MODULE 1: INTRODUCTION OF OM

 Production: The creation of goods and services

 Operations management (OM): The set of activities that

relate to the creation of goods and services through the
transformation of inputs to outputs.

 The business function responsible for planning, coordinating, and

controlling the resources needed to produce a company’s goods
and services.
THE TRANSFORMATION PROCESS
SIGNIFICANT EVENTS IN OPERATIONS MANAGEMENT
SIGNIFICANT EVENTS IN OPERATIONS MANAGEMENT
MANUFACTURING AND SERVICES
 Manufacturing organizations: Organizations that primarily
produce a tangible product and typically have low customer
contact.

 Service organizations: Organizations that primarily produce

an intangible product, such as ideas, assistance, or information,
and typically have high customer contact.
FUNCTIONAL AREAS OF BUSINESS
 Marketing, which generates the demand, or at least takes the
order for a product or service (nothing happens until there is a
sale).

 Production/operations, which creates, produces, and delivers the

product.

 Finance/accounting, which tracks how well the organization is

doing, pays the bills, and collects the money.
ORGANIZATION CHART
ORGANIZATION CHART
ORGANIZATION CHART
INTEGRATION BETWEEN DIFFERENT
FUNCTIONAL AREAS IN BUSINESS
OPERATIONS MANAGEMENT CONCEPT
 Quality: Goods and services that are reliable and perform
correctly.

 Efficiency: the amount of input to produce a given output

 Responsiveness to customer: Action taken to respond to

customer need.
OBJECTIVES OF OM
 Right Quality

 Right Quantity

 Predetermined Time

 Pre established cost (manufacturing cost)

STRATEGY AND COMPETITIVENESS
 Vision: What the company wants to become by setting a defined
direction for the company's growth.
 Mission: Reason for existence

 Objective: What result to accomplish and when

 Strategies: Plan to achieve the mission and objective

 Policies: Broad guidelines for policymaking

STRATEGY AND COMPETITIVENESS
 Business strategy: A long-range plan for a business.

 Operations strategy: A long-range plan for the operations

function that specifies the design and use of resources to support
the business strategy.

 Same industry can use different strategy. Southwest Airlines,

which has a strategy to compete on cost. Singapore Airlines,
which has a strategy to compete on service.
DEVELOPING A BUSINESS STRATEGY
 A company’s business strategy is developed after its managers
have considered many factors and have made some strategic
decisions.
 Developing an understanding of what business the company is in
(the company’s mission), analyzing and developing an
understanding of the market (environmental scanning), and
identifying the company’s strengths (core competencies).
 These three factors are critical to the development of the
company’s long-range plan, or business strategy.
MISSION
 Mission: The purpose or rationale for an organization’s
existence.
 Once an organization’s mission has been decided, each functional
area within the firm determines its supporting mission.
 The mission is a statement that answers three overriding
questions:
 What business will the company be in (“selling personal computers,”
“operating an Italian restaurant”)?
 Who will the customers be, and what are the expected customer
attributes (“homeowners,” “college graduates”)?
 How will the company’s basic beliefs define the business (“gives the
highest customer service,” “stresses family values”
 Dell Computer Corporation: “to be the most successful
computer company in the world”
 Delta Air Lines: “worldwide airlines choice”

 IBM: “translate advanced technologies into values for our

customers as the world’s largest information service company”
ENVIRONMENTAL SCANNING
 Monitoring the external environment for changes and trends to
determine business opportunities and threats
 Environmental scanning allows a company to identify
opportunities and threats.
 To stay ahead of the competition, a company must constantly
look out for trends or changing patterns in the environment, such
as marketplace trends.
CORE COMPETENCIES
 The unique strengths of a business.
 It helps define a business strategy is an understanding of the
company’s strengths.
 To be successful, a company must compete in markets where
its core competencies will have value.
 Highly successful firms develop a business strategy that takes
advantage of their core competencies or strengths.
THREE INPUTS IN DEVELOPING A BUSINESS STRATEGY
THE ROLE OF OPERATIONS STRATEGY
 The role of operations strategy is to provide a plan for the
operations function so that it can make the best use of its
resources.
 Operations strategy specifies the policies and plans for using the
organization’s resources to support its long-term competitive
strategy.
 Includes the location, size, and type of facilities available; worker
skills and talents required; use of technology, special processes
needed, special equipment; and quality control methods.
THE IMPORTANCE OF OPERATIONS STRATEGY
 Operational efficiency is performing operations tasks well, even
better than competitors.
 Operational strategy, on the other hand, is a plan for competing
in the marketplace.
 An analogy might be that of running a race efficiently, but the
wrong race. Strategy is defining in what race you will win.
 Operational efficiency and strategy must be aligned; otherwise,
you may be very efficiently performing the wrong task. The role of
operations strategy is to make sure that all the tasks performed
by the operations function are the right tasks.
COMPETITIVE ADVANTAGE
 Competitive advantage implies the creation of a system that has
a unique advantage over competitors.

 Competitive Advantage implies the virtue, that helps the firm

to perform better than its rivals at the market place. Core
Competence refers to the specific skills, knowledge and
expertise, that is hard to be followed by the competitors.
 Core competencies are the major source of attaining
competitive advantage and determines the areas, which a firm
must focus. It helps the firms in identifying prospective
opportunities for adding value to customers.
ACHIEVING COMPETITIVE ADVANTAGE THROUGH
OPERATIONS
 Firms achieve missions in three conceptual ways:
(1) differentiation, (2) cost leadership, and (3) response.

 Operations managers are called on to deliver goods and services

that are (1) better, or at least different, (2) cheaper, and (3) more
responsive.
ALTERNATE PERSPECTIVES
 Resources view: A method managers use to evaluate the
resources at their disposal and manage or alter them to achieve
competitive advantage.
 Value-chain analysis: A way to identify those elements in the
product/service chain that uniquely add value.
 Five forces model: A method of analyzing the five forces in the
competitive environment.
PORTER’S VALUE CHAIN ANALYSIS
PORTER’S FIVE FORCE ANALYSIS
MODULE 1
 What is Production?
 What is operation s management?
 Transformation Process
 Difference between manufacturing and production.
 Difference between goods and services
 Functional Areas of business and interrelationship between them
 Objectives and history of OM
 Business strategy and competitiveness
 Process to make strategy
 Core competencies and competitive advantages
 Operational efficiency and strategy
 Porter’s value chain analysis and five forced model