Operations Management Module 1 Introduction to Operations Management

Operations Management Module 1 : Introduction to Operations Management S. Balachandran December 2007 © S. Balachandran 1

In this session. . . • • • What is Operations Management ? Current Relevance of OM OM Function, Skills & Decisions Transformation Processes Products vs Services Importance of Service Sector Core vs VA Services – OM Role OM Timeline Current Issues in OM December 2007 © S. Balachandran 2

What is ‘Operations Management‘ ? - Definition • Design, Operation and Improvement of systems that create and deliver firm’s primary products and services December 2007 © S. Balachandran 3

Current Relevance • Success/failure & growth depend on Operational Excellence • Types of Organisations ? – Business, Govt. , NPO, NGO – Products & Services • Career Opportunities • Tools & Techniques for study & solution of – Operations Problems – Problems in other Functions • Window to Organisational Processes December 2007 © S. Balachandran 4

OM Function 60 -80% of firm’s Direct expenses are in Operations area December 2007 © S. Balachandran 5

OM Skills Skill Areas • Quantitative methods • Organizational behavior • General management • Information systems • Economics • International business • Business ethics and law December 2007 © S. Balachandran 6

Types of OM Decisions Long Term Strategic Decisions Tactical Decisions Middle Mgmt. Medium Term Frontline Short Term Sr. Mgmt. December 2007 © S. Balachandran Location, Capacity, Product Design, Process Design Location Assignment, Manning, Sourcing, Scheduling, Inventory Opnl. Decisions QA, Man, Machine & Task Assignment, Prioritisation 7

The Operations System Inputs • Materials • Fin. Products • Customers Resources • • Equipment Facilities Land Energy Managers Workers Services Internal and external customers Transformation Processes 1 Outputs 3 5 2 • Services • Goods 4 Information on performance Exercise : Identify Inputs, Resources, Transformations & Outputs for 1. Airline, 2. Jail, 3. Bank Branch and 4. Bank H/O. December 2007 © S. Balachandran 8

Transformation Processes - Types • Physical--manufacturing • Locational--transportation • Exchange--retailing • Storage--warehousing • Physiological--health care • Informational--telecommunications December 2007 © S. Balachandran 9

Product – Service Contunuum More like a manufacturing organization • Physical, durable product • Output that can be inventoried • Low customer contact • Long response time • Regional, national, or international markets • Large facilities • Capital intensive • Quality easily measured December 2007 More like a service organization • Intangible, perishable product • Output that cannot be inventoried • High customer contact • Short response time • Physical Dly. : Local markets Online Dly. : Global markets • Small facilities • Labor intensive • Quality not easily measured © S. Balachandran 10

Share & Growth of Services – Indian Economy At present rates of Sectoral Growth 5 Years Hence (2011 -12): 13. 4% 27% 59. 6% 1950 -51 2. 7% 11. 2% 2006 -07 10. 0% Source: Economic Survey of India, February 2007 December 2007 © S. Balachandran Trade, Hotels Transport & Communication 13. 0% Fin. Services 11. 1% Community, Social & Personal Services 7. 8% 11

Service Employment & Productivity % GDP per worker (Rs. ) Input Emphasis Workforce (millions) % GDP (2004 -05) (Rs. ‘ 000 Cr. ) 1. Primary 295 62 681 24. 0 23, 085 Labour 2. Industry 76 16 695 24. 5 91, 447 Capital 3. Services 104 22 1462 51. 5 1, 40, 576 475 100 2838 100 59, 747 Sector TOTAL Knowledge Source: Economic Survey of India, February 2005 December 2007 © S. Balachandran 12

Core & VA Services • Core services : basic things that customers want from products & services – C, Q, D, R 1, F, R 2 • VA Services : differentiate the organization from competitors and build relationships that bind customers to the firm in a positive way – – Problem Solving Information Sales Support Field Support December 2007 © S. Balachandran 13

OM Timeline Period 1910 s 1930 s 1940 s 1950 -60 s 1970 s 1980 s 1990 s 2000 s December 2007 Concept/Tool • Functional Specialisation • Time, Work & Motion study • Activity scheduling • Assembly Line • SQC, Sampling • Worker Motivation • Linear Programming • Network, Simulation, Waiting Line & other OR Models, Decision Theory • Computer usage for business apps. In scheduling, inv. Control, forecasting, Project Management, MRP • Service Quality & Productivity • Toyota Mfg. System • Factory Automation • Synchronous Manufacturing • TQM • Business Process Reengineering • Internet, WWW • Supply Chain Management • E-commerce & E-business © S. Balachandran Origin Ø F. W. Taylor Ø Frank & Lilian Gilbreth Ø L. Gantt Ø Henry Ford Ø Various Ø Elton Mayo Ø OR Groups in US & UK Ø US Defence / Navy Ø OR Groups in US & UK Ø IBM Ø MRP: Orlicky & Wight (US) Ø Mc. Donald’s Ø Taichi Ohno (Japan) Ø Engineers - Diff. Countries Ø Eliyahu M. Goldratt (Israel) Ø Deming, Juran, Baldrige, ISO Ø Michael Hammer Ø US Govt. , NS, MS Ø SAP, BAN, Oracle, People. Soft Ø Dell, Amazon, E-bay, AOL, Yahoo, Airlines, Hotels 14

Current Issues in OM • Globalisation of Business : Products & Services • Outsourcing – Supply Chain • Customisation of Products & Services • Co-Production by Customers • Electronic Delivery Channels • Operations as Competitive weapon December 2007 © S. Balachandran 15