3003: OPERATIONS MANAGEMENT I Objective : The course is designed to acquaint the students with decision making in planning scheduling

g and control of production and operation functions in both manufacturing and services. Productivity improvement in operations through layout engineering and quality management etc. Effective and efficient flow, replenishment and control of materials with reference to both manufacturing and service organization.
Module I Nature and Scope of Operations Management: Manufacturing and Service OperationsOperations Function: Transformation & Value Addition: Primary Topic in Operations Management (Overview); Strategic Decisions in Operations, Vertical Integration; Process Design Decisions: Manufacturing and Services, Learning Curve. Study Notes

Nature of Production Production is regarded as one of the most crucial functions of management in modern organizations. Obviously, to sell a product and earn profits, organizations need to firstly have a product which carters to an unsatisfied need of the consumers. A product which is efficiently produced helps the organization to reap more advantages in terms of cost saving, resource utilization leading to reduced inventory costs and delay times and enhanced customer loyalty. Production becomes the most important function in organizations implementing Just in Time techniques (JIT). Production is sometimes confused with manufacturing. The definition of both is same though, the only difference is that production can be used to describe the process of producing both tangible as well as intangible product, i.e. both goods and services whereas manufacturing is referred to the process of producing tangible products i.e. goods. The nature of production can be explained under three heads:

Production as a system Production as an organizational function Decision making in production 1. Production as a system: A system can be understood as a group of independent but interrelated elements comprising a unified whole; "a vast system of production and distribution and consumption keep the country going". We can thus identify three systems namely a. Production System: The basic function of a production system is to convert a set of inputs into a set of desired outputs. Inputs are resources such as materials, personnel, capital, utilities and information. The objective of an enterprise is to provide goods or services, and to earn profits. These days, many firms are focusing on continuous improvement and customer delight. A continuous search for areas of improvement in the production system is needed. For this, a clear understanding of recent developments in production system, industrial engineering and management is necessary. To achieve these objectives, the firms need to convert some inputs like men, material, money, energy, information, etc, into useful outputs like finished products and services in required quantity and quality. The transformation of the inputs into pre specified outputs is achieved through production process.

b. Conversion Sub-system: It is a sub-system of the larger production system where the inputs are converted into outputs. The resources taken in as the inputs are processed to obtain the desired outputs known as the final product. c. Control Sub-system: It is a sub-system of the larger production system where a portion of the output is monitored for feedback signals to provide corrective action if required. This subsystem is responsible for maintaining the acceptable standards of cost, quality and quantity. If the produced output varies from what is required, corrective actions are taken to meet the standards. Thus, the control sub-system ensures a uniform level of system performance by providing feedback information so that corrective action can be triggered by managers in case of deviation from set standards. The interrelationship of these functions can be understood through the following figure.

Figure 1: A Production System Model Inputs

Conversion Sub-System

Outputs

Environment: Legal/Political, Social, Economic & Technological Physical: Manufacturing, Mining Locational Services: Transportation Exchange Services: Retailing, Wholesaling Product Information & Customer Desires Storage Services: Warehousing

Competition

Goods or Services

Other Private Services: Insurance, Finance, Utilities, Real Estate, Health, Business Service & Pers

Government Services: Local, State, and Central. aterial & Supplies Personnel, Capital Assets Capital (Money) & Utilities Feedback Information

Control Sub System

Source: Chapter 1: Introduction to Production and Operations Management, page 3; Production and Operations Management by K. Aswathappa & K. Shridhara Bhat.

2. Production as an organizational function: As an organizational function the conversion process of inputs into final goods and services is at the heart of the production function. This makes the conversion subsystem the core of production system, where labor, materials and machines are used to

convert inputs into products and services. Thus, it becomes clear that every organization, irrespective of its nature and purpose has a production function where departments and personnel play a central role in achieving the objectives of the organization. 3. Decision making in Production: Operation managers have to make crucial decisions related to the planning, organizing, staffing, directing and controlling the process of conversion of the inputs into desired outputs. They are expected to make decisions at each level and implement them too. The decisions made by operation managers can be categorized as: Table 1: Types of Decisions in Operations Management and Their Application Type of Decision Area of Involvement Nature of Activities 1. Production Process Developing long range production plans including production process design. 2. Production Technology Selecting and managing production Strategic Decisions: Decisions technology relating to products, processes 3. Facility Layout Planning the arrangement of facilities and manufacturing facilities. 4. Allocating Resources to Planning for the optimal distribution of These decisions are major ones Strategic Alternatives scarce resources among product lines or having strategic importance and business units long-term significance. 5. Long range Capacity Answering the 'how much' and 'where' Planning and Facilities questions about long range production Location capacity 1. Production Planning Aggregate Planning and Master Production Systems Schedule Operating Decisions: Decisions relating to planning production to 2. Independent Demand Planning and controlling finished goods meet demand. These decisions are Inventory Systems inventories necessary in order to ensure that Planning Materials and capacity the ongoing production of goods 3. Resource Requirements Planning Systems requirements and services meets the market 4. Shop Floor Planning and Short range decisions about what to produce demand and provides reasonable Control at each work center and when to produce profits. 5. Materials Management Managing all facets of material system 1. Productivity and Employees Planning for the effective and efficient use Control Decisions: Decisions of human resources in operations relating to planning and Planning and Controlling the quality of controlling operations. These 2. Total Quality Control products and services decisions concern the day-to-day activities of the workers, quality 3. Project Planning and Planning and controlling projects of products and services, Control Techniques production and overhead costs 4. Maintenance Management Planning for maintaining the machines and and maintenance machines and Reliability facilities of production
Modified from Table 1.2: POM Decisions and their Applications; Production and Operations Management: K. Aswathappa & K. Shridhara Bhat.

S.N

II

III

Production Function Production contributes to the wellbeing of the society. The standard of living of people depends on the production of goods and services. More the production, higher the standard of living of the people.

A production function is a function that specifies the output of a firm, an industry, or an entire economy for all combinations of inputs. The production function relates the output of a firm to the amount of inputs, typically capital and labor. It is important to keep in mind that the production function describes technology, not economic behavior. A firm may maximize its profits given its production function, but generally takes the production function as a given element of that problem. It is an important ingredient in achieving high productivity as well. Production helps achieve competitive advantage. Production function can offer competitive advantage to a firm in the following areas: Shorter new-product-lead time More inventory turns Shorter manufacturing lead time Higher quality Greater flexibility Better customer services Reduced wastage

Many reasons due to which firms lose their competitive advantage is attributed to manufacturing function-specifically to poor quality and reliability, delayed deliveries, high production costs and lack of adequate inventory at the right time. Characteristics of Production and Operations Function

Organization of Production Function Operations management is a mission-critical managerial function in all kinds of organizations from private manufacturing sectors to public service sectors, where OM impacts each step in the process of providing a product or service. The importance of operations management has increased dramatically in recent years due to the intensified global competition, shorter product/service lifecycles, increasingly demanding consumers, and significant advancement of information and process technology. These trends have driven business organizations to focus on their operations function to improve efficiency and productivity while providing a wider variety of high-quality products and services. As a result, OM is situated at the core of business and its interaction with other business functions has become increasingly important. The OM discipline is historically dominated by design, planning and control issues. While this focus is still important to the field today, there is also a need to adopt a multidisciplinary approach an incorporate perspectives of other business functions. The POM department is headed by a senior vice president of operations who organizes the department with the help of plant manager as well as staff heads, who are reporting to him.
Adapted fromOrganization of production function; Production and Operations Management: K. Aswathappa & K. Shridhara Bhat

Duties and Responsibilities of Production Managers in Manufacturing Organizations OM line of direct responsibility Planning the geographical location of the factory. Purchasing production equipments. Layout of equipments within the factory. Designing production processes and equipments. Product Design. Designing production work and establishing work standards.

Capacity planning. Production planning and scheduling. Production control. Inventory management. Supply chain management. Quality Control. Production equipment maintenance and repair. Measurement and monitoring of productivity. Industrial relations. Health and safety. Staff selection and liaisoning. Budgeting and capacity planning.

Emerging Role of the Production and Operations Manager After the economic reforms of 1991 and the advent of LPG in the Indian economy, major changes have been observed in the business environment. It becomes inevitable for organizations to change with the changing business environment if it wishes to stay back in the market and reap profits. Indian industries now face fierce competition from MNCs and if managers of our industries want to win this competition, they need to accept new responsibilities and reframe their roles. The same applies for production and operations managers in India. Following are the responsibilities of production and operation managers in India. Participate in strategic decision making of the company. Participate in the implementation and use of Enterprise Resource Planning in the company. Automate processes as per the requirements of the company. Enhance the research and development effort in developing self-reliant new technologies. Reduce lag in implementation of projects [new products/services launching; expansion of facilities] due to increased competition. Protect the environment by implementing environment and pollution norms established by the government from time to time. Act as a member of the concurrent engineering teams in new product design ad old product development. Develop long-term strategic relationship with supplies by acting as supply chain managers. Give more attention to technology management, in view of joint ventures of multinational companies with domestic companies. Be an internal quality auditor in quality certification programming such as ISO 9000 series and ISO 14000.

Recent Trends in Production/Operation Management

1. Global Market Place: Globalization of business is the reason why many manufacturing firms felt
the need of operations in many countries where they have certain economic advantage. This has increased the level of competition among manufacturing firms throughout the world.

2. Production/Operations Strategy: An operations strategy becomes important for overall success of

business and the necessity for relating it to their overall business strategy.

3. Total Quality Management: This approach has been adopted by firms to achieve customer
satisfaction by a never-ending quest for improving the quality of goods and services.

4. Flexibility: The ability to adapt quickly to changes in volume of demand, in the product mix
demanded, and in product design or in delivery schedules, has become a major competitive advantage to the firms.

5. Time Reduction: Reduction of manufacturing cycle time and speed to market for a new product
provides competitive edge to the firm over other firms. When companies can provide products at the same price and quality, quicker delivery (short lead times) provide one firm competitive edge over the other.

6. Technology: Advances in technology have led to a vast array of new products, new processes and
new materials and components. Automation, computerization, information and communication technologies have revolutionized the way companies operate. Technological changes in products and processes can have great impact on competitiveness and quality, if the advanced technology is carefully integrated into the existing system.

7. Worker Involvement: The recent trend is to assign responsibility for decision making and problem
solving to the lower levels in the organization. This is known as employee involvement and empowerment, for example quality circles and quality improvement teams.

8. Re-engineering: This involves drastic measures or break through improvements to improve the
performance of a firm. It involves the concept of clean-slate approach or starting from scratch in redesigning the business processes.

9. Environmental Issues: There is increasing emphasis on reducing waste, recycling waste, using
less-toxic chemicals and using biodegradable materials for packaging.

10. Corporate Downsizing (Right Sizing): Companies are forced for downsizing or right sizing due to
competition, lowering productivity, need for improved profit and for higher dividend payment to shareholders.

11. Supply Chain Management: Management of supply chain, from suppliers to final customers
reduces the cost of transportation, warehousing and distribution throughout the supply chain.

12. Lean Production: Lean production systems use minimal resources to produce high volume of
high quality goods with some variety. These systems use flexible manufacturing systems and multi-skilled work force to have advantages of both mass production and job production (or craft production). Organization Strategy An organization that wants to succeed in a competitive business environment needs a sound strategy. A strategy is a broad, long term plan, conceived in order to achieve business objectives. Strategy is an art and science of planning and marshalling resources for their most efficient and effective use. The term is derived from the Greek word for generalship or leading an army. Corporate Strategy It is an approach to a future that involves examination of the current and anticipated factors associated with customers and competitors (external environment) and the firm itself (internal environment), envisioning a new or effective role for the firm in a creative manner, and aligning policies, practices, and resources to realize that vision. Operations Strategy According to Slack and Lewis, Operations strategy is the total pattern of decisions which shape the longterm capabilities of any type of operations and their contribution to the overall strategy, through the reconciliation of market requirements with operations resources. It is the tool that helps to define the methods of producing goods or a service offered to the customer.

Manufacturing Make to Stock The basic approach to this system is to schedule production for replenishing stock to some predetermined level. Based on the estimate of the demand and the available inventory of finished goods on hand, the exact production quantity for the planning period is arrived at. In an MTS scenario, the forecasting exercise and the production planning exercise are decoupled by way of having a stock of finished goods. As a result of this decoupling exercise, those in production planning are not required to know what exactly the demand is. Such systems are more suitable to systems with fewer product varieties and high production volumes, as in the case of continuous and streamlined flow systems. Make to- order In this approach, no production is done until a customer order is available. Once a customer order is launched into the production system, detailed requirements are computed and production is planned. The key implication of this method is that it results in a long planning and execution time for order delivery. A long planning and execution time means greater manufacturing lead time and associated problems of large inventory investment and greater uncertainty of operations and outcomes. These organizations belong to manufacturers of high product variety in low volumes, which are identified under jumbled flow process systems. It is evident that a MTS planning framework is infeasible for such organizations as it may result in carrying a very large amount of inventory. The inventory may face the risk of becoming outdated over time, as customer specifications may be different from what is being carried as finished goods. Assemble to-Order When the variety is not very high, as in the case of a jumbled flow process, then it is possible to work with a planning methodology that is intermediate to MTS and MTO. This hybrid version to planning is known as ATO. In this approach, the system utilizes MTS for early stages of manufacturing process. At the later and final stages of the manufacturing system, the planning changes to that of MTO. The basic assumption of ATO is that while at the component and sub-assembly level there exists a high degree of commonality, the problem of variety occurs only at the final assembly stage. Thus, the MTO can be postponed to the point of product differentiation. If there is a high degree of commonality in the parts and sub-assembly level, then the volume of production and demand will be high. Therefore, typical MTS planning will be efficient. For example, in the case of Titan watches, despite producing more than 40,000 models and variants, a closer analysis of Titan manufacturing system will reveal that the core mechanism of the watch has very few varieties, regardless of the type of watch into which they are finally assembled. At the next level, casing will have a little more variety and it may be possible to even manage production planning of this using the MTS approach. However, in the manufacturing of dials there is a lot of product differentiation. Therefore, dial manufacturing and final assembly of the watches should be largely on the basis of MTO planning methodology. ATO methodology is more appropriate for mid volume, mid variety manufacturing systems having intermittent flow patterns. Services Standardized Service Strategy Standardized service strategy is employed when an organization is involved in the production of limited variety of services. Importance is given to cost control and quality rather than on flexibility of the system. For example Mavalli Tiffin room in Bangalore, serves only the traditional South Indian food in the traditional style all the year round. The greater the services are standardized the lesser is the customer involvement and lesser is the chance of error.

Assemble to Order ATO systems are very useful in service system. Service systems are characterized by peak hour and non peak hour conditions and require methods of managing the demand during peak hours. There are several ways in which service systems respond to peak hour requirement like to increase the capacity of the system by adding more workers or to narrow down the choices available to the customer and thereby save capacity from changeover losses and customization. For example, in a multi-cuisine restaurant providing a wide set of options to its customers, during non peak hours it is possible for the service firm to respond to specific customer requests as adequate capacity will be available with them. Here they shall be using MTO planning methodology. However, service firms will alter their strategy when they approach the peak hour period. Just about an hour or so before the peak hour, the restaurant may start preparing or pre cooking some food items from the menu (like salad, curd, vadas etc.) which can later on prepared fully according to the customers order. Thus the service firm is building inventory for managing the demand during the peak hours. This helps the restaurant to reduce the lead time in order delivery and thus efficiently and swiftly meet the demand. Here, we witness MTS planning philosophy. The methodology used during peak hours is thus ATO. Customized service strategy Such a service strategy is possible where dedicated services are to be given to customers. So the level of customization is high. Service is designed to meet individual customer needs. The focus is on the quality and on-time delivery rather than on cost. There exists great variety in the type of services offered and thus the volume is low. Customized services are helpful in attracting customers and establishing a longterm relationship with them, for they have a positive effect on the customers level of satisfaction and on the degree of comfort experienced during the service being offered. Customized service is based on both adapting the qualities and properties of a service to a specific customer and determining his expectations regarding the way in which such service should be provided. Customized service demands more time and dedication, as well as permanent contact with the customers, so as to be able to get to know their requirements and their expectations regarding the services offered. The persons in charge of offering customized service must have at their disposal all the theoretical and practical tools needed for such purpose. Some of the characteristics of customized service: 1. Close contact with the Customer: It is necessary to have as much information on the customers as possible before, during, and even after the customer has been served; therefore, the person in charge of delivering customized service must be allowed the time and resources needed to such end. 2. Flexibility: Customers needs often generate the creation of a new service or the introduction of changes that had not been contemplated; therefore, they may modify existing regulations and policies. The secret lies in flexibility: looking for ways to satisfy their needs without significantly affecting the business. 3. Creativity: A key element of customized service is offering something that no one has offered before, or doing it in a different way. This requires ongoing market research on international business trends as well as the analysis of the customers opinion and suggestions on the services offered 4. Adaptability: Service has to be adapted to each individual customer. This is a major factor to be considered when creating new services, ensuring that they offer an acceptable range of adaptability. Customized services offer the following advantages, among other: The description of the primary and secondary qualities of service for each customer. The determination of the level or degree of service quality for each customer. Knowledge of the customers needs, so that they can be anticipated.

Increased knowledge of the customer. Positive effect on customer retention rates and brand loyalty.

Some hotel chains have understood the significance of getting to know the preferences and needs of their guests. However, they have failed to determine which data should be collected and the way, in which this should be done. In the hotel, when a guest lacks something, this is translated into a need that must be met through a specific service. In turn, the guest has certain requirements as to the manner in which such service should be provided.

Product Design
Manufacturers in industries face the challenge of Designing new products and getting them to market. The competitiveness and profitability of a firm depend partly on the design and quality of the products and services offered by it and the cost of production. The designing and developing products and production processes are key elements in successful production and operations strategies in today's global economy. The essence of any organization is the product or services it offers. There is a close link between product design and the success of the organization. Those organizations which have welldesigned products are more likely to achieve their goals than those with poorly designed products. Hence organizations have a major objective in achieving good product design. Product Design is concerned with the form and function of a product. Form design involves the determination of what a product would look like, i.e., the shape and physical appearance of the product, of what material it will be made of (product structure) and how it will be made (process design). Functional design deals with what function the product will perform and how it will perform it. Functional Design is the most important requirement of a good product i.e., the product should effectively perform the function for which it is developed. For example, for a television set, the picture quality (video) and the sound quality (audio) is more important than the appearance of the cabinet. Form Design is concerned with the physical appearance, and aesthetic considerations like the size, volume and weight of the product which are secondary to the performance of the product. Process Design is the overall sequences of operations required to achieve the design specifications of the product. It specifies the type of work stations that are to be used, the machines and equipments necessary to carry out the processes to produce the product.

Reasons for Product Design or Redesign

To offer new products to remain competitive in the market. To make the business grow and increase profits. When productivity gains result in reduction of workforce, developing new products can mean adding jobs and retaining surplus workforce instead of downsizing by layoffs/ retrenchment. Redesign or modification of existing design instead of an entirely new design is done due to Customer complaint Accidents or injuries during product use, Excessive warranty claims or low demand To achieve cost reductions in labor and material costs.
The overall objective is profit generation in the long run. To achieve the desired product quality. To reduce the development time and cost to the minimum. To reduce the cost of the product. To ensure producibility or manufacturability (design for manufacturing and assembly).

Objectives of Product Design

1. 2. 3. 4. 5.

Factors Influencing Product Design

a. Customer requirements: The designers must find out the exact requirements of the customers to ensure that the products suit the convenience of customers for use. b. Convenience of the operator or user: The industrial products such as machines and tools should be so designed that they are convenient and comfortable to operate or use. c. Trade off between function and form: The design should combine both performance and aesthetics or appearance with a proper balance between the two. d. Types of materials used: Designers keep in touch with the latest developments taking place in the field of materials and components and make use of improved materials and components in their product designs. e. Work methods and equipments: Designers must be updated with improvements in work methods, processes and equipments and design the products to make use of the latest technology and manufacturing processes to achieve reduction in costs. f. Cost/Price ratio: designers need to design products which are cost effective because cost and quality are inbuilt in the design. With a constraint on the upper limit on cost of producing products, the designer must ensure cost effective designs. g. Product quality: The product quality partly depends on quality of design and partly on quality of conformance. The quality policy of the firm provides the necessary guidelines for the designers regarding the extent to which quality should be built in the design stage itself by deciding the appropriate design specifications and tolerances. h. Process capability: The designer should have the knowledge of the capability of the manufacturing facilities and specify tolerances which can be achieved by the available machines and equipments. i. Effect on existing products: New product designs while replacing existing product designs, must take into consideration the use of standard parts and components, existing manufacturing and distribution strategies and blending of new manufacturing technology with the existing one so that the costs of implementing the changes are kept to the minimum. j. Packaging: Packaging design must take into account the objectives of packaging such as protection and promotion of the product. Attractive packaging enhances the sales appeal of products in case of consumer products (nondurable).

Characteristics of Good Product Design

Function or performance Appearance or aesthetics Reliability Maintainability/serviceability Availability Producibility Simplification Standardization Specification Safety

Product Development Process

Product development process consists of a structured and orderly set of activities. These activities repeat at periodic intervals when the firm feels the need for bringing new products. Concept Generation Understanding customer needs, how exactly the existing mix of products and services fulfill the needs of customers and the areas that need greater application and attention are identified. The next step is to translate the need into products and services. This activity requires good innovation skills to develop unique products and services. Several alternative methods of fulfilling the identified need can be listed down and the feasibility and novelty of each of these approaches need to be carefully done. Feasibility refers to the technological feasibility to manufacture and deliver as per design; marketing feasibility to

create a market, distribute, and sustain maintenance; cost feasibility; and the feasibility of customer acceptance etc. Design Once product feasibility is established, it is likely that the choice among several ideas is narrowed down to a few potential ones. The next step in the process is to put more details into the concept. A potentially useful idea requires to be analyzed from the perspective of physical attributes such as shapes, sizes, material and so on. Costs, manufacturing processes and specifications are the other aspects of the concept that require detailed consideration before the decision to go ahead can be taken. The design phase of the product development process is focused on these aspects. During this stage, detailed specifications are first drawn about the product. For instance, it is important to fix the weight, the material, surface finish, and the tolerances required. Once these details are drawn, they provide the necessary inputs to explore how exactly these requirements could be met using the machines and other production resources available in the organization. The process planning activity provides these details of the product being designed. Product specifications and the process planning decisions are required for cost estimation of the proposed design of the process. At the end of these three steps, it is possible to make an assessment of the feasibility of the design. During the design phase, the product goes through several iterations before the design is approved. Several entities are involved in the decision making at this stage. These include the design department, the finance department, the production planning department, and the marketing and procurement departments. At the end of this exercise, the few potential ideas are thoroughly analyzed with a greater level of detail provided by the design team, and one alternative is selected for commercial production. In some cases, a certain amount of flexibility is still incorporated in the design, in which case two or three versions of the product are developed further before the final choice is made.

Development The third stage of the product development process is the physical development of the product. During this stage, the details arrived at on the drawing board are translated into reality. Usually, a prototype is built for extensive testing and fine-tuning of design specifications. Moreover, detailed manufacturing specifications, specific methods of manufacture, assembly and testing are established during this phase. Just as design specifications undergo a few iterations before the specifications are firmed up, similar efforts are required at this stage to iterate and firm up the manufacturing specifications. Design changes are made on the basis of findings from multiple controlled experiments and product usage. Production

The last stage of the product development process pertains to the transfer of know-how to the production personnel and establishing the system for volume production. During the development phase, a few pieces of the product are manufactured for the purpose of testing. The efficiency and effectiveness of the manufacturing process are not of concern at that point in time. Moreover, dedicated equipment and assured sources of supply are not established at that stage. Therefore, in the last phase, these aspects are addressed in a detailed manner. The product development cycle described above is representative of a vast majority of situations faced in practice. These steps are normally found even in the case of development of software products and services. The only difference in the case of development of software products and services is the specific set of activities undertaken at each stage. In reality, these could be considered to be the review points in the product development cycle for the top management to review the progress of the product development process and take some "go-no go" decisions based on the additional information available, both within the firm and in the external environment.

Design of Services Design of Services is a more challenging task because of the intangibility and variability associated with it. The efficiency in the delivery of services largely depends on the person delivering it and also on the customer experiencing it. Thus the results vary from customer to customer and from one service personnel to another. The reason is evidently the Human factor associated with services. Thus services are designed keeping in mind the kind of customers it wants to serve. The services may be standardized or partially or fully customized depending on the degree of customer involvement needed for delivering the service. Service Design is the activity of planning and organizing people, infrastructure, communication and material components of a service, in order to improve its quality, the interaction between service provider and customers and the customer's experience. For example, a restaurant may choose to have a Service Design agency change the way its menu is set out, or change the layout of the restaurant to improve the customer's experience. Customers can mean paying patrons, but also can be within an organization, so long as they are the direct recipients of a service e.g. an organization implements a new payroll interface for its staff - therefore the staff are effectively 'customers' of the payroll interface. To do this, Service Design methodologies are used to plan and organize people, infrastructure, communication and material components used in a service. The increasing importance and size of the service sector, both in terms of people employed and economic importance, requires services to be accurately designed in order for service providers to remain competitive and to continue to attract customers. The design (or redesign) of a service may involve re-organizing the activities performed by the service provider (Back office), e.g. how letters from customers are processed internally; and/or the redesign of interfaces and interactions that customers use to contact the service provider (Front office) e.g. website, in person, telephone, blog etc Process A process is a sequence of activities that is intended to achieve some result, typically to create added value for the customers. It converts inputs into outputs in a production system. It involves the use of organizations resources to provide something of value. No product can be made and no service can be provided without a process and no process can exist without a product or service. Process Planning

Process planning is planning the conversion processes needed to convert the raw material into finished products. It consists of two parts: (i) Process design: It is the overall sequences of operations required to achieve the product specifications. It specifies the type of work stations to be used, the machines and equipments necessary to carry out the operations. The sequence of operations are determined by a. the nature of the product b. the materials used c. the quantities to be produced d. the existing physical layout of the plant. (ii) Operations design: It is the design of the individual manufacturing operation. It examines the man-machine relationship in the manufacturing process. It specifies how much labor and machine time is required to produce each unit of the product. Process Design After the final design of the product has been approved and released for production, the production planning and control department takes the responsibility of process planning and process design for converting the product design into a tangible product. As the process plans are firmly established, the processing time required for performing the production operations on the equipments and machines selected is estimated. These processing times are compared with the available machine and labor capacities and against the cost of acquiring new machines and equipments before a final decision is made on whether to manufacture the product completely inhouse or any parts or sub-assemblies must be outsourced. Framework for Process Design
The process design is concerned with the following: a. Expected volume of output: Volume indicates the average quantity of the products b. Flow of materials: n Flow indicates the nature and intensity of this phenomenon and provides an understanding of how the components and material in an operations system get transformed from the raw material stage to the finished goods stage. Knowledge of flow provides vital clues to the operations manager about production planning and control issues that need to be addressed. It also provides useful information about the complexities of operations management in an operations system. c. Variety of products: Variety refers to the number of alternative products and variants of each product that are produced in a manufacturing system. It is easy to visualize that increase in the variety of product offerings is likely to introduce variety in various processes in the system. Alternative production resources, materials, skill of workers and increase in the number of stages of production will become inevitable and it may call for better operations management practices. Planning and scheduling can become more complex on account of these added choices in the operating system. One sees a similar phenomenon in a service system too. d. Characteristics of the product or service offered to the customers e. Kinds of equipments and machines available in the firm. f. Whether equipments and machines should be of special purpose or general purpose. g. Cost of equipments and machines needed. h. Kind of labor skills available, amount of labor available and their wage rates. i. Expenditure to be incurred for manufacturing processes. j. Whether the process should be capital-intensive or labor-intensive. k. Make or buy decision.

produced in a manufacturing system. It can vary from high-volume, mid-volume to low volume production.

l. Method of handling materials economically. In general, volume and variety seem to have an inverse relationship. When the volume of production is very high, it is highly likely that the firm is engaged in the manufacture of fewer varieties of products. On the contrary, if the firm caters to a wide ranging set of products and services, then the production volume of each of these variations is likely to be very low.

Process Selection The production manager has to choose from five basic process types 1. Job shop process: It is used in job shops when a low volume of high-variety goods are needed. Processing is intermittent; each job requires somewhat different processing requirements. A job shop is characterized by high customization (made to order), high flexibility of equipment and skilled labor and low volume. A tool and die shop is an example of job shop, where job process is carried out to produce one-of-a kind of tools. Firms having job shops often carry out job works for other firms. A job shop uses a flexible flow strategy, with resources organized around the process. 2. Batch process: Batch processing is used when a moderate volume of goods or services is required and also a moderate variety in products or services. A batch process differs from the job process with respect to volume and variety. In batch processing, volumes are higher because same or similar products or services are repeatedly provided, examples of products produced in batches include paint, ice cream, soft drinks, books and magazines. 3. Repetitive process: This is used when higher volumes of more standardized goods or services are needed. This type of process is characterized by slight flexibility of equipment (as products are standardized) and generally low labor skills. Products produced include automobiles, home appliances, television sets, computers, toys etc. Repetitive process is also referred to as line process as it includes production lines and assembly lines in mass production. Resources are organized around -a product or service and materials move in a line flow from one operation to the next according to a fixed sequence with little work-in-progress inventory. This kind of process is suitable to "manufacture-to-stock" strategy with standard products held in finished goods inventory. However, "assemble-to-order" strategy and "mass customization'' are also possible in repetitive process. 4. Continuous process: This is used when a very highly standardized product is desired in high volumes. These systems have almost no variety in output and hence there is no need for equipment flexibility. A continuous process is the extreme end of high volume, standardized production with rigid line flows. The process often is capital intensive and operate continuously to maximize equipment utilization and to avoid expensive shut downs and shut ups. Examples of products made in continuous process systems include petroleum products, steel, sugar, flour, paper, cement, fertilizers etc. 5. Project process: It is characterized by high degree of job customization, the large scope for each project and need for substantial resources to complete the project. Examples of projects are building a shopping centre, a dam, a bridge, construction of a factory, hospital, developing a new product, publishing a new book etc. Projects tend to be complex, take a long time and consist of a large number of complex activities. Equipment flexibility and labor skills can range from low to high depending on the type of projects. Types of Processes and Operations Systems based on flow Three types of flows can be identified in operating systems: continuous, intermittent and jumbled. Continuous Flow System

It is characterized by a streamlined flow of products in the operating system. In such systems, the conversion process begins with input of raw material at one end. It progresses through the system in an orderly fashion to finally become finished goods at the final stage. The production process is sequential and the required resources are organized in stages. Despite the similarity of streamlined flow in process industries and mass production systems, there are important differences with respect to operations management practices between the two. Therefore, it is useful to discuss these issues separately for these two categories. Process industries Since the process is continuous, there should be balance of capacity between all the stages in the manufacturing process to maintain an even flow of the material from the raw material stage to that of finished goods. Process industries require huge capital investments in the manufacturing system, as incremental addition at a later stage is not possible. Due to this, high productivity implies lower cost of production and vice versa. Process industry firms invest more time on developing good maintenance practices. Moreover, the amount of spare parts inventory that they carry will be a significant portion of the overall inventory in the system. Due to the continuous and closed loop nature of the entire manufacturing process, process industries tend to have very little work-in-process inventory. Process industries benefit vastly from the vertical integration of their operations and adding several secondary conversion facilities. This is because at certain intermediate stages of the processing, by-products are released from the manufacturing system and having facilities to process them into useful products will lower the overall cost of the production system and increase revenue generation opportunities. The other alternative will be to transport it to another point of demand at an extra cost. One of the best examples of vertical integration can be seen in the development of various facilities by Reliance Industries Limited. Mass production The mass production system in the discrete manufacturing industry is another example of continuous and streamlined flow in the manufacturing system. In a mass production system, the volume of production is very high and the number of variations in the final product is low. Therefore, it is possible to organize the entire manufacturing by dedicating the required manufacturing resources for each product variant and arranging the resources one after the other, as per the manufacturing sequence. Such a structure is typically known as product line structure. In the context of layout, such a structure is known as product layout. Due to this arrangement, a streamlined flow is possible. Automobile and two wheeler manufacturers, manufacturers of electrical components, such as switches, and healthcare products, such as disposable syringes, are typical examples of high volume production. Other examples include manufacturers of several consumer non-durables. Process design for streamlined flow can be visualized at two levels in a mass production system. At the overall level, each product will flow across departments in a streamlined fashion. Furthermore, within each department, there will be orderly flow of components and materials. In operations management terminology, the configuration of the processes pertaining to the mass production system, in the context of planning and scheduling of the activities, is referred to as a flow shop

Intermittent Flow System When variety increases, the volume of production for each variation will be less compared to a mass production system. Therefore, dedication of manufacturing resources for each variation may not be a feasible option. Manufacturing resources will be shared by a group of products. Since each product may have different processing requirements and sequence of operations, the flow will become complicated. These systems are characterized as mid-volume, mid-variety systems and process design for this type of system must address issues arising out of intermittent flow. Operations management issues in intermittent flow systems are very different from those of continuous flow systems. The notion of flow balancing or capacity balancing is of great importance in a continuous flow system and is not an issue in the case of intermittent flow systems. However, capacity planning for catering to the overall requirements of the various varieties is important. Capacity estimation is comparatively difficult in an intermittent flow system as compared to a continuous flow system. The major issue pertaining to capacity as well to the overall working of an intermittent flow system is the issue of changeover from one variety to another. Production planning and scheduling must critically analyze the impact of alternative changeovers and develop an optimal changeover sequence while planning for production. The structural aspects of manufacturing systems are addressed in operations management through layout design. In the case of continuous flow, a flow shop with a product layout serves the purpose very well. In the case of intermittent flow/ appropriate layout choices are made using group technology principles The appropriateness of the structure is dependent on the relative magnitude of volume and variety in an intermittent flow system. When the variety is very large, it is likely that only some of these variants are produced in large quantities. The rest are produced in small quantities. Jumbled Flow Systems Jumbled flow occurs on account of non-standard and complex flow patterns characteristic of certain manufacturing systems. The flow pattern is non-standard and complex because there are unique process designs for each and every customer order. Moreover, customer orders are typically for one off items and organizations cannot benefit from any batching and repetitive manufacturing practices as continuous flow and intermittent flow systems do. This adds to the complexity of the flow and provides very little opportunity for the operations personnel to benefit from learning effects of past projects. All these characteristics demand different operations management practices unlike the previous two categories of flows. In reality, two types of manufacturing systems have jumbled flow. This includes project organizations and customized manufacturing systems. Project organizations Consider a turnkey project executor such as BHEL. The projects that they undertake are typically large scale, involve high levels of customization and have long lead times. When the product or service offered is of very large scale, it introduces problems that are not encountered in normal operating systems. In such a case, multiple entities are involved (architect, engineers, government regulatory bodies, construction workers, local community and society and so on). It also involves multiple stages of the process (design of building, foundation, and superstructure, electrical systems, heating and air-conditioning system, fabrication activities, and acoustics). The flow not only becomes jumbled but also complex and managing such a large set of activities requires different methods of planning and control. Due to high degree of customization, the degree of uncertainty is

likely to be significant. Planning tools that incorporate uncertainty are essential in managing such situations. Second, the number of entities involved in accomplishing the various tasks is numerous. Furthermore, these entities have several complex interactions amongst themselves. The performance standards of one entity and deviations from the specifications at one part of the system have a significant impact on the other. Virtually no process design is possible in such a situation. However, operations management principles are required to manage situations arising out of the jumbled flow inherent in project organizations. Scheduling of various activities and control of these is an essential requirement and appropriate tools are required. Similarly, handling uncertainty and decision making in the context of uncertainty is also an important requirement. Customized manufacturing systems A highly customized manufacturing system such as a tool room operation is another example of jumbled flow. The number of customer orders in such a system could be very large, resulting in large variety. Since each customer order could potentially demand unique process requirements, the resulting flow in the system becomes highly jumbled. There are several examples of customized manufacturing available in practice. These include PCB fabricators, a variety of sheet metal fabricators, tool room operators and printing and publishing. In operations management, such shops are referred to as job shops. Job shops typically have a functional layout in which machines of the same type are grouped together. This is inevitable because no single customer order can justify dedication of resources, on account of its low production volume. The operational complexity arising out of such a jumbled flow is high. The most significant issue is one of capacity management. Considerable time is lost due to the repeated setup of processes. Since each customer order requires different levels of capacity, estimation of capacity already committed and that which is remaining is very hard to make. Good scheduling practices could minimize such capacity related problems. The other significant issue is managing operations in the system. Due to jumbled flow, crisscrossing of jobs in the system results in poor visibility. Problems are often hidden and build up of work in process inventory takes place. Therefore, good process inventory management practices are essential. Cost accounting and estimation systems are crucial for job shops as there is a constant need to quote for specific customer orders. Process-Product Matrix The idea of the process-product matrix was first proposed by Hayes and Wheelright. A processproduct matrix depicts all these relationships in a compact form. One dimension of the matrix shows the product characteristics and the other the process characteristics. Product characteristics essentially indicate the level of customization and the volume of production. On the other hand, process characteristics indicate the complexity and divergence in the process. When organizations have a high volume of production, the flow cannot be jumbled. Instead, it will be streamlined. Similarly, when the variety is high, the flow cannot be continuous. As shown in the figure, these two situations represent the two extremes in the figure and are not applicable. Each combination has unique operations management issues to be addressed. The notion of a productprocess matrix is useful not only for a manufacturing organization, but for service systems too.

Service - Process Matrix Process design for service systems differs from that in manufacturing systems because in a service setting customers are part of the system. The other issue related to design of the service process is the complexity and divergence of the service offering. Customer contact signifies the extent to which the customer participates in the preparation and consumption of a service and the nature and intensity of interaction that the customer has with the service personnel. It also indicates the level of exposure that the customer has to the various facets of the service system while receiving the service. The degree of customer contact relates to varying proportions of customers' exposure to all the attributes of services. The self-service model of service is one of low customer contact whereas the order placing model of service indicates high customer contact. The degree of customer contact is a design choice that a service organization has and different choices would mean alternative impact on the service delivery system design and operation. When the degree of customer contact is very low, the system could be highly mechanized and firms can pursue efficiency goals very well. On the other hand, when the degree of customer contact is high, it is difficult to pursue efficiency goals. Satisfying the customer requires clear trade-offs between efficiency and effectiveness of service delivery. Based on the degree of customer contact there are three types of design or service processes. Low degree of customer contact: Quasi-manufacturing Medium degree of customer contact: Mixed service

 High degree of customer contact: Pure service The other two parameters that influence service design are The degree of complexity: It is the steps and sequences in the process, measured by the number and intricacy of the steps. The degree of divergence of the service offerings: The variability of these steps and sequences represents the degree of divergence. A standardized process will have a low degree of divergence. In contrast, in a process in which every step of the process is unique for each and every customer the degree of divergence is high. Customer contact directly influences the nature of interaction in a service system. The degree of divergence signifies the customization in the system. A high degree of divergence results in a high degree of customization. Finally, the complexity of the service indicates the labor intensity required in the service system. A service process matrix illustrates the alternative design choices to available to a service organization on the basis of these variables. When the degree of interaction and customization is low, the flow becomes streamlined due to fewer varieties. Also, it is possible to exploit technology options to provide the service. Therefore, such systems will resemble mass production systems. On the contrary, when the degree of customization and interaction is high, the system resembles a jumbled flow and similar operations management problems will be faced by the service system.

Vertical integration The term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Nineteenth century steel tycoon Andrew Carnegie introduced the concept and use of vertical integration. This led other businesspeople to use the system to promote better financial growth and efficiency in their businesses.

Vertical integration is the degree to which a firm owns its downstream suppliers and its upstream buyers. It is typified by one firm engaged in different parts of production (e.g. growing raw materials manufacturing, transporting, marketing, and/or retailing). There are three varieties: backward (upstream) vertical integration, forward (downstream) vertical integration, and balanced (both upstream and downstream) vertical integration. A company exhibits backward vertical integration when it controls subsidiaries that produce some of the inputs used in the production of its products. For example, an automobile company may own a tire company, a glass company, and a metal company. Control of these three subsidiaries is intended to create a stable supply of inputs and ensure a consistent quality in their final product. It was the main business approach of Ford and other car companies in the 1920s, who sought to minimize costs by centralizing the production of cars and car parts. A company tends toward forward vertical integration when it controls distribution centers and retailers where its products are sold. Balanced vertical integration means a firm controls all of these components, from raw materials to final delivery. The three varieties noted are only abstractions; actual firms employ a wide variety of subtle variations. Suppliers are often contractors, not legally owned subsidiaries. Still, a client may effectively control a supplier if their contract solely assures the supplier's profitability. Distribution and retail partnerships exhibit similarly wide ranges of complexity and interdependence. In relatively open capitalist contexts, pure vertical integration by explicit ownership is uncommonand distributing ownership is commonly a strategy for distributing risks. Examples: One of the earliest, largest and most famous examples of vertical integration was the Carnegie Steel company. The company controlled not only the mills where the steel was made, but also the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the railroads that transported the coal to the factory, the coke ovens where the coal was cooked, etc. The company also focused heavily on developing talent internally from the bottom up, rather than importing it from other companies. Later on, Carnegie even established an institute of higher learning to teach the steel processes to the next generation. The Indian petrochemical giant Reliance Industries is a great example of vertical integration in modern business. Reliance's backward integration into polyester fibres from textiles and further into petrochemicals was started by Dhirubhai Ambani. Reliance has entered the oil and natural gas sector, along with retail sector. Reliance now has a complete vertical product portfolio from oil and gas production, refining, petrochemicals, synthetic garments and retail outlets. Problems and benefits There are internal and external (e.g. society-wide) gains and losses due to vertical integration. They will differ according to the state of technology in the industries involved, roughly corresponding to the stages of the industry lifecycle. Static technology This is the simplest case, where the gains and losses have been studied extensively. Internal gains: Lower transaction costs

 Synchronization of supply and demand along the chain of products Lower uncertainty and higher investment Ability to monopolize market throughout the chain by market foreclosure Internal losses: Higher monetary and organizational costs of switching to other suppliers/buyers Benefits to society: Better opportunities for investment growth through reduced uncertainty Losses to society: Monopolization of markets Rigid organizational structure, having much the same shortcomings as the socialist economy (cf. John Kenneth Galbraith's works) Concept of Learning Curves Learning is acquiring new knowledge, behaviors, skills, values, preferences or understanding, and may involve synthesizing different types of information. The ability to learn is possessed by humans, animals and some machines. Progress over time tends to follow learning curves. The term learning curve refers to a graphical representation of the changing rate of learning (in the average person) for a given activity or tool. In the beginning of production runs workers are unfamiliar with their tasks and the amount of time required to produce the first few units is high. But as workers learn their tasks, their output per day increases up to a point and then levels off to a constant output rate. It is helpful to be able to analyze these workers situations and to be able to estimate: a. The average number of labor hours required per unit for N units in a production run b. The total number of labor hours required to produce N units in a production run c. The exact number of labor hours required to produce the nth unit of a production run Application of Learning Curves There are three approaches to learning curve problems Arithmetic Analysis: It is the simplest approach to learning curves with the fundamental concept that as the number of units produced doubles, the labor hours per unit decline by a constant factor. Logarithmic Analysis: labor hours required to produce the nth unit can be calculated unlike in the case of arithmetic analysis. Learning Curve Tables: These tables give the learning curve coefficients that allow the computation of the labor hours for the nth unit in a production run as well as the total labor hours in the entire production run.