Chapter 1
Operations
Management:
Trends & Issues
Operations Management
Definition
An operations system is defined as one in
which
several activities are performed
to transform a set of inputs into useful output
using a transformation process
Operations Management is
a
systematic approach
to
address
all the issues
pertaining to
the
transformation process
that converts some
inputs into output that are useful, and
Operations Management (OM)
Salient Aspects
OM is a systematic approach
using scientific tools & techniques and solution
methodologies to analyze problems
OM is about addressing several issues
varying in terms of time horizon, nature of
decisions
Transformation processes are central to
Operations
Focusing on keeping costs to the minimum
Developing a set of measures to assess
Manufacturing Sector
Salient Aspects
Index of Industrial Production
*2003‐04
2004‐05
2005‐06
2006‐07
Average
Manufacturing
9.20
9.10
12.50
10.27
Capital goods
13.60
13.90
15.80
18.20
15.38
Consumer goods
7.20
11.70
12.00
10.10
10.25
Intermediate goods
6.40
6.10
2.50
12.00
6.75
Corporate Sector Performance
#Sales/Income: Manufacturing
13.30
20.50
18.30
23.10
18.80
Sales/Income: Services (other than
financial)
27.00
21.40
15.70
22.60
21.68
Sales/Income: Financial services
‐9.10
‐66.10
‐13.90
32.60
‐14.13
Wages and Salaries: Manufacturing
6.70
3.00
8.90
18.20
9.20
Wages and Salaries: Services (other than
financial)
16.00
35.10
17.90
26.50
23.88
Wages and Salaries: Financial services
12.80
8.60
11.20
10.90
10.88
PAT: Manufacturing
147.80
58.30
17.30
58.40
70.45
PAT: Services (other than financial)
165.60
109.90
39.50
27.60
85.65
PAT: Financial services
62.30
‐2.70
27.70
34.90
30.55
Total Assets: Manufacturing
7.00
12.50
18.80
20.70
14.75
Total Assets: Services (other than
financial)
11.10
13.30
18.10
21.60
16.03
Total Assets: Financial services
14.70
14.60
18.60
23.80
17.93
Gross Savings: Manufacturing
58.60
31.50
14.00
45.10
37.30
Gross Savings: Services (other than
financial)
34.30
40.20
11.90
31.60
29.50
Gross Savings: Financial services
30.80
8.50
17.30
24.30
20.23
All number in the table represent growth % over the previous year * Compiled from Economic Survey 2007 – 08, Government of India, Ministry of Finance, Economic Division, Oxford University Press, New Delhi, 2008, pp 201 # Compiled from Economic Intelligence Services (EIS) database on Corporate Sector
Indian Manufacturing
Export Potential of Sectors
Sector of Industry
Exports
Current
Potential
Exports
Strengths
Weaknesses
Electrical & Electronics
$ 1.25 b
$ 15 - 18 b
Design &
Engineering
skills, vendor
base
Lack of scale,
Low domestic
demand
Apparel Manufacturing
$ 6.10 b
$ 25 - 30 b
Vertical
integration,
skilled labour,
design skills
Lack of scale,
operational
expertise
Auto-components
$ 1.10 b
$ 20 - 25 b
Engineering and
continuous
improvement of
skills
Fragmented
industry and
poor OEM
linkages
Specialty chemicals
$ 1.60 b
$ 12 - 15 b
Low cost
manpower and
process
innovation skills
Application R & D
and marketing
Source: Based on Roshni Jayakar, “Manufacturing’s Next Export Wave,” Business Today, 24 April 2005 , pp. 66–72.
Service – Manufacturing
Continuum
Pure Product
Pure Service
Ayurvedic Healing Treatment
Legal/Tax Consulting
Cyber Café – Telephone Booths
Emergency Maintenance Services
Facilities Maintenance
High quality restaurant meal
Fast food in a eat out joint
Customized durable goods
Fast moving commodities
Vending Machines
Service Sector in India
GDP growth rate
Service Sectors
2001
-02
2002
-03
2003-
04
2004
-05
2005
-06
2006-
07
Trade, Hotels, Transport,
Communications
9.2
9.4
12.0
10.7
11.5
11.8
Financial Services,
Insurance, Real Estate &
business services
7.3
8.0
5.6
8.7
11.4
13.9
Public administration &
defence and other services
4.1
3.9
5.4
6.9
7.2
6.9
All number in the table represent growth % over the previous year
* Compiled from Economic Survey 2007 – 08, Government of India, Ministry of Finance, Economic Division, Oxford University Press, New Delhi, 2008, Table A-7.
Service Operations
Salient Features
Tangibility
: Services are performances and
actions rather than objects, therefore
having poor tangibility
Heterogeneity
: High variability in the
operation system performance
Simultaneous Production & Consumption:
Degree of customer contact is very high
Perishability:
Services cannot be
inventoried as in the case of manufactured
products.
Operations Management in Services
Process flow diagram for passport application
processing
Source: Ravichandran, N and D. Bahuguna (2006), “Rule Bound Government Agency to Customer Centric Service Facility: Can Indian Passport Offices make the leap?” IIMB Management Review, 18(1), 59 – 66.
Manufacturing & Service
Similarities & Differences
Manufacturing Organizations
Service Organizations
Differences
Physical durable product
Intangible, perishable product
Output can be inventoried
Output can’t be inventoried
Low customer contact
High customer contact
Long response time
Short response time
Regional, national, Intl. markets
Local markets
Large facilities
Small facilities
Capital intensive
Labour intensive
Quality easily measured
Quality not easily measured
Similarities
Is concerned about quality, productivity & timely response to its customers
Must make choices about capacity, location, layout
Has suppliers to deal with
Has to plan its operations, schedules and resources
Balance capacity with demand by a careful choice of resources
Has to make an estimate of demand
Operations
A key functional area in an Organisation
Operations
Finance
Operations Function
Linkages with other functions
I T
Operations Support Layer
Marketing Design Costing Quality Planning Material Maintenance Tooling I E
