CHAPTER 1 Operations Management Concepts W. Skinner and J.

Orlicky (1970) – developed

the incorporations of all operations in an organization
Operation-part of as organization, concerned with
into a unified strategy.
the transformation of inputs into the required output
(services)

Management- is the process, combines and 1.3 Concept of Production

transforms various resources used in the operations
subsystem
Production - ‘the part of an organization, concerned
with the transformation of inputs into the required
Production management- set of interrelated outputs (products)
management activities, involved in manufacturing
 The step-by-step conversion of one form of
certain products,
material into another form through chemical or
mechanical process
Operations management- same concept is
extended to services management,
Edwood Buffa defines production- ‘a process by
which goods and services are created’.

1.2 Historical Development

traditional view of manufacturing management 1.4 Production System

began in eighteenth century
Production system- part of an organization, which
Adam Smith- recognized the economic benefits of produces products of an organization.
specialization of labor.

 Recommended breaking of jobs down into

subtasks and recognizes workers to specialized
tasks in which they would become highly skilled
and efficient.

Frederick W. Taylor- implemented Smith’s

theories and developed scientific management.

Henry Gantt, F.W Harris- developed the use of

inventory for economic controls. 1.5 Classification of production System

W. A Shewart- further developed into sampling Production systems- can be classified as Job-shop,
techniques to control quality of products and for
Batch, Mass and Continuous production systems .
inspection purposes.
Job-shop production- manufacturing one or few
John Mauchly and J.P Eckert- develop digital
quantity of products
computers.
Batch Production- manufacture of limited number
A. Charnes and W.W Cooper (1950) -
of products produced at regular intervals and stocked
developed linear mathematical programming.
awaiting sales.
Mass Production- Manufacture of discrete parts or
assemblies using a continuous process. large volume of
A Framework of Managing Operations
production.
Planning- activity that establishes a course of action
Continuous Production- arranged as per the
and guide future decision-making.
sequence of production operations from the first
operations to the finished product. Organizing- determine the activities required to
achieve the goals and assign authority and responsibility
for carrying them out.
1.6 Production Management
Controlling- activities that assure the actual
Production management- ‘a process of performance in accordance with planned performance.
planning, organizing, directing and controlling the
activities of the production function.

E.S.Buffa defines production management- that it

deals with decision-making related to production
processes so that the resulting goods or services are
produced according to specifications.

Objectives of production Management

1. Right Quality
2. Right Quantity
3. Right Time
4. Right Manufacturing Cost

1.7 Operations System 1.8 Operations Management

Operations system- converts physical resources Joseph G .Monks- process whereby resources,
into outputs, the function of which is to satisfy flowing within a defined system, are combined and
customer wants. transformed by a controlled manner

Everett E. Adam & Ronald J. Ebert- operating
system is the part of an organization that produces the
organization’s physical goods and services’.
Ray Wild- operations system as ‘a configuration of
resources combined for the provision of goods or
services’.
Definition of the operations Management
Resources- the human, material and capital inputs to
the production process. Human resources are the key
assets of an organization.
Systems- the arrangement of components designed
to achieve objectives according to the plan.

Transformation and Value Adding

Activities- resources under controlled conditions is to
transform them into goods and services having a higher
value than the original inputs.

1.9 Operations Management Objectives

1. CUSTOMER SERVICE- utilizes resources for the environmental considerations together with the
satisfaction of customer wants this is the key objective organization’s current production/operations position.
of operations management.

2. RESOURCE UTILIZATION- utilizes resources for Strategic Planning Approaches for

the satisfaction of customer wants effectively.
Production/Operations: Operations typically
utilize the overall corporate approach to strategic

1.10 Strategic Role of Operations

(a) A STRATEGIC PERSPECTIVE- Overall

organizational strategy must be developed:

 Quality (product performance).

 Cost efficiency (low product price).
 Dependability (reliable, timely delivery of
orders to customers).
 Flexibility (responding rapidly with new
products or changes in volume).

(b) OPERATIONS OBJECTIVES –

 Product/service characteristics.
 Process characteristics.
 Product/service quality.
 Efficiency
 Customer service (schedule)
 Adaptability for future survival.
(c) OPERATIONS ALTERNATIVES
TRADEOFFS- operations sub-goals can be
through the decisions that are made in the various
operations areas.
1.11 The Strategic Planning
planning, with special modifications and a focus upon
operations issues and opportunities.
One general approach to strategic planning is a forced
choice model given by Adam and Ebert.
CHAPTER 2 Operations Decision-
AND Making
attained
2.1 Management as a science is characterized by:
1. Organized principle of knowledge.
2. Use of empirical data.
3. Systematic analysis of data.
4. Repeatable results.

Strategic Planning for Production and
Operations- strategic planning is the broad, overall
planning that precedes the more detailed operational
planning. Executives of production and operation
functions are involved in strategic planning, developing
plans.
Strategic Planning—Forced Choice Model-
In-group sessions or individually, analysts assess
Management scientists hold that, education,
scientific training and experience can improve a
person’s ability to make decisions.
2.2 Characteristics of decisions-making
Business decision-makers - have always had to
work with incomplete and uncertain data.
 Degree of certainty

1. Complete Certainty methods- all relevant

information is known or assumed to be known.

 Algebra: basic mathematical logic is very useful

for both certainty and uncertainty analysis.
2.3 Framework of Decision-Making
 Calculus: branch of mathematics provides a
useful tool for determining optimal value
DEFINING THE PROBLEM- enables to identify the
 Mathematical programming: Programming
relevant variables and the cause of the problem.
techniques have found extensive applications in
ESTABLISH THE DECISION CRITERIA- it is making a product mix decisions;
important because the criterion reflects the goals and
2. Risks and uncertainty Methods-
purpose of the work efforts.
information about the decision variables is probabilistic.
FORMULATION OF A MODEL- it lies at the heart  Statistical analysis: Objective and subjective
of the scientific decision-making process. Models are probabilities with the use of probability and
used to simplify, so the relationships can be expressed probability distribution.
in tangible form and studied in isolation.  Queuing theory: analysis of queues in terms of
waiting-time length and mean waiting time.
GENERATING ALTERNATIVES- Alternatives are  Simulation: duplicates the essence of an
generated by varying the values of the parameters.
activity.
Mathematical and statistical models are particularly
 Heuristic methods: involve set of rules, which
suitable for generating alternatives because they can be
facilitate solutions of scheduling.
easily modified.
 Network analysis techniques: include decision
trees, CPM and PERT methods.
EVALUATION OF THE ALTERNATIVES-it is
 Utility theory: or preference theory allows
relatively objective in an analytical decision process
decision-makers to incorporate their own
because the criteria for evaluating the alternatives have
experience
been precisely defined.
3. Extreme Uncertainty Methods- no
IMPLEMENTATION AND MONITORING- it is
information is available.
essential for completing the managerial action.
 Game theory: helps decision-makers to choose
Also we need to consider “legal site”
course of action when there is no information
 Coin flip: Flipping a coin is sometimes used in
situation where the decision-makers are wholly
2.4 Decision Methodology indifferent.
The kind and amount of information available helps to
4. Decision-Making under Uncertainty- No
determine which analytical methods are most
information is available on how likely the various states
appropriate for modeling a given decision.
of nature are under those conditions.

Possible decision criteria

Maximin: Determine the worst possible pay-

off for each alternative.
 Maximax: Determine the best possible pay-
off, and choose the alternative with that pay-
off.
Minimax regret: Determine the worst regret
for each alternative, and choose the alternative
with the “best worst.”
Laplace: Determine the average pay-off for
each alternative, and choose the alternative
with the best average.
2.5 Decision Support System
Decision support system (DSS) - computer-
based systems designed to aid decision-makers of any
stage of the decision process in the development of
alternatives and evaluation of possible course of action.
2.6 Economic Models (Break Even Analysis)
Break-even Analysis- it determines the level of
operations in an enterprise where the undertaking
neither gains a profit nor incurs a loss.
Break-even chart (BEC): a graph showing the
variation in total costs at different levels of output
Break-even point: point of activity (sales volume)
where total revenues and total expenses are equal.
Angle of incidence: angle at which total revenue
line intersects total cost line.
Margin of safety: excess of budgeted or actual
sales over the break-even sales volume.
2.7 Decision Tree
Decision tree- is schematic representation of the
alternatives available to a decision maker and their
possible consequences.
CHAPTER 3- Project Management
Project Management- the application of
knowledge, skills, tools, and techniques to project
activities to meet the project requirements.
3.2 PROJECT LIFE CYCLE
Project life cycle- this sequence of phases that a
project goes through from its initiation to its closure.
1. THE INITIATION PHASE- aims to define
and authorize the project. The project manager
takes the given information and creates a
Project Charter.
2. THE PLANNING PHASE- lay down a
detailed strategy of how the project has to be
performed and how to make it a success.
Project Planning consists of two parts:
 Strategic Planning- overall approach to
the project is developed.
 Implementation Planning- ways to
apply those decisions are sought.
3. THE EXECUTION PHASE - decisions and
activities defined during the planning phase are
implemented. This process is also termed as
monitoring and controlling.
4. THE TERMINATION PHASE- last phases
of any project and it marks the official closure of
the project.
3.4 WORK BREAKDOWN STRUCTURE
Work-breakdown structure (WBS) - is a
deliverable-oriented breakdown of a project into
smaller components.
RESOURCE BREAKDOWN STRUCTURE (RBS)
- consists of both the material and human resources
required to complete a deliverable
.
3.5 PLANNING AND SCHEDULING WITH
GHANTT CHART
Gantt chart- It is a visual interpretation of the
project which gives an overview of the project’s
progress, timeline, and tasks over its entire time frame.
A classic Gantt chart consists of:
1. Projects dates and timeline – gives project
managers an overview of all the project dates.
2. Gantt chart bars as project tasks – great way to
see them all in one place.
3. Milestones – little “wins” of the projects.
4. Dependencies – one task is dependent on the
other’s start or finish.
5. Resources - you can add a resource to your task
to see who’s responsible for the task.
3.6 PERT AND CPM
Project management- a systematic way of
planning, scheduling, executing, monitoring, controlling
the different aspects of the project,
PERT/ Program (Project) Evaluation and
Review Technique- in which planning, scheduling,
organizing, coordinating and controlling uncertain
activities take place. Aimed to reduce the time and cost
of the project.
CPM/Critical Path Method- an algorithm used
for planning, scheduling, coordination and control of
activities in a project. It is used to compute the earliest
and latest possible start time for each activity.
CHAPTER 4 FORECASTING DEMAND
Forecasting- art and science of predicting the future
value of a variable such as demand.
4.2 FORECASTING OBJECTIVES AND USES
Managers- use forecasts as the basis for budgeting,
planning capacity, sales, production and inventory,
personnel, purchasing, and more.
Two uses for the forecast:
1. Help managers plan the system,
2. Help them plan the use of the system.
4.3 FORECASTING DECISION VARIABLES
Forecasting activities are a function of:
1. The type of forecast
2. The time horizon
3. The database available
4. The methodology employed.
Types of Forecasts
1. Economic forecasts: address the business
cycle by predicting inflation rates, money
supplies.
2. Technological forecasts: concerned with
the investigation of trends and rates of
technological progress, can result in the birth of
new products.
3. Demand forecasts: projections of
customer demand to optimize supply decisions
by a company’s products or services.
The Time Horizons
Usually classified by the future time horizon that it
covers. Time horizons fall into three categories:
1. The short-range forecast: time span of
up to 1 year but is generally less than 3 months.
2. Medium-range forecast: 3 months to 3
years.
3. Long-range forecast: spans from 3 years
or more.
4.4 FORECASTING METHODS
There are numerous methods to forecasting depending
on the need of the decision-maker. These can be
categorized in two ways:
• Opinion and Judgmental Methods or Qualitative
Methods.
• Time Series or Quantitative Forecasting Methods.
4.4.1 Opinion and Judgmental Methods
Forecasters rely solely on judgment and opinion about
casual factors that underlie the demand for certain
products or services.
1. Executive Opinions: takes the opinion of a
small group of high-level managers and
collectively develop a forecast.
2. Delphi Method: allows individuals in an
interactive group process and contributes
meaningfully in making a consensus forecast.
3. Sales force Opinions: Members of the
sales staff are often good sources of
information
4. Consumer Surveys: involves direct
interviews from the real market field.
4.4.2 Time Series Methods
Time series – is a time-ordered sequence of
observations of a variable taken at regular intervals
(daily, weekly, monthly, quarterly, and annually).
Decomposition of the Time Series- Analyzing
time series requires analysts to breakdown past data
into components and then project them forward. These
components can be described as follows:
1. Trend (T) - refers to the gradual long-term
upward or downward movement of the data.
2. Seasonality (S) - refers to a short-term
similar variations occurring during
corresponding periods.
3. Cycles (C)- are the long term swings or
wavelike variations of more than one year’s
duration.
4. Random component (R) - are sporadic
effects due to unusual circumstances. They are
the residual after the trend, cyclical, and
seasonal variations are removed.
4.5 EXPONENTIAL SMOOTHING
Exponential smoothening- a sophisticated
moving-average forecasting technique that weights past
data in an exponential manner
CHAPTER 5 PRODUCT DEVELOPMENT AND
DESIGN
Product design - the primary step in manufacturing
venture.
5.2 PURPOSE OF PRODUCT DESIGN
 Organizations are more likely to achieve their
goals with well-designed products.
 Design is usually more concerned with the
process of applying scientific principles and
inventions.
 Marketing gathers information from customers
and potential customers to identify customer
needs and expectations.
 Product design has strategic implications with
the company’s overall plans and policies.
5.3 PRODUCT ANALYSIS
Product analysis- enables us to understand the
factors in connection with product development and
design.
Some of these factors may be grouped as follows:
Marketing Aspect- marketers of the organizations
evaluate the strength of the market demand for the
product, the environment, and how this adapts the
possible changes that might affect the product's future
sales and costs.
Product Characteristics- It is important to
understand the difference between product functions
(the purpose for which the product is designed) and
product features (something added to the product as
a special attraction.).
Economic Analysis- obtained sufficient
information about customers’ requirements and market
potentialities.
Production Aspect- important to consider the
operational convenience of the manufacturer and the
availability of the materials.
Manufacturability- one of the key attributes of a
system in manufacturing goods.
Design for manufacturing (DFM) - the idea of
modifying or improving the design and process of the
product considering the company’s capabilities to
manufacture the same easier, quicker, and less cost
without compromising the quality.

5.4 A FRAMEWORK FOR PROCESS DESIGN

Design for assembly (DFA) - focuses on reducing
the number of parts and simplification processes in an
 Reasons why some organizations fail are that assembly.
they place most of their attention to product
design and not enough on process design.
5.6 DESIGNS FOR EXCELLENCE
Design process- a series of steps that product
teams follow during the formulation of a product from Design for excellence- a combination of six sigma
start to finish. principles, methods on how the product has been
designed, and standards for quality contributing to the
Product Planning- Product planning and process
overall excellence of the company.
design are integrated so that at the end of the design
stage there is a product with the optimum qualities, and
a process to produce it.

Process Design- macro perspective of the

process design is consists of work station selection and
a workflow analysis.

Micro

perspective of the process design comprises the

operational content and the operational method.

5.5 DESIGNS FOR MANUFACTURE (DFM)