This document provides an overview of topics covered in an operations management unit, including production systems, classifications of production systems, operations as a source of competitive advantage, and supply chain trends. It defines key terms like operations management, production systems, job shop production, batch production, and mass production. It also discusses strategic operations decisions, resources of competitive advantage, and frameworks like production possibility frontiers, productive efficiency, and allocative efficiency. Finally, it compares manufacturing and service operations, describes a systems perspective on operations, and outlines factors in make-or-buy decisions and break-even analysis.

1. OPERATION MANAGEMENT
DR. M. NEVEDIDA
ASSISTANT PROFESSOR.
SRM-IST

2. TOPICS COVERED IN THIS UNIT
1. INTRODUCTION
2. PRODUCTION SYSTEM IN PRODUCTION AND OPERATION MANAGEMENT
3. CLASSIFICATION OF PRODUCTION SYSTEM
4. OPERATIONS AS A SOURCE OF COMPETITIVE ADVANTAGE
5. SUPPLY CHAIN TRENDS IN MODERN BUSINESS
ENVIRONMENT-GIVING COMPETITIVE EDGE TO FIRMS
6. PRODUCTION POSSIBILITY TRADEOFFS AND COMBINATION
7. DIFFERENCE BETWEEN MANUFACTURING AND SERVICE OPERATIONS
8. OPERATIONS – A SYSTEMS PERSPECTIVE
9. MAKE OR BUY DECISION

3. OPERATION MANAGEMENT- MEANING
• OPERATION MANAGEMENT IS THE BUSINESS FUNCTION THAT MANAGES THAT
PART OF A BUSINESS THAT TRANSFORMS RAW MATERIALS AND HUMAN INPUTS
IN TO GOODS AND SERVICES OF HIGHER VALUE. OPERATION MGT IS A BUSINESS
ACTIVITY THAT DEALS WITH THE PRODUCTION OF GOODS AND SERVICES.

4. ORDER TO CONVERT TO INPUTS INTO
DESIRED OUTPUTS:
ALTERATION IT REFERS TO THE TRANSFORMATION OF THE STATE OF INPUT.
THIS TRANSFORMATION CAN BE A PHYSICAL CHANGE IN THE INPUT TO
PRODUCE GOODS.
TRANSPORTATION IT REFERS TO PHYSICAL MOVEMENT OF GOODS FROM ONE
LOCATION TO ANOTHER.
STORAGE IT REFERS TO PRESERVING GOODS IN A PROTECTED ENVIRONMENT.
INSPECTION IT REFERS TO THE VERIFICATION OF AND CONFIRMATION TOWARDS
THE REQUIREMENTS OF AN ENTITY.

5. • RESOURCES:
Resource are in the forms of the human, material and capital inputs. Human
resources are the key resources of an organization. By using the intellectual
capabilities of people, managers can multiply the value of their employees.
MATERIAL RESOURCES ARE THE PHYSICAL INPUTS, WHICH ARE NEEDED FOR
PRODUCTION.
• SYSTEM:
The business systems are subsystem of large social system. Inside business,
personnel, engineering, finance and operation are subsystem of business. Design
and control mechanism are very much important to achieve the objectives of the
system.
INPUT ----- TRANSFORMATION ACTIVITIES --- OUT PUT.
• PRODUCTIVITY:
The process of converting raw material to final out put is known as productivity.

6. PRODUCTION AND OPERATION
MANAGEMENT FUNCTIONS
• Location of facilities
• Plant layouts and material Handling.
• Product Design.
• Process Design,
• Production and planning control.
• Quality Control
• Materials mgt.
• Maintenance mgt.

7. SCOPE OF OPERATION MANAGEMENT

9. OPERATION AS AN TRANSFORMATION
PROCESS
INPUT ------------ TRANSFORMATION PROCESS--------------- OUT
PUT
MATERIAL PRODUCT DESIGN
LABOR PRODUCT PLANNING GOODS
MANAGEMENT PRODUCTION CONTROL SERVICES
CAPITAL MAINTENANCE

10. PRODUCTION SYSTEM IN PRODUCTION AND
OPERATION MGT.
 PRODUCTION IS AN ORGANIZED ACTIVITY, SO EVERY PRODUCTION
SYSTEM HAS AN OBJECTIVE.
 THE SYSTEM TRANSFORMS THE VARIOUS INPUTS TO USEFUL OUTPUTS.
 IT DOES NOT OPERATE IN ISOLATION FROM THE OTHER ORGANIZATION SYSTEM.
 THERE EXISTS A FEEDBACK ABOUT THE ACTIVITIES, WHICH IS
ESSENTIAL TO CONTROL AND IMPROVE SYSTEM PERFORMANCE.

11. CLASSIFICATION OF PRODUCTION
SYSTEM
• JOB SHOP
• BATCH
• MASS
• CONTINUOUS PRODUCTION SYSTEMS.

12. JOB SHOP PRODUCTION
LOW VOLUME AND HIGH VARIETY OF PRODUCTS.
CHARACTERISTICS :
 HIGH VARIETY OF PRODUCTS AND LOW VOLUME.
 USE OF GENERAL PURPOSE MACHINES AND FACILITIES.
 HIGHLY SKILLED OPERATORS WHO CAN TAKE UP EACH JOB AS A CHALLENGE
BECAUSE OF UNIQUENESS.
 LARGE INVENTORY OF MATERIALS, TOOLS, PARTS.
 DETAILED PLANNING IS ESSENTIAL FOR SEQUENCING THE REQUIREMENTS OF
EACH PRODUCT, CAPACITIES FOR EACH WORK CENTRE AND ORDER PRIORITIES.

13. BATCH PRODUCTION
• BATCH PRODUCTION IS A METHOD USED TO PRODUCE SIMILAR ITEMS IN
GROUPS, STAGE BY STAGE. IN BATCH PRODUCTION, THE PRODUCT GOES
THROUGH EACH STAGE OF THE PROCESS TOGETHER BEFORE MOVING ON TO
THE NEXT STAGE.
EXAMPLE: BAKERY AND TEXTILE

14. BATCH PRODUCTION
 CHARACTERISTICS
BATCH PRODUCTION SYSTEM IS USED UNDER THE FOLLOWING CIRCUMSTANCES:
 WHEN THERE IS SHORTER PRODUCTION RUNS.
 WHEN PLANT AND MACHINERY ARE FLEXIBLE.
 WHEN PLANT AND MACHINERY SET UP IS USED FOR THE PRODUCTION OF ITEM IN A
BATCH AND CHANGE OF SET UP IS REQUIRED FOR PROCESSING THE NEXT BATCH.
 WHEN MANUFACTURING LEAD TIME AND COST ARE LOWER AS COMPARED TO JOB
ORDER PRODUCTION.

16. MASS PRODUCTION
 CHARACTERISTICS
• MASS PRODUCTION IS USED UNDER THE FOLLOWING CIRCUMSTANCES:
• STANDARDIZATION OF PRODUCT AND PROCESS SEQUENCE.
• DEDICATED SPECIAL PURPOSE MACHINES HAVING HIGHER PRODUCTION CAPACITIES
AND OUTPUT RATES.
• LARGE VOLUME OF PRODUCTS.
• SHORTER CYCLE TIME OF PRODUCTION.
• LOWER IN PROCESS INVENTORY.
• PERFECTLY BALANCED PRODUCTION LINES.
• FLOW OF MATERIALS, COMPONENTS AND PARTS IS CONTINUOUS AND WITHOUT
ANY BACK TRACKING.
• PRODUCTION PLANNING AND CONTROL IS EASY.
• MATERIAL HANDLING CAN BE COMPLETELY AUTOMATIC.

17. CONTINUOUS PRODUCTION
CHARACTERISTICS
 DEDICATED PLANT AND EQUIPMENT WITH ZERO FLEXIBILITY.
 MATERIAL HANDLING IS FULLY AUTOMATED.
 PROCESS FOLLOWS A PREDETERMINED SEQUENCE OF OPERATIONS.
 COMPONENT MATERIALS CANNOT BE READILY IDENTIFIED WITH FINAL PRODUCT.
 PLANNING AND SCHEDULING IS A ROUTINE ACTION.

18. OPERATIONS AS A SOURCE OF COMPETITIVE ADVANTAGE
Strategic and tactical operations decisions determine how well the organization can accomplish its goals. They also provide opportunities for the organization
to achieve unique competitive advantages that attract and keep customers.
FOR INSTANCE:
United parcel service, an international package delivery service, formed a partnership with its customer, toshiba computers. Toshiba
needs to provide a repair service to its laptop computer customers. The old approach of providing this service was cumbersome and
time-consuming: (1) customers had pick up their computers, (2) delivered the computers to toshiba, (3) toshiba repaired the
computers, (4) picked up the repaired computers and delivered them back to the customers. Under this traditional approach, the total
time to get a laptop computer repaired was two weeks—a long time for people to be without their laptop! Then they came up with an
innovative idea for toshiba to provide better service to its customers. United parcel service hired, trained, and certified its own
employees to repair toshiba laptop computers. The new repair process is much more efficient: (1) picks up computers from toshiba
owners, (2) repairs the computers, (3) delivers the computers back to their owners. The total time to get a computer repaired is now
about two days. Most toshiba customers think that toshiba is doing a great job of repairing their computers, when in fact toshiba
never touches the computers! The result of this operations innovation is better service to toshiba customers and a strong and
profitable strategic partnership between and its customer, toshiba.

19. RESOURCE OF COMPETITIVE ADVANTAGE
• QUALITY
• FLEXIBILITY
• COST
• SPEED
• DEPENDABILITY
• COST LEADERSHIP
• LEAN MANUFACTURING
• SCHEDULING
• RELIABILITY
• FLEXIBILITY
• SHORT THROUGHPUT TIME

20. SUPPLY CHAIN TRENDS IN MODERN BUSINESS
ENVIRONMENT- GIVING COMPETITIVE EDGE TO
FIRMS
• IN CONTEMPORARY TIMES, SUPPLY CHAINS CAN BE SOURCES OF COMPETITIVE
ADVANTAGE AS EFFICIENT MANAGEMENT OF THE SUPPLY CHAIN LEADS TO COST
SAVINGS AND SYNERGIES BETWEEN THE COMPONENTS OF THE SUPPLY CHAIN
LEADS TO GREATER PROFITABILITY FOR THE FIRMS.
• CUSTOMER RELATIONSHIP MGT
• COLLABORATIVE SUPPLY CHAIN
• TRANSFORMATION AGILE STRATEGY
• PROCESS INTEGRATION
• RELATIVE VALUE FOR CUSTOMERS
• END CASTING OR DEMAND MGT
• VIRTUAL INTEGRATION
• INFORMATION SHARING AND VISIBILITY
• VALUE BASED MGT

21. CUSTOMER
RELATIONSHIP
MANAGEMENT
CUSTOMER RELATIONSHIP MANAGEMENT
(CRM) IS A TECHNOLOGY FOR MANAGING ALL
YOUR COMPANY'S RELATIONSHIPS AND
INTERACTIONS WITH CUSTOMERS AND
POTENTIAL CUSTOMERS. THE GOAL IS
SIMPLE: IMPROVE BUSINESS RELATIONSHIPS.
A CRM SYSTEM HELPS COMPANIES STAY
CONNECTED TO CUSTOMERS, STREAMLINE
PROCESSES, AND IMPROVE PROFITABILITY.

22. COLLABORATIVE
SUPPLY CHAIN
MANAGEMENT
SUPPLY CHAIN COLLABORATION IS DEFINED
AS TWO OR MORE AUTONOMOUS FIRMS
WORKING JOINTLY TO PLAN AND EXECUTE
SUPPLY CHAIN OPERATIONS. IT IS KNOWN
AS A COOPERATIVE STRATEGY WHEN ONE
OR MORE COMPANIES OR BUSINESS UNITS
WORK TOGETHER TO CREATE MUTUAL
BENEFITS.

23. TRANSFORMATION
AGILE STRATEGY
AN AGILE TRANSFORMATION STRATEGY
IS AN ORGANIZATION'S LONG TERM PLAN
TOWARDS A GOAL OF TRANSFORMING AN
ORGANIZATION'S CULTURE AND SOFTWARE
DELIVERY METHODS TO BE ONE THAT
PRACTICES THE VALUES AND PRINCIPLES
ACCORDING TO THE AGILE MANIFESTO.
THE AGILE TRANSFORMATION DEFINITION IS
AS AN ACT OF TRANSFORMING AN
ORGANIZATION'S FORM OR NATURE
GRADUALLY TO ONE THAT IS ABLE TO
EMBRACE AND THRIVE IN A FLEXIBLE,
COLLABORATIVE, SELF-ORGANIZING, FAST
CHANGING ENVIRONMENT.

24. PROCESS
INTEGRATION
• BUSINESS PROCESS INTEGRATION REFERS TO A
BUSINESS MODEL WHEREIN AN ACCEPTABLE
BUSINESS PROCESS MODEL IS DEFINED
THROUGH THE SPECIFICATIONS OF EVENTS,
SEQUENCE, HIERARCHY, LOGIC OF EXECUTION
AND THE INFORMATION PATHWAYS BETWEEN
SYSTEMS, WITHIN THE SAME ENTERPRISE OR
VARIOUS INTERCONNECTED ENTERPRISES.
ITS AN SYNCHRONIZATION OF A
COMPANY'S INTERNAL
OPERATIONS WITH THOSE OF ITS
OTHER DIVISIONS AND ITS TRADING
PARTNERS BY CONNECTING
DISPARATE SYSTEMS IN REAL-TIME

25. RELATIVE VALUE FOR
CUSTOMERS
THE CUSTOMER VALUE APPROACH
FOCUSES ON HOW PEOPLE CHOOSE
AMONG COMPETING SUPPLIERS,
CUSTOMER ATTRACTION AND
RETENTION, AND MARKET-SHARE GAINS.
BY HIGHLIGHTING THE BEST PERFORMER
ON EACH KEY BUYING FACTOR,
MARKETERS OBTAIN A MARKET DERIVED,
EMPIRICAL AGGREGATE OF EACH
SUPPLIER'S CUSTOMER VALUE
PROPOSITION

26. END CASTING OR
DEMAND MGT
• END-CASTING IS A HEIGHTENED FOCUS ON
FINAL CONSUMER DEMAND. BIG DATA HAS
LED TO THE DEVELOPMENT OF THE CONCEPT
OF END-CASTING. WITH THE UBIQUITY OF
SCANNERS, DATA IS NOW AVAILABLE FOR
ANALYSIS AND FOR DEVELOPING INSIGHTS
INTO DEMAND PATTERNS NOT JUST FROM
CHANNEL PARTNERS BUT ALSO FROM END
CUSTOMERS. BIG DATA CAN BE USED TO
SENSE DEMAND FORECAST AND REDUCE
FORECASTING ERRORS BY 40%. THESE ARE
GAME CHANGING NORMS IN PERFORMANCE
THAT CAN TURN INTO CONSIDERABLE
FINANCIAL GAINS.
DEMAND MANAGEMENT IS THE
SUPPLY CHAIN MANAGEMENT
PROCESS THAT BALANCES THE
CUSTOMERS' REQUIREMENTS WITH
THE CAPABILITIES OF THE SUPPLY
CHAIN. ... IT INCLUDES
SYNCHRONIZING SUPPLY AND
DEMAND, INCREASING FLEXIBILITY,
AND REDUCING VARIABILITY.

27. VIRTUAL INTEGRATION
• VIRTUAL INTEGRATION IS THE USE OF INTERNET TO
REPLACE PHYSICAL COMPONENTS THAT A FIRM HAS
WITH TIMELY AND USEFUL INFORMATION. FIRMS
ENGAGED IN VIRTUAL INTEGRATION OWN ONLY THEIR
BRAND AND THEIR CLIENTS THUS ELIMINATING THE
NEED TO PRODUCE, SHIP OR HANDLE ANY SUCH
PRODUCTS AS THEY ARE NOW OUTSOURCED.

28. INFORMATION SHARING AND VISIBILITY-
• INFORMATION – MULTIPLE SOURCE- USING FOR BUSINESS – AFTER
ANALYZATION OF EXPERTS.
• EX- F.B
• NYKAA APP

29. VALUE BASED
MANAGEMENT
Value based management is an
approach to organizational leadership in
work. It says that organizations should
define what they consider value to be,
then focus on maximizing it.
Organizations usually define value as
shareholder value.

30. PRODUCTION POSSIBILITY TRADEOFFS AND COMBINATION:
• WHAT DOES A PRODUCTION POSSIBILITIES CURVE REPRESENT A
COMBINATION?
• A PRODUCTION POSSIBILITIES CURVE SHOWS THE MAXIMUM COMBINATIONS
OF TWO GOODS AND SERVICES THAT AN ECONOMY CAN PRODUCE WHEN
RESOURCES ARE FULLY USED AND THE BEST TECHNOLOGY IS APPLIED. ... IN
ORDER TO ACHIEVE THE BEST COMBINATION, THE ECONOMY SHOULD
PRODUCE AT THE POINT WHERE MARGINAL BENEFIT AND MARGINAL COST ARE
EQUAL.

31. HOW DO TRADE OFFS WORK WITH
PRODUCTION POSSIBILITIES?
• ALL THE POINTS IN BETWEEN ARE A TRADE-OFF OF SOME COMBINATION OF
THE TWO GOODS. AN ECONOMY OPERATES MORE EFFICIENTLY BY
PRODUCING THAT MIX. THE REASON IS THAT EVERY RESOURCE IS BETTER
SUITED TO PRODUCING ONE GOOD OVER ANOTHER. ... THE MORE
SPECIALIZED THE RESOURCES, THE MORE BOWED-OUT THE PRODUCTION
POSSIBILITY CURVE.

32. PRODUCTION
POSSIBILITY
FRONTIER
IN BUSINESS ANALYSIS, THE
PRODUCTION POSSIBILITY
FRONTIER (PPF) IS A CURVE
ILLUSTRATING THE VARYING
AMOUNTS OF TWO PRODUCTS THAT
CAN BE PRODUCED WHEN BOTH
DEPEND ON THE SAME FINITE
RESOURCES.

33. PRODUCTIVE EFFICIENCY
AND ALLOCATIVE EFFICIENCY
PRODUCTIVE EFFICIENCY MEANS
THAT, GIVEN THE AVAILABLE INPUTS
AND TECHNOLOGY, IT'S
IMPOSSIBLE TO PRODUCE MORE
OF ONE GOOD WITHOUT
DECREASING THE QUANTITY OF
ANOTHER GOOD THAT'S
PRODUCED.
ALLOCATIVE EFFICIENCY MEANS
THAT THE PARTICULAR MIX OF
GOODS A SOCIETY PRODUCES
REPRESENTS THE COMBINATION
THAT SOCIETY MOST DESIRES.

34. DIFFERENCE BETWEEN MANUFACTURING AND SERVICE OPERATIONS
• PRODUCTION ON DEMAND
• CUSTOMER SPECIFIC PRODUCTION
• LABOUR REQUIREMENTS AND AUTOMATED PROCESSES
• PHYSICAL PRODUCTION LOCATION

35. OPEREATIONS – A SYSTEMS PERSPECTIVE
• SYSTEMS VIEW OF OPERATIONS MANAGEMENT STATES THAT ACTIVITIES IN AN
OPERATIONS SYSTEM CAN BE CLASSIFIED AS INPUTS, TRANSFORMATION
PROCESS AND OUTPUT. ... INPUTS ARE CLASSIFIED INTO THREE GENERAL
CATEGORIES-EXTERNAL, MARKET AND PRIMARY RESOURCES

36. STRATEGY FORMULATION PROCESS:
• SETTING ORGANIZATIONS’ OBJECTIVES
• EVALUATING THE ORGANIZATIONAL ENVIRONMENT
• SETTING QUANTITATIVE TARGETS
• AIMING IN CONTEXT WITH THE DIVISIONAL PLANS
• PERFORMANCE ANALYSIS
• CHOICE OF STRATEGY

37. MAKE OR BUY DECISION
• ELEMENTS OF THE "MAKE" ANALYSIS INCLUDE:
•
• INCREMENTAL INVENTORY-CARRYING COSTS DIRECT
LABOR COSTS
• INCREMENTAL FACTORY OVERHEAD COSTS DELIVERED
PURCHASED MATERIAL COSTS INCREMENTAL
MANAGERIAL COSTS
• ANY FOLLOW-ON COSTS STEMMING FROM QUALITY AND RELATED PROBLEMS
INCREMENTAL PURCHASING COSTS
• INCREMENTAL CAPITAL COSTS

38. • COST CONSIDERATIONS FOR THE "BUY" ANALYSIS INCLUDE:
•
• PURCHASE PRICE OF THE PART
TRANSPORTATION COSTS RECEIVING AND
INSPECTION COSTS INCREMENTAL
PURCHASING COSTS
• ANY FOLLOW-ON COSTS RELATED TO QUALITY OR SERVICE

39. BREAK-EVEN ANALYSIS:.
• THE STUDY OF COST-VOLUME PROFIT ANALYSIS IS OFTEN REFERRED TO AS ‘BREAK-EVEN
ANALYSIS’ AND THE TWO TERMS ARE USED INTERCHANGEABLY BY MANY. THIS IS SO,
BECAUSE BREAK-EVEN ANALYSIS IS THE MOST WIDELY KNOWN FORM OF COST-VOLUME-
PROFIT ANALYSIS.
• THE BREAK-EVEN ANALYSIS IS BASED UPON THE FOLLOWING ASSUMPTIONS:
(i) ALL ELEMENTS OF COST, I.E., PRODUCTION, ADMINISTRATION AND SELLING
AND DISTRIBUTION CAN BE SEGREGATED INTO FIXED AND VARIABLE
COMPONENTS.
(ii) VARIABLE COST REMAINS CONSTANT PER UNIT OF OUTPUT IRRESPECTIVE OF
THE LEVEL OF OUTPUT AND THUS FLUCTUATES DIRECTLY IN PROPORTION TO
CHANGES IN THE VOLUME OF OUTPUT.
(iii) FIXED COST REMAINS CONSTANT AT ALL VOLUMES OF OUTPUT.
(iv) SELLING PRICE PER UNIT REMAINS UNCHANGED OR CONSTANT AT ALL
LEVELS OF OUTPUT.

40. BREAK EVEN POINT

41. BREAK EVEN POINT

42. PROBLEM AND SOLUTION