Types of Business Activities

1. Production/ManufacturingProduction is the process by which raw materials and other inputs are converted into finished products. It involves receiving inputs in the form of materials, personnel, capital utilities and information .These inputs are changed into a conversion system into desired products and services which are called the outputs. Example:

INPUT
1. Custome rs
2. Raw

PROCESS
Capital Labor

OUTP UT
1. Product
2. Services

2. Service
An Industry that comprises of companies that primarily earns revenue through providing intangible products or services. Example: Airline, hotel etc.

3. Trading
The term trading implies for an industry which involves pure trading of goods and services in exchange of money. The Company in this kind of a business purchases the goods required in bulk from one dealer and sells it to the customer. Example: Buying and selling of shares and stocks, relation between whole seller and retailer.

Evolution of Operations

Production is the term which precedes operations management. The system and process in a production setup are not only complex they are hazardous also. There is a greater investment of the organization in terms of resources involved in manufacturing. All these made it necessary to ensure a certain amount of discipline, standardization of processes, proper supervision and thus it became essential for many owners of the business to make it more systematic.

Development of Factory System of Production: Until the emergence of concept of

Manufacturing there was no such thing as management .It is true that for the most part these people were owner of business and did not regard themselves as managers as well.

The Development of Larger Corporation: The development of the larger corporation

with many owners made it necessary to hire people from outside to operate business at various levels.

Growth of Service Sector: The traditional view of manufacturing management began in

8th century when Adam Smith recognized the economic benefits of specialization of labor. Fredrick Taylor implemented Smith's theories and crusaded for scientific management throughout the vast manufacturing complex of his day. This traditional view prevailed till about 1930s.

Production management became more widely accepted term from the 1930s through the 1950s. As Fredrick Taylor's work became more widely known, managers developed techniques that focused on economic efficiency in manufacturing .However in the 1970s, as the service sector became more prominent the change in the term from "production" to "operations" management came into existence.

Operations
Operations are purposeful actions or activities which are done methodically as a part of a plan of work by process that is designed to achieve the pre-decided objectives. Jobs or tasks comprising of one or more elements or subtasks, and which are performed typically in one location. Operations transform resource or data inputs into desired goods, services, or results, and create and deliver value to the customers

Example: 1) Airline Industry At an airport, the operation in which customers are involved is processing our ticket and baggage, moving from ticket desk through security check points and onto your awaiting plane. This system is planned and organized by an operations manager

2) Financial Consultancy A financial advisor gathers and provides information to the client and assist in developing a financial plan. It also involves feedback to control the process.

Operations in management
Operations management is an area of business concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient in terms of using as little resource as needed, and effective in terms of meeting customer requirements. It consists of tactics such as scheduling work, assigning resources including people, equipment, managing inventories, assessing quality standards, process types decisions etc. In short it is understood as the process whereby resources of inputs are converted into more useful products. Example of operations management in various fields: The physical distribution of items to the users or customers. The arrangement of collection of marketing information. The selection and the recruitment process.

Understanding the difference between production and operation management

Sr no Production Management
1. Origin: Production Management is more often used where tangible goods are produced Example: Production of cell phones, cars etc

Operation Management

Operations Management is more frequently used where various inputs are transformed into intangible services Example: It will cover service organization such as banks, airlines, educational institutions etc.

2.

Involvement: Production management is just a subset of operations management Operations management involves more than just production

3.

Tangibility: Production Management is more often used where tangible goods are produced Example: Production of cell phones, cars etc. Operations Management is more frequently used where various inputs are transformed into intangible services Example: It will cover service organization such as banks, airlines, educational institutions etc

A Common example distinguishing production and operations in a FMCG Sector

A Demand

Order Processi ng Product Planning

Process Of Manufacturi ng

Quality Inspectio n

F.G. Inventor y

R.M Inventory

Procurement of R.M Delivery After sales service Invoices

Packing

Finished Goods Inventory

Characteristics of Modern Operations Function

The production and operations management of today present certain characteristics which make it look totally different from what it was in the past. Specifically, todays production system is characterized by at least four features which are given below:

1) Manufacturing as Competitive Advantage:

In the past Production Management was considered to be like any other function of the organization. When demand was high and capacities were inadequate, the concern was to somehow muster all inputs and use them to produce goods which would be grabbed off the shelves. However, a host of new management techniques were employed by companies to gain a competitive edge in terms of price, product price and ultimately profit. Some of these techniques are Total Quality Management (TQM), Time Based Competition, Business Process Reengineering (BPRE), Just In Time (JIT), Focused Factory, Flexible Manufacturing Systems (FMS), Computer Integrated Manufacturing(CIM) and the Virtual Corporation .

Case Study:
Making products cheaper by better production management: Walmart has an increased competitive edge in the market due to its production management techniques. Due to tie ups with its suppliers Walmart has managed to offer products at extremely low prices and hence virtually run other supermarket stores out of business.

2) Services Orientation:
The service sector is gaining greater relevance these days. The production system, therefore needs to be organized keeping in mind the peculiar requirements of the service component. The entire manufacturing needs to be geared up to serve: I. II. Intangible and perishable nature of the services. Constant interaction with clients and customers.
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III. IV.

Small volumes of production to serve the local markets. Need to locate facilities to serve local markets.

Case Study:
Service oriented customer retention campaign A recent Media Partners Asia (MPA) report has suggested that digital pay TV penetration in India may grow from 10% in 2008 to 33% by 2013, and 42% by 2018. Tata Sky today has nearly 5 million subscribers out of 22 million in a market of seven players. The recent Tata Sky campaigns have focused more on the services that are available with the use of its product, rather than marketing conventional cable tv. While there are many Direct to Home cable service providers, Tata Sky probably provides the same TV quality that its competitors do but holds a distinct edge in the market due to the added services it provides.

3) Disappearing Smokestacks
Protective labor legislation, environmental movements and the understanding that being environment friendly would mean earning more good will from their customers and prospective customers has now resulted in companies worldwide striving for a greener image. Production and manufacturing plants today are more environment friendly.

Case Study:
Striving for a greener planet In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency. The primary goals included spending $500 million a year to increase fuel efficiency in Wal-Marts truck fleet by 25% over three years and double it within ten, reduce greenhouse gas emissions by 20% in seven years, reduce energy use at stores by 30%, and cut solid waste from U.S. stores and Sams Clubs by 25% in three years. CEO Lee Scott said that WalMart's goal was to be a "good steward for the environment" and ultimately use only renewable energy sources and produce zero waste.

4) Small is beautiful
Companies are now moving away from the age old paradigm of conventional mass production by advocating intermediate technology based on smaller working units, community ownership, and regional workplaces utilizing local labour and resources. This emerging trend has led to many tiny manufacturing units sprouting up and providing specialized and customized services and products.
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Case Study:
Outsourcing The latest trend During the course of a software project companies who are contracted to deliver the project hire smaller companies to provide customized niche services. When Etisalat wanted to set up a call center in Mumbai, they hired Tech Mahindra for the job. Tech Mahindra hired Siebel for the CRM portion of the project and hired Avaya Global Connect for the voice infrastructure. Avaya Global Connect in turn hired Interact CRM as consultants to implement the software interface for the voice infrastructure.

Role of an Operations Manager

THE OPERATIONS MANAGER plays a very important role. His duties do not start and end with the production. He is involved in all the aspects of operations i.e. right from deciding the location of his factory till sales of the product manufactured. The entry of MNCs in almost every sphere of industry has created a sense of competition in the Indian industry. And facing this competition is possible only when managers are capable of multi tasking. They should also be willing to take up new responsibilities. They need to take strategic, operating and controlled decisions.
1)

Strategic decisions:
These decisions relate to products, processes and manufacturing facilities. They have long term significance for the organization. -Developing production plans including process design -Selecting and managing production technology -Planning the arrangement of facilities -Planning for the optimal distribution of scarce resources among product lines or business units -Answering The How Much and Where questions about production capacity.

2) Operating decisions
These relate to planning production to meet demand. They should provide profits for the organization. -Aggregate planning and master production scheduling -Planning and controlling finished goods inventory -Planning materials and capacity requirements -Decisions on what to produce and when?
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-Managing all facets of material systems.

3) Controlled decisions
-These relate to planning and controlling day to day activities -Planning for effective and efficient use of human resources in operations -Planning and controlling the quality of products and services -Planning and controlling projects

Hierarchy

Operations Manager

Engineering

Maintenance

Ground Operations

Flight Operation

Line Maintenance Overhaul

Station Maintenance Food and Commissary

New Equipment Modification of Equipment Communications Engineering

Flying Communications Dispatching

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SOME LINE AND STAFF JOBS IN OPERATIONS MANAGEMENT

Organizational Level Manufacturing Industries Service Industries

------------------------------------------------------------------------------------------Upper VP of manufacturing VP of operations (airline)

Regional manager of manufacturing Chief administrator

Middle

Plant Manager Program Manager

Store Manager Facilities manager

Lower

Department Supervisor Shift Supervisor Chief Crew

Branch Manager Department Supervisor Assistant Manager

Staff

Productions Controller

System & procedures Analyst

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Materials manager Quality Manager Work Method Analyst (hospital) Process Engineer

Purchasing Agent Inspector Dietician Customer Service Manager

Recent Trends in Operations Management 1. Global Market Place:

Globalization has compelled many manufacturing firms to have operations in countries where they have certain economic advantage. As a result there has been a steep competition amongst the firms to make their products cost effective. Example: Many firms across the globe have their manufacturing operations outsourced to China.

2. Operations Strategy:
More firms these days are emphasizing on strengthening their operations strategy having realized its importance in the overall success of business. Example: Just-in-time (JIT) is an inventory strategy that strives to improve a business's return on investment by reducing in-process inventory and associated carrying costs. The JIT inventory system focus is having the right material, at the right time, at the right place, and in the exact amount.

3. Total Quality Management(TQM):

TQM is a management concept coined by W. Edwards Deming. The basis of TQM is to reduce the errors produced during the manufacturing or service process, increase customer satisfaction, streamline supply chain management, aim for modernization of equipment and ensure workers have the highest level of training. One of the principal aims of TQM is to limit errors to 1 per 1 million units produced.

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TQM is a way of thinking about goals, organizations, processes and people to ensure that the right things are done right first time. This thought process can change attitudes, behavior and hence results for the better. The total in TQM applies to the whole organization. Therefore, unlike an ISO 9000 initiative which may be limited to the processes producing deliverable products, TQM applies to every activity in the organization. Also, unlike ISO 9000, TQM covers the soft issues such as ethics, attitude and culture. The principles of quality management: Customer-focused organization, Leadership, Involvement of people, Process approach, System approach to management, Continual improvement, Factual approach to decision making, Mutually beneficial supplier relationships

Flexibility:
Flexibility (Agile/Lean Manufacturing) in manufacturing means the ability to deal with slightly or greatly mixed parts, to allow variation in parts assembly and variations in process sequence, change the production volume and change the design of certain product being manufactured. A flexible manufacturing system (FMS) is a manufacturing system in which there is some amount of flexibility that allows the system to react in the case of changes, whether predicted or unpredicted. This flexibility is generally considered to fall into two categories, which both contain numerous subcategories. The first category, machine flexibility, covers the system's ability to be changed to produce new product types, and ability to change the order of operations executed on a part. The second category is called routing flexibility, which consists of the ability to use multiple machines to perform the same operation on a part, as well as the system's ability to absorb large-scale changes, such as in volume, capacity, or capability. Most FMS systems consist of three main systems. The work machines which are often automated CNC machines are connected by a material handling system to optimize parts flow and the central control computer which controls material movements and machine flow. The main advantages of an FMS are its high flexibility in managing manufacturing resources like time and effort in order to manufacture a new product. The best application of an FMS is found in the production of small sets of products like those from a mass production. Advantages: Faster, Lower- cost/unit, Greater labor productivity, Greater machine efficiency, Improved quality, Increased system reliability, Reduced parts inventories, Adaptability to
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CAD/CAM operations. However the only limitation involved is high cost of initial investment. 4. Time Reduction: Cutting down on the delivery cycle time provides a firm with an added advantage over its competitor and is a necessary tool for survival in todays fast placed and highly competitive business environment. Delivery cycle time (DCT): Delivery cycle time may be defined as the amount of time from when an order is received from a customer to when the completed order is shipped is called delivery cycle time. This time is clearly a key concern to many customers, who would like the delivery cycle time to be as short as possible. However in order to improve on delivery cycle time it is necessary to improve on the Manufacturing cycle time (MCT). Manufacturing cycle time (MCT): The amount of time required to turn raw materials in to finished goods is called manufacturing cycle time. MCT = Process time + Inspection time + Move time + Queue time Process time: Process time is the amount of time work is actually done on the product. Inspection time: Inspection time is the amount of time spent ensuring that the product is not defective. Move time: Move time is the time required to move materials or partially completed products from workstation. Queue time: Queue time is the amount of time a product spends waiting to be worked on, to be moved, to be inspected, or to be shipped. Only one of these four activities adds value to the product and that is process time. The other three activities (inspecting, moving and queuing) add no value and should be eliminated as much as possible.

5. Technology:
Advancement in technology has led to development of a vast array of new products, processes, materials and components. Automation, computerization, information and communication technologies have revolutionaries the way companies operate. Technological advancements have helped in bringing down the cost and time spent on a product/business development.

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Example: Industrial automation has helped to cut down on manufacturing cycle time; video conferencing has helped to cut down on cost and time spent on business travel trip.
6.

Worker Involvement:
It looks after assigning responsibilities for decision making and problem solving at lower levels in the work organization. It helps in employee involvement at a larger scale. Higher the employee involvement in the organization, better the results for the company. Example: The BPO Industry nowadays have a level 1 Quality control team, they are the members within a team who looks at the quality and give suggestions for the required improvement, thus ensuring every individual comes up to the mark and also not avoid to face the music with the Quality lead.

7.

Re-Engineering:
Its a trend involving drastic improvements to improve the performance of a firm. It involves the concept of starting from scratch in redesigning the business process. The re engineering team must be observant. It must work with the customers. After understanding what the customer requirements are, it should examine what the process flow is. It will indicate the direction for the new process. Thus the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed is called as Re-Engineering. Example: Many IT industries have come up with the Outsourcing facility in it. It was a new concept in early 2000-01 with only few companies giving the facility of providing Customer Care as an outsourced service. But off late many IT giants have also come up with this concept.

8.

Environmental issues:
Nowadays, each and every person has realized the importance of nature. This impact has lead todays Operation manager to think more about pollution control and waste disposal which are key issues in protection of environmental and social responsibility. This makes the manager to emphasize on reduction of waste, recycling of waste, use of less toxic chemicals and use of biodegradable materials. A good example could be seen by nowadays mobile service providers which are opting for e-billing. Also an advertisement shown by the service provider Idea for lessening the use of papers could be because of the environmental issue of prevention of cutting down the trees.
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9. Corporation Downsizing (Rightsizing):

Downsizing has been forced on the firms to shed their obesity. This has become necessary due to competition, need for improved profit and for higher dividend payment to shareholders. Downsizing refers to the permanent reduction of a company's workforce and is generally associated with corporate reorganization, or creating a "leaner, meaner" company. In ordinary terms, downsizing is associated with the layoffs in industries. Any form of acquisition or layoff could fit into the example of Rightsizing

10.Supply-Chain Management:
It deals with the management of supply-chain, from suppliers to final customers. Supply chain is the system by which organizations source, make and deliver their products or services according to market demand. Supply chain management operations and decisions are ultimately triggered by demand signals at the ultimate consumer level. Example: Materials flow downstream, from raw material sources through a manufacturing level transforming the raw materials to intermediate products (also referred to as components or parts). These are assembled on the next level to form products. The products are shipped to distribution centers and from there on to retailers and customers.

11. Lean Production:

Production systems have become lean production systems which use minimal amounts of resources to produce a high volume of high quality good with some variety. These systems use flexible manufacturing systems and multi-skilled workforce to have advantages of both mass production and job production

Example: Many IT industries nowadays are hiring professional for working as a Software Developer with an added skill of Software Testing. Also they prefer job seekers having knowledge of more than one Computing Language. This in turn is kind of a Lean Production system.

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References: Books: Production And Operations Management K. Aswathappa & K. Shridhara Bhatt
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URL: http://www.school-for-champions.com/competition/tqm.htm http://economictimes.indiatimes.com/Opinion/Comments-Analysis/Level-playing-fieldis-essential-Tata-Sky-MD/articleshow/5704406.cms http://en.wikipedia.org/wiki/Wal-Mart http://www.thegreeno.com/green-companies.html

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