Operations Management

What is Operations??

Operations are purposeful activities – done methodically – as part of a work

plan – designed to achieve the pre-decided objectives.

What is Operations Management??

Operations Management is often used along with the term Productions

Management. Productions Management refers to the application of
management principles to the production function in a factory.

Operations Management is the Systematic direction, control, and evaluation of

the entire range of processes that transform inputs into finished goods or
services.
 Operations Management

OM consists of activities such as Scheduling Work, Assigning

Resources ie., people, equipment, Managing inventories, assessing
quality standards etc. OM is a process through which resources
and inputs are converted into more useful products.

Production Management is used for a system where Tangible

goods are produced. OM is more frequently used where inputs
are transformed into intangible services. OM covers service
oriented organizations such as :- Banks, Airlines, Pollution Control
Agencies, Shopping Malls, Educational Institutions etc.
 Operations Management
Definition of Operations Management.

Operations Management refers to the administration of

business practices to create the highest level of efficiency
possible, within an organization. Operations Management is
concerned with converting materials and labor into goods
and services as efficiently as possible to maximize the
profit of an organization.

“ Operation Management is the set of activities that create

goods and services through the transformation of inputs
into outputs.” - (Slack, 2001)
Goal of Operations Management:

The goal of Operations Management is to ensure that the input requirements and the
transformation process, in which part of the value addition takes place, to get the
required quantity of the product or services, with the targeted quality, within the
specified time period, is carried out in a most economical way.

Operations System could be either Manufacturing Sector or Services Sector.

Operations Management Plan coordinates and controls all the activities in the operation
system to achieve the stated objectives.

Objectives of Operations Management:

1) The Customer Service Objective: Provide goods or services with the right
specification, at the right cost and at the right time.
2) The Resource Utilization Objective: To achieve agreed levels of utilization of
Materials, Machines and Labour.
 President and/or CEO

Product VP -
R&D Accounting Marketing Finance
Engineering Operations

VP - VP - General Industrial
Material Quality Manager Engineering

Inventory Distribution Plant Work

Purchasing
Management Management Maintenance Standards

Process
Management
Supervisor Supervisor Supervisor

Production line associates

Operations as Service:

The emerging model in the industry is that every organization is in the service
business. This is true whether the organization makes big planes or big mac.
This means that the manufacturing operations, as well as every other part of
the organization, are also in the service business, even if the customer is an
internal one.

In Manufacturing, such services are divided into Core and Value-added Services.

Core Services – Quality, Flexibility, Speed and Price.

Value-added Services – Information, Problem-solving, Sales support and Field

support. Value-added services provided to external customers yield two
benefits:

Differentiate the organization from the competition.

Bind customers to the organization in a positive way.

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 Historical Development of OM
 Industrial revolution Late 1700s
 Scientific management Early 1900’s
 Human relations movement 1930s to 1960s
 Management science Mid-1900s
 Computer age 1970s
 Just-in-Time Systems (JIT) 1980s
 Total quality management (TQM) 1980’s
 Reengineering 1990s
 Flexibility 1990s
 Time-Based Competition 1990s
 Supply chain Management 1990’s
 Global Competition 1990s
 Environmental Issues 1990s
 Electronic Commerce Late 1990s

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Current Issues in OM:

1) Effectively consolidating the operations resulting from mergers.

2) Developing flexible supply chains to enable mass customization of products
and services.
3) Managing global supplier, production and distribution networks.
4) Increased “commoditization”of suppliers.
5) Achieving the “Service Factory”.
6) Achieving good service from service firms.
Operations Management Strategy:
 DEVELOPING PRODUCTION/OPERATIONS STRATEGY.

Corporate Mission

Distinctive
Assessment of
Business Strategy Competencies or
Business Conditions
Weaknesses

Product Service/Plans

Competitive Priorities

Cost, Time, Quality, Flexibility

Production/Operations Strategy
Positioning the production system
Product/Service Plans
Outsourcing Plans
Process and Technology Plans
Strategic allocation of resources
Facility Plan, Capacity, Location and Layout
Things to consider in Strategy Formulation:

1) External Factors:
- Economic Conditions.
- Political Conditions.
- Legal Environment.
- Technology.
- Competition.
- Markets.
2) Internal Factors:
- Human Resources.
- Facilities & Equipment.
- Financial Resources.
- Customers.
- Products/Services.
- Technology.
- Suppliers.
- Distinctive Competencies. (Cost, Quality, Time, Flexibility, Customer Service, Location)
Operations Strategy:

Operations Strategy is concerned with setting broad policies and plans for using the resources of a firm to best support
its long-term competitive strategy.

Operations Strategy can be viewed as part of a planning process that coordinates operational goals with those of the
larger organization. Since the goals of the larger organization changes over time, the operation strategy must be designed
to anticipate future needs. Should be able to adapt to the customers changing needs for goods/services.

Competitive Dimensions:

Customers today have a lot of choices in terms of what to buy. Different customers are attracted to different
attributes.

The Major Competitive Dimensions that form the competitive position of a firm include the following:

Cost/Price: Could result in commoditization.

Quality: There are two characteristics of a product/service that define quality: Design Quality (Child's Cycle versus
Athlete's Cycle) and Process Quality (Defect free Products and Services).
Delivery Speed:
Delivery Reliability:
Coping with Changes in Demand: Changes in volume:
- Higher volume – Increase production and costs reduce due to economies of scale.
- Lower demand/volume – Difficult decisions such as scaling down operations, laying off employees etc.
6) Flexibility and New Product Introduction Speed:
7) Other Product Specific Criteria (Support):
- Technical Liasion and Support.
- Meeting a launch date. 15
- Supplier after sale support.
- Other dimensions (Colors, size, weight, customization etc).
Operations Strategy in Manufacturing:

Developing Manufacturing Strategy:

Main Objectives of developing Manufacturing Strategy:

Translate required competitive dimensions into specific performance

requirements for operations.
To make plans necessary to ensure that operations capabilities are sufficient to
meet the production goal.

Operations Strategy in Services:

Order Qualifier & Order Winners.

Order Qualifiers are the characteristics of products or services that is

required in order for the product or service to be considered by a customer.

Order Winners are the characteristics that will win the bid or the customers
purchase. 16
 RECAP
Way to remain Competitive through Operations:

1) Price.
2) Quality.
3) Product/Service Differentiation.
4) Flexibility.
5) Time.
6) Service.
7) Management & Workers.
Importance of Operations Management:

1) Operations Management is the core of all business organizations.

2) A large percentage of the jobs are in the field of operations.
3) Ensures Higher Standard of Living.
- Ability to increase productivity.
- Lower costs of Goods and Services.
2) Better Quality Goods and Services.
- Competition increases Quality.
3) Improved Working Conditions.
- Better Job Design and Employee Participation.
How is Operations Relevant to your Major?

Marketing

“How can you do a good job marketing a product if you’re unsure

of its quality or delivery Status?”

Finance

“Most of our capital budgeting requests are from operations,

and most of our cost savings too.”

Human Resources

“Human Resources are the most important asset of an

organization. Essential to run the operations”.
Scope of Productions and Operations Management:

Location of
Facilities
Plant Layout
Maintenance & Material
Management Handling

Productions/
Material Operations Product
Management Management Design

Quality Production
Planning Process
Control Design
& Control
(Planning, Routing,
Scheduling, Dispatching,
Follow up)