OPM - Topic 1 - Introduction About OPM

EMBA,IBA Operations&ProductionManagement
Operations &
Production Management
(OPM)
Dr. Muhammad Wasif
Visiting Faculty, IBA.
Section 1.1
Introduction to Operations &

Production Management
Resouce Person : Dr. Muhammad Wasif
Operations & Production Management
ResourcePerson:Dr.MuhammadWasif
What are Goods ?
Something Tangible
Consistent product definition
Production usually separate

from consumption
Low customer interaction
Often procedure based
Can be inventoried
What are Services ?
Intangible product
Often unique, Inconsistent

product definition
Produced and consumed at

same time
High customer interaction
Often knowledge-based
Frequently dispersed
4
Goods and Services

Automobile
Computer
Installed carpeting
Fast-food meal
Restaurant meal/auto repair
Hospital care
Advertising agency/
investment management
Consulting service/
teaching
Counseling
100%
|
75
|
50
|
25
|
Percent of Product that is a Good
0
|
25
|
50
|
75
|
100%
|
Percent of Product that is a Service

5
Goods and Services
Goods
Services
Commonalities: Products & Services
Entail customer satisfaction as a key measure

of effectiveness
Require demand forecasting
Require design of both the product and the

process
Involve purchase of materials, supplies, and

services
Require equipment, tools, buildings, and

skills, etc.
7
What is Production ?
Creating goods and services
Raw
Material
Production
Goods &
Services
Examples are;
Mcdonalds used to provide take away meals.
K-Electric generating and supplying electricity
Automobile industry manufacturing cars.

8
What are Operations ?
Creates value in the form of goods and services by transforming

inputs into outputs.
Raw Material
+ services +
information
Examples are;
Now Mcdonalds provide take away and accommodating dine in service.
K-Electric generating and supplying electricity with enhanced customer care

and better monitoring and control of their transmission.
Automobile industry manufacturing cars and delivering enhanced after-sales

and buying services to the customers.
9
Essential Functions
Goods +
Services +
Information
Operations
Materials &
Service Inputs
Finance
Operations
Translates materials
And services into
outputs
Product &
Service
Outputs
Support Functions
Accounting
Information Systems
Human Resources
Engineering
Acquires financial
resources and capital
for inputs
Sales Revenue
Marketing
Generates sales
of outputs
10
Ten Decision Areas

1.
Design of goods and services
2.
Managing quality
3.
Process and capacity design
4.
Location strategy
5.
Layout strategy
6.
Human resources and job design
7.
Supply chain management
8.
Inventory management
9.
Scheduling
10.
Maintenance
11
Section 1.2
Organizational Processes &

Productivity
12
Process View
External environment
Internal &
External
Customer
Process view is important

rather than department view.
A process can have its own set

of objectives, involve a work
flow that cuts across
departmental boundaries, and
require resources from several
departments.
Inputs
Workers
Managers
Equipment
Facilities
Materials
Land
Energy
Processes and
Operations
Such as; passenger

transportation, manufacturing
a car etc.
Outputs
Goods
Services
Information
on
performance
13
Process View
To produce the good, manufacturing processes are

possessed.
To produce the services, services processes are executed.
Key difference between the two are due to;

(1) the nature of their output and
(2) the degree of customer contact.
14
Productivity
Productivity is a basic measure of performance for economies,

industries, firms, and processes.
It is the measure of outputs (goods and services) gained with

respect to the inputs (labor, capital, material etc.) consumed.
Productivity is the measure of how specified resources are

managed to accomplish timely objectives as stated in terms of
quantity and quality.
Efficiency is the measure of tangible output relative to tangible

input, whereas productivity is of both tangible and in-tangible.
15
Productivity
OPM
Inputs
Outputs
Products
Services
Feedback to control process

inputs or process technology
16
Productivity in Manufacturing & Service

Starbuck: A team of 10 analysts
continually look for ways to shave
time. Some improvements:
Stop requiring signatures
on credit card purchases
under $25
Saved 8 seconds
per transaction
Change the size of the ice

scoop
Saved 14 seconds
per drink
New espresso machines
Saved 12 seconds
per shot
Productivity has improved by 27%, or about 4.5% per year.

17
Productivity in Manufacturing & Service
A manager at an insurance firm might measure office productivity as the

number of insurance policies processed per employee per week.
A manager at a carpet company might measure the productivity of

installers as the number of square yards of carpet installed per hour.
A manager at beverage company can measure productivity of a capping

machine by measuring number of capped bottles with the invested capital
on the machine.
A manager can measure the number of part produced with the electricity
consumed by the machine.
18
Single-factor Productivity
Labor-hour is the common measure of input;
Manufacturing output is easier to quantify.

For example 1000 units are produced by 250 labor-hr

(25workers and 10 hours)

1000
250
.
19
Productivity Factors
Labor
Productivity
Units of output per labor hour

Units of output per shift
Value-added per labor hour
Machine
Productivity
Units of output per machine hour

Units of output per machine
depreciation.
Capital
Productivity
Units of output per dollar input

Dollar value of output per dollar
input
Energy
Productivity
Units of output per kilowatt-hour

Dollar value of output per kilowatthour
20
10
Multi-factor Productivity
Also known as total factor productivity
Output and inputs are often expressed in dollars
KLEMS represents all production inputs: K is capital services;

L is labor services; E, energy; M, materials; and S refers to
purchased services
Use of productivity measures aids managers in determining

how well they are doing.
21
Multi-factor Productivity
Example: (labor and materials productivity):
200 units produced that sell for $12.00 each
Materials cost $6.50 per unit
40 hours of labor were required at $10 an hour
200
200
$6.5
$12
40
$10
1.41
Is the productivity measure of 1.41 in the previous example good or bad?
Cant tell without a reference point
Compare to previous measures (e.g.: last week) or to another benchmark

22
11
Relative Productivity
Can be used to compare a processs productivity at a given time

(P2) to the same process productivity at an earlier time (P1)

Last week a company produced 150 units using 200 hours of labor.
This week, the same company produced 180 units using 250 hours
of labor

150
200

180
250
0.75

0.71
0.71 0.75
0.75
0.053
23
Measurement Problems
Quality may change while the quantity of inputs and outputs

remains constant (increasing quality compliances may
decrease the productivity).
External elements may cause an increase or decrease in

productivity (political situation, poor transpiration, law and
order situation etc.)
Precise units of measure may be lacking

24
12
Productivity Variables
Labor - contributes about 10% of the

annual increase
Capital - contributes about 38% of the

annual increase
Management - contributes about 52% of

the annual increase
25
Service Productivity
Typically labor intensive
Frequently focused on unique individual

attributes or desires
Often an intellectual task performed by

professionals
Often difficult to mechanize
Often difficult to evaluate for quality

26
13
Knowledge-centric: Customer does

not/cannot provide process inputs. such
as; Medical, Teaching, legal,
consultations etc.
High
Customer-centric: Customized Services.

such as; Plastic surgery, personal
cruise, construction etc.
Customer
centric
service
Knowledge
centric
service
Low
Contact Intensity
Process
centric
service
Flexibility
centric
services
Low
High
Process-centric: Customer has to

follow process but have little options
of output. Such as Mobile service,
banking etc.
Complexity of service
Flexibility-centric: Too flexible to

choose output. Such as stores, e-shops.
27
Productivity is determined by all not directly quantifiable

factors that manifest in employee and customer satisfaction,
strongly based on;
the quality of customer-employee interaction and relationship,
covering the resource,
process,
customer and outcome dimension of service delivery.

28
14
Exists in case of
welfare service
Ref: Measuring State and Local, Government Labor Productivity. U.S. Department of Labor,
Bureau of Labor Statistics
29
Ref 5
30
15
Ref 5
31
Section 1.3
Corporate & Operations Strategies
32
16
Action plan to maintain mission and achieve vision.
Corporate strategy provides an overall direction that

serves as the framework for carrying out all the
organizations functions.
Specifies the means by which operations implements corporate

strategy and helps to build a customer-driven firm.
Links long-term and short-term operations decisions
to corporate strategy and develops the capabilities the firm

needs to be competitive.
33
Developing Missions and Strategies
Vision : What organization want to be.
Mission : The reason for existence for an

organization
Goals : Provide detail and

scope of mission
The Strategy tells the

organization how to get
there
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies
Tactics
Operating
procedures
Vision
Marketing
Strategies
Operations
Strategies
Tactics
Tactics
Operating
procedures
Operating
procedures
Tactics : The methods and actions taken to accomplish strategies

34
17
Corporate and Operations

Strategies
process of identifying
groups of customers to
address their needs
are the critical operational
dimensions a process or
supply chain must
possess to satisfy
customers
35
36
18
Corporate & Operations

Strategies
37
Reasons to Globalize
Reduce costs : Foreign locations with lower wage rates can

lower direct and indirect costs. E.g. Dell production in
Maxico, Apples in China, CAREPILLAR in Bangalore, India etc.
Improve supply chain : Locating facilities closer to unique

resources. E.g. Bio-fuels in brazil, Pakistan and India, Adidas
production in China, perfume manufacturing in France.
Provide Better Goods and Services : Objective and

subjective characteristics of goods and services. E.g. Gerry's
dnata stations for on-time deliveries, Gourmet food for
quality foods, Standard Chartered bank for its unique and
new services.
38
19
Reasons to Globalize
Understand Markets : Interacting with foreign customers

and suppliers can lead to new opportunities. E.g. Cell
phones designed in Europe, motherboards are produced in
Japan but production in China,
Learn to Improve Operations : Remain open to the free

flow of ideas. E.g. General Motors partnered with a
Japanese auto manufacturer to learn Lean Manufacturing.
Attract and Retain Global Talent : Offer better employment

opportunities. E.g. LRQA rotates people from Pakistan to
dubai and other places.
39
Cultural and Ethical Issues
Cultures can be quite different
Attitudes can be quite different towards
Punctuality
Thievery
Lunch breaks
Bribery
Environment
Child labor
Intellectual
property
40
20
More Considerations
National literacy rate

Rate of innovation
Rate of technology
change
Number of skilled
workers
Political stability
Product liability laws
Export restrictions
Variations in language
Work ethic
Tax rates
Inflation
Availability of raw
materials
Interest rates
Population
Number of miles of
highway
Phone system
41
References
1.
Operations Management, 10th Ed., by J. Heizer

& B. Render
2.
Operations Management, William J. Stevenson.
3.
Operations Management, 7th Ed., N. Slack, A.B.

Jones, R. Johnston.
4.
Cases in Operations Management, S. Chambers,

C. Harland, A. Harison, N. Slack.
5.
Methodology for the Analysis and Optimization of

Service Productivity considering qualitative
Factors, Fraunhofer, University of Stuttgart.
42
21

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EMBA,IBA Operations&ProductionManagement

Introduction to Operations &

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

What are Goods ?

Consistent product definition

Production usually separate

Low customer interaction

Often procedure based

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

What are Services ?

Often unique, Inconsistent

Produced and consumed at

High customer interaction

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Goods and Services

Percent of Product that is a Good

Percent of Product that is a Service

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Goods and Services

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Commonalities: Products & Services

Entail customer satisfaction as a key measure

Require demand forecasting

Require design of both the product and the

Involve purchase of materials, supplies, and

Require equipment, tools, buildings, and

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Creating goods and services

Mcdonalds used to provide take away meals.

K-Electric generating and supplying electricity

Automobile industry manufacturing cars.

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

What are Operations ?

Creates value in the form of goods and services by transforming

Now Mcdonalds provide take away and accommodating dine in service.

K-Electric generating and supplying electricity with enhanced customer care

Automobile industry manufacturing cars and delivering enhanced after-sales

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Operations & Production Management

Ten Decision Areas

Design of goods and services

Process and capacity design

Human resources and job design

Supply chain management

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Organizational Processes &

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

Process view is important

A process can have its own set

Such as; passenger

Resouce Person : Dr. Muhammad Wasif

Operations & Production Management

To produce the good, manufacturing processes are

To produce the services, services processes are executed.