OPERATIONS

MANAGEMENT
BY PROF. MD. ABDUL RAZAQUE
IMPORTANCE OF OPERATIONS
MANAGEMENT
Marketing IS Finance

Current Financial
operating Capital investments planned measures
Customer demands
capabilities
Information
Customer feedback Inventory levels needs Capital requirements Budgets
Output rates
Need for new products Technological
Capacities capabilities Stockholder
requirements

Operations
Management

Operations Labor skills

Billing information capabilities available
Product specs Labor
Current requirements Labor
Process Design
performance Technological costs
improvements requirements
measures trade-offs

Human
Accounting Engineering Resources
OPERATIONS AS SERVICE

 Definition: It is defined as the design, operation, and

improvement of the systems that create and deliver the
firm’s primary products and services.
OPERATIONS AS SERVICE

 In manufacturing, services can be decided into two

categories: core services and value-added services.
 Core Services: Components of core service are quality,
flexibility, speed and price.
 Value-added service: In case of external customer, it
makes their life easier and in case of internal customers,
it helps them to carry out their functions smoothly.
OPERATIONS AS SERVICE

 Components of value-added services

 Information: It is the ability to furnish critical data on
product performance, process parameters, and cost to
internal departments and to external customers, who
use the data to improve their own operations or
products.
 Ex – Providing quality datasheet to field sales and service
personnel.
OPERATIONS AS SERVICE

 Problem – Solving: It is the ability to help internal and

external groups solve problems, especially in quality.
 Ex – Raritan Corporation, a metal rod fabricator, sends
factory workers with salespeople to troubleshoot quality
problems.
 Sales Support: It is the ability to enhance sales and
marketing efforts by demonstrating the technology,
equipment or production systems the company is trying
to sell.
 Ex – Eureka Forbes
OPERATIONS AS SERVICE

 Field Support: It is the ability to replace defective parts

quickly or to replenish stocks quickly to avoid downtime
or stockouts.
 Ex – Caterpillar, The Limited
RESPONSIBILITIES OF AN OPERATIONS
MANAGER
 Policy Formulation: Companies must operate and
function on a daily basis within a prescribed set of
guidelines.
 Policies can also include disciplinary actions taken when
employees break company rules.
 Planning: Operations managers tend to determine
which products are bought and sold, what prices they
are bought or sold for and to whom they will be
marketed.
 RESPONSIBILITIES OF AN OPERATIONS
MANAGER
 Controlling Resources: Operations managers oversee the
implementation of payroll policies and procedures, how much
employees are paid, how funds are allocated for benefits
packages and how other funds are spent to keep the company
operating smoothly on a day-to-day basis.
 Communication: Operations manager has to communicate with
other management professionals within the organization to keep
the company running smoothly, and communicating with other
companies and organizations with which the company does
business.
 They also put together reports and financial statements that are
essential for other top executives within the company or
organization.
OPERATIONS STRATEGY

 It involves decisions that relate to the design of a process

and the infrastructure needed to support the process.
 It is concerned with setting broad policies and plans for
using the resources of a firm to best support its long – term
competitive strategy.
 Process design includes selection of appropriate
technology, sizing the process over time, role of inventory
in the process and locating the process.
OPERATIONS STRATEGY

 Infrastructure decision involves the logic associated with

the planning and control systems, quality assurance and
control approaches, work payment structures and
organization of the operations function.
 It can be viewed as part of a planning process that
coordinates operational goals with those of the larger
organization.
COMPETITIVE DIMENSIONS

 Cost or Price
 Quality: Design quality and process quality.
 Design Quality: It relates to the set of features which the
product or service contains. Ex - Bicycles
 Process Quality: It relates to the reliability of the product.
 Goal is to produce defect-free products or service
 Adherence to specifications.
COMPETITIVE DIMENSIONS

 Delivery Speed. Ex – Time required for on-site repair

service.
 Delivery Reliability: Firm’s ability to supply the product or
service on or before a promised delivery due date.
 Ex – In automobile industry, supplier of tires should
provide needed quantity and quality for each day’s car
production.
COMPETITIVE DIMENSIONS

 Coping with changes in demand

 Flexibility and NPD speed: It refers to the ability of a
company to offer a wide variety of products to its
customers.
 Other product-specific criteria
 Technical liaison and support: A supplier may be expected
to provide technical assistance for product development,
particularly during the early stages of design and
manufacturing.
COMPETITIVE DIMENSIONS

 Other product-specific criteria

Meeting a launch Date: Coordinating between
different firms, before a launch date.
Supplier after-sales support: Availability of
replacement parts, and possibly, modification of
older, existing products to new performance levels.
Other Dimensions: These typically include such factors
as colors available, size, weight, location of the
fabrication site, customization available and product
mix options.
PROCESS ANALYSIS

 A process is, any part of the organization that takes

inputs and transform them into outputs that, it is hoped,
are of greater value to the organization than the original
inputs.
 Cycle Time: It is the average time between completions
of successive units.
 Utilization: It is the ratio of the time that a resource is
actually activated relative to the time that it is available
for use.
TYPES OF PROCESSES

 Single Stage
 Multiple Stage
 Buffering: It refers to a storage area between stages
where the output is stored prior to being used in the next
stage.
 Blocking: It occurs when the activities in the stage must
stop because there is no place to deposit the item just
completed.
 Starving: It occurs when the activities in a stage must
stop because there is no work.
TYPES OF PROCESSES

 Bottleneck: Stage which limits the process.

 Make-to-order: Order is activated in response to a
customer order.
 Make-to-Stock: Storing standard products that can be
delivered quickly to the customer.
 Hybrid: Combination of both make-to-order and make-
to-stock.
MEASURING PROCESS PERFORMANCE
MEASURING PROCESS PERFORMANCE

 Efficiency: Ratio of actual output of a process related to

some standard.
 Run time: Time required to produce a batch of parts.
 Set up time: It is the time required to prepare a machine to
make a particular item.
 Operation time: It is the sum of set up time and run time for
a batch of parts that are run on a machine.
 Throughput time: It includes the time that the unit spends
actually being worked on together with the time spent
waiting in the queue.
MEASURING PROCESS PERFORMANCE

 Throughput Rate: It is the output rate that the process is

expected to produce over a period of time.
 Little’s Law: It’s a mathematical relationship between
throughput rate, throughput time, and the amount of
work-in-process inventory, which is useful in calculating
the total throughput time for a process.
MEASURING PROCESS PERFORMANCE
PROCESS THROUGHPUT TIME
REDUCTION
 Perform activities in parallel.
 Ex – NPD is performed by integrated teams.
 Change the sequence of activities.
 Reduce Interruptions.
 Ex – Purchase orders can be prepared every other day.
MANUFACTURING PROCESS SELECTION

 Process selection: It refers to the strategic decision of

selecting which kind of production process to have in
the manufacturing plant.
 Types of processes
 Conversion Process. Ex – Converting iron ore into steel.
 Fabrication Process: Changing raw materials into some
specific form. Ex – metal sheet into car body.
MANUFACTURING PROCESS SELECTION

 Assembly process. Ex – Putting toothpaste into tubes.

 Testing Processes: These are not strict processes but are
widely mentioned as a standalone major activity.
 Process flow structures: How a factory organizes material
flow using one or more of the processes listed above.
 Job Shop: Production of small batches of a large
number of different products, most of which require a
different set or sequence of processing steps. Ex –
printing firms, airplane manufacturers, machine tool
shops etc.
ASSEMBLY LINE
MANUFACTURING PROCESS SELECTION

 Batch Shop: It is employed when a business has relatively

stable line of products, each of which is produced in
periodic batches, either to custom order or for inventory.
 Assembly Line: Production of discrete parts moving from
workstation to workstation at a controlled rate, following
the sequence needed to build the product. Ex –
Assembly of toys and appliances.
 Continuous Flow: Conversion or further processing of
undifferentiated materials such as petroleum, chemicals,
or beer.
SERVICE PROCESS SELECTION AND
DESIGN
 Nature of services:
 Everyone is an expert on services.
 Services are idiosyncratic.
 Quality of work is not quality of service.
 Most services contain a mix of tangible and intangible
attributes that constitute a service package.
 Services can take the form of cycles of encounters
involving face-to-face, telephone, electromechanical
and or mail interactions.
SERVICE TRIANGLE
OPERATIONAL CLASSIFICATION OF
SERVICES
SERVICE – SYSTEM DESIGN MATRIX
SERVICE – SYSTEM DESIGN MATRIX

 Buffered Core: Physically separated from the customer

 Permeable System: Penetrable by the customer via
phone or face-to-face contact
 Reactive System: Both penetrable and reactive to the
customers’ requirements.
 Characteristics of workers, operations and innovations
relative to the degree of customer/service contact
SERVICE DESIGN TYPES

 Production line Approach

 Pioneered by McDonald’s, it treats the delivery of fast
food as a manufacturing process rather than a service
process.
 Apart from marketing and financial skills, the company
carefully controls “the execution of each outlet’s central
function – the rapid delivery of a uniform, high-quality
mix of prepared foods in an environment of obvious
cleanliness, order and cheerful courtesy.”
SERVICE DESIGN TYPES

 Key aspects of McDonald’s operations

 The French fryer allows cooking of the optimum number
of french fries at one time.
 Wide-mouthed scoop is used to pick up the precise
amount of French fries for each order size.
 Storage space is expressly designed for a predetermined
mix of prepackaged and premeasured products.
 Cleanliness is pursued by providing ample trash cans in
and outside of each facility.
 Hamburgers are wrapped in color-coded paper.
SERVICE DESIGN TYPES

 The Self Service Approach

 The personal Attention Approach
 Ritz – Carlton Hotel
RITZ CARLTON HOTEL
CHARACTERISTICS OF SERVICE SYSTEM

 Each element of the service system is consistent with the

operating focus of the firm.
 It is user – friendly.
 It is robust.
 It is structured so that consistent performance by its
people and systems is easily maintained.
CHARACTERISTICS OF SERVICE SYSTEM

 It provides effective links between the back office and

the front office so that nothing falls between the crack.

 It manages the evidence of service quality is such a way

that customers see the value of the services provided.

 It is cost-effective.
JOB DESIGN

 Definition: It may be defined as the function of

specifying the work activities of an individual or group in
an organizational setting.
 Its objective is to develop job structures that meet the
requirements of the organization and its technology and
that satisfy the jobholder’s personal and individual
requirements.
FACTORS AFFECTING JOB DESIGN

 Quality control as part of the worker’s job.

 Cross – training of workers.
 Employee involvement and team approaches to design
and organizing work.
 Extensive use of temporary workers
 Creation of alternative workplaces such as shared
offices to supplement or replace traditional office
settings.
FACTORS AFFECTING JOB DESIGN

 Automation of heavy manual work.

 Organizational commitment to providing meaningful
and rewarding jobs for all employees.
 “Informating” of ordinary workers through email and the
internet thereby expanding the nature of their work and
their ability to do it.
JOB DESIGN DECISIONS
WORK METHODS

 The responsibility of developing work methods is

generally assigned to staff department or in large firms, is
typically assigned to industrial engineering department.

 The principal approach to the study of work methods is

through charts such as operations charts, worker –
machine charts, simultaneous motion charts and activity
charts in conjunction with time study.
WORK METHODS

 The choice of charting method depends upon the task’s

activity level i.e. whether the focus is on –
 A production process
 The worker at a fixed workplace
 A worker interacting with an equipment
 A worker interacting with other workers
WORK METHODS DESIGN HEADS
WORK METHODS

 A production process
 The objective in studying a production process is to
identify delays, transport distances, and processing time
requirements to simplify the entire operation.
 Approach is to flowchart the process and then ask
questions.
WORK METHODS

 Worker at a fixed place

 When the nature of the job is primarily manual (such as
sorting, inspecting or making entries), the focus of work
design is on simplifying the work method and making the
required operator motions as few and as easy as
possible.
WORK METHODS

 Worker interacting with equipment

 The focus is on efficient use of the person’s time and
equipment time.
 When the operator’s working time is less than the
equipment run time, a worker - machine chart is a
useful tool.
 If the operator can operate several machines, then the
problem is to find the most economical combination of
operator and equipment.
WORKER MACHINE CHART FOR A GOURMET COFFEE STORE