PRODUCTION AND OPERATIONS

MANAGEMENT

PROF. ROSE ANTONY

ASSISTANT PROFESSOR
NMIMS, SBM, MUMBAI
 WHAT IS OPERATIONS?

 Operations
 The part of a business organization that is responsible for producing
goods or services
 The collective success or failure of operations functions ----nations’
economy and its ability to compete with its competitors
DIGITAL TRANSFORMATION
Technology
adoption

Process
Enhanced
optimization :
customer
smarter
interactions
decisions

Mindset of
innovation
NEED OF OPERATIONS IN DIGITAL TRANSFORMATION
• Areas for • Aligning technology
improving and with operational
innovating in goals
DT, Design for • Right tech for
flexibility customer service
Understanding
Right
process
application
optimization

Bringing
Managing
scalability and
Transition
efficiency

• Identifying • Smooth transition happens

solutions for with knowledge of
handling operations and data
business availability
complexity
OPERATIONS AND SUPPLY CHAIN
 Intrinsically linked

 Supply Chain – a sequence of activities and organizations involved

in producing and delivering a good or service

Suppliers’ Direct Final

Producer Distributor
suppliers suppliers Customers
WHAT IS OPERATIONS MANAGEMENT?
DEFINED
 Operations management (OM)
 the design, operation, and improvement of the systems/ processes that create and
deliver the firm’s products and services.
 Managing the core-OM

Output
Input (raw
Process (goods and
materials)
services)

 Match supply and demand

 Excess- wasteful and costly
 Shortage- lost opportunity , customer dissatisfaction

 Efficiency vs. Effectiveness

 Doing something at lowest possible cost
 Doing right things to create most value for the company
THE TRANSFORMATION PROCESS
A transformation process is defined as a use of resources to
transform inputs into some desired outputs

Value-Added ( psychological –branding)

Inputs Transformation/ Outputs
•Land Conversion •Goods
•Labor Process •Services
•Capital
•Information
Measurement
and Feedback
Measurement Measurement
and Feedback Control and Feedback

Feedback = measurements taken at various points in the transformation process

Control = The comparison of feedback against previously established
standards to determine if corrective action is needed.

Value added- for profit vs. non profit organization

 Types of Operations
Operations Examples

Goods Producing Farming, mining, construction ,

manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites
 Food Processor
Inputs Processing Outputs

Raw Vegetables Cleaning Canned

Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
 WHAT IS A SERVICE
AND WHAT IS A GOOD?

 “If you drop it on your foot, it won’t hurt you.” (Good or service?)

 “Services never include goods and goods never include services.”

(True or false?)
 Goods-Service continuum

Steel production
Automobile fabrication

House building
Low service content Road construction
High goods content
Dressmaking
Farming

Computer Repair
Restaurant meal

Songwriting , software
Increasing development
goods content
Increasing Teaching,
service content Surgery
High service content
Low goods content
 Manufacturing Service
Degree of customer contact Low High

Uniformity of input High (variability of inputs Low

could be controlled)
Labor content of jobs Low High

Measurement of Easy difficult

productivity

Quality assurance High Low

Amount of inventory Much Little

Wage variation Narrow range Wide range

Ability to patent design Usually Not usually-Low

 PROCESS MANAGEMENT
• Key aspect of operations management
• Consists of one or more actions that transform inputs into outputs
• Upper management processes : organizational strategy /
governance
• Operational processes : core processes making up the value stream-
Purchasing , production, marketing and sales
• Supporting processes : HR, accounting, IT
• Activities: Process design, execution and monitoring
• Aim: meet demand & manage variations
 MEETING DEMAND

• Need to match supply and demand

• Forecast accuracy to fulfil the demand
• Process capable of meeting the demand

• Fail to meet demand:

• Demand variability
• Process variability
• Need to manage variations
 PROCESS VARIATIONS
Sources:
Random variations; uncontrollable
Varieties offered :controllable
Structural variations in demand : trends and seasonal ; predictable
Assignable variations ; controllable

Effects:
Additional costs , delays, shortages , poor quality, customer
dissatisfaction, organization’s reputation

Managers need to deal with these variability

 Responsibilities of Operations
Management

Organizing:
centralization ,
Controlling subcontracting
inventory,
Planning quality
capacity,
Location,
projects
ROLE OF THE OPERATIONS MANAGER
 The Operations Function consists of all activities directly related to
producing goods or providing services.
 A primary function of the operations manager is to guide the system by
decision making.
 System Design Decisions (affects design)---strategic decision
 System capacity
 Geographic location of facilities
 Arrangement of departments
 Acquisition and placement of equipment
 Product and service planning
 System Operation Decisions (affects operations)---operational decisions
 Management of personnel
 Inventory planning and control
SCOPE OF OPERATIONS MANAGEMENT
The scope of operations management ranges across the organization.

The operations function includes many interrelated activities such as:

 Forecasting: weather, demand -seat
 Capacity planning: right no. of planes at right places profit
 Facilities and layout: effective use of workers and equipment,
 Scheduling: of planes , pilots, ground staff etc.
 Managing inventories: food, beverages, blankets
 Assuring quality: safety
 Motivating employees
 Deciding where to locate facilities- major /minor hub
*Airline company
Success customer satisfaction , short term and long term planning
WHICH IS IMPORTANCE-
MANUFACTURING OR
SERVICE SECTOR?
 MANUFACTURING SECTOR AND
SERVICE SECTOR
 Very crucial
 Decreasing jobs in manufacturing : manufacturin
Service
 Outsourcing g

 Manpower replaced with machines

 Results:
 4 services jobs lost for each manufacturing job
 Transfer of work, intellectual knowledge
 Erosion of federal, state and local taxes- lower tax revenues

 Need to become exporters- to reduce trade deficit (imports > exports)

 WHY STUDY OM?
 Every aspect of business affects or is affected by operations –doesn’t matter you
opt for manufacturing or services
 Many service jobs are closely related to operations
 Financial services (stock market analyst, investment banker etc..)
 Marketing services (market analyst, advertising manager etc.)
 Accounting services (corporate accountant, budget analyst etc.)
 Information services (corporate intelligence, library service etc..)
 It provides an excellent vehicle for understanding the world in which we live, all
aspects of the business, global dependencies, reason behind success and failure
of companies etc..

That is Why ??? It is a core subject

That is Why ??? You study OM
 OM AND SUPPLY CHAIN
CAREER OPPORTUNITIES

Operations manager
Supply chain manager
Production analyst
Schedule coordinator
Production manager
Industrial engineer
Purchasing manager
Inventory manager
Quality manager
1-24
 ASSOCIATIONS

 APICS, the Association for Operations Management, 8430 West Bryn Mawr Avenue, Suite
1000, Chicago, Illinois 60631 www.apics.org
 American Society for Quality (ASQ) 230 West Wells Street, Milwaukee, Wisconsin 53203
www.asq.org
 Institute for Supply Management (ISM) 2055 East Centennial Circle, Tempe, Arizona 85284
www.ism.ws
 Institute for Operations Research and the Management Sciences (INFORMS) 901 Elkridge
Landing Road, Linthicum, Maryland 21090-2909 www.informs.org
 The Production and Operations Management Society (POMS) College of Engineering,
Florida International University, EAS 2460,10555 West Flagler Street, Miami, Florida
33174 www.poms.org
 The Project Management Institute (PMI)4 Campus Boulevard, Newtown Square,
Pennsylvania 19073-3299 www.pmi.org
 Council of Supply Chain Management Professionals (CSCMP) 333 East Butterfield Road,
Suite 140, Lombard, Illinois 60148 http//cscmp.org
 Finance & Operations
 Budgeting
 Economic analysis of investment
proposals
 Provision of funds

 Marketing & Operations

 Demand data
 Product and service design
 Competitor analysis
 Lead time data
 OPERATIONS TODAY

 Technology oriented – e-commerce

 Scientific discoveries applied for the development and

improvement of goods and services

 Knowledge

 Material

 Methods

 Equipment
 Product and service technology- researchers using scientific approach

to develop new knowledge for commercial applications

 Process technology: methods involved in producing good or service;

supply chain processes

 Information technology: science for storing, processing and sending

information

Implications on cost , productivity and competitiveness

Conflicting technologies can make choice of technologies more

difficult
 Globalisation  supply chain

 Operations strategy: Negligence of operations strategy till 1980s

 Resource constraints: trade –off decisions and emphasis on cost control and
productivity improvement

 Revenue management: by influencing demand through price manipulation. Eg. Tourism,

amusement parks

 Process analysis and improvement: cost and time reduction, productivity improvement,
process yield improvement, quality improvement, customer satisfaction ---six sigma
process (Price and Quality—Time)

 Agility: organisations ability to respond quickly to demands or opportunities—flexibility in

volume and/or product varieties.

 Lean production: quality, flexibility, time reduction and team work; fewer levels of
management (emerged in 1990s)- involves skilled labours
 Economic conditions
 Innovativeness: in processes and products and services
 Quality problems: product design and testing, risk assessment
 Risk management: identify, assess, execute to reduce or share risk
 Competing in a global economy
 Environmental concerns
 Ethical conduct
 Managing the supply chain
 Reduce carbon footprint
Operate sustainable processes
 Sustainability
 Using resources in ways that do not harm ecological systems that support
human existence
 Sustainability measures often go beyond traditional environmental and
economic measures to include measures that incorporate social criteria
in decision making
 All areas of business will be affected
 Product and service design
 Consumer education programs
 Disaster preparation and response
 Supply chain waste management
 Outsourcing decisions
 Vegetarian Vs. Non-Vegetarian
Ethics : Standard of behaviour guiding the way one should act in different
situations

 Financial statements
 Worker safety
 Product safety
 Quality: warranties
 The environment
 The community
 Hiring and firing workers
 Workers rights
 In the past, organizations did little to manage the supply chain beyond their
own operations and immediate suppliers which led to numerous problems:
 Oscillating inventory levels
 Inventory stockouts
 Late deliveries
 Quality problems
1. The need to improve operations: procurement, distribution and logistics
2. Increasing levels of outsourcing : cost –packaging, moving, sorting etc..
3. Increasing transportation costs
4. Competitive pressures: customized products, shorter production cycles
5. Increasing globalization: increasing SC length
6. Increasing importance of e-business
7. The complexity of supply chains: complex and dynamic; forecast errors ,
changed orders
8. The need to manage inventories
 Elements Issues
1. Customers 1. Wants
2. Forecasting 2. Quantity and demand
3. Design 3. Incorporating 1 and 2
4. Capacity planning 4. Matching Supply and demand
5. Processing 5. Controlling quality
6. Inventory 6. Optimised inventory
7. Purchasing 7. Evaluating potential suppliers
8. Suppliers 8. Monitoring supplier quality
9. Location 9. Determining the location of facilities
10. Logistics 10. Best way of moving material and
information
 Premier grocery chains in USA
 Headquarter is in Rochester NY
 It has over 70 stores, 37000 employees, annual sales -$3 billion
 High product quality and excellent service
 Customer feedback
 All of the superstores are giants in size
 Full service Deli-large displays
 Food and non food items
 Unique departments with customised food varieties
 Each store is different from other & have separate ordering system
 Produce department Meat department

 Inventory replenishment -12  Customised cuts

times
 Meat university
 4 to 5 times large produce
 Promote selling culture
sections
 Centralised meat processing and
 Local produce during seasons
 reduced inventory cost and vacuum packaging—cost and quality
timely delivery
 Customised crates- avoid
bruising
 1 truck of goods in regular
days and 2 truck of goods in
peak days comes to store.
 Ordering Inventory management
 Department specific ordering  Optimal inventory handling
 Sales record not considered  Periodic inventory tracking
directly for replenishment of
stock– future trends
 Short lead times –replenishment
from warehouses
 Supplier evaluation-time and
quality
Employees Quality
 Employee training  Testing of private food labels
 Motivation
 Compensation and profit
sharing
 Employee turnover: 6 % vs.
20%
 Technology Sustainability
 For maintaining freshness  Fluorescent bulbs- less CO2
emission
 Tracking inventory
 Managing supplies
Customers judge the quality of a supermarket based on:
 Quality of individual products
 Exterior and interior physical look of the store
 Effectiveness and efficiency of service personnel
 Price , product availability and variety
 Reliability
 Responsiveness
 Assurance
 Empathy
 a. Customer satisfaction is the major key to the success of any operation;
without it, the company cannot survive.
 b. Forecasting allows the company to plan the workforce levels,
purchase quantities, inventory levels, and capacity.
 c. Capacity planning allows the company to balance the trade-off
between shortages and excess inventories and between waiting lines and
idle time.
 d. A good location can have a significant impact in attracting customers,
thus improving sales.
 e. Planning and controlling levels of inventory will assist with avoiding
stockouts and avoiding excess inventory levels.
 f. Good layout of the store can assist in maximizing customer service
and sales by strategically directing customers through the store. An
effective layout can also improve the efficiency of the operations.
 g.Effective scheduling of company workers and work hours can improve
both customer service and efficiency. An effective schedule provides
convenient store hours, minimal customer waiting lines, and minimal
employee idle time.
3. Wegmans uses technology to track inventory and manage its supply
chain, which lessen the risk of occurrences of out-of-stock events, and to
maintain freshness in its meat and produce departments.
 Imagine yourself as a manager in meat department – how will you handle the
department / situation in India?
 What are additional aspects considered for replenishing stocks?
 Price
 Promotions
 Festivals
 Seasons
 Weather conditions
 Past trends

 What could be the possible environmental concerns that the case should
consider while setting up similar stores in India?
 Product and service design
 Consumer education programs
 Supply chain resilience
 Supply chain waste management
 Outsourcing decisions
 Operations Interfaces

Maintenance
Personnel MIS

Distribution Public Relations

Operations

Purchasing Industrial
Procuring materials Engineering: scheduling,
Timing and quantity of
Accounting performance standards, QC,
purchase
Vendor evaluation material handling

Kind of job and expertise of operations manager vary from

organization to organization and product and services
 Most operations decisions involve many alternatives that can have quite
different impacts on costs or profits
 Typical operations decisions include:
 What: What resources are needed, and in what amounts?

 When: When will each resource be needed? When should the work
be scheduled? When should materials and other supplies be ordered?
 Where: Where will the work be done?

 How: How will the product or service be designed? How will the
work be done? How will resources be allocated?
 Who: Who will do the work?
Models: Physical, Schematic, Mathematical
Quantitative Approaches : LP, Queuing techniques,
Performance metrics
Analysis of trade –off
Degree of customization
A systems approach
Establishing priorities
 Modeling is a key tool used by all decision makers
 Model - an abstraction of reality; a simplification of
something.
 Physical, Schematic, Mathematical

 Common features of models:

 They are simplifications of real-life phenomena
 They omit unimportant details of the real-life systems they
mimic so that attention can be focused on the most
important aspects of the real-life system
 Keys to successfully using a model in decision making
 What is its purpose?
 How is it used to generate results?
 How are the results interpreted and used?
 What are the model’s assumptions and limitations?
1. Easier to use and less expensive than dealing with the real system

2. Require users to organize and sometimes quantify information

3. Increase understanding of the problem

4. Enable managers to analyze “What if?” questions

5. Serve as a consistent tool for evaluation and provide a standardized format

for analyzing a problem
 Quantitative information may be emphasized at the expense
of qualitative information
 Models may be incorrectly applied and the results
misinterpreted
 This is a real risk with the widespread availability of sophisticated,
computerized models are placed in the hands of uninformed users.

 The use of models does not guarantee good decisions.

 A decision making approach that frequently seeks to obtain a
mathematically optimal solution
 Linear programming
 Queuing techniques
 Inventory models
 Project models
 Forecasting techniques
 Statistical models : regression
 Performance Metrics  Analysis of Trade-Offs
 All managers use metrics to  A trade-off is giving up one
manage and control operations thing in return for something
 Profits else
 Costs  Carrying more inventory (an
 Quality expense) in order to achieve a
greater level of customer service
 Productivity
 Understand the pros and cons
 Flexibility
 Relative importance
 Inventories
 Schedules
 Forecast accuracy
 System - a set of interrelated parts that must work together
 The business organization is a system composed of subsystems
 marketing subsystem
 operations subsystem
 finance subsystem

 The systems approach

 Emphasizes interrelationships among subsystems
 Main theme is that the whole is greater than the sum of its parts
 The output and objectives of the organization take precedence over those
of any one subsystem
 In nearly all cases, certain issues or items are more
important than others
 Recognizing this allows managers to focus their attention to
those efforts that will do the most good
 Pareto Phenomenon - a few factors account for a high
percentage of occurrence of some event(s)
 The critical few factors should receive the highest
priority
 This is a concept that is appropriately applied to all
areas and levels of management