A PRESENTATION ON

PRODUCTION AND OPERATIONS

STRATEGIES
Team Members

Anitha B (11)
Devanshu Mehta (29)
Dion D’Sa (30)
Gayathri Asaithambi (34)
Aditya Jain (39)
Kalyani Barman (46)
INTRODUCTION
 Any form of business involves either production of
component/machine or the delivery of a service

 Either way, the objective is to deliver full

satisfaction to the customer at full organisational
efficiency

 Operations Management is the systematic

analysis and implementation of processes to
achieve these goals
 According to E. S. Buffa, design and control of
production systems are the two most
important functions of Productions
Management.

 These functions can be planned for both,

 The Short Term
 The Long Term
 Design strategies in the Long Range
- These are strategies that are typically developed
before the product or service is launched.
The aim is to plan for efficiency over the entire life
cycle of the product or service

 The decision involved would be in terms of

 Type and Design of the product/service
 Selection of Equipment, Process and Job design
 Location and Layout of the facility
 Design Strategies in the Short Range
 These decisions are typically operational in nature
 These are used improve operational efficiency and
reduce costs

 The decisions involved in the Short Range would

be
 Inventory, Production and Quality Control
 Maintenance and Reliability
 Labour, Cost Control and improvement
 The success of POM is evaluated based on the
following criteria

 Customer Satisfaction

 Effectiveness – If the process is applicable as

required by a going concern

 Efficiency – If the process is cost effective

Porters Generic Strategy
In his book, Competitive Strategy: Techniques for
Analysing Industries and Competitors (1980),
Michael A. Porter introduced three generic
strategies which businesses use to maintain a
competitive advantage

 Overall Cost Leadership

 Differentiation
 Focus
 Overall Cost Leadership – the organisation works
to achieve the lowest cost for the product or service
 These products are usually freely available and found off
the shelf
 Economies of Scale are used
 Learning and Experience Curves are employed

 Product Differentiation – The organisation makes

products and services of high quality and
innovative design
 These products and services are highly customised as per
requirements
The strategies used in the above methods are
completely independent of each other

i.e. If an organisation goes in for Overall Cost

Leadership, then it can not parallely work
towards product differentiation

Both the above methods are used for the broad

market scope
 Focus – Focus is when the above cost and differentiation
strategies are used for narrow or niche segments

 The offshoot of this is

 Cost Focus and
 Differentiation Focus

Cost Focus is when an organisation employs a Overall Cost

Strategy for a narrow market segment

Differentiation Focus is when an organisation employs a

highly customised strategy for a very small market segment
– Eg. Bugatti Veron
 An organisation may choose any of the above
strategies

 However, the overall success of the organisation

depends on how the various departments within
the organisation streamlines itself to fit that
model

 The following presenters will describe the

process required to implement these strategies
6 ELEMENTS
OF OPERATIONS STRATEGY
 Positioning the production system
 Product/Service plans, Process and
technology plans
 Facility plans: capacity, location, and layout
 Workforce and Job design
 Making operating decisions strategic
 Strategies regarding suppliers and vertical
integration
1.Positioning the Production System

 Select the type of product design

 Standard
 Custom
 Select the type of production processing
system
 Product focused
 Process focused
 Select the type of finished-goods inventory
policy
 Produce-to-stock
 Produce-to-order
Competitive Priorities for
Services
 The competitive priorities listed earlier for
manufacturers apply to service firms as well
• Low production costs
• Fast and on-time delivery
• High-quality products/services
• Customer service and flexibility

 Providing all the priorities simultaneously to

customers is seldom possible.
Positioning Strategies for
Services
 Type of Service Design
 Standard or custom products
 Amount of customer contact
 Mix of physical goods and intangible services
 Type of Production Process
 Quasi manufacturing
 Customer-as-participant
 Customer-as-product
Evolution of Positioning
Strategies
 The characteristics of production systems tend to
evolve as products move through their product life
cycles.
 Operations strategies must include plan for modifying
production systems to a changing set of competitive
priorities as products mature.
 The capital and production technology required to
support these changes must be provided.
Evolution of Positioning
Strategies
Life Early Late
Intro. Maturity
Stage Growth Growth
Slightly Highly
Product Custom Standard
Standard Standard
Very Very
Volume Low High
Low High
Focus Process Process Product Product
Fin.Gds. To-Order To-Order To-Stock To-Stock
Batch Very Very
Small Large
Size Small Large
Linking Operations and
Marketing Strategies
 Operations Strategy
 Product-focused
 Make-to-stock
 Standardized products
 High volume
 Marketing Strategy
 Low production cost
 Fast delivery of products
 Quality
 Example: TV sets
Linking Operations and
Marketing Strategies
 Operations Strategy
 Product-focused
 Make-to-order
 Standardized products
 Low volume
 Marketing Strategy
 Low production cost
 Keeping delivery promises
 Quality
 Example: School buses
Linking Operations and
Marketing Strategies
 Operations Strategy
 Process-focused
 Make-to-stock
 Custom products
 High volume
 Marketing Strategy
 Flexibility
 Quality
 Fast delivery of products
 Example: Medical instruments
Linking Operations and
Marketing Strategies
• Operations Strategy
– Process-focused
– Make-to-order
– Custom products
– Low volume
• Marketing Strategy
– Keeping delivery promises
– Quality
– Flexibility
• Example: Large supercomputers
2.Product/Service Plans And
Process Technology
As a product is designed, all the detailed
characteristics of the product are established.

Each product characteristic directly

affects how the product can be made.

How the product is made determines

the design of the production system.
Stages in a Product’s Life Cycle

 Introduction- Sales begin, production and marketing

are developing, profits are negative.

 Growth - sales grow dramatically, marketing efforts

intensify, capacity is expanded, profits begin.

 Maturity - production focuses on high-volume,

efficiency, low costs; marketing focuses on
competitive sales promotion; profits are at peak.

 Decline - declining sales and profit; product might be

dropped or replaced.
Process and Technology
Plans
 An essential part of operations strategy is the
determination of how products/services will be
produced.

 The range of technologies available to produce

products/services is great and is continually changing.
3.Facility Plans
 How to provide the long-range capacity to produce
the firm’s products/services is a critical strategic
decision.

 The location of a new facility may need to be decided.

 The internal arrangement (layout) of workers,

equipment, and functional areas within a facility
affects the ability to provide the desired volume,
quality, and cost of products/services.
Capacity strategic decisions include:
 When, how much, and in what form to alter capacity

Facility strategic decisions include:

 Whether demand should be met with a few large
facilities or with several smaller ones
 Whether facilities should focus on serving certain
geographic regions, product lines, or customers
 Facility location can also be a strategic decision
4.Workforce and Job design

 Labour is an important aspect of operation strategy and should be

integrated with other elements of a coordinated operations strategy.

 Sidelined as a staff function with the development of organized labour

in 1930’s.

 Crucial issues of wage determination, design of work rules and job

design were ignored.

 Process detrimental for both labour and management; firms lost

markets and jobs to foreign competitors.

 employment in manufacturing will decline in 10 20 years in absolute

numbers.
SOLUTION

A. COLLECTIVE BARGAINING
Process by which workers collectively bargain with
employers regarding workplace.

 Allows both workers and managers to discuss specific terms

that can depending on the national law:
1. determine the rules that govern their relationship
2. determine wages
3. deal with other matters of mutual relationship like hiring
prices, layoffs, promotions, safety, worker termination etc.
 Collective bargaining should be the focus of top
management
B. JOB DESIGN
SITUATION TILL NOW:

Considerable variation in policies towards job design were

noted and in the responsibilities of job design.
 In some companies industrial engineers were
responsible. In others, personnel and in others supervisors.
 Overall, no systematic approach was noted or that any
alternative principles were being evaluated. The primary
objective set in each instance was the minimization of costs
of performing a task.
Criteria used in job design included:

 Economic considerations
 the desire to minimize costs
 Technical considerations
 relating to process requirements
 Time and Space
 limitations imposed by time and space
 Skill requirements
 availability of labor with the right skills
 Machinery
 equipment needed
 Industrial relations
 management / union agreements relating to staffing levels and
wages
 traditions, customs and norms of the plants
A better way?

 Research, indicates that there are no clear rules to design

jobs.

 People bring a diverse range of skills and abilities to the

workplace, together with a diverse range of experiences,
aspirations and expectations.

 The task facing responsible organizations would be to strike

a balance between the needs of the organization to achieve
it's goals and the creation of a working environment which
results in the job satisfaction for employees.
5.Making operating decisions
strategic
Operational decisions determine how activities actually get
done. They are the 'grass roots' decisions about who is going
to do what and when. It includes:

 How will the firm spend its money this month?

 How will it service that client?
 What would be their procedure for delivering an order?
 Who will be doing quality control?

These operating decisions should be made strategic as they

have a significant impact in reducing cost and controlling
quality.
Driver of operating system : “ Reduction of set-up cost”

Effect of reducing set-up cost lower EOQ( Economic

Order quantity)
Set up costs can be reduced by:
 Effective tool design
 quick clamping devices
 Carefully worked out procedures etc.

Benefits of lowering EOQ:

 In process inventories reduce
 Flexibility to change production from one product to other
maximized
 Improves focus on scrap and JIT( Just In Time) method
JIT production- small lot sizes – worker produces and passes
it on to second worker. Second worker reports on the
defect immediately. First worker is motivated to discover
the cause and further scrap accumulation is avoided. Each
pair of operation is highly linked and awareness of
interdependence of two workers is enhanced.

Constant improvements improves quality and reduces cost

 There should be no distinction between long term

strategic issues and short term operating issues. REASON:
quality, cost, on-time delivery extremely important in the
basic strategy of firm.
6. Strategies regarding suppliers and
vertical integration

Supplier effectiveness affects operation functions as a whole.

Strategic issues to be considered while choosing alternative suppliers:

1. How does the supplier view the firm as a customer?
2. Is the business significant to the supplier?
3. Is the firm a costly customer for the supplier?
4. Is the supplier strategy one of low cost or product differentiation ?

To achieve strategic goals, there has to be a fit of

compatibility between supplier and firm goals.
Different supplier strategies:

 American way : based on arms-length negotiations; use

of threat of withdrawal

 Japanese way: JIT purchasing; development of long

term ,stable relationships with suppliers.

 Manufacturers should analyze when to use vertical

integration as an appropriate strategy for long term and
short term economic benefits.
Vertical integration
 The degree to which a firm owns its upstream suppliers
and its downstream buyers is referred to as vertical
integration.

 The vertical scope of the firm is an important

consideration in corporate strategy as it can have a
significant impact on a business unit's position in its
industry with respect to cost, differentiation, and other
strategic issues

 Expansion of activities downstream is referred to as

forward integration, and expansion upstream is referred
to as backward integration.
Benefits of Vertical Integration

 Reduces transportation costs if common ownership

results in closer geographic proximity.
 Improves supply chain coordination.
 Provides more opportunities to differentiate by means of
increased control over inputs.
 Captures upstream or downstream profit margins.
 Increases entry barriers to potential competitors, for
example, if the firm can gain sole access to a scarce
resource.
 Facilitates investment in highly specialized assets in
which upstream or downstream players may be reluctant
to invest.
Drawbacks of Vertical Integration
 Capacity balancing issues.
 Potentially higher costs due to low efficiencies
resulting from lack of supplier competition.
 Decreased flexibility due to previous upstream
or downstream investments
 Decreased ability to increase product variety if
significant in-house development is required.
 Developing new core competencies may
compromise existing competencies.
 Increased bureaucratic costs.
PRODUCTION SYSTEMS
STRATEGIES
 A variety of products are available in the market, each of these require a
manufacturing system to be produced.

 We need to understand the nature of product

from its introduction to maturity stage of its
life cycle and by relating to the competitive
criteria like Cost, quality, on time delivery and
flexibility we can develop logical types of
manufacturing system that the market needs.

 In order to define types of manufacturing

systems , we need to understand
“Product Strategies”
Product Strategies
Products occur in great diversity, we classify them in
relation to the four competitive criteria given below:

 Products that are Custom in nature

 Highly standardized Products

 Product focused – Continuous demand

 Process focused – intermittent demand

Need to design production facility
based on product/process
 Size of the production facility depends on the size of the
product. For eg, size of a facility manufacturing an air craft
would be bigger than that of a car manufacturing facility.
 Size also depends on the type of manufacturing process,
job production facility would be smaller than a mass
production facility.
 In a job manufacturing facility most of the machines would
be bought to the job, where as in mass production the job
is bought to the machine.
 In projects, the production facility is the site of the product.
For eg, construction of a building or a bridge.
Product Life Cycle
 PLC shows that products sell in relatively low
volume, intermediate volume and high volume in
relation to stages of product introduction, growth ,
maturity and decline.
 Introduction – low volume, good number of variety.
 Growth – when volume goes on increasing & variety
bec0mes limited
 Maturity - when variety becomes even more limited
as product becomes a commodity.
 Decline – substitutes came in with superior function ,
quality, cost or availability, thus volume starts to fall.
Two dimensions of positioning – Product or
process & Production to order or stock

 Production to stock: To offer better service in terms of

availability, cost reduction, increase in market share by making
the product available “off the shelf”.
 Production to order: To offer product design flexibility to
customers, to minimize risks associated with carrying
inventories & to allow closer control on quality.
 The decision to produce “to stock” or “to order” may be due to
varying reasons /factors as producing for both the purposes
are feasible.
 The choice between to produce to stock or to order does not
necessarily depend on whether a product focused or process
focused physical system that has been adopted.
Two dimensions of positioning
Types of system F.G.Inventory Policy – to F.G.Inventory Policy – to
stock order

Product focused Office copiers Construction Equipment

T V Sets Buses, Trucks
Calculators Experimental Chemicals
Gasoline Textiles
Cameras Wire and Cable
Electronic Components

Process Focused Medical Instruments Machine tools

Test equipments Nuclear pressure vessels
Spare Parts Space shuttle
Some steel products Ships
Molded plastic parts Construction projects
Production Systems
TYPES OF PRODUCTION SYSTEMS

A manufacturing production system is classified

into

 Continuous Production

 Intermittent Production
INTERMITTENT PRODUCTION

 Production is performed on a start-and-stop

basis, such as for the manufacture of made-to-
order product

Intermittent production is classified into:

 Job Production

 Batch Production
JOB PRODUCTION / PROCESS
FOCUSSED SYSTEMS
 Products are manufactured to meet the
requirements of a specific order

 Quality involved is small

 Manufacturing of the product will take place

as per the specifications given by the
customer
CLASSIFICATIONS
JOB PRODUCED ONLY ONCE:

 Customer books an order and gets it delivered

 May not book an order with the firm again

 The firm has to plan for material, process and

manpower only after receiving the order from the
customer

 The firms has no scope for pre-planning the

production of the product.
JOB PRODUCED AT IRREGULAR
INTERVALS
 Customer visits the firm to place orders for the
same type of the product at irregular intervals

 Here also planning for materials, process and

manpower will start only after taking the
order from the customer

 In case the firm maintains the record of the

Jobs produced by it, it can refer to the
previous plans
JOBS PRODUCED PERIODICALLY AT
REGULAR INTERVALS
 The customer places orders for the same type
of product at regular intervals.

 Firm can plan for materials, and process and

manpower and have them in a master file

 If the volume of the order is considerably large

and the number of regularly visiting customers
are large in number, the Job Production system
slowly transform into Batch Production system
BATCH PRODUCTION / PROJECT
SYSTEMS
 Batch Production is the manufacture of number of
identical products either to meet the specific order or
to satisfy the demand
 Large scale

Classified into:

 A batch produced only once

 A Batch produced at irregular intervals

 A Batch Produced periodically at known Intervals

CONTINUOUS PRODUCTION / PRODUCT
FOCUSSED SYSTEMS
 Specialized manufacture of identical
products on which the machinery and
equipment is fully engaged

 Associated with large quantities and with

high rate of demand

 Advantage of automatic production is

taken
CLASSIFICATIONS

 Mass Production

 Flow Production
MASS PRODUCTION
 Same type of product is produced to meet
the demand of an assembly line or the
market

 System needs good planning for material,

process, maintenance of machines and
instruction to operators

 Purchases of materials in bulk quantities is

advisable
FLOW PRODUCTION

 The plant and equipment is designed for a

specified product

 Hence if the demand falls for the product or

ceases, the plant cannot be used for
manufacturing other products
EXAMPLES
 Job Production Shop: Tailors shop; cycle
and vehicles repair shops, small Workshops
 Batch Production Shop: Tyre Production
Shops, Readymade dress companies,
Cosmetic manufacturing companies.etc
 Mass Production Shops: Components of
industrial products
 Flow Production: Cement Factory, Sugar
factory, Oil refineries.etc.
MIXED SYSTEMS

 Both process focused and product focused

 Parts fabrication is often organized on a

batch – intermittent basis

 Final assembly is organized on a continuous

basis
PROCESS LIFE CYCLES AND
TECHNOLOGY
 Automation was not available for
intermittent systems where the volume is low
and variety is more

 But with technology development,

numerically controlled machines promise to
change this situation
Contd…
 In continuous systems where the volume is high
and variety is less, process technology is used

 More mechanization, automation and

numerically controlled processes

 When variety reduces further more, productive

systems are fully integrated and process
technology emphasizes high levels of
mechanization and automation including
computer controls and robotics
RELATIONSHIP BETWEEN PLC AND PRODUCTIVE SYSTEMS
ORGANIZATION OF THE OPERATIONS
FUNCTIONS
 The nature of the organizational structure
that a company selects.
 It is based on its strategic choices for the
productive system.
 Factors : quality, volume of output and cost,
flexibility and dependability of supply to its
consumers.
TYPES OF ORGANIZATION

Process focused :
 Product design, flexibility and quality.

Product focused :
 Dependability of supply to its consumers,
cost and price competitiveness.
PROCESS-FOCUSED ORGANIZATION STRUCTURE
PROCESS-FOCUSED ORGANIZATION

1. Physical departmentation.
2. Have highly developed staff functions at higher
levels in the organization.

First level supervisor :

 They are also experts in production technology.
 Co-ordinate the utilization of people, machine
and material.
 Plant manger level- functions that support
production like materials control, quality control,
industrial engineering and plant maintenance,
and purchases.

 Plant manager for single plant- product

engineering, finance and accounting, marketing
and personal and industrial relations.
PRODUCT-FOCUSED ORGANIZATION

 Process is highly decentralized.

 Supervisors supported by support experts.
 Support staff are directly responsible to production
manager.
 Higher level staff provide co-ordination but it has less
influence on operating decisions.
Disadvantages:
 Lack of flexibility in the specialized personnel.
 Inability to accommodate customer needs for variations
in product design.
PRODUCT-FOCUSED ORGANIZATION STRUCTURE
CONCLUSION
Organization structure is selected to give productive system
design

Impact on managers:

 Integral positioning of productive system in relation to

markets.
 Decide on whether to produce the stock or to order.
 Match the productive system to their position on the
product life cycle.
 Investment in improved process technology either through
direct purchases or by allocation to R&D.