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FIG(1): Organization chart

Table (1) Production of goods versus delivery of services

Characteristic Goods Services

Customer contact Low High

Uniformity of input High Low

Labor content Low High

Uniformity of output High Low

Output Tangible Intangible

Measurement of productivity Easy Difficult

Opportunity to correct quality High Low

problems before delivery to
Inventory Much Little

Evaluation Easier More difficult

Patentable Usually Not usually

Process management

The three categories of business processes:

1.upper- management processes : these govern the operation of the entire

organization ex : organization governance and organization strategy .

2. operational processes : these are the core processes that make up the value stream
ex: purchasing , marketing, sales .

3.supporting processes :these support the core processes ex: HR ,IT.

?Why learn about operation management

Operations management is important to an organization’s managers for at least two reasons.

First, it can improve productivity, which improves an organization’s financial health. Second,
it can help organizations meet customers’ competitive priorities.

To improve productivity: A measure of efficiency

Productivity, the ratio of output to input, is a measure of a manager’s or an employee’s

efficiency in using the organization’s scarce resources to produce goods and services. The
higher the numerical value of this ratio, the greater the efficiency. Ernst & Young managers
use “hoteling” to affect to affect both parts of this ratio. They seek to cut inputs (space cost)
and to boost the output of traveling accountants.

The importance of operations management today is therefore quite easy to see, even if not
necessarily in reference to the subject as an entire job description, but instead referring to the
skills useful to anyone in a managerial position. Indeed, with the growth of smaller companies
- especially within the digital and media sectors - the latter is more significant.
Increasingly, the trend amongst 21st Century industries is to offer both products and services,
such as specialist programmers and tools alongside consultancy, in an effort for businesses to
differentiate themselves and to offer more to prospective clients. Those with operations
management skills will therefore be more prepared for differentiation between planning,
control and delivery of either products or services.





Fig (2) operation interfaces with number of supporting functions

operation management and decision making

Operations research is a scientific discipline that managers use to make informed

decisions for their operations. It draws heavily from math, statistics and science.
Operations managers use this extensively to schedule and assemble their production
functions. Operations research is primarily used in the manufacturing, oil, energy and
telecommunication industries.
Companies use operations research to devise ways and means to maximize their
profits and restrict their losses and risks. The company is able to zero down on
the most optimum levels of production. Also, they devise means to produce at
lower costs or produce more quantities at the same costs.

The operations manager is able to evaluate the various available routes for
production and fix the most feasible and practical one. He tries to derive the
maximum output with the minimum possible input.

Operations research is very beneficial to the managers in deciding what to
produce, the quantities, the methods of production, which employees to engage in
the production processes and the marketing schemes of the produced goods.

General approaches to decision making:

1- Models: is an abstraction of reality, a simplified representation of something .

Types: 1. Physical model: like real life

2. schematic models: more abstract than physical

3. mathematical models: not like real life at all (numbers,symbols)

2- Quantitative approaches: is an attempt to obtain mathematically optimal solution to

managerial problems. ex: CPM, PERT.

3-Performance metrics

4-analysis of trade-offs : ex: in deciding on the amount of inventory to stock , the

decision maker must take into account the trade-off between the increased level of
customer service that the additional inventory would yield and the increased costs
required to stock that inventory.

5-Degree of customization:

6-systems approach: the organization can be thought of as a system composed of

7-establishing priorities: a few factors account for a high percentage of the
occurrence of some events

8-ethics :

1.Financial systems

2.Product safety

3.Worker safety


5.The environment

6.The community

7.Hiring and firing employees

8.Workers rights

9.Closing facilities

The historical evolution of operations management

In the 18th century, most manufacturing was performed by rural families in their own
homes under the domestic or cottage industry system.
Merchants supplied families in small towns with raw materials and later found markets
for the finished products.
The development of steam power and the introduction of labor-saving equipment (or
automation) early in the 18th century led to the development of the factory system.
Until the 19th century, the world was mostly rural and agricultural. Most of the products
were made by highly skilled people called artisans. Under the apprenticeship system, an
artisan supervised the work of several apprentices during long training period.
The principle of the factory systems was simple:
Assign workers a small set of tasks that they repeat over and over. This reduces the
time spent by workers in switching tasks and they become specialized. The result is
improved labor productivity and lower production costs. Technological
developments in 1850s transformed factory system into mass-production.
Factories became larger.They produced huge volumes of identical products.
Manufacturing costs were reduced because no time was needed for setting machines and
people to produce other types of products. As the sizes of the factories increased,
management of these operations became a major problem. FrederickTaylor introduced
systematic approaches to operations management at the
turn of 19th century.
His intent was to eliminate waste, especially the wasted effort, in order to minimize costs.
Henry Ford combined the teachings of Taylor with the concepts of labor specialization
and interchangeable parts to design the first moving assembly line in 1913.
In 1920s and 1930s, a series of studies were conducted at the Hawthorne Works of
Western Electric by Elton Mayo.
The results showed that psychological factors were as important as scientific job design.
The Hawthorne Studies stimulated the development of human relations movement by
demonstrating that worker motivation is a crucial element in improving productivity.
As the complexity of operations increased, sophisticated decision making tools were
Some of the quantitative models and statistical techniques used by modern operations
managers are:
1- Statistical Quality Control:Uses statistics inthe control of product quality by controllingthe
processes by which products are made.
2- Economic Order Quantity:Used for finding the least cost inventory ordering
3-Gantt charts for sequencing operations and Critical Path Method for finding optimum
completion time of operations.
4- Linear programming: A management tool for optimum resource allocation given some
restrictions of the resources.
The 1950s was the beginning of the information technology era. The discovery of
transistor by Shockley led to the ability process data and information at continuously
decreasing costs.
Today, you can imagine the difficulty of monitoring inventories of hundreds of units OR
managing a large project without a computerized system.
In the late 1950s and early 1960s scholars began to write books dealing specifically with
the problems faced by operations managers.These books also contained information
regarding the application of quantitative models to operations management.

The need to manage the supply chain

1-the need to improve operation

2-increasing level of outsourcing

3-increasing transporting costs

4-competitive pressures

5-increasing globalization

6-increasing importance of e-business

7-the complexity of supply chain

8-the need to mange inventories