OPERATIONS

MANAGEMENT
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Operations Managemen
Introduction
 What do You
understand by
the Statement : Customer-
Centric Organization ?
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Customer Retention - Key

Issues

A Recent Survey says –

• “More than 90 % of unsatisfied customers
do not complain”

• “It costs 5 times more to get a new

customer than it does to keep a current
customer”
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Customer Expectations /
Desire
What do Customers look for in
Any Product or Service?

• Right Price (affordability factor)

• Right Quality (reliability factor)
• Right Delivery (service factor)
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Dawn of a New Era ……………..

Old Perceptions New Realities

• Price : Seller’s Cost plus Profit • Price : What customer is willing to pay

• Quality : Standards determined • Quality : Standards determined by

by the Seller the customer

• Marketing : A distinct Functional • Marketing : Is Everything / The whole

Activity Business is Marketing

• Focus on What is good for the • Focus on What is good for the
company customer

• Customer’s freedom of choice • Customer’s freedom of choice

limited unlimited

• Customer doesn’t know a thing • Customer is the King

 Management : Definition
Inputs Transformation Outputs

Labour, Economic system Goods

Capital, transforms inputs to and
Materials outputs /CONVERSION Services
PROCESS

Feedback loop

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Operations Management is:

The business function responsible

for planning, coordinating, and
controlling the resources needed to
produce products and services for a
company
Operations Management is:

 A management function
 An organization’s core function
 In every organization whether
Service or Manufacturing, profit or
Not for profit
What is the Role of OM?

 OM Transforms inputs to outputs

 Inputs are resources such as

People, Material, Money & Machines

 Outputs are goods and services

OM’s Transformation
Process
Typical Organization Chart
 OM in the Organization Chart

Finance Operations
Operations Marketing

Plant
Plant Mfg.
Mfg. Supply
Supply Mgr.
Mgr.
Manager
Manager Manager
Manager

Manufacturing,
Manufacturing, Production
Production control,
control,
Quality
Quality assurance,
assurance, Engineering,
Engineering,
Purchasing,
Purchasing, Maintenance,
Maintenance, etc
etc
Manufacturers vs Service
Organizations
 Services:  Manufacturers
 Intangible product :
 Product cannot be  Tangible product
inventoried  Product is inventoried
 High customer  Low customer contact
contact  Longer response time
 Short response time  Capital intensive
 Labor intensive
 Characteristics of Goods

 Tangible product
 Consistent product
definition
 Production usually
separate from
consumption
 Can be inventoried
 Low customer
interaction
Characteristics of Service

 Intangible product
 Produced and consumed at
same time
 Often unique
 High customer interaction
 Inconsistent product
definition
 Often knowledge-based
 Frequently dispersed
 Similarities for Service /
Manufacturers
 Both use technology
 Both have quality, productivity, &
response issues
 Both must forecast demand
 Both can have capacity, layout, and
location issues
 Both have customers, suppliers,
scheduling and staffing issues
OM Decisions
 All organizations make decisions
and follow a similar path
 First decisions very broad – Strategic
decisions

Strategic Decisions – set the direction for
the entire company; they are broad in
scope and long-term in nature
 OM Decisions (contd.)
 Following decisions focus on specifics -
Tactical decision
 Tactical decisions: focus on specific day-to-
day issues like resource needs, schedules, &
quantities to produce
 are frequent
 Strategic decisions less frequent
 Tactical and Strategic decisions must
align
OM Decisions (contd.)
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Operations as a Process

Input Transformation Transformation Output

Fabrication Assembly

Fabrication: making the parts

Assembly: putting the parts together
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SCOPE OF OPERATIONS
MANAGEMENT
• Location of Facilities (Mfg. / Storage)
• Plant Layout & Materials Handling
• Product / Process Design
• Production Planning & Control
• Quality Control / Quality Assurance
• Supply Management
• Maintenance Management
Functions of Operations Managers
Planning
• Plan product and service mix
• Location & Capacity Planning
• Plan equipment procurement
• Generate Master Schedule – What products to make and when
• Decide number of shifts/ number of hours

Organizing
• Centralized or Decentralized operations
• Design hierarchical structure
• Assign responsibility for every activity
• Organize supplier/ subcontractor networks
• Establish maintenance policies
Functions of Operations Managers
Controlling
• Compare costs to budget
• Inspect the Quality levels
• Compare work progress to schedule
• Compare actual labor hours to standards
Directing
• Establish provisions of union contracts
• Establish personnel policies
• Establish employment contracts
• Issue Job assignments and instructions
Functions of Operations Managers
Motivating
• Provide specific objectives / Goals & challenges
• Encourage through praise, recognition of job achieved
• Motivate through tangible Reward System
Coordinating
• Coordinate through use of forecasts and master schedule
• Recommend corrective actions / necessary improvement on
performance achieved
• Report, inform and communicate (through MIS Reports)
Training and development
• Support employees in training programs
• Encourage suggestion schemes
• Facilitate people involvement/ empowerment
 Historical Development of
OM
 Industrial revolution Late 1700s
 Scientific management Early 1900s
 Human relations movement 1930s-60s
 Management science 1940s-60s
 Computer age 1960s
 Environmental Issues 1970s
 JIT & TQM* 1980s

*JIT= Just in Time, TQM= Total Quality Management

 Historical Development of
OM (contd.)
 Reengineering 1980s
 Global competition 1990s
 Flexibility 1990s
 Time-Based Competition
1990s
 Supply chain Management 1990s
 Electronic Commerce 2000s
 Outsourcing & flattening of world 2000s
For long-run success, companies must place much
importance on their operations
Phases in Evolution Of Production Methodology
CRAFT Craftmen used to make customer specific products :
Production but low production rate

MASS
Production Henry Ford producing the same product without any
(Assembly line) customisation but at cheaper rate – due to high
productivity of the Assembly line

BATCH Customisation upto some extent by offering a range of products

Production
(O.R. Techniques like Optimum Batch Size , Sequencing etc.)

Flexible
Manufacturing Capability of production lines to switchover to another product :
System
PULL system of demand
(TPS)

LEAN
Manufacturing Waste Reduction to reduce cost , Integration of suppliers
(JIT) & customers, Pull system of Manufacturing, Kanban etc.
Today’s OM Environment
 Customers demand better quality,
greater speed, and lower costs
 Companies implementing lean system
concepts – a total systems approach to
efficient operations
 Recognized need to better manage
information using ERP and CRM systems
 Increased cross-functional decision
making
THANK YOU.!

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