Introduction to

Operations Management
LEARNING OBJECTIVES
Identify the three major functional
1 Define Operations Management 4 areas of the organizations and
describe how they interrelate

Explain what do Operations Describe the flow of information

2 Managers do. 5 between operations management
and other business functions

Explain the distinction between Explain the key aspect of operations

3 goods and services
6 management decision making
OPERATIONS MANAGEMENT
• The science and art of ensuring that goods and services are created
and delivered successfully to customers. (Collier, Evans and Lindsay)
• The management of systems or processes that create goods and/or
provide services. (Stevenson)
• The activities that relate to the creation of goods and services
through the transformation of inputs to outputs. (Helzer, Munson,
and Render)
• The business function responsible for planning, coordinating and
controlling the resources needed to produce a company’s goods and
services. (Reid and Sanders)
What do Operations Manager Do?
 Resource and capacity
Forecasting
management

Supply Chain Process Design

Management

Facility Layout and Job design

design
Service Encounter
Technology Selection design

Quality Management Scheduling

Purchasing Sustainability
SUPPLY CHAIN
• A sequence of activities and organizations involved in producing and
delivering a good or service.

• Facilities might include warehouse, factories, processing centers,

offices, distribution centers and retail outlets.

• Functions and activities include forecasting, purchasing, inventory

management, information management, quality assurance,
scheduling, production, distribution, delivery and customer service.
SIMPLE PRODUCT SUPPLY CHAIN
TITLE
Supplier’s Producer Final
Supplier Consumers

Direct Distributor
Supplier
 GOODS SERVICES

Physical items that includes raw Activities that provide some

materials, parts, subassemblies and combination of time, location, form
final product. and psychological value.
 Characteristics of Goods Characteristics of Services

1. Tangible 1. Intangible
2. Product can usually be kept in inventory 2. Produced and consumed simultaniously
3. Similar products produced 3. Unique
4. Limited customer involvement in 4. High customer interaction
production
5. Product standardized 5. Inconsistent product definition
6. Standard tangible products tends to 6. Often knowledge based
make automation feasible
7. Product typically produced at a fixed 7. Services dispersed: Service may occur at
facility retail store, local office, house call, or via
8. Many aspects of quality are easy to internet
evaluate 8. Quality may be hard to evaluate
9. Product often has some residual value 9. Reselling is unusual
INPUTS
• Land
• Human (labor)
• Capital
• Raw Materials (Water, wood)
• Equipment (Machines, trucks)
• Facilities (Factories, Retail stores)
• Others (Information, Time)
Major Functional Areas of Organization
Operations / Production
• Creates, produces and
OPERATIONS
delivers the product

Marketing
• Generates the demand,
focus is on selling and/or
Finance FINANCE MARKETING
promoting the goods or
• Tracks how well the services
organization is doing, pays
the bills and collects the
money
Operations Management and Marketing
Marketing Managers must Operations managers need
understand: information about customer wants
• what operations can produce and expectations.
• what due dates it can and cannot
meet An exciting marketing campaign will
• what types of customization not prosper if operations cannot
operations can deliver produce the desired product.
Operations Management and Finance
Finance cannot realistically judge Operations managers cannot
the need for: make large financial expenditures
• capital investments without understanding:
• make-or-buy decisions • financial constraints and
• plant expansions • methods of evaluating ficial
investments
• relocation if finance managers
do not understand operations
concept and needs.
Operations Management and
Information System (IS)
IS enables information to flow OM is highly dependent on
throughout the organization. information such as:
• forecast of demand
Usually, IS and OM work together • quality levels being achieved
to design an information network. • inventory levels
• supplier deliveries, and
• worker schedules
Operations Management and
Human Resources
Human resource managers must Operation managers need to
understand: understand
• job requirements and • job market trends
• worker skills • hiring and layoff costs, and
in order to hire the right people • training costs
for the available jobs
Operations Management and Accounting

Accounting needs to consider: Operation managers must

• inventory management communicate:
• capacity information, and • billing information and
• labor standards • process improvements to
accounting,
in order to develop accurate cost
data and they depend heavily on
accounting data for cost
management decisions
Operations Management and Engineering

Operations management provides Engineering, provides valuable

engineering with: input on:
• the operations capabilities and • technological trade-offs and
• design requirements • product specifications
which are essential for the
product design process.
Operations Management Decision Making
WHAT?
What resources will be needed, and
in what amounts?

WHEN?
When will each resources be
WHERE?
needed? Where will the work be
When the work be scheduled? done?
When sould materials and other
supplies be ordered?
When is corrective action needed?
HOW?
How will the product or service be
designed?
WHO? How will the work be done
Who will do the work? (organization,methods,
equipment)?
How will resources be allocated?
 Operations Management Decision Making
Approaches
Models Analysis of Trade-offs
An abstraction of reality; Listing the advantages
a simplified representation of and disadvantages—the pros
something. and cons—of a course of action.

Quantitative Approaches
Attempt to obtain Degree of Customization
mathematically Additional requirements
optimal solutions to managerial compared to standardized
problems. products.

Performance Metrics A Systems Approach

Those related to profits, costs, The whole is greater than the
quality, productivity, flexibility, sum of its individual parts.
assets, inventories, schedules, and
forecast accuracy.
THANK YOU