Lecture 1 Operation Management MBA303.pptx

Lecture 1 Operation Management MBA303.pptx

1. SUBJECT MBA303 : OPERATION MANAGEMENT LECTURE NO .- 1 Dr. Moiz Akhtar Faculty of Commerce & Management Integral University, Lucknow CENTRE FOR DISTANCE AND ONLINE EDUCATION INTEGRAL UNIVERSITY, LUCKNOW

2. Topics Covered Operation Management Operation Performance

3. Topic 1 Operation Management

4. Contents 1- What is Operations Management (OM)? 2- Importance of OM . 3- Operations Management decisions. 4- Operations Management contributions to society. 5- Operations Management of service & manufacturing organizations.

5. What is operations management (OM)? Operations Management definition Responsibilities of Operations M anagers Difference between Operations Management and Production Management

6. What is operations management ? 1-The collection of people, technology, and systems within a company that has primary responsibility for providing the organization’s products or services. 2-The management of the direct recourses that are required to produce and deliver an organization's goods and services . 3- A discipline and profession that studies and practices the process of planning, designing, and operating production systems and subsystems to achieve the goals of the organization. 4- The business function responsible for planning, coordinating, and controlling the resources needed to produce a company’s products and services. 5- The management of the conversion process that transforms inputs into outputs in the form of finished goods and services.

7. INPUTS Material Machines Labor Management Capital - Customer TRANSFORMATION PROCESS OUTPUTS Goods Services Feedback Operations as a transformation process

8. Inputs and Outputs of a production system Inputs External: Legal, Economic, Social, Technological Market: Competition, Customer Desires, Product Info. Primary Resources: Materials, Personnel, Capital, Utilities Outputs Direct Products Services Indirect Waste Pollution Technological Advances

9. The transformation process within OM

10. Input-transformation-output relationships for typical systems

11. What is operations management ? Operations management is the set of activities that create value in the form of goods and services by transforming inputs into outputs. Value added is the net increase between output product value and input material value ( The value of the outputs is greater than the value of the inputs , resulting in the profit or the benefit for government or non-profit organizations ). All types of organizations , manufacturing or service, large or small, transform inputs into outputs . Every organization has OM function , since all organizations provide products or services , but the function may be formal or informal ( In many smaller organizations operations management may be done by people who perform many other types of task such as marketing and accounting ).

12. What's the difference between PM and OM? Some thinks that they are really one and the same by different names. others think that production management is just a subset of operations management because operations involve more than just production. if services concept added to the production management it can be called operations management.

13. What responsibilities do operations managers have? Direct responsibilities :the activities which are directly related to producing and delivering products and services. Indirect responsibilities :the activities involved in interfacing with other parts of the organization . Broad responsibilities :a wider set of tasks that involve scanning the business, social and political environment in which the organization exists in order to understand its context.

14. Responsibilities of OM Products & services Planning – Capacity – Location – – Make or buy – Layout – Projects – Scheduling Controlling/Improving – Inventory – Quality Organizing – Degree of centralization – Process selection Staffing – Hiring/laying off – Use of Overtime Directing – Incentive plans – Issuance of work orders – Job assignments – Costs – Productivity

15. Importance of OM 1- Operations is an important part of every organization . 2- We should know how goods and services are produced ( All managers should have an understanding the main principles and tools of OM ). 3- It is responsible for the customer fulfillment aspects of an organization. Thus, it manages customer satisfaction . 4- OM is such a costly part of an organization . (For most organizations it absorbs a huge percentage of required capital ) Companies need to have efficient operations to survive . To succeed, a firm must have a strong operations function teaming with the other organization functions . 5- OM responsible to increase productivity and profitability . Increasing overall productivity leads to economic growth and a higher standard of living . 6- Operational decision-making requires a long-term perspective and requires inputs from all business functions . OM Decisions tend to be costly and difficult to reverse

16. Strategic options managers use to gain competitive advantage 28% - Operations Management (+quality?) 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 3% - Other

17. Some definitions Productivity: The ration of what is produced by an operation or process to what is required to produced it, that is ,the output from the operations divided by the input to the input operation (ratio of output to input) Efficiency: producing something at the lowest possible cost Effectiveness: doing the right things to create the most value for the firm Value: quality divided by price Competitive advantage: competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices

18. OM decisions Operations managers must make decisions on three levels:

19. Where should we locate our facility How much capacity do we need What should we make, what should we buy What t echnology should we use How do we insure appropriate quality Who should we use as vendors How much inventory do we need How should we schedule our resources Main operational decisions

20. Critical decisions of OM Product & service design. Quality management. Process design. Capacity & location of facilities. Layout of facilities. Human resource & Job design. Supply-chain management. Inventory management. Scheduling. Maintenance.

21. Strategic decisions senior management responsibility More broad in nature Determine the success of an organization's strategy , Very risky and hard to reverse Have significant long - term impact, ,and less frequent. Examples: How will we make the product? Where do we locate the facility? How much capacity do we need? When should we add more capacity?

22. Tactical decisions Medium- range decisions focus on resource needs, schedules, & quantities to produce. Tactical decisions are frequent, must align with strategic decisions. Involves resource allocation and utilization. Involves a moderate degree of uncertainty and risk . They are the link between lower and high level management Examples: How many workers do we need? When do we need them? Should we work overtime or put on a second sift? When should we have material delivered? Should we have a finished goods inventory?

23. Operational decisions Involves a short time horizon . Involves very little uncertainty and risk. Examples : What jobs do we work on today or this week? To whom do we assign what task? What jobs have priority?

24. OM decisions Strategic Tactical Operating Characteristics Longer term decisions Medium term decisions Shorter term decisions Responsibility of the senior management Responsibility of middle and senior managers Responsibility of middle and lower management levels High capital investment Broad in nature Narrow in scope These decisions concern the day-to-day activities of workers

25. Operations management's contributions to society OM's contributions to society:- (A)- Higher Standard of Living (B) - Better Quality Goods and Services (C)- Concern for the Environment (D)- Improved Working Conditions

26. ( A)- Higher standard of living A major factor in raising the standard of living in a society is the ability to increase its productivity . Higher productivity is the result of increased efficiency in operations , which in turn translates into lower cost goods and services . Thus, higher productivity provides consumers with more discretionary income, which contributes to their higher standard of living.

27. (B) - Better quality of goods and services One of the many consumer benefits of increased competition is the higher-quality products that are available today. Quality standards are continually increasing . Many companies today have established Six-Sigma quality standards (pioneered by Motorola in the late 1980s), resulting in no more than 3.4 defects per million opportunities. Such high quality standards were once considered not only prohibitively expensive but also virtually impossible to achieve even if cost wasn't a consideration. Today we know that such high quality is not only very possible, but also results in lower costs, because firms can reduce their waste and rework.

28. (C)- Concern for the environment Many companies today are taking up the challenge to produce environmentally friendly products with environmentally friendly processes , all of which falls under the purview of operations management. Recycling and concern for air and water quality.

29. (D)-Improved working conditions Managers recognize the benefits of providing workers with better working conditions. This includes not only the work environment but also the design of the jobs themselves . Workers are now encouraged to participate in improving operations through suggestions . After all, who would know better how to do a particular operation than that person who does it every day . Managers also have learned that there is a very clear relationship between satisfied workers and satisfied customers, especially in service operations. ( Empowerment : The concept of encouraging and authorizing workers to take the initiative to improve operations, reduce costs, and improve product quality and customer service.)

30. Topic 2 Operation Performance

31. Contents Introduction The quality objective The speed objective The dependability objective The flexibility objective The cost objective The ‘top-down’ and ‘bottom-up’ perspectives

32. The Five Operations Performance Objectives Quality : You would want to do things right; that is, you would not want to make mistakes, and would want to satisfy your customers by providing error-free goods and services which are ‘fit for their purpose’. This is giving a quality advantage. Speed : You would want to do things fast, minimizing the time between a customer asking for goods or services and the customer receiving them in full, thus increasing the availability of your goods and services and giving a speed advantage. Dependability : You would want to do things on time, so as to keep the delivery promises you have made. If the operation can do this, it is giving a dependability advantage .

33. 4. Flexibility : You would want to be able to change what you do; that is, being able to vary or adapt the operation’s activities to cope with unexpected circumstances or to give customers individual treatment. Being able to change far enough and fast enough to meet customer requirements gives a flexibility advantage . 5. Cost : You would want to do things cheaply; that is, produce goods and services at a cost which enables them to be priced appropriately for the market while still allowing for a return to the organization; or, in a not-for-profit organization, give good value to the taxpayers or whoever is funding the operation. When the organization is managing to do this, it is giving a cost advantage. The Five Operations Performance Objectives

34. The Quality Objective Quality is consistent conformance to customers’ expectations Quality is the most visible part of what an operation does It is something that A customer finds relatively easy to judge about the operation It is clearly A major influence on customer satisfaction or dissatisfaction A customer perception of high-quality products and services means customer satisfaction And therefore the likelihood that the customer will return.

35. Quality Inside The Operation Quality reduces costs. The fewer mistakes made by each process in the operation, the less time will be needed to correct the mistakes and the less confusion and irritation will be spread. Quality increases dependability. Increased costs are not the only consequence of poor quality . At the supermarket it could also mean that goods run out on the supermarket shelves with a resulting loss of revenue to the operation and irritation to the external customers.

36. The Speed Objective

37. The Speed Objective Inside the operation, speed is also important . Fast response to external customers is greatly helped in decision-making and speedy movement of materials and information inside the operation.

38. Speed inside the operation Speed reduces inventories. Speed reduces risks. Forecasting tomorrow’s events is far less of a risk than forecasting next year’s. The further ahead companies forecast, the more likely they are to get it wrong. The faster the throughput time of a process the later forecasting can be left.

39. The dependability objective

40. Dependability inside the operation Dependability saves time Dependability saves money. Dependability gives stability

41. The flexibility objective

42. The flexibility objective Product/service flexibility – the operation’s ability to introduce new or modified products and services; Mix flexibility – the operation’s ability to produce a wide range or mix of products and services; Volume flexibility – the operation’s ability to change its level of output or activity to Produce different quantities or volumes of products and services over time; Delivery flexibility – the operation’s ability to change the timing of the delivery of its services or products.

43. Flexibility inside the operation Flexibility speeds up response. Flexibility saves time. Flexibility maintains dependability.

44. Low cost is a universally attractive objective Productivity Single-factor productivity Multi-factor productivity

45. Single-factor productivity Often partial measures of input or output are used so that comparisons can be made. in the automobile industry productivity is sometimes measured in terms of the number of cars produced per year per employee. This is called a single-factor measure of productivity . Single-factor productivity = Output from the operation One input to the operation

46. The cost objective Productivity is the ratio of what is produced by an operation to what is required to produce it. The measure that is most frequently used to indicate how successful an operation is at doing this is productivity. Output from operations Input to operations

47. Multi-factor productivity Total factor productivity is the measure that includes all input factors. Multi-factor productivity = Output from the operation All inputs to the operation

48. Improving productivity To reduce the cost of its inputs while maintaining the level of its outputs. Reducing the costs of some or all of its transformed and transforming resource inputs . Cutting out waste.

49. Cost reduction through internal effectiveness High-quality operations do not waste time or effort having to re-do things, nor are their internal customers inconvenienced by flawed service. Fast operations reduce the level of in-process inventory between and within processes, as well as reducing administrative overheads. Dependable operations do not spring any unwelcome surprises on their internal customers. They can be relied on to deliver exactly as planned. This eliminates wasteful disruption and allows the other micro-operations to operate efficiently. Flexible operations adapt to changing circumstances quickly and without disrupting the rest of the operation. Flexible micro-operations can also change over between tasks quickly and without wasting time and capacity .

50. External effect of five performance objectives

51. Thank You