Fundamentals to Operations Management PDF

Introduction to Operations Management Compiled by Dr. Rinki Rola  Course Overview Operations management is an essential element of any business, whether it provides a product or service to its customers. The field is both evolving and growing. This cour...

Introduction to Operations Management Compiled by Dr. Rinki Rola  Course Overview Operations management is an essential element of any business, whether it provides a product or service to its customers. The field is both evolving and growing. This course is an introduction to the field of operations management. The topics covered include both strategic issues and practical applications of operations.  Objectives of Course To familiarises students with basics of operations management in the manufacturing and service sector for product and process designs to improve the firm’s performance. To let the students be able to propose a solution to managerial problems related to plant location and layout and operation designing for an organization. To let the students be able to determine strategies for forecasting, inventory control, and inventory ordering policies and select appropriate model to forecast demand and solve inventory management problems. To let the students be able to predict the managerial problems related to quality management and solve using appropriate process capability and statistical quality control techniques. To let the students be able to design a operating systems and supply chain network for creating and delivering value for customers using appropriate operations and SCM strategy.  Prerequisites 1. The students should be able to understand the random behaviour of systems and the results of random nature. 2. Knowledge of normal distribution and use of standard tables should be known to the students.  Course Policies / Instructions 1. No missed exams, quizzes, or other in-class assignments, announced or unannounced, can be made up later. 2. Students not in attendance at the start of class time will be counted absent. 3. Students may request an emergency absence in writing to the faculty and the programme office.  Course Outcomes At the end of the course, students will be able to: CO DS103 (1) Apply the fundamentals of operations management in the manufacturing and service sector for product and process designs to improve the firm’s performance. Performance Indicators ∙ Describe the basic concepts of operations and role of operations in achieving various competitive capabilities. ∙ Explain how operations and supply chain strategy are implemented and evaluated. ∙ Identify similarity and differences between product and services and develop the designs and process strategies. ∙ Choose appropriate strategy and how to implement in the firms. CO DS103 (2) Propose a solution to managerial problems related to plant location and layout, line balancing, operation designing for an organization. Performance Indicators ∙ Discuss the location selection factors for manufacturing and service facility. ∙ Compare and recommend where to locate a facility based on location analysis techniques. ∙ Analyze the common types of manufacturing and service layouts. ∙ Solve the assembly line problems and calculate the efficiency of the balance. CO DS103 (3) Develop strategies for forecasting, inventory control, and inventory ordering policies and select appropriate model to forecast demand and solve inventory problem. Performance Indicators ∙ Describe the qualitative techniques for forecasting demand. ∙ Apply appropriate quantitative techniques to forecast demand. ∙ Discuss the key elements inventory and inventory control in a firm. ∙ Utilize basic inventory models to calculate order quantity and related inventory measures. ∙ Classify the given inventory data into ABC category. CO DS103 (4) Solve quality management issues of various firms using principles of quality management and statistical quality control. Performance Indicators ∙ Evaluate the quality of product and services using various techniques. ∙ Explain the scope of total quality management in a firm. ∙ Illustrate Six Sigma Approach to improve quality and productivity. ∙ Analyze process quality and quality of batches using statistical techniques. CO DS103 (5) Analyze product and service systems and network for creating and delivering value for customers through supply chain. Performance Indicators ∙ Design the service blueprint for service system to identify failure points and suggest Poka-Yoke. ∙ Explain the basic concepts of supply chain management and role of SCM in creating value for customers. ∙ Analyze supply chain processes to design a suitable SCM strategy. ∙ Apply lean and JIT concepts to product and service processes.  Course Outline Introduction to Operations Management Product & Service Designing Process Designing Facility Location Planning Designing Facility Layouts Demand Forecasting Capacity Planning Inventory Management Quality Management Process Capability and Statistical Quality Control Supply Chain Management JIT and Lean Production Service Operations  Reference Books Operations Management - Sustainability and Supply Chain Management by jay Heizer and Barry Render Operations and Supply Chain Management e - Chase R. B., Jacobs, F. R., Aquilano, N. J. and Agarwal N.K., Latest edition., McGraw Hill Publication Management – Process and Supply Chains by Lee J Krajewski, Larry P. Ritzman, Manoj K Srivastava and Samir K Srivastava, Eleventh Edition, Pearson Publication Operations and Supply Chain Management by Russell, Roberta S. and Taylor, Bernard W., Latest edition. John Wiley and Sons (Wiley India) Production and Operations Management by Kanishka Bedi, Publisher: OXFORD Evaluation Procedure / Pattern Details Written Exam (ETE) – 50% (100 Marks) MCQ Quiz (10 Marks) Project (20 Marks) Continuous Evaluation (CE) – Class Test (10 Marks) 50 % N = 4 Components Case Analysis (10 Marks) Total – 100% Contact Details: Name: Dr. Rinki Rola Email ID: [email protected] Contact: 90990 44167 How do you define and differentiate – Goods and Services ??  Goods & Services Goods / Product Service What can How the value is What customer buys – What can you make provided – Intangible Physical, tangible aspect you do for me? aspect for me?  Goods vs. Services Goods / Products Services 1) Goods can be resold 1) Reselling services is unusual 2) Goods can be inventoried 2) Services cannot be inventoried 3) Some aspects of quality are 3) Many aspects of quality are measurable difficult to measure 4) Selling is distinct from 4) Selling is often a part of production of goods production of service 5) Goods are transportable 5) Service provider, not the service, is transportable 6) Often easy to automate 6) Service is often difficult to production of goods automate 7) Are tangible 7) Are intangible 8) Involve less customer 8) Involve higher customer interaction interaction  Manufacturing vs. Service Manufacturing and Service Organizations differ primarily because manufacturing is goods-oriented and service is act-oriented. Goods Services Tangibl Act-Oriented  Manufacturing vs. Service !! Characteristic Manufacturing Service Output Tangible Intangible Customer contact Low High Uniformity of output High Low Labor content per unit of Low High goods or service Uniformity of input High Low Measurement of Easy Difficult productivity Opportunity to correct Easy Difficult quality problems Similarities in Manufacturing & Services!! Both use technology. Both have quality, productivity, & response issues. Both must forecast demand. Both will have capacity, layout, and location issues. Both have customers, suppliers, scheduling and staffing issues. Manufacturing often provides services. Services often provides tangible goods. Goods - Services Continuum The Product / Process Continuum Automobile Photocopier retailers Banks Consultancies Automobile manufacturers & service manufacturers providers Restaurants Airlines Teaching / Financial Advisor Product Process orientation orientation Organizations on a Product/Process Continuum What about McDonald’s - Service or Manufacturing?  Hybrid organizations Some organizations are a blend of service / manufacturing are called Hybrid or semi-manufacturing organizations.  What is Operations? The aspect of business organization that is responsible for producing goods and services. A function or system that transforms inputs into output of greater value (worth, importance, utility, etc.) It deals with the design and management of ; – Products – Processes – Services – Supply Chains  What is Operations Management? Operation Management is the set of activities that relate to the creation of goods and services through the transformation of inputs into outputs OR in other words its is the management of all process and systems that produce goods and services for external and internal customers. Operations Management is the business management function responsible for planning, coordinating, and controlling the resources needed to produce products and services for a company. It is an core function of every organization whether Service or Manufacturing, profit or not for profit. “The science and arts of ensuring, goods and services are created and delivered successfully to customers”  Transformation Process The transformation process can be: – Physical: as in manufacturing operations – Locational: as in transportation or warehouse operations – Exchange: as in retail operations – Physiological: as in health care – Psychological: as in entertainment – Informational: as in communication  How is Operations Relevant to specialization? Accounting - “As an auditor you must understand the fundamentals of operations management.” Information Technology - “IT is a tool, and there’s no better place to apply it than in operations.” Strategy Management or General Management - “We use so many things you learn in an operations class—scheduling, lean production, theory of constraints, and tons of quality tools.” Economics - “It’s all about processes. I live by flowcharts and Pareto analysis.” Marketing - “How can you do a good job marketing a product if you’re unsure of its quality or delivery status?” Finance - “Most of our capital budgeting requests are from operations, and most of our cost savings, too.” HR- operations managers and human resource managers interact primarily on administrative issues regarding payroll and other matters. Data Science - Data Science provides tools such as process mining to analyze and visualize the flow of operations. This aids in identifying bottlenecks, inefficiencies, and areas for improvement in the workflow. Communication- Planning, organizing, leading, and controlling resources—depends on effective communication. Managers must be able to receive accurate information to determine plans, and they must be able to send accurate information for the plans to be implemented.  Transformation Process Quality of inputs Quality of outputs monitored monitored Random disturbances INPUTS Transformation OUTPUTS Process (Goods Or Service) Feedback Mechanisms  Transformation Process For a Manufacturing Organization (A Refrigerator Manufacturer) Random disturbances High turnover of workers and managers Recession Quality of Machines & Quality of Government’s taxation outputs Equipments inputs policy monitored Building monitored Strikes instigated by trade Components, unions parts, Customers satisfied with: sub-assemblies, Transformation Good cooling performance etc. Workers Process Less consumption with Office electricity infrastructure Good after-sales service (computers, New advanced features furniture, etc.) Packaging material Feedback Mechanisms Capital Rising sales volume Managers Lesser customer complaints Positive response of customers in INPUTS the feedback forms OUTPUTS  Transformation Process For a Service Organization (An MBA Institute) Random disturbances Strikes of students, teachers or Quality of Quality of staff outputs inputs Undue interference of the Raw minds monitored monitored government in the working of (students) institutions Teachers Class rooms Enlightened students with: Transformation Good communication skills Computer lab Process Pleasant personalities Library Leadership qualities Projectors Good analytical ability (OHP, LCD etc) Team spirit Decision making abilities Administrative Computer skills Feedback Mechanisms staff Success at placement interviews Grades obtained in examinations INPUTS Rising career graph of alumni in the industry OUTPUTS Number of applications for admission in the institute Ratings of surveys  Transformation Process For a Hybrid Service & Manufacturing Organization (A Restaurant) Random disturbances High turnover of chefs, Quality of Customers Quality of waiters, etc. outputs Building inputs Inflation monitored Chef monitored Government’s taxation Vegetables policy Furniture Customers satisfied with: Mutton, Transformation Good preparation of the chicken, Process food pork, etc. Pleasant behavior and Cooking oil, personality of the waiter Spices, etc. Genuine prices charged Waiters Manager Feedback Mechanisms Rising Revenues INPUTS OUTPUTS Repeat Customers Appreciation of customers  Role of Operations in an Organization Integration between Different Functional Areas of a Business STRATEGY AND COMPETITIVE PRIORITIES  Corporate Strategy and Operations Strategy is how the mission of a company is accomplished. Provides direction for achieving a mission Unites the organization Provides consistency in decisions Keeps organization moving in the right direction Operations Management play an important role in corporate strategy. Strategic Planning  Strategy Formulation 1. Defining a primary task – What the firm is in the business of doing? 2. Assessing core competencies – What does the firm do better than anyone else? 3. Determining order winners and order qualifiers – What qualifies an item to be considered for purchase? – What wins the order? 4. Positioning the firm – How will the firm compete? 5. Deploying the strategy  Competitiveness Competitiveness is the ability and performance of a firm to sell and supply goods and services in a given market, in relation to the ability and performance of other firms. In other words, how will one firm win over customers in order to become the product or service of choice. Competitive advantage is the leverage a business has over its competitors. This can be gained by offering clients better and greater value.  Competitive Priorities and Capabilities Competitive Competitive Priorities Capabilities The critical The cost, quality, dimensions that a time, and flexibility process or supply dimensions that a chain must possess process or supply to satisfy its internal chain actually or external possesses and is customers, both now able to deliver. and in the future.  Distinctive competency “A strength that sets a business apart from its competition” McDonald’s - Quality Disney World - Innovation Intel Corporation - Product Leadership Dell - Low Cost Honda – Engine Design A distinctive or core competence has three characteristics: 1. It provides potential access to a wide variety of markets. 2. It increases perceived customer benefits. 3. It is hard for competitors to imitate.  Order Qualifiers & Order Winners Terry Hill has divided the criteria required in the marketplace into two groups: Order qualifiers and Order winners. An order qualifier is a characteristic of a product or service that is required in order for the product/service to even be considered by a customer. An order winner is a characteristic that will win the bid or customer's purchase. Therefore, firms must provide the qualifiers in order to get into or stay in a market. To provide qualifiers, they need only to be as good as their competitors. Failure to do so may result in lost sales. However, to provide order winners, firms must be better than their competitors.  Order Winners and Qualifiers Winners: Differentiators — performance not yet duplicated by competitors Competitive advantage — performance better than all or most of the competitors Qualifiers Minimum acceptable level of performance With time, Order Winners become Order Qualifiers 38 Order Winners and Order Qualifiers Source: Adapted from Nigel Slack, Stuart Chambers, Robert Johnston, and Alan Betts, Operations and Process Management, Prentice Hall, 2006, p. 47 Copyright © 2023 Wiley India Pvt. Ltd. 39 Relationship of Order Winners to Competitive Priorities Relationship of Order Qualifiers to Competitive Priorities  Order Winners and Qualifiers COST Definition Process Considerations Example 1. Low-cost Delivering a service or a Processes must be designed and Costco, Walmart, operations product at the lowest operated to make them efficient IKEA possible cost QUALITY 2. Top quality Delivering an outstanding May require a high level of customer Rolex service or product contact and may require superior product features 3. Consistent Producing services or Processes designed and monitored to McDonald’s quality products that meet design reduce errors and prevent defects specifications on a consistent basis  Order Winners and Qualifiers TIME Definition Process Considerations Example 4. Delivery speed Quickly filling a Design processes to reduce lead Netflix customer’s order time 5. On-time delivery Meeting delivery-time Planning processes used to United Parcel promises increase percent of customer Service (UPS) orders shipped when promised 6. Development Quickly introducing a Cross-functional integration and Zara speed new service or a involvement of critical external product suppliers  Order Winners and Qualifiers FLEXIBILITY Definition Process Considerations Example 7. Customization Satisfying the unique needs of Low volume, close customer Ritz Carlton each customer by changing contact, and easily service or product designs reconfigured 8. Variety Handling a wide assortment of Capable of larger volumes than Amazon.com services or products efficiently processes supporting customization 9. Volume flexibility Accelerating or decelerating Processes must be designed The United States the rate of production of for excess capacity and excess Postal Service services or products quickly to inventory (USPS) handle large fluctuations in demand  Key Purchasing Criteria Key purchasing criteria is what drives their customers to make purchases. Each organization needs to have a deep understanding of their customers. They are the factors which customers evaluate and consider when making a product choice. It is important to keep in mind that the customer is not always a consumer purchasing a good at a store. The customer in many instances may be another business.  Price – Firms need to understand how much the customer will pay for an item. If products are seen to be very similar to one another, the customer will choose based on price. Quality – Many customers are willing to spend more in order to obtain a product with specific characteristics or brand reputation. Variety – There is a part of the market that value the opportunity to choose from a wide variety of products. They look for options to change the style, colour, dimensions or technical characteristics. Timeliness – Some customers care greatly about how long it will take to obtain the product or service.  Operations Competitive Dimensions Cost Traditional Quality (including Service) Competitive Priorities Delivery (Speed) Flexibility Service Delivery Reliability Innovation Coping with Changes in Demand New Product Introduction Speed  Operations Competitive Dimensions Cost or Price: “Make the product or deliver the service at low cost” E.g. Maruti Quality: “Make a great product or deliver great service” E.g. Amway Delivery Speed: “Make the product or deliver the service quickly” E.g. Dominos Delivery Reliability: “Deliver it when it is promised” E.g. Federal Express Coping with changes in demand: “Change its volume with the demand fluctuation” E.g. Coke Flexibility and New Product introduction speed: “Change it” E.g. Samsung Competitive Priorities - The Edge Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs? 49  Dealing with Trade-offs For example, if we reduce costs by reducing product quality inspections, we might reduce product quality. For example, if we Cost improve customer service problem solving by cross-training Flexibility Delivery personnel to deal with a wider-range of Quality problems, they may become less effective at dealing with commonly occurring problems.  Important Videos IKEA Business Model ikea-business-model.mp4 Hard Rock Cafe- Operations Strategy Case Study- Operation Management - Chapter 2.mp4