1,2-introduction operation mgmt
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CHAPTER 1 - INTRODUCTION TO
OPERATIONS MANAGEMENT
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PRODUCT
From Consumers prospective : Soap can beidentified by complexion, cleanliness of body,freshness, fragrance or health.... etc. Because
of this, many producers advertise that they areselling health, or they are selling Cine starComplexion or they are selling freshness.
From Production Managers prospective :Product is the combination of processes
(or operations).
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Production Manager has to produce the given product by
using the best and cheapest method so as to make the
product to face competition in the market.
From a Financial Managers prospective : product is amix of various cost elements as he is responsible for the
profitability of the product.
From a Personnel Managers prospective : For him theproduct is a mix of various skills, as he is the person
who selects and trains the personnel to meet thedemand of the skill to produce the product.
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PRODUCTION
Production means application of processes (Technology) to the rawmaterial to add the use and economic values to arrive at desiredproduct by the best method, with out sacrificing the desired quality.We have three ways ofProduction, they are:
Production by Disintegration: By separating the contents of Crude oil
or a mixture the desired products are produced. For example thecrude oil is disintegrated into various fuel oils.
Similarly salt production is also an example for product produced bydisintegrated. We can use Mechanical or Chemical or bothtechnologies to get the desired product, so that it will have desireduse value.
Production by Integration: In this type ofProduction variousComponents of the products are assembled together to get thedesired product.
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Production by Service: Here the Chemical andMechanical Properties of materials are
improved without any physical change. The example forthis is Heat Treatment of metals. In real world, a
combination of above methods is used. MANAGEMENT :
Management can be explained as an art or science, (infact it is a combination of art and science) of getting
things done by the people, by planning, coordinating,organizing, directing and controlling the activities tomeet specified goals, with in the frame work of agreedpolicies.
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WHAT IS OPERATIONS
MANAGEMENT? The business function responsible for planning,
coordinating, and controlling the resources needed to
produce a companys products and services.
Operations management (OM) is defined is defined as
the design, operation, and improvement of the systems
that create and deliver the firms primary products and
services
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OM is management ofprocesses that produce and distribute
products and/or services to customers.
OM objective is make sure that the processes work effectively
and efficiently.
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TYPICAL OPERATIONS DECISIONS AND
THEIR HIERARCHY
Strategic level
Broad scope, long term
Tactical level
Moderate scope, medium term
Operational level
Narrow scope, short term
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TYPICAL ORGANIZATION CHART
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OMS TRANSFORMATION PROCESS
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TRANSFORMATION PROCESSES
INPUTS USE RESOURCES OUTPUTS
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McDonalds is in Service or Manufacturing
sector?
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DIFFERENCES BETWEEN
MANUFACTURERS AND SERVICE
ORGANIZATIONSServices: Manufacturers:
Intangible product Tangible product
Services cannot be inventoried Product can be inventoried
High customer contact Low customer contact
Short response time Longer response time
Labor intensive Capital intensive
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SIMILARITIES-
SERVICE/MANUFACTURERS
All use technology
Both have quality, productivity, & response
issues All must forecast demand
Each will have capacity, layout, and location
issues All have customers, suppliers, scheduling and
staffing issues
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SERVICE - MANUFACTURING
Manufacturing often provides services
Services often provides tangible goods
Some organizations are a blend ofservice/manufacturing
Using customers as a labor: Self servicesituation like supermarkets and ATMs
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CORE SERVICES
Core services are the basic things that customers (internal or
external) want from products they purchase (quality, on time
delivery, price (cost), etc.)
Some what easier to emulate or copy
OperationsManagement
lexibility
Quality
Speed
Price (or cost
Reduction)
Performance Objectives
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VALUE ADDED SERVICES
Value-added services differentiate the organization from
competitors and build relationships that bind customers to the
firm in a positive way (sales and field support, problem solving,
etc.) ------Significantly more difficult to copy and implement
OperationsManagement
Information
Problem
Solving
SalesSupport
Field Support
Value-Added Service Categories
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SCOPE OF PRODUCTION AND OPERATION
MANAGEMENT
Operation management covers such activities as
acquisition of land, constructing building ,procuring
and installing machinery ,purchasing and storing raw
material and converting them into saleable products,quality management ,maintenance management
,production planning and control, methods
improvement and work simplification and other
related areas.
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OPERATIONS FUNCTION
Operations function is much broader than
activities occur in a factory.
Products must be developed,
Materials must be purchased,
Facilities must be maintained,
Products must be distributed, and so on.
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OPERATIONS FUNCTION
Inputs Operations Function
Output Customers
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OPERATIONS FUNCTION
Operations function must also be wellintegrated with other parts of business.
Operations function is one of 3 primary
functions within a business: Finance,Marketing, and Operations.
Work of 3 primary functions overlaps each
other and all 3 must work to reach the fullpotential of the system.
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FUNCTIONS OF PRODUCTION PLANNING
& CONTROL
Cost estimation
Work measurement (checking technical
feasibility, availability of work force) Sub contracts
Capacity planning
Demand forecasting
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OPERATIONS FUNCTION
Therefore, operations function pla s asignificant role in success of usinesses.
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EVOLUTION OF OPERATIONS
MANAGEMENT
Until the 19th century, the world was mostly rural and
agricultural.
Most of the products were made by highly skilled
people called artisans (skilled manual worker orcraftsman) .
Under the apprenticeship system, an artisan
supervised the work of several apprentices during
long training period.
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EVOLUTION OF OPERATIONS
MANAGEMENT
In the 18th century, most manufacturing wasperformed by rural families in their own homes underthe domestic or cottage industry system.
Merchants supplied families in small towns with raw
materials and later found markets for the finishedproducts.
The development of steam power and the introductionof labor-saving equipment (or automation) early in the
18th century led to the development of the factorysystem.
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EVOLUTION OF OPERATIONS
MANAGEMENT
The principle of the factory systems was simple:
Assign workers a small set of tasks that they repeatover and over.
This reduces the time spent by workers in switchingtasks and they become specialized.
The result is improved labor productivity and lowerproduction costs.
Technological developments in 1850s transformedfactory system into mass-production.
Factories became larger. They produced hugevolumes of identical products.
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EVOLUTION OF OPERATIONS
MANAGEMENT
Manufacturing costs were reduced because no timewas needed for setting machines and people toproduce other types of products.
As the sizes of the factories increased, management
of these operations became a major problem. Frederick Taylor introduced systematic approaches to
operations management at the turn of 19th century.
His intent was to eliminate waste, especially the
wasted effort, in order to minimize costs.
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EVOLUTION OF OPERATIONS
MANAGEMENT
Henry Ford combined the teachings of Taylor with the concepts of labor
specialization and interchangeable parts to design the first moving
assembly line in 1913. the large-scale mass production technology
pioneered by Henry Ford. Ford employed a system called "continuous-flow
manufacture," in which production is arranged so materials move smoothly
through successive processing stages. Making use of interchangeable parts,
this system established what came to be called an "assembly line." Spurred
on by the industrial challenges of two world wars, U.S. factories mastered
the art of mass production, and the nation's manufacturing system became
the world standard.
In 1920s and 1930s, a series of studies were conducted at the HawthorneWorks of Western Electric by Elton Mayo.
The results showed that psychological factors were as important as
scientific job design.
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EVOLUTION OF OPERATIONS
MANAGEMENT
The Hawthorne Studies stimulated the development of
human relations movement by demonstrating that
worker motivation is a crucial element in improving
productivity. As the complexity of operations increased,
sophisticated decision-making tools were needed.
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EVOLUTION OF OPERATIONS
MANAGEMENT
Some of the quantitative models and statistical
techniques used by modern operations managers are:
1- Statistical Quality Control: Uses statistics in the
control of product quality by controlling the processesby which products are made.
2- Economic Order Quantity: Used for finding the least
cost inventory ordering
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EVOLUTION OF OPERATIONS
MANAGEMENT
3- Gantt charts for sequencing operations and Critical
Path Method for finding optimum completion time of
operations.
4- Linear programming: A management tool for optimumresource allocation given some restrictions of the
resources.
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EVOLUTION OF OPERATIONS
MANAGEMENT
The 1950s was the beginning of the information
technology era.
The discovery of transistor by Shockley led to the
ability process data and information at continuouslydecreasing costs.
Today, you can imagine the difficulty of monitoring
inventories of hundreds of units OR managing a large
project without a computerized system.
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EVOLUTION OF OPERATIONS
MANAGEMENT
In the late 1950s and early 1960s scholars began to
write books dealing specifically with the problems
faced by operations managers.
These books also contained information regarding theapplication of quantitative models to operations
management.
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RESPONSIBILITIES OF A OPERATION MANAGER
Forecast requirement of factors of production to meet target of
production.
Utilize factors of production in most efficient manner.
Reduce cost and improve quality by periodical analysis and by
taking corrective and preventive actions.
Reduce material handling cost by using efficient material
handling systems and correctly developed plant layouts.
Device efficient methods of manufacturing based on method
study.
Improve labour productivity by providing them training.
Build team spirit and motivate work force.
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MANUFACTURING SYSTEM
Inputs : Men, machines, materials, instructions,
drawings, paper work
Transformation process: Involves operations,
mechanical or chemical process to convert inputs intooutput.
Output: Goods or services
Combination of operational activities employed to
create goods & services, are known as manufacturing
systems or methods.
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MANUFACTURING SYSTEM
Factors Influencing choice of manufacturing system: It
must be able to meet the specifications of the final
product and it must be cost effective.
Various factors which determine the choice of themanufacturing process are as follows:
A) Effect of volume/variety: High product variety i.e.
many products in one or few numbers requires highly
skilled labour, general purpose machines and detailedand sophisticated production planning & control
systems.
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MANUFACTURING SYSTEM
Low product variety i.e. one or few products produced
in large volumes requires less skilled labours, highly
automated mass production processes using special
purpose machines and simple production planningand control systems.
B) Capacity of the plants : If manufacturing process
will be intermittent or not continuous, it will be
cheaper to install and operate at low volumes andcontinuous process will be economical to use at high
volumes.
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MANUFACTURING SYSTEM
C) Flexibility: Implies ability of the company to satisfy
varied customers requirement. Flexibility and product
variety are inter-related. If more variety is to be
manufactured the operation department should bemore flexible.
D) Lead time: Time within which customer is expecting
the product and the faster deliveries are expected in
the competitive market therefore lead time plays animportant in choosing manufacturing process or
system.
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MANUFACTURING SYSTEM
E) Efficiency: It measures speed and cost of
manufacturing system. Efficiency should be greatest
when the product will have to be mass produced
therefore manufacturing system with the bestefficiency in terms of machine and manpower
utilization will have to be selected.
F) Environment: It brings new technologies and forces
the adoption of new process of manufacturing. Forexample wooden furniture is now replaced by metals
and plastics(Change in fashion).
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CLASSIFICATION OF MANUFACTURING SYSTEM
Project production: Where single assignment of a complex
nature is undertaken for completion within given period
and estimated expenditure.
Jobbing production: Where one or few units of product areproduced to satisfy customers requirement within the
given date and within the price fixed prior to contract.
Batch production: where limited quantity of each type of
product is authorized for manufacturer at a time. Mass & flow production: Where production is done either
on single machine or number of machines, arranged
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CLASSIFICATION OF MANUFACTURING
SYSTEM
according to the sequence of operations and several number
of a product are manufactured at a time and stocked in a
warehouse awaiting sales.
Process production: Where production is conducted for an
infinite period.
What is Mass Customization?
Mass Customization is the customization and
personalization of products and services for individual
customers at a mass production price (Variety at commonprice).
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WHAT IS MASS CUSTOMIZATION?
Variety = Customization = Increase in cost
Mass production = Low cost
Mass customization = Variety at low costs
Traditionally customization and low cost have beenmutually exclusive. Mass production provided low cost but at
the expense of uniformity. Customization was the product of
designers and craftsman. Its expense generally made it the
preserve of the rich. To-day, new interactive technologies, like
the Internet, allow customers to interact with a company and
specify their unique requirements which are then
manufactured by automated systems.
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DR.W. EDWARDS DEMING (19001993)
Deming argued that higher quality leads to
higher productivity, which, in turn, leads to long-
term competitive strength.
Improvements in quality
lower costs
higher productivity
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DR.W. EDWARDS DEMING (1900
1993)
The theory is that improvements in quality lead
to lower costs and higher productivity because
they result in less rework, fewer mistakes, fewer
delays, and better use of time and materials.
With better quality and lower prices, a firm can
achieve a greater market share and thus stay in
business, providing more and more jobs.
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PHILIP CROSBY (19262001)
Quality Is Free : In his book Quality Is Free, Crosby
makes the point that it costs money to achieve quality,
but it costs more money when quality is not achieved.
When an organization designs and builds an item rightthe first time (or provides a service without errors),
quality is free. It does not cost anything above what
would have already been spent. When an organization
has to rework or scrap an item because of poorquality, it costs more.
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DR. GENICHI TAGUCHI (B. 1924)
The Taguchi Method (Design of Experiments),
and other methodologies have made major
contributions in the reduction of variation and
greatly improved engineering quality and
productivity.
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TYPES OF INDUSTRIES
TYPE OF
INDUSTRY
PRODUCTION
PROCESS
(what/How)
EST. NO OF
EMPLOYEES
CAPITAL
REQUIREMET
EXAMPLE
Cottage
Industries
ediu ale
Industry
Large ale
Industry
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TYPES OF INDUSTRIES
Cottage Industries/Small scale industries fewworkers, uses simple tools, may work at home, smallcapital requirement, workers do not exceed 100
Medium scale Industries 100-200 employees,
bigger capital requirement but does not exceedmuch, use simple machines and equipment
Large-scale Industries 200 employees and above,invest in plants for mass production, use of complexmachinery, huge capital requirement, reliance onfinancial institutions
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Manufacturing industry can be divided into 3
divisions:
1. Heavy
2. Light
3. High-tech
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HEAVY INDUSTRY
Perform a variety of roles. For example, they may:
Refine minerals such as crude oil, into many different products
Smelt metals such as iron ore, into steel
The works usually cover a large area of land; pollution from their
chimneys may be obvious many kilometres away.
They do not add to the scenic beauty of the landscape, but theyare necessary because they provide the materials many light
industries use for consumer goods.
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LIGHT AND HIGH-TECH INDUSTRIES
They are combined under one heading footloose industries.
The termfootloose refers to their greaterfreedomto choosealocation
compared with heavy industries. This freedom comes from having low raw
material demands and the need only for small factories, which means that
suitable sites are widely available
Final products are high in value and low in weight, can be easily distributed by
road.
New factories have pleasant locations on the rural-urban fringe surrounded bygreen areas.
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INTEGRATION OF MANUFACTURING &
SERVICES
Pure products :
Manufacturing inputs materials to produce products during the
process of transformation. As for the process of manufacturing
itself, theres nearly no services involved, but just producing the
goods.
For example, the car manufacturing, for such particular field,
the manufacturer only produces cars with slight services
included. In other words, it is the industry which produces pure
product.
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Pure services
In some of the industries, there is only service provision, such
as the clinic or hospital.
Mixture of products and services
There are many different sorts of industries all over the world.
Some industry is the mixture of providing products as
well as providing services.
Restaurant which we are fairly familiar with is a typical mixed
industry. The restaurant not only provides the food which can
be considered as product, but also the service.
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METHODS OF MANUFACTURING
Job Shop
Batch
Repetitive
Continuous
(Project)
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JOB SHOP
Relatively small scale
Low volume of high-variety goods or services
Processing is intermittent
High flexibility of equipment
Manufacturing example: A tool and die shop that is able to
produce one-of-a-kind tools.
Service example: A veterinarians office, which is able toprocess a variety of animals and a variety of injuries and
diseases.
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BATCH
Moderate volume of moderate variety products or services.
The equipment need not be as flexible as in a job shop, but
processing is still intermittent.
The skill level of workers doesnt need to be as high as in a job
shop because there is less variety in the jobs being processed.
Manufacturing example: Bakeries, which make bread, cakes, or
cookies in batches
Service example: Movie theaters, which show movies to groups
(batches) of people, and airlines, which carry planeloads
(batches) of people from airport to airport.
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REPETITIVE/PROCESS PRODUCTION
Higher volumes of more standardized goods or services
Slight flexibility of equipment
Skill of workers is generally low.
Manufacturing example: Automobiles, television sets, pencils,
and computers.
Service example: Automatic carwash, cafeteria lines and ticketcollectors at sports events and concerts.
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PROJECT
Nonroutine work
Unique set of objectives
Limited time frame
Equipment flexibility and worker skills can range from low tohigh.
Example: Consulting, making a motion picture, launching a new
product or service, publishing a book, building a dam, and
building a bridge.
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CONTINUOUS
Very high volume of nondiscrete, highly standardized output is
desired
No variety in output
No need for equipment flexibility.
Manufacturing example: Petroleum products, steel, sugar, flour,
and salt.
Service example: Air monitoring, supplying electricity to homes
and businesses, and the Internet.
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