OPERATIONS

MANAGEMENT
 Why Should we study OM?
 Factories occupy a unique place in our country (lifting economy, employment,
sustenance etc..) & understand how important it is to the nation
 Produce goods and services for our day-to –day consumption
 Bring changes in socioeconomic outlook (income, lifestyle, wants, motives,
thoughts, actions, patterns….)
 the three basic functions of a firm
 Marketing – generates demand
 Production/operations – creates the product
 Finance/accounting – tracks how well the organization is doing, pays bills,
collects the money
 We want to know how goods and services are produced and understand and
appreciate the role played by people.
 To have clear picture about factory and understand what operations managers
do.
 Strategic use to executives: It provides a major opportunity for an organization to
improve its profitability and enhance its service to society.
 Helps in selecting a career
1-9
K. Aswathappa, G. Sudarsana Reddy and
B. Krishna Reddy,
Production and Operations Management,
Himalaya Publishing House

TEXT BOOK
Overview of syllabus
 https://www.youtube.c
om/watch?v=hg5Rlap
dEtE
Toyota Factory in Mississippi USA | AutoMotoTV
 Unit I: Introduction
 Nature of Production
 production as a system
 Production as an organisation function
 Importance of Production Function
 Meaning and definition of operations management
 Scope of Production and Operations Management
 Process Technologies– Job Shop, Batch,
Continuous, Assembly, Project
 Plant Location
 Need for the selection of the location
 Factors of location
 Steps in Location.
 Unit II: Production Planning
and Control, Quality Control
 Production planning and control
 Meaning, objectives and Functions
 Quality Control
 Definition
 organization for quality control
 SQC meaning
 Quality control techniques
 Types of control charts (Problems X bar and R chart
only)
 TQM
 ISO 9000 Series – ISO 14000
 Unit III: Work Study, Plant
Layout and Plant Maintenance
 Definition of Work study
 method study and work measurement
 objectives of work study
 Meaning and Definition of plant layout
 Scope of Plant Layout
 Objectives of Good Layout
 Factors influencing Layout
 Principles of Layout
 Types of Layout
 Meaning and Definition of Maintenance
 Scope of Maintenance
 Importance of Maintenance Management
 types of maintenance
PLANT LAYOUT
 Unit IV: Materials Management
and Materials Storing
 Materials Management
 Definition
 objectives of materials management
 Importance of materials management
 material requirement planning(MRP I)
 manufacturing resource planning ( MRP II)
 Nature of stores
 Importance of stores
 Function of Stores
 stores Layout
 Classification and Codification
materials
 Unit V: Inventory Management
 Meaning and definition
 objectives of Inventories
 Inventory costs
 EOQ
 Inventory management and control
 factors affecting Inventory Management and
control
 Selective Inventory control techniques
INVENTORY
https://www.youtube.c
om/watch?v=Ewtjgpsd
2Nc
Nissan Factory Life: How Cars are Built
 Operations Management
 Operations Management is:
The management of systems or processes
that create goods and/or provide services

 Operations Management affects:

 Companies’ ability to compete
 Nation’s ability to compete internationally
 DEFINITION OF OPERATIONS
MANAGEMENT
 It is concerned with creating, operating and
controlling a transformation system which
takes inputs of a variety of resources and
produces outputs of goods and services
which are needed by customers
- Naylor, 1996
 Value-Added Process

The operations function involves the conversion of

inputs into outputs
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Feedback Feedback
 Food Processor
Table 1.2

Inputs Processing Outputs

Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
 Hospital Process
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Healthy

Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Manufacturing or Service?

Tangible Act
 Goods vs Service
Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Output Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usual
 Characteristics of Products

 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer interaction
Characteristics of Service
 Intangible product
 Produced and consumed at same
time
 Often unique
 High customer interaction
 Inconsistent product definition
 Often knowledge-based
 Frequently dispersed
 PRODUCTION & PRODUCTIVITY

 Production: conversion process of input to

output
 Productivity : how efficiently we convert
input to desirable outputs - efficiency
Outputs
Productivity =
Inputs
Competitiveness

Price

Quality

Time
• Production: Application of resources such as people and
machinery to convert materials into finished goods and services.
• Production and Operations Management: Managing people
and machinery in converting materials and resources into
finished goods and services.
 What Is Operations
Management?

 Operations Management
 Management of the conversion process which
transforms inputs such as raw material and
labor into outputs in the form of finished
goods and services.
Outputs
Inputs
Transformation Process (goods
(customers
(components) and
and/or
services)
materials)
 What is Operations Management?

OM is the set of activities that creates value in

the form of goods and services by
transforming inputs into output.
Scope 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 . . .
 Types of Operations
Table 1.4
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
Figure 1.4

U.S. Manufacturing vs. Service Employment

Year Mfg. Service
45
90 79 21
50 72 28 Mfg.
80
55 72 28 Service
70
60
60 68 32
Percent

65
50 64 36
70
40 64 36
75
30 58 42
80 44 46
20
85 43 57
10
90 35 65
0
95 25 75
45 50 55 60 65 70 75 80 85 90 95 00 02 05
00 30 70
02 25 75 Year
 Decline in Manufacturing Jobs
 Productivity
 Increasing productivity allows companies to
maintain or increase their output using fewer
workers
 Outsourcing
 Some manufacturing work has been outsourced
to more productive companies
 Why Manufacturing Matters
 Over 18 million workers in manufacturing
jobs
 Accounts for over 70% of value of U.S.
exports
 Average full-time compensation about 20%
higher than average of all workers
 Manufacturing workers more likely to have
benefits
 Productivity growth in manufacturing in the
last 5 years is more than double U.S.
economy
 Why Manufacturing Matters
 More than half of the total R&D performed is
in the manufacturing industries
 Manufacturing workers in California earn an
average of about $25,000 more a year than
service workers
 When a California manufacturing job is lost,
an average of 2.5 service jobs are lost
 Challenges of Managing
Services
 Service jobs are often less structured than
manufacturing jobs
 Customer contact is higher
 Worker skill levels are lower
 Services hire many low-skill, entry-level workers
 Employee turnover is higher
 Input variability is higher
 Service performance can be affected by worker’s
personal factors
 Operations Management
Decision Making
 Models
 Quantitative approaches
 Analysis of trade-offs
 Systems approach
 Establishing priorities
 Ethics
 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
 Decision Making

System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of
equipment
 Decision Making

System operation
– personnel
– inventory
– scheduling
– project
management
– quality assurance
 Decision Making
 Models
 Quantitative approaches
 Analysis of trade-offs
 Systems approach
 Models

A model is an abstraction of reality.

– Physical
– Schematic
– Mathematical Tradeoffs

What are the pros and cons of models?

 Models Are Beneficial
 Easy to use, less expensive
 Require users to organize
 Increase understanding of the problem
 Enable “what if” questions
 Consistent tool for evaluation and
standardized format
 Power of mathematics
 Limitations of Models
 Quantitative information may be emphasized
over qualitative
 Models may be incorrectly applied and
results misinterpreted
 Nonqualified users may not comprehend the
rules on how to use the model
 Use of models does not guarantee good
decisions
 Quantitative Approaches
• Linear programming
• Queuing Techniques
• Inventory models
• Project models
• Statistical models
 Analysis of Trade-Offs
 Decision on the amount of inventory to stock
 Increased cost of holding inventory
Vs.
 Level of customer service
 Systems Approach

“The whole is greater than

the sum of the parts.”

Suboptimization
 Pareto Phenomenon

• A few factors account for a high

percentage of the occurrence of some
event(s).
• 80/20 Rule - 80% of problems are caused
by 20% of the activities.

How do we identify the vital few?

 Ethical Issues
 Financial statements
 Worker safety
 Product safety
 Quality
 Environment
 Community
 Hiring/firing workers
 Closing facilities
 Worker’s rights
 Business Operations Overlap
Figure 1.5

Operations

Marketing Finance
 Operations Interfaces
Industrial
Engineering
Maintenance
Distribution

Purchasing Public
Operations Relations

Legal
Personnel

Accounting MIS
 Historical Evolution of Operations
Management
Table 1.7

 Industrial revolution (1770’s)

 Scientific management (1911)
 Mass production
 Interchangeable parts
 Division of labor
 Human relations movement (1920-60)
 Decision models (1915, 1960-70’s)
 Influence of Japanese manufacturers
 Trends in Business
 Major trends
 The Internet, e-commerce, e-business
 Management technology
 Globalization
 Management of supply chains
 Outsourcing
 Agility
 Ethical behavior
 Management Technology
 Technology: The application of scientific
discoveries to the development and
improvement of goods and services
 Product and service technology
 Process technology
 Information technology
 Simple Product Supply Chain
Figure 1.7

Suppliers’ Direct Final

Producer Distributor
Suppliers Suppliers Consumer

Supply Chain: A sequence of activities

And organizations involved in producing
And delivering a good or service
 A Supply Chain for Bread

Stage of Production Value Value of

Added Product
Farmer produces and harvests wheat $0.15 $0.15
Wheat transported to mill $0.08 $0.23
Mill produces flour $0.15 $0.38
Flour transported to baker $0.08 $0.46
Baker produces bread $0.54 $1.00
Bread transported to grocery store $0.08 $1.08
Grocery store displays and sells bread $0.21 $1.29
Total Value-Added $1.29
 Other Important Trends
 Ethical behavior
 Operations strategy
 Working with fewer resources
 Revenue management
 Process analysis and improvement
 Increased regulation and product liability
 Lean production