operationsmanagement-170519174700.pdf

1. Operations Management
BHARTI KUMARI

2. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
What Is Operations
Management?
Production
Production is the creation of goods
and services
Operations management (OM)
Operations management (OM)
is the set of activities that
create value in the form of
goods and services by
transforming inputs into
outputs

3. What Is Operations Management?
• Operations Management
– Management of the conversion process which
transforms inputs such as raw material and
labor into outputs in the form of finished goods
and services.
Transformation Process
Transformation Process
(components)
(components)
Inputs
Inputs
(customers
(customers
and/or
and/or
materials)
materials)
Outputs
Outputs
(goods
(goods
and
and
services)
services)

4. The Transformation Process within OM

5. Organizing to Produce Goods and
Services
• Essential functions:
1.
1. Marketing
Marketing – generates demand
2.
2. Production/operations
Production/operations – creates the
product
3.
3. Finance/accounting
Finance/accounting – tracks how well
the organization is doing, pays bills,
collects the money
4.
4. Human Resources
Human Resources – provides labor, wage
and salary administration and job
evaluation

6. Commercial Bank
Operations
Teller Scheduling
Check Clearing
Collection
Transaction processing
Facilities design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
Human Resources
Recruitment
Job evaluation
Performance evaluation
Wage and Salary Adm.
Personnel records
Organizational Charts
Organizational Charts

7. Manufacturing
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply-chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/ accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Marketing
Sales
promotion
Advertising
Sales
Market research
Human Resources
Recruitment
Job evaluation
Performance evaluation
Wage and Salary Adm.
Personnel records
Organizational Charts
Organizational Charts

8. Why Study Operations Management?
Operations
Management
Business Education/
Career Opportunities
Systematic Approach
to Org. Processes
Increase Competitive
Advantage/Survival
Cross-Functional
Applications
3

9. Operations Decision Making
People Plants Parts Processes
Planning and Control
Materials &
Customers
Products &
Services
Input Output
Operations Management
Marketing Strategy
Finance Strategy
Marketplace
Corporate Strategy
Operations Strategy
The Transformation Process (value adding) 4

10. Step 1
Prior to any production, Inventory Control
Department and Production Department
each performs a routine procedure.
Inventory Status
Report
Inventory Status
Report
Factor Availability
Report
Factor Availability
Report
Production Control Production Department Inventory Control

11. Step 1
Inventory Status
Report
Inventory Status
Report
Factor Availability
Report
Factor Availability
Report
Production Control Production Department Inventory Control
• Inventory Control Department performs a status check on
the amount of raw materials and finished goods and then
sends the report to Production Control Department.
• This is to inform the Production Control Department the
amount of available raw materials can go into production,
and the amount of finished units can be used to fill
customers orders.

12. Step 1
Inventory Status
Report
Inventory Status
Report
Factor Availability
Report
Factor Availability
Report
Production Control Production Department Inventory Control
• Production Department checks the production capacity
and issues a Factor Availability Report and sends it to
Production Control Department.
Factor Availability Report – states the available production capacity. It
contains how much resource such as labor, land, capital etc are
available.
• With these information, the Production Control Department
can make plans to schedule productions, so all orders can
be met in time.

13. • Production Control Department issues production orders which
authorize the unit production.
a. A copy of the P.O. is sent to Cost Accounting Department.
b. Another copy of the P.O. is sent to the Production Dept. which
authorizes them to produce the order.
c. The last copy of the P.O. is filed numerically in Production Control
Department.
Step 2
3
2
Production Control Production Department Cost Accounting
Production Order 1
Production Order 2
Production Order 1
N
Completed Production Order

14. • Production Control issues material requisition.
a. Production Control send 3 copies of the Material Requisition
to inventory control.
b. The 4th
copy of the Material Requisition is filed numerically in
Production Control.
Step 3
4
3
2
Material Req. 1
N
3
2
Material Req. 1
Production Control Production Department Inventory Control Cost Accounting

15. • Inventory Control receives 3 copies of the Material Requisition
from Production Control.
a. 1 copy goes to Cost Accounting.
b. Another goes to the Production Dept. along with the
requested amount of raw materials.
c. The last copy is filed numerically in Inventory Control to
keep track of the inflows and outflows of raw materials
Step 4
3
2
Material Req. 1
Material Req. 2
N
Production Control Production Department Inventory Control Cost Accounting
Material Req. 1

16. • Production Control sends a copy of the Production
Schedule to the Production Dept. This informs the
Production Department the scheduled date of completion
of that particular order.
• The other copy of the Production Schedule is filed in
Production Control by date.
Step 5
2
Production Schedule 1
D
Production Control Production Department
Production Schedule 1

17. • Inventory Control creates a Journal Voucher which contains
information about the amount of material used in production.
And this journal voucher is used to update the general ledger.
Journal Voucher updates general ledger.
Step 6
Journal Voucher
Inventory
Control
General
Ledger
Journal Voucher

18. • This is the actual production process. As the Production
Department receives the production order, which is the
approval of production from step (2), and the raw material
required for production from step (4), the production takes
place.
• The material requisition form is attached to the production
order form, and along with the finished production, they
are sent to the Inventory Control Department.
Step 7
Production Order 2
Production Department Inventory Control
Completed Production Order
2
Production Order 2

19. 1. Inventory Control receives the Completed Production Order
along with the Material Requisition from the Production Dept. (7)
a. They post to the inventory records.
Quantity produced
Quantity of material used
b. It is sent to Cost Accounting
i. To summarize production
ii. Record unit cost/total cost/quantity etc.
Step 8
Completed Production Order
2
Inventory control Cost Accounting
Completed Production Order
2

20. 1. The Production Dept. sends the Job Time Cards to Cost
Accounting to calculate Labor Costs.
a. Cost Accounting posts to WIP records.
b. Direct Labor Cost
c. Indirect Labor Cost
Step 9
Job Time Card
Production
Department
Cost Accounting
Job Time Card

21. Step 10
Production Status
Production Control Production Department
Production Status
Production Control receives a Production Status Report from
the Production Dept.

22. Step 11
Production Order 1
Cost Accounting
Post to WIP Records
Cost Accounting posts the Production Order to WIP records.
The Production order was received from Inventory Control
earlier in step (2).

23. Cost Accounting posts the Material Requisition to WIP records.
The Material Requisition was received from Inventory Control in
step (4).
Step 12
Material Req. 1
Cost Accounting
Post to WIP Records

24. 1. Cost Accounting updates the General Ledger by using a
Journal Voucher to record Conversion Costs
= Direct Labor + Manufacturing
Cost Overhead Cost
Step 13
Journal Voucher
Cost Accounting General
Ledger
Journal Voucher

25. Step 14
1. Cost Accounting updates the General Ledger by using the
Journal Voucher to record the Cost of Goods
Manufactured.
Direct Material used
+ Direct Manufacturing Labor
+ Manufacturing Overhead Costs
+ Work in Process (beginning)
- Work in Process (ending)
= Cost of Goods Manufactured
Journal Voucher
Cost Accounting General
Ledger
Journal Voucher

26. Step 15
Completed Production Order
2
Cost Accounting General
Ledger
M
M
Management
Cost Accounting sends the Completed Production Order
to Management.

27. Classification of Operations
• 1.Based on Demand Pattern:
a) Make-to-Order (e.g. Airplane / Film
Developing/……)
Assembly-to-Order (e.g. Car/ Fast food/……)
b) Make-to-Stock (e.g. Clothes/ Toys/……)
Assembly-to-Stock (e.g. Electronic Products/ TV
Sets/……)

28. Classification of Operations
• 2.Based on Type of Conversion Process:
Type of Conversion
1.Project Shop
2.Job Shop
(Batch Shop)
3.Assembly Line
4.Continuous Process
Goods
House Building
Printing Shop
Automobile
Oil Refinery
Food
Process
Service
Landscaping
Dept. Store
Airport
Gas Station
TV Channels

29. New Product Development (NPD)

30. New Product Development Process
Step 1. Idea Generation
Systematic Search for New Product Ideas
Internal sources
• Customers
• Competitors
• Distributors
• Suppliers

31. New Product Development Process
Step 2. Idea Screening
Process to spot good ideas and drop poor ones
• Criteria
• Market Size
• Product Price
• Development Time & Costs
• Manufacturing Costs
• Rate of Return

32. New Product Development Process
Step 3. Concept Development & Testing
1. Develop Product Ideas into
Alternative
Product Concepts
1. Develop Product Ideas into
Alternative
Product Concepts
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers
2. Concept Testing - Test the
Product Concepts with Groups
of Target Customers
3. Choose the Best One
3. Choose the Best One

33. New Product Development Process
Step 4. Marketing Strategy Development
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Two - Short-Term:
Product’s Planned Price
Distribution
Marketing Budget
Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Part Three - Long-Term:
Sales & Profit Goals
Marketing Mix Strategy
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share
Part One - Overall:
Target Market
Planned Product Positioning
Sales & Profit Goals
Market Share

34. New Product Development Process
Step 5. Business Analysis
Step 6. Product Development
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
Business Analysis
Review of Product Sales, Costs,
and Profits Projections to See if
They Meet Company Objectives
If Yes, Move to
Product Development
If Yes, Move to
Product Development
If No, Eliminate
Product Concept
If No, Eliminate
Product Concept

35. New Product Development Process
Step 7. Test Marketing
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Standard
Test Market
Full marketing campaign
in a small number of
representative cities.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Simulated
Test Market
Test in a simulated
shopping environment
to a sample of
consumers.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.
Controlled
Test Market
A few stores that have
agreed to carry new
products for a fee.

36. 8. Possible “roll-out” strategies
during “commercialization”
• By geography
• By market size
• By customer type
(business/consumer/government)
• By channel of distribution (Rx/OTC)
• By use (special occasion/every day)
• By benefit sought

37. © 2007 Wiley
Product Design
• Product design – the process of defining all of the companies
product characteristics
– Product design must supp0ort product manufacturability (the ease
with which a product can be made)
– Product design defines a product’s characteristics of;
• appearance,
• materials,
• dimensions,
• tolerances, and
• performance standards

38. © 2007 Wiley
The Product Design Process
• Step 1 - Idea Development
- Someone thinks of a need and a product/service design to satisfy it
e.g. customers, marketing, engineering, competitors,
benchmarking, reverse engineering
• Step 2 - Product Screening
- Every business needs a formal/structured evaluation process
e.g. fit with facility and labor skills, size of market, contribution margin,
break-even analysis, return on sales
• Step 3 – Preliminary Design and Testing
- Technical specifications are developed, prototypes built, testing starts
• Step 4 – Final Design
- Final design based on test results, facility, equipment, material, & labor
skills defined, suppliers identified

39. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Issues for Product Development
 Robust design
 Modular design
 Computer-aided design (CAD)
 Computer-aided manufacturing (CAM)
 Virtual reality technology
 Value analysis
 Environmentally friendly design

40. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Robust Design
 Product is designed so that small
variations in production or assembly
do not adversely affect the product
 Typically results in lower cost and
higher quality

41. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Modular Design
 Products designed in easily segmented
components
 Adds flexibility to both production and
marketing
 Improved ability to satisfy customer
requirements

42. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
 Using computers to design
products and prepare
engineering documentation
 Shorter development cycles,
improved accuracy, lower
cost
 Supports “mass
customization”
 3-D Object Modeling
Small prototype
development
Computer Aided Design (CAD)

43. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Computer-Aided Manufacturing
(CAM)
 Utilizing specialized computers and
program to control manufacturing
equipment
 Often driven by the CAD system
(CAD/CAM)
 CNC Machines
CNC Machines

44. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Virtual Reality Technology
 Computer technology used to develop an
interactive, 3-D model of a product from
the basic CAD data
 Allows people to ‘see’ the finished design
before a physical model is built
 Very effective in large-scale designs such
as plant layout

45. Value Analysis
Value Analysis versus Value
versus Value
Engineering
Engineering
 While Value Engineering focuses on
preproduction design improvement, Value
Analysis takes place during the production
process.
 Value Analysis seeks improvements leading
either to a better product or a product which
can be produced more economically.

46. Ethics and Environmentally Friendly
Ethics and Environmentally Friendly
Designs
Designs
It is possible to enhance productivity,
It is possible to enhance productivity,
drive down costs, and preserve
drive down costs, and preserve
resources
resources.
.
Effective at any stage of the product life cycle
Effective at any stage of the product life cycle
 Design
Design
 Production
Production
 Destruction
Destruction

47. Guidelines for Environmentally Friendly
Guidelines for Environmentally Friendly
Designs
Designs
1. Make products recyclable
2. Use recycled materials
3. Use less harmful ingredients
(Using soy-based inks)
4. Use lighter components
Mercedes is using banana plant fiber for car exteriors
Biodegradable and lightweight
5. Use less energy
6. Use less material

48. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Service Design
 Service typically includes direct interaction
with the customer
 Increased opportunity for customization
 Reduced productivity
 Cost and quality are still determined at the
design stage
 Delay customization
 Modularization helps customization
 Reduce customer interaction, often through
automation

49. © 2011 Pearson Education,
Inc. publishing as Prentice
Hall
Service Design
Figure 5.12

50. Plant Location

51. Steps( Procedure) in choosing Location
National Decision
National Decision
National Decision
National Decision
Regional Decision
Regional Decision
Regional Decision
Regional Decision
Community Decision
Community Decision
Community Decision
Community Decision
Site Decision
Site Decision
Site Decision
Site Decision
Political, social, economic stability;
Currency exchange rates; . . . . .
Climate; Customer concentrations;
Degree of unionization; . . . . .
Transportation system availability;
Preference of management; . . . . .
Site size/cost; Environmental impact;
Zoning restrictions; . . . . .

52. 8-52
Location Decision Factors
Regional Factors
Site-related
Factors
Multiple Plant
Strategies
Community
Considerations

53. 8-53
• Location of raw materials
• Location of markets
• Labor factors
• Climate and taxes
Regional Factors

54. 8-54
• Quality of life
• Services
• Attitudes
• Taxes
• Environmental regulations
• Utilities
• Developer support
Community Considerations

55. 8-55
• Land
• Transportation
• Environmental
• Legal
Site Related Factors

56. 8-56
• Product plant strategy
• Market area plant strategy
• Process plant strategy
Multiple Plant Strategies

57. 8-57
Service and Retail Locations
• Manufacturers – cost focused
• Service and retail – revenue focused
– Traffic volume and convenience most important
– Demographics
• Age
• Income
• Education
– Location, location, location
– Good transportation
– Customer safety

58. Clientes
Centro
distribución
Response Time 1 week-> 1 Distribution Center
Response Time 1 week-> 1 Distribution Center

59. Clientes
Centro
distribución
Response Time 5 days-> 2 Distribution Center
Response Time 5 days-> 2 Distribution Center

60. Clientes
Centro
distribución
Response Time 3 days-> 5 Distribution Center
Response Time 3 days-> 5 Distribution Center

61. Clientes
Centro
distribución
Response Time 1 day-> 13 Distribution Center
Response Time 1 day-> 13 Distribution Center