IMTCDL

OPERATION MANAGEMENT
SESSION -1
10 AM 1PM
Part 1 Introduction to Operations Management
Part 2 Operation Strategy and competitiveness
Part 3 Product Design & Process Analysis
Product Design
Process Selection
Manufacturing Process
Service Process

OPERATION MANAGEMENT

INTRODUCTION TO OPERATIONS MANAGEMENT

Introduction to Operation Management

Three Main Functions
of a Business:
OPERATIONS

FINANCE

MARKETING

Introduction to Operation Management

Nature of Production System

Introduction to Operation Management

Nature of the Production System
INPUTS
Land, Labor and Capital.
Raw materials, equipment, facilities, knowledge, time, suppliers,
customers.

Transformed resources resources that are treated, transformed or

converted in the process. They are a mixture of Materials,
Information and Customers

Transforming resources these are the resources which act upon the
transformed resources. They are two types: Facilities & Staff

Introduction to Operation Management

Nature of the Production System
Transformation - Forms of value addition
1.
2.
3.
4.
5.
6.
7.

Physical change manufacturing

Relocation - transportation
Storage / Protection - warehousing
Inspection better understanding.
Exchange retailing
Physiological healthcare
Informational telecommunications

Introduction to Operation Management

Nature of the Production System
OUTPUTS Goods & Services
Goods

Services

Tangible

Intangible

Can be inventoried

Cannot be inventoried

No or very less interaction

between customer and
process

Direct interaction between

customer and process

Delayed consumption

Immediate consumption

MOST OF THE TIME OUTPUT IS A COMBINATION OF GOODS AND SERVICES.

Introduction to Operation Management

Nature of the Production System
MOST OF THE TIME OUTPUT IS A COMBINATION OF GOODS AND SERVICES.

Introduction to Operation Management

Subject Matter of Operation Management.
A banker friend of yours has recently come across some old family recipes
of baking cookies. As his wife has an interest for trying new recipes she
tried those recipes and found them to be something special, different
from the packaged cookies available in grocery stores and also different
from those available in the established bakeries. His wife suggested
starting a cookie baking business. As getting finance is not an issue for him
and he can also take care of all the legal and government requirements (
like permits & licensing) that are required to start the business. He has a
cousin who is willing to take care of the marketing part. His problem is to
find how to make the business operational. He asks for your help.

What are the issues you will take into account before giving your
suggestions with regard to the operations of the cookie business?

Introduction to Operation Management

Subject Matter of Operation Management

Product Design
Process Selection
Facility location and Layout
Capacity Management
Forecasting
Material Requirement Planning
Inventory Control
Quality Management

And more

Introduction to Operation Management

What is Operation Management?
The business function responsible for planning, coordinating,
and controlling the resources needed to produce a companys
goods and services.

Introduction to Operation Management

Definition of Operation Management
Operations Management is a systematic approach to
addressing issues in the transformation process that converts
inputs into useful, revenue generating outputs.

OPERATION MANAGEMENT

OPERATIONS STRATEGY AND COMPETITIVENESS

Operations Strategy and Competitiveness

A business needs to remain competitive.
Factors that determine competitiveness are
Cost of producing the product.
Quality of the produced product.
Timely delivery of the product.
Flexibility of the business with respect to its product.

Operations Strategy and Competitiveness

Factors that determine competitiveness are
Cost of producing the product.
Quality of the produced product.
Timely delivery of the product.
Flexibility of the business with respect to its product.

Low Cost =>

Low Price =>
Increase Market Share =>
Increase Profit

Operations Strategy and Competitiveness

Factors that determine competitiveness are
Cost of producing the product.
Quality of the produced product.
Timely delivery of the product.
Flexibility of the business with respect to its product.

Quality => Superior Features, Close Tolerances, High

Durability, Excellent Customer Service.
Quality => Consistency in goods and services produced.

Operations Strategy and Competitiveness

Factors that determine competitiveness are
Cost of producing the product.
Quality of the produced product.
Timely delivery of the product.
Flexibility of the business with respect to its product.

Timely delivery => Not only speedy delivery but also on

time delivery.

Operations Strategy and Competitiveness

Factors that determine competitiveness are
Cost of producing the product.
Quality of the produced product.
Timely delivery of the product.
Flexibility of the business with respect to its product.

Flexibility=> Ability to offer wide range of products.

Flexibility => Ability to rapidly increase or decrease the
volume of product produced.

Operations Strategy and Competitiveness

What is Operation Strategy?

Competitive Priorities

Competitive Edge

Strategy

Operations Strategy and Competitiveness

What is Operation Strategy?
The plan, the tactics, and the principles that help us in achieving the
operational goals.
A long term strategy that describes how the firm will employ its
resources in the production of a product or service.

Operation Strategy and Competitiveness

The Role of Operation Strategy
Operation strategy implements business strategy

Operation strategy supports business strategy

Operation strategy drives business strategy

Operation Strategy and Competitiveness

The Formation of Operation Strategy
Step I : Understand the Competitive Market Dynamics.
Step II: Identifying Order-qualifying and Order-winning Attributes.
Step III: Identifying Strategic options for sustaining Competitive
advantage.
Step IV: Devise the Strategy.

Operation Strategy and Competitiveness

The Formation of Operation Strategy

Operation Strategy and Competitiveness

Formation of Operation Strategy The Top Down Perspective
BUSINESS STRATEGY => OPERATION STRATEGY
The operations strategy will support and implement the business
strategy.

Operation Strategy and Competitiveness

Formation of Operation Strategy The Bottom Up Perspective
DAY TO DAY EXPERIENCE=> OPERATION STRATEGY
The strategic ideas that emerge over time from operational experience
gradually give shape to the operation strategy.

Operation Strategy and Competitiveness

Formation of Operation Strategy The Market Requirement Perspective
MARKET REQUIREMENTS => OPERATION STRATEGY
Operation Strategy depends on
Customers requirement from the product
State of the product in the Product Life Cycle

Operation Strategy and Competitiveness

Formation of Operation Strategy The Market Requirement Perspective.
Customers requirement from the product
Consumers Requirements

Objective of the operations

Strategy: to excel in

Low Price

Cost

High Quality

Quality

Fast Delivery

Speed

Reliable Delivery

Dependability

Innovative product and Services,

Wide range of product and services,
ability to change the timing or
quantity of products and services

Flexibility in customization of
product & service or flexibility in
volume and delivery

Operation Strategy and Competitiveness

Formation of Operation Strategy The Market Requirement Perspective
State of the product in the Product Life Cycle
Introduction > Growth > Maturity > Decline

Operation Strategy and Competitiveness

Formation of Operation Strategy the market requirement perspective
State of the product in the Product Life Cycle
Introduction > Growth > Maturity > Decline

Introduction stage:
New product => the needs of customers are unlikely to be well
understood
Operations Strategy => Be flexible to cope with any changes in
product specification and maintain the quality.

Operation Strategy and Competitiveness

Formation of Operation Strategy the market requirement perspective
State of the product in the Product Life Cycle
Introduction > Growth > Maturity > Decline

Growth stage:
Increase in Demand => New competitors enter the market.
Operations Strategy => Keeping up with demand and maintain
quality to ensure that the company keeps its share of the market.

Operation Strategy and Competitiveness

Formation of Operation Strategy the market requirement perspective
State of the product in the Product Life Cycle
Introduction > Growth > Maturity > Decline

Maturity stage:
Saturation in Demand => Few big companies will dominate the
market.
Operations Strategy => Keep costs down in order to maintain prots
or to allow price cutting, or both. Cost and productivity issues,
together with dependable supply, are likely to be the operations
main concerns..

Operation Strategy and Competitiveness

Formation of Operation Strategy The Market Requirement Perspective
State of the product in the Product Life Cycle
Introduction > Growth > Maturity > Decline

Decline Stage:
Fall in Demand => Price will dominate the market.
Operations Strategy => Keep costs down in order to maintain
prots.

Operation Strategy and Competitiveness

Formation of Operation Strategy The Operations Resource Perspective
THE CAPABILITIES OF OPERATIONS RESOURCES =>
OPERATION STRATEGY
the constraints imposed by its operations must be taken into account.

OPERATION MANAGEMENT

Product Design & Process Selection

Product Design
What is design?
An exercise to conceive the looks, arrangement and workings of
something before it is constructed.

In the context of operation management the term design means

Designing the product or service.
Designing the process that will deliver the product or service.

Product Design
What is product design?
Product design is the process of creating a new product to be sold
by a business to its customers.

Product design primarily means three things

a)

Specifying the products characteristics in terms of its appearance and

dimensions (i.e. style, look and size)
b) Specifying the materials to be used and stating the acceptable tolerance
level.
c) Specifying the product's mechanical architecture and minimum
performance standards where relevant.

Product Design
Steps in product design

Product Design
Steps in product design - approaches
Sequential over-the-wall process
Each function did its work and
passed it to the next function
Concurrent Engineering process
All functions form a design team
that develops specifications,
involves customers early,
solves potential problems,
reduces costs, & shortens time
to market

Product Design
Steps in product design
1. Idea Generation
2. Product Screening
3. Preliminary Design and Testing
4. Final Design

Product Design
Product Designing Process
1. Idea Generation

Sources:
Customers
Competitors

Product Design
Product Designing Process
2. Product Screening

Operations:
The production needs of the proposed
product, and how do they match the
existing resources?

Product Design
Product Designing Process
2. Product Screening

Operations:
The production needs of the proposed
product, and how do they match the
existing resources?
Marketing:
What is the potential size of the market
for the proposed product?

Product Design
Product Designing Process
2. Product Screening

Operations:
The production needs of the proposed
product, and how do they match the
existing resources?
Marketing:
What is the potential size of the market
for the proposed product?
Finance:
What is the proposed products nancial
potential, cost, and return on
investment?

Product Design
Product Designing Process
3. Preliminary Design
and Testing

Specifies the product architecture

and decompose the product into
subsystems and components.
The output of this phase includes a
layout of the product, functional
specification of each of the product
subsystems.

Product Design
Product Designing Process
4. Final Design

Specification of materials, tolerances

of parts in the product and
identification of all the standard
parts to be purchased from
suppliers.
A process plan is established and
tooling is designed for each part to
be fabricated within the production
system.

Process Analysis
Process
A set of activities which transforms inputs into outputs.

Process Design
Specifying the tasks that need to be done and how those need
to be done by the various functions in an organization.

PROCESS ANALYSIS
Process Design
Points to Note
Process design is an outcome of the overall operations
strategy.
The process selected should be compatible with the product
design. Process design and product/service design are
interrelated.
The process should be capable of producing the entire range
of product mix.
The final product or service may involve a large number of
processes.

PROCESS ANALYSIS
Process Design Objectives
Operation Performance Objective

Process Design Objective

Quality

Error free processing capable of

achieving the proper specification

Speed

Minimum throughput time

Dependability

Reliable process output timing and

volume

Flexibility

Capable of changing what, how or how

much is being processed

Cost

Eliminate process waste in terms of

excess capacity, in process delays, in
process errors, in appropriate process
inputs

PROCESS ANALYSIS
Representation of Process
Flowcharting

The use of a diagram to present the major elements of a

process.
The basic elements can include tasks or operations, flows of
materials or customers, decision points, and storage areas or
queues

PROCESS ANALYSIS
Process Flowcharting
Flowchart Symbols
Tasks or operations

Decision Points

PROCESS ANALYSIS
Process Flowcharting
Flowchart Symbols
Storage areas or queues

Flows of materials or
customers

PROCESS ANALYSIS
Process Flowcharting
Flow chart of student going to school
Go to
school
today?

No
Goof
off

Yes
Drive to
school

Walk to
class

PROCESS ANALYSIS

Material
Received
from
Supplier

No,
Continue

Inspect
Material for
Defects

Defects
found?

Yes

Return to
Supplier for
Credit

PROCESS ANALYSIS
Types of Process
Single Stage Process & Multi Stage Process
Make-to-order & Make-to-stock
Intermittent Process & Repetitive Process

PROCESS ANALYSIS
Process Types
Single Stage Process & Multi Stage Process
Single-stage Process
Stage 1

Multi-stage Process
Stage 1

Stage 2

Stage 3

PROCESS ANALYSIS
Types of Process
Make-to-order & Make-to-stock
Make-to-order
Only activated in response to an actual order
Both work-in-process and finished goods inventory kept to a minimum

PROCESS ANALYSIS
Types of Process
Make-to-order & Make-to-stock
Make-to-stock
Process activated to meet expected or forecast demand
Customer orders are served from target stocking level

PROCESS ANALYSIS
Types of Process
Intermittent Process & Repetitive Process
Criterion
Range (Variety) of
Products
Volume

Process Requirement

Intermittent Process
Large

Repetitive Process
one or a few standardized
products.
Low. The volume of goods
High. The volume produced is
produced is directly tied to the usually based on a forecast of
number of customer orders.
future demands rather than on
direct customer orders.
Different products have
Resources are organized in a line
different processing needs.
ow to efciently accommodate
production of the product.

PROCESS ANALYSIS
Types of Process
Intermittent Process & Repetitive Process
Criterion
Labor intensive or
Capital Intensive .

Intermittent Process
Labor intensive rather than
capital intensive.

Repetitive Process
Capital intensive rather than
labor intensive.

Skill of Labor

Important

Not very important

Organization of resources Grouped by function

Arranged as per processing

needs

PROCESS ANALYSIS
Types of Process: Intermittent Process & Repetitive Process
Project Process
One-of-a-kind products
exactly to customer
specications.
.

Batch (Job) Shop

Small quantities of
products in groups or
batches based on
customer orders or
product specications.

Example :construction, Example: Bakeries,

shipbuilding, medical
education, and printing
procedures, creation of shops.
artwork, custom
tailoring, and interior
design.

Assembly (Flow ) Line

Large volume of a
standardized product
for mass production.

Continuous
Continuous operation
to produce a very high
volume of a fully
standardized product.

Example: Cars,
Example: Oil reneries,
computers, television, water treatment plants.
shoes, candy bars, food
items.

PROCESS ANALYSIS
Selection of Process
Manufacturing Process Selection
Service Process Selection

PROCESS ANALYSIS
Manufacturing Process Selection
Factors
Type and amount of factor to be produced.
For example
Construction of one vehicle => project methodology.
Construction of a large number => an assembly line.

PROCESS ANALYSIS
Manufacturing Process Selection
Factors
Type and amount of factor to be produced.
Marketing and business strategy
For example
More Individual Products => a job shop process flow.
Low Cost Products => Production line and continuous flow.

PROCESS ANALYSIS
Manufacturing Process Selection
Factors
Type and amount of factor to be produced.
Marketing and business strategy
Product life cycle stage
For example
when a product is first introduced => a job shop or batch process
At maturity stage => Assembly Line

PROCESS ANALYSIS
Manufacturing Process Selection
Factors
Type and amount of factor to be produced.
Marketing and business strategy
Product life cycle stage
Availability of factor inputs
For example
Cheap labour => Job shop or batch process
Expensive Labour => Assembly Line

Product Processes
Process Type Low Volume, Multiple
One of a Kind Products, Low
Volume
Job Shop

Appliance
repair
Commercial
printer

High Volume,
High
Standardization

Ineffective

Heavy Equipment
Classroom
Lecture

Batch

Automobile
Burger

Repetitive
Continuous
(flow)

Few Major
Products,
Higher
Volume

Ineffective

Steel Production
Water purification
Sugar Refinery

PROCESS ANALYSIS
Service Process Selection
The nature of services
Classification of services
Factors

PROCESS ANALYSIS
Service Process Selection - The nature of services

Services are individualistic.

Services are experienced
Quality of work is not quality of service
Most services contain a mix of tangible and intangible attributes
Services often take the form of cycles of encounters involving face-to-face,
phone, Internet, electromechanical, and/or mail interactions

PROCESS ANALYSIS
Service Process Selection - Classification
External Services & Internal Services.
High degree customer contact service & Low degree customer
contact service.

Service Process Selection and Design

Classification of Services External Services & Internal Services
External Services Classification - Depending on who the customer is:
business to consumers services (financial, retail, leisure)
business to business services (consultant, communication)
& public services (police , education, health).
Classification - Depending on where the customer is getting the
service
Facilities based services.
Field based services

Service Process Selection and Design

Classification of Services - External Services & Internal Services
Internal Services:
These services include such functions as data processing,
accounting, engineering and maintenance. the customers are
the various departments within the organization that require
such services.

Service Process Selection and Design

Classification of Services High customer contact &
Low customer contact
High Degree of Customer Contact
More difficult to control and more difficult to rationalize.
The customer can affect the time of demand, the exact nature of
service and the quality of service

Service Process Selection and Design

Classification of Services - High customer contact & Low customer
contact
HIGH CONTACT SYSTEM

LOW CONTACT SYSTEM

Operations must be near the customer

Operations may be placed near supply,

transport of labor

The facility should accommodate the

customers physical and psychological needs
and experiences

The customer is not in the service

environment so the product can be defined
by fewer attributes.

The customer is in the production schedules

and must be accommodated

The customer is concerned mainly with the

completion dates

Orders can not be stored so smoothing

production flow will result in loss of business

Both backlogging and production smoothing

are possible.

PROCESS ANALYSIS
Service Process Selection Factors
1.

Inventory of services not possible. Demand must be met as it arises.

Consequently service capacity becomes an important issue.

2.

Marketing plays an active role in proper utilization of capacity.

3.

In designing service the process and the output must be developed

simultaneously.

PROCESS ANALYSIS
Service Process Selection Service System Design matrix
The matrix establishes the relationship between the three key factors of
service.

Key factors
Degree of contact
Opportunity for sales
Efficiency
The matrix defines the relationship between sales opportunity (factor
two) and efficiency (factor three) measured against the amount of human
interactivity (factor one).

PROCESS ANALYSIS
Service Process Selection Service System Design matrix

PROCESS ANALYSIS
Next Class Basic Terminology and Evaluation Concepts used in Process
Analysis.
MCQ quiz based on the 1st class
Numerical
Chapters 6, 7, 8

PROCESS ANALYSIS