2. What is Operations Management?
The direction and control of the processes
that transform inputs into products and
services
2

3. Operations Management
Operations Management is a set of
decisions that the Operations Manager
makes these could be strategic & tactical
namely:
• Strategic
• Process
• Quality
• Capacity, Location and Layout
• Operating decision
3

4. Operations Management as a
Function
4

5. OM Decisions
1. Strategic Choices
These decisions affect the company’s future
direction.
Operations
Managers
help
determine the company’s global strategy and
competitive priorities. How the OM’s will best
design the process to fit with its competitive
priorities.
5

6. OM Decisions
2. Process
The Operations Managers make process
decisions about the types of work to be done
in-house, the amount of automation to be used,
methods to improve current processes and
technologies to pursue to become market
leaders.
6

7. OM Decisions
3. Quality
Quality issues underlie all processes and work
activity. Operations Managers help in establish
quality objectives and seek ways to improve
the quality of the firms products/services and
use various statistical methods to monitor the
quality produced by various processes.
7

8. OM Decisions
4. Capacity, Location and Layout
The types of decisions in this category require
long term commitments. Operations Managers
help to determine the systems capacity,
location of new facility including global
locations and organizing of the departments
physical layout.
8

9. OM Decisions
5. Operating Decisions
These deal with operating the facility after it is
built, this requires Operations Managers to
help co-ordinate with internal and external
supply chain, manage inventory, control
output and staffing levels, do resource
planning, implement new techniques etc.
9

10. Manufacturing v/s Services
Manufacturing
Services
Physical Product
Intangible product
Output can be inventoried
Output cannot be
inventoried
Low customer contact
High customer contact
Long response time
Short response time
Regional, national or
international markets
Local Markets
Large facilities
Small facilities
Capital intensive
Labor intensive
Quality easily measured
Quality not easily measured
10

11. Operations Strategy a
Competitive Weapon
• An Organization that wants to succeed in a
competitive business needs needs a sound
strategy.
• A strategy is a broad long term plan
conceived in order to achieve business
objectives.
• Strategies are developed at 3 levels:
• Corporate level
• Business level
• Functional level
11

12. Operations Strategy a
Competitive Weapon
Key objective of any business organization
is to attract more customers than its
competitors and they do that with:
• Product/Process Expertise
• E.g. Intel Corp using superior chip
technology
• Quick Delivery – An organization with
flexible capacity, an adaptive production
process and satisfy customer needs
• E.g. 1 hour photo
• “Same-day” dry-cleaning
12

13. Elements of Operations Strategy
• Designing the production system.
• Product/Service design and development.
• Technology
selection
and
process
development.
• Allocation of resources to strategic
alternatives
• Facility planning
13

14. Designing the Production System
• Product Design
• Customized product design: high level of
customization and quantity produced is
low. E.g. Rolls Royce, Handmade watches
etc.
• Standard Product design: Production of
limited variety of products but produced
in large batches. E.g. Ford Model T,
coolers, fan, televisions etc.
14

15. Designing the Production System
• Production System
• Product-focused systems: used generally
employed in mass production units
where there are groups of machines,
tools and workers arranged according to
tasks. E.g. cars, televisions etc.
• Process-focused systems: Designed to
support departments that perform a
single task like painting or packing .
15

16. Finished Good Inventory Policy
• Produce-to-stock: Products are produced
well in advance and are stored in
warehouses from where they are
dispatched as per customer orders
• Produce-to-order: This allows production
to start only after the company receives
customer orders and halts production until
another order is received
16

17. Product/Service Design and
Development
The following are the important steps in
the development of new products:
• Idea Generation
• Feasibility Studies
• Prototype Design
• Prototype Testing
• Initial Design of Production Model
• Economic Evaluation
• Market Testing
• Final Design of Production Model
17

18. Product/Service Life Cycle
18

19. Product/Service Life Cycle
Once Product Design is finalized:
• Technology
selection
and
process
development: This involves thorough
analysis and planning or the production
process and facilities
• Allocation of resources to strategic
alternatives: Minimizing wastage and
optimal use of resources
• Facility Planning: Set up facility with
adequate capacity and proximity to raw
materials
19

20. Developing Operations Strategy
20

21. Financial and Economic Analysis
Productivity =
Output
--------------------Input
Two types of Productivity:
• Labor Productivity – Index of output per
person or per hour worked
• Multifactor Productivity – output provided
by more than 1 resource used in input
21

22. Productivity Calculations
Calculate the productivity for the following
operations:
1. Three employees process 600 insurance
policies in a week. They work 8 hours per
day and 5 days per week
2. A team of workers make 400 units of a
product, which is valued by its standard
cost of $10 each. The accounting
department reports that for this job the
actual costs are $400 for labor, $1000 for
material and $300 for overhead
22

23. Productivity Calculations
Policies Processed
------------------------Employee hours
Labor Productivity =
Labor Productivity =
600 policies
-------------------------
(3
employees)(40hrs/empl
oyee)
= 5 policies/hour
23

24. Productivity Calculations
Quantity at standard cost
Multifactor Productivity =
-------------------------
Labor cost+Material cost+overhead cost
(400 units)($10/unit)
Multifactor Productivity =
------------------------$400+$1000+$300
= $4000/$1700
= 2.35
24

25. Productivity Calculations
Calculate the productivity for the following
operations:
1. 5 employees create 800 units of chairs in a
week. They work 10 hours per day and 6
days per week
2. A team of workers make 500 units of
television, which is valued by its standard
cost of $150 each. The accounting
department reports that for this job the
actual costs are $300 for labor, $800 for
material and $400 for overhead
25

26. Financial and Economic Analysis
Two methods to evaluate the
effectiveness of an investment:
• Payback Method
• Net Present Value (NPV) method
cost
26

27. Financial and Economic Analysis
Payback Method:
Payback period =
Net Investment
--------------------Net Annual income
27

28. Productivity Calculations
Calculate the productivity for Payback
Method:
1. The initial investment for a factory is 12
lakhs and is expected to generate an
income of 3 lakhs per annum what is the
payback period
2. The initial investment in a call center is 45
lakhs and is expected to generate a revenue
of $20,000/- per annum, what is the
payback period.
28

29. Financial and Economic Analysis
Net Present Value (NPV):
29

30. Financial and Economic Analysis
Net Present Value (NPV):
If the NPV is greater than 1 then the project is
acceptable. If the NPV is less than zero the
project is rejected.
The greater the NPV of a project the better the
profitability
When multiple projects are being considered
then project with highest NPV is selected
30

31. Forecasting
31

32. Forecasting
Forecasting is the scientific process of
estimating without having all the necessary
information.
For Operations Managers forecasting provides
the basis for making decisions with regards to
independent demand planning and scheduling
and for mitigating risk and uncertainty.
32

33. Forecast Components
For forecasting we need to take into
consideration various factors or components.
• Base Demand
• Seasonal Component
• Trend Component
• Cyclic Component
• Promotional Component
• Irregular Component
33

34. Forecast Components
• Base Demand
Base Demand is the average sales over a
given time period. This figure can be taken
as the right forecast if the products
demand is not impacted by the other
forecast components
34

35. Forecast Components
• Seasonal Component
This refers to the repeated pattern of
increase and decrease in the demand over
a period if time. E.g. Demand for ice cream
and cold drinks goes up in summer.
Demand for umbrella’s goes up in rains
etc.
35

36. Forecast Components
• Trend Component
The trend component refers to the long
term pattern of movement of demand over
a period of time. The trend could be
positive, negative or neutral.
Positive trend means that the demand is
increasing.
Negative trend means the demand is
decreasing.
36

37. Forecast Components
• Cyclic Component
This refers to changes in the demand
patterns, which exist for more than one
year. These changes could either show and
upward or a downward movement.
37

38. Forecast Components
• Promotional Component
This component is one of the key factors
that impact demand. This refers to the
changes in demand that occur due to a
promotional activity like a discount or a
sale etc.
38

39. Forecast Components
• Irregular Component
This component refers to all the changes
in demand that cannot be attributed to
any of the above five factors.
This is of random nature and difficult to
predict.
All forecasting exercise is done to try and
reduce the impact due to this to a
minimum.
39

40. Forecast Components
The next steps in Forecasting are:
• Identify major factors that influence the
Demand Forecast
• Understand and identify customer
segments
• Determine the appropriate forecasting
technique
40

41. Forecasting Methods
41

42. Forecasting Methods
42

43. Project Management
43

44. Project Management
Project Management can be defined as
planning, directing and controlling resources
(people, equipment, material) to meet the
technical, cost and time constraints of the
Project.
44

45. Project Management
45

46. Types of Projects
• Pure Projects
• Functional Projects
• Matrix Projects
46

47. Types of Projects
Pure Project: is where a self sustained team
works full time on the project. Here each one is
autonomous, entrepreneurial and the essence
here is speed and flexibility.
It keeps away from hierarchical management
structures.
47

48. Types of Projects
Pure Projects
Advantages
Disadvantages
The Project manager has full
authority over the project
Duplication of resources.
Equipment and people are not
shared across projects
Team members report to one boss
they do not have to worry about
dividing loyalty with a functional
and area manager
Organization goals are ignored, as
team is often physically and
logically removed from the
headquarters
Lines of communication are
shortened and decisions are made
quickly
The organization falls behind in its
knowledge due to weakened
functional divisions
Team pride, motivation and
commitment are high
As the team has no functional area
home they worry about life after
the project
48

49. Types of Projects
Functional Project: This is where a project is
housed within a functional area
President
R&D
Project
A
Project
B
Project
C
Engineering
Project
D
Project
E
Manufacturing
Project
F
Project
G
Project
H
Project
I
49

50. Types of Projects
Functional Projects
Advantages
Disadvantages
A team member can work on
several projects
Aspects of the project are not
directly related to the functional
area get shortchanged
Technical expertise is maintained
within the functional area even if
the individuals leave the project
or organization
Motivation of the team members
is often weak
The functional area is a home
Needs of the clients are secondary
after the project is completed.
and are responded to slowly
Functional specialists can advance
vertically
A critical mass of specialized
functional area experts creates
synergystic solutions to a projects
technical problem
50

51. Types of Projects
Matrix Project: This attempts to blend the
properties of a functional and pure project
structure. Each process utilizes people from
different functional areas.
The Project manager decides what tasks and
when they will perform.
51

52. Types of Projects
Matrix Project Structure
President
R&D
Engg
Mnfrng
Mktng
Manager
Project A
Manager
Project b
Manager
Project c
52

53. Types of Projects
Matrix Projects
Advantages
Disadvantages
Communication between
functional divisions is enhanced
There are two bosses. Often the
functional manager will be
listened to before the project
manager
The Project manager is held
responsible for the completion of
the project
It is a doomed a failure unless the
PM has strong communication
skills
The team members have a
functional home after project is
completed
Sub optimization is a danger, as
PM hoard resources for their own
project thus harming other
projects
A critical mass of specialized
functional area experts creates
synergystic solutions to a projects
technical problem
53

54. Work Break Structure
Project starts with Statement of Work which
gets further broken down into tasks and sub
tasks.
The work break down structure defines the
hierarchy of project tasks, sub tasks and work
packages. Completion of one or more work
packages results in the completion of a sub
task, the completion of one or more sub tasks
results in completion of a task and completion
of all tasks results in the completion of the
project.
54

55. Work Break Structure
Level
1
2
3
4
Program
Project 1
Project 2
Task 1.1
Task 1.2
Subtask 1.1.1
Work package
1.1.1.1
Subtask 1.1.2
Work package
1.1.1.2
55

56. Work Break Structure
Please list down the complete Work Break
down structure for the following Projects
• Going to office from waking up in the
morning
• Purchasing a new car
• Travel from Mumbai to Delhi in a car
• Construction of a new house with ground
+ 2 floors
56

57. Project Control Charts
57

58. Project Control Charts
58

59. Project Control Charts
59

60. Network Planning Models
The best known Network Planning Models
were developed in the 1950’s, they are:
• Critical Path Method or CPM
• The Program Evaluation and Review
Technique (PERT)
As the time passed and features that
distinguished the two faded we now just use
the CPM
60

61. Critical Path Method
The steps involved in CPM
• Identify each activity to be done in the
project and how long it will take to
complete each activity
• Determine the required sequence of the
activities and construct a network
reflecting the precedence relationships
• Determine the Critical Path
61

62. Critical Path Method
Example: A group assignment that requires a
decision on whether you should invest in a
company. Analysis to be done in 4 steps
A. Select a Company
B. Obtain the company’s annual report
C. Collect the technical stock price data and
construct charts
D. Individually review the data and make a
team decision on whether to buy the stock
62

63. Critical Path Method
Steps:
1. Identify each activity to be done in the
project and estimate how long it will take
to complete each activity
2. Determine the required sequence of
activities and construct a network
reflecting the precedence and relationship
63

64. Critical Path Method
Activity
Designation
Immediate
predecessors
None
Time
1
Select a Company
A
Obtain annual
Report and perform
Ratio analysis
B
A
2
Collect stock price
Data and perform
tech. analysis
C
A
1
Review data &
Make decision
D
B and C
1
64

65. Critical Path Method
B(2)
A (1)
D(1)
C(1)
65

66. Critical Path Method
Steps:
3. Determine the Critical Path: take the sum
of activities in A-B-D and A-C-D and the
longest duration here is taken as the
critical path. Here the critical path is A-BD as any activity that is delayed in this
path will result in delaying the project.
66

67. Critical Path Method
Slack Time
Early
Start
Early
Finish
Activity(Du
ration)
Late
Start
Late
Finish
67

68. Critical Path Method
Slack Time – Early Start/Finish
1
3
B(2)
1
0
4
3
A (1)
D(1)
2
1
C(1)
68

69. Critical Path Method
Slack Time – Late Start/Finish
1
3
B(2)
1
0
1
3
4
3
A (1)
0
D(1)
1
2
1
C(1)
2
3
4
3
69

70. Critical Path Method
70

71. Critical Path Method
71

72. Critical Path Method
72

73. Critical Path Method
73

74. Product and Service Design
74

75. Product Development
Process
75

76. Product Development Process
The generic product development process is
done in six phases:
Phase 0: Planning
Phase 1: Concept Development
Phase 2: System level design
Phase 3: Design Detail
Phase 4: Testing and refinement
Phase 5: Production Ramp up
76

77. Product Development Process
77

78. Product Development Process
78

79. Product Development Process
• Technology-Push Products: In developing
Technology-Push products, a firm looks for
an appropriate market in which to apply
the technology( that is the technology
“pushes” the development. E.g. Teflon sheets
manufactured by Gore-Tex
• Platform Products: A platform product is
built around a pre-existing technological
sub system. E.g. the Hybrid car Prius built
by Toyota, Mircosoft Vista
79

80. Product Development Process
• Process- Intensive Products: Examples of
these include semi-conductors, chemicals,
paper. For these products the production
process has an impact on the properties of
the product
• Customized Products: Products which are
created with slight variations for each
customer.
Modular
Kitchens,
Cars,
Furniture, Batteries
80

81. Product Development Process
• High Risk Products: These products
usually entail large uncertainties, this
involves completing design and testing
activity in the initial stages. E.g. Precast
structure for bridges etc.
• Quick Build Products: For development of
products like Software and many technical
products, building and testing prototype
has become a rapid process. This fast
prototyping cycle results in the product
reaching the market faster
81

82. Product Development Process
Designing for the Customer
82

83. Product Development Process
Quality Function Deployment Exhibit 4.6
83

84. Product Development Process
Quality Function Deployment Explain
84

85. Process Planning and Design
Major Factors
Decisions
affecting
Process
Design
85

86. Process Planning and Design
Factors affecting
integration
Degree
of
backward
86