Week 1 Handout - Introduction to Operations Management PDF

Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations...

Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Operations in an Organization Section 1, Sub-section 1.2 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Operations Management B Mahadevan Week 1 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 – involving multiple stakeholders Operations Management is a systematic approach to address all the issues pertaining to an Operations System. © All Rights Reserved, Indian Institute of Management Bangalore  Operations Function Introduction to Operations Management - I B Mahadevan Week 1 Linkages with other functions Customer Layer Operations Support Layer Ultimate Dealers Marketing Maintenance Quality Customer Retailers Core Operations Layer Costing Planning Tooling Testing Assembly Material IT Design IE Fabrication Machining Service Delivery system Supplier Layer Layer of Innovation Sub-contractors Suppliers Innovation Strategy Research & Development Other service providers Adopted from Mahadevan, B. (1999), “The New Manufacturing Architecture”, Tata McGraw Hill, pp 7. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Operations Management B Mahadevan Week 1 Issues to address… Do we have the right capacity to address the demand on hand? How should one look at the issues pertaining to the supply chain? Can we deploy some methods to improve the productivity of the processes and people in our organizations? How do I put a quality assurance system in place so that there is some predictability of the quality of products and services offered? © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Alternative Configurations in Operations (Streamlined Flow Systems) Section 1, Sub-section 1.3 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Flow Patterns in Streamlined Flow Systems B Mahadevan Week 1 Automobile Assembly & Restaurant Examples Parts Doors Cars roll Chassis Painting QC out Assembly Assembly 100 – 200 work stations Cash Delivery Dining Area Dispose Depart Counter Counter Continuous Flow  Low variety/high volume Splitting work into several  Flow Streamlined stages  Work Stations  Need to balance them © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Issues in Streamlined Flow Systems Week 1 Ensuring continuous flow Work/Capacity Balancing Importance of Maintenance Management Good Quality Assurance System © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Alternative Configurations in Operations (Intermittent Flow Systems) Section 1, Sub-section 1.3 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Why Intermittent Flow Systems? Week 1 The quest for variety is leading organizations to create more versions in products and services. Some examples: – Travel agency: Adventure tourism, eco/nature tourism, personal vacations etc. – Number of tariffs and plans offered by mobile telephone providers or satellite based DTH entertainment services is on the increase – Product variations: Do it yourself products and services – PET bottles (industrial, medical, food grade) © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Intermittent Flow System B Mahadevan Week 1 Salient Features Characterized by mid-volume, mid-variety products/services Increases the flow complexities Flow and capacity balancing are difficult but important – Batch Processing – Alternative methods of work organization Capacity Estimation is hard Production Planning & Control is complex © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Intermittent Flow System B Mahadevan Week 1 Sources of Problems Inappropriate Complex Complex Choice on Material & Operations Structure & Information Planning & People Issues Flows Control © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Intermittent Flow System B Mahadevan Week 1 Sources of Problems Too much Paper Work High Enormous Overhead/Cost Supervision Series of Excess Inventory Problems Excessive Coordination Poor Delivery Long Lead Times Reliability © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Intermittent Flow System B Mahadevan Week 1 Role of Operations Management What happens when you try to offer these variations to the customers? – Delivering variety without compromising on quality and delivery schedule is a challenge. – Focus shifts to how we organize the operations. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Intermittent Flow System B Mahadevan Week 1 Role of Operations Management Manage the offering – Variety Management – modular designs – delayed differentiation Design an appropriate Operating System – Divide & Rule Manage operations – Changeover from one mode to another © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Alternative Configurations in Operations (Jumbled Flow Systems) Section 1, Sub-section 1.3 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Jumbled Flows B Mahadevan Week 1 Examples Construction of a flyover, the metro train network or a new airport terminal. Manufacturing and Assembly of Boeing or Airbus Aircraft. A large multi-specialty hospital located on a 10-storey building. In these examples if we watch operations we will see a jumbled flow. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Jumbled Process Flow Week 1 Resource 3 Resource 1 Resource 6 Job 1 Resource 4 Job 3 Resource 2 Resource 7 Job 2 Resource 5 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Jumbled Process Flow B Mahadevan Week 1 Issues to address Non-standard, complex flow patterns (Highly customized items, customer orders for one or a few) Very High Variety, Low volumes No benefits arising out of volume or scale of operations Large uncertainty, Too many entities involved Longer time span Difficult to dedicate resources exclusively for requirements – Sharing of common resources is a reality © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Jumbled Process Flow B Mahadevan Week 1 How to handle this? Operations Planning and Control too complex Needs sub-system oriented thinking Taking uncertainty into consideration is important Project Management tools and techniques are critical © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Alternative Configurations in Operations B Mahadevan Week 1 Some observations We have seen three different patterns of operating systems – both in manufacturing and service settings – what is it pointing to in terms of understanding operations? – Volume & Variety always trade off with one another – There is a trend towards mid-volume mid variety situation – Flow is always related to the volume – variety interactions High Volume – Low Variety :Continuous Flow Low Volume – High Variety : Jumbled Flow Mid Volume – Mid Variety: Intermittent Flow © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Making Sense of Operating Systems Week 1 High Jumbled Flow Systems Variety Continuous Flow Systems Low High Volume Low © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Complexity of Operations Management Week 1 The Notion of variety is to be understood – Products, Models, Processes, Routing, Technology Choices Factors Affecting Operations Management Complexity – Volume – Variety Interactions leading to flow – Number of Stages in Operations © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Complexity of Operations Management Week 1 Type of Flow Continuous Intermittent Jumbled Flow Flow Flow Many More Complex No. of Stages Some Less Complex Few © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Complexity of Operations Management Week 1 Type of Flow Continuous Intermittent Jumbled Flow Flow Flow Petro-chemicals Multi-specialty Hospital Many No. of Stages Automobile Software Some Garments Computer Full fare Airline No frills Airline Few Fast Food Restaurant Eye Hospital © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Performance Measures for Operations Section 1, Sub-section 1.4 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Performance Metrics B Mahadevan Week 1 An example (Indigo Airlines) Capacity Decisions The number of employees per Cost aircraft in Indigo is 96 Four handlers stack bags in hold Responsiveness Source: Mehra, V. (2012), “Soaring above the rest”, Business Today, June 24, 2012, pp 84 – 92. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Performance Metrics B Mahadevan Week 1 An example (Indigo Airlines) Operational Choices Cost Check-in staff also doubles as baggage handler Ground crew takes 20 minutes to Responsiveness prepare the aircraft for the next flight Flexibility Indigo planes fly about 12 hours a day Source: Mehra, V. (2012), “Soaring above the rest”, Business Today, June 24, 2012, pp 84 – 92. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Performance Metrics B Mahadevan Week 1 Comparison of Two Manufacturers Criteria for Comparison Manufacturer Manufacturer Quality A B Production Volume (million) 5 10 No. of Employees 35,000 120,000 Cost Design to customer delivery 27 months 36 months No. of models offered 45 28 Delivery Defects at Assembly Line (ppm) 1,400 8,900 Inventory (Days) 23 39 Order to Delivery Time (Days) 11 24 Flexibility © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan What do we infer from these examples? Week 1 Operational choices will eventually affect the performance of an organization. Performance Metrics help us assess the impact of these choices. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Performance Metrics for Operations Week 1 Quality – PPM, DPMO, Quality Costs, FPY Cost – Inventory (days), Procurement, Production Delivery – Order Fulfillment time, OTD Index, Schedule Adherence Flexibility – No. of models, Responsiveness – Waiting Time, Delivery Quote Innovation – No. of new models, Patents, Learning – Training time, Suggestions per employee Improvement – NVA Content © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Identifying appropriate Performance Metrics B Mahadevan Week 1 An example An insurance service provider wants to know which performance metrics are important to stay competitive. – Is it cost, time or responsiveness? If he/she has a good understanding of this, he/she can accordingly plan operations and make appropriate operational choices. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Reasons for not having insurance Week 1 Reasons Rural Urban Not so important 24.1% 25.6% Too Expensive 54.9% 57.1% Limited Range of Products 30.5% 28.0% Poor Services 10.7% 9.3% Complex Policies 10.4% 12.1% Accessibility Problem 17.0% 12.6% Difficult Procedure 10.5% 12.5% Source: Survey regarding insurance awareness levels, http://www.irda.gov.in/ADMINCMS/cms/Uploadedfiles/INSURANCE_AWARENESS_insdie_report_final_for_mail.pdf © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Identifying appropriate Performance Metrics B Mahadevan Week 1 Comparison of Offerings among competitors Criteria for Comparison Firm Best Average Cost of Passenger Car (in the INR INR INR segment) 700,000 540,000 670,000 No. of Variations offered 30 30 18 Order Delivery Time 2 weeks 3 days 6 days Kilometers per Litre (Fuel 12.5 12.8 10.4 Efficiency) Average Maintenance Cost per INR 18,000 INR 11,000 INR 17,000 year © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I Identifying appropriate Performance Metrics B Mahadevan Week 1 Emerging Challenges & Concerns Growing customer expectations – 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. Today’s businesses are constantly challenged by the rapid technological advancements. – ATMs & Internet Banking, Procurement of goods & services, New Product Development Environmental Issues – Growing industrialization raises concerns regarding the depletion of natural resources and the waste generated from production systems and end-of-life products. – Increasingly, firms are under pressure to take responsibility of restoring, sustaining and expanding the planet’s ecosystem instead of merely exploiting it. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Priorities for Operations Today Week 1 Relate operations system to Customer/ Market. Acquire Capabilities to tolerate product proliferation. Develop systems and procedures that promote learning. Develop Green Manufacturing Practices. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan How do we identify the important metrics? Week 1 Get to know what the customers want. Analyze the existing offerings in the market. Understand the emerging trend in business & society. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Order Qualifiers & Order Winners Week 1 Order qualifying attributes are the set of attributes that customers expect in the product or service they consider for buying. Order winning attributes are other attributes that have the potential to sufficiently motivate the customer to buy the product or service. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Week 1 Understanding Operations Highlights Section 1 © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Summary Week 1 Operations is a basic requirement in all organizations. Decisions regarding Capacity, Supply Chain, Productivity, Quality and other operational choices are part of Operations Management. – These create the competitive advantage for firms from operations. First step in this process is understanding operations, configurations, and patterns in organizations. – Three types of patterns: Continuous/Streamlined, Intermittent and Jumbled Flow Systems. © All Rights Reserved, Indian Institute of Management Bangalore  Introduction to Operations Management - I B Mahadevan Summary (cont.) Week 1 Volume and Variety in offerings determine: – Flow patterns in organizations. – Complexity of managing the operations. We need performance measures for operation: – To prioritize efforts and choices we need to make. – Assess the impact of various operational choices we make. With this understanding of operations, we may be in a position to: – Develop an overall sense. – Focus on specific aspects of operations in some detail. © All Rights Reserved, Indian Institute of Management Bangalore