Operations
Management
Course Instructor:
Mansoor Qureshi
Learning Objectives
• Define and explain OM
• Explain the role of OM in business
• Describe the differences between service and
manufacturing operations
• Identify major historical developments in OM
• Identify current trends in OM
• Describe the flow of information between OM
and other business functions
Operations Management is:
The business function responsible for planning,
coordinating, and controlling the resources
needed to produce products and services for a
company
Operations Management is:
• A management function
• An organization’s core function
• In every organization whether Service or
Manufacturing, profit or Not for profit
Typical Organization Chart
What is Role of OM?
• OM Transforms inputs
to outputs
– Inputs are resources
such as
• People, Material, and
Money
– Outputs are goods and
services
OM’s Transformation Role
• To add value
– Increase product value at each stage
– Value added is the net increase between output product value and
input material value
• Provide an efficient transformation
– Efficiency – means performing activities well for least possible cost
The Importance Of Operations
Management
• Operations management defined
– The study and application of the transformation
process
• OM is important because it:
– Encompasses processes in all organizations—services
as well as manufacturing.
– Is important in effectively and efficiently managing
productivity.
– Plays a strategic role in an organization’s competitive
success.
Transformation and Organizations
• Transformation process
– The process through which an organization creates
value by turning inputs (people, capital, equipment,
materials) into outputs (goods or services)
• Manufacturing organization
– Organizations that produce physical goods
• Service organization
– An organization that produces nonphysical outputs
such as educational, medical or transportation
services
Manufacturers vs Service Organizations
• Services: • Manufacturers:
• Intangible product • Tangible product
• Product cannot be • Product is inventoried
inventoried • Low customer contact
• High customer contact • Longer response time
• Short response time • Capital intensive
• Labor intensive
Food Processor - Product
Inputs Processing Outputs
Raw Vegetables Cleaning Canned
Metal Sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
Hospital Process - Service
Inputs Processing Outputs
Doctors, nurses Examination Healthy
Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Production of Goods vs. Delivery of Services
• Production of goods – tangible output
• Delivery of services – an act
• Service job categories
– Government
– Wholesale/retail
– Financial services
– Healthcare
– Personal services
– Business services
– Education
Manufacturing vs Service
Characteristic Manufacturing Service
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labor content Low High
Uniformity of output High Low
Measurement of productivity Easy Difficult
Opportunity to correct High Low
quality problems
High
Similarities for Service/Manufacturers
• Both have quality, productivity, & response issues
• Both must forecast demand
• Both can have capacity, layout, and location issues
• Both have customers, suppliers, scheduling and
staffing issues
OM Decisions
• All organizations make decisions and follow a
similar path
– First decisions very broad – Strategic decisions
• Strategic Decisions – set the direction for the entire
company; they are broad in scope and long-term in
nature
• Following decisions focus on specifics - Tactical
decision
– Tactical decisions: focus on specific day-to-day issues like
resource needs, schedules, & quantities to produce
– are frequent
• Strategic decisions less frequent
• Tactical and Strategic decisions must align
OM Decisions
Historical Development of OM
• Industrial revolution Late 1700s
• Scientific management Early 1900s
• Human relations movement 1930s-60s
• Management science 1940s-60s
• Computer age 1960s
• Environmental Issues 1970s
• JIT & TQM* 1980s
*JIT= Just in Time, TQM= Total Quality Management
Historical Development con’t
• Reengineering 1990s
• Global competition 1980s
• Flexibility 1990s
• Time-Based Competition 1990s
• Supply chain Management 1990s
• Electronic Commerce 2000s
• Outsourcing & flattening of world 2000s
For long-run success, companies must place much importance on their operations
Today’s OM Environment
• Customers demand better quality, greater speed, and
lower costs
• Companies implementing lean system concepts – a
total systems approach to efficient operations
• Recognized need to better manage information using
ERP and CRM systems
• Increased cross-functional decision making
OM in Practice
• OM has the most diverse organizational function
• Manages the transformation process
• OM has many faces and names such as;
– V. P. operations, Director of supply chains, Manufacturing
manager
– Plant manger, Quality specialists, etc.
• All business functions need information from OM in
order to perform their tasks
Operations Management in practice
OM Across the Organization
• Most businesses are supported by the functions of
operations, marketing, and finance
• The major functional areas must interact to achieve the
organization goals
• Marketing is not fully able to meet customer needs if they do
not understand what operations can produce
• Finance cannot judge the need for capital investments if they
do not understand operations concepts and needs
• Information systems enables the information flow throughout
the organization
• Human resources must understand job requirements and
worker skills
• Accounting needs to consider inventory management,
capacity information, and labor standards
Highlights
• OM is the business function that is responsible for managing
and coordinating the resources needed to produce a
company’s products and services.
• The role of OM is to transform organizational inputs into
company’s products or services outputs
• OM is responsible for a wide range of decisions, ranging from
strategic to tactical.
• Organizations can be divided into manufacturing and service
organizations, which differ in the tangibility of the product or
service
Highlights – con’t
• Many historical milestones have shaped OM. Some of these
are the Industrial Revolution, scientific management, the
human relations movement, management science, and the
computer age
• OM is highly important function in today’s dynamic business
environment. Among the trends with significant impact are
just-in-time, TQM, reengineering, flexibility, time-based
competition, SCM, global marketplace, and environmental
issues
• OM works closely with all other business functions
