Introduction to Operations

Management

PRODUCTION AND OPERATIONS MANAGEMEN

In simply we could say

it is the
conversion of certain input in to
output
through
systematic
process..
Transformation, value addition
alteration
transportation
storage

Operations as a System
Technology
Energy

Transformation
(Conversion)
(Conversion)
Process
Process

Materials
Labour
Capital

Goods &
Services

Information

Input

Feedback (information) - control

over process inputs & technology

Output

Forecasting

INPU
T

Capital

Other
Resources

Purchasing &
Inventory
Control

PROCESS

Production
Capacity
Planning &
Panning
Control
Maintenance
Management Packing & Storing

Quality
Control

Goods

OUTPU
T

Product Engg
Design & Process
Design

Labour

Material

FACILITY LOCATION
PLANT LAYOUT

Process
Improvement

Services

PRODUCT
TANGIBLE

hysical Goods

urable, Non Durable, Business Products

FMCG, white goods, machineries etc

INTANGIBLE
Services
Non Physical

Telecom, education, etc

Product is anything that can be offered to a market

that might satisfy a want or need.
Service is the non-physical equivalent of a good.
Service doesn't have ownership, and this is what differentiates it
from providing physical goods.

Consumer Goods
Classes
Consumer products can be classified by the buying
behaviour of the consumers:
Convenience goods are bought with little time and
effort, such as milk, bread, a chocolate bar.
Shopping goods are those where extensive
comparison is the norm Garments, footwear etc.
Specialty goods are those for which consumers
have a strong brand preference. Computer ,car,
mobile .
Unsought goods are those now unknown to the
consumer or, if known, undesired.

FMCG
Fast Moving Consumer Goods (Non Durable Products )

STAPLES
Goods that consumes purchase on a regular basis ( tooth pastes
,detergents ,soap etc.)
IMPULSE GOODS
Purchased without any planning or search
Chocolates ,soft drinks, snacks items etc..
EMERGENCY GOODS
Purchased when a particular needs arises
Umbrellas ,rain coats ,torch cells ,CF lamps ,etc

Classifying Business
Products
raw materials: unprocessed, become part of other
manufactured products
manufactured parts and materials: processed products that
become part of other products
installations: major buildings and equipment
accessory equipment: used in operations, include
computers, desks, tools
operating supplies: low value, used by most firms,
convenience products for businesses

SERVICE PRODUCTS
LIC PRODCUTS
Children's Policy
Endowment Policy
Group Insurance Policy
Joint Life Policy
Money Back Policy
Pension Plans or Annuities
Special Plans
Term Policy
Whole Life Policy

Education
Telecom Products
Airlines

HDFC BANK
Home Loans
Educational Loans
Used Car Loans
New Car Loans
Two Wheeler Loans
Personal Loans
Express Loans Plus
Gold Loan
Loans Against Securities
Loans Against Property
Loans Against Rental Receivables
Tractor Loans

Logistics & Courier Services

Etc etc..

Pure Products
Salt

Soft Drinks
Detergents
Consumer Electronics

Automobiles

Fast-food
Outlets

Tangible
Dominant

Fast-food
Outlets

Pure Services

Intangible
Dominant

Telecom

Airlines
Investment
Management
Consulting

Teaching

12

5Ps OF OPERATIONS MANAGEMENT

People
Products /Parts
Plants
Processes
Planning and Control Systems

Scope Of The Operations Management

Product development
Forecasting
Facility location identification
Capacity planning
Process planning
Plant layout
Resource management
Production planning and control
Job design
Maintenance
Quality management
Inventory management
Purchasing
Warehouse management
Materials management
Store keeping etc

9Ms of OM

Market
Money
Management
Men
Motivation
Materials
Machines and mechanization
Modern information methods
Mounting product requirements

Evolution of OM

EVOLUTION OF OPERATIONS MANAGEMENT

CONCEPT
TOOL
1910s Principles of Time Study
Scientific
Management
Industrial
Psychology
Assembly
line

Motion
Study
Activity
Chart

Economic
Lot Size

EOQ

ORIGINATOR
F.W.Taylor

Frank and
Lillian Gilbreth
Henry Ford
Henry L Gantt
F.W.Harris

EVOLUTION OF OM(contd..)
1930s Quality
Control
Hawthorne
studies,
Worker
Motivation

SQC,
Acceptance
Sampling
Activity
Sampling for
work analysis

1940s Multidisciplin- Simplex

ary approach Method of

Shewart,
Dodge,
Romig
Elton Mayo,
LHC Tippet

Dantzig

EVOLUTION OF OM(contd..)
1950s Development Simulation,
Queueing theory,
1960s of OR
Mathematical
techniques
Programming,
PERT/CPM

Many
research
ers

1970s Widespread
use of
computers

IBM,
Joseph
Orlicky,
Oliver
Wight

Shop Scheduling,
Inventory Control,
Forecasting,
Project
Managemt, MRP

EVOLUTION OF OM(contd..)
1970s Service
quality,
Productivity

Mass
McDonalds
production in restaurants
service sector

1980s Manufacturing Mfg as a

Strategy
competitive
weapon
JIT, TQC,
Factory
automation

Kanban,
Poka-Yokes,
CIM, FMS,
CAD/CAM,
Robots etc.

Harvard BSchool
Many
researchers

EVOLUTION OF OM(contd..)
1990s TQM

Business
Process
Reengg

ISO 9000, quality Many

function devpt,
organisatiovalue and
ns
concurrent engg,
continuous
improvement
Radical change

Electronic Internet, world

enterprise wide web

Michael
Hammer,
consultants
Netscape,
Microsoft

EVOLUTION OF OM(contd..)
1990s Supply Chain SAP/R3,
Contd. Management client/server
software

SAP,
Oracle

2000s E-commerce Internet, world Amazon,

wide web
eBay, AOL,
Yahoo!

Production Process

INTERMITTENT
PRODUCTION PROCESS
1. Projects
2. Job Process
3. Batch Process

CONTINUOUS
PRODUCTION PROCESS

1. Line Process
2. Continuous Flow Process

INTERMITTENT PRODUCTION
PROCESS
Volume Of Production Is Less
Varity Is High
General Purpose Machinery
Highly Skilled Labor
Lower Capacity Utilization Of Resource
Simple Material Handling Equipments
Higher Degree Of Flexibility
Customer Driven Production

INTERMITTENT PRODUCTION PROCESS TYPE -1

It

can

be

PROJECTS
gigantic scheme

like

the

developing ,designing and construction of Big

Dam, Flat, fly Over ,Flying Machine Etc..
Defined multiple objectives/ Targets
Complex
Higher skilled labor , employees
Time bound activates
Higher investment
No repetitive action

NTERMITTENT PRODUCTION PROCESS TYPE -2

JOB SHOP PROCESS

Higher level of Customization

Specifications Are Given By Customer

Quantity Produced Is Small In Size (Low Volume)

Higher Degree Of Flexibility In Production
Handel Different Variety Of Product
Complexity depends on products
No Order In Process Flow( No Line Flow)
Higher degree of divergence
Higher Degree Of Control Required
No Standard Quality Control
Low Equipment Utilization
Multiple skilled labors

Machine
Shop
Printing
Press

NTERMITTENT PRODUCTION PROCESS TYPE -3

BATCH PROCESS
Work content of each product will be broken down in to number of
modules.
Workers will be divided in
operations in each module .

to worker/groups

perform

specific

After the completion first operation the module will send to next
operation and so on till the completion of product.

Multiple products
Moderate low volume and Is Made Into Batches
ow degree of Order In Process Flow (Disconnected line flow
Moderately complex work
pecialized Skilled Labors Are Required
ow Production Process
Electronic Instruments
Electric Motor
esource Utilization Less
igher Work In Progress
dle Time Higher

CONTINUOUS PRODUCTION
PROCESS

Large and continuous demand for product.

High investment
on special purpose
,automated

machines

,fixed

path

material

handling equipments.
Costly control systems.
Operation cycle time less.
Unit cost of production is less due to large
volume of production.
Specialized Skilled Labors Are Required.
Higher investment in safety measures .
Systematic human resource management .
Product layout etc.

CONTINUOUS PRODUCTION PROCESS TYPE Assembly Line Or Mass Production

Few Major Product Variety
Connected line
High Volume
High Repetitive Work
Assembly Line Almost Flexible
Specialized Labor Required
Predetermined Sequence Of Operations
Large Investment
Operation Cycle Time Almost Less
Work In Progress Almost Nil
Production Planning And Control &Line Balancing
Required
Good Inventory Management

ONTINUOUS PRODUCTION PROCESS TYPE -2

FLOW PRODUCTION PROCESS

oduct Variety Nil and High Volume & Highly Standardized

ontinuous Flow
pecialized Labor Required
edetermined Sequence Of Operations
o Flexibility
arge Investment
aterial Handling Equipments Like Belt Conveyor Roller
Conveyors ,Pipe Lines Etc
peration Cycle Time Is Very Less
ork In Progress Almost Nil
oduction Planning And Control &Line Balancing Required
Oil Refinery
ood Inventory Management
Fertilizer Production
uality Control Mechanism
Chemical Plant

Product-Process Matrix for Processes

Less Customization and Higher Volume

Less Complexity, Less Divergence, More Line

Flows

Product Design

Process
Characteristics
(1)
Complex and
highly customized
process, unique
sequence of tasks

(2)
Disconnected line
flows, moderately
complex work

(3)
Connected line, ,
highly repetitive
work
(4)
Continuous flows

(1)
(2)
(3)
(4)
Low-volume Multiple products with low Few majorHigh volume,
high
products, made to moderate volume
products
standardization,
to customer
higher
Continuous Flow
order
volume

Job
process
Small batch
process
s es
s
e
c
Pro
h
c
Bat
Large batch
process
Line
process
Continuous
process

SERVICE PRODUCTION PROCESS

In The Services Customer Is The King
FRONT OFFICE
HIGHER DEGREE OF INTERACTION WITH CUSTOMER
HIGHLY CUSTOMIZED SERVICE
FLEXIBLE FLOW
COMPLEX WORKS

BACK OFFICE
LOW INTERACTION WITH CUSTOMER
STANDARDIZED JOB
ROUTINE WORKS
WITH LINE FLOW.

HYBRID OFFICE
LITTLE INTERACTION WITH CUSTOMER
STANDARD SERVICES WITH SOME OPTIONS
FLEXIBILITY IN FLOW
MODERATE JOB COMPLEXITY

Less Complexity, Less Divergence, More Line Flows

Customer-Contact Matrix for

Service Processes

Less Customer Contact and

Customization
Process
Characteristics
(1)
Flexible flows,
complex work
with
many
exceptions

(2)
Flexible flows
with
some dominant
paths,
moderate job
complexity with
some
exceptions

(3)

2007 Pearson
Education
Line flows,

(1)

Service (2)
Package

(3)

High interaction with

Some interaction with Low
interaction with
customers, highly
customers, standard
customers,
standardized
customized service services with some options
services

Front office

Hybrid office

Back office

Operations
strategy:

OPERATIONS STRATEGY
STRATEGY PROCESS

Four Stages of Operations

Stage 4
Initiates
Strategy
Competitive
Advantage
Stage 1
Stage 2
Stage 3
Advanced
No
Industry Current Organizationally
capabilities
Goals set
Involvement
Supportive
developed and
No positive
Organizations
according to
significant input
contribution
industry practice
competitive
to
strategic
Concerns:
to strategy
strategy
process
formulation
Capital
closely followed
provided
Concerns:
investment
and
Concerns:
Cost
Quality control
supported
New products
Concerns:
Labor
Inventory
New services
efficiency
management
Advanced
New
Capacity
process
technologies
technologies
International
Source: Based on R.H. Hayes and S.C. Wheelwright, Restoring Our Competitive Edge: Competing through Manufacturing (New York: Wiley, 1984).
New plants
What to make
for the United
36

Major Steps and decisions for

Effective Process Design

Cost
Low Cost Operations

Time
On Time Deliver
Delivery Speed

COMPETITIVE PRIORITIES
Flexibility

Quality

Customization
Varity
Volume Flexibility

Top Quality
Consistent Quality

Links of Competitive Priorities with

Manufacturing Strategy

2007 Pearson Education

Operations Strategy at Wal-Mart

Copyright 2006 John Wiley & Sons,

Inc.

2-40

Operations Strategy:
Products and Services
Make-to-Order
products and services are made to customer
specifications after an order has been received

Make-to-Stock
products and services are made in anticipation
of demand

Assemble-to-Order
products and services add options according to
customer specifications

Copyright 2006 John Wiley & Sons,

Inc.

2-41

Process Analysis

What is a process?
A process is a series of independent
tasks that transforms an input into
output material of higher value for
the organization
Examples:
1. Honda transforms steel, rubber, and plastic
into cars
2. McDonalds transforms meat, potatoes, and
sauces into packaged food
3. Dell transforms customer orders into PCs

Process Analysis
Lets look at the black box in more detail
Why do we need to analyze the process?
- To identify inefficient tasks
- To spot possible effectiveness improvement tasks
- To understand where value can be added

How can we analyze a process? Map it!

What are the relevant performance
measures?

Process Flow Charts

Graphical description of a process:
Holding:
Raw Materials, RM
Work in Process, WIP
Finished Goods Inventory, FGI
Flow of material or work
Processing step
Decision point

Make-to-order vs. make-to-stock

Task 1

Task 2

FGI
Demand

Task 1

Task 2

If demand is satisfied by FGI then the system is make-to-stock,

otherwise it is a make-to order system

Some examples
What are the tradeoffs?

Process Analysis: the performance

measures
Assume a process is in place. What do we
need to measure in order to understand
how efficient it is?
Task 1

Task 2

Task 3

What is its capacity? How many units per unit

time go through each task? The process as a
whole?
What is the bottleneck? Which production step
limits the process capacity?
What is the throughput time? How long does it
take to get through the system?

How do we measure capacity?

Capacity of a task is the physical limitation in
terms of how much can be processed at this
task

Cycle Time: Average time for completion of a unit at a production

step or process. Does not include waiting. Measured as
time/unit
Throughput Rate: Average number of units processed over a
time interval. Measured as units/time

Key
relationship

Throughput
rate =

1
Cycle Time

Capacity = throughput rate

Computing Cycle Times

Processing a fixed amount of work

Example: Producing 100 cars. On average,

production takes 5 hours per car. It takes 50
hours to set up the production line.

Set-up Time + (Batch size) x (Time per unit

Cycle Time =
Batch size

Computing Cycle Times

Setup time:
15 min

Production Time:
25min/unit

Question: What is the cycle time between points A and B of

the process, if we work in batches of 10?

What is a bottleneck?
Bottleneck is the
process stage with
the
smallest throughput
rate
cycle time)
Which task is(longest
the
bottleneck?
3 units/hr

5 units/hr

2 units/hr

Capacity of a process
The capacity of the process is:
minimum throughput rate at any of the
stages

What is the capacity of this process?

3 units/hr

5 units/hr

2 units/hr

How do we measure throughput

time?
Throughput Time: Average time that a unit takes to go through
the entire process (including waiting time).
Measured as time
Work in Process(WIP): Average number of units in system
over a time interval. Measured as
units

Key
relationship

Throughput
time =

WIP
Throughput rate

(Littles Law)

How do we analyze a complex

process

1. Look at the process step by step

2. Determine throughput rate (i.e.
capacity) of each step
3. Identify the process bottleneck
(smallest processing rate, or largest
cycle time).
4. The capacity of the process is equal
to the capacity of the bottleneck

Example : hammer production process

Description
1. Work begins at the machining center. Here
two lines form the heads of the hammers and
place them in a buffer.
2. Handles are attached at the assembly step.
3. Finished hammers are sent to the next stage,
where they are packed and shipped.
machinin
g
machinin
g

WIP

WIP
assembly

pack and
ship

Lets analyze the hammer

process
machinin
g
machinin
g

WIP

WIP
assembly

pack and
ship

Process Data:
machining: Set up 80 min. 4 min per unit
processing. Batch size 200. Identical lines.
assembly: Manual by two workers (no set up).
Each hammer requires 40 min processing. 34
workers available.
pack and ship: 30 min set up, 2 min per unit
processing. Lot sizes of 100.

Step 1: Machining
Look at one line. 200 units require:
80 + 200 4 = 880 minutes/200 units
The throughput rate is:
200 / 880 = 0.227 units/minute
= 13.63 units/hour
But we have two identical lines, so for the
machining step capacity is 2 13.63 = 27.26
units/hour.

Step 2: Assembly
1 unit requires 40 min processing time, so
the throughput rate is:
1 unit / 40 min = 0.025 units/min
= 1.5 units/hr
34 workers available, but 2 workers are
required for each unit, so assembly
capacity is:
17 1.5 = 25.5 units/hr

Step 3: Pack and ship

Similar to machining:
30 + 100 2 = 230 min/100 units
Pack & ship capacity is:
100 / 230 = 0.43 units/min
= 26.09 units /hr

Hammer process: what is the

capacity?
Process Step

Capacity (units/hr)

Machining

27.26

Assembly

25.50

Pack & Ship

26.09

Assembly is
the
bottleneck!

Some vocabulary
Buffering: Keep some inventory between stages
0

1/2

Starving: Stoppage of activity because of lack of material

0/2

Blocking: Stoppage of flow because there is no storage place

1

2/2

More Examples..
Lets study this make-to-stock system.
CT = 3s

CT = 1s

Task 1

Task 2

FGI

Note: No buffer space between stations, so upstream

station has to wait if downstream station is busy
Is any task starved or blocked?
What is the capacity of the process?
What is the throughput time?
What is the average WIP?

More Examples..
CT = 3s

CT = 1s

Task 1

Task 2

FGI

Task 2 starved for 2s. each time.

Throughput rate = 20 units/min at Task 1, 60 units/min at Task 2
Capacity (throughput rate) of process = 20 units/min
Throughput time = 4 seconds = 1/15 min
WIP = Throughput rate x Throughput time
= 20 units/min x 1/15 min
= 1.33 units

More Examples..
Lets study this make-to-stock system:
CT = 1s

CT = 3s

Task 1

Task 2

FGI

Note: No buffer space between stations, so upstream

station has to wait if downstream station is busy
Is any task starved or blocked?
What is the capacity of the process?
What is the throughput time?
What is the average WIP?

More Examples..
CT = 1s

CT = 3s

Task 1

Task 2

FGI

Task 1 blocked for 2s. each time.

Throughput rate = 60 units/min at Task 1, 20units/min at Task 2
Capacity of process = 20 units/min
Throughput time = 6 seconds = 0.1 min
WIP = Throughput rate x Throughput time
= 20 units/min x 0.1 min
= 2 units

More Examples..
Lets study this make-to-stock assembly system:
CT = 3s

CT = 3s

Task 1

Task 2
CT = 4s
Task 3

Note: No buffer space between stations

Is any task starved or blocked?
What is the capacity of the process?

CT = 2s
Task 4

FGI

More Examples..
CT = 3s

CT = 3s

Task 1

Task 2
CT = 4s

CT = 2s
Task 4

FGI

Task 3
Tasks 1 and 2 are blocked by Task 3 for 1 second per product.
Task 4 is starved for 2 seconds per product.
The capacity of the process is 15 units/hour (limited by Task 3).