Operations Management – An Overview 1
Operations Management – An Overview1
2Production and Operations ManagementPRODUCTION ANDOPERATIONSMANAGEMENTProf. K. SHRIDHARA BHATB.E. (Mech), PG DIM, M.B.A. F.I.I.M.M.Managing DirectorAkshaya Management Consultancy ServicesBangalore - 560 085Karnataka, IndiaMUMBAI NEW DELHI NAGPUR BENGALURU HYDERABAD CHENNAI PUNE LUCKNOW AHMEDABAD ERNAKULAM BHUBANESWAR INDORE KOLKATA GUWAHATI
Operations Management – An Overview3 AuthorNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers.First Edition : 2011Published by: Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd.,“Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004.Phone: 022-23860170/23863863, Fax: 022-23877178E-mail: himpub@vsnl.com; Website: www.himpub.comBranch Offices:New Delhi: “Pooja Apartments”, 4-B, Murari Lal Street, Ansari Road, Darya Ganj,New Delhi - 110 002. Phone: 011-23270392, 23278631; Fax: 011-23256286Nagpur: Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018.Phone: 0712-2738731, 3296733; Telefax: 0712-2721215Bengaluru: No. 16/1 (Old 12/1), 1st Floor, Next to Hotel Highlands, Madhava Nagar,Race Course Road, Bengaluru - 560 001. Phone: 080-32919385;Telefax: 080-22286611Hyderabad: No. 3-4-184, Lingampally, Besides Raghavendra Swamy Matham,Kachiguda, Hyderabad - 500 027. Phone: 040-27560041, 27550139;Mobile: 09848130433Chennai: No. 85/50, Bazullah Road, T. Nagar, Chennai - 600 017.Phone: 044-28144004/28144005Pune: First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth(Near Prabhat Theatre), Pune - 411 030. Phone: 020-24496323/24496333Lucknow: Jai Baba Bhavan, Church Road, Near Manas Complex and Dr. Awasthi Clinic,Aliganj, Lucknow - 226 024. Phone: 0522-2339329, 4068914;Mobile: 09305302158, 09415349385, 09389593752Ahmedabad: 114, “SHAIL”, 1st Floor, Opp. Madhu Sudan House, C.G. Road,Navrang Pura, Ahmedabad - 380 009. Phone: 079-26560126;Mobile: 09327324149, 09314679413Ernakulam: 39/104 A, Lakshmi Apartment, Karikkamuri Cross Rd., Ernakulam,Cochin - 622011, Kerala. Phone: 0484-2378012, 2378016;Mobile: 09344199799Bhubaneswar: 5 Station Square, Bhubaneswar (Odisha) - 751 001. Mobile: 09861046007Indore: Kesardeep Avenue Extension, 73, Narayan Bagh, Flat No. 302, IIIrd Floor,Near Humpty Dumpty School, Narayan Bagh, Indore - 452 007 (M.P.).Mobile: 09301386468Kolkata: 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank,Kolkata - 700 010, Phone: 033-32449649, Mobile: 09910440956Guwahati: House No. 15, Behind Pragjyotish College, Near Sharma Printing Press,P.O. Bharalumukh, Guwahati - 781009. (Assam).Mobile: 09883055590, 09883055536DTP by: Page Designers, BengaluruPrinted by: New Delhi.
4Production and Operations ManagementPrefaceProduction and Operation Management (POM) is about the transformation ofproduction and operational inputs into outputs, that when distributed, meet the needs of customers.POM incorporates many interdependent tasks which can be grouped under five main headingsviz., Product, Plant, Processes, Programmes and People. Production and Operations Managersensure that quality products are produced and delivered as quickly and cost effectively aspossible. Therefore, a basic knowledge of this subject is essential for students of MBAprogrammes.This book comprises 11 chapters covering various important topics such as OperationsStrategy, Production Planning and Control, Design of Production Systems, Design of WorkSystems, Aggregate Production Planning, Project Management, Scheduling of Operations,Maintenance Management, Quality Management and Facility Location and Layout.This book is specifically designed to cover the syllabus of MBA programme offered byBiju Patnaik University of Technology. However, it may be found useful to students of MBAprogramme of any other Indian university as well. The book has special features such asillustrations, solved problems, review questions, problems to be solved and case illustrationsand case exercises.I have great pleasure to express my sincere thanks to Sri Niraj Pandey and Sri Anuj Pandeyof Himalaya Publishing House for their keen interest and effort to publish this book. I am alsothankful to Sri Vijay Pandey for his effort in printing and promoting this book in a very short time.I thank Sri B.S. Madhu and Smt. Divya of M/s Page Designers for their excellent D.T.P.work. I am also thankful to Smt. Nimisha, Sri Rajesh, Sri Yogesh of HPH production unitfor their effort in designing the cover page and printing this book.I also thank my family members, friends and well-wishers for their constant support andencouragement for this endeavour. I also thank one and all who have directly or indirectly helpedor supported me in my work. I invite readers, both students and teachers to offer their valuablesuggestions as a feedback to me so as to improve the book in its future editions.K. SHRIDHARA BHATNo.680, ‘Akshaya’, 1 ‘C’ Main,Kempegowda Layout, 3rd Block,3rd Phase, Banashankari III StageBangalore - 560 085.Phone : (080) 26694761Email : sbhat680@yahoo.com
Operations Management – An Overview5ContentsCHAPTER 1. OPERATIONS MANAGEMENT - AN OVERVIEW1 - 30Meaning of "Production" – Meaning of “Operations” – Nature of Production/Operations– Production Functions – Managing a Production/Operating System – Distinctionbetween Production Management and Operations Management – Objectives ofProduction/Operations Management –Decision Making in Production/OperationsManagement – Organising to Produce Goods and Services – Functions of Production/Operations Managers – Problems of Production/Operations Management – The HistoricalEvolution of Production/Operations Management – The Scope of OperationsManagement – Recent Trends in Production/Operations management – Systems Designand Systems Operation – A Production System Model – Production System Diversity –Types of Production Systems – Differentiating Features of Production Systems – FactorsAffecting Production and Operations Management Today – Review QuestionsCHAPTER 2 : OPERATIONS STRATEGY31 - 46Productivity – Competitiveness – Production/Operations Strategy – Competitive Priorities– Building Production/Operations Strategy on Competitive Priorities – Elements ofProductions/Operations Strategy – Solved Problems – Review Questions – PoblemsCHAPTER 3 : OPERATIONS PLANNING AND CONTROL47 - 70Classification of Production Planning and Control Functions – Production Planning (orOperations Planning) – Factors Determining Production Planning Procedures – ProductionPlanning System – Production Control – Production Control System – FactorsDetermining Production Control Procedures – Production Planning/Operations Planningand Control – Role of Production Planning and Control in Operations Management –Scope of Production Planning and Control – Principles of Production Planning andControl – Phases in Production Planning and Control Function – Main Functions ofProduction Planning and Control Department – Levels of Production Planning –Production Planning Functions – Production Control Functions – Benefits of ProductionPlanning and Control Function – Limitations of PPC – Measuring Effectiveness of PPCFunction – Production Planning and Control in Different Production Systems –Organisation of PPC Department – Routing – Scheduling and Loading – Objectives ofScheduling – Elements of Scheduling – Types of Scheduling – Dispatching – Centralisedand Decentralised Dispatching – Progressing (or Expediting or Follow-up) – ReviewQuestionsCHAPTER 4. DESIGN OF PRODUCTION/OPERATIONS SYSTEMS[A] Product Planning and Development: What is a Product? – Need for Product Planningand Development – Objectives of Product Planning and Development – Characteristicsof Successful Product Development – Role of Production Management in ProductDevelopment – The Challenges of Product Development – New Product71 - 111
6Production and Operations ManagementDevelopment Strategy – New Product Development Process – Approaches to Speed upNew-Product Development – The Product-life Cycle Concept – Factors to be Consideredin Product Development. [B] Product Design: Product Design, Process Design andProduction Design – Importance of Product Design – What does Product Design Do? –Reasons for Product Design or Redesign – Objectives of Product Design – FactorsInfluencing Product Design – The Product Design Process as a part of ProductDevelopment Process – Sources of Ideas for Designing New Products or Redesigningthe Products – Stages in Product Design – Design Documents for Production – Effectof Product Design on Product Cost. [C] Process Management: What is a Process? –Process Planning – Process Management – Major Process Decisions – Make-or-buyDecisions – Make-or-buy Analysis – Procedure for Process Planning and Design –Process Design – Scope of Process Design – Basic Factors Affecting Process Design –Major Factors Affecting Process Design Decisions – Interrelationship Among ProductDesign,Process Design and Inventory Policy – Arithmetic Analysis – Logarithmic Analysis –Selecting a Learning Rate – Uses and Limitations of Learning Curves – Solved Problems– Review Questions – ProblemsCHAPTER 5 : DESIGN OF WORK SYSTEMS112 - 156(A) Productivity: Productivity Measurement – Productivity Improvement – FactorsAffecting Productivity – Productivity Improvement Techniques. (B) Job Design: JobDesign Decisions – Factors Affecting Job Design – Behavioural Considerations in JobDesign – Physical Considerations in Job Design – Machine-Worker Interaction –Ergonomics – The Work Environment. (C) Work Study: Objectives of Work Study –Scope of Work Study – Relationship between Method Study and Work Measurement –Basic Work Study Procedure – Method Study – Method Study Procedure – RecordingTechniques Used in Method Study – Motion Study – Principles of Motion Economy –Memomotion Study – Work Measurement – Objectives of Work Measurement –Techniques of Work-measurement – Time Study – Synthesis Method – AnalyticalEstimating – Predetermined Motion Time System (PMTS) – Work Sampling or ActivitySampling or Ratio-Delay Method – Solved Problems – Review Questions – ProblemsCHAPTER 6 : AGGREGATE PRODUCTION PLANNING157 - 185Aggregate Planning – Objectives of Aggregate Planning – Operations Planning andScheduling Systems – Aggregate Production (Output) Planning – Aggregate Planningor Aggregate Capacity Planning – Approaches to Aggregate Planning – Aggregate Plansfor Services – Capacity Requirement Planning – Capacity Requirement Planning (CRP)Process – Aggregate Capacity Planning Strategies – Level Capacity Plan – MatchingCapacity with Aggregate Demand Plan – Strategies for Aggregate Capacity Planning –Master Production Scheduling – Procedure for Developing MPS – Guidelines for MasterScheduling – Updating of MPS – MPS in Produce-to-Stock and Produce-to-Order Firms– Length of Planning Horizon of MPS – Symptoms of a Poorly Designed MPS – SolvedProblems – Review Questions – ProblemsCHAPTER 7 : CAPACITY PLANNINGTypes of Capacity – Measurement of Capacity – Capacity Decisions – Factors AffectingDetermination of Plant Capacity – Capacity Planning – Capacity Changes – Types ofCapacity Planning – Capacity Requirement Planning Strategies – Economic Batch186 - 209
Operations Management – An Overview7Quantity for Production – Long-Range Capacity Planning – Forecasting Long-termFuture Capacity Demand – Economies and Diseconomies of Scale – Developing CapacityAlternatives – Selecting from Among the Alternative Sources of Capacity (or CapacityAlternatives) – Solved Problems – Review Questions – ProblemsCHAPTER 8 : PROJECT MANAGEMENT210-237Project Management – Project Life Cycle –Project Organisation –The Role of a ProjectManager – Problems in Managing a Project – Project Planning and Control Techniques– Network Fundamentals – Commonly Used Network Symbols – Terms used in NetworkBased Scheduling Techniques – Networking Conventions – Project SchedulingTechniques – Scheduling Chart (Gantt Chart or Horizontal Bar Chart) – ProgrammeEvaluation and Review Technique (PERT) and Critical Path Method (CPM) – Critical PathMethod (CPM) – Purpose of CPM – Procedure for Drawing up a CPM Network – CPM- Time Analysis – Programme Evaluation and Review Technique (PERT) – DeterminingProbability of Meeting Scheduled Date in PERT Analysis – Crashing CPM Networks –Steps in Network Crashing – Solved Problems – Review QuestionsCHAPTER 9 : SCHEDULING OF OPERATIONS238 - 270The Production Environment – Production Activity Control or Shop Floor ActivityControl – Operations Planning and Scheduling – Scheduling – Scheduling Process Focused Production Systems – Scheduling Techniques for Job Shop – Stages inScheduling – Loading, Dispatching – Finite Loading and Infinite Loading – Load Chartsand Machine Loading Charts – Priority Sequencing – Single-Criterion Priority SequencingRules – Dynamic Sequencing Rules – Johnson’s Rule or Algorithm – Scheduling ProductFocused Systems – Batch Scheduling – Economic Batch Quantity (EBQ) or EconomicRun Length (ERL) – Solved Problems – Review Questions – ProblemsCHAPTER 10 : MAINTENANCE MANAGEMENT271 - 300What is Maintenance? – Areas of Maintenance – Types of Maintenance – Planning andScheduling of Maintenance – Control of Maintenance – Total Productive Maintenance– Reliability and Maintenance – Basic Concepts and Definitions – Evolution of the Fieldof Reliability – Reliability measurement – The Strategic Importance of Maintenance andReliability – Solved Problems – Review Questions – ProblemsCHAPTER 11 : FACILITY LOCATION AND LAYOUT(A) Facility Location: The Need for Location Decisions – The Nature of LocationDecisions – General Procedure for Making Location Decisions – Factors affectingLocation Decisions – Methods of Evaluating Location Alternatives – Single FacilityLocation versus Multi-facility Location – Centre of Gravity Method. (B) Facility Layout:Significance of Layout Choices – Factors Influencing Layout Choices – Principles ofPlant Layout – Types of Layout – Layout Planning – Layout Tools and Techniques –Analysing Layouts with Computers – Layout or Building? – Criteria for Selection andDesign of Layouts – Computerised Layout Techniques – Design of Group TechnologyLayout – Line Balancing – Line Balancing Methods – Solved Problems – ReviewQuestions – Problems301 - 363
8Production and Operations ManagementCHAPTER 12 : INVENTORY MANAGEMENT364 - 395Nature and Importance of Inventory – Classification of Inventories – Functions ofInventory – Inventory Costs – Inventory Decisions – Inventory Models – QuantityDiscounts for the EOQ Model – Importance of Inventory Management – InventoryControl Systems – Inventory Control Systems for Independent-Demand Items –Continuous Review System (“Q” System) – Selective Inventory Control – Measurementof the Effectiveness of Inventory Management – Simulation Technique for DecisionMaking in Inventory Management – Solved Problems – Review Questions – ProblemsCHAPTER 13 : RESOURCE REQUIREMENTS PLANNING396 - 426Resource Requirements Planning – Material Requirements Planning (MRP or MRP-I ormrp) – Objectives of MRP – Manufacturing Resource Planning or MRP-II – GeneralOverview of MRP (Material Requirements Planning) – Operation of the MRP System –Definitions of Terms used in MRP System – The MRP Computational Procedure – Issuesin MRP – Potential Benefits from MRP – Implementation of MRP – Problems in usingMRP – Problems in Designing the MRP System – Problems in Managing the MRP System– Evaluation of MRP – Manufacturing Resource Planning (MRP II) – Evolution of MRPII – Enterprise Resource Planning – Just-In-Time Systems (JIT) – Solved Problems –Review Questions – ProblemsCHAPTER 14 : QUALITY MANAGEMENT427 - 483Nature of Inspection – Inspection and Quality Control – Scope of Inspection – QualityControl – Organisation for Quality Control – Ensuring Quality – Statistical Quality Control(SQC) – Types of Control Charts – Test for Homogeneity – Control Charts for Attributes– Acceptance Sampling Technique – Operating Characteristic (OC) Curves – Types ofAcceptance Sampling Plans – Total Quality Management – What is quality management?– Modern Quality Management – Process Management – Bench Marking – BusinessProcess Reengineering (BPR) – Quality Movement in India – Quality Circles (QC) –Quality Certification – Solved Problems – Review Questions – ProblemsANNEXURE484 - 486CASE ILLUSTRATIONS487 - 501CASE EXERCISES502 - 510INDEX511 - 522
Operations Management – An Overview9CHAPTER ONEOverview of Production andOperations ManagementThe managing of any organisation that produces products demanded by customers presents a greaterchallenge today than ever before. While all other functional managers are involved in planning, organisingand controlling in their own field of work, production/operations managers who are in charge of manufacturingthe products have the direct responsibility of getting the job done. They must be the leaders in the task ofproducing products demanded by the customers most efficiently and effectively. The production/operationsmanagers are involved in planning, organising, co-ordinating, executing and controlling of all activities thatcreate goods and/or services to satisfy the needs of their customers. Of all the functional areas of management,production management (which is also referred to as operations management) is considered to be crucialin any manufacturing organisation because it is responsible for converting raw materials into finished goodsensuring that the objectives regarding volume of production (quantity), quality of outputs (i.e., products),cost of production (i.e., productivity), the timeliness of production (i.e., delivery schedules to meet customerdemand), customer service and ultimately maximum possible customer satisfaction are met.Meaning of "Production"Production implies the creation of goods and services to satisfy human needs. It involves conversionof inputs (resources) into outputs (products). It is a process by which, raw materials and other inputs areconverted into finished products. Earlier the word "manufacturing" was used synonymously with the word"production", but nowadays, we use the term "manufacturing" to refer to the process of producing onlytangible goods whereas the word "production" (or operation) is used to refer to the process of creating bothgoods (which are tangibles) as well as services (which are intangibles).Any process which involves the conversion of raw materials and bought-out components into finishedproducts for sale is known as production. Such conversion of inputs adds to the value or utility of theproducts produced by the conversion or transformation process. The utility or added value is the differencebetween the value of outputs and the value of inputs. The value addition to inputs is brought about byalteration, transportation, storage or preservation and quality assurance.Meaning of “Operations”The term “operations” refers to a function or system that transforms inputs into outputs of greater value.Operations are often defined as a transformation or conversion process wherein inputs such as materials,machines, labour and capital are transformed into outputs (goods and services). In a productive system, if theoutputs are strictly tangible goods, such a system is referred to as a “production system” and thetransformation process is referred to as “production”. Nowadays, the service system in which the outputis predominantly a service or even a pure service, is also treated as a productive system and often referredto as an “operating system” instead of a “production system”9
10Production and Operations ManagementDifference between Goods and Services(i) Services are usually intangible whereas goods are tangible (i.e., can be touched and seen)(ii) Services are often produced and consumed simultaneously, services cannot be stored
Master Production Scheduling – Procedure for Developing MPS – Guidelines for Master Scheduling – Updating of MPS – MPS in Produce-to-Stock and Produce-to-Order Firms – Length of Planning Horizon of MPS – Symptoms of a Poorly Designed MPS – Solved Problems – Review Questions – Problems CHAPTER 7 : CAPACITY PLANNING 186 - 209 Types of Capacity – Measurement of Capacity .
6.1 Overview of operations management Operations Management Operations management (OM) is any business function responsible for managing the process of making goods and services. Operations Strategy The total pattern of decisions which shape the long-term capabilities of any type of operations and their contribution to the overall strategy .
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Operations and Big Data: Hadoop, Hive and Scribe Zheng Shao 微博：@邵铮9 12/7/2011 Velocity China 2011 . 1 Operations: Challenges and Opportunities 2 Big Data Overview 3 Operations with Big Data 4 Big Data Details: Hadoop, Hive, Scribe 5 Conclusion Agenda . Operations challenges and opportunities . Operations Measure and
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