OPERATIONS MANAGEMENT

GETTING STARTED
 Me
 Entrepreneur – www.prosares.com
 rvajpai@gmail.com
 9321521467 (only if really necessary)

 Expectations from you

 Energy
 Challenge
 Fun
ASSIGNMENTS
 Assignment
 Divide yourselves into groups of 4
 20 minutes of each day – Presentation by 1 grp
 10 Weightage points for presentation
 (5 individual, 5 group)
 5 weightage points for participation – one winner per
presentation
 CR to prepare and announce groups
OPERATIONS MANAGEMENT
Introduction
1. INTRODUCTION TO OPERATIONS MANAGEMENT
 What is operations management?
 Discuss
OPERATIONS MANAGEMENT - CONTEXT

Time

Quality Operations Flexibility

Costs
FOUNDATIONAL CONCEPTS

Product Type (Goods/Services)

Product Positioning
Development Product Architecture

Process Type (Discrete/Continuous)

Design & Technology
Management
Process Flow

Supply Chain Supply Chain Architecture

Supply Chain Co-ordination
DEFINITIONS
 “Management of direct resources that are required to produce
goods and services”
(Direct resources - e.g. Man, Material, Machine)
(Indirect resources – e.g. Money)

 “Design, operation & improvement of the systems that create and

deliver the firm’s primary products and services”

 Management of an organisation’s productive resources or its

production systems
 A Production System takes inputs and convers it into output
 The Conversion process is the predominant activity of a production system
 Primary concern of the Operations Manager is the conversion process
WHY STUDY OM
Finance/Accounting
Production and Budgets
Inventory data Cost analysis
Capital budgeting requests Capital investments
Capacity expansion and Stockholder
Technology plans requirements
Orders for materials Product/Service
Production and delivery Availability
Schedules Quality Lead-time estimates

Marketing
Requirements Design/ Status of order
Suppliers

Performance specs Delivery schedules

Operations /
Material availability
Production Sales forecasts
Quality data Customer orders
Delivery schedules Customer feedback
Designs Promotions
Personnel needs
Hiring/firing
Skill sets
Training
Performance evaluations
Legal requirements
Job design/work
Union contract negotiations
measurement

Human Resources
DECISIONS & ACTIVITIES OF AN OPERATIONS MANAGER

 Plan
 Organize

 Control

 Direct

 Motivate

 Training & Development

HISTORICAL EVOLUTION
 The Industrial Revolution

 Post-Civil War Period

 Scientific Management

 Human Relations & Behaviorism

 Operations Research

 The Service Revolution

INDUSTRIAL REVOLUTION
 Developed in England in 1700s

 Steam Engine Invented by James Watt in 1764, replaced human & water
power for factories

 Adam Smith’s The Wealth of Nations in 1776 – Specialisation of labour

 Late 1700s factories had the machine power and also ways of planning and
controlling the tasks of workers.

 Spread to other European Countries & United States

 Eli Whitney developed the concept of interchangeable parts (1790)

 Textile industry was the first “industry”

 Gasoline Engine & Electricity in 1800s further advanced the revolution

 By Mid 1800’s the “cottage” production system gave way to “factory system”
POST-CIVIL WAR
 Led to great expansion of production capacity

 Following developments led to production explosion of 20th

Century:
 Increased capital & production capacity
 Expanded urban workforce
 New Western US Markets
 An Effective National Transportation System
SCIENTIFIC MANAGEMENT
 Frederick Taylor’s Shop System
 Each worker’s skill, strength, learning ability determined
 Stopwatch studies conducted to precisely set standard output per worker
on each task
 Material specifications, work methods, routing sequences were used to
organise the shop
 Supervisors were carefully selected and trained
 Incentive pay systems were initiated

 In 1920s, Ford Motor Company’s operations embodied

 Standardised product designs
 Mass production
 Low manufacturing costs
 Mechanised assembly lines
 Specialisation of labour
 Interchangeable parts
HUMAN RELATIONS & BEHAVIOURALISM

 1927-1932 – Howthorne Studies realised that human

factors were affecting production.

 Researchers and Managers alike were recognising that

psychological and socialogical factors affected production.

 From the work of behaviouralists came a gradual change in

the way managers thought about and treated workers.
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 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.
THE SERVICE REVOLUTION

 The creation of services organisations accelerated

sharply after World War II.

 Investment per office worker now exceeds

investment per factory worker.

 Thus, there is a growing need for service

operations management.
THE IT REVOLUTION
 Explosive growth of computer and communication technologies

 Easy access to information and the availability of more information

 Advances in software applications as Enterprise Resource Planning

(ERP) software

 Widespread use of email

 More and more firms becoming involved in E-Business using the

Internet

 Results: Faster, better decisions over greater distances

OPERATIONS MANAGEMENT IN TODAY’S CONTEXT

 Global Competition

 Quality, Customer Service, Cost Challenges

 Rapid Expansion of Advanced Technologies

 Continued Growth of the Service Sector

 Scarcity of Operations Resources

 Social-Responsibility Issues
SYSTEMS VIEW OF OPERATIONS

Production System

Conversion
Inputs Outputs
Subsystem

Control
Subsystem
MANUFACTURING VS SERVICES
Manufacturing
 Tangible output
 Less labour, more equipment
 Mass production, fewer
variations
 Can produce and store
 Quality determined by defects
Service
 Intangible output
 More labour, less equipment
 Customised output
 Cannot store
 Intangible measures of
quality …(No more!!!)
OPERATIONS STRATEGY
WHAT IS STRATEGY?
 Discuss
STRATEGY

a deliberate search for a plan of action that will develop and

grow a business's distinctive competence
OPERATIONS STRATEGY

 Execution!
MCDONALD’S OPERATIONS STRATEGY - STATEMENT

“To provide unmatched consistency in operations in support of

high product quality. This must be accomplished with adequate
speed, low cost, and process innovation to accommodate changes
in consumer tastes.”

 Order winners
 Consistent operations
 High product quality

 Order Qualifiers
 Speed
 Cost
 Process innovation
COMPONENTS OF OPERATIONS STRATEGY
 Structure
 Capacity, Facilities, Vertical integration, Technology

 Infrastructure
 Workforce, Organization, Information/control systems

 Capabilities
 Unique to each firm

 Competitive Priorities
 Cost, Quality, Time, Flexibility
DIMENSIONS
 Competition based on Costs

 Competition based on Quality

 Competition based on Time

 Competition based on Agility

 “blue ocean”
SOUTHWEST AIRLINES
Southwest Airlines

Average Airlines

Car Transport

Price Meals Lounges Seating Hub Friendly Speed Point-Point

Choice Connectivity Service Frequency
Source: Kim & Mauborgne
CRITERIA FOR EVALUATING OPERATIONS STRATEGY
 Consistency
 vis-à-vis business strategy
 vis-à-vis other functions
 vis-à-vis competitive dimension (cost/quality/etc)
 vis-à-vis external environment

 Contribution to Business
MCDONALD’S
Dimension Strategy
Capacity Growth as needed through additional stores - but capacity added carefully
Well-utilized - franchisee's well-being depends on it being used heavily

Facilities Distributed facilities, each facility being very similar to the next, all focused around
the same menu - although the uniformity is beginning to change

Process High degree of process understanding, emphasis on "fool-proof" processes

Technology A leader in the technology of fast-food delivery

Vertical Partnership arrangement

Integration Long-term relationship with suppliers to promote innovation and quality
improvement
Workforce Franchisees: well-trained, carefully selected, entrepreneurs
Operators: high-turnover, cheap

Organization Guidelines provided by corporation, but franchisees push to locally optimize

Control Centralized buying

Systems Bulk contracts
"Push" system for basic supplies, "pull" system day-to-day in the restaurants
 Recap?