UNIT 1 INTRODUCTION TO OPERATION MANAGEMENT

● OPERATION MANAGEMENT :The systematic design, direction, and control of

processes that transform inputs into services and products for internal, as well as
external, customers
● PROCESS: activity or group of activities that takes one or more inputs, transforms them,
and provides one or more outputs for its customers.”
● INPUTS: workers,managers,materials,equipment,land,facilities
● OUTPUT:goods and services
● NESTED PROCESS: the concept of a process within a process
Every process and every person in the organization has customers

Every process and every person in the organization relies on suppliers

DIFFERENCES BETWEEN GOODS AND SERVICES

● COMPETITIVE PRIORITIES:The critical dimensions that a process or supply

chain must possess to satisfy its internal or external customers, both now and in
the future.
● ANOTHER DEFINITION:signify a strategic focus on building specific
manufacturing capabilities that can improve a plant’s position in the market. Such
focus may guide decisions with regards to the capacity, technology, production
process, planning, control, etc. In fact the strength of an operations strategy is
dependent on the level of consistency between emphasized competitive priorities
and
 matching decisions concerning operational structure and infrastructure.
● COMPETITIVE CAPABILITIES:The cost, quality, time, and flexibility dimensions that a
process or supply chain actually possesses and is able to deliver.

1. Top quality:Delivering an outstanding service or product.

● Process consideration:May require a high level of customer
contact and may require superior product features
● Example:Rolex,Ferrari
2. Consistent quality:Producing services or products that meet design
specifications on a consistent basis
● Process consideration:Processes designed and monitored to
reduce errors and prevent defects
● Example:Mcdonalds,casio

3. Delivery speed/Fast delivery:Quickly filling a customer’s order

● Process consideration:Design processes to reduce lead time
● Example:Netflix
4. On-time delivery:Meeting delivery-time promises
● Process consideration:Planning processes used to increase
percent of customer orders shipped when promised
● Example:

5. Development speed:Quickly introducing a new service or a product

● Process consideration:Process involve cross-functional integration
and involvement of critical external suppliers
● Example:Zara
6. Customization(flexibility):Satisfying the unique needs of each customer by
changing service or product designs
 ● Process consideration:Processes typically have low volume, close
customer contact, and can be easily reconfigured to meet unique
customer needs
● Example:Ritz carlton

7. Variety(flexibility):Handling a wide assortment of services or products

efficiently
● Process consideration:Processes are capable of larger volumes
than processes supporting customization
● Example:Amazon
8. Volume flexibility:Accelerating or decelerating the rate of production of
services or products quickly to handle large fluctuations in demand
● Process consideration:Processes must be designed for excess
capacity and excess inventor
● Example.United states postal services
ORDER WINNERS:A criterion customers use to differentiate the services or products of one
firm from those of another.
e.g. if the service provider offers a discount in telephone lines too, visits your facilities to
provide recommendations on your network.
ORDER QUALIFIERS:Minimum level required from a set of criteria for a firm to do business
in a particular market segment.
e.g. the internet connection should be reliable, not too many outages
NEEDS ASSESSMENT:
Service or Product Needs: Attributes of the service or product, such as price, quality, and
degree of customization.
Delivery System Needs :Attributes of the processes and the supporting systems, and resources
needed to deliver the service or product, such as availability, convenience, courtesy, safety,
accuracy, reliability, delivery speed, and delivery dependability.
Volume Needs: Attributes of the demand for the service or product, such as high or low volume,
degree of variability in volume, and degree of predictability in volume.
Other Needs:Other attributes, such as reputation and number of years in business, after-sale
technical support, ability to invest in international financial markets, and competent legal
services.

MORE LIKE A MANUFACTURING PROCESS:

★ Physical, durable output
★ Output can be inventoried
★ Low customer contact
★ Long response time
★ Capital intensive
★ Quality easily measured
★ Intangible, perishable output

TANGIBLE:Physical, durable output

STORAGE:Output can be inventoried
RESPONSE: Low customer contact
Long response time
AUTOMATION:Capital intensive
MEASURE: Quality easily measured

MORE LIKE A SERVICE PROCESS:

★ Output cannot be inventoried
★ High customer contact
★ Short response time
★ Labor intensive
★ Quality not easily measured

TANGIBLE:Contains customer experience

Intangible, sometimes perishable or distorted with memories
STORAGE:Output cannot be inventoried
RESPONSE: High customer contact
Short response time
AUTOMATION:Labor intensive
MEASURE: Quality not easily measured

The supply chain view

Each activity in a process should add value to the preceding activities; waste and unnecessary
cost should be eliminated.
An interrelated series of processes within and across firms that produces a service or product to
the satisfaction of customers

Supply chain management

is the synchronization of a firm’s processes with those of its suppliers and customers to match
flow of materials, services, and information with customer demand.

A process is an activity or group of activities that takes one or more inputs, transforms
them, and provides one or more outputs for its customers.
Interaction with clients

Independent processing:low
Surrogate interaction:Medium
Direct interaction:high

Sipoc
A SIPOC diagram provides a high-level view of a process by documenting its suppliers, inputs,
process, outputs, and customers
WHY THIS TOOL IS RELEVANT
SIPOC diagrams are excellent for analyzing and improving business processes.
Easy to understand. Useful for onboarding new team members and stakeholders alike.
 Value chain analysis

● Our process belongs to a company, the company is part of a value-chain Managing the
Supply chain is crucial
● In order to delivery quality to end-users, everybody must work with high quality and take
care of time

QUALITY
The totality of features and characteristics of a product or service that bears on its ability to
satisfy stated or implied needs
Defect
Any instance when a process fails to satisfy its customer

Sustainable development goals

launched by the United Nations in 2015, are an excellent vehicle for driving this change. They
represent an action plan for the planet and society to thrive by 2030

PRODUCTIVITY
Multifactor: Total
single-factor:Productivity Labor productivity; units per hour Raw materials: per meter, per kilo

LABOUR PRODUCTIVITY

MULTIFACTOR PRODUCTIVITY

❖ Also known as total factor productivity

❖ Output and inputs are often expressed in dollars
❖ Multiple resource inputs multi-factor productivity

IMPORTANT
➢ Quality may change while the quantity of inputs and outputs remains constant
➢ External elements may cause an increase or decrease in productivity
➢ Precise units of measure may be lacking

CAPACITY MANAGEMENT
● Capacity management refers to the act of ensuring an organization maximizes its
potential activities and/or production output, meeting expectations in a cost-effective
manner
● The capacity of a business measures how much companies can achieve, produce, or
sell within a given time period.

Capacity utilization

1. Measures Productive efficiency, since you can measure the idleness of resources in your
business
2. Higher utilization can reduce unit costs(fix cost variable cost)/number of units

Capacity cost=Facilities,labour,equipment
Danger of operating a low capacity utilization
•Higher unit costs (impact on competitiveness)
•Less likely to reach breakeven output
•Capital tied up in under-utilized assets
Danger of operating a 100% of the capacity utilization
•Possible negative effect on Quality (less time for quality control?)
•Employees suffer (if sustained for too long,because of added workloads & stress)
•Loss of sales, less able to meet sudden or unexpected increase in demand
•Repairs of equipment

CONTRIBUTION
Contribution is what a business needs to achieve in sales in order to, first cover its fixed costs
and then make a profit
❖ TOTAL CONTRIBUTION= Total revenues- total variable cost
❖ CONTRIBUTION PER UNIT=Selling price(per unit)-variable cost(per unit)
Breakeven output

WORK MEASUREMENT
● Work measurement is concerned with the determination of the amount of time required
to perform a unit of work.
● Is very important for promoting productivity of an organization. It enables management to
compare alternate methods and also to do initial staffing.
● Provides basis for proper planning
 ● The exact examination of time is very essential for correct pricing. To find the correct
manufacturing time for a product, time study is performed.
● To give competitive quotations, estimation of accurate labour cost is very essential.
● It becomes a basis for wage and salary administration and devising incentive schemes.
Objectives of work measurement
1. To compare the times of performance by alternative methods.
2. To enable a realistic schedule of work to be prepared.
3. To arrive at a realistic and fair incentive scheme.
4. To analyze the activities for doing a job with the view to reduce or eliminate
unnecessary jobs.
5. To minimize human effort.
6. To assist in the organization of labour by daily comparing the actual time with that
of target time

TAKT TIME
is the rate at which you need to complete a product in order to meet customer demand.

CYCLE TYME
The more units you want to produce per hour, the less time a part can spend at each
Station.
• Cycle time = time spent at each spot

NUMBER OF WORKSTATION
•Given required cycle time, find out the theoretical minimum number of stations

THEORETICAL MINIMUM
A benchmark or goal for the smallest number of stations possible

IDLE TIME
The total unproductive time for all stations in the assembly of each unit
 ● Total time – productive time

EFFICIENCY
The ratio of productive time to total time, expressed as a percent

If efficiency is unsatisfactory, rebalance using another rule to improve efficiency

BALANCE DELAY
The amount by which efficiency falls short of 100 percent

MANAGERIAL CONSIDERATION
● Pacing is the movement of product from one station to the next as soon as the cycle time
has elapsed
● Behavioral factors such as absenteeism, turnover, and grievances can increase after
installing production lines.
● The number of models produced complicates scheduling and necessitates good
communication.
● Cycle times are dependent on the desired output rate or sometimes on the maximum
workstations allowed

SCHEDULING
● Scheduling is the allocation of resources over time to accomplish specific tasks
● Operations scheduling indicates which jobs are assigned to workstations or employees
are assigned to jobs for specified time periods
OBJECTIVES
1. Efficient use of resources (Minimizing idle time)
2. Best possible use of equipments available
3. Increasing profit, output and service level
 4. Maximizing the delivery performance
5. Minimizing all types of inventories
6. Minimizing the production costs
LINE BALANCING
The assignment of work to stations in a line so as to achieve the desired output rate with the
smallest number of workstations
PRECEDENCE DIAGRAM
A diagram that allows one to visualize immediate predecessors better

BOTTLENECK
A bottleneck is a point of congestion in a production system that stops or severely slows the
system.
Short-term bottlenecks are temporary and usually caused by employees on vacation or sick
leave.
Long-term bottlenecks are built into the manufacturing protocol and often related to inefficient
equipment or processes.

MAXIMUM PRODUCTION

COMPUTE REQUIRE CYCLE TIME

• If we are required to assembly 100 fans per day (desired by top managers) and we know that
total production time per day is 420 mins = 7 hrs 60 min/hr, then
ASSEMBLY LINE
The assembly line is a production line where material moves continuously through a series of
workstations where assembly work is performed.

Important
•Long tasks make it hard to get efficient combinations.
•Consider splitting tasks, if physically possible.
•If not:
• Parallel workstations
• use skilled (faster) worker to speed up