Module 1

Introduction to Production and Operation Management

(POM)
Introduction Operations Management:
Meaning, Definition, Scope and Functions. Difference
Between Production and Operations Management.
Management Guru’s and their Contribution. The Roles
and Functions of Operations Manager. Industry 4.0;
Productions and Operations Management in Indian
Context
What you can Expect from the Subject
• Define the Process
• Identify the cost optimizing technique.
• Implement the Technique.
• Assess and evaluate the impact.
• Refine and proceed.
• https://commercemates.com/what-is-
operations-management/
#Functions_of_Operations_Management
OM
Hard Rock Cafe Inc. Operations Management & Productivity

• Hard Rock Cafe Inc. is a food service, hospitality, and

gaming business originally focused on operating casual
dining restaurants.
• Founded in London in 1971, the company developed its
brand through the themed restaurant experience.
• Customers are typically greeted with an ambiance of rock
and roll. The company experienced significant growth and
expansion in the 1990s.
• Today, Hard Rock Cafe is diversified, with operations in the
food service (themed restaurants) industry, gaming
(casino) industry, and hospitality (hotel) industry.
• The company has also achieved global status, with
restaurants, hotels, and casinos in more than 70
countries. In 2007, the Seminole Tribe of Florida bought
the company.
• At that point, the Hard Rock Cafe Inc. headquarters
were moved to Orlando, Florida.
• This business case is an example of how the
differentiation generic strategy can support business
development.
• Also, this case of Hard Rock Cafe sheds light on the
importance of effective operations management to
facilitate business growth and expansion in industries
with high competition.
• The success of Hard Rock Cafe is partly linked to the
firm’s effectiveness in addressing the business needs
pertaining to the 10 decisions of operations
management.
• Also relevant are the productivity principles and concepts
on personnel and other areas of the business
organization.
• Hard Rock Cafe directly and indirectly competes against
other firms, such as Hooters, Twin Peaks, and Planet
Hollywood, as well as food service chains like McDonald’s
, Burger King, Starbucks, and Dunkin’ Donuts.
• http://panmore.com/mcdonalds-operations-
management-10-decisions-areas-productivity
Hard Rock Cafe: 10 Decisions of Operations Management

• The 10 decision areas of operations management are critical

considerations for managers to improve business operations.
• The goal is to develop operations that satisfy business
objectives, while minimizing problems that cause inefficiency
of operations.
• At Hard Rock Cafe, these 10 decisions are applied to ensure
that the brand, company reputation, and financial targets
are met.
• The company’s success is dependent on operations
management, among other factors in the business and
industry environment.
1. Service and Product Design
• Hard Rock Cafe applies service and product design
decisions to maintain the Hard Rock ambiance and brand
image.
• For example, such ambiance and image represent the hard
rock culture, with emphasis on what the music genre
means to the company’s target customers.
• Managers assess different attributes of target markets and
apply modifications to the products and services to suit
the specific demands of the local market.
• Still, these products and services consistently follow the
general specifications of the Hard Rock Cafe brand image.
2. Quality Management.
• Hard Rock Cafe applies quality management by
maintaining a specific quality assessment role for the
operations manager.
• The manager uses the firm’s quality standards to
identify issues and weaknesses in operations.
• Recommended changes are then applied to ensure
compliance throughout Hard Rock Cafe.
• For example, the company adjusts quality rules as a
response to changes in the market condition, with
consideration for social trends that affect the
business.
3. Process and Capacity Design.
• Hard Rock Cafe’s process and capacity design refers to internal
business processes and the target capacity of facilities.
• Internal business processes include food preparation, order
routing, reservations, and others.
• The target capacity of Hard Rock Cafe facilities is based on the
condition of the local markets.
• The company applies process and capacity design decisions to
maximize capacity utilization.
• Capacity planning is adjusted to address changes in demand
based on seasonal events in the local market, such as festivals
and holidays.
4. Location
• Hard Rock Cafe decides about the location of its
businesses based on market analysis and industry
analysis.
• Market research is applied to determine if the market
can support a Hard Rock Cafe in terms of revenue and
profitability targets.
• Industry statistics are used to determine if expanding the
firm through additional locations is feasible.
• The company’s executives and corresponding regional or
local operations management personnel evaluate market
potential along with the potential of the target location.
5. Layout Design
• The company decides regarding layout design by
assessing the expected influx of customers and the
nature of business operations in the facilities.
• For example, Hard Rock Cafe themed restaurants have
layout designs that differ from the layout designs of
the company’s casinos and hotels. In addition, the
company’s restaurants have different layout designs
specific to the unique requirements of each location.
• Hard Rock Cafe’s operations managers apply layout
design for efficient workflow in the limited space
available in these facilities.
6. Job Design
• Hard Rock Cafe’s job design decisions are reached and
applied through an analysis of needs and expectations
of the company and its employees.
• The appropriateness of job design is evaluated based
on employee feedback and company standards.
• For example, jobs are designed based on company
standards and the sociocultural characteristics of the
local labor market.
• Hard Rock Cafe’s operations management is focused on
optimizing workers’ person-job fit, while making it easy
for employees to do their jobs to maximize efficiency.
7. Supply Chain Management.
• Hard Rock Cafe’s supply chain management
decisions are based on market demand, variety of
suppliers, and inventory management costs, among
other factors.
• For example, the company determines target
supply levels based on current inventory conditions
and projected fluctuations in market demand.
• The supply chain management decisions are
applied through Hard Rock Cafe’s operations
managers and location managers.
8. Inventory Management
• The company applies inventory management
decisions through inventory management
software, in addition to tradition approaches.
• Hard Rock Cafe’s operations management uses
demand fluctuations and historical records to
predict changes needed in the inventory.
• The inventory is then adjusted accordingly. The
strategic objective is to ensure that the inventory
levels are adequate to maximize the revenues and
profits of the business.
9. Scheduling
• Hard Rock Cafe makes decisions in scheduling by
evaluating current operational effectiveness. For example,
personnel involved in operations management assess the
business to determine operational bottlenecks linked to
scheduling.
• The schedules must satisfy capacity requirements. Hard
Rock Cafe’s operations managers disseminate planned
schedules to staff and use their feedback to make
adjustments.
• The adjusted schedules are then applied to ensure
flexibility and resilience of the business.
10. Maintenance.
• Maintenance decisions at Hard Rock Cafe are
applied based on a comparative evaluation of assets
and the firm’s standards.
• For example, the company has standards on how
much equipment wear and tear is allowed before
the equipment needs repair or replacement.
• Hard Rock Cafe also has standards and policies on
how maintenance should be conducted, with
reference to the qualifications of maintenance
personnel or service providers.
Productivity at Hard Rock Cafe

• Hard Rock Cafe determines the productivity of

its human resources, including kitchen staff
and wait staff, through a set of well-defined
quantitative and qualitative criteria that
reflect performance.
• Some of the quantitative criteria used in
operations management at Hard Rock Cafe are
as follows:
• The number of orders that the kitchen staff fulfills within
Hard Rock Cafe’s standard allotted time versus the number
of items ordered by the customers. (Kitchen staff
productivity)
• The number of orders that the wait staff serves or delivers
within Hard Rock Cafe’s standard allotted time versus the
number of items ordered by customers. (Wait staff
productivity)
• The total number of staff members versus the total number
of orders fulfilled in a day. (Kitchen and wait staff
productivity)
• The number of late or unfulfilled orders per day versus the
total number of orders for that day. (Kitchen and wait staff
productivity)
• The qualitative criteria for determining workforce productivity
at Hard Rock Cafe are based mainly on subjective judgment of
managers, staff members, and customers.
• For example, operations managers use customer complaints
and comments to qualitatively monitor kitchen staff and wait
staff productivity.
• Hard Rock Cafe uses these quantitative and qualitative
productivity criteria to assess specific performance aspects of
its human resources.
• The company also combines these criteria to develop a
broader perspective on the productivity and performance of
the workforce.
• These quantitative and qualitative measures guide
productivity decisions at Hard Rock Cafe.
Introduction Operations Management:
• Meaning, Definition, Scope and Functions.
Difference Between Production and
Operations Management. Management
Guru’s and their Contribution. The Roles and
Functions of Operations Manager. Industry
4.0; Productions and Operations
Management in Indian Context
Production &
Operations Management
• Production is the creation of goods and
services.
• Operations management (OM) is the set of
activities that creates value in the form of
goods and services by transforming inputs into
outputs
• In an organization that does not create a tangible
good or product, the production function may be less
obvious. We often call these activities services .
• The services may be “hidden” from the public and
even from the customer.
• The product may take such forms as the transfer of
funds from a savings account to a checking account,
the transplant of a liver, the filling of an empty seat
on an airplane, or the education of a student.
• Regardless of whether the end product is a good or
service, the production activities that go on in the
organization are often referred to as operations, or
operations management .
Service Organization
Airline Organization chart
Manufacturing Organization chart
• https://www.marketplace-simulation.com/
operations-management-demo
TOS
1. To acquaint the student with the basic
management principles with respect to
production and operations management.
2. To Familiar the student with different types of
Production Systems.
3. To explain the students regarding various
techniques used in Operations Management.
Why Study OM?
We study OM for four reasons:
1. OM is one of the three major functions of any organization,
and it is integrally related to all the other business
functions.
All organizations market (sell), finance (account), and produce
(operate), and it is important to know how the OM activity
functions.
Therefore, we study how people organize themselves for
productive enterprise .
2. We study OM because we want to know how goods and
services are produced .
The production function is the segment of our society that
creates the products and services we use.
3. We study OM to understand what operations
managers do . Regardless of your job in an
organization, you can perform better if you
understand what operations managers do.
In addition, understanding OM will help you explore
the numerous and lucrative career opportunities in
the field.
4. We study OM because it is such a costly part of an
organization . A large percentage of the revenue of
most firms is spent in the OM function.
Indeed, OM provides a major opportunity for an
organization to improve its profitability and enhance
its service to society.
Example 1 considers how a firm might increase its profitability via the production function.

• Fisher Technologies is a small firm that must double its

dollar contribution to fixed cost and profit in order to be
profitable enough to purchase the next generation of
production equipment.
• Management has determined that if the firm fails to
increase contribution, its bank will not make the loan and
the equipment cannot be purchased.
• If the firm cannot purchase the equipment, the limitations
of the old equipment will force Fisher to go out of business
and, in doing so, put its employees out of work and
discontinue producing goods and services for its customers.
• APPROACH : Table 1.1 shows a simple profit-and-
loss statement and three strategic options
(marketing,
• finance/accounting, and operations) for the firm.
The first option is a marketing option , where
• excellent marketing management may increase
sales by 50%. By increasing sales by 50%,
contribution
• will in turn increase 71%. But increasing sales
50% may be difficult; it may even be impossible.
a. Increasing sales 50% increases contribution by
$7,500, or 71% (7,500/10,500).
b. Reducing finance costs 50% increases
contribution by $2,250, or 21%
(2,250/10,500).
c. Reducing production costs 20% increases
contribution by $12,000, or 114%
(12,000/10,500).
d. Contribution to fixed cost (excluding finance
costs) and profit.
• Introduction Operations Management:
• Meaning, Definition, Scope and Functions.
Difference Between Production and
Operations Management. Management
Guru’s and their Contribution. The Roles and
Functions of Operations Manager. Industry
4.0; Productions and Operations
Management in Indian Context
Operations management (OM)
Meaning
• Operations management is a systematic
approach to addressing issues in the
transformation process that converts inputs
into useful, revenue generating outputs.
Define OM
• Defined as the Design, Operation and
improvement of the systems that create and
deliver the firm’s primary products and
services.
Fivestar chicken
• https://www.youtube.com/watch?
v=_okgWPalbKc&t=178s
Tomato Ketchup
• https://www.youtube.com/watch?
v=RRWpu2Rwxl0
Difference Between Production and
Operations Management
Walter A. Shewhart
• Walter A. Shewhart was a statistician at Bell Labs
during the 1920s and 1930s.
• Shewhart studied randomness and recognized
that variability existed in all manufacturing
processes.
• He developed quality control charts that are used
to identify whether the variability in the process
is random or due to an assignable cause.
• Such as poor workers or miscalibrated machinery.
Walter A. Shewhart…
• He stressed that eliminating variability
improves quality.
• His work created the foundation for today’s
statistical process control, and he is often
referred to as the “grandfather of quality
control.”
Deming's seven deadly diseases of management

• Lack of constancy of purpose to plan products and services

that will have a market and keep the company afloat.
• An emphasis on short term profits and short term thinking
(just the opposite from constancy of purpose to stay in
business), fed by fear of unfriendly takeover, and by demand
from bankers and owners for dividends.
• Evaluation of performance and annual reviews.
• Mobility of managers and job hopping.
• Management by use only of available data.
• High medical costs.
• High costs of liability
PDCA Cycle (The Deming
Wheel)

Plan for changes to bring

about improvement.
Do changes on a small scale
first to trial them.
Check to see if changes are
working and to investigate
selected processes.
Act to get the greatest
benefit from change.
Deming’s System of Profound Knowledge
• The System of Profound Knowledge (SoPK) is
the culmination of Dr. W. Edwards Deming's
lifelong work.
• It is an effective theory of management that
provides a framework of thought and action
for any leader wishing to transform and
create a thriving organization With the aim
for everybody to win.
You are in a room that has three switches
and a closed door.
The switches control three light bulbs on
the other side of the door.
Once you open the door, you may never
touch the switches again.
How can you definitively tell which switch
is connected to each of the light bulbs?
Answer: Turn on the first two switches.
• Leave them on for five minutes. Once five
minutes has passed, turn off the second
switch, leaving one switch on.
• Now go through the door. The light that is still
on is connected to the first switch.
• Whichever of the other two is warm to the
touch is connected to the second switch.
• The bulb that is cold is connected to the switch
that was never turned on.
• A man is looking at a photograph of someone.
His friend asks who it is. The man replies,
“Brothers and sisters, I have none. But that
man’s father is my father’s son.” Who was in
the photograph?
Joseph Juran
• Management theory: Juran is widely
acknowledged for the addition of the human
dimension to quality management.
• He advocated the training and education of
managers.
• Juran proposed that human relations
problems are supposed to be isolated and
that the fundamental cause of quality issues
was resistance to change.
Juran’s Trilogy
Juran Trilogy
• https://www.youtube.com/watch?
v=OEN48Vz7KRA
Voice of customer
• https://www.youtube.com/watch?
v=ZgDhQyw4uGs
Voice of Customer
• Voice of the customer is a term used in
business and information technology to
describe the in-depth process of capturing
customer's expectations, preferences and
aversions
Internal customer
• Internal customers are stakeholders who work
within your company (employees) and require
assistance from another individual or department
to get their job done.
Quality

The standard of
something as
measured against
other things of a
similar kind.
The degree of
excellence of
something.
Breakthrough Concept
An important discovery or event that helps to
improve a situation or provide an answer to a
problem.
Crossby
• Crossby is known for his concepts of “Do it
right first time” and ‘Zero Defects.’
• He defines quality as conformance to
requirements which the company itself has
established for its products based directly in
customer needs.
• He emphasizes prevention management in
every area.
• Gave 14 points for quality management.
Crossby’S 14 Steps
1. Management commitment
2. The quality improvement team
3. Quality measurement
4. The cost of quality
5. Quality awareness
6. Corrective action
7. Zero defects planning
8. Quality education.
9. “Zero Defects Day”
10. Goal setting
11. Error-cause removal
12. Recognition
13. Quality councils
14. “Do it over again.”
Seven Tools of Quality Control
Pareto Rule
• The 80/20 Rule (also known as the Pareto principle or
the law of the vital few & trivial many) states that, for
many events, roughly 80% of the effects come from
20% of the causes.
• The 80-20 rule maintains that 80% of outcomes
(outputs) come from 20% of causes (inputs).
• In the 80-20 rule, you prioritize the 20% of factors that
will produce the best results.
• A principle of the 80-20 rule is to identify an entity's
best assets and use them efficiently to create
maximum value.
Histogram
• In other words, a histogram represents a
frequency distribution by means of
rectangles whose widths represent class
intervals and whose areas are proportional
Run chart
• A run chart is a line graph of data plotted over
time.
• By collecting and charting data over time, you
can find trends or patterns in the process.
• Because they do not use control limits, run
charts cannot tell you if a process is stable.
• However, they can show you how the process
is running
Check Sheet
Check Sheet
• The check sheet is a form used to collect data
in real time at the location where the data is
generated.
• The data it captures can be quantitative or
qualitative.
• When the information is quantitative, the
check sheet is sometimes called a tally sheet.
Kaoru Ishikawa
• Known for the development of quality tools
called cause-and-effect diagrams, also called
fishbone or Ishikawa diagrams.
Fish bone diagram
• https://www.youtube.com/watch?
v=mLvizyDFLQ4&t=21s
• Diagrams are used for quality problem solving.
• First to emphasize the importance of the
“Internal Customer” the next person in the
production process.
• First to stress the importance of total quality
control, rather than focusing on products and
services.
Flow chart
Flow chart
• A flowchart is a type of diagram that
represents a workflow or process.
• A flowchart can also be defined as a
diagrammatic representation of an algorithm,
a step-by-step approach to solving a task.
• The flowchart shows the steps as boxes of
various kinds, and their order by connecting
the boxes with arrows.
Scatter diagram
• The scatter diagram graphs pairs of numerical
data, with one variable on each axis, to look
for a relationship between them.
• A scatter plot is a type of plot or mathematical
diagram using Cartesian coordinates to display
values for typically two variables for a set of
data.
Taguchi methods
• Are statistical methods to improve the quality
of manufactured goods.
• Three principal contribution to statistics:
1. Taguchi loss function.
2. The philosophy of offline control.
3. Innovations in the design of experiments.
Taguchi Loss Function
• The philosophy of off-line quality control,
designing products and processes so that they
are insensitive ("robust") to parameters
outside the design engineer's control.
System design stage
• The non-statistical stage for engineering, marketing
and customer knowledge.
Parameter stage
• How should the product perform against defined
parameters?
• The robust solution of cost-effective manufacturing
irrespective of the operating parameters.
Tolerance design stage
• Tolerance around the desired settings.
• Finding the balance between manufacturing cost
and loss.
Innovation in Design of experiments
Roles of Operations Manager
• Ensuring that the operations systems meet
objectives of the organization as a whole.
• Making strategic decisions relating to planning
and designing an operating system.
• Inventory management.
• Manufacturing.
• Quality
• Maintenance / Engineering.
Roles of Operations Manager
Functions of an Operations Manager

Finance
• Finance plays a chief role in operations
management. It is essential to ensure that the
organization’s finance has been utilized
properly to carry out major functions such as
the creation of goods or services so that the
customer’s needs could be satisfied.
Operation
• This function in operation management is
mainly concerned with planning, organising,
directing and controlling all the activities of an
organisation.
• Which helps in converting the raw materials
and human efforts into valuable goods and
services for satisfying customer needs.
Strategy
• Strategy in operation management refers to
planning tactics that could help them to
optimise the resources and have a competitive
edge over others.
• Business strategies imply to supply chain
configuration, sales, capacity to hold money,
optimum utilisation of human resources and
many more
Design of the product
• Incorporating innovative technologies play a
crucial role in the selling of a product.
• Thus it is the duty of operations manager to
ensure that the product is designed catering to
the market trends and needs of the customers.
• The modern-day customers are more
concerned about the quality of the product
than its quantity.
• So, the operation managers focus on
producing top-notch quality products.
Forecasting
• In operation management, forecasting refers
to the estimation of customer’s demand so
that production can be done accordingly.
• The manager gets to know what to produce,
when to produce and how to produce in
accordance with the customer’s needs.
Supply Chain Configuration
• The main motive is to ensure effective
management, monitoring and controlling of
all the main activities that are held in a firm.
• The supply chain configuration starts from the
supply of the raw materials and continues till
the production of the final product
• Then their selling to the customers which will
satisfy their needs and wants.
Managing the Quality
• The operation managers allocate the task of
quality management to a team and then
supervise their task.
• The managers identify project defects and
rectify them to ensure quality.
• Certain systems are used that measure and
maintain the quality of the product.
Industry 4.0
• Industry 4.0 is the digital transformation of
manufacturing/production and related
industries and value creation processes.
• Industry 4.0 is used interchangeably with the
fourth industrial revolution.
• Represents a new stage in the organization
and control of the industrial value chain.
Productions and Operations Management in Indian Context
• Global Market Place
• Production/Operations Strategy
• Total Quality Management (TQM)
• Flexibility
• Time Reduction
• Technology
• Worker Involvement
• Re-engineering
• Environmental Issues
• Corporate Downsizing (or Right Sizing)
• Supply-Chain Management
• Lean Production
Operations management provides alternative methodologies
to address such wide-ranging issues in an organization .
• Transformation processes are central to operations systems.
• The transformation process ensures that inputs are converted into
useful outputs.
• The focus of operations management is to address the design,
planning, and operational control of the transformation process.
• The goal of operations management is to ensure that the
organization is able to keep costs to a minimum and obtain revenue
in excess of costs through careful planning and control of
operations.
• Operations management also involves the development of
performance evaluation systems and methods through which the
operating system can make improvements to meet targeted
performance measures.
The important functions can be understood by:
(a) categorizing them under design issues and
control issues and
(b) classifying them as long-term issues and
short-term issues, based on the planning
horizon.
Functions of OM
Design Issues Operational Control Issues
• Product and service design - Forecasting
• Process design - Operations planning and control
• Quality management - Supply chain management
• Location and layout of facilities - Maintenance management
• Capacity planning - Continuous improvement of operations