Production and

Operations
Management
Vishal Gupta, PMP

Introduction to the
Field
OBJECTIVES
Introduction to Production and Operations
Management
Transformation Processes Defined
Scope of Operations Management
Servicing

as

Management

part

of

Operations

Introduction to the
Field
OBJECTIVES
Evolution of Operations Management
Why Study Operations Management?
Current Issues in POM
POMs future challenges
Manufacturing trends in India

Operations Management at IKEA

IKEA has reduced its retail prices by a total of
about 20 percent during last four years.
Trofe Mug
Redesigned 3 times to fit in a pallet
864 to 1280 to 2024
Reduced shipping costs by 60%
A notch at the bottom that prevents water from
pooling at the base during dishwasher run
Refinements have optimized the speed at
which cup can pass through the machines

Operations Management at IKEA

Operations management : NANO

Back office operation

in a bank

Kitchen unit
manufacturing operation

They are
all
operations
Retail operation

Take-out / restaurant
operation

Operations Management
Functions

Design of Operations

Operational Control of Operations

Product Design & Development

Process Design
Quality Management
Location and Layout of facilities
Capacity Planning

Forecasting
Production Planning and Control
Supply Chain Management
Maintenance Management
Continuous improvement of operations

What is Operations Management?

Operations:
refers
to
the
processes that are used to
transform
the
resources
employed by a firm into products
and
services
desired
by
customers.
Operations management (OM) is
defined as the design, operation,
and improvement of the systems
that create and deliver the firms

Definition and Criteria

Production and operations management
(POM) concerns itself with the conversion of
inputs into outputs using physical resources
so as to meet its criteria of performance.
Criteria of Performance
Customer satisfaction
Effectiveness : Doing the right thing to
create most value
Efficiency
: Doing at the lowest possible
cost
Value

Definition and Criteria

Criteria of Performance
Value : Quality/Price

Question Bowl
1. A major objective of POM is to
show how smart managers can do
which of the following?
a. Improve efficiency by lowering
costs
b. Improve effectiveness by creating
value
c. Increasing value by reducing
prices
d. Serving customers well

What is a Transformation Process

A transformation process is defined
as a user of resources to transform
inputs into some desired outputs

OM as Transformation process
Inputs =
= Transformation
Transformation =
=
Inputs
Outputs
Outputs
INPUTS

PROCESS

OUTPUTS

PERFORMANCE
MANAGEMENT

Transformations
Physical--manufacturing
Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications

Question
1. In
the
Input-TransformationOutput Relationship, a typical
input for a Department Store is
which of the following?
a.
b.
c.
d.
e.

Displays
Stocks of goods
Sales clerks
All of the above
None of the above

Question
1. In
the
Input-TransformationOutput Relationship, a typical
input for an Airline which of
the following?
a.
b.
c.
d.

Airplanes
Airports
Ticketing Systems
All of the above

Operations Management (OM)

Salient Aspects

OM is a systematic approach
using scientific tools & techniques and solution
methodologies to analyze problems

OM is about addressing several issues

varying in terms of time horizon, nature of
decisions

Transformation processes are central to

Operations
Focusing on keeping costs to the minimum
Developing a set of measures to assess
performance of the system

Operations Management
A systems Perspective
Forecasting

PROCESSING

Operations
Planning &
Control

Quality
Management

Purchasing &
Inventory
Control
Material &
Capacity
Planning

Maintenance
Management

Process
Improvement

Goods

Services

Feedback

Capital

INPUT

Material

Process &
Product
Design

OUTPUT

Labour

Operations Management
Functions

Design of Operations

Product Design & Development

Process Design
Quality Management
Location and Layout of facilities
Capacity Planning

Operational Control of Operations

Forecasting
Production Planning and Control
Supply Chain Management
Maintenance Management
Continuous improvement of operations

Design issues in Operations Management lay down overall

constraints under which the operations system functions
Operational Control issues focuses on optimizing the use of
available resources in the short-term while delivering goods
and services as per plan under the given design constraints

Operations

A key functional area in an Organisation

Finance

Operations

Marketing

HRM

OM in the Organization Chart

Finance

Operations
Operations

Marketing

Plant
Plant
Manager
Manager

Operations
Operations
Manager
Manager

Director
Director

Manufacturing,
Manufacturing, Production
Production control,
control,
Quality
Quality assurance,
assurance, Engineering,
Engineering,
Purchasing,
Purchasing, Maintenance,
Maintenance, etc
etc

Interface with other functions

Operation Management Marketing
Interface
Operation Management- Finance
Interface
Operation Management- Design
Interface
Operation Management- Human
Resource Interface
Operation Management- Information
System Interface

What is a Service and What is a Good?

If you drop it on your foot, it
wont hurt you. (Good or
service?)
Services never include goods
and goods never include
services. (True or false?)

Service Operations
Tangibility:
Services
are
performances and actions rather
than objects, therefore having poor
tangibility (Cannot be patented)
Heterogeneity: High variability in the
operation system performance
Simultaneous
Production
&
Consumption: Degree of customer
contact is very high
Perishable:
Services
cannot
be
inventoried as in the case of

Service Manufacturing Continuum

Pure Product

Pure Service
Ayurvedic Healing Treatment
Legal/Tax Consulting
Cyber Caf Telephone Booths
Emergency Maintenance Services
Facilities Maintenance
High quality restaurant meal
Fast food in a eat out joint
Customized durable goods
Fast moving commodities
Vending Machines

Manufacturing & Service

Manufacturing Organizations

Service Organizations

Differences
Physical durable product

Intangible, perishable product

Output can be inventoried

Output cant 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

Indian Manufacturing

Export Potential of Sectors

Sector of Industry

Current
Exports

Potential
Exports

Electrical & Electronics

$ 1.25 b

$ 15 - 18 b

Design &
Engineering
skills, vendor
base

Lack of scale,
Low domestic
demand

Apparel Manufacturing

$ 6.10 b

$ 25 - 30 b

Vertical
integration,
skilled labour,
design skills

Lack of scale,
operational
expertise

Auto-components

$ 1.10 b

$ 20 - 25 b

Engineering and
continuous
improvement of
skills

Fragmented
industry and
poor OEM
linkages

Specialty chemicals

$ 1.60 b

$ 12 - 15 b

Low cost
manpower and
process
innovation skills

Application R & D
and marketing

Strengths

Weaknesses

Service Sector in India

GDP growth rate
Service Sectors

200102

200203

200304

200405

200506

200607

Trade, Hotels, Transport,

Communications

9.2

9.4

12.0

10.7

11.5

11.8

Financial Services,
Insurance, Real Estate &
business services

7.3

8.0

5.6

8.7

11.4

13.9

Public administration &

defence and other services

4.1

3.9

5.4

6.9

7.2

6.9

All number in the table represent growth % over the previous year
* Compiled from Economic Survey 2007 08, Government of India, Ministry of Finance,
Economic Division, Oxford University Press, New Delhi, 2008, Table A-7.

Growth in Services Sector

Case: OM in Snacks
Lets say that you decided to go for
some snacks with your friends. Among
many options, you can go to a
roadside cart, a pizza/burger outlet, or
a snack joint like a Udipi restaurant
(which serves many things including
full meals).
While enjoying the delicious snacks, did
you observe the following from the
point of view of understanding

1. Where are they located? What kind

of customers do they intend to
serve?
2. Do they serve you while standing
or do they first seat you? How big is
their seating capacity?
3. What
is
the
process
of
communicating yr orders to others
working in the outlet so that you
can be served?
4. Are the items prepared after taking
yr order or are they already
prepared?

OM in Snacks : Next
Session
1. Identify the type of Production
System they followed.
2. Check how Production System is
managed.
3. Find out the utilization of the
resources
namely;
manpower,
capacity & material.
4. How the customer service is
rendered (feedback system exist or
not)

Why Study Operations Management?

Systematic Approach
to Org. Processes

Business Education

Operations
Management

Cross-Functional
Applications

Career Opportunities

History of POM
Individual efficiency
Work study

Collective efficiency
Production control, Assembly line

Quality and materials

Statistical quality control, Inventory control

36

Historical Development of OM
Era Events/Con
1. Ind. Rev
Watt

Year

Originator

Steam Engine 1769 James

Dvn of Labour
1776 Adam

2. Scie. Mg. Time & Motion 1911

Moving Ass. Line

1913

3. Hum Rel. Hawthorne Stu.

4. OP. Res.

Linear Prog.

5. Quality Rev JIT, TQM

Deming

Gilberth
Ford

1930

1947

Mayo
Dantzig

1970,1980

Oho,

Historical Development of OM
Era

Events/Con Year

6. Internet Rev ERP, SCM

SAP

Originator

1990, 2000Lee,

7. GlobalizationWTO
1990
Numerous
Countries & Cos

Historical Development of OM

Historical Development of OM

The Importance of OM

Synergies must exist with

other functional areas of the
organization
Operations account for 6080% of the direct expenses
that burden a firms profit.

Careers in Operations Management

Typical job titles include:

Business Analyst
Business Process Improvement Analyst
Project Manager
Facilities Manager
Branch Manager (Bank)
Department Store Manager
Supply Chain Manager
Production Planner
Quality Analyst/Quality Control Specialist
Materials Manager /Purchasing Manager

Careers in Operations Management

Examples of public- and privatesector employers who hire operations
management graduates include:

Retail establishments
Hospitals
Banks
Insurance companies
Airlines
Government agencies
Manufacturing companies
Research corporations

Challenges in Operations Management

Competitive Pressures due to economic
reforms
Tariff reduction has exposed Indian companies
to global competition
Abolition licensing policies had enabled several
new players to enter into business increasing
domestic competition and capacity build up

Challenges in Operations Management

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

Challenges in Operations Management

Todays businesses are constantly
challenged by the rapid technological
advancements
ATMs & Internet Banking.
Buying a train ticket. http://www.irctc.co.in/, a
customer can accomplish all tasks pertaining to
ticket booking and cancellation at leisure.
Procurement
of
goods
&
services.
A
manufacturing organization can procure goods
& services by organizing a reverse auction on
the Internet.
New Product Development. A team of design
personnel from across different geographical
locations can participate in new product

Challenges in Operations Management

Environmental Issues
Growing
industrialization
raises
concerns
regarding the depletion of natural resources
Waste generated from production systems and
end-of-life products.
Generation of solid wastes.
Consumption of energy and water in countries
like India is on the rise.
Increasingly, firms are under pressure to take
responsibility of restoring, sustaining, and
expanding the planets ecosystem instead of
merely exploiting it.

OM practices must address

environmental concerns in order to

THANK YOU

@ copyright vishalg 2015

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