The competitive environment

Survival Triad:Cost, Quality and Delivery/Response

Cost
Continuously pushed down Compressed continuously

Driven up continuously

Delivery/Response time

Quality

Competitive Strategy for the new environment

Three Box approach

Box 1
Protect the Present

Box 2
Selectively forget the Past

Box 3
Change the Rules of the game

Intensification

Innovation

Breakthrough

Doing things better and better

Doing new things and different things better

Identify opportunity gap

Completely new ways of doing things

Bridge opportunity gap

Bridge performance gap

OM - Course objective
To develop in students : A keen understanding of people and processes. Team building approach Leadership & decision-making capabilities Analytical and problem-solving skills Interpersonal communication skills

Oral and written skills

Ability to apply concepts learned in class to work situations

What is Operations Management?

Defined

Operations management (OM) is defined as the design, operation, and improvement of the systems that create and deliver the firms primary products and services

What is Operations Management?

Where do I locate my facilities? How much inventory do I need? How do I bargain with suppliers? How do I ensure a quality product? How do I transport my product? How do I make my companys processes
as efficient as possible?

Why study OM course ?

OM is a core function Strategic importance of OM and interrelationship with other functions To learn the concepts and methods related to managing operations Growing importance of Services in Operations Exciting area due to computer and technology revolution

Challenging due to escalating consumer expectations

Career prospects abound in the field of OM

What is a Production System?

Defined

A production system is defined as a user of resources to transform inputs into some desired outputs

What is a Transformation Process?

A series of activities along a value chain extending from supplier to customer. Activities that do not add value are superfluous and should be eliminated

Operations as a Transformation Process

INPUT Material Machines Labor Management Capital OUTPUT Goods Services

TRANSFORMATION PROCESS

Feedback

Transformations
Physical--manufacturing

Locational--transportation
Exchange--retailing

Storage--warehousing
Physiological--health care

Informational--telecommunications

An Integrated Value Chain

Value chain: set of activities that create and
deliver products to customer

Customer

Manufacturer

Supplier

Flow of information (customer order) Flow of product (order fulfillment)

Relation of Operations to its Environment

SOCIETY
External Environment

Human Resources

Design

Marketing

Suppliers

Operations transformation system

Production Finance MIS

CUSTOMERS

COMPETITORS
Internal Environment

GOVERNMENT

A typical Operations System

The process of transformation is at the heart of operations management
Operations system Primary inputs transformation Outputs subsystem Transmits info. Educated and develops persons skills and knowledge

College or University

Students, books, supplies, personnel, buildings, utilities

Organizational Functions

Marketing Gets customers Operations creates product or service Finance/Accounts Obtains funds Tracks money
1995 Corel Corp.

Functions - Bank
Commercial Bank
1984-1994 T/Maker Co.

Marketing

Operations

Finance/ Accounting

Teller Scheduling

Check Clearing

Transactions Processing

Security

Functions - Airline
Airline
Marketing Operations

1984-1994 T/Maker Co.

Finance/ Accounting

Flight Operations

Ground Support

Facility Maintenance

Catering

Functions - Manufacturer
Manufacturing
Finance/ Accounting

Marketing

Operations

Manufacturing

Production Control

Quality Control

Purchasing

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?)

Characteristics of Goods
Tangible product Consistent product
definition Production usually separate from consumption Can be inventoried Low customer interaction

1995 Corel Corp.

Characteristics of Service
Intangible product Produced & consumed at
1995 Corel Corp.

same time Often unique High customer interaction Inconsistent product definition Often knowledge-based Frequently dispersed

Core Services Defined

Core services are basic things that customers want from products they purchase

Core Services Performance Objectives

Quality

Flexibility

Operations Management

Speed

Price (or cost Reduction)

Value-Added Services Defined

Value-added services differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way

Value-Added Service Categories

Problem Solving

Information

Operations Management

Sales Support

Field Support

Evolution of Operations Management

Craft production

Division of labor

process of handcrafting products or services for individual customers dividing a job into a series of small tasks each performed by a different worker

Interchangeable parts

standardization of parts initially as replacement parts; enabled mass production

Evolution of Operations Management (cont.)

Scientific management
systematic analysis of work methods

Mass production
high-volume production of a standardized product for a mass market

Lean production
adaptation of mass production that prizes quality and flexibility

Historical Development of OM

JIT and TQC

Manufacturing Strategy Paradigm

Service Quality and Productivity

Total Quality Management and
Quality Certification

Historical Development of OM (contd)

Business Process Reengineering

Supply Chain Management Electronic Commerce

Historical Events in OM
Industrial Revolution
Steam engine Division of labor Interchangeable parts 1769 James Watt 1776 Adam Smith 1790 Eli Whitney

Scientific Management
Principles Time and motion studies Activity scheduling chart Moving assembly line 1911 1911 1912 1913 Frederick W. Taylor Frank & Lillian Gilbreth Henry Gant Henry Ford

Historical Events in OM
Management Science/Operations Research
Linear programming Digital computer Simulation, PERT/CPM, Waiting line theory MRP 1947 1951 1950s 1960s George Dantzig Remington Rand Operations research groups Joseph Orlicky, IBM

JIT TQM

Quality Revolution
1970s 1980s 1990s 1990s

Strategy and operations Reengineering World Trade Organization

Taiichi Ohno, Toyota W. Edwards Deming, Joseph Juran, et. al. Skinner, Hayes Hammer, Champy Numerous countries and companies

Historical Events in OM
European Union and other trade agreements EDI, EFT, CIM

Globalization
1970s 1980s

IBM and others

Information Age/ Internet Revolution

Internet, WWW, ERP Supply chain management, E-commerce 1990s ARPANET, Tim Berners-Lee, SAP, i2 Technologies, ORACLE, PeopleSoft, Amazon, Yahoo, eBay, and others

Contemporary OM themes
Services and manufacturing Customer-directed Operations Time reduction (lean operations) Integration of Operations with other functions Environmental concerns Supply chain management Globalization of Operations

Current Issues in OM

Effectively consolidating the operations

resulting from mergers

Developing flexible supply chains to

enable mass customization of products and services and distribution networks suppliers

Managing global supplier, production Increased commoditization of

Current Issues in OM (contd)

Achieving the Service Factory

Enhancing value added services

Making efficient use of Internet
technology

Achieving good service from service

firms

New Challenges in OM
From
Local or national focus Batch shipments

To
Global focus Just-in-time Supply chain partnering Rapid product development, alliances

Low bid purchasing

Lengthy product development Standard products Job specialization

Mass customization
Empowered employees, teams