UNIT 1

Introduction to
Operations
Management

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 Unit Outcomes
By the end of this unit, students should be able to:

• Define operations management and articulate its importance in the

business environment.

• Describe the historical evolution of operations management and its

impact on modern practices.

• Explain the role of operations within an organization and how it

contributes to overall business success.

• Differentiate between efficiency and effectiveness in operations, and

understand their significance in achieving organizational objectives.

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 Introduction
• Operations is the process of transforming inputs into
valuable goods and services.
• Operations Management (OM) involves applying
management principles and practices to design and enhance
business operation processes—whether in manufacturing or
services—while maintaining economic efficiency.
• This discipline plays a central role across all functional areas
—finance, marketing, and HR—ensuring seamless day-to-day
operations.
• It deals with the management of resources (inputs:
machines, raw materials, human skills, etc),
• AND the distribution of finished goods and services
(outputs) to the customers.
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 Definition of Operations Management
• As per Joseph G. Monks, "Operations management is the process
whereby resources, flowing within a defined system, are combined
and transformed in a controlled manner to add value in accordance
with policies communicated by management."

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 Goals of Operations management

• Operations management is a delivery-focused area in

business that implements practices ensuring the conversion
of inputs into goods and services with maximum efficiency.

• The goal is to increase an organization’s income by

 Improving its operations-for Profit Maximization
 Maximizing the use of existing resources.
 Including the provision and delivery of excellent
customer service.

Objective of Operations management is to achieve higher

value.
Operations and Operations
Management

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 Operations
• Operations is also defined as a transformation process.
• Operations are the business activities that a firm engages in to convert materials into finished products or services, sell them to
customers, and earn a profit.
• The term operations (operations function) embraces all the activities required to create and deliver an organization’s goods or
services to its customers or clients.
• It is an important functional area because it plays a crucial role in determining how well an organization satisfies its customers.

Convert them Distribute them to

Procure resources their intended users
into outputs

Objectives of Operation functions:

• Profits, growth and competitiveness (private-sector companies)
• Providing value for money (public and voluntary organizations)
 Operations and Operations Management

• Operations management is the management of the processes that transform

inputs into the goods and services that add value for the customer.
• Operations Management is a systematic approach to addressing issues in the
transforming process that converts input into useful revenue generating
outputs.

Education is an operation
In an educational setting the students are a primary input. The
transformation process is the learning that takes place. The
main output is the educated student. For this operation to take
place there has to be timetabling, lecture facilities and
management of the whole activity.

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Transformation Process

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 Feedback
• Feedback information is used to control the operations system, by adjusting the inputs and
transformation processes that are used to achieve desired outputs.

• It can come from both internal and external sources.

• Internal sources include testing, evaluation and continuously improving goods and services
• External sources include those who supply products or services to end-customers as well as
feedback from customers themselves.

For example,
A chef relies on a flow of information from the customer,
through the waiter, about the quality of the food. Adverse
feedback might lead the chef to change the inputs (for example
by buying better quality potatoes) or the transformation
process (for example by changing the recipe or the cooking
method).
 Need of Operations Management

• Organizations need operations management to enhance efficiency in both the

production and distribution of goods and services.
• It is essential for optimizing the management of material inventory in the
production process.
• Operations management is crucial for planning and allocating budgets across
different initiatives.
• It ensures effective logistics management for the timely supply of products.
• It enables quick and effective resolution of customer issues.
• It involves conducting candidate interviews and overseeing the workforce.
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Role of Operations Management
• Facility Planning
• Product and Process Design
• Materials Management
• Facility Layout and Materials Handling
• Capacity Planning
• Quality Management
• Maintenance Management
• Production Planning and Control
• Inventory Control
• Method Study and Work Simplification
• Cost Reduction
• Power and Utilities Management

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 Historical Evolution of Operations Management

• Until the 19th century, the world was mostly rural and agricultural.
• Most of the products were made by highly skilled people called artisans.
• 18th Century Beginnings: The concept of operations management traces back to
the eighteenth century, originally known as manufacturing management.
• Adam Smith's Contribution (1776):
o Introduced the theory of specialization of labor.
o Proposed breaking jobs into sub-units where specialized workers handled specific tasks to
improve efficiency and skill development.

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 Historical Evolution of Operations Management

1. The Birth of Scientific Management: Frederick W. Taylor, Frank and Lillian Gilbreth,
Henry L. Gantt.
 Focus: The emergence of OM functions, with an emphasis on labor productivity.
 Techniques:
o Time and motion studies
o Production control
o Layout planning
o Queuing theory
 Significance: This period, often referred to as "Scientific Management," laid the
groundwork for modern OM practices by optimizing labor productivity.
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 Historical Evolution of Operations Management

2. The Golden Age of Industrial Development (1920s - 1960s)

• Focus: Continued emphasis on labor productivity with the integration of
Operations Research and Management Science post-World War II.
• Developments:
o Aggregate capacity planning
o Quality control and inventory management
o Introduction of specific OM textbooks
o Expansion of OM into service settings

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 Historical Evolution of Operations Management
3. Technological Advancements and Tactical Tools (1970s - 1980s)
 Technological Milestones:
o 1938: The first digital computer was built, marking the beginning of the Information
Science era in OM.
o 1970s: Emergence of tactical tools such as MRP, Total Quality Management (TQM), and
Kanban.
 Shift in Focus: From stand-alone functional applications to integrated systems supporting
overall organizational goals.
 Key Developments:
o Databases and information systems became critical for managing large data sets.
o Increasing competition, particularly from Japan, drove a focus on manufacturing
strategies, service operations, and new product development.
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 Historical Evolution of Operations Management
4. The Role of Quality and Information Systems (1980s - 1990s)
 Focus Shift: From cost reduction to quality enhancement through collaboration with information
systems.
 Key Developments:
o Emphasis on Total Quality Management (TQM), Just-In-Time (JIT), and Manufacturing Resource
Planning (MRP II).
o Strategic involvement in product and service planning, positioning strategies, and process
management.
o Tactical involvement in job design, capacity planning, logistics, materials management, and
scheduling.
 Impact: The collaboration between OM and information systems fostered significant improvements
in quality and leanness, aligning academic research with practical applications.

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 Historical Evolution of Operations Management
5. The Modern Era (1990s - Present): Integration and Connectivity
 Key Developments:
o Internet and web-based technologies revolutionized OM by connecting
enterprises and customers through seamless information networks.
o Emergence of management tools such as Customer Relationship Management
(CRM), Supplier Relationship Management (SRM), Supply Chain Management
(SCM), and Knowledge Management (KM).
 Impact: These tools have become essential for enterprise success, enabling better
customer interaction, supplier management, and overall operational efficiency.
 Significance: OM is now viewed as a continuous improvement process, focusing on
enhancing quality, productivity, and customer satisfaction.

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Functions of Operations Management

Functions of OM

Location of Facilities
Plant Layout and Material Handling
Product Design
Process Design
Production Planning and Control
Quality Control
Materials Management
Maintenance Management

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Effectiveness and Efficiency in Operations Management

• Efficiency : Doing things right

• Effectiveness: Doing the right things

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 Key Factors
• Three key factors contributing to Effectiveness and Efficiency are:

Working at Pace

Being Organised

Creating Space

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Factors Contributing to Effectiveness and Efficiency
Working at Pace
• Work on timescale
• Create interest in work
• Work shift flexibility
• Work with minimum of fuss
Being Organized
• Know, where and how to start (priorities)
• Arrange things in order
• Maintain clean surroundings
• Work with care and focus on what you are doing
• Let time
Creating management be part of you daily routine
Space
• Avoid congestions
• Create a movable space
• Be timely with task management
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 Efficiency Vs Effectiveness
Efficiency Effectiveness

• Getting the maximum output • Measures if actual output

with minimum input meets desired output
(objective performance) • Takes into consideration the
• Takes into consideration the long term strategy
present state • Having desires or innovative
• Doing things consistently ways of working
• Focuses on the process • Focuses on the results

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Challenges in Operations Management
Globalization
Sustainability
Effective Communication
Ethical Conduct
Technology Integration
Team Accountability
Coping with Strong Competitors
Challenges in Collaboration
Low Productivity

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Productivity is the relationship between the
outputs generated from a system and the inputs
that are used to create those outputs.
Mathematically

O
P =
I
 Productivity
• Productivity is the measure of the value of goods and services
produced in relation to the value of resources utilized for production.
• Productivity is essentially an index that compares the output (goods
and services) to the input (such as labor, materials, and energy) used
in production.

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 Productivity Index: Measuring Productivity Changes
• The Productivity Index measures the percentage change in
productivity from a base year.

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• Example Calculation:
• 2019 (Base Year): Average monthly production = 100 units.
• 2020: Average monthly production = 110 units.
• Monthly Productivity Index for 2020: (110/100) × 100 = 110
• Interpretation: A 10% increase in production from 2019 to 2020.
• Yearly Production:
• 2019: 1,200 units (12 × 100)
• 2020: 1,320 units (12 × 110)

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 Productivity Measures
Partial
measures

Multifactor
measures

Total
measure

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 Factors Affecting Productivity
• Methods • Efficiency

• Management • Effectiveness

• Technology • Quality

• Standardization • Quality of Work Life

• Workplace issues • Innovation

• Safety an,d Health

• Labour issue
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 Steps to Improve Productivity
Develop Productivity Metrics

Evaluate the System Holistically

Identify Methods for Improvement

Set Achievable Goals

Ensure Management Support

Track and Publicize Improvements

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 Summary
• Operations management involves overseeing the process of transforming inputs (such as
materials, labor, and technology) into outputs (goods and services) efficiently and
effectively. Its importance lies in optimizing resources, reducing costs, and enhancing
productivity to ensure competitiveness. Historically, operations management has evolved
from traditional manufacturing practices to modern, technology-driven approaches that
emphasize continuous improvement and lean production. In organizations, operations
play a critical role in achieving strategic goals, with a focus on both efficiency—doing
things right—and effectiveness—doing the right things. Productivity is closely tied to
competitiveness, as higher productivity leads to lower costs and improved market
positioning.
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 Glossary
• Operations Management: This is the discipline concerned with overseeing and controlling the processes involved in
producing and delivering goods and services.
• Production Management: This refers to the process of managing the transformation of raw materials into finished
products.
• Efficiency: Efficiency is the ability to achieve a desired output or result with the minimum amount of resources, such
as time, money, or effort.
• Effectiveness: Effectiveness is the degree to which a goal or objective is achieved. It measures how well the intended
outcomes are realized, regardless of the resources used. Effectiveness is about doing the right things to achieve the
desired results.
• Productivity: Productivity is a measure of the output produced relative to the input used. It often reflects the
efficiency of a production process and is typically expressed as the ratio of outputs (goods or services) to inputs (such
as labor, materials, and energy). High productivity indicates that more output is being generated per unit of input.

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 MCQs

1. Which of the following is NOT a key component of Operations Management?

a) Planning
b) Controlling
c) Marketing
d) Organizing
2. Which era marked the birth of Scientific Management in Operations Management?
a) 1770s - 1800s
b) 1890s - 1920s
c) 1960s - 1970s
d) 1990s - Present
3. The concept of Material Requirements Planning (MRP) was introduced during which period?
a) The Golden Age of Industrial Development
b) Early Foundations
c) Technological Advancements and Tactical Tools
d) The Modern Era

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4. Which tool is NOT associated with modern Operations Management?
a) Customer Relationship Management (CRM)
b) Kanban
c) Supply Chain Management (SCM)
d) Time and Motion Studies

5. Which of the following is a key focus of operational effectiveness?

a) Reducing costs
b) Ensuring that all fundamental activities contribute value to the end customer
c) Maximizing waste reduction
d) Implementing Just-In-Time (JIT) scheduling

6. What is a primary function of operations management related to the conversion of raw materials into finished
goods?
e) Product Design
f) Process Design
g) Quality Control
h) Materials Management
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5. What is a key objective of materials management in operations?
a) Maximizing waste
b) Minimizing material costs
c) Enhancing the durability of products
d) Improving customer satisfaction
6. Which of the following trends focuses on using renewable energy
and circular economy principles in operations management?
a) Lean Methodologies
b) Green Operations
c) Digital Supply Chain
d) Agile Methodologies
7. What is the formula for productivity?
a) Input/Output
b) Output/Input
c) Labor/Materials
d) Capital/Energy
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5. In productivity measures, which of the following is an example of a partial measure?
a) Output per labor hour
b) Output per machine
c) Output per dollar
d) All of the above

Keys to MCQs

1. c) Marketing 6. b) Process Design

2. b) 1890s - 1920s 7. b) Minimizing material costs
3. c) Technological Advancements and Tactical Tools 8. b) Green Operations
4. d) Time and Motion Studies 9. b) Output/Input
5. b) Ensuring that all fundamental activities 10.d) All of the above
contribute value to the end customer

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 Essay Type Questions
(Each question carries Five marks)
1. What is operations management?
2. How is productivity defined?
3. What do you mean by transformation process?
4. Differentiate between efficiency and effectiveness in operations management.

(Each question carries Ten marks)

5. Discuss the importance of operations management
6. Briefly discuss the historical development of operations management
7. Explain the role of operations management
8. Analyse the current challenges and priorities in operations management
9. List some factors that can affect productivity and some ways that productivity can be
improved

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Keys to MCQs
• Q. No.1 B) Entrepreneurship
• Q. No.2 C) Innovating and disrupting markets
• Q. No.3 C) Technological advancements
• Q. No.4 D) Cultural shift toward self-employment
• Q. No.5 D) Achievement motivation
• Q. No.6 B) Infrastructure and support services

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CASE STUDY

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 Dabbawallahs of Mumbai: The Innovative Indians
• The Dabbawallahs of Mumbai are a remarkable group of mostly barefoot, semi-
literate delivery men who transport home-cooked meals to office workers
across the city. Despite their simplicity, they are known worldwide for their
exceptional time management and accuracy. In 2002, Forbes awarded them a
prestigious Six Sigma rating, indicating fewer than 3.4 mistakes per million
deliveries. Their efficient system has even caught the attention of global
figures like Prince Charles and has been featured in a BBC documentary.
Starting in 1890, this service now employs around 5,000 Dabbawallahs, who
use a unique coding system to deliver over 200,000 meals daily across
Mumbai, covering distances up to 45 kilometers. Despite the challenges,
including navigating the city and its busy trains, the Dabbawallahs are
renowned for their teamwork, punctuality, and dedication.

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 Dabbawallahs of Mumbai: The Innovative Indians
The Dabbawalas use a system of alphanumeric and color-coded notations to
identify collection and delivery points, as well as the identity of the dabbawalas
involved in the process. Each tiffin box is labeled with a code, which helps in
sorting and ensures that the dabbas are delivered efficiently. The boxes are
transported to a central sorting station, from where they are distributed to
their destinations with minimal travel time. Interestingly, the dabbawalas don't
know the recipient's name or the company; they rely solely on the codes to
identify the building and floor for delivery. After lunchtime, the dabbawalas
retrieve the empty tiffin boxes and return them to the original collection points.

• The Dabbawallahs have adapted to changes over time, including incorporating

technology like SMS and websites to expand their services. While their
operations may have evolved, they remain a vital part of Mumbai's cultural and
logistical landscape.

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 Reference
https
://www.google.co.in/books/edition/OPERATIONS_MANAGEMENT/tZ
x2BAAAQBAJ?hl=en&gbpv=1&dq=operations+management+pdf&pri
ntsec=frontcover

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