Operations
Management
Course Outline
Chapter 1: Introduction- operations
management concepts
Chapter 2- Operations and operations strategy
Chapter 3- Productions systems design
Production and service design
Process selection
Capacity planning
Facility layout
Design of work systems
Location analysis
Chapter 4: Operations planning and
control
Planning and control activities
Material resource planning
Aggregate production planning
Chapter 5: Quality management
Chapter One
Introduction
Learning Objectives
Introduction to Operation & Operations
Management
Operations as a production system
Scope of Operations Management
Reasons for the study of Operations Management
New Operations Themes
Efficiency and Effectiveness
Introduction
• Operations is that part of a business
organization that is responsible for producing
goods and/or services.
• Goods are physical items produced by
business organizations.
• Services are activities that provide some
combination of time, location, form, or
psychological value.
Functions of business organization
To create goods and 1. Operation; Creates
the product
services, all organizations
2. Marketing; Generates
perform thee very important
demand
functions- these functions 3. Finance; Tracks how
are essential not only for well the organization is
production but also for the doing, pays bills, collects
survival of the organization. the money
Operations Management (OM)
Operations Management (OM) involves managing
the processes that convert inputs (materials, labor,
energy) into outputs (goods and services). It is the core
function responsible for the efficient production of
goods and services in an organization.
Operations management;.
Importance: OM is critical because it impacts the
quality, efficiency, and profitability of an organization.
It plays a crucial role in meeting customer demands
and maintaining competitive advantage.
Transformation processes include
Transformation processes include Changes in
the physical characteristics of materials or
customers- physical transformation
Changes in the location of materials,
information or customers- locational
transformation
Changes in the ownership of materials or
information- exchange transformation
Storage or accommodation of materials,
information or customers- storage
transformation
Changes in the purpose or form of
information- informational transformation
Changes in the physiological or
psychological state of customers-
physiological transformation
Operations Management for a
Manufacturer
1-
14
Marketing Finance/
Operations
Accounting
ManufacturingProduction Quality
Purchasing
Control Control
Operations Management for an Airline
1-
15
Marketing Finance/
Operations
Accounting
Flight Ground Facility
Catering
Operations Support Maintenance
Production of Goods Vs Providing Services
Production of goods results in a tangible output,
such as an automobile, eyeglasses, a
refrigerator-anything that we can see or touch.
It may take place in a factory, but it can occur
elsewhere.
Delivery of service, on the other hand,
generally implies an act. A physician's
examination, TV and auto repair, lawn care, and
the projection of a film in a theater are
examples of services.
Typical differences between
production of goods and provision
of services
Similarities production of goods and provision
of services
Forecasting and capacity planning to match supply
and demand.
Process management.
Managing variations.
Monitoring and controlling costs and productivity.
Supply chain management.
Location planning, inventory management, quality
control, and scheduling.
The Critical Decisions of Operation Manager
Design of goods and services
• What good or service should we offer?
• How should we design these products and
services?
Managing quality
• How do we define quality?
• Who is responsible for quality?
Cont.
Process and capacity design
• What process and what capacity will these
products require?
• What equipment and technology is necessary for
these processes?
Location strategy
• Where should we put the facility?
• On what criteria should we base the location
decision?
Cont.
Supply chain management
Should we make or buy this component?
Who are our suppliers and how can we integrate
them into our strategy?
Inventory, material requirements planning,
and JIT
How much inventory of each item should we have?
When do we re-order?
Cont.
Process and capacity design
What process and what capacity will these
products require?
What equipment and technology is necessary for
these processes?
Location strategy
Where should we put the facility?
On what criteria should we base the location
decision?
Cont.
Intermediate and short-term scheduling
Are we better off keeping people on the payroll
during slowdowns?
Which jobs do we perform next?
Maintenance
How do we build reliability into our process?
Who is responsible for maintenance and When do
we do maintenance?
Today's OM Environment
• OM managers operate in a dynamic environment
due to globalization of trade and the transfer of
idea, products, and money at an electronic speed.
• Customers demand better quality, greater speed,
and lower costs.
• Companies implementing lean system concepts a
total - systems approach to efficient operations
• Increased cross-functional decision making
CHAPTER TWO
OPERATIONS STRATEGY
Learning Objectives
Competitiveness
Strategy Formulation
Order Winner and Qualifier
Operation Strategy
Competitive Priorities
Productivity
Both military and business strategy can be described
in similar ways, and include some of the following.
• Setting broad objectives that direct an enterprise
towards its overall goal. Planning the path (in
general terms) that will achieve these goals
• Stressing long-term rather than short-term
objectives. Dealing with the total picture rather
than individual activities.
Strategy Formulation
Strategy formulation is almost always critical to the
success of a strategy.
To formulate an effective strategy, senior managers
must take into account the core competencies of the
organizations, and they must scan the environment.
Environmental scanning; the monitoring of
events and trends that present threats or
opportunities for a company.
They must determine what competitors are doing,
or planning to do, and take that into account.
They need to make SWOT analysis (strengths,
weaknesses, opportunities, and threats).
Order Qualifiers Order Winners
Are the basic criteria that
• A characteristics of a
permit the firm's products to firm that distinguish it
be considered as candidates from its competitors so
for purchase by customers. that it is selected as the
source of purchase.
Are the minimum
characteristics of products to
• Are the criteria that
be considered as a source of differentiate the products
of one firm from another.
purchase.
Operations Strategy
• Operations Strategy is a plan for the
design and management of operations
functions
• Operations strategy relates to products,
processes, methods, operating resources,
quality, costs, lead times, and scheduling.
Operations Strategy focuses on specific capabilities
which give it a competitive edge - competitive priorities
Competitive Priorities- The Edge
Four Important Operations Questions: Will
you compete on -
Cost?
Quality?
Time?
Flexibility?
Competing on Cost?
- Competing based on cost means offering a
product at a low price relative to the prices of
competing products. in this
Typically high volume products
Often limit product range & offer little
customization
May invest in automation to reduce unit costs &
use lower skill labor
Low cost does not mean low quality
Competing on Quality?
- Quality is a major influence on customer
satisfaction or dissatisfaction
- Quality is consistent conformance to customers'
expectations. Two major quality dimensions include
High performance design: Superior features,
high durability, & excellent customer service
Product & service consistency: Meets design
specifications, Close tolerances, & Error free
delivery
Product flexibility
Productivity; A measure of the effective use of
resources, usually expressed as the ratio of
output to input.
Used to measure of process improvement. In
addition productivity ratios are used for
Planning workforce requirements
Scheduling equipment
Financial analysis
Measuring Productivity
Capital Productivity
Definition: Output per unit of capital input.
Formula:
Capital Productivity = Output / Capital Input
Example: A company produces $500,000 worth
of goods using $100,000 worth of machinery.
Capital productivity is $5 per dollar of capital.
Multi-factor Productivity (MFP)
Definition: Output per combined input of
multiple resources (e.g., labor, capital, and
materials).
Formula:
MFP = Output / (Labor + Capital + Materials)
Example: A firm produces $1,000,000 worth
of goods using $200,000 in labor, $150,000 in
capital, and $100,000 in materials. MFP is
$2.22 per dollar of combined input.
Total Factor Productivity (TFP)
Definition: Overall measure of productivity,
considering all inputs.
• Formula:
TFP = Total Output / Total Input
• Example: A business produces 20,000 units
with a total input cost (labor, materials, energy,
capital) of $400,000. TFP is 0.05 units per
dollar
Factors that affect Productivity
• Numerous factors affect productivity. Generally,
they are
"Methods, Capital, Quality, Technology, and
Management."
• Other factors that affect productivity include the
following:
"Standardizing, Quality differences, Use of the
Internet, Computer viruses, Scrap rates, New
workers, Safety, A shortage of technology, Layoffs,
Design of the workspace, Incentive plans that reward
productivity increases."
Improving productivity
Reducing inputs while keeping output
constant
Increasing output while keeping input constant
Reducing input by a larger amount than the
reduction in output.
Increasing output by more amount than the
increase in input.
