Operations

Management
Facilitator:
Introduction

• Major sectors in a country -

Manufacturing , Service and
Agriculture

• In India Manufacturing and Services

constitute 75% of the GDP
Definition

Production and Operations Management ("POM") is about the

transformation of production and operational inputs into "outputs"
that, when distributed, meet the needs of customers.
 Operations Management
A Systems Perspective

Forecasting

PROCESSING
Labour Process & Purchasing Goods
& Inventory
Product

OUTPUT
INPUT

Material Control
Design
Capital Operations Material & Services
Planning & Capacity

Control Planning

Feedback
Quality Maintenance Process
Management Management Improvement
 Transformations
Manufacturing Transformations
 Machine tool mfg

Service Transformations
 Bank, garage, restaurant

Differences in terms of
 Tangibility
 Heterogeneity
 Simultaneous production & consumption
 Perishability
The Service – Product
Continuum
Product Domination Service Domination

Materials, Assets, Products… Services, People, Interactions…

Passenger Cars, Machine Tools

Facilities Maintenance, Turnkey Project Execution …

Logistics, Tourism, Travel and Entertainment Sectors

Health Care System (Hospitals)

Restaurants, Fitness Centres

Professional Consulting, Legal Services

Manufacturing & Service
Similarities & Differences
Manufacturing Organizations Service Organizations
Differences
Physical durable product Intangible, perishable product
Output can be inventoried Output can’t be inventoried
Low customer contact High customer contact
Long response time Short response time
Regional, national, Intl. markets Local markets
Large facilities Small facilities
Capital intensive Labour intensive

Quality easily measured Quality not easily measured

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
 OM incorporates many tasks that are
interdependent, but which can be grouped
under five main headings:
PRODUCT
Marketers in a business must ensure that a business sells products
that meet customer needs and wants. The role of Production and
Operations is to ensure that the business actually makes the required
products in accordance with the plan. The role of PRODUCT in
POM therefore concerns areas such as:

- Performance
- Aesthetics
- Quality
- Reliability
- Quantity
- Production costs
- Delivery dates
 PLANT
To make PRODUCT, PLANT of some kind is needed. This will comprise the
bulk of the fixed assets of the business. In determining which PLANT to use,
management must consider areas such as:

- Future demand (volume, timing)

- Design and layout of factory, equipment, offices
- Productivity and reliability of equipment
- Need for (and costs of) maintenance
- Heath and safety (particularly the operation of equipment)
- Environmental issues (e.g. creation of waste products)
 PROCESSES
There are many different ways of producing a product.
Management must choose the best process, or series of processes.
They will consider:
- Available capacity
- Available skills
- Type of production
- Layout of plant and equipment
- Safety
- Production costs
- Maintenance requirements
 PROGRAMMES
The production PROGRAMME concerns the dates and times
of the products that are to be produced and supplied to
customers. The decisions made about programme will be
influenced by factors such as:

- Purchasing patterns (e.g. lead time)

- Cash flow
- Need for / availability of storage
- Transportation
 PEOPLE
Production depends on PEOPLE, whose skills, experience and
motivation vary. Key people-related decisions will consider the
following areas:

- Wages and salaries

- Safety and training
- Work conditions
- Leadership and motivation
- Unionisation
- Communication
• What to Produce? The Design of Products & Services

• Where to Produce? Facility Location

• How Much to Produce? Capacity Planning for

Manufacturing & Service Systems

• How to Produce? Process Design; Work Analysis, Design

& Measurement; Layout & Safety.
 Importance of Operations
• Management
During the past couple of decades, many domestic companies saw their
market share decline due to their inability to compete with foreign firms
in terms of product design, cost, or quality.

• Theories to explain this development:

• Cultural differences
• Government policies
• Neglect of human resources
• Insufficient investment in technology

• World-class performance by operations in delivering high-quality, cost-

competitive products and services is essential to survival in today's global
economy.

• Of late Auto components, Pharma, IT and ITES sectors are showing signs
of global competitiveness.
 THE DRAGON
VS THE ELEPHANT
India Factor China
1947 Economic race started 1947
1991 Liberalisation initiated 1978

6-7% GDP Growth 7 -7.5%

125Cr + Population 136 Cr
$1165/Year Per Capita Income $3345 /Year
$21.27bn FDI $538bn
Rs. 10-12/unit Electric Power Rs. 6/unit
100 units Productivity 300 units
Very Strong Trade Unions No TU rights
 THE DRAGON
VS THE ELEPHANT
India Factor China

23 million TV sets produced 40 million

81.2 mn tons Steel production 779 mn tons

32 m bn Textiles production $145 bn

$36 bn Textiles exports $274 bn

5 million Automobiles production 23.72 million

Customer focus….
 Core Services

Core services are basic things that customers want

from products they purchase.
 Value-Added Services

Value-added services differentiate the organization

from competitors and build relationships that bind
customers to the firm in a positive way.
 Dealing with Trade-Offs

Cost
(Value)

Flexibility Delivery (Speed)

Quality
WCM -companies adopt TQM, Pull systems, JIT,TPM
 How do Firms Add Value?

• Greater productivity
– Lower costs and expenses
– Lower prices for the customer
• Higher quality
– Better performance
– Greater durability, reliability, aesthetics.
• Better timeliness
– Faster response and turnaround
– On-time delivery, meet promises
• Greater flexibility
– greater variety
– customization for customer needs / desires
Operations
A key functional area in an Organisation

Finance

Operations

Marketing HRM
 Operations Management
Challenges

• Competitive Pressures due to economic reforms

• Falling Prices
• The on road price of an automobile
• Shrinking Delivery Quote
• Textile Manufacturers are expected to cut their lead time from
order placement to final delivery down to 2 months
• Build-to-Order Requirements
• Need systems that allows customers to self-configure,
customize and visualize their own version of products &
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
• Growing industrialization raises concerns regarding the depletion of natural
resources and the waste generated from production systems and end-of-life
products.
• 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
• Effectively consolidating the operations resulting from
mergers.

• Developing flexible supply chains to enable mass

customisation of products and services.

• Managing global supplier, production and distribution

networks.
 Current Issues in OM (cont’d)

• Increased “commoditization” of suppliers.

• E-Commerce