Operations Management Framework

Session-1

Professor Winfred S.William

Xavier Institute of Management
Bhubaneswar

What is Operations Management?

Production is the creation of goods and services.

Operations Management is the set of activities

that creates value in the form of goods and
services by transforming inputs into outputs.

Significant Events In Operations Management

CUSTOMIZATION FOCUS
QULALITY FOCUS
COST FOCUS
Early concepts (1776-1880)
Labor specialization
(Smith , Babbage)
Standardize parts ( Whitney)
Scientific management Era (1880-1910)
Gantt Charts

Mass customization Era (1995---------)

Enterprise Resource Planning

Lean Production Era (1980-1995)

Learning Organization

Just in time

International Quality Standard

Compute aided Design(1970)

Supply Chain Management

Electronic Data Interchange

Agile Manufacturing

Total quality management

Services Supply Chain

Kanbans
Theory Of Constraint (TOC)

Motion and time studies

Process Analysis (Taylor)
Queuing Theory
Mass production Era (1910-1980)
Moving Assembly Line (Ford/Sorensen 1913)
Statistical sampling (Shewhart)
Economic Order Quantity (Harris)
Linear Programming (Dantzig)
PERT/CPM (Dupont 1957)
Material Requirement Planning (Orlicky 1960)

Goods

Services

Automobile
Computer
Installed carpeting
Fast-Food meal
Restaurant meal
Auto repair

Hospital care
Advertising agency
Investment management
Consulting services/teaching
Counseling
100

75

50

25
0

25

50

75

100

The Operations Management System

External environment

Customer or Client
Participation
Operations and transformations
Inputs
Workers
Managers
Equipment
Facilities
Materials
Services
Land
Energy

Outputs

Goods

Services
2

Information on
Performance

Maximizing Value Added in Operations

Transformations
Physical--manufacturing
Locational--transportation
Exchange--retailing
Storage--warehousing
Physiological--health care
Informational--telecommunications

Types of Operations Decisions

Strategic (long-range)
Needs of customers
(capacity planning)

Tactical (medium-range)
Efficient scheduling of
resources

Operational planning
and control (short-range)
Immediate tasks and
activities

Ten Critical Decisions

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Service and product design

Quality management
Process, capacity design
Location
Layout design
Human resources, job design
Supply-chain management
Inventory management
Scheduling
Maintenance.

Classification of Productive
Systems
Project
Job Shop

Job Shop

Batch
Line Flow

Flow Shop

Continuous Flow
10

Project

Flow - no flow
Flexibility - very high
Products - unique
Capital investment for transformation - very low
Variable cost - very high
Labor content and skill - very high
Volume - one

Job Shop

Flow - jumbled flow

Flexibility - high
Products - many
Capital investment - low
Variable cost - high
Labor content and skill - high
Volume - low

Batch Process

Flow - disconnected, with some dominant flows

Flexibility - moderate
Products - several
Capital investment - moderate
Variable cost - moderate
Labor content and skill - moderate
Volume - moderate

Assembly Line Process

Flow - connected line

Flexibility - low
Products - a few
Capital investment - high
Variable cost - low
Labor content and skill - low
Volume - high

Continuous Flow Process

Flow - continuous
Flexibility - very low
Products - one
Capital investment - very high
Variable cost - very low
Labor content and skill - very low, but with skilled
overseers
Volume - very high

Classification of Productive Systems

Productive systems can be classified as Project ,Job Shop, Batch, Mass
and Continuous Production.

Volume
Continuous
Production

Mass
Production
Batch Production
Job Shop
Production

Variety

Project

16

Example

Project construction of a building

Job shop - print shop
Batch process - bakery
Assembly line - automobile production line
Continuous flow - oil refinery

17

Product-Process Matrix
Process
Flexibility
High

JOB SHOP

Jumbled Flow.
Process segments
loosely linked.

(Commercial Printer,
Architecture firm)

BATCH

Disconnected Line
Flow/Jumbled Flow
but a dominant flow
exists.

(Heavy Equipment,
Auto Repari)

LINE FLOWS
Connected Line
Flow (assembly line)

Continuous, automated,
rigid line flow.
Process segments tightly
linked.

Low

(Auto Assembly,
Car lubrication shop)

CONTINUOUS
FLOW
(Oil Refinery)

Low
High Standardization
Commodity Products
High volume

High
Few Major Products

Many Products

Low Standardization
One of a kind
Low Volume

Product
Variety

18

Products and Services

Make-to-order
Make-to-stock
Assemble-to-order
Engineer-to-order

19

Classification of Processes by Customer Interface

Raw Material Components

Semifinished Finished

Assemble-to-Order

Make-to-Order

CLIENT

SUPPLIER

Make-to-Stock

Engineer-to-Order

Forecast

Order

20

MAKE-TO-STOCK VERSUS MAKE-TO-ORDER

CHARACTERISTICS

Product

Objective

Main operation
problems

MAKE-TO-STOCK
Producer-specified
Low variety
Inexpensive

Balance inventory,
Capacity, and Service

Forecasting
Planning production
Control of inventory

MAKE-TO-ORDER
Customer specified
High variety
Expensive

Manage delivery
lead times and
Capacity

Quality
Lead time

21

Push/Pull Strategies
Hybrid of push and pull strategies to overcome
disadvantages of each
Early stages of product assembly are done in a push
manner

Partial assembly of product based on aggregate demand

forecasts (which are more accurate than individual product
demand forecasts)
Uncertainty is reduced so safety stock inventory is lower

Final product assembly is done based on customer

demand for specific product configurations
Supply chain timeline determines push-pull boundary
Generic Product
Push Strategy
Raw
Materials

PushPull
Boundary

Customized Product
Pull Strategy

Supply Chain Timeline

End 22
Consumer

Organizational Model
Finance
Sales

HRM

POM
QA

Marketing

Engineering

MIS

Accounting

25

Thank You