bangalore 1 mba, semester 2 operations management module 2 : strategic decisions ms. aarti mehta...
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AMITY GLOBALBUSINESS SCHOOL Bangalore
MBA, Semester 2
Operations Management
Module 2 : Strategic Decisions
Ms. Aarti Mehta Sharma
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PRODUCT / service product life cycle
product design & planning Process Design
Module II
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Product “thing produced by labor or effort" or the "result
of an act or a process"
A product is anything that can be offered to a market that might satisfy a want or need.
Products are purchased as raw materials and sold as finished goods.
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Product Life Cycle • Every product has a certain marketable life
period.
• Depending upon the product life span will vary
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– PLC determines revenue earned and capacity planning
– Contributes to strategic marketing planning– May help the firm to identify when
a product needs support, redesign, reinvigorating, withdrawal, etc.
– May help in new product development planning
– May help in forecasting and managing cash flow
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AMITY GLOBALBUSINESS SCHOOL Bangalore Product Life Cycle
Analysis
Time
Introduction
Growth
Maturity
Saturation
Decline
Dem
and
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• Introduction – sales begin, production and mktg are developing and profits are negative
- Third generation mobile phones
- E-conferencing
- iris-based personal identity cards
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• Growth – sales grow, mktg intensifies, production concentrates on expanding capacity fast enough to keep up with the demand, profits begin
- Portable DVD Players- Email - Smart cards
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• Maturity – production concentrates on high volume, efficiency and low costs; mktg shifts to competitive sales promotion or maintaining market share
- Personal Computers- Faxes- Cotton t-shirts- Credit cards
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• Decline - Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however the product will either have to be re-modified, or replaced within the market.
- Typewriters- Handwritten letters- Cheque books
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SPAN • The cycle may vary from as little as 90
days, as in the case of “Krissh” products
• Shortened PLC’s (computers)
• As long as 100 or more years, as for gasoline-powered automobiles.
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AMITY GLOBALBUSINESS SCHOOL BangaloreWhy is Product Development
Important?1. To satisfy consumers (Demand) - Product items, no matter how successful
have a certain lifespan (product mortality)
- Replacement products need to be constantly planned
- True across all industries especially IT eg Microsoft’s new versions, Window’s XP, PS-2 etc)
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2.To create new jobs (Irish Economy)3.To maintain margins (Market share)4.Government Directives5.To expand the business (Growth)
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different kinds of new products • Generic – mkt opp - sporting, furniture,
tools
• Technology Push – new tech, finds mkt – gore-tex(artificial veins)
• Platform products ( estd product line ) – consumer electronics
• Process intensive = foods, chemicals
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AMITY GLOBALBUSINESS SCHOOL BangaloreService design
Service design is the activity of planning and organizing people, infrastructure, communication and material components of a service in order to improve its quality and the interaction between service provider and customers.
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The purpose of service design methodologies is to design according to the needs of customers or participants, so that the service is user-friendly, competitive and relevant to the customers. The backbone of this process is to understand the behavior of the customers, their needs and motivations
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New Product/ Service Development Process
Phases• Idea Generation / Idea Screening• Concept Testing• Business Analysis• Product Development ( concurrent engg ? )• Test Marketing• Production Ramp up• Introduction to market • Customer feedback
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AMITY GLOBALBUSINESS SCHOOL BangaloreDesign
21st century demands :
- New innovative products & services / improving existing products & s/ designing products & services for ease of prod
- Flexible production Systems ( lean/ assembly lines/ cellular)
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Innovation • Customers, marketing, production • Basic research / applied research- Technical and economic feasibility studies- Protoype design- Performance testing - Market testing- Design for mfg- Market, performance, process testing, and
economic evaluation of model- Continual modification of production model
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AMITY GLOBALBUSINESS SCHOOL Bangaloregetting new products to market
faster• Use Autonomous design and development
teams (GM, IBM, Motorola, GE, Nissan…)
• CAD / CAM
• Concurrent Engg - design the product and the accompanying production process simultaneously ( No throwing over the wall…)
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boeing …• Computer simulation• Different groups of engrs design diff
parts(plumbing, air circulation systems)• Software reads all files simultaneously;
combines them 3 dimensionally; • Thus, designers of one system can check
for design interference with other systems• Speeds up product development, reduces
design and developmental cost
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AMITY GLOBALBUSINESS SCHOOL Bangaloreimproving the design of
existing products • Modifying and improving existing products• Improve performance, quality and cost in order to
maintain or improve mkt share of maturing products• For eg : At Toyota, improvements were made- Taillights hooked up with single connector instead of
two; savings = $ 0.42- Underside coated only where needed; savings= $2
Continuous design improvements (value analysis)
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AMITY GLOBALBUSINESS SCHOOL BangaloreDesigning for
production• Specifications : Detailed descriptions of
material, or part, physical descriptions• Tolerances : a minimum and maximum of
each product; eg :4 ± 0.001 inch• Standardization : reduces variety among a
group of products or parts -- higher volume• Simplification :is the elimination of complex
features for higher customer satisfaction / reduced costs
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AMITY GLOBALBUSINESS SCHOOL Bangalore Designing for
QualityProducts of superior quality
• TQM
• Costs Of Quality
• Detecting Defects
• Preventing Defects
• Toyota, Intel, Motorola(6σ)
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contract manufacturers• Companies that manufacture for others
Automobile industry – interiors, taillights, GPS systems
Pharma – clinical trials
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Product FailureThe failure rate of new products remains high despite
product-planning processes• A recent survey of industrial and consumer goods’ firms revealed a failure rate of 35%
Product Failure can be defined in two ways:• Absolute Failure occurs if a company incurs a financial loss• Relative Failure occurs if a company makes a profit but does not attain profits or image objectives
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Why New Products FailThere are several reasons for absolute or
relative new-product failure, including
– Lack of differential advantage
– Poor planning
– Poor timing
– Unrealistic expectations and enthusiasm by product sponsor
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services revisited• Intangible items that cannot be inventoried• Close customer contact• Short lead times• High labor costs relative to capital costs• Subjectively determined quality• Great diversity in service jobs• 5: 1 • 2: 1 (non retail : retail )AT& T, Wal Mart, ICICI, Fullerton ….
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design • Quasi Mfg : prodn occurs; - back room
operations at banks, aircraft maintenance etc
• Customer as participant : customer involvement is high – retailing
• Customer as product : medical clinics, beauty parlors
Not mutually exclusive – Mc Donalds, Air India
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scheduling..• Services are produced and delivered by
people• Demand is non uniform( non peak incentives, advance
appointments,,waiting lines, part time personnel )
Taco Bell – computer simulation programme- how many employees are needed in a day
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Activity • Organise into groups• Choose one of these industries : generate an
idea for a new product / service (feasible) – name the product
- mobile phones - education - travel - textiles - restaurant - movie promotions
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• Make a role play / presentation to bring out all the steps involved in new product development
( 20 mins).
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Product design – the process of defining all of the companies product characteristics
Product design must support product manufacturability (the ease with which a product can be made)
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Product design defines a product’s characteristics of:
•appearance, •materials, •dimensions,
•tolerances, and•performance •standards.
Process Selection – the development of the process necessary to produce the designed product
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• Product design and process selection are directly linked
• Type of product selected defines type of operation required
• Type of operation available defines broader organizational aspects such as– Equipment required– Facility arrangement– Organizational structure
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AMITY GLOBALBUSINESS SCHOOL BangaloreService design
• Service design is unique in that the service and entire service concept are being designed– must define both the service and concept
- Physical elements, aesthetic & psychological benefits
e.g. promptness, friendliness, ambiance
– Product and service design must match the needs and preferences of the targeted customer group
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AMITY GLOBALBUSINESS SCHOOL BangaloreProcess
A process is any part of an organization that takes inputs and transforms them into outputs, that is of greater value than the inputs.
• Inputs• Outputs• Resources
• Activities
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Types of processes• Process focussed
• Product Focussed
- continuous
- discrete / assembly line / production line / Repetitive Focussed /
• Cellular processes
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Factors affecting Process• Expected demand
• No. of different products to be made
• Made to stock / order
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AMITY GLOBALBUSINESS SCHOOL Bangalore Process Focus
• Facilities are organized by process
• Similar processes are together– Example: All drill presses are together
• Low volume, high variety products
• ‘Jumbled’ flowOperation
Product A
Product B
1111 2222 3333• Other names
– Intermittent process/batch shop
– Job shop
– Example : machine, print, carpentry
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AMITY GLOBALBUSINESS SCHOOL BangaloreProcess-Focused - Examples
Bank
© 1995 Corel Corp.
Machine Shop© 1995 Corel Corp.
Hospital© 1995 Corel Corp.
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AMITY GLOBALBUSINESS SCHOOL BangaloreOperations of a Health CenterOperations of a Health Center
D
T
R P
B
D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)
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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - Physical ExamHealth Center - Physical Exam
Physical exam
D
T
R P
B
D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)
Physical exam
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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - Broken ArmHealth Center - Broken Arm
Physical exam
Broken armD
T
R P
B
D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)
Broken arm
Physical exam
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AMITY GLOBALBUSINESS SCHOOL BangaloreHealth Center - FluHealth Center - Flu
Physical exam
Broken arm
Flu
D
T
R P
B
D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)
Broken arm
Flu
Physical exam
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Pros & Cons
• Advantages– Greater product flexibility– More general purpose equipment– Lower initial capital investment
• Disadvantages– More highly trained personnel– More difficult production planning & control– Low equipment utilization (5% to 25%)
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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct Focussed - Repetitive /
Discrete• Facilities often organized by assembly
lines• Characterized by modules
– Parts & assemblies made previously
• Modules combined for many output options
• Other names– Assembly line – Production line
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AMITY GLOBALBUSINESS SCHOOL BangaloreRepetitive Focused Strategy -
Considerations• More structured than process-focused,
less structured than product focused• Enables quasi-customization• Using modules, it enjoys economic
advantage of continuous process, and custom advantage of low-volume, high-variety model
• Example : autos, motorcycles - Harley Davidson
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Repetitive-Focused Strategy - Examples
Truck
© 1995 Corel Corp.
Clothes Dryer
© 1995 Corel Corp.
Fast Food
McDonald’sover 95 billion served
McDonald’sover 95 billion served
© 1984-1994 T/Maker Co.
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Automobiles, toys, computers - Repetitive (discrete) flow – products are discrete
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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct-Focused Strategy
- Continuous • Facilities are organized by product• High volume, low variety products• Example : commercial baked goods, steel,
glass - Tata Steel
Operation
Products A & B
11 22 33
• Other names– Line flow production
– Continuous production
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Operations of an Automobile Assembly PlantOperations of an Automobile Assembly Plant
A: Front-end body-to-chassis assembly
H: Hood attachmentF: Fluid fillingS: Start-up testing
A SH F
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AMITY GLOBALBUSINESS SCHOOL Bangalore AAP - Mid-sized 6 cylinderAAP - Mid-sized 6 cylinder
A: Front-end body-to-chassis assembly
H: Hood attachmentF: Fluid fillingS: Start-up testing
Mid-sized
6 cylinder
A SH F
Mid-sized 6 cylinder
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AMITY GLOBALBUSINESS SCHOOL Bangalore AAP - Compact 4 cylinderAAP - Compact 4 cylinder
A: Front-end body-to-chassis assembly
H: Hood attachmentF: Fluid fillingS: Start-up testing
Mid-sized
6 cylinder
Compact 4 cylinder
A SH F
Mid-sized 6 cylinder
Compact
4 cylinder
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• Advantages– Lower variable cost per unit– Lower but more specialized labor skills– Easier production planning and control– Higher equipment utilization (70% to 90%)
• Disadvantages– Lower product flexibility– More specialized equipment– Usually higher capital investment
Product-Focused Strategy - Pros & Cons
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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct-Focused Examples
Paper (Continuous)© 1984-1994 T/Maker Co.
© 1995 Corel Corp.
Soft Drinks (Continuous, then Discrete)
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Process Focus Repetitive Focus Continuous Focus
1. Product: Smallquantity, largevariety
1. Product: Long runs,usually standardized
1. Product: Largequantities, smallvariety
2. Equipment:General purpose
2. Equipment: Special;assembly line
2. Equipment:Special-purpose
3. Operators broadlyskilled
3. Employees modestlytrained
3. Operators lessbroadly skilled
4. Many jobinstructions
4. Repetitive operations 4. Few work orders andjob instructions;standardization
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• Using technology and imagination to rapidly mass-produce products that cater to sundry unique customer desires.
• Under mass customization the three process models become so flexible that distinctions between them blur, making variety and volume issues less significant.
Mass Customization
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AMITY GLOBALBUSINESS SCHOOL Bangalore Cellular
Manufacturing / Group Technology _ Parts with similar characteristics are
grouped into part families– Parts in a part family are typically made on
the same machines with similar tooling
– Each part produced receives a multi-digit code that describes the physical characteristics of the part.
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– Some part families (those requiring significant batch sizes) can be assigned to manufacturing cells.
– The organization of the shop floor into cells is referred to as cellular manufacturing.
– Flow of parts within cells tend to be more like product-focused systems
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– Process changeovers simplified– Variability of tasks reduced (less training needed)– More direct routes through the system– Quality control is improved– Production planning and control simpler– Automation simpler
Advantages
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– Duplication of equipment
– Under-utilization of facilities
– Processing of items that do not fit into a family may be inefficient
Disadvantages
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ContinuumContinuum
Repetitive-Focused
Product-Focused
Process-Focused
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AMITY GLOBALBUSINESS SCHOOL BangaloreProduct Process Matrix
Product structureProduct Life Cycle
Process structure
Low vol – low stdardn
Multipl prods,low vol
Few maj prods,higher vol
Hi vol,hi std
Effectiveness measure
Job shop Comm printer, french rest
Flex high, unit cost-high
Batch Heavy eqpt
Assembly Line
Automobile, mc donalds
Continuous
Sugar refinery
Flex-low unit cost -lo