Functions of Operations management

• Operations Management includes:

– Forecasting
– Capacity planning
– Scheduling
– Managing inventories
– Assuring quality
– Motivating employees
– Deciding where to locate facilities
– Supply chain management
– And more . . .
4
 2.Strategic and Tactical
Decisions in OM
Strategic Decisions:


• Selection of process and Technology

• Selection of Location
• Determination of Firm’s Capacity
• Mix of In-house Processing and
Outsourcing (Make Vs Buy
Decision)
• Decision on ‘Make-to-order’ or Make-
to-stock’
Tactical Decisions:


• Selection of Equipment & Facilities

• Layout of the Manufacturing Unit
• Work Design
• Inventory Management
• Quality Management
• Job Scheduling
• Maintenance of the Unit
• Supply chain Management
3. Introduction to Processes
• A Process is a set of inter-related
activities performed in a logical
sequence, which
converts/transform inputs into
outputs


• A procedure is a sequence of
activities, tasks, steps, decisions,
calculations and processes, that
when undertaken in the sequence
laid down, produces the described
 Process Classification
• Project (e.g.: Building a hospital)
• Job (e.g.: machining a metal casting
for a specialised order)
• Batch (eg: Processing the payroll
statement for a firm)
• Line assembly (eg: assembly line of
cars)
• Continuous (eg: Petroleum refinery)
 4. Process Flow charts and
process charts
• ANSI(American National Standards
institute) symbols

• Process Flow Chart
Steps:

1)Determine how process flow chart

will be used
2)Identify terminal points(start & end)
3)Determine the level of detail in the
flow-chart
4)Determine size and scale of drawing
5)Draw the process flow chart using
symbols
6)
 Process Chart

n
tio
nt
Example:

ion


eme

e
pec

rag
rat

ay
Mov

Ins

Del

Sto
Ope
Details of Method
Requisition made by department head
Put in “ pick - up ” basket
To accounting department
Account and signature verified
Amount approved by treasurer
Amount counted by cashier
Amount recorded by bookkeeper
Petty cash sealed in envelope
Petty cash carried to department
Petty cash checked against requisition
Receipt signed
Petty cash stored in safety box

11
• Process Cycle Efficiency:
 Operating Time/ Throughput
time


Output time: time during which

operating activities/functions are
performed
Throughput Time : is the duration

taken by a production/processing
system from the first to the last
operation to produce the desired
output.
 5. Problem Solving in OM
• Problem: An adverse deviation from
the norm.
• Affinity diagram:
1.Brainstorm to obtain 2-3 dozen
responses
2.Group responses into 5-10 natural
groups
3.Find a name for each group



 Cause and Effect Diagram

Methods Materials
Cause
Cause
Cause
Cause
Cause Cause
Environment Effec
Cause Cause t
Cause Cause
Cause Cause

People Equipment
 8-D Model for problem
solving
1)Build the team
2)Describe the problem
3)Implement a temporary fix
4)Eliminate root cause
5)Verify corrective action
6)Implement permanent fix
7)Stop it happening again
8)Celebrate success

 6. 5S Method for organizing
workplace
•
• 5S is a philosophy and a way of
organising and managing the
workplace and work flow with the
objective of improving productivity
by eliminating waste, improving
work flow and reducing process
unevenness

• Seirior Sort : Sorting and storage of
tools and equipment acc to daily
usage
• Seiton or Straighten: Arrange tools,
equipment as per sequence of
activity to be performed
• Seiso or Sweep/Shine: Cleaning/
tiding of work-place during or after
every shift
• Seiketsu or Standardise: Following of
same sequence day after day
adhering to the same method
• Shitsuke or Sustain: Sustaining of
effort day after day along with
 7. Basic Costing
• Fixed costs
• Variable costs
C )
• Semi-variable costs t
= (V
t

Amount
c os co
s
• Contribution margin= a l F C l e
t b

($)
To + i a
 Revenue per unit- V C va
r
t al
 variable cost per unitT o
Fixed cost ( FC )
•
0
Q ( volume in units )
•
• Break even analysis:



u e
n
v e it
Amount ( $ )
e o f
r Pr
a l o st
t c
To ot
a l
T

0 BEP units
Q ( volume in units )
 8.Capacity Planning
• Capacity is the upper limit or ceiling on
the load that an operating unit can
handle.
• Importance:
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
• 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 average unit
costs.

 Economies of Scale
Minimum cost & optimal operating rate are
functions of size of production unit .
Average cost per unit

Small
plant Medium
plant Large
plant

0 Output rate
 9. Layout Planning


Strategic Importance of Location

Decisions :
Location Decisions are closely tied to

an organization’s Strategies


Ex : A Low cost Producer -> Locates



near Markets/Raw materials to

reduce Transportation costs.

Level Factors Considerations
Regional Location of Raw Materials Costs of Transportation
Location of Markets Distribution Costs, target market

Labor Availability, Age, Distribution of workforce

Community Quality of life Schools, shopping, housing

Utilities Cost and Availability

Taxes Direct/Indirect, State/Regional

Environmental Regulations State/Local

Site Land Cost, Room for Expansion, Parking

Transportation Access Roads, Rail, Air Freight

Environmental/Legal Zoning Restrictions

Benefits :
Markets, Cost Savings, Legal and

Regulatory, Financial


Disadvantages :
Transportation Costs, Security Costs,

Unskilled Labor, Import Restrictions,

Criticisms


Risks :
Political, Terrorism, Economic, Legal,

Cultural
Benefits :
Markets, Cost Savings, Legal and

Regulatory, Financial


Disadvantages :
Transportation Costs, Security Costs,

Unskilled Labor, Import Restrictions,

Criticisms


Risks :
Political, Terrorism, Economic, Legal,

Cultural
 10. Important Terms


SET UP TIME : is the time required to get



a machine/process ready for

producing/processing a particular job
from a state of being free from any
other job (neutral state).


SET DOWN TIME : is the time required to



bring a machine/process from a state of

producing/processing a particular job to
a state of being free to take up another
job.


CHANGE OVER TIME : is the time

duration between the end of
producing/processing a
product/process A and the moment
the machine /process is ready to
start producing the next
product/process B.
Change over time = Set down time for

A + Set up time for B

Run Time : is the duration the


machine/process operates in order to

produce/process the required volume
of output. This is the time measured
from the end of set up till the
moment the machine/process has
completed the task and is ready for
set down.



Cycle Time : is the duration required to

produce/process one unit of the
product/process. It is the reciprocal of
the desired output rate.
Thus if the target output rate for an

operation is 300 units per hour. The

cycle time is C = 1/300 hours per
unit = 12 seconds.
Cycle time ignores set up time and set

down time.


Throughput Time : is the duration

taken by a production/processing
system from the first to the last
operation to produce the desired
output.
Example : In an automobile line

assembly, throughput time is the

duration from the initial assembly
operation performed at the first work
station till the moment the
assembled product rolls off the line.


Throughput Rate : is the volume of

output delivered by the process in
unit time, usually an hour or a day.
Example : An insurance claim form

processing centre’s throughput rate

could be specified as 150 forms per
hour or 1200 forms per shift.
Takt time : is the time available to a

system to produce/process one unit

of output.


Bottleneck : is an operation that has

the lowest effective capacity in a
facility having multiple operations. It
limits the facility’s output rate,
bringing it down to the level of the
bottleneck.
Process cycle efficiency : is the ratio of

processing time and Throughput

Time.
Throughput time = Processing time +

Inspection time+ Movement time +

Waiting time + storage time.
Process cycle efficiency will always be
 11. Line Balancing


What is Line Balancing?

The process of deciding how to assign

tasks to workstations is referred to as

line balancing.


Why Line Balancing :

Productivity of workstations’ differ. The

factors affecting this ability include

time taken to perform the task,
complexity of the task etc.


What happens with Line balancing:

Smooth Flow of Work

Maximum Utilization of labor and

equipment


Major Obstacle to attain Line Balancing:

Difficulty of forming task bundles that

have the same duration

 Activities are not Compatible
 Required Technological Sequence
 Differences among elemental task


A Simple Example :
Scrubbing -> Rinsing -> Drying

 (2 Min) (4 Min) (2 Min)



-> 0.1 Min -> 0.7 Min -> 1.0 Min -> 0.5
Min ->
Minimum Cycle Time : Longest task

time(1.0 Min)
Maximum Cycle Time : Sum of all the task

times(2.3 Min)



Output Rate : Operating time per

day/Cycle time
For the first process :

Output Rate = 480 Min per day/ 1 Min

per unit
 = 480 Units per day
Precedence Diagram :

Visually portrays the order in which

the task must be performed.



A Simple Precedence Diagram :

