Knowledge Material for

PGP 2019-21 Batch

Part 1/2

Ashana | Megha | Pooja | Rachit | Satyajit

omega@iimk.ac.in
https://www.linkedin.com/in/omega-iimk/
https://www.facebook.com/Omega.IIMK
 Table of contents

About Omega ....................................................................................................... 01

Let’s Get Started ................................................................................................... 03

Responsibilities of OM ......................................................................................... 06

Process Fundamentals .......................................................................................... 07

Total Quality Management ...................................................................................18

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 Overview

This material focuses mainly on the very basic concepts in the field of Operations
Management. The sole purpose is to welcome you at God’s Own Kampus on behalf of
Omega, the very own Operations Interest Group and introduce you to the amazing world
of operations.

What is Omega?

Before we talk about Operations Management as a specialization, we would like to inform

you briefly what is Omega and what does Omega do as an Interest Group at IIM K.

Management is ‘The art of getting things done’. Well, someone got the definition of
Management wrong. Every activity undertaken by an organization is to either increase
its top line or bottom line or both. How to get it done is what Operations is all about.
Hence Operations defines management. From process improvements using Six Sigma
to supply chain management, from throughput rate to route-to-market, from aggregate
planning to inventory management, Operations encompasses it all. In the vast ocean of
knowledge, we may know very little about Operations only as a business function.

Omega, the Operations Interest Group of IIM Kozhikode was founded in 2003-04. It aims
to keep track of the latest in the field of Operations Management. A forum for Operations
Enthusiast to exchange ideas, debate about challenges and emerge with innovate
solutions. Omega focuses on providing a cutting-edge platform to students by giving
them a platform to engage with industry experts through guest lectures, work with
companies through live projects and sharpen their skills through competitions. We have
a few ideas that we would like to share and at the same time we would want to hear a lot
more from you.

We have our coordinators and members who will support you during your summer
placements, guide you in competitions and conduct special sessions as and when required.

Like all other Clubs, Committees and Interest Groups, Omega is an interest group
recognized by the college administration but all its activities are driven by the students
and for the students at Kampus. College academic / administration body helps in all
the way possible but the sole responsibility and accountability lies with Omega.

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 Highlights of some of our activities are as follows:

• Benchmark Six Sigma Green Belt Program: A 3-day classroom training cum
certification program on Lean Six Sigma by external agency. The certainty of the
program depends on students’ demand and situational circumstances.
• Operations Simulation Workshop: An opportunity for the operations enthusiasts to
gain knowledge and experience before joining the industry
• Opfeat: A 2-round case competition among the brightest operation minds from all
the B-schools in India
• Management-Engineering Collaboration Initiative: An event organized in
association with Mechanical Engineering Association (MEA) at NIT Calicut for
knowledge sharing and talent upbringing among the graduates
• Guest Lectures by eminent personalities on contemporary operation
related innovations & initiatives
• Sessions by industry experts for giving their insights on different topics
• Operations Management using emerging technologies in SCM etc. and their
application in industry
• Assistance to students in summer and final placements by providing preparatory
material which is a compendium of all necessary and relevant concepts in
operations
• Career help for people interested in Operations Management
• Trivia quizzes in the field of Operations Management
• Ops Facebook page: We maintain an active Facebook page which has a large
member base where in we discuss trends and development in the field of Operations
Management. https://www.facebook.com/Omega.IIMK
• Developing and Conducting themes for paper writing during Backwaters
• Ops Summit – A 3-day summit which includes paper presentation competitions,
coming in of industry experts and research paper presentations and ops quiz and
simulation games
• Managing the SCOPE (Supply Chain Consultants at IIMK) program, in which
industry research is done
• Conducting Information session on APICS (CSCP & CPIM)/PMI/Six Sigma
Certifications
• Helping Industry Interaction Cell (IIC) in the organization of the flagship annual
event “Horizons” in the field of Operations Management

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Let’s get started!!

OM – Operations Management

Management of ANY activities/processes that create goods and provide services

(Or)
A systematic approach to address all the issues pertaining to the transformation process that
converts some inputs into output that are useful and could fetch revenue to the organization.
(B.Mahadevan)

Operations managers focus on managing the “5 Ps” of the firm’s operations: People,
Plants, Parts, Processes, and Planning and control systems

Importance of OM
Finance

Operations

Marketing HRM

Operations Management Functions

Product Design and Development Forecasting

Process Design Production planning and control
Quality Management Supply Chain Management
Location and Layout of Facility Maintenance Management
Materials Management Inventory Management

Capacity Planning Continuous Improvement

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 Why to study OM?

Cost and profit breakdown at a typical manufacturing company shows that 20% of their
cost comes from Operations Management

As a result, Profit can be made by

Reducing variable cost per unit by improving operational efficiency

Adding better value to the output through operational effectiveness and thus
charging higher price to increase the revenue.

Management of operations is critical to create and maintain competitive advantage.

The active role of operations is to understand how Inputs become Outputs after some
Transformation (Process or Operation).

Let us try and understand this by a food processing example

Inputs Transformation Outputs

Energy, Raw vegetables Cleaning Clean vegetables

Energy, Metal sheets Cutting/Rolling/Welding Cans

Energy, Vegetables Cutting/Chopping Cut vegetables

Energy, Water, Vegetables Cooking Boiled vegetables

Energy, Cans, Boiled vegetables Placing Can food

Manufacturing vs Service Operations

Manufacturing and service operations are different with respect to:

Customer contact
Uniformity of input
Labor content of jobs
Uniformity of output
Measurement of productivity
Production and delivery
Quality assurance
Amount of Inventory

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Manufacturing includes

Tangible products

Automobiles, Refrigerators, Aircrafts, Coats, Books, Sodas

While Services include

Repairs, Improvements, Transportation, Regulation

Regulatory bodies: Government, Judicial system, FAA, FDA

Entertainment services: Theatres, Sport activities
Exchange services: Wholesale/retail
Appraisal services: Valuation, House appraisal
Security services: Police force, Army
Financial services: Banks
Education: Universities, K-12 schools

Manufacturing vs Service Operations

Characteristic Manufacturing Service

Output Tangible Intangible

Customer contact Low High

Uniformity of output High Low

Labor content Low High

Uniformity of input High Low

Measurement of productivity Easy Difficult

Opportunity to correct quality problems Easy Difficult

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 Responsibilities of an Operations Manager

In a nutshell – “Matching Supply with Demand”

Supply Side Demand Side

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Process Fundamentals
The basic building block of creating goods and services is the process. Production
usually involves multiple processes. The basic idea is that a process takes inputs (raw
materials, labor, equipment/technology, knowledge, energy) and creates output that
are of greater value to end users.

Elements of a Process

Consider a simple process – a coffee shop where customers enter in the shop. The first
task would be to take the customer’s order and collect payment. The second task would
be to make the drink the customer ordered and then hand it over to them.

Take order
Input: Make Order
(30
Labor, (90 Seconds) Customiz
Seconds)
Coffee, e Order
Etc

Inspection /
Control

More generally we can think of the system as having the following characteristics

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 Essentially the process shows three things:
Tasks, flows, and storage
Storage is where things are being held. In this example we have inputs waiting to be
used, and final goods waiting to be “shipped”. We also need to store information. One
could also imagine storage between tasks. So, if the patient first sees the nurse who takes
his/her vital signs and then they go to a second waiting area to see the doctor, we could
show this second waiting area as a storage stage between task 1 and 2.
Tasks are things are being done.
The arrows show Flows. There are two types of flows: physical flows shown by solid
arrows, and information flows shown by dotted arrows.

Measuring the Performance of a Process

Task Time – the time it takes to complete a specific task within a process. In the above
example they are 30 and 90 seconds, respectively.

Cycle Time (CT) – the average time between completions of successive units. “How long
does it take to finish one unit?” In the above example, the cycle time will be 90 seconds.

Throughput time – the length of time spent in the process. How long does it take to produce
a unit of output? Note that this is different from cycle time. In above example, throughput
time is 30+90 = 120 seconds

Productivity - It is the ratio of output from the process to input given to the process to
check how well the process is utilizing the given inputs while delivering the output.

Productivity is a measure of how well the inputs are utilized, hence it can be measured for
each factor of production. (i.e land, labor, capital).

Efficiency – It is the ratio of actual output to the standard output to be obtained from the
process

Capacity – It is the maximum rate of output from the process and is measured in units of
output per unit of time. Typically, this is easy to define but hard to measure.

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 Cycle time determines a process’ capacity, which limits the volume of a product that the process

is able to produce. Throughput time, however, is an important determinant of the speed of a

process.

Cycle time and capacity are related – if the cycle time of a task is 30 minutes per unit,
then the capacity of that task is 2 units per hour. In the example since cycle time is 90
seconds per unit, then capacity will be 40 per hour (60*60=3600 seconds in an hour, so
3600/90 = 40 cups per hour).
Capacity Utilization – how much output was actually achieved relative to actual capacity.
If the capacity of a process is 500 units per day and on a given day 480 are produced,
then capacity utilization is 480/500 = 96%.
Utilization – It is the ratio of the input the process actually used in creating the output to
the amount of input available for use. This can be in terms of labor – the ratio of hours
worked on a process to total hours – or in machine utilization – the percentage of time a
machine is used over a time period
Flexibility – This measure how long it takes to change the process so that it could produce
a different output, or use a different set of inputs
Bottleneck – is the factor which limits production. Often the task with the longest cycle
time is the bottleneck. Alternatively, the availability of labor (or waiting for other inputs)
can determine a bottleneck. The bottleneck affects both the process cycle time and
capacity and so it is important to identify where bottlenecks exists in a process. In above
example task 2, making the cup of coffee is the bottle neck. We can improve the first step
all we want and it will not change our cycle time or our capacity.
Theory of Constraints – an approach to management that focuses on whatever impedes
progress toward the goal of maximizing the flow of total value added.

(Please read “The Goal” series by Dr. E. Goldratt to know more about Theory of Constraints and

Production management.)

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 Idle Time – the time when useful work is not being performed.

Takt time– It is the rate at which we need to produce our product in order to satisfy
customer demand.
Suppose that 60 customers come to our coffee shop per hour, then we need to be able to
serve one patient per minute. Thus, our cycle time needs to be less than or equal to our
Takt time. So, in the example above we have troubles, since we need to produce 60 cups
per hour, but our process is designed to only produce 40. We would need to focus on the
second task. Note it has nothing to do with the workers – unless the reason it is taking
90 seconds is because the worker is lazy or incompetent. Firing the barista and hiring a
“more qualified” one would not change anything. Likewise, performance incentives
(either carrots or sticks) would not have much affect either. The only way to fix the
problem would be to change the system. This is a key observation of modern process
improvement theory.

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 The Production System

Input (Material or
Human Conversion System Output (Product or service)
Resource)

A resource required to A production system that A direct outcome (actual product

manufacture a product or converts Inputs into outputs; or service) or indirect outcome
service also, the production process or (taxes, wages, salaries) of a
technology production system

Basic Production System

Push and Pull Systems

All production and inventory control systems deal with fundamentally only two
decision variables – when to order and how much to order. It is easiest to understand
“push” and “pull” systems for managing these two variables in a logistics context.

Suppose, for example that we have a factory supplying two regional warehouses. With a
push system, the people (and the computer) at the factory decide when and how much
to ship to each of the two warehouses based on forecasted demand and inventory
position

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 information. With a pull system, we disaggregate the problem so that people (and the
computer) at each warehouse decide when and how much to order from the factory
based on their need. (Of course, the factory might not have the inventory, so some of
these orders might not be filled).
Made to stock- Goods and services manufactured basically for the Push strategy. These

systems are more important in supply chain management context.

Production Processes:

Intermittent Production

System

Production is performed on a start-and-stop basis, such as for the manufacture of made-to-

order products.

Mass Production

A special type of intermittent production process using standardized methods and single-
use machines to produce long runs of standardized items.

Mass Customization

Designing, producing, and delivering customized products to customers for at or near the
cost and convenience of mass-produced items.

Mass customization combines high production volume with high product variety.

Elements of mass customization:

Modular product

design Modular

process design

Agile supply networks

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 Continuous Production Processes

A production process, such as those used by chemical plants or refineries, that runs for
very long periods without the start-and-stop behavior associated with intermittent
production.

Enormous capital investments are required for highly automated facilities that use
special- purpose equipment designed for high volumes of production and little or no
variation in the type of outputs.

Facility Layout

The configuration of all the machines, employee workstations, storage areas, internal
walls, and so forth that constitute the facility used to create a firm’s product or service.

Product Layout

A production system design in which every item to be produced follows the same
sequence of operations from beginning to end, such as an assembly line.

Product Layout for Carwash

Process Layout

A production system design in which similar machines or functions are grouped together
A manufacturing example of a process layout is a machine shop.

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 Fixed-Position Layout

A production system arrangement in which the product being built or produced stays at
one location and the machines, workers, and tools required to build the product are
brought to that location as needed, as for the building of ships or other bulky products.

Cellular Manufacturing Layout

A combination of process and product layouts, in which machines and personnel are
grouped into cells containing all the tools and operations required to produce a
particular product or family of products.

Used in Flexible Manufacturing Systems as an integral part of FMS

The biggest problem faced by an Operations manager in industry is the variability.

This could be in customer demand, production process, product dimensions or any

other variation in raw materials, product prices etc.

Operations manager has a daunting task of keeping this variability low in order to keep
the system working in a predictable and profitable manner. This, though sounds simple
but is a very challenging task.

In order to keep the variability under control, operations manager has to be on his toes
all the time to understand the macroeconomic and demand-supply scenario.

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 Quality- It is the degree to which the product is fit for its intended use. It is an
important aspect of operations recognized world over and given the most importance
by many management gurus. In many cases it acts as a competitive advantage to a firm.
Quality control is seen as a major function in manufacturing organizations.

Total Quality Management (TQM)

TQM (Total Quality Management) is the philosophy of continuous improvement of
quality to get the right thing, first time and every time. Dr. Joseph Juran, Shewart, Dr.
Ishikawa and many other quality gurus have heavily contributed to the TQM philosophy.

Some of the important quality control tools are Cause and effect/Ishikawa/Fish-bone
diagram, Pareto chart, Checklists, Histograms, Control Charts etc

Goal of TQM – Do the right things RIGHT the first time and every time.

Each process or activity is an opportunity for a defect to occur

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 The TQM System

The 6 Concepts of TQM

Kaizen (Continuous Improvement)

Employee Empowerment

Taguchi Concept

Benchmarking

Just-In-Time (JIT)

Knowledge of TQM tools

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 Kaizen - Continuous Improvement

Defines management's role for continuously encouraging and implementing

small improvements in individuals and organization

Break complex process into sub-processes and then improve the sub-process

Continuous improvements in small increments

Does not rely on more expensive or sophisticated equipment and techniques

The 5S Method to Continuous Improvement

Seiri : Sorting

Seiton: Stabilizing or straightening out

Seiso: Sweeping or clean-up

Seiketsu: Standardizing

Shitsuke: Sustaining the practice

The Continuous Process Improvement Cycle

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 Employee Empowerment

Getting employees involved in product and process improvements

– 85% of quality problems are due to process and material

Techniques

– Build communication networks that include employees

– Create formal team structures

– Build a high moral organization

– Move responsibility to employees

Quality Circles

Group of employees who meet regularly to solve problems

Trained in planning, problem solving and statistical methods

Often led by a facilitator

Very effective when done properly

Taguchi Concepts

Experimental design methods to improve product and process design

– Identify key component and process variable affecting product variation

Taguchi concept

– Quality robustness
– Quality loss function
– Target oriented quality

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 Eg. Quality loss Function

Benchmarking

Selecting best practices to use as a standard for performance

– Determine what to benchmark

– Form a benchmark team

– Identify benchmarking partners

– Collect and analyze benchmarking information

– Take action to match or exceed the benchmark

Just-In-Time (JIT)

In order to minimize inventory and costs associated with it, organizations follow Just-
in- Time manufacturing. Here they manufacture only when the customer places an order
for the product. All the players in supply if follow JIT then at each link in the chain,
inventory will be zero and thus the supply chain can achieve greater overall profits.

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 • Relationship to quality

– JIT cuts the cost of quality but never compromises on quality itself

– JIT improves process and product quality

– Better quality means less inventory and better, easier-to-employ JIT systems

• Inventory costs money and hides process and material problems

• It is the ‘pull system’ of production scheduling including supply management

– Production only when signaled

Lean Manufacturing- Waste in any activity of life is undesirable; same is the case
with business. In manufacturing, there are 8 types of wastes (Muda as they are known
in Japanese)

They are: Waste of

Manpower, Overproduction, Transportation, Inventory, Defects, Waiting, Motion,

Over/Non-value adding processing

Every company in order to improve its profits tries to minimize these wastes. Lean
manufacturing is; thus, a production philosophy is used in order to reduce the waste
and utilize the available resources optimally to get the maximum productivity.

In order to minimize inventory and costs associated with it, organizations follow Just-
in- Time manufacturing. Here they manufacture only when the customer places an
order for the product. If all the players in supply chain follow JIT then at each link in
the chain, inventory will be zero and thus the supply chain shall achieve greater overall
profits.

Supply Chain Management- It is a set of approaches utilized to efficiently integrate

suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and
distributed at the right quantities, to the right locations, and at the right time, in order
to minimize system wide costs while satisfying service level requirements.

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 SCM aims to achieve fit between customer demand and the organization strategy known
as strategic fit. Responsive (timely delivery, high cost) vs efficient (delayed delivery, low
cost) supply chain is the trade-off to be solved by operations manager. Supply chain can
be analyzed looking at various points depending upon the organization strategy such as
cost, quality and flexibility.

Evolution of supply chain:

Ford’s Black T-Model Supply chain

Efficient Toyota Supply Chain

Dell Supply Chain

~ End of the document ~

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