UNIT 1:

OPERATIONS MANAGEMENT is a systematic approach to addressing issues in the transformation process

that converts inputs into useful, revenue-generating outputs. Four aspects of this definition merit closer
attention:

1. Operations management is a systematic approach. It involves understanding the nature of issues

and problems to be studied; establishing measures of performance; collecting relevant data; using
scientific tools, techniques, and solution methodologies for analysis; and developing effective as well
as efficient solutions to the problem at hand. Therefore, for successful operations management, the
focus should be on developing a set of tools and techniques to analyze the problems faced within an
operations system.
2. Operations management involves addressing various issues that an organization faces. These
issues vary markedly in terms of the time frame, the nature of the problem, and the commitment of
the required resources. Simple problems include deciding how to re-route jobs when a machine
breaks down on a shop floor, or how to handle a surge in demand in a service system. On the other
hand, decisions such as where to locate the plant, what capacity to build in the system, and what
 types of products and services to offer to the customers require a greater commitment of resources
and time. Operations management provides alternative methodologies to address such wide-ranging
issues in an organization.
3. Transformation processes are central to operations systems. The transformation process ensures
that inputs are converted into useful outputs. Therefore, the focus of operations management is to
address the design, planning, and operational control of the transformation process.
4. The goal of operations management is to ensure that the organization is able to keep costs to a
minimum and obtain revenue in excess of costs through careful planning and control of
operations. An appropriate performance evaluation system is required for this. Therefore,
operations management also involves the development of performance evaluation systems and
methods through which the operating system can make improvements to meet targeted
performance measures.

The focus areas of operations management are likely to be in the areas of better supplier management,
elimination of waste from the system, and improvement in overall productivity. Several sectors of the
industry have been focusing on some of these initiatives.

NEED/IMPORTANCE OF OPERATIONS MANAGEMENT

 Helps in the achievement of objectives: Operations management has an effective role in the
achievement of pre-determined objectives of an organization. It ensures that all activities are going
as per plans by continuously monitoring all operations of organization.
 Improves Employee productivity: Operation management improves the productivity of employees.
It checks and measures the performance of all people working in the organization. Operation
manager trains and educate their employees for better performance.
 Enhance Goodwill: Operation management helps in improving the goodwill and presence of the
organization. It ensures that quality products are delivered to all customers that could provide them
better satisfaction and makes them happy.
 Optimum utilization of resources: Operation management focuses on optimum utilization of all
resources of the organization. It frames proper strategies and accordingly continues all operations of
the organization. Operation managers keep a check on all activities and ensure that all resources are
utilized on only useful means and are not wasted.
 Motivates Employees: Operation management helps in motivating the employees towards their
roles. Operation managers guide all peoples in performing their roles and provide them with better
atmosphere. Employees are remunerated and rewarded according to their performance level.
10 Critical Decisions of Operations Management

These 10 areas can be applied to any size business, not just global giants such as Ford and Jet Blue. Use them
as a guide to analyze your operations. Measure your current productivity and then implement strategies to
operationalize these 10 areas into your decision-making process and watch your productivity become more
efficient.

The areas are:

1. Goods and services: This includes looking for ways to implement consistency in costs,
quality, and resources across all business divisions.
2. Quality Management: Be clear on the customer’s demands and then meet those
expectations. Use market research to determine customer needs and batch quality assurance
testing on products and services in production.
3. Process and Capacity Design: Design strategies that support all production goals including
technology and resources. A value stream map can help determine what processes are
necessary and how to keep them running efficiently.
4. Location: In developing a location strategy consider supply chain and how the location will
receive supplies, the movement of goods and services internally and to customers, and the
role of marketing and public relations in the location choice.
5. Layout Design and Strategy: Consider the placement of desks, workstations, and how
materials are delivered and used.
6. Human Resources and Job Design: Implement continuous improvement programs with
regular reviews, provide continuous training for employees, and institute employee
satisfaction programs to achieve success in this area.
7. Supply Chain Management: Determine the best strategies to streamline, be cost effective,
and to develop trusted partners.
8. Inventory: Different markets mean different challenges when it comes to inventory but all
need to strategize and plan their inventory control. Weather, supply shortages, and labor all
influence how an organization maintains its inventory.
9. Scheduling: Consider both production and people. Ask questions such as how much product
is required to be produced for the customer in the required time? How many people and how
many machines are required to do the job effectively and efficiently? This differs among
industries and business departments. For example, emergency rooms need to maintain
different schedules than a hospital’s corporate office.
 10. Maintenance: This includes maintaining people and machines, as well as, process. What do
you need to do to maintain quality and keep resources reliable and stable?

Key Differences Between Goods and Services

*There are certainly important differences between services and manufacturing- Intangibility, heterogeneity,
perishability, and simultaneous production and consumption are the factors that differentiate service
systems from manufacturing systems. Despite these differences, many of the operations management tools
that were initially developed for manufacturing organizations are applicable to services as well.The basic
differences between goods and services are mentioned below:

1. Goods are the material items that the customers are ready to purchase for a price. Services are the
amenities, benefits or facilities provided by the other persons.
2. Goods are tangible items i.e. they can be seen or touched whereas services are intangible items.
3. When the buyer purchases the goods by paying the consideration, the ownership of goods moves
from the seller to the buyer. Conversely, the ownership of services is non-transferable.
4. The evaluation of services is difficult because every service provider has a different approach of
carrying out services, so it is hard to judge whose services are better than the other as compared to
goods.
5. Goods can be returned to or exchanged with the seller, but it is not possible to return or exchange
services, once they are provided.
6. Goods can be distinguished from the seller. On the other hand, services and service provider are
inseparable.
7. A particular product will remain same regarding physical characteristics and specifications, but
services can never remain same.
8. Goods can be stored for future use, but services are time bound, i.e. if not availed in the given time,
then it cannot be stored.
9. First of all the goods are produced, then they are traded and finally consumed, whereas services are
produced and consumed at the same time.
Operations as a key functional area in an organization:

Main functions of production planning and control includes Planning, routing, scheduling, dispatching and
follow-up.

Planning is deciding in advance what to do, how to do it, when to do it and who is to do It. Planning bridges
the gap from where we are, to where we want to go. It makes it possible For things to occur which would
not otherwise happen.

Routing may be defined as the selection of path which each part of the product will follow, Which being
transformed from raw material to finished products. Routing determines the most Advantageous path to be
followed from department to department and machine to machine till Raw material gets its final shape.
Scheduling determines the programmed for the operations. Scheduling may be defined as ‘the fixation of
time and date for each operation’ as well as it determines the sequence of operations to be followed.

Dispatching is concerned with the starting the processes. It gives necessary authority so As to start a
particular work, which has already been planned under ‘Routing’ and ‘Scheduling’. Therefore, dispatching is
‘release of orders and instruction for the starting of production for any Item in acceptance with the route
sheet and schedule charts’.

The function of follow-up is to report daily the progress of work in each shop in a prescribed Preform and to
investigate the causes of deviations from the planned performance.
OTHERS:

Key Benefits of Effective Operations Management

1. Product Quality

The first unit in a typical firm that checks the durability and reliability of a product is operations
management. Operations management sees the quality of products or goods which would suit customers on
and after delivery. When a product is of quality, it gives you an edge compared to your competitors.

2. Productivity

Productivity is defined as the ratio of input to output and it is the only way to verify employees’ input.
Operations management ensures appropriate staffing of employees to resources so as to get maximum
results. The only way to ensure productivity is through effective operations management.

3. Customer Satisfaction

There is no feeling for a manager or an employee as a customer getting the utmost satisfaction ever.
Operations management rightly ensures this is coupled with a quality product. Customers make an
organization thrive and they must be treated well in every way necessary and possible.

4. Reduced Operating Cost

Through productivity, quality products, and customer satisfaction, the cost incurred on product servicing is
maximally reduced. This simultaneously leads to increased revenue. Only operations management can make
this possible. In reducing operating costs, there is also waste reduction. The exact number/size of products is
produced as requested via proper operations management.
  Production and Operation Management deals with decision making related to production
processes, so that the resulting goods and services are produced in MRCET MBA accordance with the
quantitative specifications and demand schedule with minimum cost. According to this definition
design and control of the production system are two main functions of production and operation
management. Production and Operation Management is a set of general principles for production
economies, facility design, job design, schedule design, quality control, inventory control work-study,
and cost band budgeting control.

There is always a confusion between the word OM & PM (Production Management). It is accepted norm that
OM includes techniques which are enabling the achievement of operational objectives in an operation
system. The operation system includes both manufacturing sector as well as service sector, but when you
use the word PM, you should be careful to note that it refers to the manufacturing sector but not the service
sector.

Factors Affecting Productivity Productivity stands tall on four important pillars Capital, Quality, Management,
and Technology. These pillars are also responsible for positively as well as negatively affecting the
Productivity of the Organization.
What is Operations Strategy?

Operations strategy is the plan developed by the management team of an organization to allocate funding to
the business. This plan is constructed after the overall strategy of the business has been created; thus, the
operations strategy supports the strategic direction of the firm. A well-developed operations strategy will
result in the creation of production and support capabilities that are cost-effective. It also delves into the
types of technology that will be acquired or developed in-house, and the set of suppliers from which the firm
elects to obtain goods and services.

there are seven functions of operations management.

 Operational planning- The role of operations management is to uphold operational efficiency.

 Finance - Finance is an essential—and universal—a function of operations management
because every company strives to reduce costs and increase profits.
 Product design- Once you identify customer needs and marketing trends, you'll relay what
you've learned back to the designers so they can make a strong product.
 Quality control- After the production team creates a product, the operations team will ensure
it meets quality standards. You’ll need to test the product to guarantee there are no defects
before releasing it to the public.
 Forecasting- operations teams also use forecasting to predict the demand for a product. Your
team can master forecasting by trying to answer hypothetical questions like: What will the
demand for this product be in the future? What marketing and promotions should we plan for
this product?
 Strategy- The goal of strategic management is to make sure production decisions align with
business goals.
 Supply chain management- If your company produces products or services, your company
will need supply chain management for sourcing, producing, and shipping. You may have a
separate department for the supply chain, but supply chain issues related to internal
production will be yours to handle.
STRATEGY FORMULATION PROCESS:

The process of strategy formulation basically involves six main steps. Though these steps do not
follow a rigid chronological order, however they are very rational and can be easily followed in this
order.
 1. Setting Organizations’ objectives - The key component of any strategy statement is to set
the long-term objectives of the organization. It is known that strategy is generally a medium
for realization of organizational objectives. Objectives stress the state of being there whereas
Strategy stresses upon the process of reaching there. Strategy includes both the fixation of
objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider
term which believes in the manner of deployment of resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the
selection of objectives must be analyzed before the selection of objectives. Once the
objectives and the factors influencing strategic decisions have been determined, it is easy to
take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a
review of the organizations competitive position. It is essential to conduct a qualitative and
quantitative review of an organizations existing product line. The purpose of such a review is
to make sure that the factors important for competitive success in the market can be
discovered so that the management can identify their own strengths and weaknesses as well
as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of
competitors’ moves and actions so as to discover probable opportunities of threats to its
market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the
quantitative target values for some of the organizational objectives. The idea behind this is to
compare with long term customers, so as to evaluate the contribution that might be made by
various product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and
accordingly strategic planning is done for each sub-unit. This requires a careful analysis of
macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap
between the planned or desired performance. A critical evaluation of the organizations past
performance, present condition and the desired future conditions must be done by the
organization. This critical evaluation identifies the degree of gap that persists between the
actual reality and the long-term aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of
action is actually chosen after considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.

Types Of Operations Strategy

Organizations can examine and implement efficient and effective systems for using work processes,
personnel and resources. Here are a few common types of operations strategy:

Customer-Driven Strategy
To meet the desires and needs of the target customers, an operations strategy must include customer-
driven approaches. Organizations must continuously evaluate the changing business environment
and adapt to it. This helps them enhance core competencies and develop new strengths regularly.
Organizations must also monitor industry trends to avoid threats as well as create new opportunities.
Good customer-driven strategies ensure more clients by improving the system of new and repeat
customers by building loyalty and referral.

Product Strategy

A strategy for product development must aim to deliver a compelling product or service that
resonates with customers. But the job involves more than releasing new products. Organizations also
need to maintain and upgrade their existing products for those who won’t buy the new ones. For
example, even though smartphone brands release new models every year, they continue to provide
low-cost upgrades and free patches to improve their existing models.

Market Penetration Strategy

Market penetration is an operational level strategy that focuses on capturing a larger share of the
target customer base in an industry. Managers can choose strategies to target new users who have no
experience with the brand or lure customers away from industry rivals. They may use multiple
geographical locations to target a demographic. Adding value to existing customers is also a great
way to increase spending on products or on service upgrades.

Supply Chain Strategy

This operations strategy deals with the process of building superior delivery capabilities to create
excellence. Organizations can take many paths, such as minimizing product costs by making bulk
purchases or increasing customer value by offering product customizations while delivering goods
more efficiently. Improving the efficiency of delivery operations can involve changing warehouse
layout to reduce time and effort in fulfilling orders. For example, a warehouse manager may decide
to bring all frequently bought products to the front and nearer the loading dock. This saves time for
both customers and employees and saves on labor by expediting the process.

Service-oriented organizations use basic operations strategy to create an efficient management team
and link short- and long-term corporate decisions.
MAINTENANCE MANAGEMENT
NEED/OBJECTIVES OF MAINTENANCE MANAGEMENT:

1. Minimizing the loss of productive time because of equipment failure (i.e., minimizing idle time of
equipment due to breaking down)

2. Minimizing the repair time and repair cost.

3. Minimizing the loss due to production stoppages.

4. Efficient use of maintenance personnel and equipment.

5. Prolonging the life of capital assets by minimizing the rate of wear and tear.

6. To keep all productive assets in good working conditions.

7. To maximize efficiency and economy in production through optimum use of facilities.

8. To minimize accidents through regular inspection and repair of safety devices.

9. To minimize the total maintenance cost which includes the cost of repair, cost of preventive
maintenance and inventory carrying costs, due to spare parts inventory.

10. To improve the quality of products and to improve productivity.

The 4 Asset Life cycle Stages: Explained

Stage 1: Planning

“Planning” is the very first stage of an asset’s life cycle. In this stage, building managers take
observations of current resources and equipment conditions. They may also verify the resources
needed to move forward with replacing an asset.

Stage #2: Purchase and Acquisition

After thorough research and data collection, the building management team is ready to move forward
with purchasing and acquiring the asset. In this stage, the team will define all costs and requirements
associated with purchasing the asset. The end goal of this stage is to make the acquisition as cost-
effective as possible.

The organization’s procurement department will work to find the best supplier and negotiate the best
pricing possible. They will take into account the asset’s initial investment costs, as well as the
asset’s total cost of ownership. Finally, the asset will be installed within the facility and added to the
organization’s fixed asset register and building infrastructure management software.

Stage #3: Operation and Maintenance

The operation and maintenance stage is typically the longest and most substantial portion of an
asset’s useful life. In this stage, operation and maintenance activities are performed and tracked,
typically in a software platform. Building management teams will focus their efforts on keeping the
asset in good working condition to ensure efficiency and productivity. This may be done through a
robust preventive maintenance program, regular inspection schedule, specialized cleaning routine or
regular routine maintenance.

The operation and maintenance stage can be broken down into the Three R’s: Repair, Rehabilitate
and Replace. In other words, assets should be monitored to ensure that repairs, parts replacements
and adjustments are done in a timely manner to ensure ideal functionality.

Stage #4: Renew or Dispose

As long as an asset is functioning correctly, it is within its useful life. But there will come a time
when the asset’s performance significantly deteriorates. Assets that are approaching (or exceeding)
their expected life expectancy will experience age-related wear-and-tear or outright failure.
Equipment that fails to meet production quotas or efficiency standards ultimately impacts an entire
organization’s success. In this situation, it is time to renew or dispose of the asset.

An asset management software will provide enough data over the lifecycle of an asset to inform the
best way to move forward in the wake of asset failure. A rule of thumb is that if the cost to repair
an asset is more than the cost to replace it, it is most cost-efficient to dispose of (aka
“decommission”) the asset. Once an asset is decommissioned, the asset’s life cycle completes and
begins again at stage 1.

Short Note on Bathtub Curve

Bathtub Curve is generally graph that is used to graphically demonstrate run-to-failure maintenance
strategy. This curve simply represents overall life cycle of assets and failure rate of overall
population of assets over time. Bathtub curve is usually considered to be one of most useful and
essential graphical representations of reliability of assets.

Assets are usually equipment, components, or parts of equipment, etc. With help of such graph, one
can determine and predict when failure usually happens and then identify root causes. After
identifying root causes, one can prevent failure from occurrence by simply fixing root causes. It is
being named bathtub curve simply because curve resembles longitudinal section of bathtub.

Different Sections of Curve :

Bathtub curve is basically divided into three different sections. Asset generally faces these three
sections all over their lifetime. Three different sections of bathtub curve are given below –
 Infant Mortality Section :
Infant mortality section is simply referred to as early failure period. By seeing curve, one can easily
understand that in this section, asset is beginning with its usage for first time. Initially, failure rate
i.e. probability of failure occurrence is very high and with increasing time, there is a gradual decrease
in failure rate. In this section, failures are usually occurred due to manufacturing defects, installation
issues, design issues, material defects, or improper start-up procedures, etc.

 Normal Life Section :

Normal life section is simply referred to as usual life period or steady-state operation. It can also be
said that this section represents normal operating life of assets. By seeing curve, one can easily
understand that in this section, asset is still experiencing failure but at normal and low rate. In this
section, failures are usually occurred due to overloading, hidden defects, collision with other objects,
mistakes of personnel, etc.

Failure occurrence generally depends upon function and condition of particular asset.
Therefore, for different asses, failure rate can be different. In this period or section, an asset
can be remaining unchecked for some time as chances of failure occurrence is low during this
period and therefore resources can be used wherever required. Failure rate is almost constant
in this phase. One can say that failures generally occur due to random events.

 Wear-out Section :
Wear-out section is simply referred to as aging period. By seeing curve, one can easily understand
that in this section, there is gradual increase in failure rate of assets with increasing time. Number of
failures occurrence experienced by assets generally increases with time. In this section, failures are
usually occurred due to fatigue, wear, gradual deterioration, corrosion, etc. This period simply
represents end of life cycle of assets.
LEAN PRODUCTION