Omniscience of Operations

Management
 If a firm does anything- it will use
operations management
 Factories
 Hospitals, Hotels
 Airlines
 Distribution center/ warehouse
 Banks
 Be friends with operations management
if you want to be a good manager
Operations Management

An Overview
email: skumar@mdi.ac.in
website for course material:
www.skumar.advacksite.co.cc
Room: C-3, Phone: 5506, 4560506
 Course administration
 Focus on learning and enjoying
 My course website www.skumar.advacksite.co.cc
 Please find go to this website and download course
material supplementary to book. Pl visit this website
before your class every day for notices.
 You will be required to take part in a debate / case
discussion as a group Ex. (15 marks_flexible)
 One project as a group Ex.– 15 marks
 Choose topic this week – CR_15 mins time to each
group
 Review Last week November _shortcomings/
suggestions
 Incorporate in project report and submit one day
before end term
 Mid term and End term exams
 Course administration
 New Marks distribution
 Quizzes/Cases(upto 4 nos) - 10 +/- 5
marks
 Minor project 15 marks
 Debate 15 +/- 5
marks
 Mid term 25 marks
 End term 35 marks
 Course administration

www.skumar.advacksite.co.cc
Course administration

www.skumar.advacksite.co.cc
Traditional Manufacturing Model
Sharehold
Environment
Regulations
ers
Currency
Fluctuations
Cultural Variations
Input Manufacturing Enterprise Finished
Resources Produc
Product
: Transformation of inputs ts
s to
Capital into finished products for Custome
customers rs
People
Material
Technology
Orders/
Cash

Competitors
Operations Management – General
Model
Change is the only constant
 What the model involves:
 Inputs: Transformed resources and facilitators
and transforming resources
 Environment for delivering product :
 Design & improvement of product
 Design & improvement of transforming Process and
Facilities
 Delivery of products and services to customers
 Planning and control of manufacturing system
 Firm’s strategic focus and operations strategy
Significant Events in Operations
Management

3 D printing clip
Significant Events in OM
 Division of labor (Smith, 1776)
 Standardized parts (Whitney, 1800)
 Scientific management (Taylor, 1891)
 Coordinated assembly line (Ford 1913)
 Gantt charts (Gantt, 1916)
 Motion study (the Gilbreths, 1922)
 Quality control (Shewhart, 1924)
 Significant Events -
Continued
 CPM/PERT (Dupont, 1957)
 MRP (Orlicky, 1960)
 CAD/CAM/CAE
 Robot assisted manufacturing
 Agile manufacturing (3 D printing)
 Extension to SCM (RFID clip)
World Class Manufacturing
A survey of global best
practices

What differentiates a world class

company?
 World Class Manufacturing
Competing and Thriving in Global
Markets
Global

Exporters World Class

Manufacturers
Markets

Domestic Multinational
Players
Local

Local Competitors Global

 Manufacturing Model
Environment
Regulations
Currency
Fluctuations
$ Sharehold
Cultural Variations
ers
Resources
Capital
People Supply Chain Process
Material Produc
V
Technolog Order to Delivery ts
y Process
Product Development
Process
Orders/
Customer
Cash
s
Product
s
Competitors
World class companies : What it
takes
Achieving
Close
Customer performance
relationships through
& expectation people
mapping

Close Supplier
relationships/ WCM S
Dyads Commitment
to self
analysis &
improvemen
t
Aggressive
World class approach to
capacities & technology
VISION
World Class Manufacturing – Core
Initiatives
Supplier
Relationship Customer
s/ relationships-
Dyads measure

Pursuing
Quality &
WCM Industry B.
P.
process
Benchmarki
impr.
ng and C. I.

Achieving
Aggressively performance
Embracing through
technology people
 Indian Industries – Deming award
winners

 Sundaram Fasteners
 Sundaram Clayton
 Sundaram Brake Linings
 Indian Rayons_Hi-tech Carbon
 TVS Motors
 Rane
 Mahindra Tractors
 Tata Steel ……………….
Bharat Forge (order to delivery process
–cad/m/e))

 Forge capacity of 1.2 lakh tons

upgrading to 2.20 lakh tons
 Worlds largest axle component
manufacturer – 25% of world
capacity
 50% capacity utilization initially
 Major export thrust with good
quality – Toyota, Honda, Daimler
Chrysler etc as customers
 CAD/CAM/CAE facility capable of
online simulation of new products
 Currently 26 -30 % turnover
exports
 CSD Germany for Europe thrust
 Moser Baer (ODP)

 CDRs, DVDRs and variants

 760 million units plant
 Others –CMC –1.5 b, Ritek
-2b.
 Self developed coating
machines –
 4-5% cost advantage and
saving of $40 million
 Developing variants CDRW
and higher capacity DVDRs
etc.

Name one Indian firm which is a WCM and explain why!

 Digital
Manufacturing
“Digital Manufacturing represents an integrated suite of PLM
tools that supports manufacturing process design, tool design,
plant layout, and visualization through powerful virtual
simulation tools that allow the manufacturing engineer to
validate and optimize the manufacturing processes. “
Internet of Things

Fig 1. Internet of things (taken from Furness, 2008)

 For next class:
 Email of a caselet on southwest
airlines
 Read chapter on ‘Operations
Strategy’ in the book
 Start: Overview of Manufacturing Best
Practices

 Designing the Production System  Managing the Production System

 Strategic Capacity Management
 Facility location
 Product & Service Design
 Process selection, layout and
design – functional/cellular
 Make vs Buy decision
 Strategic Sourcing and vendor
management
 SCM : an introduction
 Project Management
 Forecasting
 Aggregate Planning
 MRP, Production Planning &
Scheduling
 Quality-Process improvement and
Capability assessment
 VSM- Lean & Cellular
Manufacturing
 Managing supply and demand in
an uncertain world

Please try and find an Indian winner in the world of

Manufacturing
Competitive advantage of
Firms!
 Why should a  Have you
customer buy your communicated this
product? to your customers?
 What your is your
unique selling
preposition?
 B U Y I N G
D E C I S I O N

C U S T O M E R
S A T I S F A C T I O N

Until 1970s
L O W E R B E T ET R
- Mid 80s P R I C E P O R D
U C T
( P r o d u c t D i f f e r e n t i a t i o n )

Q u a l i t y F l e x i b i l i t y D e l i v e r Ay f t e r S a l
I d e a - t o
M a r k e t t i m e

D e s i g nC o n f o r mV a rn i c e et y V o o f l u m Oe n - T i m E e a r l y P r o d u c t
P r o d u c t s D e v e l o p m

1990-200?
1985-1990
Shifting basis of competition in products –
 Mission

♦ Mission - where are

you going?
♦ Organization’s
purpose for being
♦ Provides boundaries &
focus
♦ Answers ‘How can we
satisfy people’s
needs?’
♦ Expressed in
published statement
 Mission/Strategy
 Mission - where you are going

 Strategy - how you are going to get

there
 Strategy

♦ Action plan to
achieve mission
♦ Shows how
mission will be
achieved
♦ Company has a
business strategy
♦ Functional areas © 1995 Corel Corp.

have strategies
 Strategy Process
Company
Mission

Business
Strategy

FunctionalArea
Functional Area
Strategies

Marketing Operations Fin./Acct.

Decisions Decisions Decisions
 SWOT Analysis to
Strategy Formulation

Mission

Internal External
Strengths Opportunities
Strategy

Internal External
Weaknesses Threats
Competitive
Advantage
Mahindra War
Room !
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage

Courteous, but
limited passenger
service

No seat assignments
No baggage transfers
Automated ticketing machines
No meals
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage

Lower gate costs at

secondary airports
High number of flights, Short haul, point-to-point
reduces employee idle routes, often to
time between flights secondary airports
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage

High number of flights reduces

Frequent,
employee idle time between
reliable
flights
schedules
Saturate a city with flights
lowering administrative costs
per passenger for that city
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage
Pilot training on only one type of
aircraft
Reduced maintenance inventory
required because of only one type of
aircraft
Excellent supplier relations with
Boeing has aided financing

Standardized fleet
of Boeing 737
aircraft
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Flexible employees
Advantage
and
standard planes aids
scheduling
Flexible union
contracts
Maintenance
personnel trained on
only one type of
aircraft
20 minute gate
turnarounds
High
aircraft
utilizatio
n
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage

igh level of stock ownership

ire for attitude, then train
igh employee compensation
mpowered employees
utomated ticket machines

Lean,
productive
employees
 Activity Mapping: Southwest
Airline’s Low Cost Competitive
Advantage
Courteous, but
limited passenger
service

Lean, Short haul, point-to-

productive point routes, often to
employees Competitive Advantage: secondary airports
Low Cost

High Frequent,
aircraft reliable
utilization Standardized fleet schedules
of Boeing 737
aircraft
Southwest Airline’s Low Cost
Competitive Advantage
 Competitive Advantage
Through:
 Differentiation

 Cost leadership

 Quick response
better, cheaper, more responsive
 Competing on
Differentiation
 Uniqueness - can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customer’s perception
of value

Sample firms: Carl Zeiss, Fashion- Gucci, Park Avenue,

Mercedes
 Competing on Cost
 Maximum value as perceived by
customer
 Does not imply low value or low
quality

Sample firms: Tata Motors, McDonald’s

Competing on Response
 Flexible
 Reliable
 Rapid

Requires institutionalization within the

firm of the ability to respond
Sample firms: Fedex, Dell, Zara
Examples of Distinctive Competencies

Price Low Cost, Value for Ginger Hotels, McDonald’s,

money Low cost airlines, Nano

Quality High-performance design Sony TV

or high quality, Consistent Lexus, Toyota, Mercedes
quality Kodak, Motorola (*)

Time Rapid delivery Fedex, McDonald’s, One--

On-time delivery hour photo, Dominoes

Flexibility Variety Burger King, Zara Fashion,

Volume Nokia?
Service Superior customer Disneyland, Ritz Carlton,
service Taj Group of hotels
Location Convenience Banks, ATMs
The Critical Decisions which underlie a
firm’s positioning w.r.t. customers (10
nos)
 Service and product design
 What product or service should we offer?
 How should we design these products and services?
(ITC (tobacco), Apple pc to I - phones)
 Quality management
 Who is responsible for quality?
 How do we define quality? (Ritz Carlton, Airlines)
The Critical Decisions which underlie a
firm’s positioning w.r.t. customers (10
nos)
 Process and capacity design
 What processes will these products
require and in what order?
 What equipment and technology is
necessary for these processes? (Mitel)
 Location
 Where should we put the facility (Nano)
 On what criteria should we base this
location decision?
The Critical Decisions which underlie a
firm’s positioning w.r.t. customers (10
nos)
 Layout design
 How should we arrange the facility?
 How large a facility is required? (Nokia)

 Human resources and job design

 How do we provide a reasonable work
environment?
 How much can we expect our employees to
produce? (Southwest Airline)
The Critical Decisions which underlie a
firm’s positioning w.r.t. customers (10
nos)
 Supply chain management
 Should we make or buy this item?
 Who are our good suppliers and how many
should we have? (IBM PC, Maruti)
 Inventory, material requirements planning,
 How much inventory of each item should we
have?
 When do we re-order? (Dell/Compaq, Mahindra)
The Critical Decisions which underlie a
firm’s positioning w.r.t. customers (10
nos)
 Intermediate, short term, and project
scheduling
 Is subcontracting production a good idea?
 Are we better off keeping people on the payroll
during slowdowns? (Metro, GM, Ford)
 Maintenance
 Who is responsible for maintenance?
 When do we do maintenance? (Xerox, Toyota)

Next : How a consistent approach to these decisions forms a

pattern and leads to a strategy
Operations
Strategy at
Low cost
airlines
Low cost airlines
Easy Jet, Ryan
Mission Provide cheap air transport for our customers
air
Competiti
Low prices, everyday
ve
Priority

Operations Single aircraft type

Strategy

Operation Minimal ground

staff/ no food / Longer flying
s lugguage handling hours
Structure extra

Enabling 100%
Process and Internet/online tickets Short hop routes capacity
Technologies pricing
 OM’s Contribution to
Operatio
ns
Strategy
Exampl Specific
Strategy
Competit
ive
Decision es Used Advanta
s
Quality FLEXIBILITY ge
Sony’s constant innovation of new productsDesign
Product Compaq Computer’s ability to follow the PC market
Volume

Process Southwest Airlines No-frills service LOW COST

Location DELIVERY
Pizza Hut’s five-minute guarantee at lunchtime
Speed
Layout Federal Express’s “absolutely, positively on Dependability
time” Differentiation
(Better)
Human Resource QUALITY
Conformance
Motorola’s automotive products ignition systems Respons
Cost e
Supply Chain
Motorola’s pagers Performance leadership (Faster)
(Cheaper)
Inventory
IBM’s after-sale service on mainframe computers
AFTER-SALE SERVICE
Scheduling
Fidelity Security’s broad line of mutual funds
BROAD PRODUCT LINE
Maintenance
Operations
Strategy at Wal-Mart

Wal-Mart Mission Provide value for our customers

Competiti
Low prices, everyday
ve
Priority

Operations Low inventory levels

Short flow times
Strategy

Operation Linked Fast

s communications transportation
Structure between stores system

Enabling
EDI/satellites Cross-docking Focused
Process and locations
Technologies
 Thank you
 We now link this to the major
decisions we make such as capacity?
 What are some best practices across
the world?
Factors Affecting Mission

Philosophy &
Values
Profitability
Environment
& Growth
Mission

Customers Public Image

Benefit to
Society
Micro-operations which form the main
process
Typology of operations- The 4 Vs of
Operations
Linkages of Operations with other
functions
 The Heritage of
Operations Management
ision of labor (Adam Smith 1776 and Charles Babbage 1852
Standardized parts (Whitney 1800)
Scientific Management (Taylor 1881)
Coordinated assembly line (Ford/Sorenson/Avery 1913)
Gantt charts (Gantt 1916)
Motion study (Frank and Lillian
Gilbreth 1922
Quality control (Shewhart 1924;
Deming 1950)
Computer (Atanasoff 1938)

CPM/PERT (DuPont 1957)

 The Heritage of
Operations Management -
Continued
Material requirements planning (Orlicky 1960)
Computer aided design (CAD 1970)
Flexible manufacturing system (FMS 1975)
Baldrige Quality Awards (1980)
Computer integrated manufacturing (1990)
Globalization(1
992)
Internet
(1995)
Significant Events in OM
 Division of labor (Smith, 1776)
 Standardized parts (Whitney, 1800)
 Scientific management (Taylor, 1891)
 Coordinated assembly line (Ford 1913)
 Gantt charts (Gantt, 1916)
 Motion study (the Gilbreths, 1922)
 Quality control (Shewhart, 1924)
 Significant Events -
Continued
 CPM/PERT (Dupont, 1957)
 MRP (Orlicky, 1960)
 CAD
 Flexible manufacturing systems (FMS)
 Manufacturing automation protocol (MAP)
 Computer integrated manufacturing (CIM)
 Eli Whitney
♦ Born 1765; died 1825
♦ In 1798, received
government contract
to make 10,000
muskets
♦ Showed that machine
tools could make
standardized parts to
© 1995 Corel Corp. exact specifications
♦ Musket parts could be
used in any musket
Frederick W. Taylor (contr: 1890-
1915)

♦ Known as ‘father of
scientific management’
♦ In 1881, as chief engineer
for Midvale Steel, studied
how tasks were done &
incentives
♦ Began first motion & time
studies
♦ Created efficiency
principles
© 1995 Corel Corp.

♦ Matching employees to right

 Frank & Lillian Gilbreth
♦ Frank (1868-1924); Lillian
(1878-1972)
♦ Husband-and-wife
engineering team
♦ Further developed work
measurement methods
♦ Applied efficiency methods to
their home & 12 children!
♦ (Book & Movie: “Cheaper by
the Dozen,” book: “Bells on
Their Toes”)

© 1995 Corel Corp.

 Henry Ford
♦ Born 1863; died 1947
‘Make them all
♦ In 1903, created Ford alike!’
Motor Company
♦ In 1913, first used
moving assembly line
to make Model T
© 1995 Corel
♦ Unfinished product Corp.

moved by conveyor
past work station
♦ Paid workers very well for 1911
($5/day!)
W. Edwards Deming
♦ Born 1900; died 1993
♦ Engineer & physicist
♦ Credited with
teaching Japan
quality control
methods in post-
WW2
♦ Used statistics to
analyze process
♦ His methods involve
workers in decisions
 Contributions From
 Human factors
 Industrial engineering
 Management science
 Biological science
 Physical sciences
 Information science
 New Challenges in OM
From To

♦ Global focus
 Local or national ♦ Just-in-time
focus ♦ Supply chain
 Batch shipments partnering
♦ Rapid product
 Low bid
development,
purchasing alliances
 Lengthy product ♦ Mass customization
development ♦ Empowered
employees, teams
 Standard products ♦ Use of IT to cut
space and time
 Job specialization limitations
♦ Managing production
networks
The classic case _ The
IBM PC
The classic case _ The IBM
PC
The IBM PC value chain
 Examples of Outsourcing
Problems
 PC market entry in 1981
IBM
 Outsourced many components to get to
Outsourced many components to get to
market quickly
 40% market share by 1985 beating Apple
as the top PC manufacturer
 Other competitors like Compaq used the
same suppliers
 IBM tried to regain market by introducing
the PS/2 line with the OS/2 system
 Suppliers and competitors did not follow
 IBM market share shrunk to 8% in 1995
 Behind Compaq’s 10% leading share
 Led to eventual sale of PC business to Lenovo
Make or Buy