Page 22 - DMGT501_OPERATIONS_MANAGEMENT

Operations Management

Notes What is measured and the way in which the processes are managed play a key role in determining
productivity improvements. We have to increase the value of output relative to the cost of input.
If processes can generate more output of better quality using the same amount of input,
productivity increases. If they can maintain the same level of output while reducing the use of
resources, productivity also increases. Some of the objectives of improvements in productivity
are:
1. Efficiency
2. Maximum output

3. Economy
4. Quality
5. Elimination of waste
6. Satisfaction of human beings through increased employment, income and better standard
of living.
From a broader perspective, an increase of productivity is due to a squeeze in waste of resources.
The resources may be productive resources, governance, markets or social needs. The real issue
is how to achieve them.
Some issues can be simple improvements in the working conditions.

Example: Attention to the details of the production process, like placement of the work
piece at the work centre such that it simplifies the job loading of the machine.
This adjustment can be an important contribution in reducing movements and eliminating
physical stress, therefore leading to greater output. This type of improvement is important,
however, it does not provide the whole picture. The larger picture includes:
1. Issues related to the structure of operations, such as the number size, location, and capacity
of the facilities providing the service or producing the products.

2. The equipment and methods used in the activities.
3. The detailed analysis of the individual jobs and activities.
The structure of operations is not as simple as saying that fewer, bigger facilities will result in
higher productivity and lower costs. According to conventional economic theory, this tends to
be true up to a certain limit. Economies of scale allow firms to increase productivity by making
operations larger. Service and manufacturing operations can take advantage of this to improve
productivity and lower costs.
Consolidation in the many industries is being driven by the need to spread Fixed Costs, such as
information systems, infrastructure, and management, over a broader base of operations. But
this action assumes that demand is infinite. Therefore, matching the characteristics of the market
to the needs of the customer is crucial. Very often, adding facilities is not the right answer.

Example: When Indian Airlines purchased Boeing aircraft, it arranged for the maintenance
of the aircraft to be undertaken by Air India, which already had an established infrastructure. In
this way, Indian Airlines avoided duplicating expensive equipment, highly trained staff, and
administrative overhead. Similarly, many hospitals are forming alliances with super speciality
services to avoid duplication of expensive facilities.

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