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Production and Operations Management (09DC301) Unit I

Introduction Production Systems -Nature ,Importance and Organizational functions Characteristics of Modern Production and Operations function -Organization of Production function , Recent trends in Production and Operations Management Role of operations in strategic management-Production and operations strategy - Elements and Competitive Priorities Nature of International Operational Management -Concepts of TQM- Kaizen, Deming- Juran- Crosby

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2 2 3(8)

Definition of POM The set of interrelated management activities which are involved in manufacturing certain products is called as “Production Management”. If the same concept is extended to Services Management, then the corresponding set of management activities is called as “Operations Management”. In general, the concept of manufacturing Products / Services is called as “Production and Operations Management”. Production System Input Men Machines Materials Energy Information

POM

Adustment Needed

Transformation (conversion process)

Output

Monitor

Goods / Services

Comparison of actual versus desired

Feedback System The transformation process can be : 

Physical

: as in Manufacturing operations

Locational

: as in Transportation or Warehousing operations

Exchange

: as in in Retail operations

Physiological : as in Health Care

Psychological : as in Entertainment

Informational : as in Communication 1


POM is the process which combines and transforms various resources used in the production / operations sub-system of the organisation into vale added products / services in a controlled manner as per the policies of the organisation Eg of feedback information - Rigid quality check on incoming raw material - Adjustment of machine settings - Change of tools - Proper allocation of operators to machines with matching skills - Changes in production plan - Rework / rejection (in-process non-conformities) - Inventory ( eg. Non-moving items, obsolescence) - Customer complaints NATURE OF POM Criteria of Performance 1. Efficiency - Utilisation of resources should be optimal 2. Effectiveness – In terms of short and long-run horizons 3. Customer Satisfaction – The system has to serve the target customers, may be internal or external with a possible prioritisation and satify them All the above criteria can be measured by (a) Cost, (b) Quality , (c) Dependability & (d) Reliability

OBJECTIVE OF POM  To produce the desired or specified product by specific methods so that the optimal utilisation of available resources is met with.  The Production Management is responsible to produce the desired product which has marketability at the cheapest price by proper Planning the Manpower, Material and Processes.  In other words, it should ensure that it will deliver right goods of right quantity at right place and time and at right price. BENEFITS DERIVED FROM EFFICIENT POM Customer Improved industrial productivity, increased use value of the product, availability at right place, time, qyantity, quality & price Investor Increased security for their investments, adequate market returns, credibility and good image in the society Employee Adequate wages, job security & satisfaction, imporved working conditions Suppliers Get confidence in gettling their bills/Invoices payment in due dates Community Enjoys social stability Nation Healthy industrial atmosphere ue to increased productivity Need for POM

MARKETING

FINANCE

PRODUCTION PRODUCTION

HUMAN RESOURCE

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To manufacture the products as per the specifications, the production function needs to organise its resources ( 4 M’s - Men, Materials, Machines and Money) according to the predetermined Production Plans. All the functional subsystems of any business organisation, are interwoven by many linkages IMPORTANCE of POM Product means : - For a Customer : The product is potential utilities / benefits - For a Production Manager : The product is a combination of various surfaces and processes or operations - For a Financial Manager : The product is a mix of various cost elements as he is responsible for the profitability of the product - For a Personnel Manager : The product is a mix of various skills as he is the person who selects and trains the personnel to meet the demand with requisite skills to produce the product In general, We can define the product, as a bundle of tangible and intangile attributes which alongwith the service, is meant to satisfy the customer wants. Core Functions of Production Management Pre-planning stage       

Product Development Process Design Sales Forecasting and estimation Plant Location Plant Layout and facilities Equipment Policy Pre-planning (protocol,trial, pilot lot etc) Production

Planning stage Planning 4 Ms - Materials - Methods - Machines - Manpower

Control stage Routing | Estimation | Scheduling | Dispatching | Inspection | Expediting | Evaluation

Feedback Scope of POM a. New Product identification and Design b. Process Design and Planning c. Facilities Location and Layout Planning d. Design of Material Handling System e. Capacity Planning 3


Production Management Framework ( The Five ‘P’s) 1. Product o Performance o Quality and Reliability o Aesthetics and Ergonomics o Quantity and Selling Price o Delivery Schedule 2. Plant o Design and layout of buildings and offices o Maintenance of equipments o Safety of Operations o The Financial constraint 3. Process o Available Capacity o Manpower skills available o Type of Production o Plant Layout o Safety o Manufacturing Costs 4. Programme o It refers to the time table of production from raw material –product---customer 

Purchasing

Transformation

Maintenance

Cash ( Working Capital)

Storage and Transport

5. People o Wages / Salary administration 4


o Conditions of Work / Safety o Motivation o Training of Employees CLASSSIFICATIONS OF MODERN POM

Types of Production Systems   

Varieties of Production Systems

Make to stock production Make to order production system Assemble-to-order production system

* * * *

Job shop production Batch (or) Intermittent production Continuous production Flow Cellular production Mass

Make to stock -

The manufacturer stocks the finished goods in inventory for immediate shipment This system ensures immediate delivery of good quality, reasonable priced, off the shelf standard products For eg. Automobile Bearings, Ready to wear garments, Nuts , Bolts, Motors, TV etc Fairly constant and predictable demand Products are few and they are standardised Shorter delivery time ie. customer does not accept delay in delivery and a minimum stock to be maintained Products having higher shelf life

Make to order -

Manufacturing of products starts after receipt of a firm order from a customer Production activities will be initiated after confirmation of the order The products are not supplied from the stock Hence longer lead time ie. Time between ordering and delivery Products are manufactured to customer specifications Customer has to wait till the order is processed Products are not standardised For eg. Custom tailored clothing, Special purpose machinery, Jewellery of exclusive designs etc

Assemble-to-order -

Here the components / parts are kept at stock According to the customer option / preference, the products are assembled and delivered to the customer Since the components are in stock, the lead time required is shorter only for assembling the parts The modular parts approach strategy is normally used here For eg. Automobiles, Computers, Electronic goods etc

Comparison Sl.No. 1

Particulars Characteristics Product range

Make to stock

Make to order

Assemble-to-order

Low

High

Medium / High 5


2 3 4 5

Production volume Lead time Customer-producer interface Handling of fluctuations in demand

6

Basis of Planning

7

Inventory level

8

Product category and cost

High Low Limited / Distant Safety stock of units

End item forecasts

High finished goods inventory & associated carrying costs Standardised products with lower price / unit

Low High High at sales level & Design level Planning of excess capacity & raw material stock Backlogs & Marketing intelligence reports Low inventory

Special products(high variety) & high cost per unit

Medium Medium High at sales level Planning of standard modules &parts Backlogs and trend analysis Major parts / modules held in inventory

Modular parts / subassembly, medium and high price per unit

Job shop production -

-

-

Job produced only once – One time order. The customer may or may not comeback for further orders Jobs produced at irregular intervals – The customer visits the firm to place orders for the same type of product but at irregular intervals. The planning work starts only after receiving the order. In case, the firm maintains the data about the previous orders, it may be utilised to facilitate and complete the order in time for further orders. Jobs produced periodically at regular intervals - The customer visits the firm to place orders for the same type of product at regular intervals. The firm can very well plan in anticipation and can start the production as soon as teh order is booked For eg. Tailor shop, Cycle repair shop, Automobile garage, Job typing, small workshops

Batch Production -

It is nothing but the manufacture of number of identical products either to meet the specific order or to satisfy the demand

-

Here also, the nature of production with considerable quantities, may be only once, at regular intervals or irregular intervals

-

For eg. Readymade dress makers, Cosmetics production, pharma industries

Continuous production -

Mass production o The same type of product is produced in bulk quantities to meet the demand of an assembly line or the market o This system needs good planning for material in bulk quantities, process, toolings, maintenance of machines and instruction to operators 6


o For eg. Industrial products like washers, nuts, bolts, pipe fittings, plastic components, rubber components -

Flow Production o This is a conversion process in which successive units of output undergo the same sequence of operations using specialised equipments usually positioned along a production line o The plant, equipments and machineries are designed for a specific product o For eg. Industries like Cement, Chemicals, Sugar, Petroleum, Steel

Difference between Mass and Flow production Suppose the order / demand for the existing products falls down or ceases or no more requirement at all, the plant and equipments can be used for producing new product ranges after necessary modification in case of mass production, whereas the plants and equipments cann’t be used for someother production in case of Flow production. Comparison Sl.No. 1

Characteristics Volume of production

Job order One or few jobs

2 3

Product variety Layout

4 5 6

Set up time Mfg cycle time Materil flow

7

10 11 12

Equipment and Machinery Flexibility Production, Planning & Control WIP inventory Cost per unit Skill of labour

Large Process (or) Functional High Large Non-uniform, discontinuos and travel long distances General purpose

13 14 15

8 9

Batch production Limited number of small lots Medium or few Process (or) Functional High and frequent Medium Discontinuos

Mass production Large

High Complex

Generela purpose with high production rate High Complex

Special purpose and dedicated Very low Simple & routine

High High Highly skilled

Medium Medium Skilled

Investment Material Handling

Low Manual

Plant utilisation & productivity

Low

Medium Manual/semiautomatic Medium

Low Low Semiskilled/unskilled High Automated

One or few Product (or) Line Low Low Uniform and uniterrupted

High

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Cellular Production -

The cellular production is based on group technology, which seeks to achieve superior performance(efficiency) by exploiting similarities inherent in the parts

-

The parts, having similar processing requirements, are divided into families, a cell is created that includes all the equipments, facilites and human skills required to produce a part familiy

-

A team is completely responsible gor organisaing work within the cell

-

It combines the advantages of job shop to obtain high variety possible with job and the reduced costs and response times available with mass production

Advantages of Cell Production -

Reduced material handling and transportation because work stations are spatially close

-

Set up times are reduced

-

Reduction in throughput time due to proper scheduling

-

Lower in-process inventory

-

Less space is required as machines are located close to each other

-

Increased accountability

Limitations of Cellular Production -

Breakdown of a singl machinw may hamper the entire operation a cell

-

In case, the demand for the parts manufactured by a cell comes down, redistribution of machines and men may be difficult

DIFFERENT TYPES OF PRODUCTION / OPERATIONS DECISIONS

Strategic Level (Top)

Long term implications, high risk and uncertainty

Tactical Level (Middle) Operational level (Bottom)

Medium term implications Routine decisions, very little uncertainty or risk

a. Strategic decisions – taken at Top level management o Defining goals o Making Policies o Determination of organisational objectives o Technology decisions – choice of technology 8


o Expansion o Modernisation o Relacement b. Tactical decisions – taken at middle level management o Establishing parameters for measuring operational efficiency and productivity o Making plan to imporve utilisation of existing resources o Acquisition of resources o Preparaton equipment and manpower planning o Preparation of work plans for process-redesign, methods improvement and jon design o Preparation for skill development plans o Planning for medernisation of teh facilities and automation o Make or buy decision o New products establishment c. Operational decisions – taken at bottom level management o Comparison of actual performance to production schedule o Job loading, scheduling and sequencing o Highlighting the bottleneck areas o Quality specifications and inspection and test details o Effective and efficient utilisation of faciities and resources OPERATION STRATEGY IN POM

Continous production

Production volume

Mass production

Flexibility

Capacity

Batch production Job production

Output / Product Variety --->

RECENT TRENDS IN PRODUCTION AND OPERATIONS MANAGEMENT Long Time Horizon Product Design Quality Policy Technology to be employed  Process Selection   

Intermediate Time Horizon  Product variations  Methods selections  Quality implementation, inspection and control  Machinery and Plant

Short Time Horizon Production scheduling Materials allocation and handling  Scheduling of manpower  Breakdown maintenance  

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   

    

Site Selection Machinery Plant Selection Plant size selection – phased addition Manpower training and development – phased programme Long gestation period Warehousing arrangements Setting up work standards Effluent and waste disposal systems Safety and maintenance systems

       

 

    

loading decisions Forecasting Output per unit period decision Deployment of manpower Overtime decisions Shift-working decisions Temporary hiring or layoff of manpower Purchasing policy Purchasing source selection, development and evaluation Make or buy decision Inventory policy for raw materials, WIP and finished goods Transport and delivery arrangements Preventive maintenance scheduling Implementation of safety decisions Industrial relations Checking/setting up work standards and incentive rates

 

Progress check and change in priorities in production scheduling Temporary manpower Supervision and immediate attention to problem areas in labour, materials, machines etc

ROLE OF OPERATIONS IN STRATEGIC MANAGEMENT Definition of Strategy :  

Strategy represents a fundamental congruence (agreement) between external opportunity and internal capability Strategy is the overall plan of a firm deploying its resources to establish a favourable position and compete successfully against its rivals

Strategy describes a framework for charting a course of action

Strategy explicates an approach for the company that builds on its strength and is a good fit with the firm’s external environment

Strategy helps firms to achieve competitive advantage

The essence of strategy is to match strengths and distinctive competence with terrain (markets, segments and products used) The determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals

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A unified, comprehensive and integrated plan designed to ensure that the basic objectives of the enterprise are achieved

Features of Strategy o Strategy is all about winning ie. to have edge over rivals o Strategy offers broad guidelines - it does not indicate what is to be done but gives a general programme of action o Strategy is forward looking o Strategy life span is limited o Strategy is generally a product of top management thinking o Strategy is a dynamic and flexible programme of action – changes in the environment will bring about changes in the strategic planning o Strategy is inherently a creative process – understands the current situation and has a view of future Strategic Management Process 

The process of making decisions about their future in this complex and changing environment is called ‘Strategic Management’

Strategic Management is defined as the set of decisions and actions that result in the formulation and implementation of plans, designed to achieve a company’s objectives. Strategy Formulation

The two phases the Strategic Management Process are : Strategy Implementation Strategy Formulation : It is concerned with making decisions with regard to : a. Defining the mission and objectives of the organisation o Mission : Defines line or lines of businesses of an organisation, identifies its products and services and specifies the markets it serves at present and will serve within a time frame of three to five years o Objectives : (i) Long-term objectives - where results are expected after a reasonable period of time say one year (ii) Short-term Objectives : Performance targets b. Scanning the environment (internal & external) c. CORPORATE STRATEGIES 1. Stable Growth Strategy 2. Growth Strategy 3. Endgame Strategy 11


4. Retrenchment Strategy 5. Combination Strategy 1. Stable growth strategy --- Percentage increase of sales 2. Growth strategies : a. Concentration on a single product or service --- can be in new colors, style, size, new customers, new areas etc. through proper pricing strategies, product differentiation and advertising b. Concentric diversification --- developing new products or services that are similar to the present products or services. Eg. New Dettol green colour bathing soap c. Vertical diversification --- (i) Forward integration - Production + distribution (ii) Backward integration - Mfg and supply of raw materials + Production d. Horizontal diversification --- acquisition and merger of competitor facility eg. Compaq taken over by HP e. Conglomerate diversification --- developing new products that are entirely different from that of existing product lines. Eg. Machine Tool Division, Granite Division of LMW, basically a manufacturer of textile spinning machineries f. Leadership strategy - aims to achieve an above average profitability by becoming one of the few companies remaining in the industry g. Niche strategy – attempts to identify a segment of the declining industry that will either maintain stable demand or decline slowly 3. Endgame strategy --- This strategy is used in an environment of declining product demand. a. Harvest strategy – aims to decrease investments, reduce maintenance, advertising and research in order to cut cost and improve cash flow b. Disinvestments strategy – aims to sell off the business in the early stage of the decline rather than harvesting and selling it later. 4. Retrenchment strategy – They are used during economic recessions and during poor financial performance of organizations. They are short-term strategy. There are three types such as 1. Turnaround Strategy, (ii) Disinvestment Strategy and (iii) Liquidation Strategy a. Turnaround strategy 1. Change Management personnel both at the top level and bottom levels 2.

Cut down on capital expenditure

3.

Centralise decision-making in an attempt to control costs

4. Reduce recruitment 5. Reduce advertisement and promotion expenditures 6. Fire employees, if required 7. Sell-off some assets 8. Tighten inventory control 9. Improve the collection of accounts receivables

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b. Disinvestment strategy - Selling off a major part of the business which can be a strategic business unit, a product line or a division c. Liquidation strategy - It involves terminating an organization’s existence either by selling-off its assets or by shutting down the entire operation 5. Combination Strategy - It involves implementation more than one strategy at the same time. For o Simultaneous Strategy : eg. Retrenchment in one area while growth strategy in another area o Sequential Strategy : It may involve using a turnaround strategy and then employing a growth strategy when conditions improve d. GENERIC COMPETITIVE (OR BUSINESS UNIT) STRATEGIES : i) Overall cost leadership strategy - aims to produce and deliver the product or service with specified quality, at a low cost relative to competitors. ii) Differentiation strategy - aims to create a new product or service, which is unique in the industry. The uniqueness may be achieved through design or brand-image, technology, customer service or dealer network which will enable the organization to fix a higher price for its products or service. iii) Focus strategy – Aims to concentrate on a particular group of customers, geographic markets or product line segments in order to serve a well-defined but narrow market better than its competitors who serve a broader market. e. FUNCTIONAL STRATEGIES 1. 2. 3. 4.

Marketing Strategies Financial Strategies Personnel Strategies Production / Manufacturing Strategies

Marketing strategies - Consists of activities intended to move products or services from the producers to the customers or markets. Financial strategy - Consists of activities aimed at acquiring funds to meet the organization’s current and future needs, monitoring and controlling the financial results of the organization Personnel strategy - Involves identification of human needs, devising proper reward system, mechanism of retaining employees, mechanism to match employees’ competencies with the organization’s present and future needs. Production/Manufacturing strategies – Gearing up the operation subsystems to meet delivery commitments – Flexibility in meeting the customers’ demand in terms of change in product design or change in production volume – Satisfying customers’ demand with world class product quality 13


– – –

Cost effectiveness in terms of low price relative to that of its competitors Achieving highest efficiency at all operational subsystems To be effective in labour relation and manpower cost control Efficient material utilization and its cost control 6. SWOT analysis - deciding on organisational strategy appropriate to the strengths and weaknesses of the organisation after taking cognisance of the merging opportunities and possible threats to the organisation Strengths Quality Technology Resource availability Flexibility Capacity Skills Cost structure Motivation

Weaknesses Management Systems Industrial Relations Employee age Equipment age

Opportunities New Markets Interest rates Population characteristics Improved communications New Technologies New Products

Threats New competitors RBI Intervention Exchange Rates Competitor’s Plans Govt. Policy changes

Strategy Implementation Implementation means mobilizing employees to translate formulated strategies into concrete action. The steps are: i. ii. iii. iv. v. vi. vii. viii. ix. x.

Establish annual objectives Devise policies Motivate employees Allocate resources Develop a strategy of supportive culture Create an effective organization structure Channel marketing efforts Prepare budgets Develop and utilize information systems and Link employees rewards to organizational performance

ROLE OF OPERATIONS IN STRATEGIC MANAGEMENT-PRODUCTION AND OPERATIONS STRATEGY - ELEMENTS AND COMPETITIVE PRIORITIES PRODUCTION STRATEGY

a. Differentiation Strategy o Being different and superior in some aspect of the business(from competitors) that has value to the customer 

For eg. A wider product range

A functionally superior product(design) 14


A superior after-sales-service

o To serve the customer better through various means o Differentiation is a strategy to win customers and to keep retaining them for a long time b. Flexibility Strategy o Flexibility is one of the differentiation strategies o Ie. flexibility in 

Product Design

Product Mix or Product range

Volumes

Quick deliveries

Quick introduction of new product / design

Responding quickly to the changed needs of the customer(Agile mfg) or quickly attending to the problems of the customer 

For eg. Maruti replaced a batch of cars for faulty fuel pumps

Toyota replaced a batch of cars for the reason the floor mats getting clogged with accelerator/clutch/brake pedals

o Flexibility is a part of being responsive, responsible, reliable, accessible, communicative and empathetic to the customer o Flexibility involves not only operations ( Mfg, Supplies) but also the design and development, the project execution, the marketing and servicing functions o Flexibility in mfg means that flexibility in machines, process and in manpower to process altered designs, the variety, in small batches with minimal wastage of time, of the desired quality, in a shortest process-time possible and deliver on time for the logistics function to take over the next part of the responsibility c. Focus Strategy o It aims to concentrate on a particular group of customers, geographic markets or product line segments in order to serve a well-defined but narrow market better than its competitors who serve a broader market d. Comparison of Traditional and New approaches Strategy Approaches to meaningful differentiation through product availability Traditional/Old approach

New approach 15


-

Keep / increase buffer stocks of the finished goods and other materials Invest in more machinery, hire more people, get more materials and thus increase the production capacity

Outcome : - Large inventories - Increased costs, - Increased complexity giving rise to further wastes and costs - Confusion on the shop floor or in the operating systems - Failure to meet customer’s changing needs

Decrease response time by : - Reduction of operations lead times, delivery times through continuous improvements - No postponements r cancellations of scheduled production thus ensuring the supply ‘on-time’ - Improvement in quality – by do it right first time, self-inspection and certification leading to reduction unnecessary wastages of time - Improved machinery maintenance(TPM) so that the expenditure of time due to breakdowns, rejects, reworks is avoided Outcome : - Improved reliability in terms of deliveries and performance quality - Reduced costs - Reduced product variability - Improved flexibilities in time, productmix, volumes - Enhanced Brand image - Simplicity in the system

e. Cost Leadership Strategy o It means offering the product / service at the lowest price in the industry o This has to be achieved by cost reduction as follows:

 

Traditional/Old approach Control on costs related to labour Reduction in budgetary allocations in areas such as training, human resource Defer investment in machines, including the necessary replacements Reduced inventories of raw materials, of bought-out items and of supplies Reduction of various indirect labour expenses leading to reduction in supporting activities

 

    

   

New approach Eliminate only the non-value adding activities Improve quality of design and thus reduce cost of input materials, processing and packaging etc Improve the yield by improving the process Reduce rework and rejections Reduce the set-up times and save on attendant costs Reduce the inventories (JIT) Use technology to simplify the processes, procedures and to reduce confusion and the resultant wastes Adopt Lean manufacturing Better product / service quality Better time discipline and enhanced responsiveness to the customer Improved market performance 16


 

Better training of manpower Better support to vendors, dealer and more service to customers

OPERATIONS STRATEGY

a. Improved Responsiveness in terms of : o Minimising time to respond / Timely response o Accessibility through better locations, better geographical proximity, improved logistics and better communication systems o Be proactive o Reduced throughput times, cycle times o Better trained manpower o Flexible machines and improved product designs and processing capabilities b. Reduced Prices through : o Overall improvements in the production-delivery value chain o Better designs of products / services c. Improved Quality through : o Better skills, knowledge and attitudinal orientation of all product-and-service providers o Improved technology o Reduced complexity o Reduced problem-generators KEY SUCCESS FACTORS

Kenichi Ohmae mentions the following as the key success factors for any business : 1. Product performance 2. Technology Leadership 3. New product introduction 4. Access to key decision-makers or key-influencers 5. Delivery service

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Industry Computers industry Routine household products like fan, motor pumps, wet grinder , mixers et Industrial products like machine tools Project marketing ie large complex equipment Governmental projects / contracts

Key success factor Technology leadership and new product introduction Product performance, choice Product performance, delivery and after-sales services Technical consultant and mechanic – key influencers Decision-maker ie. the authority is concentrated with one person who may or may not understand all the nuances of technology improvements or of new designs of products

Michael Porter’s Five Forces Model Strategy Risk of entry by potential competitors

Bargaining power of suppliers

Rivalry among established firms

Bargaining power of buyers

Threat of substitute products

NATURE OF INTERNATIONAL OPERATIONS MANAGEMENT Globalisation – a wide canvas for the business organisations to paint upon Aspects to be carefully analysed before globalisation 

To face world-wide competition

Focus – ie. who is our customer? What services does he need and/or expect?

Depending upon the market segment chosen, the basis for competitive advantage for the organisation has to be chosen

Technology – Choice

Location – Where will the organisation’s presence be and in what form?

Orientation : o If it is Product orientation, few facilities can produce the entire worldwide requirement 18


o If it is Market or Region orientation, more than one operations facilities o If it is Supply Chain orientation, each facility produces specially assigned parts 

Logistics – It involves : o Transport issues o Issues of selection and arrangement with vendors o Issues of inventory / Warehousing o Stocks management o Distribution channel – irrespective of the geographical, political, economical, social and cultural distance

Organisation o Structure o Management systems o Resources including HR o Management style and Culture

Competitor activity o Their Markets o Their Capacities o Their Locations o Their Capabilities o Their future Plans

Developing a Global Operations Strategy

Defining / redefining the customer and the focus Region

Market segment

Choice of the basis for competitive advantage

Addressing the Global Operations issue Technology Choice 19


Location Choice Orientation Selection Logistics Design Organisation Design Global Partners / Arrangements

Fitting the above Operations decisions into the existing mosaic or vice versa

Global Operations strategy and related decisions

Results

CONCEPTS OF TOTAL QUALITY MANAGEMENT (TQM) QUALITY

-

A high degree of excellence Degree to which a set of inherent characteristic fulfils requirements As per JURAN - Conformance to specifications As per PHILIPS CROSSBY - Fitness for use As per ISO 9000 - Quality is conformance to requirements It is a measure of the degree to which the product meets its design standards which may relate to materials, performance, reliability, time or any quantifiable characteristics The result of care The characteristics of a product or service that bear on its ability to satisfy stated or implied needs A product or service free of deficiencies Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for

TOTAL QUALITY

It is the ability of a good / service to satisfy customer expectations with respect to : -

The product design How well the design takes the user into account How closely the product conforms to the design standards What additional service is needed to keep the product operational

QUALITY CONTROL

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Those activities which assure that quality creation is performed in such a manner that the resulting product will, in fact, perform its intended function QUALITY ASSURANCE

It includes quality control and also refers to emphasis on quality in the design of products, development, production, installation, servicing and documentation and in personnel selection and training. It includes the regulation of the quality of raw materials, assemblies, products and components, services related to production and management and inspection processes. STRATEGIC AREAS OF QUALITY CONTROL

    

Supplier quality Incoming raw material quality Process quality Final inspection Customer quality

TOTAL QUALITY MANAGEMENT

TQM is an integrated organisational approach in delighting customers ( both internal & external) by meeting their expectations on a continuous basis through everyone involved in the organisation, working on continuous improvement in all products / processes /services alongwith proper problem solving methodology Six sigma is a disciplined extension of TQM CONCEPT OF TQM

Nowadays, customers demand products / services with greater durability and reliability at the most economic price ensuring full customer satisfaction. This can be achieved through TQM, because quality is not a technical function but a systematic process extending throughout all phases of the business operations BENEFITS OF TQM

1. -

Customer satisfaction oriented benefits Improvement in Product design Improvement in Product quality Improvement in product service Improvement in market place acceptance Improvement in employee morale and quality consciousness

2. -

Economic improvements oriented benefits Reduction in operating cost Reduction in operating losses Reduction in field service costs Reduction in liability exposure

FUNDAMENTAL FACTORS ( 9 M’s) AFFECTING QUALITY

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a. b. c. d. e.

Market – Technology advancement due to L P G Money – Huge outlays due to global competition Men - Human capital with different specialization Motivation - A satisfied employee will only deliver quality output Materials – Selection of proper materials due to quality attributes such as surface finish, strength, ruggedness etc f. Machineries and Mechanisation - Upgradation of conventional machines with CNC machines and automated material handling systems g. Modern Information Methods - Computer based method of reporting will provide on-line information h. Mounting Product requirements – Product diversification to meet customer’s taste leads to intricacy in design, manufacturing and quality standards Drivers of Quality - Competition in the market - Knowledge explosion - Threat of survival - Demand from stakeholders - Promise of greater profit - Desire to do better KAIZEN 

Kaizen literally means – ‘Kai’ (change) to become ‘zen’(Good/improvement)

Kaizen , a Japanese word, means ‘Continuous or ongoing small improvements’

It is a culture of sustained continuous improvement focusing or eliminating waste in all systems and processes of an organisation

The Kaizen strategy begins and ends with people

Kaizen originated in Toyota Motor Company as part of Lean Manufacturing

Taiichi Ohno developed the Toyota Production System through Kaizen activity in the areas of Quality, Cost, Delivery, Safety etc

Kaizen has two aspects : o Improvement / change for the better o Ongoimg/continuity

If the improvements come in a large scale(drastic) with an investment of larger amounts of funds , then it is called ‘Innovation’

Key elements of Kaizen 

Elimination of waste an inefficiency 22


o Over production o Large inventory o Defects : rejection / rework o Quarantine :wastages and scraps o Transportation o Waiting time ie idle time 

The Kaizen 5S framework for good House-keeping o Seiri

– Tidiness / sort

o Seiton

– Orderliness / systematise

o Seiso

– Cleanliness / sweep

o Seiketsu

– Standardised clean-up

o Shitsuke

– Self-discipline

Standardisation – helps organisations to manufacture items with discrete shapes and sizes

Kaizen Umbrella Suggestion System Customer Focus Quality Circle JIT

Small Group activities Kanban Zero Defects Six Zigma

TPM Total Quality Control

Productivity Improvement Labour-Management Relations

Benefits of Kaizen 

Realisation of immediate results

Involvement of workforce

Incorporation of visual action oriented tasks

It fosters communication amongst employees 23


It facilitates team concept

It creates ideas

QUALITY GURUS - DEMING, JURAN and PHILIP CROSBY William Edwards Deming (October 14, 1900 – December 20, 1993) 

He was an American statistician, professor, author, lecturer, and consultant.

Deming is widely credited with improving production in the United States during the Cold War, although he is perhaps best known for his work in Japan

In Japan, from 1950 onward he taught top management how to improve design (and thus service), product quality, testing and sales (the last through global markets)] through various methods, including the application of statistical methods.

Deming made a significant contribution to Japan's later reputation for innovative high-quality products and its economic power.

He is regarded as having had more impact upon Japanese manufacturing and business than any other individual not of Japanese heritage.

Deming received a BSc in electrical engineering from the University of Wyoming at Laramie (1921), an M.S. from the University of Colorado (1925), and a Ph.D. from Yale University(1928). Both graduate degrees were in mathematics and physics. Deming had an internship at Bell Telephone Laboratories while studying at Yale. He later worked at the U.S. Department of Agriculture and the Census Department. While working under Gen. Douglas MacArthur as a census consultant to the Japanese government, he famously taught statistical process control methods to Japanese business leaders, returning to Japan for many years to consult and to witness economic growth that he had predicted as a result of application of techniques learned from Walter Shewhart at Bell Laboratories. Later, he became a professor at New York University while engaged as an independent consultant in Washington, D.C.

Deming was the author of Out of the Crisis (1982–1986) and The New Economics for Industry, Government, Education (1993), which includes his System of Profound Knowledge and the 14 Points for Management (described below). Deming played flute & drums and composed music throughout his life, including sacred choral compositions and an arrangement of The Star Spangled Banner.[4]

A number of Japanese manufacturers applied his techniques widely and experienced theretofore unheard of levels of quality and productivity. The improved quality combined with the lowered cost created new international demand for Japanese products.

Joseph Moses Juran (December 24, 1904 – February 28, 2008) 24


He was a 20th century management consultant who is principally remembered as an evangelist for quality and quality management, writing several influential books on those subjects.

The end of World War II compelled Japan to change its focus from becoming a military power to becoming an economic one. Despite Japan's ability to compete on price, its consumer goods manufacturers suffered from a long-established reputation of poor quality. The first edition of Juran's Quality Control Handbook in 1951 attracted the attention of theJapanese Union of Scientists and Engineers (JUSE) which invited him to Japan in 1952. When he finally arrived in Japan in 1954 Juran met with ten manufacturing companies, notably Showa Denko, Nippon Kōgaku, Noritake, and Takeda Pharmaceutical Company. He also lectured at Hakone, Waseda University, Ōsaka, and Kōyasan. During his life he made ten visits to Japan, the last in 1990.

Working independently of W. Edwards Deming (who focused on the use of statistical quality control), Juran—who focused on managing for quality—went to Japan and started courses (1954) in Quality Management.

In 1941 Juran stumbled across the work of Vilfredo Pareto and began to apply the Pareto principle to quality issues (for example, 80% of a problem is caused by 20% of the causes). This is also known as "the vital few and the trivial many". In later years Juran preferred "the vital few and the useful many" to signal that the remaining 80% of the causes should not be totally ignored.

Juran is widely credited for adding the human dimension to quality management. He pushed for the education and training of managers. For Juran, human relations problems were the ones to isolate. Resistance to change—or, in his terms, cultural resistance—was the root cause of quality issues. Juran credits Margaret Mead's book Cultural Patterns and Technical Change for illuminating the core problem in reforming business quality.[9] He wrote Managerial Breakthrough, which was published in 1964, outlining the issue.

Juran's vision of quality management extended well outside the walls of the factory to encompass non-manufacturing processes, especially those that might be thought of as service related. For example, in an interview published in 1997[10] he observed:

The key issues facing managers in sales are no different than those faced by managers in other disciplines. Sales managers say they face problems such as "It takes us too long...we need to reduce the error rate." They want to know, "How do customers perceive us?" These issues are no different than those facing managers trying to improve in other fields. The systematic approaches to improvement are identical. ... There should be no reason our familiar principles of quality and process engineering would not work in the sales process.

He also developed the "Juran's trilogy," an approach to cross-functional management that is composed of three managerial processes: quality planning, quality control and quality improvement.

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Philip Bayard "Phil" Crosby, (June 18, 1926 - August 18, 2001) 

He was a businessman and author who contributed to management theory and quality management practices.

Crosby initiated the Zero Defects program at the Martin Company Orlando, Florida, plant.

As the quality control manager of the Pershing missile program, Crosby was credited with a 25 percent reduction in the overall rejection rate and a 30 percent reduction in scrap costs.

Crosby's response to the quality crisis was the principle of "doing it right the first time" (DIRFT). He would also include four major principles: 1. the definition of quality is conformance to requirements 2. the system of quality is prevention 3. the performance standard is zero defects 4. the measurement of quality is the price of non-conformance Crosby's prescription for quality improvement was a 14-step program. His belief was that a company that established a quality program will see savings returns that more than pays off the cost of the quality program ("quality is free"). --- End ---

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