Productions and

Operations Management :
An Overview
 THE OPERATIONS FUNCTION

• Operations as a transformation
process
• Operations as a
basic function
• Operations as the
technical core
 OPERATIONS AS A
TRANSFORMATION PROCESS
INPUT
Material
Machines OUTPUT
TRANSFORMATION Goods
Labor PROCESS
Management Services
Capital

Feedback
 OPERATIONS AS THE
TECHNICAL CORE
Finance / Accounting

Production and Budgets

Inventory data Cost analysis
Capital budgeting requests Capital investments
Capacity expansion and Stockholder
Technology plans requirements

Orders for materials Product / Service

Production and delivery Availability
Schedules Quality Lead - time estimates

Marketing
Suppliers

Requirements Design / Status of order

Performance specs Delivery schedules
Operations
Material availability Sales forecasts
Quality data Customer orders
Delivery schedules Customer feedback
Designs Promotions

Personnel needs
Hiring / firing
Skill sets Training
Performance evaluations Legal requirements
Job design / work
measurement Union contract negotiations

Human Resources
VALUE CHAIN
 Value Chain Model
from Michael E. Porter’s Competitive
Advantage
•
SUPPORT
• Firm Infrastructure (General Management)

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ACTIVITIES

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Human Resource Management
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Technology Development

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Procurement

Inbound Ops. Outbound Sales & Service and

Logistics Logistics Marketing Support

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PRIMARY ACTIVITIES
 A NEW VALUE CHAIN
( a ) Traditional Value Chain

Manufacturer Wholesaler/
Wholesaler/ Retailer Consumer
Manufacturer Retailer Consumer
distributor
distributor

( b ) Intermediaries Eliminated ( Deintermediatio n )

Manufacturer Wholesaler/
Wholesaler/ Retailer Consumer
Manufacturer Retailer Consumer
distributor
distributor

( b ) New Intermediaries Introduced ( Reintermediation )

Manufacturer
Manufacturer Infomediary
Infomediary E-Retailer
E-Retailer Aggregator
Aggregator Portal
Portal Consumer
Consumer
 VALUE CHAIN AND THE TBC
TRIANGLE
• Technical
– Increases knowledge of no profit zones
– Increases knowledge of forward and/or backward integration
opportunities
– Identifies value processes
– Identifies win-win alliance opportunities
• Behavioral
– Focus shifts to “the customer”
– Focus shifts from conflict to partnering with customers & suppliers
• Cultural
– Creates externally focused mindset
– Generates information sharing environment with respect for
confidentiality
–
 STRATEGY FORMULATION
1.Define a primary task

2.Assess core competencies

3.Determine order winners & order qualifiers

4.Positioning the firm

•
 IMPORTANT QUESTIONS
• What the various functions of
operations?
• How does operations functions as the
technical core?
• What is “Value Chain”? Explain the
concept of disintermediation.
•

•
 New Product
Development Process
 New Product Development
Process
Ø In business and Operation, New Product Development (NPD)
is the term used to describe the complete process of
bringing a new product or service to market.
Ø There are two parallel paths involved in the NPD process:-
1) It involves the idea generation, product design, and detail
• engineering.
2) It involves market research and marketing analysis.
 PRODUCT LIFE CYCLE
•PLC can be defined as the changes in the various
•features and dimensions of the product that is made, as

•a company goes through the different stages of selling

•product, from the beginning to the end.

Ø Introduction
Ø Growth
Ø Maturity
Ø Decline
 Stages in the Design
Process
ü
• Idea Generation — Product Concept
• Feasibility Study — Performance Specifications
• Preliminary Design — Prototype
• Final Design — Final Design Specifications
• Process Planning — Manufacturing Specifications


 The Design Process

Idea Feasibility
generation Product or study Performance
service concept specification
s

Suppliers Customers Form design

R &D

Marketing Competitors Revising and testing

prototypes

Functional Production
design design
Design Manufacturing
specification or delivery
New product s specifications
or service
launch Pilot run
Final design and final tests
& process plans
• FORM DESIGN :-

It refers to the physical appearance of the product- its

shape, color, size and style. Aesthetics such as image,
market appeal, and personal identification are also a part of
the form design of a product.
•

• FUNCTIONAL DESIGN:-

It is concerned with how the product performs. It seeks to

meet the performance specifications of fitness for use by
the customer.
•
• PRODUCTION DESIGN :-

It is concerned with how the product will be made.

Recommended approaches to design include simplification,
standardization and modularity.
 Quality Function Deployment (QFD)

• Translates the “voice of the customer” into technical design

requirements
• Displays requirements in matrix diagrams
• First matrix called “house of quality”
• Series of connected houses
•

•
 BENEFITS OF QFD
• Promotes better understanding of customer demands
• Promotes better understanding of design interactions
• Involves manufacturing in the
design process
• Breaks down barriers between
functions and departments
• Provides documentation of
the design process
•
 KANO MODEL
• The Kano Model of Customer (Consumer) Satisfaction
classifies product attributes based on how they are
perceived by customers and their effect on customer
satisfaction
• The Kano Model of Customer satisfaction divides product
attributes into three categories: threshold, performance, and
excitement. A competitive product meets basic attributes,
maximises performances attributes, and includes as many
“excitement” attributes as possible at a cost the market can
bear
•
• 1) Threshold Attributes
• Threshold (or basic) attributes are the expected attributes or
“musts” of a product, and do not provide an opportunity for
product differentiation.
2) Performance Attributes
Performance attributes are those for which more is generally
better, and will improve customer satisfaction.
3) Excitement Attributes
Excitement attributes are unspoken and unexpected by
customers but can result in high levels of customer
satisfaction, however their absence does not lead to
dissatisfaction
 FMEA

• A failure modes and effects analysis (FMEA) is a procedure

for analysis of potential failure modes within a system for
classification by severity or determination of the effect of
failures on the system.
• Failure modes are any errors or defects in a process, design, or
item, especially those that affect the customer, and can be
potential or actual.
•
 USES OF FMEA
• Development of system requirements that minimize the likelihood
of failures.
• Development of methods to design and test systems to ensure that
the failures have been eliminated.
• Evaluation of the requirements of the customer to ensure that those
do not give rise to potential failures.
• Identification of certain design characteristics that contribute to
failures, and minimize or eliminate those effects.
• Tracking and managing potential risks in the design. This helps
avoid the same failures in future projects.
• Ensuring that any failure that could occur will not injure the
customer or seriously impact a system.
• To produce world class quality products
•
•
 IMPORTANT QUESTIONS
• Kano model
• FMEA
• Stages in product design
 PROCESS

• A process is any part of an organization

that takes inputs and transforms them
into outputs which brings in greater
value to the organization than the
original inputs.
• Outputs may be services.
• Cycle time and utilization are of major
concern.
• Process flowchart is prepared which
consists of or operations, decisions,
storage areas and flow of materials or
 TYPES OF PROCESS

• Single stage process

• Multi stage process
Ø Buffering
Ø Blocking
Ø Starving
Ø Bottlenecks
• Make-to-order
• Make-to-stock
• Hybrid
• Pacing
•

•
 PROCESS PERFORMANCE
MEASUREMENT
• Productivity
• Efficiency
• Run time
• Setup time
• Operation time
• Throughput time
• Process velocity
 PROCESS ANALYSIS
• Process analysis is an approach that
helps managers improve the
performance of their business
activities.
• The process may be visually mapped
with methods such as flowcharts,
dataflow, state-transition and other
tools.
• This can be a top-down analysis, a
bottom-up approach, or a
combination of top-down and
 MANUFACTURING PROCESS
FLOW DESIGN
• Assembly drawing
• Operation and route sheet
• Process flowchart
•
 TYPES OF LAYOUT
•PROCESS LAYOUT
• Department arrangement consisting of
all like processes in a way that
optimizes their relative placement.
• Enhances better interdepartmental
flow.
• Checks feasibility.
•PRODUCT LAYOUT

• Equipment or departments are

dedicated to a particular product line
and a straight line flow of material
movement is achieved.
•
 CAPACITY PLANNING
• Capacity planning is the process of
determining the production capacity
needed by an organization to meet
changing demands for its products.
• Capacity can be increased through
introducing new techniques, equipment
and materials, increasing the number of
workers or machines, increasing the
number of shifts, or acquiring additional
production facilities.
• The broad classes of capacity planning are:
Ø Lead strategy
Ø Lag strategy
Ø Match strategy
 PRODUCTION
• Specifies the output of a firm or an
industry.
• Q = f(X1,X2,X3,...,Xn)
• where,
• Q = quantity of output
• X1,X2,X3,...,Xn= factor inputs
(such as capital, labour, land or raw
materials).
 TYPES OF PRODUCTION
• Job method
Ø Low technology jobs
Ø High technology jobs
• Batch method
• Flow method
•
 PRODUCTION TECHNIQUE
5S
•

• Sort : S e iri
• Set in order : S e ito n
• Shine : S e iso
• Standardize : S e ike tsu
• Sustain : S h itsu ke
•
 BENEFITS OF 5S
• Improve safety
• Decrease down time
• Raise employee morale
• Identify problems more quickly
• Develop control through visibility
• Establish convenient work practices
• Increase product and process quality
• Strengthen employees’ pride in their work
• Promote stronger communication among
staff
• Empower employees to sustain their work
area
PRODUCTION PLANNING
 PRODUCTION PLANNING

• It is a consideration of all input variables to

achieve predetermined output goals; a pre-
production activity to determine optimal
production schedule, operation sequence,
economic batch quantity, etc.

ction to prevent variance of output from planned levels; tracking operations to ensure complian
 Production Planning Stages
• Defining objectives
• Setting priorities to attain objectives
• Examining internal & external
environments of planned system
• Determining achievable targets
• Determining inputs needed to achieve
targets
•
 BILL OF MATERIALS

• A listing of all the subassemblies, intermediates, parts, and raw materials

that go into a parent assembly showing the quantity of each required to
make an assembly.
•

• Basically, a bill of material (BOM) is a complete list of the components

making up an object or assembly.
•

• BOM is also known as the formula, recipe, or ingredients list.

•

• It is also part of material requirements planning (MRP)

•

• Types of bill of materials:

• STATIC (FIXED) BILL
• DYNAMIC (PARAMETRIC) BILL
•

•
 MATERIAL RESOURCE
PLANNING
• Material Requirements Planning (MRP) is a software-based production
planning and inventory control system used to manage manufacturing
process.
•

• An MRP system is intended to simultaneously meet three objectives:

•

v Ensure materials and products are available for production and delivery to
customers.
v Maintain the lowest possible level of inventory.
v Plan manufacturing activities, delivery schedules and purchasing activities.

•
 TIME AND MOTION STUDIES
• Motion study is for cost reduction, and time study is for cost
control. Motion study is the creative activity
of motion and time study. Motion study is design, while time study
is measurement.
• Motion and time study can reduce and control costs, improve working
conditions and environment, and motivate people.
• Motion study uses the principles of motion economy to develop work
stations that are friendly to the human body and efficient in their
operation.
• Motion study must consider the operator’s safety above all else. No
one wants to be responsible for getting someone hurt or producing
injury due to long-term exposure to a condition or environment.
• Time study can reduce cost significantly well. Time standards are goals
to strive for. In organizations that operate without time standards,
60% performance is typical.
• Motion and time study is considered to be the backbone of
industrial engineering, industrial technology, and
industrial management programs because the
information that time studies generate affects so many
other areas, including the following:
• 1. Cost estimating
• 2. Production and inventory control
• 3. Plant layout
• 4. Materials and processes
• 5. Quality
• 6. Safety
§
MAINTENANCE
 Maintenance
• Fixing of mechanical/ electrical
devices
• Performing routine checks which
keep the device in working order
• “actions which have the objective of
retaining or restoring an item in or
to a state in which it can perform
its required function.”
 Types of Maintenance
• Corrective maintenance
– equipment is maintained after break
down.
– often most expensive because worn
equipment can damage other parts
and cause multiple damage
• Preventive Maintenance
– equipment is maintained before break
down occurs
– cleaning, inspection, oiling and re-
tightening
– to retain the healthy condition of
 Types of Maintenance…
• Preventive Maintenance…
• Further divided into two:
– Periodic maintenance
• periodically inspecting, servicing and
cleaning equipment and replacing parts
– Predictive maintenance
• the service life of important part is
predicted based on inspection or
diagnosis
• Example - Unusual sounds coming out
of a rotating equipment predicts a
trouble
•
 TOTAL PRODUCTIVE
MAINTENANCE
•

• Total Productive Maintenance is a

management system for optimizing
the productivity of manufacturing
equipment through systematic
equipment maintenance involving
employees at all levels
 Benefits Of TPM

• Increase productivity and OPE ( Overall

Plant Efficiency ) by 1.5 or 2 times.
• Rectify customer complaints.
• Reduce the manufacturing cost by 30%.
• Satisfy the customers needs by 100 % (
Delivering the right quantity at the
right time, in the required quality. )
• Reduce accidents.
• Follow pollution control measures.
•
Process and Operations

Process and Operations

• Inventory Management
 INTRODUCTION
• Inventory-A physical resource that a
firm holds in stock with the intent
of selling it or transforming it into a
more valuable state.
•

• Inventory System- A set of policies

and controls that monitors levels of
inventory and determines what
levels should be maintained, when
stock should be replenished, and
how large orders should be
 Why We Want to Hold
Inventories
• Improve customer service
• Reduce certain costs such as
– ordering costs
– stockout costs
– acquisition costs
– start-up quality costs
• Contribute to the efficient and
effective operation of the
production system
 Vendor Management
• Vendor Evaluation
• Vendor Rating
• Vendor Negotiation
 WHAT IS JIT ???
Ø Just in time is an inventory strategy that strives to improve
a business return on investment by reducing in-process
inventory and associated carrying costs.
Ø
Ø The main objective is that it can improve quality, return on
investment and efficiency.
Ø
Ø Quick notice that stock depletion requires personnel to
order new stock is critical to the inventory reduction at
the center of JIT.
Ø
Ø This saves warehouses space and costs.
Ø
Ø EXAMPLE:
Ø The improved customer satisfaction by providing vehicles
within a day or two of the minimum economic shipping
delay. Also, the factory began building many vehicles to
 Critical success Factors

S u p p lie rs
E m p lo ye e
co m m u n ica tio n
E m p o w e rm e n t

Q u a lity In ve n to ry

M anagem ent S ch e d u lin g

LEAN MANUFACTURING
 VALUE
• L e a n m a n u fa ctu rin g or le a n
p ro d u ctio n , which is often known
sim p ly a s " L e a n " , is a production
p ra ctice th a t co n sid e rs th e
exp e n d itu re o f re so u rce s fo r a n y
g o a lo th e r th a n th e cre a tio n o f
v a lu e for the end customer to be
w a ste fu l.
• Le a n m a n u fa ctu rin g is a g e n e ric
p ro ce ss m a n a g e m e n t p h ilo so p h y
•
• It is renowned for its focus on
reduction of the original Toyota
seven wastes to improve overall
customer value.(MUDA)
ü Overproduction
ü Unnecessary transportation
ü Inventory
ü Motion
ü Defects
ü Over-Processing
ü Waiting
 Lean Manufacturing
PRINCIPLE
•
• Lean manufacturing works on a
simple principle. In one word it is
based on seeing the bigger picture.
At least organization must move
away from departmentalized
thinking and must move towards
seeing the organization as one
entity.
 LEAN MANUFACTURING
TECHNIQUE
• Prime objective of waste elimination
from the system is achieved with lean
manufacturing technique and all
tools. Based on this requirement
• Just In Time (JIT) techniques,
• Total Quality Management (TQM),
• Total Productive Maintenance (TPM),
• Flow charts, Workplace Redesigning
techniques are used.
•
 4 STEPS
•1.) First step is to realize that there are
wastes in the system to be removed
•2.) In the second step, you will identify

the different forms of that waste.

•3.) In the third step, comes the

solution finding for the identified root

causes.
•4.) Final step is the implementation

process and making sure things are

going in the intended way
Quality concepts in
Operations
 Total Quality Management
Ø T h e cu sto m e r d e fin e s q u a lity , a n d
cu sto m e r sa tisfa ctio n is th e to p
p rio rity.
Ø T h e to p m a n a g e m e n t m u st p ro vid e
th e le a d e rsh ip fo r q u a lity.
Ø Q u a lity is a stra te g ic issu e , a n d
re q u ire s a stra te g ic p la n .
Ø Q u a lity is th e re sp o n sib ility o f a ll
e m p lo ye e s a t a ll le ve ls o f th e
o rg a n iza tio n .
Ø A ll fu n ctio n s o f th e co m p a n y m u st fo cu s
o n co n tin u o u s q u a lity im p ro ve m e n t to
a ch ie ve stra te g ic g o a ls.
Ø Q u a lity p ro b le m s a re so lve d th ro u g h
co o p e ra tio n a m o n g e m p lo ye e s a n d
m a n a g e m e n t.
Ø Pro b le m so lvin g a n d co n tin u o u s q u a lity
im p ro ve m e n t u se sta tistica l q u a lity
co n tro lm e th o d s.
Ø Tra in in g a n d e d u ca tio n o f a ll e m p lo ye e s
a re th e b a sis fo r co n tin u o u s q u a lity
im p ro ve m e n t.
The TQM Process
 Expected Questions
• Frame a PDCA cycle with respect to
any company.
• How does a customer’s perspective
of quality differs from that of
producer’s?
• What is Japanese contribution to
world in productions and
operations?
• Discuss how six sigma can help in
attaining superior quality?
 Benchmarking
• In simple words, it is the
comparison with a standard
example for improvements.
•

•
 Benefits of Benchmarking
1.World class process and
products
2.Improves company image
3.Better individual and group
Relations
4.Enables organization to be
globally competitive
5.Use of proven method and hence
no risk
6.
 SERVQUAL & RATER
• They are service quality frameworks
used for measuring Quality. It enables us to
measure difference in quality before and
after change. RATER is a simplified version
of SERVQUAL.
SERVQUAL
•
Reliability Responsiveness Courtesy Communication Security
Access Competence Credibility Understanding Tangibles

RATER
Reliability Responsiveness Assurance Empathy Tangibles
 Business Process Re-
engineering
• BPR is overall re-evaluation of the product
and system to see all possible areas of
improvement.
•

WHY BPR????
•

• Intense Competition & Falling Market Share.

• Inefficient New Product Development.
• Product quality, features, price,
satisfaction not at par with
competitor’s product.
Re-Engineering Process