OPERATIONS MANAGEMENT

COURSE DESCRIPTION:

This course gives an overview of the techniques, methods, and processes involved in production
management. It familiarizes students with core operational activities and covers measurement,
purchasing, and production concepts and applications in manufacturing and service businesses. It will
integrate the numerous activities and processes necessary to produce products and services in a highly
competitive global environment. At the end of the course, students should have a deeper understanding
of the role production/operations management plays in the decision-making process.

COURSE OUTCOMES:

Upon the completion of this course, learners are expected to:

Identify and describe the elements of the operations management (OM) function in both manufacturing
and service organizations and show how it interacts with other functions of the firm.

Describe, analyze, and apply appropriate models and methods for the management of the operations
function, techniques for analysis, decision-making, and control.

Examine the current issues and problems (such as global production, value chains, operations strategy,
technology, the environment, quality, etc.) which affect the productive segment of the firm, and suggest
ways in which such issues and problems may be addressed.

Recognize when it is appropriate to apply various analytic or decision-making models of OM models for
production systems and system elements.

GRADING SYSTEM:
COURSE POLICIES:

Communicating with the Teacher

It is your responsibility to communicate with your teacher about questions or issues that prevent you
from completing assignments or completing this course.

Inactive Students

Students who have been inactive as of the end of the 3 rd week of the course and who have not
communicated with the teacher will be given an INC grade.

Plagiarism

Plagiarism is using someone else’s words instead of your own. In this course, you are expected to use
your own words and ideas, and to acknowledge any sources you use to gather ideas. Plagiarism is not
allowed in this course.
MODULE 1 LEARNING OBJECTIVES:

By the end of this module, you will be able to:

Explain the concepts of operation management.

Evaluate what operations managers do.

Compare and contrast the goods from services of the hospitality industry.

Summarize the historical development of OM.

Critique the current challenges face by OM in the hospitality industry.

COURSE CONTENT FOR MODULE 1:

GOODS, SERVICES, AND OPERATIONS MANAGEMENT

ACTIVITY

DESCRIPTION

TIME TO COMPLETE

Lecture Discussion

Operations Management (OM)

1 Hour

Application
Module 1, Activity 1:

Customer Experience and its Relationship to Operations Management

30 Minutes

Lecture Discussion

OM in the Workplace

1 Hour

Assessment

Module 1, Assessment 1:

Service Management Skills of Operations Manager

30 Minutes

Lecture Discussion

Understanding Goods and Services

30 Minutes

Assessment

Module 1, Assessment 2:
Goods and Services in the Hospitality Industry

30 Minutes

Lecture Discussion

OM: A History and Challenge

30 Minutes

Lecture Discussion

Current Challenges in OM

1 Hour

Assessment

Module 1, Assessment 3:

Challenges in OM

30 Minutes

LECTURE DISCUSSIONS
1.1 OPERATIONS MANAGEMENT (OM)
1.2

Science and art of ensuring that goods and services are created and delivered successfully to customers.
Applying the principles of OM entails a solid understanding of people, process, and technology, and how
they are integrated within business systems to create value.

Only function by which managers can directly affect the value provided to all the stakeholders —
customers, employees, investors, and society.

Essential in providing high quality goods and services that customer demands, motivating and
developing the skills of the people who actually do the work, maintaining efficient operations, to ensure
an adequate return on investment and protecting the environment.

You need not have the title of “Operations Manager” to “do operations management. Every job entails
some aspects of operations management. The ideas and methods of operations management will help
you get things done successfully regardless of your functional area of business or industry.

As you manage business functions such as accounting, human resource management, legal, financial,
operations, supply chain, environment, service, or marketing processes, you create value for your
internal customers (within the organization) and for your external customers (outside the organization).
Everyone who manages the process, or some business activity should specifically set of basic OM.

1.3 OM IN THE WORKPLACE

1.4

What do Operations Managers do?

Translating market knowledge of customers to design and manage goods, services, and processes.

Helping organizations do more with less.

Ensuring that resources (labor, equipment, materials, and information) and operations are coordinated.

Exploiting technology to improve productivity.

Building quality into goods, services, and processes.

Determining resources capacity and schedules.

Creating high performance workplace.

Continually learning and adapting the organization to global and environmental changes.

Below are some examples of how OM is applied in our jobs:

Gemnoe was an accounting major in college major and started her career at Chiquita Brands in a division
that produces and sells fruit ingredients such as, banana, puree, frozen sliced banana, and other types of
fruit products. Although her primary job title is accountant and she is involved in monthly accounting
closing and other accounting tasks, Gemnoe uses OM skills to support her work. These include:

Quality and customer Service Issues

If there is a quality issue with a product either at the plant level or the customer level, the accounting
group has to account for it in the Inventory Reserve Account, which is reconciled during the closing
process.

Performance Measurement and Evaluation

Part of Gemnoe’s responsibility is to look at the monthly profit versus cost analysis by product to
calculate a net contribution. She examines the product costs at the plant level to find more efficient and
co-effective methods of production.

An example is to increase efficiency by reducing plant downtimes, which increases the price per pound
of the product. To find more cost-effective methods of producing the product, the biggest area is in
constantly looking for better or cheaper fruit sourcing suppliers.

Managing Inventory

Part of the closing process is to reconcile the inventory movement because inventory is what drives the
fruit commodity business. It is very important to make sure inventory balances a level are accurate as
this is what the percentage of sales is based on. She is also involved in ensuring inventory accuracy at
the company’s distribution centers.
Another example, Lorenzo, is a senior software developer for a small software development company
that creates sales proposal automation software. Lorenzo uses OM skills in dealing with quality and
customer service issues related to the software products he is involved in developing.

He is also extensively involved in project management activities related to the development process,
including identifying tasks, assigning developers to tasks, estimating the time and cost to complete
projects, and studying the variance between the estimated and actual time it took to complete the
project. He is also involved in continuous improvement projects; for example, he seeks to reduce
development time and increase the efficiency of the development team. Lorenzo was an information
technology and management major in college.

Last example, Chamy Lyn is a process manager for MK Anacan Company, specifically in the credit card
division. After several years working as an Operations Analyst, she was promoted to a Production
Supervisor position overseeing “plastic card production”. Among her OM-related activities are:

Planning and Budgeting

Representing the plastic card production area in all meetings, developing annual budgets and staffing
plans, and watching technology that might affect the production of plastic credit cards.

Inventory Management

Overseeing the management of inventory for items such as plastic blank cards, inserts such as
advertisements, envelopes, postage, and credit card rules and disclosure inserts.

Scheduling and Capacity

Daily to annual scheduling of all resources (equipment, people, inventory) necessary to issue new credit
cards and reissue cards that are up for renewal, replace all or damaged cards, as well as cards that are
stolen.

Quality
Embossing the card with accurate customer information and quickly getting the card in the hands of the
customer.

1.3 UNDERSTANDING GOODS AND SERVICES

TERM

DESCRIPTION

EXAMPLES

Good

A physical product that you can see, touch, or possibly consume.

Oranges, flowers, televisions, soaps, airplanes, fish, furniture, coal, lumber, personal computers, paper,
or industrial machines

Durable Good

A product that typically lasts at least three years

Vehicles, home appliances, furnitures, consumer electronics, medical equipments

Non-Durable Good

A perishable and generally lasts for less than a year.

Toothpaste, software, shoes, condiments, and fruits

Service

Any primary or complementary the non-goods part of a transaction between a buyer (customer) and
seller (employee).

Hotels, legal and financial firms, airlines, healthcare organizations, museums, and consulting firms

Goods and services share many similarities. They are driven by customers and provide value and
satisfaction to customers who purchase and use them. They can be standardized for the mass markets
or customized individual needs. They are created and provided to customers by some type of process
involving people and technology.

Services that do not involve significant interaction with customers (for example, credit card processing)
can be managed much the same goods in a factory, using proven principles of OM that have been
refined over the years. Nevertheless, some very significant differences exist between the goods and
services that make the management of service-providing organizations different from goods-producing
organizations and create different demands of the operations function.

As a review:

Goods are tangible, services are intangible.

Customers participate in many service processes, activities, and transactions.

The demand for services is more difficult to predict than the demand for goods.

Services cannot be stored as physical inventory.

Service management skills are paramount for successful service encounter.

Service facilities typically need to be in close proximity to the customer.

Patents do not protect services.

These differences between goods and services have important implications on the areas of an
organization, and especially to operations. By understanding them, organizations can better select the
appropriate mix of goods and services to meet customer needs and create the most effective operating
systems to produce and deliver those goods and services.

1.5 OM: A HISTORY AND CHALLENGE

1.6

In the last century, operations management has experienced more changes than any other functional
area of business and is the most important factor in competitiveness. This is a chronology of major
themes that have changed the scope and direction of operations management:

ERA

DESCRIPTION

Focus on Efficiency

OM has its roots in the Industrial Revolution that occurred during the late 18 th and early 19th centuries in
England. Until that time, goods had been produced without the aid of mechanical equipment. During
the Industrial revolution many inventions came into being that allowed goods to be manufactured with
greater ease and speed; it led to the development of modern factories. As international Trade grew the
emphasis on operations efficiency and cost reduction increased. Many companies moved their factories
to low-wage countries. Technology was viewed primarily as a method of reducing costs and distracted
from the importance of improving quality.
Quality Revolution

US consultants told Japanese executives that continual improvement of quality would open world
markets, free up capacity and improve the economy. They embarked on a massive effort to train the
workforce, using statistical tools to identify causes of quality problems and fix them; so that the made
steady progress in reducing defects and paid attention to consumer’s needs. Thanks to this progress
Japanese good were seen as more reliable and better met consumer’s needs, then Japanese firms
captured major shares of world market. Therefore, quality became an obsession with top managers.

Customization and Design

As the goals of low cost and high quality became “given´´, companies began to emphasize innovative
designs and product features to gain a competitive edge. Quality meant much more than simply defect
reduction; quality meant offering consumers new and innovative products, not only meeting their needs
but surprising and delighting them. Inflexible mass production methods that produced high volumes of
standardized goods and services using unskilled or semiskilled workers and expensive single-purpose
equipment, thought very efficient and cost effective, were inadequate for the new goals of increased
G&S variety and improvement.

Time-Based Competition

Companies have to respond quickly to changing customer needs to win competitive advantage. That
task includes developing products faster than competitors, speeding ordering and delivering process,
rapidly responding to changes in customers’ needs and improving the flow of paperwork. As information
technology matured, time became an important source of competitive advantage.

Service Revolution

While the goods-producing industries were getting all the attention in the business community, the
popular press and in business school curricula, service industry were quietly growing and creating many
jobs. Today about four out of five jobs in the US are in the service sector.

1.5 CURRENT CHALLENGES IN OM

OM is continually changing, and all managers need to stay abreast of the challenges that will define the
future workplace. Among these are technology, globalization, changing customer expectations, a
changing workforce, the loss of manufacturing jobs, and building sustainability as part of an
organization’s corporate social responsibility.

Technology has been one of the most important influences on the growth and development of OM.

Globalization has changed the way companies do business and must manage their operations.

Consumers’ expectations have risen dramatically.

Today’s workers are different; they demand increasing levels of empowerment and more meaningful
work.

Final challenge is sustainability; refers to an organization’s ability to strategically address current

business needs and successfully develop a long-term strategy that embraces opportunities and manages
risk for all products, systems, supply chains, and process, to preserve resources for future generations.