Introduction to

Operations Management
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Operations Management is:

The business function responsible for

planning, coordinating, and
controlling the resources needed to
produce products and services for a
company

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Definition
◼ Operations Management is defined as
the design, operation, and improvement
of the transformation process, which
converts the various inputs into desired
outputs of products and services.

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 Operations as a Transformation Process

INPUT
•Material
OUTPUT
•Machines TRANSFORMATION
•Goods
•Labor PROCESS
•Services
•Management
•Capital

Feedback
Operations Management is:

◼ A management function

◼ An organization’s core function

◼ In every organization whether Service

or Manufacturing, profit or Not for profit

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 Examples -Important Decisions in Business

Suppose
◼ Intel needs to construct a new multi-billion dollar
fabrication plant to produce its next generation of
computer chips
–Where should it build factory?
◼ Indigo Airlines needs to allocate the necessary resources
to meet all of its customer demand for air travel for the
next three months
–How should it assign different sized aircraft to flight
routes, Departure schedule for each aircraft, pilots to
aircraft?
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Examples -Important Decisions in Business

◼ HP (Hewlett-Packard) needs to increase output for

one model of Laptop on a production line that is
already running at full capacity
–What is the cost-effective way to redesign the
production line to increase the output?
◼ The manager of Airtel call center wants to better
utilize the call answering staff and avoid long wait
calls
–What method should be used to forecast the calls
received during each work shift

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Typical Organization Chart

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What is Role of OM?

◼ OM Transforms inputs to outputs

◼ Inputs are resources such as
◼ People, Material, and Money

◼ Outputs are goods and services

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OM’s Transformation Process

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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 – means performing activities well for least
possible cost

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 Goods & Services

◼ Manufacturing ◼ Services
◼ Tangible product ◼ Intangible product
◼ Product can be ◼ Product cannot be
inventoried inventoried
◼ Low customer contact ◼ High customer contact
◼ Low customer ◼ High customer
participation participation
◼ High degree of ◼ High degree of
uniformity in output heterogeneity in output
◼ Longer response time ◼ Short response time
◼ Capital intensive ◼ Labor intensive 12
 On the other hand…
◼ Both use technology
◼ Both have quality, productivity, & response
issues
◼ Both must forecast demand
◼ Both will have capacity, layout, and location
issues
◼ Both have customers, suppliers, scheduling and
staffing issues
◼ Manufacturing often provides services
◼ Services often provides tangible goods

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 Hybrid organizations
◼ Some organizations are a blend of
service/manufacturing/quasi-
manufacturing Quasi-Manufacturing
(QM) organizations
◼ QM characteristics include
◼ Low customer contact & Capital Intensive

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OM Decisions
◼ All organizations make decisions and
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

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 OM Decisions
◼ Following decisions focus on specifics -
Tactical decision
◼ Tactical decisions: focus on specific day-to-day
issues like resource needs, schedules, & quantities
to produce
◼ are frequent
◼ Strategic decisions less frequent
◼ Tactical and Strategic decisions must align

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OM Decisions

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Activities in Prod/Operations
Management
◼ Organizing work
◼ Selecting processes (Process planning)
◼ Designing layouts (layout planning)
◼ Locating facilities (Location planning)
◼ Designing jobs
◼ Measuring performance
◼ Controlling quality (Quality management)
◼ Scheduling work (Job scheduling)
◼ Managing inventory (Inventory management)
◼ Planning production

Dr. Gyanesh Kumar Sinha

OM in Practice
◼ OM has the most diverse organizational
function
◼ Manages the transformation process
◼ OM has many faces and names such as;
◼ V. P. operations, Analytics Director of supply
chains, Manufacturing manager
◼ Plant manger, Quality specialists, Director-
sourcing etc.
◼ All business functions need information from
OM in order to perform their tasks
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OM Across the Organization

◼ Most businesses are supported by the

functions of operations, marketing, and
finance
◼ The major functional areas must
interact to achieve the organization
goals

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Operations Function Interface with other
Functions

◼ Operations
◼ Marketing
◼ Finance and
Accounting
◼ Human
Resources
◼ Outside
Suppliers

Dr. Gyanesh Kumar Sinha

OM Across the Organization – con’t
◼ Marketing is not fully able to meet customer needs if
they do not understand what operations can produce
◼ Finance cannot judge the need for capital
investments if they do not understand operations
concepts and needs
◼ Information systems enables the information flow
throughout the organization
◼ Human resources must understand job requirements
and worker skills
◼ Accounting needs to consider inventory management,
capacity information, and labor standards

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 Conflict of interests among various
functions/department

◼ Finance Vs Marketing
Finance-inventory level to be kept low (as inventory tied up
the capital)
Marketing – inventory level to be kept high for easier
commitment to the customers
◼ Marketing Vs Operations

Marketing –Prompt delivery of products to customers

Operations –Lower cost of transportation by choosing the
most economical routes and full truck load capacity, which
may take more time in serving customers
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 Conflict of interests among various
functions/department (Contd…)

◼ Marketing Vs Operations
Marketing –Prefer short production run so that variations in
customer preferences can be promptly introduced in the
product
Operations –Prefer long production run to avoid frequent set-
up causing high set-up or change-over cost
Marketing –Prefer separate warehouse near different markets
Operations –Prefer centrally located warehouse to have better
control over inventory and distribution
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 Important Trends

Reasons of increasing focus on operations for improving

organization performances
◼ Operations Strategy
◼ E-Commerce
◼ Supply chain management
◼ Outsourcing
◼ Agility
◼ Management of technology
◼ Lean operations
◼ Revenue management
◼ Process analysis and improvement
◼ Quality
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◼ Increased regulations and product liability issues