Operations Management

Operations Management deals with the design and management of

products, processes, services and supply chains. It considers the
acquisition, development, and utilization of resources that firms need
to deliver the goods and services their clients want.

OR

The systematic design, direction, and control of processes that

transform inputs into services and products for internal, as well as
external customers.

Types of Inputs:
 Customers
 Raw material
 Information

Transformation Process

Process: The steps needed to transform inputs into outputs.

Capital Equipment: The tools needed to support transformation

process .i.e. structures, machinery and computers.

Labor: The personnel needed to execute transformational process.

Outputs: outputs are the goods or services required by the
customers.

Types of Business Organizations

 Manufacturing Organizations
 Servicing Organizations
 Non-Manufacturing Organizations

1. Manufacturer; These take raw materials and make finished products, which
they then sell. They make a physical good such as a car or a sofa.

2. Service businesses; offer intangible goods or services and typically

generate a profit by charging for labor or other services provided to government,
other businesses, or consumers. Organizations ranging from house decorators to
consulting firms, restaurants, and even entertainers are types of service
businesses.

3. Non-manufacturing organizations: Organizations involved in mining

are called non-manufacturing organizations.

There are three types of business processes:

Management processes: the processes that govern the operation of a

system. Typical management processes include “Corporate Governance” and
“Strategic Management”.

Operational Processes: processes that constitute the core businesses and

create the primary value stream. Typical operational processes are Purchasing,
Manufacturing, Marketing and Sales.

Supporting Processes: which support the core processes. Examples

include Accounting, Recruitment, and Technical Support.
Operations in Manufacturing Organizations

Manufacturing operations deal with goods/tangible products. Example industries:

Agriculture, forestry and fishing, Mining, Construction, etc. Inputs (raw materials, etc.) and
outputs (products) are tangible and visible objects. Manufacturing transformation
processes are some kind of chemical or physical processes (ex: welding, assembling).

Some companies are make-to-stock producers. These firms make items that are
completed and placed in stock before customer order is received. Ex: Arcelik plant.Some
companies are make-to-order producers. These complete the end item only after
receiving a customer order.

Because manufacturer cannot anticipate what each customer wants. Example: a metal
fabrication shop, which gives the desired shape to any kind of metal.

When the company produces standard modules and assembles these modules according
to the specifics of a customer order, this is an assemble-to-order producer.

Examples are: PVC window assemblers, and modular kitchen board assemblers.

The extent to which a factory has the flexibility to produce a variety of products is another
characteristic used to distinguish between types of factories.

One extreme is to produce custom products in low volume or in single units. Example is a
metal fabrication shop.

Other extreme is to produce a standard product in very high volume. Example: nuts and
nails.

Operations in Service businesses

The other companies who are not manufacturers are referred to as service companies.
These deal with non-manufacturing operations or service type operations. Example
industries: Transportation, Finance, real estate, insurance, hotels, etc. Here, there are
also inputs and outputs. The output is a satisfied customer. Processes in service
operations include giving advice (consultant firms), transporting, packaging, storing,
serving (food), etc. Other examples: educational institutions, repair shops, and barbers.
Some service operations deal with tangible outputs even though they do not manufacture
a product: examples are distributors, mail service, library, etc. Other service operations
deal with intangible products. These are pure service operations: examples are financial
advice, counseling, etc.

In some service operations, customer is not present as a participant: examples are

architectural design, repairing automobiles, insurance, etc.

In some others, customer is present: examples are health care, haircut, travel, etc.

WHAT DO OPERATIONS MANAGERS DO?

At the strategic level (long term), operations managers are responsible

for or associated with making decisions about product development
(what shall we make?), process and layout decisions (how shall we
make it?), site location (where will we make it?), and capacity (how
much do we need?).

At the tactical level (intermediate term), operations management

addresses the issues relevant to efficiently scheduling material and
labor within the constraints of the firm's strategy and making
aggregate planning decisions. Operations managers have a hand in
deciding employee levels (how many workers do we need and when
do we need them?), inventory levels (when should we have materials
delivered and should we use a chase strategy or a level strategy?),
and capacity (how many shifts do we need? Do we need to work
overtime or subcontract some work?).

At the operational level, operations management is concerned with

lower-level (daily/weekly/monthly) planning and control. Operations
managers and their subordinates must make decisions regarding
scheduling (what should we process and when should we process it?),
sequencing (in what order should we process the orders?), loading
(what order to we put on what machine?), and work assignments (to
whom do we assign individual machines or processes?).

The text divides the responsibilities of operations managers into,

 Direct responsibilities – the activities which are directly related to

producing and delivering products and services.
 Indirect responsibilities – the activities involved in interfacing with
other parts of the organization.
 Broad responsibilities – a wider set of tasks that involve scanning
the business, social and political environment in which the
organization exists in order to understand its context.
http://mitsloan.mit.edu/omg/om-definition.php

http://www.referenceforbusiness.com/management/Ob-Or/Operations-Management.html