Module 1:

3 Basic Functional Areas

FINANCE- securing financial resources

OPERATIONS- producing goods/ providing services

MARKETING- selling and promoting

Operations- is what businesses do. The work of managing the inner workings of a business so it would
run smoothly. It takes place in every type of businesses. Part of business that is responsible for
producing goods and/ or providing services. Core of what the organization does.

Operations Management- is the management of systems or processes that are part of the operations
that will create goods and/ or provide services.

- Its main concern is with designing and controlling the systems and processes of production and
redesigning the business operations in the production of goods and services.
- All businesses need operations management in order to function. It also affects cost, revenue,
amount of investment, innovation, and plan for future expansion of a business. Its either make
or break a business.

MODULE 2

Production of goods- results in tangible output. It may take place in a factory, but it can occur
elsewhere. For example, farming and restaurants produce non- manufactured goods.

Delivery of service- implies an act. Such as, physician’s examination, TV and auto repair. Service
organizations usually produce intangible products such as ideas, assistance, or information that cannot
be produced ahead of time.

 Most systems involve a blend of goods and services.

 The job of operations management which is overseeing the processes and systems of
transforming the resources into goods and services is essentially the same for both.
 Operations and sales are the two line functions in a business organization. All other functions
support the two functions.

Service Jobs that are closely- related to operations

 Financial Services- Stock Market Analyst, Broker, Investment Banker, Loan Officer
 Accounting Services- Corporate Accountant, Public Accountant, Budget Analyst.
 Marketing Services- Market analyst, Marketing Researcher, Advertising Manager, Product
Manager.
 Information Services- Corporate Intelligence, Library Services, Management Information
Systems Design Services.
- Through learning about operations and those activities related to it and understanding the role
it plays in an organization, you will have a better understanding of the world you live in, the
global dependencies of companies and nations some of the reasons that companies succeed or
 fail, and the importance of working with others as well. You will find tools and information to
become the best manager possible.

MODULE 3

Process- consists of one or more actions that transform inputs into outputs.

A key aspect of operations management is process management. The central role of all management is
process management.

Process management- is a discipline in operations management in which people use various methods to
discover, model, analyze, measure, improve, optimize, and automate business processes.

Three Categories of Business Processes

 Upper- management processes- these govern the operation of the entire organization.
 Operational processes- these are core processes that make up the value stream.
 Supporting processes- these support the core processes.

-Business processes, large and small, are composed of a series of supplier- customer relationships,
where every business organization, every department, and every individual operation is both a customer
of the previous step in the process and a supplier to the next step in the process.

Two Major Aspects of Process Management

1. Managing a Process to meet Demand

Supply > Demand- Wasteful, Costly
Supply < Demand- Opportunity loss, customer dissatisfaction
Supply = Demand- Ideal
- There is an essential bridge between the market place through the sales and marketing and the
internal operations that impacts both supply and demand and each has to play a significant role
of managing a process to meet demand.
2. Process Variation- variation occurs in all business processes. It can be due to variety or
variability. Variation can occur as the result of deliberate management choices to offer
customers variety.
4 BASIC SOURCES OF VARIATION
1. The variety of goods or services being offered- the greater the variety of goods and services, the
greater the variation in production or service requirements because different goods may require
different production processes.
2. Structural variation in demand- it includes trends and seasonal variations which are generally
predictable.
3. Random variation- natural variability present to some extent in all processes, as well as in
demand for services and products and it cannot influence by managers.
4. Assignable Variations- these are caused by defective input, incorrect work methods, out-of-
adjustment equipment, and so on. These variations can be eliminated or reduced by analysis
and corrective action. Is variation in a production process that can be traced to specific causes.
Operations Function- requires both the strategic and day-to-day production of goods. It includes many
interrelated activities, such as forecasting, capacity planning, scheduling, managing, inventories, assuring
quality, motivating employees, deciding where to locate facilities and more.

Operations Manager- primary function is to guide the system by decision making.

- Is the key figure in the system.

- He or she has the ultimate responsibility for the creation of goods and provision of services.
- He or she is responsible for managing all the activities that are part of the production of goods
and services.

System design- strategic decisions -usually require long- term commitment of resources. (system
capacity, the geographic location of facilities, arrangement of departments and placement of equipment
within physical structures, product and service planning, and acquisition of equipment)

System operation- tactical and operational decisions (management of personnel, inventory management
and control, scheduling, project management, quality assurance)

In their chief role of planner, operations managers exert considerable influence over the degree to
which the goals and objectives of the organization are realized.

Product design and process selection are examples of System designs decisions

Operational processes- are core processes that make up the value stream.

System design relates to strategic designs.

Supply Chain- is the sequence of organizations, including their facilities, functions and activities, that are
involved in producing and delivering a product or service.

Customer Satisfaction- major key to the success of any operation; without it, the company cannot
survive.

Module 4

- The chief role of an operations manager is that of planner and decision maker and their daily
concerns include costs (budget), quality, and schedules (time). Operations management
professionals make a number of key decisions that affect the entire organization.

General Approaches to Decision Making

1. Model- an abstraction of reality; a simplified representation of something. These are classified

as:
a. Physical Models- look like their real- life counterparts. Example, a child’s car is a model of a
real automobile.
b. Schematic Models- are more abstract than their physical counterparts such as graphs and
charts, blueprints, pictures and drawings. The advantage of these models is that they often
relatively simple to construct and change.
 c. Mathematical Models- are the most abstract such as numbers, formulas, and symbols. They
do not look at all like their real- life counterparts. These models are usually easy to
manipulate.

Modelling- is a key tool used by all decision makers because these are generally easy to use and less
expensive.

- The use of models does not guarantee good decisions. There are certain limitations. Models may
be incorrectly applied and the results misinterpreted.
2. Quantitative Approaches- a decision- making approach that frequently seeks to obtain a
mathematically optimal solution to certain managerial problems. Computers have had a major
impact on operations management. Examples: linear programming for optimum allocation of
scarce resources, PERT (program evaluation and review technique, and forecasting techniques)
3. Performance Metrics- all managers use metrics to manage and control operations. (Metrics in
use include those related to profits, costs, quality, productivity, flexibility, assets, inventories)
4. Analysis of Trade- offs- a trade-off is giving up one thing in return for something else. It means
analyzing the advantages and disadvantages- the pros and cons- of a course of action.
5. Degree of Customization- a major influence on the entire organization is the degree of
customization of products or services being offered to its customers. Higher degrees of
customization involve more complexity in terms of production, layout, worker skills and
productivity.
6. Systems Approach- emphasizes interrelationship among subsystems. It is essential whenever
something is being designed, redesigned, implemented, improved or otherwise changed.
7. Establishing Priorities- managers discover that certain issues or items are more important than
others. Recognizing this allows managers to focus their attention to those efforts that will do
the best.

Pareto Phenomenon (Pareto Analysis)- a relatively few issues or items are very important, so that
dealing with those factors will generally have a disproportionately large impact on the results achieved.
This is one of the most important and pervasive concepts in operations management. States that 20% of
the things done in the right manner produce 80% of the desired results. It works on the concept of first
segregating the “vital few” from the “trivial many” and the working on those “vital few’’ to achieve the
best results.

Key Issues for today’s business operations

 Economic conditions- recession, slow recovery in various sectors.

 Innovating- finding new or improved products or services
 Quality problems- due to operations failures
 Risk management- financial crisis, product recalls, accidents, natural and man- made disasters,
and economic ups and downs.
 Cyber- security- need to guard against intrusions from hackers.
 Competing in global economy- outsourcing, reducing costs internally, changing designs, and
working to improve productivity.

Green initiatives- the possibilities include reducing packaging, materials, water and energy use, the
environmental impact of supply chain, including buying locally.
 Ethics- standard of behavior that guides how one should act in various situations.

Five Principle

 The Utilitarian Principle- the good done by an action or inaction should outweigh any harm it
causes or might cause. Example: not allowing a person who has had too much to drink to
drive
 The Rights Principle- actions should respect and protect the moral rights of others. example:
not taking advantage of a vulnerable person.
 The Fairness Principle- equals should be held to, or evaluated, by the same standards.
Example: equal pay for equal work.
 The Common Good Principle- actions should contribute to the common good of the
community. Example: an ordinance on noise abatement.
 The Virtue Principle- actions should be consistent with certain ideal virtues. Example:
honesty, compassion, generosity, tolerance, fidelity, integrity and self- control.

E- business (electronic business)- involves the use of the internet to transact business.

E- commerce- a consumer- to- business transactions and a product of our ever- changing business world.

Lean Systems- are systems that use minimal amounts of resource to produce a high volume of high-
quality goods with some variety. Use a highly skilled workforce and flexible equipment. Example:
Toyota, Nike and Intel.

Recognition of Priorities- Dealing with the fact that certain aspects of any management situation are
more important than others.

Taking a systems viewpoint with regard to operations in today’s environment increasingly leads decision
makers to consider sustainability in response to the threat of global warming.

Models are usually tools for making decisions without confronting the actual situation with all of its
complexity, there is the risk that important qualitative information may be overlooked.

Sustainability- is a relatively recent operations management consideration.

Computers have had a major impact on operations management.

Product and service technology- allows a company to develop new products faster.

Process technology- enables a company to improve methods, procedures, and equipment used to
produce goods and to provide services.

Information technology- enables companies to process large quantities of data quickly, to identify and
track goods, to obtain point-of-sale data, and to communicate documents electronically to suppliers and
customers.

Module 6
Production- is defined as “the step-by-step conversion of one form of material into another form
through a chemical process to create or enhance the utility of the product to the user. Is a value
addition process.

Production systems- “the step-by-step conversion of one form of material into another form through
chemical or mechanical process to create or enhance the utility of the product to the user.

Example of a Production System:

 Tangible goods: Sugar Industry

 Intangible goods: Service industry

Production systems can be classified as follows:

1. Job-shop Production- characterized by manufacturing one or few quantity of products designed

and produced as per the specification of customers within prefixed time and cost. The
distinguishing feature of this is low volume and high variety of products. Each job demands
unique technological requirements, demands processing on machines in a certain sequence.
Example is customization of flip flops by Havianas or the customization of shoes by Nike.
2. Batch Production- most commonly used in consumer durables, FMCG or other such industries
where there are large variety of products with variable demands. Example: Biscuits,
confectionaries, packaged food items, etc.
 One of the advantages of a job shop production is learning activities while one of its
disadvantages is higher cost.
 Material handling is complex is one of the disadvantages of batch production.
 One of the characteristics of a job shop production is high variety of products and low volume.
 One of the characteristics of a batch production is it has shorter production runs.
 Material handling is complex in batch production due to the irregular and longer flows.
 Gardenia loafs, candies- batch production
 Customized Louis Vuitton, customized Ferrari car- Job shop
 Inputs- men, materials, machine
 Production process- men, quality, maintenance.
 Without effective floor- level management of production processes, error and inefficiency would
be more common within a factory.
 Production or product cost- all the costs incurred by a business from manufacturing a product or
providing a service. Includes variety of expenses, such as labor, raw materials, consumable
manufacturing supplies and general overhead.

Module 7

3. Mass Production- is justified by very large volume of production. The machines are arranged in a
line or product layout. Product and process standardization exists and all outputs follow the
same path.
- The aim of mass production is to ensure that the whole process of manufacturing remains at the
lowest cost possible while turning out the highest volumes possible. Producing products in bulk
results in their individual cost being decreased.
- Example: canned goods, over-the-counter drugs, household appliances, chocolate bars.
 4. Continuous Production- production facilities are arranged as per the sequence of production
operations from the first operations to the finished product. The items are made to flow
through the sequence of operations through material handling devices such as conveyors,
transfer devices, etc. Example: Oil Refining, Metal smelting, paper, pastes, peanut butter.
Challenges:
a. Manual changeovers
b. Difficult Training
c. Complex Economics

Module 8

Strategic Planning- is one of the most important keys in the management and companies especially in
the production and operations. With right strategic planning, the company will be able to achieve its
goals and incur lesser expenditures as to operations and production.

- Is the process of thinking through the current mission of the organization and the current
environmental conditions facing it, then setting forth a guide for tomorrow’s decisions and
results.
- Is built on fundamental concepts: that current decisions are based on future conditions and
result.
- Production and operations strategic plans are the basis for 1. Operational planning of facilities
(design) and 2. Operational planning for the use of these facilities.

Henry Mintzberg suggests three contrasting modes of strategic planning: the entrepreneurial, the
adaptive, and the planning modes.

1. Entrepreneurial Mode- is an approach in which strategy is formulated mainly by a strong

visionary chief executive who actively searches for new opportunities, is heavily oriented toward
growth, and is willing to make bold strategies rapidly” (Management, Kathryn M. Bartol & David
C. Martin)
- Searches for new model are most likely to be found in organizations that are young or small,
have a strong leader, or are in such serious trouble that bold are their only hope.
2. Adaptive Mode- is most likely to be used by managers in established organizations that face a
rapidly changing environment and yet have a several coalitions, or power blocks, that make it
difficult to obtain agreement on clear strategic goals and associated long-term plans.
- With adaptive approach, the degree of innovation fostered by the strategic management
process is likely to depend on the ability of managers to agree on at least some major goals and
basic strategies that set essential directions.
3. Planning Mode- is an approach to strategy formulation that involves systematic, comprehensive
analysis, along with integration of various decisions and strategies”. With the planning mode,
executives often utilize planning specialists to help with strategic management process. The
ultimate aim of the planning mode is to understand the environment well enough to influence
it.
There are several processes for strategy development. Forced- choice model is one of them.

Forced- Choice Model- it is considered to be the simplest process. This model is usually used by new
businesses or organizations with less experience in strategic planning and development. 6-12 members
of upper management are involved in this process. The first step is to perform organization assessment
which includes financial goals, strengths and weakness analysis, short term operations plans and future
goals.

Strategic planning- current decisions are based on future conditions and result.

Entrepreneurial Mode- a strategy that is formulated mainly by a strong visionary chief executive who
actively searches for new opportunities.

Adaptive Mode- degree of innovation fostered by the strategic management process is likely to depend
on the ability of managers to agree on at least some major goals and basic strategies that set essential
directions.

Production and operations strategic plans are the basis for operational planning for the use of these
facilities and design.

Operations strategy- role of operations is to provide a plan for the operations function so that it can
make the best use of its resources. It specifies the policies and plans for using the organization’s
resources to support its long- term competitive strategy.

Disadvantages of Standardization- decreases the potential variety of product

Delay differentiation- postponement tactic

4 Product Life Cycle

1. Introduction- most expensive

2. Growth
3. Maturity
4. Decline