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Operations management

The document provides an overview of Operations Management (OM), detailing its definitions, concepts, and the distinction from Operations Research (OR). It discusses the importance of OM in transforming inputs into valuable outputs, the similarities and differences between manufacturing and service operations, and the strategic decision-making involved in OM. Additionally, it highlights the significance of productivity measurement and ethical dilemmas faced in operations management.
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0% found this document useful (0 votes)
6 views51 pages

Operations management

The document provides an overview of Operations Management (OM), detailing its definitions, concepts, and the distinction from Operations Research (OR). It discusses the importance of OM in transforming inputs into valuable outputs, the similarities and differences between manufacturing and service operations, and the strategic decision-making involved in OM. Additionally, it highlights the significance of productivity measurement and ethical dilemmas faced in operations management.
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CHAPTER ONE

Operation Management
An over view
Gross Look!!!
INTRODUCTION TO
OPERATIONS MANAGEMENT
Previously called Production Management
 Then Production and Operations Management
Often called Operations Management
Should not be confused with Operations Research
which are the domain of Mechanical and Industrial
Engineering.
Distinctions between OR & OM
OR relies on mathematical modeling and OM relies
on practical scenarios/industrial cases.
OR is a domain and tool of Engineers while OM is
considered to be one of the critical tools of
Managers.
OR considered more powerful to improve the whole
system where as OM can be applied to a part of
the system.
OM Concepts & Definitions
Operation is where the organizations goods &
services produced.
Operation is common to all organization-be it
small or large, private or government, local or
international, manufacturing or service giving.
OM Definitions
Operations management can be defined as:
The administration of process that transforms
inputs of labor, capital and materials in to
output bundles of products and services that
are valued by customers.
Operation is among the major
business functions!!!
System concepts in OM.
A system is defined as “a purpose full
collection of people, objects and procedures for
operating within an environment”.
Thus every organization can be represented
as a system consisting of interacting sub
systems.
System concepts in OM...
The basic process of the system converts
(transforms) the resource inputs (such as people,
plant, part processes, planning and controlling
systems) in to some useful form of outputs.
Of course, depending up on the efficiency of the
conversion process we may have undesirable outputs
too-such as pollution, scrap/wastage rejections,
losses of human life(in a hospital) etc.
System concepts in OM...
Using the generalized concepts of operations management we
can call such system as operations system and the operation
management has the prime responsibility for transforming
input in to output.
Inputs transformation process output
Note: in operations management, the objective
of combining resources under control
conditions/conversions is to transform them in
to goods and services having higher value
than the original inputs.
Thus transformation involves value adding
activities.
Input –transformation-output
relationships for typical system
System Inputs Components Transformations Output
Hospital Patients Doctors ,Nurses, Physiologica Cured person
Staff, Equipment, l
Facility, Energy,
etc
Bank Clients Teller, Staff, Exchange Loan/deposit etc.
Facility etc
College High school Teacher, Class imparting Educated person
graduate room, Books etc knowledge
Automobile Steel, Sheet, Tools, Physical Automobile
factory Engine Equipment’s,
Power etc
Restaurant Hungry Waiter, Physical Satisfied
Customer Environment, customers
Energy etc
Manufacturing operation Vs Service
operation
Similarities between manufacturing and services
Every organization whether manufacturing or service
giving, has processes (transform input in to output)
that must be designed and managed effectively.
Some type of technology be it manual or
computerized must be used in each process.
Every organization is concerned about
quality, productivity, and the timely
response to customers.
Manufacturing operation Vs Service
operation ...
Similarities between manufacturing and services
A service provider, like a manufacturer, must make
choices about the capacity, location, and lay out of
its facility.
Every organization deals with suppliers of outside
services and materials, as well as scheduling
problems.
Finally, matching staffing levels and capacities with
forecasted demand is universal problems.
Differences between manufacturing and services
More like a manufacturing organization More like a service organization
Tangible, durable product intangible product
Output that can be inventoried output that can’t be inventoried
Low customer contact high customer contact
Long response time short response time
Regional, national or international local market
market small facilities
Large facilities labor intensive
Capital intensive quality and productivity is difficult to
Quality and productivity easy to measure
measure high degree of variety of input and
High degree of uniformity of difficult to automate etc.
input& output
Ease to automate etc.
Operations management decision
making areas
Strategic Decision Operational/Tactical
Broad in scope
difficult to undo Narrow in scope
once implemented short term planning
Long term in and control problems.
nature Short term in nature
All encompassing Concerning a small
Eg. What are the group of issues
unique features of our Eg. Who will work the
product that make us second shift tomorrow?
competitive?
Operations management
decision making areas
Strategic decisions: Operational/Tactical
Production planning,
Product selection scheduling and control
and design: Inventory planning and
Process selection and control
planning Quality assurance
Facilities location Work and job design
Facilities layout and Maintenance and
Capacity planning replacement
Cost reduction and control
Why we study operations
management?
Operations management (OM) is one of the
three major functions of any organizations, and
it is integrally related to all the other business
functions.
We study operations management because we
want to know how goods and services are
produced.
We study OM to understand what operations
managers do.
Process in Operation
Env.t of OM
Internal
External Env.t
Internal -Mkting
-Finance
-Accting
-Engineering
-Personnel and labor relation
-R& D
-Purchasing and traffic
Env.t of OM...
External Env.t
Economic factors
Government regulation
Competition
Technological forces
Current trends influencing the field
of OM
Growth and dominance of services
Internationalization
Environmental quality
CHAPTER TWO

Operation strategy &


competitiveness
What is operations strategy?

Operations strategy is concerned with setting


broad polices and plans for using the
resources of the firm to best support the
firm’s long term competitive strategy.
In short, OM strategy specifies the means by
which operations implements the firm’s
corporate strategy.
Business strategy-functional strategy
Operation strategy & competitiveness...
What is operations strategy?
Operations strategy links long and short term
operation decisions to corporate strategy.
Operation strategy is derived from business
strategy which in turn is derived from
corporate strategy.
Operation strategy & competitiveness...
Corporate Strategy
• is the set of decisions that answer the questions, what
business are we in?
• Is overarching Strategy

Business level strategy


• is the set of decisions that answers the
question, how will we compete in this
business.

Operations level strategy


• business strategy needs to be translated
downward in to operations strategy
Competitive advantage and competitive
priorities
Competitive advantage
is any activity that creates superior value above its
rivals.
The strongest competitive advantage is a strategy that
can’t be imitated by other companies.
In general, a competitive advantage can be gained by
offering the customer a greater value than the
competitors
Competitive advantage and
competitive priorities...
The key to developing an effective operations strategy
lies in understanding how to create or add value
for customers i.e. how to gain competitive advantage.

Specifically, competitive advantage can be gained


(value can be added) through the competitive priority
(priorities that are selected to support a given
strategy).
competitive priorities
Cost
Quality
High performance design
Consistent quality
Time
Flexibility
Productivity
Measuring productivity

Productivity is used for making comparison or


to measure improvement.
Productivity is a relative term i.e. it gives sense
only when we compare it with: company’s
previous performance, with other similar
company’s performance or with the
performance of leader of the industry.
Values of output may be measured by: what the
customers pay (dollar values of the output) or
simply by the number of units produced (in
manufacturing industry) or customers served
(in service industry).
The values of inputs can be measured by: their
cost or simply by the number of hours
worked.
Productivity may be expressed as:
Total factor productivity measure:-is the ratio of all
output to all input i.e. total outputs/total inputs. Total
inputs include all resources used in the production of
goods and services: labor, capital, raw materials, and
energy.
Multi factor productivity: - measures only a sub set of
these inputs.
i.e. output/ (labor + capital), output/ (labor+ capital
+ materials), output/ (materials + energy).
Productivity...
Single factor (partial productivity) measure:-is the ratio
of output to a single resource (inputs).
i.e. output/labor, output/capital , output/material,
output/energy etc.
Numerical examples
Example1. Three employees process 600 insurance
policies in a week.
They work 8 hrs per day, 5 days a week. Required
calculate labor productivity?
Numerical examples ...
Solutions Labor productivity=output/inputs.
Where, output is number of insurance policies processed and
input is hours worked.

= 5 insurance polices/hours
Total or multifactor productivity measures are
generally preferable than partial productivity.
The reason for this is that focusing on
productivity improvement in a narrow
portion of an organization may actually
decrease total productivity.
Example: ABC Furniture Company produced 10,000
chairs, with annual labor and equipment cost of
$50,000 and $25000 respectively. Total productivity
can be calculated as:
Productivity: chairs/dollar input = 10000 chairs
$50000 + $ 25000
=0.133chairs/dollar input
Labor productivity, however, is measured for this
example as:
.
Suppose that a $10,000 reduction in labor can be
achieved by investing in a more advanced machine.
Labor productivity will increase to: 5 chairs/labor-
dollar.
Thus, from a productivity perspective, it would
appear that this investment is attractive.
If, however, that annual cost with the new equipment
increases to $40,000 then, total productivity will be:
And hence overall productivity would
decrease.
It is necessary, therefore to examine the
simultaneous effects of all changes on
productivity.
Improving productivity

There are several ways in which operations


manager can improve productivity.
These may be classified as
Improving productivity...

*increasing output while keeping input constant


*decreasing input while keeping output constant
*increasing output at higher rate than increasing input
*decreasing output at lower rate than decreasing input
*increasing output while decreasing input (Most
challenging but effective).
Ethical dilemma
Major corporations with overseas subcontractors have been
criticized, often with substantial negative publicity when
children under 10 have been found working in the
subcontractors facilities. The standard response is to perform
an audit and then enhance controls so it doesn’t happen again.
In one such case, a 10 year old was terminated. Shortly,
thereafter, the family, without the 10-year-old’s contribution
to the family income, lost its modest home, and the 10-year-
old was left to beg in the local dump for scraps of metal.
Was the decision to hire the 10-year-old ethical?
Was the decision to terminate the 10-year-old ethical?

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