OPERATIONS MANAGEMENT

Lecture 4

The Basic Issues Involved in Design and Operating Decisions

Decision Area Design: Product and service design Capacity Basic Issues Customer demands, improvement of products Capacity needed and how the organization best meet capacity requirements. What process should the organization use? What is the best arrangement for departments, equipment?

Process selection Layout

The Basic Issues Involved in Design and Operating Decisions

Decision Area Design of work systems Basic Issues What is the best way to motivate employees? How can productivity be improved? What is the satisfactory location of the facility/store, etc.? How is quality defined? How are quality goods achieved and improved? Are processes performing adequately? What standards should be used?

Location Operations: Quality Quality Control

The Basic Issues Involved in Design and Operating Decisions

Decision Area Basic Issues Supply Chain Management How to achieve effective flows of information and goods throughout the chain? Inventory Management How much to order? When to reorder? Which items should get the most attention? How much capacity will be needed over the intermediate range?

Aggregate Planning

The Basic Issues Involved in Design and Operating Decisions

Decision Area Materials Requirement Planning Just-in-time and Lean systems Scheduling Project Management Waiting Lines Basic Issues What materials, parts and subassemblies will be needed, and when? How to achieve a smooth, balanced flow of work using fewer resources? How can jobs and resources best be scheduled? Who will do which job? Which activities are most critical to the success of a project? What service capacity is appropriate?

The Traits of a Good Operations Manager

Implementing health and safety procedures Managing staff training issues Motivating other members of the team Project management Setting Objectives Inspires a shared vision Good Communicator Competence

The Traits of a Good Operations Manager

Ability to delegate tasks Team-Building skills Problem-Solving skills, and above all, A good planner

The Historical Evolution of Operations Management

The Industrial Revolution: The industrial revolution began in 1770 s in England. The revolution spread to the rest of the Europe and United States during the 19th century. Prior to revolution: Goods were produced in small shops by craftsman and their apprentices. It was common for one person to be responsible for making a product. Only simple tools were available.

The Historical Evolution of Operations Management

Goods were produced using craft production. Craft production is a system in which highly skilled workers use simple, flexible tools to produce small quantities of customized goods. Shortcomings of Craft Production: Products were made by skilled craftsmen who custom fitted parts, production was slow and costly. When parts failed the replacements were also custom made. Production cost did not decrease as volume increased.

The Historical Evolution of Operations Management

No economies of scale that could provide incentive for companies to expand. The revolution: A number of innovations in the 18th century changed the face of production forever by substituting machine power for human power. The most significant innovation was the steam engine, because it provided a source of power to operate machines in the factories. Factories began to spring up and grow rapidly.

Scientific Management
Despite major changes that were taking place, management theory and practice had not progressed much from early days. The Scientific Management: The term Scientific management relates to the development of various methods and their application to the problems of personnel and production management. It requires a detailed inquiry into the conventional methods and developing basic management principles for improving the efficiency of workers leading to higher wages through incentive for increased productivity.

The Father of Scientific Management

The scientific management era brought widespread changes to the management of factories. The term owes much to the efficiency engineer and inventor Frederick Winslow Taylor (1856-1915) who joined Midvale Steel Company at Philadelphia in 1878 and worked there as a laborer, machinist, foreman and finally as a chief engineer. Then he joined Bethlehem Steel Company in 1898 and rose to the post of director and president of the company later on.

The Father of Scientific Management

Taylor believed in a science of management based on observation, measurement, analysis and improvement of work methods, and economic incentives. He took keen interest in each of three areas of management i.e., human relations, technical work and the organization. He was disturbed with the wastage of time both by the workers and management. He studied work methods in great detail to identify the best method for doing each job.

The Father of Scientific Management

Taylor floated a new idea based on the following principles: 1. Management should be responsible for appropriate planning and organization of work. 2. It should select and train workers on scientific grounds. 3. Work should be assigned according to a standard of time, quality and quantity. 4. Ensure improvements in layout and workplace. 5. Piece rate system of wage payment and incentive plan is adopted.

The Father of Scientific Management

Standard of Time and Production as suggested by Taylor: Taylor suggested that necessary time study should be made so as to fix a standard of production in relation to a standard of time. In his words: The average individual accomplishes the most when he either gives himself or someone else assigns him a definite task namely a given amount of work which he must do within a given time and the more elementary the mind and character of the individual the more necessary does it become that each task should extend over a short period only

The Name of the System

The system originally was called as a Taylor system in 1881 and later on in 1896 it was given the name a Piece-Rate System by Taylor himself. It was unacceptable to the workers and he gave it the name of The task system which indicates that a daily task target will be given with a reward of higher pay for success and penalty for failure. The idea was again opposed severely and in 1903 it was named as Shop Management but again failed to describe the system accurately. Ultimately in a meeting of management people in 1911 it was finally agreed as Scientific Management to which Taylor agreed.

Utility of Taylor s Theory

The benefits of the standards fixed as perceived by Taylor were: It will help in planning the flow of work. It will help in estimation of order completion dates. It will help in suggesting machinery replacement schedule. It shall help in introducing workable wage system. It will help in making comparative cost analysis. It shall help in increasing workers efficiency.

Criticism on Taylor s Theory

The idea floated by Taylor was much criticized by the workers as well as other management writers on the following grounds: Workers thought the methods were used to unfairly increase production without corresponding increase in compensation. Workers thought that the system treats the man equal to the machine. It requires a worker to show the same efficiency throughout the day as performed by a machine which is not at all possible. Contd.

Criticism on Taylor s Theory

The theory does not provide any fatigue allowance to workers for his diminishing efficiency. The efficiency of different workers will be different. There will be limitation of fixed standard time in group movement job. The workers may suffer due to inefficiency of officers in guiding them properly.