Operations Management

Introduction
Sanjay Choudhari
Indian Institute of Management
Indore
Operations as a Transformation Operations as a Transformation
Process Process
The
transfor-
mation
process
Input
transformed
resources
Material
Information
Customers
Input
transforming
resources
Facilities
Staff
Environment
Environment
OUTPUT
INPUT
Output
Goods
Output
Services
Output: Goods & Services Output: Goods & Services
Figure 1.3
Tangible
Output can be inventoried
Low customer contact
Consumption after
production
Quality is evident
Intangible
Output cannot be inventoried
High customer contact
Consumption are production
simultaneous
Quality difficult to judge
More like a
manufacturing
process
More like
a service
process
Illustration of Input Illustration of Input Output Output
Transformation Process Transformation Process

Input Resources Transformation
Process
Output
Automobile
Raw material, workers,
equipment
Manufacturing Finished car
Airline
Aircraft, pilots, crew,
passengers
Move passengers Transported
passengers
Department
Store
Goods for sale, staff,
customer
Display goods, sell
goods, Sales advice
Customers & goods
together
Dentist
Dental surgeons,
equipments, patients
Check & treat teeth,
give preventative
advice
Patients with
healthy teeth &
gums
Zoo
Zoo keepers, animals,
customers
Display animal,
educate customers,
breed animal
Entertained
/informed
customers
Police
Police officers,
information, public
Prevent / solve crime,
arrest criminal
Lawful society,
public with feeling
of security
Input: Transformed Resources Input: Transformed Resources
Mixture of 1) Material, 2) Information & 3) Customers
Predominantly
Materials processors
Predominantly
Information processors
Predominantly
Customer processors
All mfg. operations
Mining & extraction
Retail operations
Warehouse
Postal services
Container shipping line
Trucking company
Accountants
Bank headquarters
Market research company
Financial analysts
News service
Univ. research unit
Telecom company
Hairdressers
Hotels
Hospitals
Mass rapid transports
Theatres
Theme Parks
Dentists
Input: Transforming Resources Input: Transforming Resources
Two types: 1) facilities and 2) staff
Ferry company Paper
manufacturer
Radio station
Types of
Facilities
Ships
On-board navigation
equipment
Dry docs
Material-handling equipment
On-shore building
Warehouses
Pulp-making vats
Paper-making
machines
Reeling equipment
Slitting equipment
Packing machinery
Steam-generating
boilers, warehouses
Broadcasting
equipment
Studios and studio
equipment
transmitters outside
broadcast vehicles
Types of
Staff
Sailors, Engineers
Catering staff
On-board shop assistants
Cleaners
Maintenance staff
Operators
Chemists & chemical
engineers
Process plant engineers
Disc jockeys
Announcers
Technicians
Different types of Different types of
transformation processes transformation processes
Material processors Information
processors
Customer
processors
Physical
properties
Mfg. operations,
mining & extrac.
Hairdressers, plastic
surgeons
Informational
properties
Bank HQs,
accountants
Possession Retail operations Financial analysis,
market research
Location Postal service, port &
distrbtn
Telecom company Public transport, taxi
Storage/Accomod
ation
Warehouse Library Archives Hotels
Physiological
state
Hospitals & other
health care
Psychological
state
Education, theatres,
psychoanalysts
Performance of Process Output / Performance of Process Output /
Competitive Priorities Competitive Priorities
COST Definition Process Considerations Example
1. Low-cost
operations
Delivering a service or a
product at the lowest
possible cost
Processes must be designed and
operated to make them efficient
Local Manuf.,
Accer
QUALITY
2. Top quality
Delivering an outstanding
service or product
May require a high level of
customer contact and may require
superior product features
Apple
3. Consistent
quality
Producing services or
products that meet design
specifications on a
consistent basis
Processes designed and
monitored to reduce errors and
prevent defects
McDonalds
TIME
4. Delivery
speed
Quickly filling a
customers order
Design processes to reduce lead
time
Dell , Pizza
5. On-time
delivery
Meeting delivery-time
promises
Planning processes to increase
percent of customer orders
shipped when promised
FedEx, Pizza
6. Development
speed
Quickly introducing a new
science or a product
Cross-functional integration and
involvement of critical external
suppliers
Mobile companies

FLEXIBILITY Definition Process Considerations Example
7. Customizatio
n
Satisfying the unique
needs of each customer
by changing service or
products designs
Low volume, close customer
contact, and easily reconfigured
Thermax
8. Variety
Handling a wide
assortment of services or
products efficiently
Capable of larger volumes than
processes supporting
customization
Flipkart
9. Volume
flexibility
Accelerating or
decelerating the rate of
production of service or
products quickly to
handle large fluctuations
in demand
Processes must be designed for
excess capacity
The United States
Postal Service
(USPS)
Performance of Process Output / Performance of Process Output /
Competitive Priorities Competitive Priorities
Production System Design Production System Design
Process Choice
Strategy
Competitive
Priorities
Strategic
fit
The process chosen should reflect the desired
competitive priorities
Product Product--Process Matrix Process Matrix
For manufacturing organization it brings together
1. Product customization & Volume
2. Process characteristics
Process choices include job, batch, line, and
continuous flow processes
Production include make-to-order (MTO),
assemble-to-order (ATO), and make-to-stock
(MTS)
Product Product--Process Matrix Process Matrix
Project (construction)
Job Shop (machine shop)
Batch
Process (apparel)
Assembly
Line (auto assembly)
Continuous
Process
(sugar mill)
Very
Jumbled
Flow
Rigid
Flow
One of
a kind
Low Volume
Many Products
High Volume
Few Products
Product Product--Process Matrix Process Matrix
Poor Good
Manufacturing Deliverable
Materials in Manufacturing Materials in Manufacturing
RM : Raw materials

WIP : Work in Process

FG : Finished good
Examples ?
Process Summary Process Summary
MTS
ATO MTO
Customer Interface point
Finished Products
Work-in-Process (WIP)
Raw Materials
Customer response time
Low Moderate
High
Continuous flow
Line
Batch
Line
Batch
Job
Batch
Cost
Delivery speed

Product varieties
Delivery speed
Flexibility (i.e.
customization)
Top quality
On-time delivery
Dell,
Bajaj
Dell,
Subways
Thermax
Operations Management
is
the process of managing resources to deliver
Goods & Services to Customers