Chapter

01
OPERATIONS MANAGEMENT:
as a competitive weapon

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
 Process Innovation Game Changer
Pull
Jidoka: Autonomation Game Player Push
Disruptive
Market-Driven Innovation

Marketing Driven
Supply Chain
Intelligence

Vector vs
Scalar
Forecasting JIT / Lean
Think and then take decision,
why to think after taking decision: DECISION INTELLIGENCE

Either do RIGHT THINGS or do THINGS RIGHT

Yes, No or Po?
अच्छा लो, बुरा लो, डिसीजन लो।
Need vs Requirement
 Very Satisfied
redial button on telephone receiver; spare change holders/
soft drink holders in automobiles; one-touch recording
button on some VCRs;

Providing delighters (unknown exciting

characteristics) can get you market leadership.
Performs Very Poorly

Performs Very Well

You are “OK if Providing satisfiers
you don’t (performance needs) can keep
provide them. you in a market

Actual Performance

Customer Satisfaction

Very Unsatisfied Customer Satisfaction Strategies

 Learnings

Needs must be understood,

Requirements should be listened
 Today’s market demands…

Quality Being RIGHT

Competitiveness
Dependability Being CONSISTENT

Speed Being FAST

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

 The Best

What makes a world class organization?

 Teaser

ICE War Jidoka: Autonomation

Wastivity

DESIGN INSPIRED BY NATURE

 Teaser

Wastivity Jidoka: Autonomation

Hoshin Kanri
Kaizen
SMED

Kanban
TPM
 The Others
Intel
Andy Grove
Tick Tock Strategy
Competing with Self

Sony
Akio Morita
Made in Japan
500 Years American Express

Changing Environment..Changing
Apple Strategies..
Game Changer
NASA
McDonald’s
QSVC
Supplier Development
Google
Microsoft
Blue Ocean
Strategy

James Cameron Bharat Forge

2009 Avatar $2.8 bn
1997 Titanic $2.1 bn
 The Failures
Fujifilm / Kodak
Polaroid Camera / Sony
Xerox
Capabilities Discovered : not Developed

T-Series
Washing Powder, Zee TV

Sony, BMG, Crescendo

Napster, spiderweb

RIN (HLL)
Mera Naam Joker
Bobby
Nirma, Wheel

New Coke / Coca Cola

Napster, spiderweb
 What is Operations Management?
What is Operations? Operations management (OM) is the set of
a function or system that
transforms inputs into outputs of activities that creates value in the form of goods
greater value
and services by transforming inputs into outputs
What is a Transformation TYPES OF TRANSFORMATIONS
Process?
a series of activities along a value • Physical: as in manufacturing operations
chain extending from supplier to
customer. • Locational: as in transportation operations
activities that do not add value are • Exchange: as in retail operations
superfluous and should be eliminated
• Physiological: as in health care
What is Operations
• Psychological: as in entertainment
Management?
design, operation, and improvement of • Informational: as in communication
productive systems

Value Engineering / Value Analysis

 Use  Esteem  Time  Place
  Service, product design……………..
 Quality management…………………
 Process, capacity design…………..
 Location …………….…………………
Ten  Layout design ………………………..
Critical Decisions  Human resources, job design……..
 Supply-chain management…………
 Inventory management …………….
 Scheduling ……………………………
 Maintenance ………………………….
Differences within sectors are often greater than the
differences between sectors

Financial services
An account management Financial analyst advising a
centre at a large retail bank client at an investment bank

Furniture manufacturing
Mass production of Craft production of reproduction
kitchen units ‘antique’ furniture

Hotels
Value-for-money Lobby of an international
hotel luxury hotel
 A Typology of Operations: 4 V’s
how many products or services are
Low Volume High
High
made by the operation?

how many different types of products or

High Variety Low
services are made by the operation?

High Variation in Low

how much does the level of demand
demand change over time?

how much of the operation’s internal

High Visibility Low
working are ‘exposed’ to its customers?
 A Typology of Operations
Implications Implications
Low repetition High repeatability
Each staff member performs more Specialization
of job Low High
High
Less systemization
Volume Capital intensive
Low unit costs
High unit costs

Well defined
Flexible
Routine
Complex
High Variety Low Standardized
Match customer needs
Regular
High unit costs
Low unit costs

Changing capacity Stable

Anticipation Routine
Flexibility High
Variation in Low Predictable
In touch with demand demand High utilization
High unit costs Low unit costs

Time lag between production and

Short waiting tolerance consumption
Satisfaction governed by Standardization
customer perception
Low contact skills
Customer contact skills needed High Low
Received variety is high Visibility High staff utilization
Centralization
High unit costs
Low unit costs
Effectiveness
Efficiency
Productivity
 Types of Productivity
Single Factor Productivity Output is of quality nature

Output Output Output

Labor Materials Capital

Multifactor Productivity
Output Output
Labor + Materials + Overheads Labor + Energy + Capital

Total Factor Productivity

Goods and Services Produced
All inputs used to produce them
 Competitiveness
The degree to which a nation can produce goods and services that meet
the test of international markets while simultaneously maintaining or
expanding the real incomes of its citizens.
A firm is competitive if it can produce products [...] of Global Competitiveness Ranking
superior quality or lower costs than its domestic and
international competitors. 1. Switzerland
(US-President`s Commission on Industrial Competitiveness 1985, S. 6) 2. Sweden
Competition Within Industries Increases When 3. Singapore
4. United States
 Firms are relatively equal in size and resources
5. Germany
 Products and services are standardized 6. Japan
 Industry growth is slow or exponential 7. Finland
8. Netherlands
Barriers to Entry Economies of scale 9. Denmark
 Learning curves Capital investment India 51 10. Canada
 Access to supply and distribution channels China 27

Manufacturing vs. services

Degree of Servitization
 Manufacturing and Manufacturing
Service Employment Employment
and Production

Services as
% of GDP
Tangibility Spectrum
Differences Between Goods and Services

Intangibility Heterogeneity

Simultaneous

Perishability Production &

Consumption
 Five Eras of
Operations Management

Journey of
Operations Management
Chapter

02
OPERATIONS STRATEGY

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://www.mks507.vistapanel.net Operations Management Area
 Today’s market demands…

Quality Being RIGHT

Competitiveness
Dependability Being ON TIME

Speed Being FAST

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

Strategy and Issues During a Product’s Life
 Categories of Business Strategies
First-to-Market Strategy Market Segmentation
 Products available before competition or Specialist Strategy
 Strong applied research capability needed
 Can set high price to skim market or set lower price to gain market share  Focuses on servicing
 Marketing emphasis: primary demand generation small pockets of
demand with special
applications of the
Second-to-Market Strategy technology.

 Quick imitation of first-to-market companies  Entry in the growth

 Less emphasis on applied research and more emphasis on development stage of the product
 Learn from first-to-market’s mistakes life cycle or later as
 winning customers from the technological innovator, advanced Features the market is
segmented.

 Requires a strong
Late-to-Market Strategy capability in applied
engineering and
 Wait until market becomes standardized and large volumes demanded
flexibility in
 Compete on basis of costs instead of product features manufacturing.
 Research efforts focus on process development versus product development
 product dominant design
 Getting The Fit Right
‘Fit’ means that the operation’s resources and processes are aligned with the requirements of its markets.

Strategic Fit
Market for
REQUIREMENTS reconciliation


Operation’s resource
CAPABILITY
 Process Design Strategies

Product-Process Matrix Service-Process Matrix

 Continuous Production
A paper manufacturer produces a continuous sheet
paper from wood pulp slurry, which is mixed, pressed,
dried, and wound onto reels.

Mass Production
Here in a clean room a worker performs quality checks on a
computer assembly line.

Batch Production
At Martin Guitars bindings on the guitar frame are installed by hand and
are wrapped with a cloth webbing until glue is dried.

Project
Construction of the aircraft carrier USS Nimitz was a huge project that took
almost 10 years to complete.
 Service Factory
Electricity is a commodity available continuously
to customers.
 Airlines  Trucking  Hotel  Resorts

Mass Service
A retail store provides a standard array of products from
which customers may choose.
 Retailing  Wholesaling  Schools

Service Shop
Although a lecture may be prepared in advance, its delivery is affected by
students in each class.
 Hospitals  Auto Repair Shops

Professional Service
A doctor provides personal service to each patient based on extensive training in
medicine.
 Physicians  Lawyers  Accountant  Architects
 Chapter

03
Product and Service Design

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
 Form Design
(How the Product Looks)

Cellular Personal
Safety Alarm

Personal Computer
Functional Design (How the Product Performs)
 Reliability
 Probability product performs
intended function for
specified length of time

 Maintainability
 Ease and/or cost or
maintaining/repairing product

 System Availability,
MTBF
 SA =
MTBF + MTTR
 Production Design
 Part of the preliminary design phase

 Simplification

 reducing number of parts, assemblies, or options in a product

 Standardization

 using commonly available and interchangeable parts

 Modularity

 combining standardized building blocks, or modules, to create

unique finished products
 Design Simplification
(a) The original design (b) Revised design (c) Final design

Assembly using One-piece base & Design for

common fasteners elimination of push-and-snap
fasteners assembly
 Taguchi’s
Quality Loss Function
 Chapter

04
Process Design & Technology

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
3.1 Process Chart Symbols
Flow process charts for processing expense reports at
Intel before and after improving the process
Components of e-Manufacturing (A Technology Primer)
Product Technology
Computer-aided design (CAD) Creates and communicates designs electronically

Group technology (GT) Classifies designs into families for easy retrieval and modification

Computer-aided engineering (CAE) Tests functionality of CAD designs electronically

Collaborative product commerce (CPC) Facilitates electronic communication and

exchange of information among designers and suppliers

Product data management (PDM) Keeps track of design specs and revisions for the life
of the product

Product life cycle management (PLC) Integrates decisions of those involved in

product development, manufacturing, sales, customer service, recycling, and disposal

Product definition Confines products “built” by customers who have selected among various
options, usually from a Web site
Process Technology
 Standard for exchange of product model data (STEP) Set
standards for communication among different CAD vendors; translates CAD data into
requirements for automated inspection and manufacture

 Computer-aided design and manufacture (CAD/CAM) Electronic

link between automated design (CAD) and automated manufacture (CAM)

 Computer aided process & planning (CAPP) Generates process plans

based on database of similar requirements

 E-procurement Electronic procurement of items from e-marketplaces, auctions,

or company websites
Manufacturing Technology
 Computer numerically control (CNC) Machines controlled by software code to perform a variety of
operations with the help of automated tool changers; also collects processing information and quality data
 Flexible manufacturing system (FMS) A collection of CNC machines connected by an automated
material handling system to produce a wide variety of parts
 Robots Manipulators that can be programmed to perform repetitive tasks; more consistent than workers but less
flexible
 Conveyors Fixed-path material handling; moves items along a belt or overhead chain; “reads” packages and
diverts them to different directions; can be very fast
 Automatic guided vehicle (AGV) A driverless truck that moves material along a specified path; directed
by wire or tape embedded in floor or by radio frequencies; very flexible

 Automated storage and retrieval system (ASRS) An automated warehouse—some 26 stores

high—in which items are placed in a carousel-type storage system and retrieved by fast-moving stacker cranes;
controlled by computer

 Process Control Continuous monitoring of automated equipment; makes real-time decisions on ongoing
operation, maintenance, and quality

 Computer-integrated manufacturing (CIM) Automated manufacturing systems integrated through

computer technology; also called e-manufacturing
Information Technology
 Business – to –Business (B2B) Electronic transactions between businesses usually
over the Internet
 Business – to –Customer (B2C) Electronic transactions between businesses and
their customers usually over the Internet
 Internet A global information system of computer networks that facilitates communication and data
transfer
 Intranet Communication networks internal to an organization; can be password (i.e., firewall)
protected sites on the Internet
 Extranet Intranets connected to the Internet for shared access with select suppliers, customers,
and trading partners
 Bar Codes A series of vertical lines printed on most packages that identifies item and other
information when read by a scanner
 Radio Frequency Identification tags (RFID) An integrated circuit embedded
in a tag that can send and receive information; a twenty-first century bar code with read/write capabilities
Information Technology
 Electronic data interchange (EDI) A computer-to-computer exchange of business documents over a
proprietary network; very expensive and inflexible

 Extensive markup language (XML) A programming language that enables computer – to -

computer communication over the Internet by tagging data before its is sent

 Enterprise resource planning (ERP) Software for managing basic requirements of an enterprise,
including sales & marketing, finance and accounting, production & materials management, and human resources

 Supply chain management (SCM) Software for managing flow of goods and information among a
network of suppliers, manufacturers and distributors

 Customer relationship management (CRM) Software for managing interactions with customers
and compiling and analyzing customer data

 Decision support systems (DSS) An information system that helps managers make decisions
includes a quantitative modeling component and an interactive component for what-if analysis
 Chapter

05
Location Strategies

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
 Objective of Location Strategy

Long-term decisions
Difficult to reverse
Affect fixed & variable costs
• Transportation cost
“Hub-Spoke” concept • As much as 25% of product price
Fed-Ex • Other costs: Taxes, wages, rent

Small # of larger facilities (Inward / Outward Cost)

vs. Point to Point
larger # of smaller facilities (Inward / Outward Cost) Hub and Spoke
For a service firm like a retail store or fast-food restaurant, even placing the facility
on the wrong side of the road can spell disaster if the location is inaccessible.
 Industrial Location Service Location
Decisions Decisions

Cost focus Revenue focus

 Revenue varies little between
 Costs vary little between market
locations
areas
Location is a major cost factor Location is a major revenue factor
Affectsshipping & production costs (e.g., labor)
 Affects amount of customer contact
Costs vary greatly between locations
 Affects volume of business
Factors affecting COUNTRY

Factors affecting REGION

Factors affecting SITE

 Factor-Rating
Method
 Most widely used location
technique
 Useful for service & industrial
locations
 Rates locations using factors
 Tangible (quantitative)
factors
 Example: Short-run & long-run
costs

 Intangible (qualitative)
factors
 Example: Education quality, labor
skills

• Identify important factors

• Weight factors (0.00 - 1.00)
• Subjectively score each factor (0 - 100)
• Sum weighted scores
 Center-of-Gravity
Technique
 Locate facility at center of
geographic area
 Based on weight and distance
traveled establish grid-map of area
 Identify coordinates and weights
shipped for each location
 Load-Distance
Technique

 Compute (Load x Distance)

for each site
 Choose site with lowest
(Load x Distance)
 Distance can be actual or
straight-line
Method of cost-
Locational Break-Even
volume analysis Analysis
used for industrial
locations

Steps
• Determine fixed &
variable costs for
each location
• Plot total cost for
each location (Cost
on vertical axis,
Annual Volume on
horizontal axis)
• Select location with
lowest total cost for
expected production
volume
• Must be above break-
even
Brown & Gibson Model for Site Selection

Location measure for ith site

LMi = CFi x (λ x OFMi + (1-λ) x SFMi)
Critical Factor, 0 or 1

Objective Factor

Subjective Factor
Obj factor decision weight 0< λ <1
 Chapter

06
Facility Layout

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
 Facility Layout
configuration of the total facilities,

principles of plant layout

Over all integration
(not only) machines
Minimum distance
(but also) employee, work stations,
Flow
storage areas, internal walls
Cubic space
 Minimize material-handling costs
 Utilize space, labor efficiently Satisfaction & safety
 ease of working and maintenance
 Eliminate bottlenecks flexibility
 Reduced congestion of man, machines, materials
 Eliminate wasted or redundant movement
 Greater safety and reduced health hazards for workers
 Provide flexibility to adapt to changing conditions
 Types of Facility Layout
• Product layouts
– arrange activities in line according to sequence of
operations for a particular product or service
• Process layouts
– group similar activities together according to process
or function they perform
• Fixed-position layouts
– are used for projects in which product cannot be
moved
 Product Layout
every item to be produced follows the same sequence of operations from
beginning to end, moving from one specialized tool and operation to another
 Process Layout
In a process layout, similar machines or functions are grouped together; for
example, all drill presses may be positioned in one area and all lathes in another.

universities and hospitals are usually organized

around process layouts;

separate locations exist for classrooms, libraries,

offices, and computer.
 Fixed-Position Layout
Arrangements where (resources)
labor, materials, and equipment are brought to the job site (big size)

Agriculture, Mining, Ship, Construction

Typical of projects
Highly skilled labor
Often low fixed costs
Typically high variable costs
 Chapter

07
Job-design

mks@mdi.ac.in
mks Prof. (Dr.) Manoj K Srivastava
http://mks507.vistapanel.net Operations Management Area
 To develop job structures that meet the
requirements of the organization and its
technology and satisfies the jobholder’s
personal and individual requirements
 Work study
Method study Work
measurement
Systematic recording / Establishment of standard time
critical examination of for a normal worker in a normal
existing and proposed ways working environment
of doing work
motion time
 Principles of motion economy

Use of the human body

Arrangement of the work place

Design of tools & Equipments

Considerations
Selection
Economic, technical, human
All relevant facts, by direct observations Record
Use charts to present information convenient to analyze
Critically ask four question in each category
Purpose
Place What*
Sequence
Why Examine
What* else What / where / when /who / how
Person What* should
Means
The most effective, economical, practical method within constraints
Principles of motion economy Develop
Eliminate / combine /rearrange / simplify
New method as standard practice Install
That standard practice by regular routine checks Maintain
Systems Approach

Reduce waste…or enhance output…

 Teaser

Wastivity Jidoka: Autonomation

Hoshin Kanri
Kaizen
SMED

Kanban
TPM
 The Failures
Fujifilm / Kodak
Polaroid Camera / Sony
Xerox
Capabilities Discovered : not Developed

T-Series
Washing Powder, Zee TV

Sony, BMG, Crescendo

Napster, spiderweb

RIN (HLL)
Mera Naam Joker
Bobby
Nirma, Wheel

New Coke / Coca Cola

Napster, spiderweb
 Chapter

01
Cases

mks mks@mdi.ac.in
Prof. (Dr.) Manoj K Srivastava
http://mks507.iwebs.ws Operations Management Area
 Titanic:
What went wrong?
 15 Apr 1912
2.75 hours

Temp: -20 C
2.75 hours

17 knots,
3.5 hours

1985

Arthur Rostron
 Intel:
Strategic Innovation
Tick

Tock

Manufacturing process technology

tick-tock model
Microarchitectures
Tick
Intel's tick-tock model maintains an innovation cadence in
Tock microprocessor manufacturing and microarchitecture with
new advancements every other year.
 IDEO:
The Power of Design