Productions Operations Management

1. Productions Operations Management Chapter 1 Book: Principles of Operations Management By Raturi and Evans

2. Introduction • Operation Management • A business activity that involves design, development, maintenance of systems and processes that transforms raw materials, technology and labor into Goods and Services • An auto mobile factory • A hospital serving patients

3. OM’s Purpose • OM purpose is to support the organization’s business strategy and help create and sustain competitive advantage.

4. Principles of OM • Designing the VALUE CHAIN for manufacturing goods and delivering services • Design and manage processes to support the value chain e-g product design, purchasing, materials management, storage, customer support, transportation, Tech development

5. Principles of OM (Continued) • Control and improve the value chain and support processes to achieve and sustain high level of business and organization performance • Managing interface with other functional areas such as marketing, finance an HR to derive competitive Operations functions

6. OM and Competitiveness • OM is there to develop unique competencies for the company e-g creative workforce, strong distribution network or ability to develop a new product rapidly • OM is linked directly with Product Development, Process Improvement, TQM, Supply chain management Technology and Innovation • OM function is to contribute to Organization by achieving lower costs, ever improving quality, shorter time and increased responsiveness

7. Case Study: BMW • BMW’s plant in South Carolina • Established in 23 months for X5 and Z3 • First X5 in 35 Months • 22 Color Options for Z3 • 123 Center Consoles options • 26 Wheel Options • Aim to reduce Product Development Cycles by 30 Percent

8. Case Study: BMW • How was it possible • BMW a master of logistics • Flexibility raising up to management and people • Two 10 hours shifts • Attention to quality • Tech Innovation • SAP R3’s beta test site • Guidance from HONDA

9. Products • Products • Tangible items • Can be transferred or stored • Can be consumed after a while • Services • Intangible • Cannot be transferred or stored • Perishable • Contracts • Business Exchange • Neither services nor goods are transferred • Goods and services will be provided on a need basis.

10. Case Study: Ritz Carlton • One of the largest hotels in United States • Uses more than one source to get information • Travel partners, focus groups, credit card companies • Customer satisfaction and performance date are gathered daily • Complaints, claims, feedback from sales force • Travel publications and even psychological studies on customers. • Each production and support process has an executive owner at head office and at the hotel. • Responsible for the improvement and success of the process

11. Case Study: Ritz Carlton • What it achieves • Minute attention to detail is achieved e-g language preference, customer’s culture etc. • Error free products and services • Opportunities for improvement • Sense of authority for the employees • Increased morale for employees; satisfaction for the customer.

12. Comparison

13. Processes and Supply chain • Process is a set of linked activities that perform some manufacturing or service task to add value • Basic unit for defining and managing operations • Key processes • Primary processes; Value Creation process. Benefits for customers and company by creating products. Such as design, manufacturing and service delivery • Support Process which does not add direct value to the product. • One core process can be secondary process for another

14. Finance/Accounting Production and Inventory data Capital budgeting requests Capacity expansion and Technology plans Budgets Cost analysis Capital investments Stockholder requirements Orders for materials Production and delivery Schedules Quality Requirements Design/ Performance specs Material availability Quality data Delivery schedules Designs Product/Service Availability Lead-time estimates Status of order Delivery schedules Sales forecasts Customer orders Customer feedback Promotions Operations Suppliers Marketing Personnel needs Skill sets Performance evaluations Job design/work measurement Hiring/firing Training Legal requirements Union contract negotiations Human Resources Operations as the Technical Core

15. Processes 2 3 1 4 5 The Value Chain Feedback-Internal and external customers • Inputs • Workers • Managers • Equipment • Facilities • Materials • Services • Land • Energy • Outputs • Services • Goods Feedback-Information on performance

16. Key concepts • External Suppliers • Internal Suppliers • Make or buy Decision • Backward Integration • Forward Integration • Supply Chain • Procure, Transform, Deliver • Make to Order : Pull System • Make to Stock : Push System

17. Case Study Merrill Lynch Primary Processes Support Processes • Business Development • Marketing • Client Services • Under Writing • Lending Services • Post Closing/Secondary marketing • Loan Administration • Technology • Information Systems • Human Resources • Administrative Services • Legal Services • Business Services

18. Key Decisions in OM • Structural Decisions • Product and Service Design • Process Design and Technology • Capacity • Facilities • Infrastructural Decisions • Quality • Inventory and Supply Chain • Schedules • Project Management

19. Structural Decisions

20. Infrastructural Decisions

21. Infrastructural Decisions (Contd.)

22. Evolution of OM • Lean Manufacturing • 1950 introduced by Toyota • Focuses on • Getting the product right the first time, • Minimum inventories • Continuous improvement • High Quality • Flexible productions • Minimizing all sorts of waste

23. Evolution of OM (Contd.) • Agile Manufacturing • Pre Requisite is Lean Manufacturing • Blends automation and IT • Economically produce a variety of products in any quantity • Adaptable to rapid changeovers

24. Challenges in OM • To improve quality eight factors are considered • Partnering • Learning Systems • Adaptability and Speed of Change • Environmental Sustainability • Globalization • Knowledge Focus • Customization and Differentiation • Shifting Demographics