MIRPUR UNIVERSITY OF SCIENCE AND TECHNOLOGY (MUST), MIRPUR

MUST BUSINESS SCHOOL

Books to Follow
Operations Management Latest Edition by William J Stevenson

Operation Management Latest Edition by Jay Heizer (Author), Barry

Render

Operations Management
Operations Management
Lecture No. 1 : Operations Management

ADEEL RAZAQ
Lecturer
 LEARNING OBJECTIVES

Able to differentiate between Management and Operations Management

Why study Operations Management?

Difference Between Efficiency and Effectiveness in Business

Critical Decision Area for OM

Operations Management
Management
 Henri Fayol,
"To manage is to forecast and to plan, to organize, to command,
to co-ordinate and to control.“
Management as a Process : refers to the Functions of
Management i.e. Planning, Organizing, Directing, Controlling,
etc.
Management
the process of dealing with or controlling things or people.
Peterson define management, ‘as a set of activities
directed at the efficient and effective utilization of
resources in the pursuit of one or more goals.
Management is a set of principles relating to the functions
of planning, organizing, directing and controlling, and the
application of these principles in financial, human and
informational resources efficiently and effectively to achieve
organizational goals.
What Is the Difference Between Efficiency and Effectiveness in Business?

Effectiveness means something entirely different than

efficiency. An effective employee produces at a high level,
while an efficient employee produces quickly and intelligently.
Effectiveness is the degree to which something is successful
in producing a desired result; success.
Efficiency: The comparison of what is actually produced or
performed with what can be achieved with the same
consumption of resources
Cont…
Managerial Concerns
Efficiency
 “Doing things right”
 Getting the most output for the least input
Effectiveness
 “Doing the right things”
 Work activities that attain organizational goals
Operations Management:

The management of systems or processes that create goods

and /or provide services.
Operations management is concerned with converting
materials and labour into goods and services as efficiently as
possible to maximize the profit of an organization.
Why study Operations Management?

OM activities are core for all business organizations. More

than 45% of jobs are related to the OM regardless of the
business such as:
Customer services, Quality assurance, Production planning,
Controlling, Scheduling and Inventory management. Other
areas are finance, marketing, accounting, logistics and
purchasing activities.
Functions within business Organizations

Organizations are formed for achievement of the goals

efficiently in groups rather than individually.
Three major functions of business organizations
These functions overlap and are interdependent on one
another.
Finance

1. Budgeting: It is the process of creating a plan to spend your

money. This spending plan is called a budget.
2. Economic analysis of investment proposals: Evaluation of
alternative investments in plant and equipment requires
inputs from both operations and finance people.
3. Provision of fund: necessary funds of operations and the
amount and timing of funding can be important and even
critical when funds are tight. Careful planning can help avoid
cash flow problems.
Operations/ production

Operational function is directly and actively related to the

producing goods or providing services. The production
function exists not only in manufacturing and assembly
operations, which are goods-oriented, but also in areas such
as health care, transportation, food handling and retailing,
which are primarily service oriented.
Value added:

The difference between the cost of inputs and the value or

price of outputs.

Inputs Transformati Output

Land labour on/ Goods
and capital conversion Services
information process

Control
Types of Operations
Operations Examples

Goods producing Farming, mining, construction, manufacturing

Storage/transportation Warehousing, trucking, mail service, airlines

Exchange Retailing, wholesales, banking, renting, leasing

Entertainment Films, radio, plays, concerts, recording

Communication Newspapers, radio and TV newscasts, telephones

 Marketing

Marketing consists of selling and /or promoting the goods or

services of an organization. Advertising and pricing decisions
are made by marketing people. Marketing is also responsible
for assessing customers wants and needs.
Lead time: The amount of time that intervene between when
a process starts and when it is completed. Lead time is
examined closely in manufacturing.
Other functions
Five Differences Between Service and Manufacturing
Organizations

The tangibility of their output; production on demand or for

inventory; customer-specific production; labour-intensive or
automated operations; and the need for a physical production
location, Goods can be returned.
Services are intangible, facilities, benefits or help provided
by other people. Services cannot be returned back once they
are provided.
Management Process

Planning: It is also a management process, concerned with

defining goals for a company's future direction and determining
the missions and resources to achieve those targets.
Organizing: It is the function of management that involves
developing an organizational structure and allocating human
resources to ensure the accomplishment of objectives.
How to perform work Practically. HR, Finance, Marketing.
Possession of land, how many workers, raw material, rent are
involved in Organizing.
Cont…
Staffing: set of activities related to the managers. HR design,
hiring advertisement, select, test, interview, salary packages,
right person for right job.
Leading: How to influence other and motivate the employees.
Controlling: It is a process of comparing the actual
performance with the set standards of the company to ensure
that activities are performed according to the plans and if not
then taking corrective action.
Check and balance but from feedback of customers.
Henzer 10 Critical Decision Area for OM

I. Goods and service design.

Design of goods and design defines much of the transformation
process.
Decisions at this stage are made about cost, quality, human
resources, tangible and intangible feature.
II. Quality.
Customer has a very high quality standard nowadays and operation
management decision, in quality must be clear and strict for its
members to understand and meet high expectation of customers.
For example: In Nokia quality is the highest objective
product leadership (improvement, innovation)
III. Process and capacity design.

Manufacturing of physical products may have higher importance

on process and capacity design than services operation.
Operation management (product) should decide what process it,
what type of technology and to what extent, human resources,
quality and maintenance that determines its basic cost structure.
Services operation decision on this area is much simpler and it
can determine by customers who directly involved in the process
For example, customer will ask tailor to design specific fashion
clothes. Capacity design issue is critical for services because it
will try to reduce waiting time and avoid lost of sales due to
insufficient capacity.
IV. Location.

It can be an area for operation management to decide and with

globalization of business, operation managers too must think
global. For physical goods, location selection can be determined
by pools of qualified human resources, technology, raw material,
access to market and government policy. For services as it is
direct to customers, the location is determined by market
accessibility or near to customer as possible.
For example: As a global company, Nokia operates in over 130
countries with the headquartered in Espoo in Finland, in the
origins of Nokia. To create cutting edge technologies, it carries
out researches in technologically advanced countries.
V. Layout design.

Material flow, process selection technology used, capacity

needs, workers needs, inventory requirement, and capital will
influence the decision for layout design. For services such as
hotels, beside capacity needs layout also will enhance its
attributes and features to the customers.
For example When designing the product, emphasis is put not
only on the its technological aspects but also on the layout. In
Mobile Phone section fashion designers are incorporated in to
the process of developing a new product.
VI. Human Resources and Job Design.

Employees is the integral part in the total system design.

Operation management must set a policy to set labor
standards to ease transition of skills, improvement of
knowledge, skills and abilities (KSA), build a balance work
and life quality in an effective cost target.
For example: In May 2007 Nokia’s personnel was over 68,000
employees. The staff includes fulltime, part time and contract
employees.
VII. Supply Chain Management

Decisions that have to take place of what to produce, what

material to buy, from where to buy, What is the cost and the
delivery from supplier to the final end customers in on-time
delivery and minimum cost possible.
It is more critical in production of goods than services.
For example For Nokia, supply chain management is a very
important operational area. They perceive it as a significant
competitive advantage of their business.
VIII. Inventory

Decisions on how and where the inventory level to keep long

term customers satisfaction, suppliers, material availability.
 Goods production are more concern because manufacturer
may kept raw material, in progress work order and final
goods.
For example: Thanks to joint ventures and close cooperation
with their supplier, Nokia can optimize their inventory levels.
minimum levels of the inventory has to be maintained.
IX. Scheduling

Efficient way of allocation, control and management of

materials, capital goods and human resources to efficiently
produce the final goods from the input available. For services
the demand is more direct and volatile and often concern on
human resources and KSA availability to meet current
customers needs.
 For example: Average life cycle of a mobile phone is about 2
years and during one year many new models are introduced.
That’s why production of one line of products is done
simultaneously with the research and design process of new
products
X. Maintenance

Decision must be made regarding the desired level of

reliability, stability and systems must be established by
management to maintain that reliability and stability.
For example: Providing training and development for their
employees is one of the Nokia’s promises.
 Recommended Book/Material

Operations Management Latest Edition by William J Stevenson

Operation Management Latest Edition by Jay Heizer (Author), Barry Render

Operations Management