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Production & Operations Management:

Production & Operations Management 1

PowerPoint Presentation:

TATA Steel Bharat Forge Infosys Moser Baer Reliance Industries SBI Delhi Metro Corporations 2


OM Operations management (OM) is defined as the design, execution and improvement of the systems that create and deliver the firm’s primary products and services. 3

What is Operations Management?:

4 What is Operations Management? The business function responsible for planning , coordinating , and controlling the resources needed to produce a company’s products and services.

What is Operations Management?:

5 What is Operations Management? It is a management function Organization’s core function Every organization has OM function Service or Manufacturing For profit or Not for profit

OM’s Transformation Role:

6 OM’s Transformation Role To add value Value = Performance/ Cost Performance = f ( functionality, quality, speed, timeliness, flexibility) Increase product value at each stage Value added is the net increase between output product value and input material value Provide an efficient transformation Efficiency – perform activities well at lowest possible cost

PowerPoint Presentation:

Efficiency versus Effectiveness Efficiency – doing something at the lowest possible cost Effectiveness – doing the right thing to create the most value to the company 7

Differences between Manufacturers and Service Organizations:

8 Differences between Manufacturers and Service Organizations Services: Performance Intangible product Product cannot be inventoried High customer contact Short response time Labor intensive Time Orientation Manufacturers: Physical Possessions Tangible product Product can be inventoried Low customer contact Longer response time Capital intensive Raw Material Orientation


Similarities-Service/Manufacturers All use technology Both have quality, productivity, & response issues All must forecast demand Each will have capacity, layout, and location issues All have customers, suppliers, scheduling and staffing issues 9

Operations as a System:

Operations as a System Inputs Outputs Conversion Subsystem Production System Control Subsystem 10

Transformation Process:

Transformation Process Value of Output >> Cost of inputs + cost of transformation 11

Input, Operational Inputs, Transformation Process, Output:

Input, Operational Inputs, Transformation Process, Output Manufacturing Hospital Hotel Airlines Transportation Education Retailing Warehousing 12


Transformations Physical--manufacturing Locational--transportation Exchange--retailing Storage--warehousing Physiological--health care Informational--telecommunications 13

Strategic Importance of Operations:

Strategic Importance of Operations Competitive Advantage/ Differentiation Quality – Sony Price - WalMart Availability - Dell Service Innovation / Time to market - Apple Customization - Dell Flexibility - Role of operations 14


15 MANUFACTURING ENVIRONMENTS Make to Stock (MTS) Assemble to Order (ATO) Make to Order (MTO) Engineer to Order (ETO)


16 MAKE TO STOCK (MTS) Immediate delivery of goods Based on a predicable demand pattern Customer orders cannot be identified in the production process Demand Forecasting


ASSEMBLE TO ORDER (AT0) Produce and stock standard component/ module Assemble the finished goods according to the features selected by the customer Modular design Independent units which integrate as a whole 17


MAKE TO ORDER (MTO) Production start after order is received from customer Produced to customer specifications Customer is willing to wait Product is expensive to make and store Options of product 18


ENGINEER TO ORDER (ETO) Customer’s specifications are unique Other characteristics common to MTO 19


Example Full Financial Planning - ETO Returns Seeker – MTO Debt / Equity option seeker - ATO Particular Instrument seeker - MTS 20

Type of Operation System:

Type of Operation System Based on the continuity of production Continuous Production Intermittent Production 21

Process Selection:

Process Selection Process types can be: Project process – make a one-at-a-time product exactly to customer specifications Batch process – small quantities of product in groups or batches based on customer orders or specifications Line process – large quantities of a standard product Continuous process – very high volumes of a fully standard product Process types exist on a continuum 22

CLASSIFICATION OF PRODUCTION (Volume/ Variety/ Flexibility):

23 CLASSIFICATION OF PRODUCTION ( Volume/ Variety/ Flexibility) Job Shop Batch or Intermittent Production Mass Production (Flow or Repetitive) Cellular Production

PowerPoint Presentation:

24 System Example Job Shop Commercial Printer Batch Processing Heavy Equipment Flow Shop (Production Line) Car Assembly Continuous Flow Sugar Refinery Examples of 4 basic type production Systems Most Processes are some where between Job shop and Flow shop


25 JOB SHOP PRODUCTION Low volume Engineered-to-order and/or made-to-order Functional or process layout


26 INTERMITTENT PRODUCTION (Job-lot or Batch) A form of manufacturing in which the jobs pass through the functional departments in lots, and each lot may have different routing

MASS PRODUCTION (Flow or Repetitive):

27 MASS PRODUCTION (Flow or Repetitive) Flow production Non-discrete products using a continuous process Repetitive production Assemblies using a continuous process


28 CELLULAR PRODUCTION A family of parts that have similar processing requirements. Including equipments and human skills

Facility Location:

Facility Location


Location Operations Strategy – Products/ Markets/ Volumes/ Location Location can impact operating cost thereby affecting profit & price In a Dynamic Market Company can expand , relocate or add new facilities Location decisions are made occasionally throughout the life of a company

Facility Location Decisions:

Facility Location Decisions Strategic/ Long-term/ Non-repetitive Affects most of the fixed & some variable costs Based on Objective, Quantitative & Tangible as well as Subjective, Qualitative & Intangible Factors Generally depends on inexact approach as companies are not free to decide the location

When does a Facility Location Decision arise:

When does a Facility Location Decision arise New Facility to be established Expansion in present site restricted Original advantage of present location neutralized Economic, Social, Legal, Political, Environmental factors

Poor Location causes:

Poor Location causes Higher Costs Higher Investments Difficult Marketing Difficult Transportation Dissatisfied/ Frustrated customers Dissatisfied/ Frustrated employees Interruption in Operations/ abnormal wastages, delays & substandard quality

Location Decision Process:

Location Decision Process Feasibility Study Formation of Site Selection Team Establishing Essential & Desirable factors Identify sites as per factors Team evaluates sites for final selection Top management decides location A small co may not undertake formal location study

Importance of Location:

Importance of Location Competition – Ability to compete/ time to deliver/ competence & productivity of labour Cost Hidden Effects – opportunity cost/ not directly observable

Location Factors:

Location Factors Market Related Factors: Level & location of present & future demand Location of competitors( near/avoiding) Availability of competent suppliers/vendors

Location Factors…..:

Location Factors….. Tangible Cost Factors: Local Transportation (modes/rates/in-out bound). Internal Transportation ( countries involved, involvement of several modes of transportation, nearness to air gateways, suitable ports, container pool, consolidating agents, custom duties) Labour (availability, cost, union, cost of hiring, labour laws, skills set available, flexibility, future availability)

Location Factors:

Location Factors Tangible Cost Factors (contd): Energy ( Availability, sources, regularity, future supplies, rates, taxes) Water (Availability, sources, regularity, future supplies, rates, taxes, treatment required, pollution) Site & Construction Costs Taxes

Location Factors:

Location Factors Intangible Factors: Internal Considerations Environmental Factors Community Attitude Expansion Potential Quality of Life

Facility Layout:

Facility Layout


Layout Layout: the configuration of departments, work centers, and equipment, Whose design involves particular emphasis on movement of work (customers or materials & employees) through the system Importance of layout Requires substantial investments of money and effort Involves long-term commitments Has significant impact on cost and efficiency of short-term operations

Production System Design:

Production System Design Production system design The general arrangement of workstations, dictating the pattern of flow of the products, and the resource requirements at each workstation WS1 WS5 WS4 WS3 WS2

Layout Objectives:

Layout Objectives Material/ Customers Flow Minimized Effective Space Utilization Sufficient Personal Space Effective Communication Efficient use of Men/ Machine/ Material Low cost operations Easy Supervision Worker’s Convenience & Safety

The Need for Layout Decisions:

Inefficient operations For Example: High Cost Bottlenecks Changes in the design of products or services The introduction of new products or services Accidents Safety hazards The Need for Layout Decisions

The Need for Layout Design (Cont’d):

Changes in environmental or other legal requirements Changes in volume of output or mix of products Changes in methods and equipment Morale problems The Need for Layout Design (Cont’d)


Types Classical Layouts Layout By Process/ Job Shop Layout Layout by Product/ Flow Line Layout Modern Layouts Hybrid Layout Manufacturing Cell/ Cellular Layout Group Technology


Types Process Layout Product Layout Fixed Layout Group Layout

Basic Layout Types:

Basic Layout Types Process Layout Layout that can handle varied processing requirements Tool and die shops, university departments Product Layout Layout that uses standardized processing operations to achieve smooth, rapid, high-volume flow Auto plants, cafeterias

Basic Layout Types:

Basic Layout Types Fixed Position Layout Layout in which the product or project remains stationary, and workers, materials, and equipment are moved as needed Building projects, disabled patients at hospitals Combination Layouts

Product layout:

Product layout Raw matl. Fabrication Rec- storage line-part B eiving Fabrication Planer line-part A Finished Lathe goods Drill storage Mill Mill Drill Grinder Mill Assembly line Automatic Small number of high volume products

A Flow Line for Production or Service:

A Flow Line for Production or Service Flow Shop or Assembly Line Work Flow Raw materials or customer Finished item Station 2 Station 3 Station 4 Material and/or labor Station 1 Material and/or labor Material and/or labor Material and/or labor

A U-Shaped Production Line:

A U-Shaped Production Line Advantage: more compact, increased communication facilitating team work, minimize the material handling

Product Layout:

Product Layout High Vol of one or few items Arrangement of M/c for efficient flow of materials Special purpose equipments for each production steps/ automation may be possible Equipments are closely placed along a line in the sequence of operations Work item moves along the line from workstations to workstations Sequence of work tasks dictates the layout

Product Layout:

Product Layout Objective is to make the path of movement no longer than necessary Fixed path of movement, large volume, automated Equipments Components, subassemblies made/ delivered/ store near point of use

Product layout:

Product layout Advantages High volume Low unit cost Low labor skill needed Simplification of task Low material handling High efficiency and utilization Simple routing and scheduling Simple to track and control Disadvantages Lacks flexibility Vol., design, mix, time Monotonous for labor Low motivation Low worker enrichment Can’t accommodate partial shut downs/ breakdowns Large investment in setups Individual incentive plans are not possible

Machine shop process layout:

Machine shop process layout Receiving Grin- Mills ders Raw matl. Large number of storage Assem- low volume bly products Drills Planers Finished Inspec- goods Lathes Automatics tion storage -------- Part A Part B

Process Layout:

Process Layout Process Layout - work travels to dedicated process centers Milling Assembly & Test Grinding Drilling Plating

Process Layout:

Dept. A Dept. B Dept. D Dept. C Dept. F Dept. E Used for Intermittent processing Process Layout (functional) Process Layout

Layout types: Product or Process Make your pick:

Layout types: Product or Process Make your pick A B A B

Process Layout:

Process Layout Advantages High Flexibility of Equipment, Personnel Smaller Investments as no duplication of M/c Diversity of task Work more satisfying Supervisor become functional expert Disadvantages Lack pf mat handling efficiency Lack of time efficiency High cost of Skilled workers Low Productivity Very erratic work loads

Cellular Layouts:

Cellular Layouts Cellular Manufacturing Layout in which machines are grouped into a cell that can process items that have similar processing requirements. A product layout is visible inside each cell. Group Technology The grouping into part families of items with similar design or manufacturing characteristics. Each cell is assigned a family for production. This limits the production variability inside cells, hence allowing for a product layout.

A Group of Parts:

A Group of Parts Similar manufacturing characters

Group Technology/Batch Processing Characteristics:

Group Technology/Batch Processing Characteristics Batch processing layout

Computer Package for layout Analysis:

Computer Package for layout Analysis Complexities increase with more depts in a layout (n! combination). CRAFT (Computerized Relative Allocation of Facilities Techniques) This heuristic programme can handle 40 dept. Require an input Layout (existing or arbitrary) and a matrix of near- ness priorities (such as no. of trips & material movement cost) CRAFT operates by interaction or successive improvements Every time two dept. are interchanged and cost improvement is calculated & it keeps doing this. The program will stop if no further improvement is achieved. A capability is provided in the CRAFT to fix some dept. The output of CRAFT may not be optimal because not all possible layouts are considered but the program produces a layout that can’t be easily improved.

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