OPERATION/PRODUCTION

The processes and methods used to

transform
tangible
inputs
(
raw materials,
semi-finished goods,
subassemblies) and intangible inputs (
ideas, information, knowledge) into
goods or services. Resources are used
in this process to create an output that
is
suitable
for
use
or
has
exchange value.

OPERATIONS MANAGEMENT DEFINED

Operations management is defined as the process of
designing, operating, and controlling a productive
system capable of transforming physical resources
and human talent into needed goods and services.

THE PRODUCTION SYSTEM AND ITS ENVIRONMENT

innovation
The process of translating an idea or invention into a good
or service that creates value or for which customers will pay.
To be called an innovation, an idea must be replicable at an
economical cost and must satisfy a specific need. Innovation
involves deliberate application of information, imagination
and initiative in deriving greater or different values from
resources, and includes all processes by which new ideas
are generated and converted into useful products. In
business, innovation often results when ideas are applied by
the company in order to further satisfy the needs and
expectations of the customers. In a social context,
innovation helps create new methods for alliance creation,
joint venturing, flexible work hours, and creation ...

Examples of Conversion Process

Input:

Through
put in

Patient

Conversio
n process:
Patient

Output:
Patient
receiving
Medical
service

Input-Output in a Dental Clinic

Input:
Bread,
meat,
mayonna
ise

Through put
in
Conversion
process:

Output
:
Burgers

Items being
cooked

Input-Output in a fast-food Shop

Operations Systems
Random fluctuations:
Late deliveries, Recessions, labor turnover
Inputs:
Land, Labor,
building,
equipment,
merchandise
, store
managers

Outputs:

Conversion
process

Feedback: inventory
levels, labor efficiency,
sales volume

Operations systems for a Department store

Serviced
customer
with desired
merchandise

Operations Systems
Random fluctuations:
Weather, inflation, govt. controls,
equipment breakdown

Inputs:
Land, farmer labor,
building, equipment,
tractors, plows, etc.

Outputs:
Conversion
process

Feedback: observation of
soil and crop conditions,
prices received

Operations systems for a farm

Grain,
beef, milk,
etc.

PRODUCT
Products or things are outputs converted from
inputs that satisfy consumer needs & offers
benefits to customers in forms of financial,
medical, legal, educational, etc.
A product can be either a good (i.e., a physical
object) or it may be a service (i.e., an intangible
product).
In operational terms, goods are produced/
manufactured and services are generated.

Characteristic Differences between Goods & Services

Characteristics

Goods

Services

Tangible

Intangible

2. Customer contact

Low

High

3. Uniformity of input

High

Low

4. Labor content

Low

High

5. Measurement of productivity

Easy

Difficult

6. to correct quality problems

High

Low

Lower

Greater

Less

More

1. Output

7. Input variability
8. Perishable Character

OPERATIONS MANAGEMENT ACTIVITIES

Periodic

Selecting
Involves the
selection
of products,
processes,
equipment,
work force

Designing
Involves
the design
of products,
processes,
equipment,
jobs,
methods &
wage
payment,
operating
& control
system

Continual
Updating
Involves the revision
of the productive
system in light of new
products and process,
technological
breakthroughs, shifts
in demand, new
managerial
techniques, research
findings, failures in
the existing products,
processes or operating
and control systems

Operating
Controlling
Is concerned
with setting
production
levels,
scheduling
production and
work force,
inventory
management
and quality
assurance

Process Technology
1. Job shop technology is a process technology suitable for a
variety of custom-designed products in small volume, e.g.,
Consulting firms.
2. Batch technology is a process technology suitable for a
variety of products in varying volumes, e.g., Bakery.
3. Assembly line is a process technology suitable for a narrow
range of standardized products in high volumes, e.g.,
Ready made garments manufacturing.
4. Continuous flow technology is a process technology
suitable for producing a continuous flow of products, e.g.,
Beverage.
5. Project technology is a unique & not repetitious activity
with a well defined objective that cuts across many
organizational and functional lines involving cost & time,
e.g., Jamuna Bridge project.

Product Life Cycle

Batch
Technology

Continuous flow

Assembly Line

Job Shop

Start up

Rapid
Growth

Maturation

Time

Figure: Process Costing

Commodity

IMPORTANT FEATURES OF DIFFERENT STAGES IN THE PRODUCT LIFE

CYCLE
Stages

R&D

Introduction

Growth

Maturity

Decline

Basic Strategies

Innovate

Infiltrate

Advance

Defend

Withdraw

Product Variety Great Variety

Great Variety

Increasing
standardization

Emergence of a
dominant design

High
standardization,
commodity
characteristics

Product Volume

Low Volume

Increasing Volume

High Volume

High Volume

Form of
Competition

Product
Characteristics

Product Quality &

Availability

Price & Dependability

Price

Strategic
Concerns

1. R&D for

1. Cut costs in
production &
marketing to fight
declining profit

1. Scale down
production &
marketing

new products
& services
2. Forecast
sales & key
trends

1. Plan financing for 1. R&D competitive

innovations for
negative cash flow
present products
period
2. Seek economies of
2. Scale up
scale in production
production &
marketing
operations

2. Consider extending
product life cycle via
reintroduction or
product update

2. Trim inventories

Product Design & Development Sequence

Key Activities

Steps

Search for consumer needs

Screening of alternatives
Market analysis
Economic analysis
General feasibility
Evaluation of alternative designs
with regard to reliability,
maintainability, & service life
Development & testing of process
compatibility& simulation studies

Idea generation

Selection & ranking of

best ideas

Product selection

Choice of specific
product features

Preliminary design

Final design

Facilities exist

Evaluation of alternative
technologies & methods

Key Outputs

Selection of best design

Final specifications in the
form of assembly
drawings, processing
formulas, procedure
statements, etc.
New facilities required

Major & minor

technological choice
Choice of specific
equipment & process flow
Downstream production decisions i/c:
Process
selection

Capacity planning
Production planning
Scheduling

PRODUCT SCREENING TECHNIQUES

A. PRODUCT EVALUATION SHEET
Performance
Features

Relative
Weight

Rating
Very
Good
(40)

Good
(30)

Fair
(20)

Factor
Score
Poor
(10)

Very
Poor
(0)

Sales

0.20

Competition

0.10

Patent protection

0.10

Technical opportunity

0.15

Materials availability

0.15

Effect on present product

0.10

Labor availability

0.15

4.5

Value added

0.05
Total

1.00

x
x
x

1
4.5
6

2
33

PRODUCT SCREENING TECHNIQUES (Cont.)

B. PROJECT VALUE INDEX (PVI)

CTS CCS AV P L
PVI
TPC
Where
PVI : Project Value Index
CTS : Chances for technical success on an arbitrary rating
scale, say 0 to 10
CCS : Chances for commercial success on an arbitrary rating
scale, say 0 to 10
AV : Annual volume (total sales of product in units)
P
: Profit in dollars per unit (i.e., price minus cost)
L
: Life of products (in years)
TPC : Total Project Cost

HISTORICAL DEVELOPMENT OF OPERATIONS MANAGEMENT

Date

Contribution

Contributor

1776

Specialization of labor in manufacturing

Adam Smith

1799

Interchangeable parts, cost accounting

1832

Division of labor by skill; assignment of jobs by skill; basics of time study

1900

Scientific management; time study and work study developed; dividing, planning and doing of work

1900

Motion study of jobs

1901

Scheduling techniques for employees, machines, jobs in manufacturing

1915

Economic lot sizes for inventory control

F. W. Harris

1927

Human relations; the Hawthorne studies

Elton Mayo

1931

Statistical inference applied to product quality; quality control charts

1935

Statistical sampling applied to quality control; inspection sampling plans

1940

Operations research applications in World War II

1946

Digital computer

1947

Linear programming

Eli Whitney & others

Charles Babbage
Frederick W. Taylor
Frank B. Gilbreth
Henry L. Gantt

Walter A. Shewart
H.F. Dodge & H.G. Romig
P.M.S. Blacket & others
John Mauchly & J.P. Eckert
George B. Dantzig, William OrchardHays, & others

1950

Mathematical programming, nonlinear and stochastic processes

A. Charnes, W.W. Cooper, H. Raiffa

& others

1951

Commercial digital computer; large-scale computations available

Sperry Univac

1960

Organizational behavior; continued study of people at work

1970

Integrating operations into overall strategy and policy

1970

Computer applications to manufacturing, scheduling, and control, material requirements planning (MRP)

J. Orlicky & O. Wright

1980

Quality and productivity applications from Japan; robotics, computer-aided design and manufacturing

W.E. Deming & J. Juran

L. Cummings, L. Porter & others

W. Skinner

(CAD/CAM)
1990

Time based competition and information highway

Numerous

ETHICS

The basic concepts and fundamental

principles of decent human conduct.
It includes study of universal values
such as the essential equality of all
men and women, human or natural
rights, obedience to the law of land,
concern for health and safety and,
increasingly, also for the natural
environment.

MORALITY
Conformance to a recognized code, doctrine, or
system of rules of what is right or wrong and to
behave accordingly. No system of morality is
accepted as universal, and the answers to the
question "What is morality?" differ sharply from
place to place, group to group, and time to time. For
some it means conscious and deliberate effort in
guiding one's conduct by reason based on fairness
and religious beliefs. For others it is, in the words of
the UK mathematician and philosopher Alfred North
Whitehead (1861-1947), "... what the majority then
and there happen to like, and immorality is what
they dislike.