Introduction to

Operation Management
By: Ot Chan Dy, BE & Msc.
Instructor, Management Institute of Cambodia

After finish this chapter

Explain what is process

Describe OM as function
Differentiate of VA, SVA, NVA
Describe trends and challenges in managing operation

Identify some decisions make by operation manager

Contents

Operation Management as Process

Value Chain Management
What is operation management?
Scope of responsibility of operation manager

Trends and challenges in OM

Operation Management as Process

Operation Management deal with PROCESS that produce
Goods & Service

Operation Management as Process

PROCESS should be design with according to customer
Needs and Wants
Internal
Customer
External

Operation Management as Process

Manufacturing vs. Service Process

Process

Services: 80% of job in business

Manufacturing: without it there will be products

The main differences between the two:

Nature of their output
Degree of customer contact

Operation Management as Process

Manufacturing and Service is difficult to distinguish
Total Customer Offering

Automobile is not just manufacture a car but also provide after sale
service like arrange finance, offering warranties and guarantees.
Computer industry, customer is paying both hardware and software
but after sale service is very important like help-line for
troubleshooting.

Therefore, operation management should not see as

manufacturing vs. service BUT as joint effort in the whole
supply chain to provide total customer satisfaction.

Operation Management as Process

Manufacturing and Service some other example:
1. The product is intangible for service operation

Is this still true?

Service companies speak a lot about their products
become tangible

intangible

2. Service can not be kept in the stock? Lets examine the cases

In tangible services business such as the Pizza Company, KFC, Lucky

Burger, the supporting elements of the service (supplies) is clear and
will be kept in stock.
Pachem dental clinic must have their doctors ready to provide service
to customers, therefore kept stock
Some products can not be stock that long i.e. perishable foods BUT
even CD music can last for years, it is not advised to keep it that long.

Operation Management as Process

Manufacturing and Service some other example:
3. Service vary and can not be mass-produce

Depend on where and how we view the service. KFC is consider

service but still can produce large volume and diverse types

4. There is high customer contact

It is estimated that there is less than 5 min contact between

passengers and flight attendances from Phnom Penh to Singapore
Crown (Cambodia) spend a lot of time visiting their customers
The introduction of ATM machines by ANZ and other banks has
reduce tremendous amount of contact between customer and
bankers.

Operation Management as Process

Manufacturing and Service some other example:
5. Customers participate in the service

Not really necessary and always the case! With IT system customer
could check in without having to see the counter staffs, therefore
reduce check in time process for air transport companies.

6. Facilities are located near to customers

That was really in the past! Still true for some cases
With modernization of IT, Angkor Home Hotel in Siem Reap can be
book from Tokyo, Operation Management books can be bought from
Amazon.com and have it ship straight to office door in Phnom Penh.

Operation Management as Process

Manufacturing and Service some other example:
7. Quality is difficult to measure and depends on the server

In services industry, time is an important dimension in measure

quality speed and reliability of response are measurable and
quantifiable
Gone in 60 seconds! By McDonald fast food chain vs. long line up of
Lucky Burger, KFC, Pizza Company during peak time!

Operation Management as Process

The service management system
External environment
Internal environment

The way service concept

is delivered.
5. Service
Delivery
System

3. Service
Image

1. Culture
&
Philosophy

Specification that
describe the benefit
offered by service.
4. Service
Concept

Who we target for?

Where we choose to be
and not to be?
2. Market
Segment

Service Management System (Norman, 2000)

Operation Management as Process

Manufacturing and Service the key points
It is not always helpful when trying to manage operation by
making a total distinction between service and
manufacturing
Manufacturing and service is about the collaboration
activities in providing customers the goods or services
The effort should use to distinction between input that
manufacturing & service process (materials & customers)
Remember: materials do not think or act for themselves
while customers can and do. Service companies that forget
this would die soon

Contents Map

Operation Management as Process

Value Chain Management
What is operation management?
Scope of responsibility of operation manager

Trends and challenges in OM

Value Chain Management

What is value chain?

Process must add value to their customers

Activities that are necessary for adding values
Therefore, It is about value chain management!!! See: Value Innovation

Value Chain Management

It is about management of value added activities in the
whole supply chain (supply chain management)
Processes are resource consumer , therefore its activities of
converting input to output must be examine carefully. They
should value added!

Core processes

Process 1

Process 2

Process 3

Process 4

Process 5

Process 6

A business is profitable if the value it creates exceeds the cost of performing the value activities (Porter,
2001)

The Value Chain (Porter, M. 2001)

A companys value chain is a system of interdependent activities which are connected by

linkages.
Linkages exist when the way in which one activity is performed affects the cost or
effectiveness of other activities. Therefore need to be trade-off & coordination!

Contents Map

Operation Management as Process

Value Chain Management
What is operation management?
Scope of responsibility of operation manager

Trends and challenges in OM

Definition of Operation Management

Systematic design, direction, and control of process that
transforming input into product/service for external & internal
customers
In large organization, operation is usually responsible for the actual
transformation of input into services & products.
Therefore, it is consisted of series of small operation which work as
function.
Some firms do not own the function but contracting
Most of senior level executive have their work experience in operation
i.e. VP Operation or Production, Chief Operation Officer (COO)
Typical report function to COO include Customer Service, Production,
Logistic, QA, Inventory, Maintenance & Reliability etc.

Contents Map

Operation Management as Process

Value Chain Management
What is operation management?
Scope of responsibility of operation manager

Trends and challenges in OM

Scope of responsibility of OM
Decision COO makes both Strategic and Tactics
Decision making process:
1

Recognize & Clearly define the problems

Collect information to be analyzed

Choose the most attractive solutions

Implement chosen alternatives

Scope of responsibility of OM
Strategic vs. Tactics decision
Strategic decision include:

Development of new capabilities

Maintaining of existing ones
Process design
Value chain linkage development
KPIs development (finance and non finance matrices)

Tactics decision include:

Process improvement
Performance measurement & management (see: Kaplan & Norton, Davenportanalytical performance management)
Managing projects
Planning
Inventory

Supplement docs: The three level of decision making

Scope of responsibility of OM
2 Principles must be kept in mind as COO:
1.

Must design and operate processes deal with Quality, Technologies,

and staffing issues

2.

Each part of organization has its own identity

Contents Map

Operation Management as Process

Value Chain Management
What is operation management?
Scope of responsibility of operation manager

Trends and challenges in OM

Trends & Challenges in managing operation

Productivity
Global competition
Technologies changes
Environmental issues
Ethical
Diversity

Trends & Challenges in managing operation

Productivity
Value of output (services or products)
Value of input (wage, cost of equipment,
materials etc.)

Four strategies to consider:

Trends & Challenges in managing operation

Global competition
It is agreed that to prosper & survive business have to view
customers, suppliers, facilities location, and competitor in global
terms

Feature articles:
What it take to compete in flat world
Global competition for resources

Trends & Challenges in managing operation

Technological changes:
Thus, the first and critical point about why we fail to see the need for
change stems from the fact that we stand blinded by the light of
successful past mental maps (Black & Gregerson,2008).

Feature articles:
strategy & the internet
It is all start with ones
How information gives you competitive advantages
LFC vs KFC

Trends & Challenges in managing operation

Environmental issues:
Companies that persist in treating climate change solely as a
corporate social responsibility issue, rather than a business problem,
will risk the greatest consequences (Porter & Reinhardt, 2007).

Feature articles:
business climate and climate business
Impact of Climate Changes on future business strategy adoption
Virtual Matrix of Corporate Social Responsibility

Trends & Challenges in managing operation

Business ethic:
Raising the bar of rules or standards governing the conduct of doing
business

Feature articles:
http://en.wikipedia.org/wiki/Business_ethics
http://www.scu.edu/ethics/

Trends & Challenges in managing operation

Workplace diversity:
Managing diversity is comprehensive process for creating work
environment that includes everyone
There is single recipe for success!

Feature articles:
Harvard Business Review on Managing Diversity
Harvard Business Review on Culture Changes
Diversity as strategy Harvard Business Review
Diversity at workplace: benefits , challenges, and required material
tools

Trends & Challenges in managing operation

Feature articles:

5 Competitive Forces that Shape Strategy

Question

Class activities
Objectives:
To get deeper understand of business present & future trends & challenges
Increase level of competences in business research
Team work in practices
Business presentation skill
Topics:
1. Productivity improvement challenges
2. Globalization The competition for resources. Try to answer why companies
are competing with everyone from everywhere for everything?
3. Climate changes threats and opportunities for business in the future (to
include case studies)
4. Management of workplace diversity
5. Using Service Management Model developed by Norman, compare service
offer by The Pizza Company, Lucky Burger, KFC, Pizza World, and Soksabby.

Class activities
Team
A Lead by:
Member:

B Lead by:
Member:

C Lead by:
Member:

D Lead by:
Member:

E Lead by:
Member:

Requirements:
Paper works > 14 pages
Presentation 20 30 min
Q&A < 15 min
Each team member must present

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