Production/Operations

Management: Introduction
evaluation,
major long term and short
term decisions;
objectives, importance and
activities

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 What is Operations
Management?
OPERATIONS MANAGEMENT is the design and
operations of production/service systems

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 Without operations
management:
A normal queue at a bank would take 1
to 2 hours …
A 3 hours ferry crossing could require 9
hours, if not several days!
The Eurostar would take 15 hours to go
from London to Paris…
Mail would rarely be delivered…

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 In other words:

Unless we could totally revise our

every day’s perceptions of time and
performance…
… we could not live in such a world

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 Contemporary Issues
Shift in balance of power to consumers
Achieving higher levels of productivity
● Creating higher quality products
● Delivering better customer service
● Achieving shorter delivery times
● Reducing labor and material costs

Globalization of business and markets

E-commerce
● From a primary sector to a secondary sector economy
● From a manufacturing to a service economy
● E-service economy
● Case of developing economies: can we leap-frog the manufacturing stage?

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 International Division of
Labour

Source: From Joseph E. Stiglitz, Principles of Micro-

economics, 2nd ed. (New York: W.W. Norton and
Company, 1997), p. 58. ravikantswami@gmail.com 66
The Value Chain and Its Support
ClickFunctions
to edit Master text styles
Second level
● Third level

● Fourth level

● Fifth level

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 Division of Labour
The objective is to specialise jobs by
reducing them to their most
elementary tasks
Results from the simultaneous
application of two principles
horizontal division of labour
● (Smith, Babbage)
vertical division of labour
● (Taylor, introduction of management science; Gilbreth,
time and motion studies)
The vertical division of labour implies:
A design and planning activity
A control activity ravikantswami@gmail.com 88
The Transformation Process
within
Click OM
to edit Master
Second level
text styles

● Third level
● Fourth level

● Fifth level

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 Input-Transformation-Output
Relationships for Typical Systems
Click to edit Master text styles
Second level
● Third level

● Fourth level

● Fifth level

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OM and the Service Industry

Application of OM to Service
Operations
Batch cooking operations at
McDonald’s
Telephone Banking
Call CentresService
Product Good

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 Most Products Are a
“Bundle”
Click to edit Master text styles
of Goods
Second leveland
Third level
●
Services
● Fourth level
● Fifth level

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 Differences Between Goods and
Goods Services Services

Tangible Intangible

Can be inventoried Cannot be inventoried

Direct interaction between

No interaction customer and process
between customer and
process

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 Product Delivery Systems

• Manufacturing Processes - customer

are separate from the place of
production both geographically and in
terms of time
– Exceptions: B2B transactions

Manufacturing
Materials Goods Customer
process

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 Service Delivery Systems

• There are two basic

structures of service
delivery system.....
– 1. where customers participate
– 2. where customers' goods are
processed Goods
Service
Customer Customer
Customer Service
delivery delivery
system system

Processed
Goods

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 Front & Back Office

Key feature of service industry. Nowadays front and

back offices are often separated geographically -
and may even be in Front
different continents
Office - Servers
Customers (receptionist / dispatcher /
cashier etc.) Back Office

Division of labour
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