Chapter Two Operations Managemnt.pptx

1
Saunders, Lewis and Thornhill, Research Methods for Business Students, 5th Edition, © Mark Saunders, Philip Lewis and Adrian Thornhill 2009
Slide 1.1
Chapter Two;
Design of the Operation System
 The organization provides good or service to
the society.
 Top organizations typically focus on core products
 Fundamental to an organization's strategy with
implications throughout the operations function
6/6/2023 OM 1

2
Slide 1.2
Product Strategy Options
• Differentiation
• Low cost
• Rapid response
6/6/2023 OM 2

3
Slide 1.3
Life Cycles of Products or Services
6/6/2023 OM 3
Time
Introduction
Growth
Maturity
Saturation
Decline
Demand

4
Slide 1.4
Product Life Cycle
6/6/2023 OM 4
Introduction Growth Maturity Decline
OM
Strategy/Issues
Expenditure:
• Research
• Product
development
• Process
modification
and
enhancement
• Supplier
development
• Forecasting
criticaly
• Increase/enha
nce capacity
• Improved cost
control
• Less rapid
product
changes –
more minor
changes
• Optimum
capacity
• Increasing
stability of
process.
• Reduce
capacity

5
Slide 1.5
Product-by-Value Analysis
 Effective operations managers select items that
show the greatest promise i.e. focus on the critical
few not the trivial many.
 List products in descending order of their
individual dollar contribution to the firm.
 Helps management evaluate products to be
eliminated or fail to justify further investment in
research and development.
6/6/2023 OM 5

6
Slide 1.6
Why developing new products?
 Because products have life cycle i.e. introduction to
decline and firms generate most of their revenues and
profit from new products product selection, definition and
design take place on a continuing basis.
 Knowing how to successfully find and develop new
products is a requirement.
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7
Slide 1.7
Techniques for Product Design
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Value analysis
 Environmentally friendly design
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8
Slide 1.8
Robust Design
Robust Design; is a technique that reduces
variation in a product by reducing the sensitivity of
the design of the product to sources of variation.
• Product is designed so that small variations in
production or assembly do not adversely affect
the product.
• Typically results in lower cost and higher quality.
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9
Slide 1.9
Modular Design
 Modular design, or modularity in design,
 is a design principle that subdivides a system into
smaller parts called modules (such as modular
process skids), which can be independently
created, modified, replaced, or exchanged with
other modules or between different systems.
 Products designed in easily segmented
components
 Adds flexibility to both production and
marketing
 Improved ability to satisfy customer
requirements
 Example cars, computers, process systems, solar
panels, wind turbines, furniture, etc
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10
Slide 1.10
Computer Aided Design (CAD)
.
6/6/2023 OM 10
 Using computers to design products and
prepare engineering documentation.
 Shorter development cycles, improved
accuracy, lower cost.
 Information and designs can be deployed
worldwide.
 Utilizing specialized computers and
program to control manufacturing
equipment

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Slide 1.11
Benefits of Computer Aided Design
.
6/6/2023 OM 11
1. Product quality
2. Shorter design time
3. Production cost reductions
4. Database availability
5. New range of capabilities

12
Slide 1.12
Value Analysis
• Focuses on design improvement during
production
• Seeks improvements leading either to a better
product or a product which can be produced
more economically
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Slide 1.13
The Ethical Approach
• View product design from asystems
perspective
• Inputs, processes, outputs
• Costs to the firm/costs to society
• Consider the entire life cycleof the product
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14
Slide 1.14
Goals for Ethical and Environmentally Friendly
Designs
1. Develop safe and more environmentally sound
products
2. Minimize waste of raw materials and energy
3. Reduce environmental liabilities
4. Increase cost-effectiveness of environmental
regulations
5. Be recognized as a good corporate citizen
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15
Slide 1.15
Guidelines for Environmentally Friendly Designs
1. Make products recyclable
2. Use recycled materials
3. Use less harmful ingredients
4. Use lighter components
5. Use less energy
6. Use less material
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Slide 1.16
Service 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 the
service provider and its customers.
 Service design involves
 The physical resources needed
 The products that are purchased or consumed by the
customer
 Explicit services: benefits readily observable example
quality of meal, on-time service etc.
 Implicit services: psychological benefits example privacy of
loan office, security of a well-lighted parking lot etc.
6/6/2023 OM 16

17
Slide 1.17
Service Design
Service
Something that is done to or for a customer
Service delivery system
The facilities, processes, and skills needed to
provide a service
Product bundle
The combination of goods and services
provided to a customer
Service package
The physical resources needed to perform the
service
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Slide 1.18
Phases in Service Design
1. Conceptualize
2.Identify service package components
3. Determine performance specifications
4.Translate performance specifications into
design specifications
5. Translate design specifications into delivery
specifications
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19
Slide 1.19
Service Blueprinting
Service blueprinting
• A service blueprint is a diagram that displays the
entire process of service delivery, by listing all the
activities that happen at each stage, performed by
the different roles involved.
• A method used in service design to describe and
analyze a proposed service
• A useful tool for conceptualizing a service
delivery system
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20
Slide 1.20
Characteristics of Well Designed
Service Systems
1. Consistent with the organization mission
2. User friendly
3. Robust
4. Easy to sustain
5. Cost effective
6. Value to customers
7. Effective linkages between back operations
8. Ensure reliability and high quality
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21
Slide 1.21
Strategic Capacity Planning
 Capacity-the throughput, or the number of units a facility
can hold, receive, store, or produce in a period of time
 Determines fixed costs
 Determines if demand will be satisfied
 Three time horizons
 Determining facility size with an objective of achieving high
levels of utilization and a high return on investment is
critical.
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22
Slide 1.22
Design and Effective Capacity
Design capacity is the maximum theoretical
output of a system.
• Normally expressed as a rate
Effective capacity is the capacity a firm expects to
achieve given current operating constraints.
• Often lower than design capacity
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Slide 1.23
Utilization and Efficiency
Utilization is the percent of design capacity
achieved
Utilization = Actual output/Design capacity*100%
Efficiency is the percent of effective capacity
achieved
Efficiency = Actual output/Effective capacity*100%
6/6/2023 OM 23

24
Slide 1.24
Example
 Actual production last week = 14,000 units
 Effective capacity = 17,000 units
 Design capacity = 1,200 units per hour
 Bakery operates 7 days/week, 6 hour/day
 Determine:
• Design capacity
• Utilization
• Efficiency and
• Expected output
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25
Slide 1.25
Example
 Actual production last week = 14,000 units
 Effective capacity = 17,000 units
 Design capacity = 50,400 units
 Design capacity = (7 x 6) x (1,200) = 50,400 units
 Utilization = 14, 000/50,400*100% = 27.7%
 Efficiency = 14,000/17,000*100% = 82.3%
 Expected Output = (Effective Capacity)(Efficiency)
 = (17,000)(84%) = 147,280 units
6/6/2023 OM 25

26
Slide 1.26
Capacity and Strategy
 Capacity decisions impact all 10 decisions of operations
management as well as other functional areas of the
organization
 Capacity decisions must be integrated into the
organization’s mission and strategy
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27
Slide 1.27
Capacity Considerations
1) Forecast demand accurately
2) Understand technology and capacity
increments-once volume is determined
technology decisions may be aided by analysis of
cost, human resource required, quality and
reliability.
3) Find the optimum operating level (volume)
4) Build for change
6/6/2023 OM 27

28
Slide 1.28
Managing Demand
 Demand exceeds capacity
• Decrease demand by raising prices, scheduling longer
lead time
• Long term solution is to increase capacity
 Capacity exceeds demand
• Stimulate market for example through price reduction
and aggressive marketing
• Product changes
 Adjusting to seasonal demands
• Produce products with complementary demand patterns
6/6/2023 OM 28

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Slide 1.29
Facility Location & layout
 Location Strategy;
 One of the most important decisions a firm makes
Increasingly global in nature
 Significant impact on fixed and variable costs
 Decisions made relatively infrequently
The objective is to maximize the benefit of location
to the firm.
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Slide 1.30
Conti...ed
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Slide 1.31
Location and Costs
Location decisions based on low cost require
careful consideration.
Once in place, location-related costs are fixed in
place and difficult to reduce.
 Determining optimal facility location is a good
investment.
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32
Slide 1.32
Location and Innovation
 Cost is not always the most important aspect of a
strategic decision.
 Four key attributes when strategy is based on
innovation
• High-quality and specialized inputs
• An environment that encourages
investment and local rivalry.
• A sophisticated local market.
• Local presence of related and supporting
industries.
6/6/2023 OM 32

33
Slide 1.33
Location Decisions
Country Decision
6/6/2023 OM 33
Critical Success Factors
1. Political risks, government
rules, attitudes, incentives
2. Cultural and economic issues
3. Location of markets
4. Labor talent, attitudes,
productivity, costs
5. Availability of supplies,
communications, energy
6. Exchange rates and currency
risks

34
Slide 1.34
Critical Success Factors of Location Decisions at
regional level Conti...ed
1. Corporate desires
2.Attractiveness of region
3. Labor availability, costs, attitudes towards unions
4.Costs and availability of utilities
5.Environmental regulations
6.Government incentives and fiscal policies
7.Proximity to raw materials and customers
8.Land/construction costs
6/6/2023 OM 34

35
Slide 1.35
Layout Strategies
6/6/2023 OM 35

36
Slide 1.36
Strategic Importance of Layout
Decisions
The objective of layout strategy is to develop a
cost-effective and efficient layout that will meet a
firm’s competitive requirement.
Layout decisions include the best placement of
machines (in production settings), offices and
desks(in office settings), or service centers
(hospitals).
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37
Slide 1.37
Layout Design Considerations
Higher utilization of space, equipment, and people
 Improved flow of information, materials, or people
 Improved employee morale and safer working
conditions.
 Improved customer/client interaction
 Flexibility
 Cost of moving between various work areas
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Slide 1.38
Office Layout
 Positions workers, their equipment, and
spaces/offices to provide for movement of
information.
 Movement of information is main
distinction.
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39
Slide 1.39
TYPES OF LAYOUT
1. Fixed-position layout-addresses the layout requirements
of large, bulky projects such as ships and buildings.
2. Process-Oriented layout deals with low-volume, high-
variety production (also called “job shop.
3. Office layout- positions workers, their equipment, and
spaces/offices to provide for movement of information.
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Slide 1.40
TYPES OF LAYOUT
4. Retail/service layout-allocates shelf space and
responds to customer behavior.
5. Warehouse layout – addresses trade-offs
between space and material handling.
6. Product-oriented layout – seeks the best
personnel and machine utilization in repetitive or
continuous production.
6/6/2023 OM 40

41
Slide 1.41
Job Design and Work Measurement
 The objective of a human resource strategy is
to manage labor and design jobs so people
are effectively and efficiently utilized.
 People should be effectively utilized within
the constraints of other operations
management decisions.
 People should have a reasonable quality of
work life in an atmosphere of mutual
commitment and trust.
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42
Slide 1.42
Job Design
The act of specifying the contents and methods of jobs
 What will be done in a job
 Who will do the job
 How the job will be done
 Where the job will be done
Importance
 Organization’s are dependent on human efforts to accomplish their goals
 Many job design topics are relevant to continuous and productivity
improvement
Objectives
 Productivity
 Safety
 Quality of work life
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Slide 1.43
Behavioral approaches to job design
1. Job Enlargement
 Giving a worker a larger portion of the total task by horizontal loading
2. Job Rotation
 Workers periodically exchange jobs
3. Job Enrichment
 Increasing responsibility for planning and coordination tasks, by vertical
vertical loading
4. Empowerment is when motivation can be improved by increasing
autonomy and task accomplishment at work.
5. A self-directed team is a set of individuals in an organization who
incorporate various talents and abilities to work toward a common goal or
objective without the standard administrative oversight.
 Benefits of teams
 Higher quality
 Higher productivity
 Greater worker satisfaction
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44
Slide 1.44
Job Design....
6/6/2023 OM 44
Specialization
Enlargement
Self-directed
teams
Empowerment
Enrichment
Increasing
reliance on
employee’s
contribution
and increasing
responsibility
accepted by
employee
Job expansion

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Slide 1.45
Motion Study
Motion study is the systematic study of the human
motions used to perform an operation.
6/6/2023 OM 45

46
Slide 1.46
conti....ed
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47
Slide 1.47
conti...ed
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48
Slide 1.48
Job Design Success Factors
 Carried out by personnel with appropriate training and
background
 Consistent with the goals of the organization
 In written form
 Understood and agreed to by both management and
employees
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Slide 1.49
Constraints on HR Strategy
conti...ed
6/6/2023 OM 49
Product strategy
• Skills needed
• Talents needed
• Materials used
• Safety
Schedules
• Time of day
• Time of year
(seasonal)
• Stability of
schedules
When
Location strategy
• Climate
• Temperature
• Noise
• Light
• Air quality
Layout strategy
• Fixed position
• Process
• Assembly line
• Work cell
• Product
Individual differences
• Strength and
weekness
• Information
processing and
response
Who
Process strategy
• Technology
• Machinery and
equipment used
• Safety
HUMAN
RESOURCE
STRATEGY

50
Slide 1.50
Core Job Characteristics
Jobs should include the following
characteristics
 Skill variety
 Job identity
 Job significance
 Autonomy
 Feedback
6/6/2023 OM 50

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