Introduction to
Operations Management
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Learning Objectives
Define and explain OM
Explain the role of OM in business
Describe the decisions that operations managers
make
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
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Operations Management is:
The business function responsible
for planning, coordinating, and
controlling the resources needed to
produce products and services for
a company
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OM - Definition
OM is concerned with the
design, management and
improvement of the
systems that create the
organization’s goods and
services.
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Operations Management is:
A management function
An organization’s core function
In every organization whether Service
or Manufacturing, profit or Not for profit
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Another view of
operations
Consider the human body –
Marketing – Style of dress, personal hygiene
Finance – Blood, oxygen
Administration – taking care of health,
exercising, lifestyle management
Training – Education, work experience
Operations – The entire process of keeping all
organs healthy, interacting day to day, moving
around i.e., everything you do.
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What Drives Operations?
COMPETITION!! Every organisation attempts to be
successful in the market place by obtaining an
acceptable market share through competitive
strategies.
The competitive advantage adopted by the
management will be determined by the
organisation's overall strategic plan and by its
strategic objectives.
Success is dependent on the organisation adopting
efficient and effective operations with respect to
the manufacturing of their products or the
provision of their services 7
Characteristics of OM
All operations processes take their
'inputs' like, raw materials,
knowledge, capital, equipment and
time and transform them into outputs
(goods and services).
They do this in different ways, and the
main four are known as the Four
V's, Volume, Variety, Variation and
Visibility.
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Main objectives of OM
Customer Service: The primary
objective of operations management, is to
utilize the resources of the organization,
to create such products or services that
satisfy the needs of the consumers, by
providing “right thing at the right
price, place and time”.
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Performance objectives of
OM
The five key business performance
objectives for any organization
include quality, speed, dependability,
flexibility, and cost.
When it comes to business performance
objectives you're likely aware that
efficiency and productivity are
crucial.
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Scope of OM
Operations management is mostly
concerned with converting input to
physical resources that cater to the
customers' needs.
They need to reach effectiveness,
efficiency, and adaptability in an
organization.
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Importance of OM
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Nature of OM
Dynamic- is dynamic in nature. It keeps
on changing as per market trends and
demands.
Transformational Process– is the
management of activities concerned with
the conversion of raw materials into
finished products.
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Nature of OM
Continuous Process–is a continuous
process. It is employed by organizations for
managing its activities as long as they
continue their operations.
Administration– administers and
controls all activities of the organization.
It ensures that all activities are going
efficiently and there is no
underutilization or misutilization of any
resource. 14
Typical Organization Chart
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Type of Operations
Management
MTO- Make to Order ATO – Assembly to Order
MTS – Make to Stock EDI – Electronic Data Interchange
Electronic Kanban – Controlling Stock Via Internet
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What is the Role of OM?
OM Transforms inputs to outputs
Inputs are resources such as
People, Material, and Money
Outputs are goods and services
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OM’s Transformation Process
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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
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Functions of OM
Location of facilities.
Plant layouts and Material Handling.
Product Design.
Process Design.
Production and Planning Control.
Quality Control.
Materials Management.
Maintenance Management
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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
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Similarities for
Service/Manufacturers
Both use technology
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
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Service vs Manufacturing
Manufacturing often provides services
Services often provides tangible goods
Some organizations are a blend of
service/manufacturing/Quasi-
Manufacturing (QM) organizations
QM characteristics include
Low customer contact & Capital Intensive
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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
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OM Decisions
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
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OM Decisions
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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
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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
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JIT & TQM
JIT, is an inventory management method in
which goods are received from suppliers only
as they are needed.
Total quality management (TQM) is the continual
process of detecting and reducing or
eliminating errors in manufacturing,
streamlining supply chain management,
improving the customer experience, and
ensuring that employees are up to speed
with training.
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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 Enterprise Resource
Planning (ERP) and Customer Relationship
Management systems
Increased cross-functional decision making
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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
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Business Information Flow
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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
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OM Across the
Organization – con’t
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
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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
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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
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