Lecture 3

Operations Management
Dr. D Jinil Persis
Assistant Professor, IIM Kozhikode
Operations Strategy (Contd.)
• Organizations can choose to compete in time, cost or differentiation depending
on the core competencies, environment and corporate values.
• Functional strategies are devised aligned to corporate strategy.
Balanced Scorecard (Framework)
• A top-down management system that organizations can use to clarify their vision and
strategy and transform them into action
• The first BSC was prepared by Analog Devices Inc. (ADI), in the US in 1987 by Arthur
Schneiderman in an attempt to bring about connectivity between the non-financial and
financial measures.
• The four perspectives of BSC are developed by Kaplan and Norton (1992) – innovation
and learning, internal processes, customer, and financial interrelated through a cause-
effect relationship
• Shows how metrics are connected to tactical actions, how tactics are aligned to drive the
organization towards the strategic goals, and how synergy can be realized through
concerted actions.
• Not only performance measurement tool (productivity measurement model) but also a
strategy implementation system.
• The actions are captured consisting of metrics, initiatives, and time-bound action plans
which help drive the agreed upon strategy.
 Focal points in BSC

Internal
Suppliers Customers Employees
Delivery performance, processes
Job satisfaction,
quality performance, Quality performance, Bottlenecks,
learning opportunities
number of suppliers, satisfaction, retention automation potential,
and delivery
supplier locations, rate turnover
performance
duplicate activities

Top down Communication and reflection of Corporate strategy and competitive priorities
Performance measures critical or inline to corporate strategy
Performance Measures and trade-offs made visible
Transforming strategies into
actions - BSC
 Example – Volvo
Objective Metric Initiative Budget
Financial
Increase Sales Sales New feature/product

Customer
Reputation for quality Rank Quality improvement programme

Process
High throughput % improvement Automation
from base year

Learning and Growth

Improve workforce # certified in Certification
skill automation programme
Product Design & Process
management
 Products have a life cycle

Process-intensive
Generic /market pull
products: production Complex products:
Technology-push Platform products: Customized products: Quick-build products: products: begins with
process has an impact High-risk products: systems must be
products: firm begins built around a new products are rapid modeling and a market opportunity
on the properties of technical or market decomposed into
with new technology preexisting slight variations of prototyping enables and team selects
the product. Product uncertainties create several subsystems
and looks for a technological existing many design-build- appropriate
design cannot be high risks of failure and many
market subsystem configurations test cycles technologies to meet
separated from components
customer needs
process design

Product varieties have varying length of life cycles

Product design
• Design for customers
• Quality function deployment (QFD)
• Design that is simplified
• Value engineering / Value analysis
• Design for reliability, manufacturability, assembly
• Design for Mass Customization
• Concurrent engineering, Modular design
• Design eco-friendly
Quality Function Deployment
• An approach that integrates the “voice of the customer” into both product and
service development
• The purpose is to ensure that customer requirements are factored into every aspect of the
process
• Listening to and understanding the customer is the central feature of QFD

Order qualifiers
Characteristics that customers perceive as
minimum standards of acceptability for a
product or service to be considered as a
potential for purchase
Order winners
Characteristics of an organization’s goods or
services that cause it to be perceived as better
than the competition

Kano’s model
4 linked houses of Quality

How?
How?
How?

How?
What? What?
What?
What?

Product QFD Component QFD Process QFD QC QFD

Steps to develop a house of quality

What are
What are key selling the target
VOC (whats) CTQs (Hows) Hows vs. hows Whats vs. hows points? (Compare CTQs (in
with competitors) relation with
competitors)
Roof Body

• - Very strong relationship

⃝ - Strong relationship
∆ - weak relationship
 House of Quality for a Car Door
Customer
requirements
information forms
the basis for this
matrix, used to
translate them into
operating or
engineering goals Refer: Reading material
“House of Quality”
 Customization is key to success

Mass customization
Customer order
• Vast array of goods and services Build to order
not forecast
• Rapid low cost production satisfying Repetitive focus
customer demands
• Variety of products in low volume (process Flexible people &
equipment
focus) at the cost of standard high volume
(product focussed) production Mass customization

Economy of scale
Process focused Product focused
Economy of scope
General purpose equipment Rapid throughput
Effective scheduling Specialized Equipment
Mass customization (Contd.)
Standardization is concerned with the use of common components, tools. Raw material Standardization can apply to bar stock/tubing,
products, or processes to satisfy heterogeneous needs. sheet-metal, molding/casting, protective coatings, and programmable
chips.
• Part Standardization efforts only apply to new products, due to rapid
product obsolescence and short product life cycles, all older products • Process Standardization. Standardization of processes results from the
may be phased out in a few years. concurrent engineering of products and processes to ensure that the
processes are actually specified by the design team, rather than being
• Tool Standardization. how many different tools are required for left to chance or "to be determined later." Processes must be
assembly, alignment, calibration, testing, repair, and service. Company- coordinated and common enough to ensure that all parts and products
wide tool standardization can be determined as follows: in the mass customization platform can be built without the setup
• Analyze tools used for existing products. changes that would undermine flexible manufacturing. Example: auto-
• Prioritize usage histories to determine the most "common" of feed screwdrivers.
existing tools. • Component commonality When products have a high degree of
• Work with people in manufacturing/service to determine tool similarity in features and components, a part can be used in multiple
preferences. products. Benefits are -
• Coordinate common tool selection with common part selection. • Savings in design time
• Issue common tool lists with common parts lists. • Standard training for assembly and installation
• Feature Standardization. "Features" are any geometry that requires a • Opportunities to buy in bulk from suppliers
separate tool like a drill, ream, hole punch, bend radii, and cutting tool • Commonality of parts for repair
bit for machine tools. These tools need to be standardized using the • Fewer inventory items must be handled
same procedures as parts.
• Raw Materials Standardization. If raw materials can be standardized,
then the processes can be flexible enough to make different products
without any setup to change materials, fixturing mechanisms, or cutting
Mass customization (Contd.)
Products with short life cycles
• Concurrent engineering
• Parallel or simultaneous engineering
• Design the product for lifetime use
• Benefits –
• Cost reduction
• Quality improvement
• Throughput time reduction
• Delayed differentiation
• The process of producing, but not quite completing, a product or service until
customer preferences are known
• It is a postponement tactic
• Produce a piece of furniture, but do not stain it; the customer chooses the stain
Mass customization (Contd.)

• Modular design
• A form of standardization in which component parts are grouped into modules that are easily
replaced or interchanged
• Advantages
• Easier diagnosis and remedy of failures
• Easier repair and replacement
• Simplification of manufacturing and assembly
• Training costs are relatively low
• Disadvantages
• Limited number of possible product configurations
• Limited ability to repair a faulty module; the entire module must often be scrapped
Design for Reliability
• Reliability - The ability of a product, part, or system to perform its intended function under a prescribed set
of conditions
• Failure - Situation in which a product, part, or system does not perform as intended
• Reliabilities are always specified with respect to certain conditions
• Normal operating conditions - The set of conditions under which an item’s reliability is specified
• More reliable systems can be achieved by combining less reliable elements by redundancy

Example,
Say an aircraft engine is having a reliability of 0.98. By having redundant system (n=2), reliability becomes
0.9996. When n=3, reliability becomes 0.999999999936

Robust design
A design that results in products or services that can function over a broad range of conditions
The more robust a product or service, the less likely it will fail due to a change in the environment in which it
is used or in which it is performed
Pertains to product as well as process design
Eg. Railway lines, bridges, houses