Chapter One Introduction An operation is defined in terms of the mission it serves for the organization, technology it employs and

the human and managerial processes it involves. Operations in an organization can be categorised into manufacturing operations and service operations. Manufacturing operations is a conversion process that includes manufacturing yields a tangible output: a product, whereas, a conversion process that includes service yields an intangible output: a deed, a performance, an effort. In short, The term operation management is composed of two terms operation and management. Operation refers to activities and management refers to art of managing activities (planning, organising, controlling, implementing and feedback).

Definition Chase, Richard B. Aquilano J. and Jacobs F. Robert, Operation management may be defined as the design, operation and improvement operations of the production systems that create the firms primary products or services. Managing Operations Managing operations can be enclosed in a frame of general management function. Operation managers are concerned with planning, organizing, and controlling the activities which affect human behaviour through models. Planning Activities that establishes a course of action and guide future decision-making is planning. The operations manager defines the objectives for the operations subsystem of the organization, and the policies, and procedures for achieving the objectives. This stage includes clarifying the role and focus of operations in the organizations overall strategy. It also involves product planning, facility designing and using the conversion process. Organising Activities that establishes a structure of tasks and authority. Operation managers establish a structure of roles and the flow of information within the operations subsystem. They determine the activities required to achieve the goals and assign authority and responsibility for carrying them out. Controlling Activities that assure the actual performance in accordance with planned performance. To ensure that the plans for the operations subsystems are accomplished, the operations manager must exercise control by measuring actual outputs and comparing Page 1 of 12

them to planned operations management. Controlling costs, quality, and schedules are the important functions here. Behaviour Operation managers are concerned with how their efforts to plan, organize, and control affect human behaviour. They also want to know how the behaviour of subordinates can affect managements planning, organizing, and controlling actions. Their interest lies in decision-making behaviour. Models As operation managers plan, organise, and control the conversion process, they encounter many problems and must make many decisions. They can simplify their difficulties using models like aggregate planning models for examining how best to use existing capacity in short-term, break even analysis to identify break even volumes, linear programming and computer simulation for capacity utilisation, decision tree analysis for long-term capacity problem of facility expansion, simple median model for determining best locations of facilities etc. Types of production system The production system can be categorised into a. Intermittent (break down) production systems b. Continuous production systems Intermittent system: In this system, products and services are produced in small amount to meet the demand of customer rather than keeping them in stock for future use. There will be imbalanced work centres, highly skilled manpower, immediate change in planning, scheduling and high unit costs are main features of intermittent production system. The inputs and conversion process are regularly managed and changed as per the design size and quantity of input. Work shop, Hospitals, Furniture manufacturing, movie making, building, bridges are example of intermittent system. Types of intermittent system a. Job or Unit production system b. Batch production system. i. Job shop or unit production system: In this system a single unit or a job is completed by one or group at one time in accordance to the order of customer e.g. making furniture, bridge. ii. Batch production system: Batch production system: In this system production is done on large amount of similar products at one time. The more products will be kept for future demand of customer. The batch production starts after finishing of first batch only. Eg. Producing electronic goods, book printing.

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b. Continuous Production System: In this system, production is carried out accordance to sales forecast and stock position. Here, raw material, process and products are standardised. Eg. Production of soaps, biscuits, noodles, Approaches to operation management The approaches are Classical Management Behavioural Management Modelling Management

Classical Management This concept is based on core production systems. In another word, this concept explains about the increment of production / output. This management concept has following theories i. ii. Scientific Management Administrative Management

i. Scientific Management: The scientific management refers to the use of scientific method to determine the one best way for a job to be done. This theory concentrated on the problems of shop-floor management and efficiency of production. This theory was specially based on Standardisation, Time and Task Study, Pay Incentives, Close Cooperation, between Managers and Operatives. ii. Administrative Management: Scientific Management Theory focuses on jobs of individual employee but administrative management focuses on managing the total organisation.

Functions of operation manger As we know, operations function is about producing the right amount of a good or service at the right time, of the right quality and at the right cost to meet customer demand. Operation managers are responsible for managing activities of the production of goods and services. The responsibilities include managing the operations process of designing, planning, controlling, improving, and operations strategy. Their indirect responsibilities include interacting with managers in other functional areas within the organization whose roles have an impact on operations ; marketing, accounting, human resource and engineering. In short, the main responsibilities of operation managers are a. Asset management- this category includes buildings, facilities, equipment and other direct operation functions. Page 3 of 12

b. Cost management this category includes managing cost regarding to producing goods, services related with directly or indirectly to get resources or transforming them or delivery mechanism. Operation management (production) function / system Fig1: Simple model
Input Monitoring

Monitoring

Output Monitoring

Inputs - Raw materials - Capital - Information - Entrepreneurship

Processing

Output - Goods - Services

Feedback (Deviation)

Fig2; General model for operation management

Difference between manufacturing and service operations Difference between manufacturing and service operations Base Manufacturing Service Yields tangible output. Eg. Pen Yields intangible output. Eg. Output nature Teaching

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Output consumption

Can be consumed over time. Eg. Taking lunch after some time Need more capital and uses more machines and equipment than labour. Eg. Investment, Plant/equipment customer contact frequency is lower Customer follow up will be less because once order is placed, then customers do not need to follow more Complex type of quantitative methods should be applied to check performance It needs local, national and international market It needs complicated process

Immediately consumable e.g laughing Need low capital investment, machines, equipment and uses more labour Higher frequency of customer contact Customer follow up will be higher for conversion process

Work nature

Frequency of public relation Customer follow up Performance measurement Market accessible Production process

Simple qualitative methods can applied to measure the performance It needs local but very limited market It needs simple process.

Input-Transformation-Output relationship for typical systems System Hospital Restaurant Automobile factory College / university Department store Primary inputs Patients Customers Engine parts, sheet steel School graduates Shoppers Resources Nurses, medical supplies, equipment Food, waiter, environment Tools, equipment, workers Teachers, books, classrooms Display, stock of goods, sales persons Crews, ticketing systems, scheduling Transformation Physical healthcare Hygienic food Fabrication and assembly of vehicles Imparting knowledge Promote products, fill orders (exchange) Fly to destination Output Healthy person Satisfied customers High quality vehicles Graduated students Sales to satisfy customers Safe and on time landing (delivery)

Airlines

Passengers

Historical development of operation management Adam Smith first introduced a concept about division of labour Charles Babbage emphasises the concept about base for pay fixation F.W. Taylor introduced a concept of scientific management technique (selection, training, high pay for high productivity, safety needs, right person to right job, training, scientific tools, job security) Page 5 of 12

Henry Gantt introduced a concept of Gantt Chart Walter Shewart introduced a concept of Statistical Quality Control.
Ancient Era (Trade Focus) Specialisation of labour Use of standardised parts Scientific Management Gantt Chart Motion study Queuing theory Cost base -Early Era (Before 1900s) Assembly line movement Statistical techniques PERT / CPM Quality base-Lean era (1990s to 2000s) JIT concept CAD TQM Malcolm Baldrige Award Kanban Welfare Base-Mass customisation (After 200s) Globalisation Use of internet ISO Supply chain management E-commerce WTO

Historical summary of operations management Date 1776 1799 1832 1900 1900 1901 1915 1927 1931 1935 1940 1946 1947 1950 1951 1960 1970 Contribution Specialization of labour in manufacturing Interchangeable parts, cost accounting Division of labour by skill; assignment of jobs by skill; basics of time study Scientific management time study and work study developed; dividing planning and doing of work Motion of study of jobs Scheduling techniques for employees, machines jobs in manufacturing Economic lot sizes for inventory control Human relations; the Hawthorne studies Statistical inference applied to product quality: quality control charts Statistical sampling applied to quality control: inspection sampling plans Operations research applications in World War II Digital computer Linear programming Mathematical programming, on-linear and stochastic processes Commercial digital computer: large-scale computations available. Organizational behaviour: continued study of people at work Integrating operations into overall strategy and policy, Computer applications to manufacturing, Scheduling and control, Material requirement planning (MRP) Quality and productivity applications from Japan: robotics, CAD-CAM Contributor Adam Smith Eli Whitney and others Charles Babbage Frederick W. Taylor Frank B. Gilbreth Henry L. Gantt F.W. Harris Elton Mayo W.A. Shewart H.F. Dodge & H.G. Roming P.M. Blacker and others. John Mauchlly and J.P. Eckert G.B. Dantzig, Williams & others A. Charnes, W.W. Cooper & others Sperry Univac L. Cummings, L. Porter W. Skinner J. Orlicky and G. Wright W.E. Deming and J. Juran.

1980

Scope of operation management Operations management concerns with the conversion of inputs into outputs, using Page 6 of 12

physical resources, so as to provide the desired utilities to the customer while meeting the other organisational objectives of effectiveness, efficiency and adoptability. It distinguishes itself from other functions such as personnel, marketing, finance, etc., by its primary concern for conversion by using physical resources. Following are the activities which are listed under production and operations management functions:

Facilities location Location of facilities for operations is a long-term capacity decision which involves a long term commitment about the geographically static factors that affect a business organization. It is an important strategic level decision-making for an organization. It deals with the questions such as Where our main operations should be b ased? The selection of location is a key-decision as large investment is made in building plant and machinery. An improper location of plant may lead to waste of all the investments made in plant and machinery equipment. Hence, location of plant should be based on the companys expansion plan and policy, diversification plan for the products, changing sources of raw materials and many other factors. The purpose of the location study is to find the optimal location that will results in the greatest advantage to the organization. Plant layout and material handling Plant layout refers to the physical arrangement of facilities. It is the configuration of departments, work centres and equipment in the conversion process. The overall objective of the plant layout is to design a physical arrangement that meets the required output quality and quantity most economically. Page 7 of 12

Material Handling refers to the moving of materials from the store room to the machine and from one machine to the next during the process of manufacture. It is also defined as the art and science of moving, packing and storing of products in any form. It is a specialised activity for a modern manufacturing concern, with 50 to 75% of the cost of production. This cost can be reduced by proper section, operation and maintenance of material handling devices. Material handling devices increases the output, improves quality, speeds up the deliveries and decreases the cost of production. Hence, material handling is a prime consideration in the designing new plant and several existing plants. Product design Product design deals with conversion of ideas into reality. Every business organization has to design, develop and introduce new products as a survival and growth strategy. Developing the new products and launching them in the market is the biggest challenge faced by the organizations. The entire process of need identification to physical manufactures of product involves three functions: marketing, product development, and manufacturing. Product development translates the needs of customers given by marketing into technical specifications and designing the various features into the product to these specifications. Manufacturing has the responsibility of selecting the processes by which the product can be manufactured. Product design and development provides link between marketing, customer needs and expectations and the activities required to manufacture the product. Process design Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities. Hence, the important decisions in process design are to analyse the workflow for converting raw material into finished product and to select the workstation for each included in the workflow. Production planning and control Production planning and control can be defined as the process of planning the production in advance, setting the exact route of each item, fixing the starting and finishing dates for each item, to give production orders to shops and to follow up the progress of products according to orders. The principle of production planning and control lies in the statement First Plan Your Work and then Work on Your Plan. Main functions of production planning and control includes planning, routing, scheduling, dispatching and follow-up. Planning is deciding in advance what to do, how to do it, when to do it and who is to Page 8 of 12

do it. Planning bridges the gap from where we are, to where we want to go. It makes it possible for things to occur which would not otherwise happen. Routing may be defined as the selection of path which each part of the product will follow, which being transformed from raw material to finished products. Routing determines the most advantageous path to be followed from department to department and machine to machine till raw material gets its final shape. Scheduling determines the programme for the operations. Scheduling may be defined as the fixation of time and date for each operation as well as it determines the sequence of operations to be followed. Dispatching is concerned with the starting the processes. It gives necessary authority so as to start a particular work, which has already been planned under Routing and Scheduling. Therefore, dispatching is release of orders and instruction for the starting of production for any item in acceptance with the route sheet and schedule charts. The function of follow-up is to report daily the progress of work in each shop in a prescribed proforma and to investigate the causes of deviations from the planned performance. Quality control Quality Control (QC) may be defined as a system that is used to maintain a desired level of quality in a product or service. It is a systematic control of various factors that affect the quality of the product. Quality control aims at prevention of defects at the source, relies on effective feedb ack system and corrective action procedure. Quality control can also be defined as that industrial management technique by means of which product of uniform acceptable quality is manufactured. It is the entire collection of activities which ensures that the operation will produce the optimum quality products at minimum cost. The main objectives of quality control are: To improve the companies income by making the production more acceptable to the customers i.e., by providing long life, greater usefulness, maintainability, etc. To reduce companies cost through reduction of losses due to defects. To achieve interchangeable manufacturing in large scale production. To produce optimal quality at reduced price. To ensure satisfaction of customers with productions or services or high quality level, to build customer goodwill, confidence and reputation of manufacturer. To make inspection prompt to ensure quality control. To check the variation during manufacturing. Material management Materials management is that aspect of management function which is primarily Page 9 of 12

concerned with the acquisition, control and use of materials needed and flow of goods and services connected with the production process having some predetermined objectives in view. The main objectives of materials management are: To minimise material cost. To purchase, receive, transport and store materials efficiently and to reduce the related cost. To cut down costs through simplification, standardisation, value analysis, import substitution, etc. To trace new sources of supply and to develop cordial relations with them in order to ensure continuous supply at reasonable rates. To reduce investment tied in the inventories for use in other productive purposes and to develop high inventory turnover ratios. Maintenance management In modern industry, equipment and machinery are a very important part of the total productive effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very important that the plant machinery should be properly maintained. The main objectives of maintenance management are: 1. To achieve minimum breakdown and to keep the plant in good working condition at the lowest possible cost. 2. To keep the machines and other facilities in such a condition that permits them to be used at their optimal capacity without interruption. 3. To ensure the availability of the machines, buildings and services required by other sections of the factory for the performance of their functions at optimal return on investment. Product life cycle approach Life cycle concept is applied in operational management for any production system which takes input and produces some output by using some process. The life cycle concept of any product is similar to any life cycle of a living being. The major stages in the life cycle concept are 1) Development 2) Introduction or Birth 3) Growth 4) Maturity 5) Decline or Death. The similar Life cycle concept we can apply to any product in production system. Start-up is the initial stage, where products have no high demand. The product goes through the series of different stages. The time periods vary with products or services. Some products may have different life time. Some may have a week or some may have a month or other time span.

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Product Life Cycle Operation activities Product variety Product volume Industry structure Competition Startup Many varieties Low volume Low competition Product features Growth More standardisation Increasing volume Fall out and consolidation Product quantity and availability Maturity Dominant design High volume Few large companies Price and dependability Decline Commodity features High volume Survivors Price

Productivity and competitiveness Productivity Productivity is the amount of output per unit of input such as labour, equipment, capital. There are many different ways of measuring productivity. For example, in a factory productivity might be measured based on the number of hours it takes to produce a good, while in the service sector productivity might be measured based on the revenue generated by an employee divided by his/her salary. Productivity = Output Input

Types of productivity measurement a. Partial productivity measure- Related with ratio of output to a single input. Eg. Output Productivity = . Labour Page 11 of 12

b. Multifactor productivity measure- Related with ratio of output to a multi input. Output Eg. Productivity= Labour+Capital c. Total factor productivity measure- Related with ratio of output to all inputs. Eg. Output Productivity = Inputs Eg. Outputs Finished goods Work in process Dividend Bonds Other income Total Amount (Rs) Inputs Amount (Rs) 6000 300 20000 1080 3000 30380

20000 Human 5000 Material 2000 Capital Energy Other expenses 27000 Total

Competitiveness The term competitiveness can be defined as a. For the company, Competitiveness is the ability to provide products and services as or more effectively and efficiently than the relevant competitors. b. In the traded sector, this means sustained success in international markets without protection or subsidies.

Measures of competitiveness in the traded sector include firm profitability, the firm's export quotient (exports or foreign sales divided by output), and regional or global market share. In the traded sector, performance in the international marketplace provides a direct measure of the firm's competitiveness. In the non-traded sector, competitiveness is the ability to match or beat the world's best firms in cost and quality of goods or services. Measuring competitiveness in the non-traded sector is often difficult, since there is no direct market performance test. Measures of competitiveness in this part of the economy include firm profitability and measures of cost and quality. In industries characterized by foreign direct investment, the firm's percentage of foreign sales (foreign sales divided by total sales) and its share of regional or global markets provide measures of firm competitiveness.

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