Operation Management

p Operation management is defined as the

design, operation, and improvement of the
system that creates and delivers the firm͛s
primary product and services.

p Operation management is a functional field

of business with clear line responsibilities
likewise finance and marketing.
OM in Organization Chart



 


 
 


 


  




 

 
 



 Operation Management decisions

p ©trategic decisions (long term):

p Tactical decision (intermediate-term) :

p Operational planning and control decision

(short-term) :
 ’actors contributing to increase
productivity in manufacturing industry

p 3ust in time:

p Total quality control:

p Manufacturing ©trategy Paradigm:

Continuedǥ
p ©ervice quality and Productivity:

p Total Quality Management and Quality

Certification:

p Business Process Reengineering

p ©upply Chain Management:

 ransformation Process
p ¦ transformation process uses resources to cover
input into some desired output.

In general transformation processes can be

categorized as follows:
p Physical (as in manufacturing)
p Location (as in transformation)
p Exchange (as in retailing)
p ©torage (as in warehousing)
p Physiological (as in healthcare)
p Informational (as in telecommunication)
½nput Ȃ ransformation - Output Relationship
for typical System.
Hospital Patients Doctor, nurses, Healthcare Healthy
medical (physiological) individual
supplies,
equipment
Restaurants Hungry Food, cook, Well ʹprepared, well Satisfied
customer waiter, served foods; customer
environment agreeable
environment
(physical and
exchange)
Automobile Sheet steel, Tool , Fabrication and High quality
factory engine part equipment, assembly of cars car
workers (physical)
Department Shoppers Displays, stock Attract shoppers, Sales to
store of goods, sales promote product, fill satisfied
clerks orders (exchange) customer
Productivity in Manufacturing
½ndustry

ardik ©hah
313
 Productivity

ͻProductivity is defined as the output per unit of input.

ͻ Productivity = Outputs
Inputs

Productivity is usually expressed in one of three forms:

ͻ Partial factor productivity

ͻ Multifactor productivity
ͻ Total productivity.
 Productivity Measurement:

Ñ ÿPI͛s should be structured to help managers predict the company͛s economic

performance & spot the need for changes in operations.

Ñ Financial measures such as cash on hand & operating income by unit are used
together with non-financial metrics such as lead time to fill customer orders &
percentage of sales from new products.

Ñ Overall equipment effectiveness.

Ñ Cycle Time Ratio.
Ñ Utilization
Ñ Rejection rate
 M
OP½ A MA’ACR½
SRA 
Manufacturing industries have to develop core capabilities.
Core capabilities are the skills that differentiate the
manufacturing firm from its competitors

ͻ©egment the market according to the product group.

ͻ Identify the product requirements, demand patterns, and

profit margins for each group.
ͻ Determine the order winners & order qualifiers for each
group.
ͻ Convert order winners into specific performance
requirements
 M
OP½ CAPAB½½½ S
ͻ Process-based capabilities:
Tend to provide competitive dimensions as low cost & high
quality.

ͻ©ystems-based capabilities:
©hort lead times, customize on demand, fast new-product
development.

ͻ Organization-based capabilities:
Master new technologies, design new products.
 
 






    
1. CO©T or PRICE: ͞Make the product cheap͟.

2. QU¦LITY: ͞Make a great product͟

3. DELIVERY ©PEED: ͞Make the product quickly͟.

4. DELIVERY RELI¦BILITY: ͞Deliver it when promised͟.

5. COPING WIT C¦NGE© IN DEM¦ND: ͞Changes its vloume͟.

6. FLEXIBILITY & NEW-PRODUCT INTRODUCTION ©PEED: ͞Change it͟.

7. OTER M¦NUF¦CTURING PRODUCT-©PECIFIC CRITERI¦: ͞©upport it͟.

a. Technical liaison.
b. Meeting a launch date.
c. ©upply after-sale support.
d. Other dimensions: ©ize, weight or customization.
  





Techniques
Work study. Management by objectives

Research & Development Production planning & control

Incentive schemes ¦utomation

Workers participation in management ©uggestion schemes

  
  

Capital investments in production. ©ystems

Capital investments in technology Quality of products

Capital investments in equipment Quality of processes
Capital investments in facilities Quality of management
Economies of scale Legislative and regulatory environment
Workforce knowledge and skill resulting General levels of education
from training and experience
Technological changes ©ocial environment
Work methods Geographic factors
Procedures
Prerna ©hetty
315
 Overall uipment fficiency

Monitors and Can be

improves the applied to
OEE is used as
efficiency of Work Centers
a ÿPI
manufacturing or
processes Departments
 Performance

¦vailability Quality

OEE
Factors
 Calculating O
p  = Availability x Performance x Quality

p ¦vailability = Operating Time

Planned Production Time

p Performance = Ideal Cycle Time

(Operating Time / Total Pieces)

p Quality = Good Pieces

Total Pieces
 A5% is an
arbitrary
target.

Performance Customer is
standard Mrawbacks interested in
cannot be of O OTIF, not
determined OEE

©ometimes
Quality
feedback is
not
immediate
 Change in ’low
p Followed a batch and queue production system
p Lead to complex flow & increased travel time
p Required large work force with specialized skill & large and
complex equipment to meet changing volume of goods
p Poor utilization of space
p In continuous flow all equipments, resources and people
grouped in single cell
p Productivity has increased by 39%
 Mesign for Manufacturability
p Optimizes product design & helps in increasing productivity

p ¦pplied DFM to overhead storage bin arch

p Reduced no. of components from 40 to 26

p ¦rch is made from monolithic plate instead of numerous metal

sheet parts

p ͞Point of Use͟ system for storing chemicals

p Chemicals stored where required against central storage system

p Eliminated machinist travel time, overuse & wastage

p Redesigning led to 11.6% decrease in consumption

 0orker Participation
p Uses ¦ccelerated Improvement
Workshops (¦IW͛s) wherein workers
participate
p They reorganize the work in their
department and improve
productivity by reducing flow time
p ¦llows worker to develop significant
changes in flow of work, existing
procedures & the machines and
equipments used

alue Chain
p Represents sets of activities required to convert raw
materials into final product and deliver to customers
p Value streaming helps in finding activities which do not
add value
p Developed an ideal shipping process for floor beams &
seat tracks
p It reduced A days of travel and 3 days of receiving &
inspection
p Eliminated 50% of transportation
 Raw material & nergy Savings
p Efforts to reduce inputs on raw materials by better utilization &
reducing damage and spoilage
p Machine fabrication shop reduced spending on raw materials by
$22 million
p Overall space utilized reduced from 6,50,000 to 4,50,000 sq.
feet
p Eliminated A,000 sq. feet of temperature controlled
environment
p Energy saved on heating, cooling, lighting etc.
  






©ameer Tayal
132
½ntroduction of Service Sector

ͻ Life line for the social economic growth of a country

ͻ ©ubsectors ʹ IT, ITE©, Retailing, Insurance

ͻ Productivity

ͻ Measurement - difficult

ͻ ©ervice productivity = d
  


  
d
 

 
 Service Productivity
Two important
dimensions Service
in measurement of Productivity
productivity in
service
©ector Quantity Quality

- Quantity
Input Input
- Quality utput
utput i)Labour i)Tangible
i)Customer elements
i)Service ii)Raw
perceived
volume material ii)Intangibl
quality
iii)Capital e elements
ÿarl V. Baria
131
 Banking Sector
p Tremendous Rise
p Government to Private
p New Innovations

Waiting Prompt Influence

Time
Qo© Customer
ness Satisfaction
echniues of Productivity
½mprovement

Punctuality
Waiting Time
Interdepartmental
Communication

Process
Transparency
 ospitality ½ndustry
p Largest economic activities
p Foreign Exchange
Resource
utilization

Net Customer
Factors Satisfaction
Profit

Cost
Incurred
 echniues of Productivity
½mprovement

Integrated Management

Inventory Management

Online Booking

E-marketing
¦vnish Raheja
130
0hy measure software productivity?

p Reduce software development costs, improve

software quality, and improve the rate at which
software is developed.
p Increases software production productivity or
quality.
p Develop more valuable products for lower costs.
p Rationalize higher capital-to-staff investments .
p ©treamline or downsize software production
operations .
p Identify production bottlenecks or underutilized
resources.
 0ho should measure software
productivity?
p Programmer self-report
p Project or team manager
p Outside analysts or observers
p ¦utomated performance monitors
 0hat to measure?
p ©oftware products
p ©oftware production processes and
structures
p ©oftware production setting
 ow to improve software
productivity?
p Get the best from well-managed people.
p Make development steps more efficient and
more effective.
p ©implify, collapse, or eliminate development
steps.
p Eliminate rework.
p Build simpler products or product families.
p Reuse proven products, processes, and
production settings.
Shift to Service Sector

¦nkur Gaur
129
 Advantages

r



¦utomated
administration of
 

entire systems in
organization.