OPERATIONS MANA

ABMA MODULE

1/1/2025

ALEX PHIRI (BBA)

blantyre international university
 OPERATIONS MANAGEMENT ABMA LECTURE NOTES

Learning Outcome 1: Analyze the key functions of an organization

a. Production
b. Sales and Marketing
c. Accounting and Finance
d. Human Resources
e. Operations
f. Public sector, private sector, and not-for-profit organizations

Operations Management: Is about how organizations design, deliver, and improve services and
products for their customers.

Definition: Operations management is the activity of managing the resources which create and
deliver services and products.

The operations function is the part of the organization that is responsible for this activity. Every
organization has an operations function because every organization produces some type of
services and/or products. However, not all types of organization will necessarily call the
operations function by this name. (Note that we also use the shorter terms ‘the operation’ and
‘operations’ interchangeably with the ‘operations function’.) Operations managers are the people
who have particular responsibility for managing some, or all, of the resources which comprise
the operations function.

The operations function is central to the organization because it creates the services and products
which are its reason for existing, but it is not the only function. It is, however, one of the three
core functions of any organization. These are:

 The Sales and Marketing function – which is responsible for communicating the
organization’s services and products (or, offerings) to its markets in order to generate
customer requests for service.
Key functions include: Market research, pricing strategies, sales, and advertising and
promotion.
  The research service/product development function – which is responsible for developing
new and modified offerings in order to generate future customer requests for services or
products.
 The operations function – which is responsible for fulfilling customer requests for
services or products through the creation and delivery of services and products.

In addition, there are other key support functions which enable the core functions to operate
effectively. Regardless of their size or sector, organizations are structured around these key
functions which work together to achieve common goals. These include, for example:

 The accounting and finance function – which provides the information to help economic
decision-making and manages the financial resources of the organization.
 The human resources function – which recruits and develops the organization’s staff as
well as looking after their welfare.

 C. Accounting and Finance:



 Definition: Managing the organization's financial resources, including recording

transactions, preparing financial statements, and making financial decisions.
 Key Activities:
 Accounting (recording and reporting financial transactions)
 Financial planning and analysis (budgeting, forecasting)
 Investment management
 Fundraising (securing capital)
 Risk management
 Importance: Sound financial management is essential for an organization's survival
and growth. It ensures that resources are used effectively and that the organization
remains financially stable.
 Example: A retail store's finance department tracks sales revenue, pays suppliers,
prepares financial statements (balance sheet, income statement), and manages cash flow.
 

 D. Human Resources (HR):



 Definition: Managing the organization's workforce, including recruitment, training,

development, compensation, and employee relations.
 Key Activities:
 Recruitment and selection
 Training and development
 Performance management
 Compensation and benefits
 Employee relations
 Legal compliance (labor laws)

Importance: Effective HR management attracts, retains, and motivates talented employees,

creating a positive work environment and boosting productivity.

Example: A hospital's HR department recruits doctors and nurses, provides training on new
medical procedures, manages employee benefits, and handles employee grievances.

E. Operations:

Definition: This term is often used interchangeably with "Production" but can also encompass a
broader view of managing all the processes involved in delivering a product or service. It often
focuses on efficiency and optimization.

Key Activities:

 Process design and improvement

 Quality management
 Supply chain management
  Project management
 Logistics and distribution

Importance: Efficient operations lead to cost savings, improved quality, and faster delivery
times. It's about making the whole system work effectively.
Example: For an online retailer, operations would include managing the website, processing
orders, warehousing, and shipping.

F. Public Sector, Private Sector, and Not-for-Profit Organizations:

Public Sector: Government-owned and operated organizations that provide services to the
public (e.g., schools, hospitals, police). Their primary goal is not profit, but public service.
Private Sector: Businesses owned by individuals or shareholders that aim to make a profit
(e.g., manufacturing companies, retail stores, consulting firms).
Not-for-Profit Organizations: Organizations that are not driven by profit but by a specific
mission, such as charitable work, education, or social advocacy (e.g., charities, foundations,
NGOs). They still need to manage their resources effectively, even though profit is not their
primary motive.

Key Differences & Considerations:

While all organizations share these core functions, the specific focus and priorities may differ
depending on the sector. For example, a not-for-profit organization might prioritize fundraising
and program delivery over profit maximization, while a private sector company will focus
heavily on sales and marketing to drive revenue. Public sector organizations are often subject to
different regulations and accountability measures.

Understanding the key functions of an organization is essential for effective management and for
understanding how organizations operate. These functions are interconnected and work together
to achieve the organization's goals. The specific emphasis on each function may vary depending
on the organization's sector, size, and mission.
Learning Outcome 2: Analyze the relationships between different organizational functions

a. Organization structures
b. Organizations as systems
c. Division of labor and other resources
d. Holistic planning
e. Impact of internal relationships quality
f. Planning, control, and management of organizational relationships

Organizations aren't just collections of departments; they are complex systems where different
functions interact and depend on each other. Understanding these relationships is crucial for
effective management. This lecture explores how these interactions shape organizational
performance.

A. Organization Structures:

Definition: The formal arrangement of roles, responsibilities, and relationships within an

organization. It defines how tasks are divided, grouped, and coordinated.
Types:
Functional: Departments are grouped by specialized functions (e.g., Marketing, Finance,
and Production). Good for specialization, but can lead to siloed thinking.
Divisional: The organization is divided into semi-autonomous divisions based on product,
geography, or customer type. Good for flexibility and responsiveness, but can lead to duplication
of resources.
Matrix: Employees report to both a functional manager and a project manager. Good for
project-based work, but can create confusion and conflict.
Network: A more decentralized structure with interconnected teams and individuals. Good
for agility and innovation, but requires strong communication and coordination.
 Impact on Relationships: The organizational structure directly impacts how different functions
communicate, collaborate, and share information. For example, a functional structure might
make it difficult for departments to collaborate on cross-functional projects.

B. Organizations as Systems:

Systems Theory: Views organizations as complex systems with interconnected parts. A

change in one part of the system can affect other parts.
Interdependence: Functions are interdependent, meaning they rely on each other to achieve
organizational goals. For example, Marketing needs information from Production to develop
realistic marketing plans.
Open Systems: Organizations interact with their external environment (customers, suppliers,
competitors). Changes in the environment can impact the organization's internal functions.
Implications: Understanding the organization as a system emphasizes the importance of
communication, coordination, and collaboration between functions.

C. Division of Labor and Other Resources:

Division of Labor: Breaking down complex tasks into smaller, specialized tasks. This
increases efficiency but requires coordination between different roles.
Resource Allocation: Distributing resources (financial, human, and material) across different
functions. This requires careful planning and prioritization.
Impact on Relationships: How labor is divided and resources are allocated can impact the
relationships between functions. For example, if one function is consistently under-resourced, it
can lead to conflict and resentment.

D. Holistic Planning:

Definition: A planning process that considers the organization as a whole, taking into account
the interdependencies between different functions.
 Importance: Holistic planning helps to ensure that different functions are working towards
common goals and that resources are allocated effectively.
Benefits: Improved coordination, reduced conflicts, and better alignment with overall
organizational strategy.
Example: Developing a new product should involve Marketing, Production, Finance, and HR
from the initial planning stages.

E. Impact of Internal Relationship Quality:

Communication: Open and effective communication between functions is essential for

collaboration and problem-solving.
Trust: Trust between individuals and departments fosters cooperation and reduces conflict.
Collaboration: A willingness to work together towards common goals.
Conflict Resolution: Effective mechanisms for resolving conflicts between functions.
Impact: High-quality internal relationships lead to improved communication, collaboration,
and overall organizational performance. Conversely, poor relationships can lead to conflict,
inefficiency, and decreased productivity.

F. Planning, Control, and Management of Organizational Relationships:

Relationship Management: Actively managing the relationships between different functions.

Strategies:
Cross-functional teams: Bringing together individuals from different departments to work
on specific projects.
Communication platforms: Establishing clear communication channels between functions.
Shared goals and objectives: Ensuring that all functions are working towards common
goals.
Conflict resolution mechanisms: Developing procedures for resolving conflicts between
functions.
Training and development: Providing training on communication, collaboration, and
conflict resolution skills.
 Importance: Effective relationship management is crucial for creating a positive and
productive work environment.

Analyzing the relationships between organizational functions is essential for effective

management. Understanding how different functions interact and depend on each other allows
managers to optimize organizational structure, allocate resources effectively, and foster a culture
of collaboration. By focusing on holistic planning and actively managing internal relationships,
organizations can improve communication, reduce conflict, and enhance overall performance.

Learning Outcome 3: Evaluate the principles of operations management

a. Operations and operations management – the distinction

b. Operations as a function and process
c. Scientific management theory
d. Six Sigma
e. Contingency theory
f. Control systems

Operations management is the heart of any organization that produces goods or services. This
lecture explores the core principles of operations management, examining its evolution and key
concepts.

A. Operations and Operations Management – The Distinction:

Operations: The actual activities involved in transforming inputs into outputs. It's the doing –
the processes that create value for the customer. Examples: manufacturing a car, providing a
haircut, processing a loan application.
Operations Management: The planning, organizing, directing, and controlling of the
operations function. It's the managing of the processes. It involves making decisions about
resource allocation, process design, quality control, and supply chain management.
 Key Difference: Operations are what you do; operations management is how you manage
what you do.

B. Operations as a Function and Process:

Operations as a Function: A major functional area within an organization, similar to

marketing, finance, or HR. It's a department with specific responsibilities and expertise.
Operations as a Process: A series of interconnected activities that transform inputs into
outputs. This process view is essential for understanding how different parts of the organization
work together. Every organization, even if it doesn't have a dedicated "Operations" department,
has operational processes.
Example: A hospital's operations function includes departments like surgery, radiology, and
emergency care. The process of treating a patient involves multiple interconnected processes
across these departments.

C. Scientific Management Theory (Taylorism):

Frederick Winslow Taylor: A pioneer of scientific management.

Key Principles:
Scientific Job Design: Analyzing and breaking down jobs into their smallest components to
optimize efficiency.
Scientific Selection and Training: Matching workers to the right jobs and providing them
with the necessary training.
Clear Division of Labor: Separating planning from execution. Managers plan and workers
execute.
Incentive-Based Compensation: Motivating workers through financial incentives tied to
output.
Impact: Revolutionized manufacturing by increasing productivity and efficiency.
Criticisms: Often criticized for its focus on efficiency at the expense of worker well-being and
job satisfaction.
D. Six Sigma:

Methodology: A data-driven approach to quality management that aims to minimize defects

and variation in processes.
Key Concepts:
DMAIC Cycle: Define, Measure, Analyze, Improve, Control – a structured approach to
process improvement.
Statistical Tools: Using statistical methods to analyze data and identify root causes of
defects.
Focus on Customer: Understanding customer requirements and designing processes to meet
those requirements.
Goal: Achieving a level of quality where only 3.4 defects occur per million opportunities.
Benefits: Improved quality, reduced costs, increased customer satisfaction.

E. Contingency Theory:

Core Idea: There is no one "best way" to manage operations. The most effective approach
depends on the specific situation, including factors like the industry, the organization's size, the
technology used, and the competitive environment.
Implications: Managers need to be flexible and adapt their approach to different situations.
They need to consider the context in which they are operating and choose the management
techniques that are most appropriate.
Example: A small startup might benefit from a more flexible and informal organizational
structure, while a large established company might require a more structured and hierarchical
approach.

F. Control Systems:

Definition: Mechanisms for monitoring and regulating operational processes to ensure that
they are performing as planned.
Key Elements:
 Standards: Performance targets (e.g., production output, defect rate).
Measurement: Tracking actual performance.
Comparison: Comparing actual performance to standards.
Corrective Action: Taking steps to address any deviations from standards.
Types of Control:
Feedforward Control: Preventing problems before they occur.
Concurrent Control: Monitoring performance while the process is ongoing.
Feedback Control: Taking corrective action after a problem has occurred.
Importance: Control systems help to ensure that operations are efficient, effective, and meet
customer requirements.

Operations management is a critical function for any organization. By understanding the

principles of operations management, organizations can design and manage their operational
processes effectively, improve quality, reduce costs, and enhance customer satisfaction. The
evolution from scientific management to more sophisticated approaches like Six Sigma and the
recognition of contingency theory highlights the dynamic nature of this field. Effective control
systems are essential for ensuring operational excellence.

Learning Outcome 4: Analyze the relationship between operations and the supply chain

a. Principles of supply chain management

b. Supply chain structures
c. Procurement
d. Manufacturing and service delivery
e. Logistics
f. Impact of the supply chain on operations

Operations and the supply chain are inextricably linked. While operations focus on
internal processes, the supply chain encompasses the network of organizations and
activities involved in getting products or services from suppliers to customers. This lecture
explores this critical relationship.
A. Principles of Supply Chain Management:

Customer Focus: Understanding and meeting customer needs is paramount. The entire
supply chain should be geared towards delivering value to the end customer.
Collaboration: Building strong relationships with suppliers and customers is essential for
smooth and efficient supply chain operations. This includes information sharing, joint
planning, and collaborative problem-solving.
Integration: Coordinating activities across different functions and organizations within
the supply chain. This requires effective communication and information systems.
Optimization: Finding the most efficient and cost-effective way to manage the flow of
goods and services through the supply chain. This might involve techniques like lean
manufacturing, just-in-time inventory management, and transportation optimization.
Sustainability: Considering the environmental and social impact of supply chain
activities. This includes reducing waste, using sustainable materials, and ensuring ethical
labor practices.
Agility: The ability to respond quickly and effectively to changes in customer demand,
market conditions, or disruptions in the supply chain.

B. Supply Chain Structures:

Linear/Sequential: A traditional, linear flow of goods from suppliers to manufacturers to

distributors to retailers to customers.
Network: A more complex and flexible structure with multiple suppliers, manufacturers,
distributors, and customers, interconnected in various ways. This allows for greater
resilience and responsiveness.
Tiered: Suppliers are organized into tiers, with tier 1 suppliers providing materials to the
manufacturer, tier 2 suppliers providing materials to tier 1 suppliers, and so on. This helps
to manage complex supply relationships.
 Centralized vs. Decentralized: Decision-making can be centralized at a single point or
decentralized across different parts of the supply chain. The choice depends on factors like
the size and complexity of the supply chain.

C. Procurement:

Definition: The process of acquiring goods and services from suppliers. This includes
identifying suppliers, negotiating contracts, managing supplier relationships, and ensuring
timely delivery.
Strategic Sourcing: Developing long-term relationships with key suppliers to ensure a
reliable supply of high-quality materials.
E-procurement: Using technology to automate and streamline the procurement process.
Importance: Effective procurement is crucial for ensuring that the organization has the
materials it needs to operate efficiently and meet customer demand.

D. Manufacturing and Service Delivery:

Manufacturing: The process of transforming raw materials into finished goods. This is a
core part of the supply chain for organizations that produce physical products.
Service Delivery: The process of providing services to customers. While not involving
physical products, service delivery also relies on a supply chain of resources, including
people, equipment, and information.
Link to Supply Chain: Manufacturing and service delivery are directly impacted by the
upstream supply chain (suppliers) and the downstream supply chain (distributors,
customers).

E. Logistics:

Definition: The planning, implementation, and control of the efficient flow and storage of
goods, services, and related information from the point of origin to the point of
consumption.
Key Activities:

Transportation, warehousing, inventory management, order fulfillment.

Importance: Effective logistics is essential for ensuring that products and services are
delivered to customers on time and in good condition.

F. Impact of the Supply Chain on Operations:

Raw Material Availability: The supply chain ensures that operations have the necessary raw
materials to produce goods or services. Disruptions in the supply chain can lead to production
delays.
Quality of Inputs: The quality of raw materials and components from suppliers directly
impacts the quality of the final product or service.
Inventory Levels: The supply chain determines the level of inventory that operations need to
hold. Effective inventory management can reduce costs and improve efficiency.
Delivery Performance: The supply chain's ability to deliver products or services to customers
on time impacts operational efficiency and customer satisfaction.
Cost of Goods Sold (COGS): The cost of materials and other inputs from suppliers
significantly impacts the organization's cost structure.
Capacity Planning: The supply chain's capacity can constrain or enable the organization's
operational capacity.

Operations and the supply chain are two sides of the same coin. Operations focus on internal
processes, while the supply chain connects the organization to its suppliers and customers.
Effective supply chain management is essential for ensuring that operations have the resources
they need to produce goods or services efficiently and effectively. Close collaboration between
operations and supply chain partners is crucial for achieving organizational goals and meeting
customer needs.
Learning Outcome 5: Evaluate how to effectively manage operations within an
organization

a. The evaluation cycle

b. Standards, benchmarks, and Key Performance Indicators (KPI)
c. Efficiency and effectiveness of operations
d. Evaluation tools and techniques
e. Value chain analysis
f. Strategic operations

Effectively managing operations is crucial for organizational success. This involves not just
planning and implementing processes, but also continuously evaluating and improving them.
This lecture explores how to effectively manage operations through a systematic approach.

A. The Evaluation Cycle:

Plan: Define objectives, identify key performance indicators (KPIs), and develop an
evaluation plan. What are you trying to achieve with your operations?
Do: Implement the operational processes and collect data on performance. This is where the
actual work happens.
Check: Analyze the data, compare actual performance against standards and benchmarks, and
identify areas for improvement. Are you meeting your targets?
Act: Take corrective action to address any deviations from the plan and implement
improvements. How can you improve your operations?
Continuous Cycle: This is an ongoing process. After acting, the cycle begins again with
planning, incorporating lessons learned from previous evaluations. It's about continuous
improvement.
B. Standards, Benchmarks, and Key Performance Indicators (KPIs):

Standards: Desired levels of performance. These can be internal (set by the organization) or
external (industry best practices). Examples: target production output, acceptable defect rate.
Benchmarks: Best-in-class performance levels achieved by other organizations or within the
industry. Benchmarking helps identify areas where the organization can improve. It's about
learning from the best.
KPIs: Measurable metrics that track progress towards achieving standards and objectives.
KPIs should be specific, measurable, achievable, relevant, and time-bound (SMART). Examples:
units produced per hour, customer satisfaction scores, on-time delivery rate.
Importance: Standards, benchmarks, and KPIs provide a framework for evaluating operational
performance and identifying areas for improvement.

C. Efficiency and Effectiveness of Operations:

Efficiency: Performing operations with minimal waste of resources (time, materials, labor,
energy). Doing things right, the first time, with the minimum amount of resources necessary.
Example: reducing the number of defective products.
Effectiveness: Producing outputs that meet customer needs and achieve organizational goals.
Doing the right things. Example: delivering products on time and to the required quality
standard.
Relationship: Efficiency and effectiveness are both important. An operation can be efficient
but not effective (e.g., producing a product quickly that no one wants) or effective but not
efficient (e.g., producing a high-quality product but at a very high cost). The goal is to be both
efficient and effective.

D. Evaluation Tools and Techniques:

Data Analysis: Using statistical methods to analyze operational data and identify trends,
patterns, and areas for improvement. Examples: histograms, scatter plots, regression analysis.
 Process Mapping: Visually representing operational processes to identify bottlenecks,
inefficiencies, and areas for simplification. Examples: flowcharts, swimlane diagrams.
Performance Dashboards: Visual displays of key performance indicators that provide a
snapshot of operational performance.
Lean Principles: Focusing on eliminating waste in all aspects of operations. Tools include
value stream mapping, 5S methodology, Kanban.
Six Sigma: A data-driven methodology for improving quality and reducing defects. Tools
include DMAIC cycle, statistical process control.
Surveys and Feedback: Collecting feedback from customers and employees to understand
their needs and identify areas for improvement.
Audits: Systematic reviews of operational processes to ensure compliance with standards and
identify areas for improvement.

E. Value Chain Analysis:

Definition: A strategic framework for analyzing the activities within an organization and its
supply chain to identify sources of competitive advantage.
Primary Activities: Those directly involved in creating and delivering the product or service
(e.g., inbound logistics, operations, outbound logistics, marketing and sales, service).
Support Activities: Those that support the primary activities (e.g., firm infrastructure, human
resource management, technology development, procurement).
Purpose: Value chain analysis helps to identify areas where the organization can add value to
its products or services and reduce costs. It allows a company to see where they can improve
their operations to better serve the customer.
Link to Operations: Operations are a key part of the value chain. By analyzing the efficiency
and effectiveness of operational processes, organizations can identify opportunities to improve
their competitive position.

Effectively managing operations requires a continuous cycle of evaluation and improvement. By

setting clear standards, tracking KPIs, and using appropriate evaluation tools and techniques,
organizations can identify areas for improvement and enhance their operational efficiency and
effectiveness. Value chain analysis provides a strategic framework for understanding how
operations contribute to the overall value creation process.