01 - Introduction

Operations management
Slack, Chambers and Johnston, Operations Management 5 th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Course Outline
• Introduction
• Operations Strategy
• Process Analysis
• Layouts and Flows
• Forecasting
• Capacity Management
• Inventory Management
• Lean Production Systems, JIT and ERP
• Theory of Constraints
• Service Operations Management
• Supply Network design
• Quality Management
• Risk Management (Failure Prevention and Recovery)
• Linear Programming
• Facility Location and Transportation Problems
Recommended Text Book
• Nigel Slack: Operations Management
Assessment Criteria
Project 60%
Write up (Report) : 40%
Presentation: 20%
End-term exam 40%
Introduction
Key Questions???
• What is operations management?

• What are the similarities between all
operations?
• How are operations different from each
other?
Production and Operations
Management
• Three different words
• Production
– Product
– Service
• Operations
• Management
Operations management defined
Operations management is the activity

of managing the resources which are
devoted to the production and delivery of
products and services.
Functions in an organization
• Core function
– Marketing
– Product / Service development
– Operations
• Support Functions
– Accounts and Finance
– Human Resource Management
Some interfunctional relationships between the operations
function and other core and support functions
Engineering/ Product/service
Understanding of the
technical capabilities and development
function constraints of the function
operations process
Analysis of new
technology options Understanding of
process technology
Accounting needs New product and
Provision service ideas
and finance Understanding of the
of relevant
function data capabilities and
Operations constraints of the
Financial analysis function operations process
for performance
and decisions Market
requirements
Marketing
Understanding of human function
resource needs Understanding Provision of systems for
of design, planning and
infrastructural control, and improvement
Recruitment
development and system
and training needs
Human Information
resources technology
function (IT) function
The consultancy services market – % of world
revenues of 40 largest consultancy firms
Financial Marketing /
6 sales
Organization 2
al design Operations and
11 process
management
Benefits /
31
actuarial
16
IT strategy Corporate
17 strategy
17
Back office operation Kitchen unit
in a bank manufacturing
operation
They are
all
Retail operation
operations
Take-out / restaurant
operation
The best way to start understanding the nature of
‘operations’ is to look around you
Everything you can see around you (except the flesh and
blood) has been processed by an operation
Every service you consumed today (radio station, bus

service, lecture, etc.) has also been produced by an
operation
Operations Managers create everything you buy, sit on,

wear, eat, throw at people, and throw away
A general model of
The operation’s
operations strategic
management objectives
Transformed Operations Operations The operation’s

resources … strategy strategy competitive role
and position
Materials
Information
Customers
Design Improvement
Operations Output
Input management products Customers
resources and
services
Transforming Planning
resources … and
control
Facilities
Staff
Operations management at IKEA
Design a store layout
which gives smooth Ensure that the jobs of
Design elegant
and effective flow all staff encourage
products which can be
flat-packed efficiently their contribution to
business success
Site stores of an Continually examine

appropriate size in and improve
the most effective operations practice
locations
Maintain cleanliness Monitor and enhance

and safety of storage quality of service to
area customers
Arrange for fast
replenishment of
products
Prêt a Manger
‘High-end’ sandwich and snack retailer

Uses only ‘wholesome’ ingredients
All shops have own kitchens, which make fresh
sandwiches every day
Fresh ingredients delivered early every morning
The same staff who serve you at lunch made the

sandwiches that morning
“We don’t work nights, we wear jeans, we party …”
The three basic functions at Prêt a Manger
Nutritional ‘mechanical’ and
aesthetic design of the
sandwiches and snacks
Product /
Service
Development
Design, location
and management of
stores and in-store
Marketing Operations processes and the
Promotional network that supplies
activities, them
market
research, etc.
Similarities between these
businesses
• ???
All operations are transformation processes …
Inputs Transformation process Outputs
that transform inputs …

into outputs
Input - Outputs
• Transformation
– Physical Properties (Shape & Composition)
– Location
– Possession
– Store
Give examples of Transformation
Input Properties Location Possession Store
Material
Information
Customer
Give examples of Transformation
Input Properties Location Possession Store
Material Car Courier service, Retail Warehouse

manufacturing Lift
Information Accountants Cellular Reports

Companies Market
Research
Customer Hospital Transportation -- Hotels
Some inputs are transformed resources
Some inputs are transforming resources
Transformed
resources …
Materials
Information
Customers
Output
Input products
resources Transformation process Customers
and
services
Transforming
resources …
Facilities
Staff Outputs are products and services that add
value for customers
At Prêt a Manger
Transformed
resources …
Ingredients
Packaging
Customers
Input Served and

resources satisfied
customers
Transforming
resources …
Equipment
Fittings
Staff
Product - Service
• What is the difference between these two
• Tangibility vs intangibility
• Storability
• Ownership
• Standardized vs tailor-made
The output from most operations is a mixture of
products and services
Pure products – Outputs
that are exclusively
Crude oil production
Acme Whistles tangible
Aluminium smelting
Specialist machine tool

production Prêt a Manger Mixture of products
and services – Outputs
that are a mixture of
Restaurant
the tangible and the
intangible
IKEA
Information systems provider
Management consultancy
Mwagusi Safari Lodge
Pure services – Outputs
Psychotherapy clinic that are exclusively
intangible
Operations can be analyzed at three levels
Flow between operations
The level of the supply network
Flow between processes
The level of the operation
The level of the process

Flow between resources
Difference between operations
• ????
Differences within sectors are often greater than the
differences between sectors
Financial services
An account Financial analyst
management centre at advising a client at an
a large retail bank investment bank
Furniture manufacturing
Mass production of Craft production of

kitchen units reproduction
‘antique’ furniture
Hotels
Value-for-money Lobby of an
hotel international
luxury hotel
A Typology of Operations
Low Volume High

High
High Variety Low
Variation in
High Low
demand
High Visibility Low
Implications Implications
Low repetition High repeatability

Each staff member Specialization
performs more of job Low Volume High
High Capital intensive
Less systemization
Low unit costs
High unit costs
Well defined
Flexible
Routine
Complex
High Variety Low Standardized
Match customer needs
Regular
High unit costs
Low unit costs
Changing capacity Stable

Anticipation Routine
Variation in Predictable
Flexibility High Low
In touch with demand demand High utilization
High unit costs Low unit costs
Short waiting tolerance Time lag between

production and
Satisfaction governed by consumption
customer perception Standardization
Customer contact skills High Visibility Low Low contact skills
needed
Received variety is high High staff utilization
High unit costs Centralization
Low unit costs
Implications
A Typology of Operations Implications
Low repetition High repeatability
Each staff member Specialization
performs more of job Low Volume High
High Capital intensive
Less systemization
Low unit costs
High unit costs
Well defined
Flexible
Routine
Complex
High Variety Low Standardized
Match customer needs
Regular
High unit costs
Low unit costs
Changing capacity Stable

Anticipation Routine
Variation in Predictable
Flexibility High Low
In touch with demand demand High utilization
High unit costs Low unit costs
Short waiting tolerance Time lag between

production and
Satisfaction governed by consumption
customer perception Standardization
Customer contact skills High Visibility Low Low contact skills
needed
Received variety is high High staff utilization
High unit costs Centralization
Low unit costs
4 V’s profile of two operations
Low Volume High
High Variety Low
High Variation Low
High Visibility Low

Mwagusi Formule 1
Safari Lodge Hotel
Important to understand how different operations are positioned

on the 4 V’s.
Is their position where they want to be?
Do they understand the strategic implications?
Any Tailor
• Turns cloth into suits

• Low volume of each item
• High variety
• High customer contact
• Process involves skilled staff, basic
technology (Scissors, chalk, tape
measure), and simple flow of materials
Christmas Puddings
Christmas Puddings
• Turns fruit, flour etc
into puddings
• Medium volume
• Low variety
• Very seasonal demand – variation
• Low/No customer contact
• Quite specialised technology, semi-skilled

labour, flow from stage to stage
Architect
• Turns information into a

buildable design
• Low volume – one-off

• High Variety – each
job different
• Variable demand but
no seasonal pattern
• Medium customer contact
• Highly skilled staff, basic technology, time-critical project

process
Power Station
• Turns coal and gas into
electricity
• No variety
• High volume
• Some variation in
demand
• Very capital intensive, specialised technology;

few staff, doing maintenance jobs.
Undergraduate Degree
• Turns new students into
knowledgeable and skilled
graduates
• Volume – medium
• Variety – medium
• Visibility – medium
(But depends on which activity)
• Mostly skilled staff and simple technologies;

complex flow and scheduling
Transformation types
Operation Transformed Type of change Product
resource Service
Car
Manufacturing
Student
counselling
Retail banking
Train journey
Roadside car
recovery (AA)
Applying the four Vs
Bonanza Making PC Student Pakistan
clothing keyboards counselling railways
Volume
Variety
Variation
Visibility

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Operations management

• Nigel Slack: Operations Management

• What is operations management?

Operations management is the activity

Every service you consumed today (radio station, bus

Operations Managers create everything you buy, sit on,

Transformed Operations Operations The operation’s

Site stores of an Continually examine

Maintain cleanliness Monitor and enhance

‘High-end’ sandwich and snack retailer

The same staff who serve you at lunch made the

Inputs Transformation process Outputs

that transform inputs …

Input Properties Location Possession Store

Input Properties Location Possession Store

Material Car Courier service, Retail Warehouse

Information Accountants Cellular Reports

Customer Hospital Transportation -- Hotels

Input Served and

• What is the difference between these two

Specialist machine tool

The level of the supply network

Flow between processes

The level of the operation

The level of the process

Mass production of Craft production of

Low Volume High

High Variety Low

High Visibility Low

Low repetition High repeatability

Changing capacity Stable

Short waiting tolerance Time lag between

Changing capacity Stable

Short waiting tolerance Time lag between

Low Volume High

High Variety Low

High Variation Low

High Visibility Low

Important to understand how different operations are positioned

• Turns cloth into suits

• Quite specialised technology, semi-skilled

• Turns information into a

• Low volume – one-off

• Highly skilled staff, basic technology, time-critical project

• Very capital intensive, specialised technology;

• Mostly skilled staff and simple technologies;

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