OPERATIONS MANAGEMENT

IN
SUPPLY CHAIN MANAGEMENT

Presented By :

Skierians
END OF THIS PRESENTATION WE WILL COME
TO KNOW ABOUT :

 What operation management is?

 Business Functions . Important business
functions for OM.
 Location of Operations In Organizational Chart.
 Difference B/w manufacturers and
service organization.
 Classification of OM
 Transformation process.
 Relation of SCM And OM
 Examples For SCM And OM
 Conclusion
 References
OPERATIONS MANAGEMENT
 WHAT IS OPERATION
MANAGEMENT?
The business function responsible
for planning, coordinating, and
controlling the resources needed
to produce a company’s products
and services.
 WHAT IS OPERATION
MANAGEMENT? (CONT:)

 It is a management function

 Organization’s core function

 Every organization has OM function

Service or Manufacturing

For profit or Not for profit

BUSINESS FUNCTIONS
 Marketing
 Sales
 Target market
 Product line
 Finance and control
 R&D
 Labor
 Purchasing
 Production
 Distribution
TYPICAL ORGANIZATION CHART
DIFFERENCES BETWEEN MANUFACTURERS AND
SERVICE ORGANIZATIONS

Services: Manufacturers:
 Intangible product  Tangible product
 Product cannot be  Product can be
inventoried inventoried
 High customer contact  Low customer contact
 Short response time  Longer response time
 Labor intensive  Capital intensive
SIMILARITIES-SERVICE/MANUFACTURERS
 All use technology
 Both have quality, productivity, &
response issues
 All must forecast demand

 Each will have capacity, layout, and

location issues
 All have customers, suppliers, scheduling
and staffing issues
 CLASSIFICATIONS OF OPERATION
MANAGEMENT
As we know that Operation management
deals with two things that is Product and
services so to work with these two
individually there is a separate system
these are:

 Productive System
 Service System
PRODUCTIVE SYSTEM
If we are talking about the goods or
products then we have to discuss about
productive system.
And these are types of productive system.

 Process Focused System

 Product Focused System

 Production to stock/order
PROCESS FOCUSED SYSTEM
PRODUCT FOCUSED SYSTEM
PRODUCTION TO STOCK/ORDER
SERVICE SYSTEM
On contrast when we talk about services
there is service system and there kinds
which are:

 Stagnant personal services

 Substitutable personal Services

 Progressive services

 Explosive services
STAGNANT PERSONAL SERVICES
SUBSTITUTABLE PERSONAL SERVICES
PROGRESSIVE SERVICES
EXPLOSIVE SERVICES
TRANSFORMATION PROCESS
OM’S TRANSFORMATION ROLE
 To add value

Increase product value at each stage

Value added is the net increase between output

product value and input material value
 Provide an efficient transformation

Efficiency – perform activities well at lowest

possible cost
WHAT IS THE CONNECTION B/W SCM & OM

Go to Transformation
process slide
CONT:
Yes each of these elements in transformation
process is connected with SCM .

HOW
This can be explained with decision making in
operation management and some of the
calculations which will make all of us to
understand that how SCM is Connected with
OM.
DECISIONS
 All organizations are based on decisions
 Decisions follow a similar path
First decisions very broad – Strategic
decisions
Strategic Decisions – set the direction for the
entire company; they are broad in scope and
long-term in nature
Following decisions focus on specifics
- Tactical decision
CONT:
Tactical decisions focus on
Specific day-to-day issues
 Resource needs, schedules, &
quantities to produce
Tactical decisions are very frequent
Strategic decisions less frequent
Tactical decisions must align with strategic
decisions
 Example of Raw material calculation for
cookies manufacturer

Ingredient Amount Required/Cookies

Flour 0.02 kg

Margarine 0.005 kg
Sugar 0.01 kg

Eggs 0.04 of an eggs

(1 egg for 25 cookies)

Water 0.005 litre

 CALCULATION
Formula:
Forcasted Demand + ending stock percent of
Amount
Example :
f the forecast demand per month is 50,000 units of cookies.
f the amount of stock at the end of the month is 5% of the amount.

50,000 5%(50,000)
50,000 2,500
52,500 cookies/mont h
The materials required for the month:

Ingredient Amount Required/Month

Flour 0.02kg/unit x 52,500 = 1050kg

Margarine 0.005kg/unit x 52,500 = 2025kg

Sugar 0.01kg/unit x 52,500 = 525kg
Eggs 0.04/unit x 52,500 = 2100 units
Water 0.005litre/unit x 52,500 = 262.5 litre
 Cost per unit calculation

OperationsCost Directmaterial Directlabour Overhead

s

CostperUnit T otalOperat ionsCost (RM)

T otalNumberof Out put(Units)
HOW PRODUCTION IS GOING ON?

ProductivtiyIndex TotalValue of
Output TotalValue
of Input

The productivity index (P.I) can be more or less

than 1.
P.I > 1 = business running efficiently
P.I < 1 = business running inefficiently
This All Calculations Decisions
shows that SCM is playing a
vital roll in OM because it is
being used in each and every
portion of Operation
management
FURTHER EXPLANATION
CONCLUSION
As we know that SCM works with the
whole Organization and if we say that
Operations management is one which
works in between the whole organization
that will not wrong because ,
All business functions need information
from OM in order to perform their tasks
REFERENCES :
 R. Dan Reid & Nada R. Sanders 3rd Edition
© Wiley
 Elwood S. Buffa & Rakesh K. Sarin 3rd Edition
© Wiley
 Internet

 Sir Abdullah Alamin