INTRODUCTION TO OPERATIONS
MANAGEMENT
Industrial Engineering Program
1
OUTLINE
What is operations Management?
Organizing to produce goods and services
The Supply Chain
Why study OM?
What Operations managers Do?
Heritage Of Operations Management
Operations for Goods and Services
Process, Activity, Task
Value Added, Non-Value Added
The productivity Challenge
Ethics and Social Responsibility
2
WHAT IS OPERATIONS MANAGEMENT?
Operations Management (OM) is the set of activities
that create a value in the form of goods and services by
transforming inputs into outputs.
OM is the science and art of ensuring that goods and
services are created and delivered successfully to
customers
Production is the creation of goods and services.
All types of organizations, manufacturing or service,
large or small, transform inputs into outputs
3
WHAT IS OPERATIONS MANAGEMENT?
oInput- transformation- output
4
ORGANIZING TO PRODUCE GOODS AND SERVICES
There are 3 functions necessary to create goods and
services:
1. Marketing
a. is the business process of creating relationships with and
satisfying customers.
b. It generates the demand, or at least takes the order for a
product or service (nothing happens until there is a sale).
2. Production/operations , which creates the products
3. Finance/accounting , which tracks how well the
organization is doing, pays the bills, and collects the
money. 5
ORGANIZING TO PRODUCE GOODS AND SERVICES
an Airlines,
6
The areas in blue indicate the significant role that OM plays in
both manufacturing and service firms.
THE SUPPLY CHAIN
oA supply chain is a global network of organizations and
activities that supply a firm with goods and services.
o When members of the supply chain collaborate to
achieve high levels of customer satisfaction, we have a
tremendous force for efficiency and competitive
advantage.
o Competition in the 21st century is not between
companies; it is between supply chains.
7
THE SUPPLY CHAIN
8
THE SUPPLY CHAIN
A supply chain for a bottle of Coke requires a
sugar cane farmer, a syrup producer, a bottler, a
distributor, and a retailer, each adding value to
satisfy a customer.
Only with collaborations between all members of
the supply chain can efficiency and customer
satisfaction be maximized. The supply chain, in
general, starts with the provider of basic raw
materials and continues all the way to the final
customer at the retail store.
9
WHY STUDY OM?
There are 4 reasons:
1. OM is one of the three major functions of any organization, therefore, we
study how people organize themselves for productive enterprise .
2. We study OM because we want to know how goods and services are
produced . The production function is the segment of our society that
creates the products and services we use.
3. We study OM to understand what operations managers do, you can
perform better if you understand what operations managers do.
4. We study OM because it is such a costly part of an organization. A large
percentage of the revenue of most firms is spent in the OM function.
Indeed, OM provides a major opportunity for an organization to improve
its profitability and enhance its service to society.
10
WHAT OPERATIONS MANAGERS DO?
The management process consists of planning , organizing , staffing ,
leading , and controlling .
Operations managers apply this management process to the decisions
they make in the OM function.
The 10 Strategic OM Decisions:
1. Design of goods and services : What good or service
should we offer? How should we design these
products?
2. Managing quality: How do we define the quality? Who
is responsible for quality?
3. Process strategy: What process and what capacity will
these products require? What equipment and
technology is necessary for these processes?
4. Location strategies : Where should we put the facility?
On what criteria should we base the location decision?
5. Layout strategies : How should we arrage the facility?
How large must the facility be to meet our plan?
11
WHAT OPERATIONS MANAGERS DO?
6. Human resources : How do we provide a resonable work
environment? How much can we expect our employees to
produce?
7. Supply-chain management: Should we make or buy this
component? Who are our suppliers and who can integrate into our
e-commerce program?
8. Inventory management : How much inventory of each item should
we have? When do we reorder?
9. Scheduling : Are we better off keeping people on the payroll
during slowdowns? Which job do we perform next?
10. Maintenance : Who is responsible for maintenance? When do we
do maintenance?
Inventory is the term for the goods available for sale and raw materials used to produce
12
goods available for sale
HERITAGE OF OPERATIONS MANAGEMENT
Eli Whitney (1800) is credited for the early
popularization of interchangeable parts, which was
achieved through standardization and quality control.
Frederick W. Taylor (1881), contributed to personnel
selection, planning and scheduling, motion study, and
the now popular field of ergonomics. One of his major
contributions was his belief that management should be
much more resourceful and aggressive in the
improvement of work methods :
✓ Matching employees to the right job.
✓ Providing the proper training.
✓ Providing proper work methods and tools. 13
✓ Establishing legitimate incentives for work to be accomplished.
HERITAGE OF OPERATIONS MANAGEMENT
Henry Ford and Charles Sorensen (1913) combined what
they knew about standardized parts with the quasi-assembly
lines of the meatpacking and mail-order industries and added
the revolutionary concept of the assembly line, where men
stood still and material moved.
Walter Shewhart (1924) combined his knowledge of
statistics with the need for quality control and provided the
foundations for statistical sampling in quality control.
W. Edwards Deming (1950) believed, as did Frederick
Taylor, that management must do more to improve the work
environment and processes so that quality can be improved.
14
OPERATIONS FOR GOODS AND SERVICES
Manufacturers produce a tangible product, while
service products are often intangible.
Services are the economic activities that typically
produce an intangible product (such as education,
entertainment, lodging, government, financial, and
health services).
The operation activities for both goods and services are
often very similar. For instance, both have quality
standards, are designed and produced on a schedule
that meets customer demand, and are made in a
facility where people are employed.
15
OPERATIONS FOR GOODS AND SERVICES
16
PROCESS, ACTIVITY & TASK
The process is formed of sub processes, which are
composed of activities ( work to have
sub processes functioning) and tasks ( piece of work
assigned or done as part of one's duties. A task is a well-
defined responsibility that is usually imposed by another)
17
PROCESS, ACTIVITY & TASK
An activity is a major unit of work to be completed in
achieving the objectives of a process. An activity has
precise starting and ending dates, incorporates a set of
tasks to be completed, consumes resources, and results in
work products. An activity may have a precedence
relationship with other activities. For example, finish-to-
start, start-to-start, finish-to-finish.
The term “task” means “a piece of work to be undertaken
or done'”or simply “work,” and “activity” means “some
event or some happening.” ...
18
19
VALUE ADDED, NON-VALUE ADDED
Value added steps in a process are those in which you add
something to a product or service for which the customer
would be willing to pay.
➢ One easy way to remember this definition is to use the
acronym CPR, which stands for: Customer pays for it, Physically
transforms the product, Right the first time.
Non-Value Added But Necessary Steps : Just because a
process step is not value-added does not mean it is a bad
thing. Processes all include steps that do not add value,
but are necessary to make the product or service
happen. For example, this work might be required
by:
➢ Customer contract or specification,
➢ Industry standard such as ISO 9001,
➢ Government regulation, 20
VALUE ADDED, NON-VALUE ADDED
Non-Value Added Steps (Waste) : The third category that
process steps can fall into is pure waste. In these steps
resources are expended, delays occur, and no value is
added to the product or service. Customers are absolutely
not willing to pay for these activities. These steps should
be eliminated from the process. For example:
➢ Unnecessary processing or steps in a process
➢ Transporting materials or information over long distances
➢ Delays / waiting
➢ Idle inventory / resources
➢ Unnecessary or excessive motion/movement of staff
➢ Rework/ fixing defects that should not have occurred in the first
place
➢ Producing more than needed to meet demand
➢ Underutilization of staff, their knowledge and/or skills 21
THE PRODUCTIVITY CHALLENGE
Productivity is the ratio of outputs (goods and
services) divided by the inputs (resources, such as
labor and capital)
Production is the making of goods and services
Measurement of productivity is an excellent way to
evaluate a country’s ability to provide an improving
standard of living for its people.
22
THE PRODUCTIVITY CHALLENGE
Productivity measurement:
1-Single factor productivity
2-Multifactor productivity
23
THE PRODUCTIVITY CHALLENGE
Productivity and the service sector : Productivity
of the service sector has proven difficult to improve
because service-sector work is :
✓ Typically labor intensive (e.g., counseling, teaching).
✓ Frequently focused on unique individual attributes or
desires (e.g., investment advice).
✓ Often an intellectual task performed by professionals (e.g.,
medical diagnosis).
✓ Often difficult to mechanize and automate (e.g., a haircut).
✓ Often difficult to evaluate for quality (e.g., performance of a
law firm).
24
PROBLEM
25
SOLUTION
26
REFERENCES
[1]- Operations management, Jay Heizer, Barry Render.
9th edition.
27
