Operations Management

Introduction, Current Issues & Trends

By
H.S.Pundle
Operations Management
Definition
 An operations system is defined as one in which several
activities are performed
 to transform a set of inputs into useful output
 using a transformation process

 Operations Management
 is a systematic approach to
 address all the issues pertaining to
 the transformation process that converts some inputs into output that
are useful, and
 could fetch revenue to the operations system
Operations Management (OM)
Salient Aspects

 OM is a systematic approach
 using scientific tools & techniques and solution
methodologies to analyze problems
 OM is about addressing several issues
 varying in terms of time horizon, nature of decisions
 Transformation processes are central to Operations
 Focusing on keeping costs to the minimum
 Developing a set of measures to assess performance
of the system
Operations Management (OM)
Salient Aspects

 Production Operations Management is managing of

productive resources (Men, Material, Equipments &
Facilities) Efficiently & Effectively.
 MBA graduates are expected to help organizations
gain competitive advantage by excelling in meeting
customer needs.
 Whether you are in Marketing, Finance or
Operations; effectively serving customers will need
knowledge of Operations Management. Serving
customers means meeting the requirement in time,
with exceptional quality at lowest cost.
Transformations
 Physical--manufacturing

 Locational--transportation

 Exchange--retailing

 Storage--warehousing

 Physiological--health care

 Informational--telecommunications
Operations System
System Primary Resources Primary Desired
Input Transformation Output
Function

Hospital Patients Doctors, Healthcare Healthy

Nurses, Individuals
Medicines,
Equipments
Restaurant Hungry Food items, Well prepared, Satisfied
Customers Chef, Well served food Customers
Waiters,
Environment
Automobile Sheet Metal, Tools, Fabrication, High quality
Manufacturing Steel, Parts Equipments, Assembly. cars.
Workers
Operations System
System Primary Resources Primary Desired
Input Transformation Output
Function
College, High school Teachers, Imparting Educated
University Pass outs Books, Knowledge, Skills Individuals
Classrooms.

Departme- Shoppers Stock of Attract shoppers, Sales to

ntal Store goods, Promote satisfied
Display, Sales products. customers.
persons

Airline Travelers Aero planes, Move to On time

Crew, Fuel. destination safe
delivery to
destination
.
Service Operations
Salient Features

 Service is intangible while goods is a physical

output.
 In service direct customer involvement in
creating output is essential.
 Customers are on the ‘shop floor’ when
consuming service. Shop floor may be called
front office, dinning area, passenger cabin.
Service Operations
Salient Features

Tangibility: Services are performances and

actions rather than objects, therefore having
poor tangibility
Heterogeneity: High variability in the operation
system performance
Simultaneous Production & Consumption:
Degree of customer contact is very high
Perishability: Services cannot be inventoried as
in the case of manufactured products
 Manufacturing & Service
Similarities & Differences
 Differences
Manufacturing Organization
Physical, durable product
Output can be inventoried
Low customer contact
Long response time
Regional, National, Intentional
national market
Large facility
Capital intensive
Quality easily measured
Service Organization
Intangible, perishable product
Output can not be inventoried
High customer contact
Short response time
Local market
Small facility
Labour intensive
Quality not easily measured
Manufacturing & Service
Similarities & Differences

 Similarities
 Is concerned about quality, productivity & timely
response to its customers
 Must make choices about capacity, location, layout
 Has suppliers to deal with
 Has to plan its operations, schedules and resources
 Balance capacity with demand by a careful choice of
resources
 Has to make an estimate of demand
 Operations Management
Functions

Design of Operations Operational Control

Product design & control Forecasting

Process design Production planning & control

Quality Management Supply chain management

Location & Layout facilities Maintenance management

Capacity planning Continuous improvement of

Operations.
Operations Management
Challenges

 Competitive Pressures due to economic reforms

 Tariff reduction has exposed Indian companies to global competition.
 Chelliah Committee tax reforms proposed during 1992 – 94 triggered
this process
 Abolition licensing policies had enabled several new players
to enter into business increasing domestic competition and
capacity build up.
 Examples include liberalization of two wheelers and LCV segment in
early 1980’s and passenger car segment in early 1990’s.
 Indian customers are more demanding in terms of quality,
cost and delivery of goods & services
Operations Management
Challenges

 Growing customer expectations

 Examples: Tariff plans and options provided by
mobile operators, options in passenger car
 Customers tend to demand more and refine their
expectations
 Manufacturing & Service organizations must learn
to respond to these expectations
 Need to develop capabilities to bring newer
products and services faster and yet profitably
Operations Management
Challenges

 Today’s businesses are constantly challenged by the

rapid technological advancements
 Example 1: ATMs & Internet Banking. Customers need not visit a bank
branch. Drafts and cheques replaced with electronic payment gateways &
fund transfer mechanisms.
 Example 2: Buying a train ticket. By visiting a Web site like
http://www.irctc.co.in/, a customer can accomplish all tasks pertaining to
ticket booking and cancellation at leisure.
 Example 3: Procurement of goods & services. A manufacturing
organization can procure goods & services by organizing a reverse auction
on the Internet. In 3 to 4 hours, the best price for a component and the
supplier willing to provide the component at a desired quality can be
located.
 Example 4: New Product Development. A team of design personnel from
across different geographical locations can participate in new product
development using technological tools.
Operations Management
Challenges

 Environmental Issues
 When Government of India announced a scheme for special economic
zones (SEZs), it generated controversies and social concerns.
 Growing industrialization raises concerns regarding the depletion of natural
resources and the waste generated from production systems and end-of-life
products.
 Growing urbanization creates societal problems arising out of scarcity of
available resources and generation of solid wastes.
 Consumption of energy and water in countries like India is on the rise. Such
a situation requires better practices and newer methods of addressing these
requirements using better operational practices.
 Increasingly, firms are under pressure to take responsibility of restoring,
sustaining, and expanding the planet’s ecosystem instead of merely
exploiting it.
 OM practices must address environmental concerns in order to ensure
a sustainable world
Operations Management
Implications & Priorities

 Relate operations system to Customer/

Market
 Acquire Capabilities to tolerate product
proliferation
 Develop systems and procedures that
promote learning
 Develop Green Manufacturing Practices
History of Production Management
 Adam Smith (1776):
 Brought the concept of division of labor in his
book ‘The wealth of nation’.
 Worker performing repetitive work attain higher
skill.
 Saving in time results while changing from one
activity to another.
 Improvement in production methods results when
workers are made to specialize on certain tasks.
History of Production Management

 Charles Babbage (1883):

 Agreed with Adam Smith; but
emphasized specialization as next
logical step.
 E.g. Pin making process:
 Drawing, straightening, pointing,
 Heading & tinning.
History of Production Management
 F.W.Taylor (1859-1915):
 Father of scientific Management.
 Disagreed with workers choosing their own
task, deciding their own methods, & get
themselves trained on the job.
 Division of labor between Management &
Workmen:
 Management – Planning& control.
 Worker – execution.
History of Production Management
 F.W.Taylor (cont):
 Duties of Management:
 Selection of best worker for particular job.
Training & developing workers.
 Performance of work by workmen in accordance
with scientifically devised method.
 Method Study & Work Measurement
(Time & Motion Study).
 Selection, Training & Placement.
History of Production Management

 Henry Ford (1913): Mass production.

 Conveyor or Assembly line.
 Henry Gantt (1913): Gantt Chart.
 F.W. Harris (1914):Ecconomic Order
Quantity.
 Walter Shewart (1929): Control Charts.
 Sampling Inspection.
History of Production Management
 1940-1980: Application of Operation
Research.
 CPM/PERT for Project Management.
 1960’s:Operations Management.
 Included non manufacturing organizations like
Hospitals, Banks, Transport.
 Japanese Techniques : JIT, QC, Lean
Manufacturing.
 Today Management has become a profession.
 A science taught in Business Schools.
Typical Organization Structure

Operations

Manufacturing Quality Assurance Materials Management

Maintenance PPC
Operations Management:
Trends & Issues - Highlights
 Operations Management is a systematic approach to address all
issues pertaining to the transformation process that converts
some inputs into useful output
 Globally, India is emerging as an important manufacturing base.
 Several recent studies point to emerging opportunities for
Indian manufacturing to grow and attain a global presence.
 From an operations management perspective, the notion of a
‘pure product’ and ‘pure service’ is just the two ends of the
spectrum.
 In reality, a vast majority of operations share a continuum of
products and services.
Operations Management:
Trends & Issues - Highlights
 Despite several important differences between products &
services, from an OM perspective there are several similarities
between the two
 Decision context in operations management can be broadly
classified as
 Design and operations control issues
 Long term and short term decisions
 Some of the challenges faced by operation firms include
 Need to address increased competition due to economic
reforms
 Addressing the growing expectations of the customers
 Rapid technological advances
 Emerging environmental concerns