OPERATIONS MANAGEMENT WEEK 1-2

Definition:
Ten Decision Areas
• Is the set of activities that relate to the
creation of goods and services through the 1. Design of goods and services
transformation of inputs to outputs.
2. Managing quality

3 FUNCTIONS TO PRODUCE GOODS AND 3. Process and capacity design

SERVICES
4. Location strategy

5. Layout strategy
1. Marketing – which generates the demand, or
at least takes the order for a product or 6. Human resources and job design
service (nothing happens until there is a sale).

2. Production/Operations – which creates the 7. Supply-chain management

product.
8. Inventory, material requirements
3. Finance/Accounting – which tracks how well
the organization is doing, pays the bills, and planning, and JIT (just-in-time)
collects the money.
9. Intermediate and short-term
scheduling
WHY STUDY OM
10. Maintenance
1. To know how people organize themselves for
productive enterprise.

2. To know how goods and services are

produced.

3. To understand what operations managers, do. Issues

4. To improve the organization’s profitability and
What good or service should we offer?
enhance its service to society.
How should we design these products?

WHAT OPERATIONS MANAGEMENT DO How do we define the quality?

Who is responsible for quality?

• Managers perform the basic functions of the What process and what capacity will these
management process: planning, organizing,
staffing, leading, and controlling. products require?

• Managers apply the management process to What equipment and technology are
10 major decisions of OM. necessary for these processes?

Where should we put the facility? On what criteria

should we base the location decision?

How should we arrange the facility?

 How large must the facility be to meet us

plan?
8. Inventory, material requirements
How do we provide a reasonable work environment?
planning, and JIT (just-in-time)
How much can we expect our employees

to produce?
9. Intermediate and short-term scheduling
Should we make or buy this component? Who should be
our suppliers and how can we integrate them into our 10. Maintenance
strategy?

How much inventory of each item should

Issues
we have?

When do we reorder? To design and produce products and services with

outstanding quality and inherent customer value.
Are we better off keeping people on the

payroll during slowdowns?

Which job do we perform next?
How do we build reliability into us
processes?
To attain the exceptional value that is consistent with our
company mission and marketing objectives by close
attention to design, procurement, production, and field
service opportunities.

Who is responsible for maintenance?

To determine, design, and produce the production process
and equipment that will be compatible with low-cost
product, high quality, and a good quality of work life at
economical cost.
SAMPLE OPERATIONS MANAGEMENT
DEPARTMENT MISSION To locate, design, and build efficient and economical
facilities that will yield high value to the company, its
employees, and

Ten Decision Areas
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
6. Human resources and job design
To provide a good quality of work life, with well-designed,
safe, rewarding jobs, stable employment, and equitable
pay, in exchange for outstanding individual contribution
from employees at all levels.
To collaborate with suppliers to develop innovative
products from stable, effective, and efficient sources of
supply.
To achieve low investment in inventory consistent with
high customer service levels and high facility utilization.

7. Supply-chain management
To achieve high levels of throughput and timely customer SIGNIFICANT EVENTS IN OPERATIONS
delivery through effective scheduling. MANAGEMENT

To achieve high utilization of facilities and

COST FOCUS
equipment by effective preventive
Early Concepts: 1776-1880

 Labor Specialization (Smith, Babbage)

 Standardized Parts (Whitney)
DIFFERENCES BETWEEN GOODS AND
SERVICES Scientific Management Era: 1880-1910
 Gantt Charts (Gantt)
 Motion & Time Studies (Gilbreth)
GOODS  Process Analysis (Taylor)
 Queuing Theory (Eriang)
1. Tangible
Mass Production Era: 1910-1980
2. Produced and inventoried.
 Moving Assembly Line (Ford/Sorensen)
3. Similar.  Statistical Sampling (Shewhart)
 Economic Order Quantity (Harris)
4. Less customer interaction.  Linear Programming
 PERT/CPM (DuPont)
5. Consistent product line and output.  Material Requirement Planning (MRP)

6. Programmed and mechanized. QUALITY FOCUS

7. Hard to distribute and deliver. Lean Production Era: 1980-1995

 Just-In-Time (JIT)
 Computer-Aided Design (CAD)
SERVICES  Electronic Data Interchange (EDI)
 Total Quality Management (TQM)
 Baldrige Award
1. Intangible
 Empowerment
2. Produced and consumed simultaneously.  Kanbans
CUSTOMIZATION FOCUS
3. Unique.
Mass Customization Era: 1995-2015
4. High customer interaction.
 Globalization
5. Inconsistent product definition.  Internet/E-Commerce
 Enterprise Resource Planning
6. Knowledge based and hard to automate.  International Quality standards (ISO)
 Finite Scheduling
7. Frequently dispersed.  Supply-Chain Management
 Mass Customization
 Build-to-Order
 Sustainability

NEW TRENDS IN OPERATIONS
TRADITIONAL APPROACH
Ethics and regulation not at
the forefront
Local, regional, national focus
Lengthy product development
Low-cost production, with little concern for
environment; free resources (air, water)
ignored
Low-cost standard products
Emphasis on specialized, often manual tasks
“In-house” production; low-bid
purchasing
Large lot production
REASONS FOR CHANGE
Public concern over pollution,
corruption, child labor, etc.
Growth of reliable, low-cost communication
and transportation
Shorter life cycles; growth of global
communication; CAD; internet
Public sensitivity to environment; ISO 14000
standard; increasing disposal costs
Rise of consumerism; increased affluence;
individualism
Recognizing the importance of the
employee’s total contribution; knowledge
society
Rapid technology change;
increasing competitive forces
Shorter product life; increasing
need to reduce inventory
CURRENT CHALLENGES
High ethical and social responsibility;
increased legal and professional standards
Global focus; international collaboration
Rapid product development; design
collaboration
Environmentally sensitive production; green
manufacturing; sustainability
Mass customization
Empowered employees; enriched jobs
Supply-chain partnering; joint ventures;
alliances; Just-in-time performance; lean;
continuous improvement
Just-in-time performance;
lean; continuous improvement
BUSINESS OPERATIONS MANAGEMENT
INTENDED LEARNING OUTCOMES
 • Describe Business Operations Management
and Business Operations
• Understand business operations efficiency
and how it will be attained.
• Create a functional and adoptable business
operation model.
BUSINESS OPERATIONS MANAGEMENT (BPM)
 Described as “process optimization process”.
 Is a field in operations management that
focuses on improving corporate performance
by managing and optimizing a company’s
business processes.
The definition, improvement and management of a
firm’s end-to-end enterprise business processes in
order to achieve three outcomes crucial to a
performance-based, customer-driven firm:
1. Clarity on strategic direction,
2. Alignment of the firm’s resources, and
3. Increased discipline in daily operations.
- BPM Institute
• Is a discipline involving any combination of
modeling, automation, execution, control,
measurement and optimization of business
activity flows, in support of enterprise goals,
spanning systems, employees, customers and
partners within and beyond the enterprise
boundaries.
BPM LIFE CYCLE
• Design – process flow, factors within it,
alerts and notifications, escalations,
standard operating procedures, service level
agreements, and task hand-over mechanisms.
• Modeling – theoretical design and introduces
combinations of variables, e.g., changes in
rent or materials costs
• Execution – steps of the process to adopt
• Monitoring – tracking of processes
• Optimization – retrieving process
performance information of each step;
identifying bottleneck or potential
opportunities or improvements, and apply
enhancements
BUSINESS OPERATIONS OR BUSINESS METHOD
• is a collection of related, structured
activities or tasks that produce a specific
service or product (serve a particular goal)
for a particular customer/s.
• It may often visualize as a flowchart of a
sequence of activities with interleaving
decision points or as a process matrix of a
sequence of activities with relevance rules
based on data in the process.
3 TYPES OF BUSINESS OPERATIONS
1. Management Processes – govern the
operation of the system. It includes
“corporate governance” and “strategic
management”.
2. Operational Processes – constitute the core
business and create the primary value stream.
3. Supporting Processes – support the core
processes.
HOW TO DEVELOP BUSINESS OPERATIONS
1. Identifying your needs.
1. review challenges in productivity and
success;
2. start at the end;
3. create specific objectives based on
the determined goals;
4. lists the activities required to achieve
the set objectives.
 2. Mapping out the process. 3. build the to-be model; and
4. implement the new model.
1. maximize efficiency of the business
process;
2. determine the order of necessary
activities; WEEK 3-5
3. optimize business process; and
4. assign management to supervise each PRODUCTIVITY
step of the process.
• the ratio of outputs (goods and services)
divided by the inputs (resources, such as labor
BUSINESS MODEL and capital).

• An abstract representation of a business, be it

conceptual, textual, and/or graphical, of all
core interrelated architectural, co- PRODUCTIVITY MEASUREMENT
operational, and financial arrangements Productivity = Units Produced/ Input Used
designed and developed by an organization
presently and in the future, as well as all core
products and/or services the organization
offers, or will offer, based on the SINGLE-FACTOR PRODUCTIVITY MEASUREMENT
arrangements that are needed to achieve its Productivity = Units Produced/ Labor-hours used
strategic goals and objectives.

• Describes the rationale of how an

organization creates, delivers, and captures MULTIFACTOR PRODUCTIVITY MEASUREMENT
value, in economic, social, cultural or other
contexts.
Productivity = Output

HOW TO MAKE A BUSINESS OPERATIONS Labor+Materials+Energy+Capital+Miscellaneous

MODEL

BUSINESS PRODUCTIVITY
PART I. PREPARING TO MAKE THE MODEL
• Improve quality
1. define the process you are modeling; • Reduce downtime and inputs of labor,
2. identify the starting point of the process; materials, energy and purchased services
3. separate the different steps in the process;
4. clarify who or what performs each step; and
5. decide which type of modeling to use.

PART II. CREATING AN AS-IS MODEL

1. make sure you can rearrange parts as needed;

2. start with the beginning of the process and HOW TO IMPROVE BUSINESS
follow the sequence;
3. check your model; and
PRODUCTIVITY
4. identify inefficiencies or problems.

PART III. DESINING THE TO-BE MODEL Method 1. Increase your Work Productivity
1. brainstorm improvements to the as-is model;
a. Start with yourself.
2. identify how improvements will help the
b. Set deadlines and tell people about them.
business or the customer;
c. Work in 90 minutes intervals.
 d. Take breaks regularly.
e. Follow the 2-minute rule.
f. Take advantage of your commute.
g. Commit to multiple drafts of everything.
h. Handle your email more efficiently.
Method 2. Increase Employee Productivity
a. Apply the same productivity boosting
techniques that you use.
b. Allow for remote work and flexible hours.
c. Show appreciation for your employees.
d. Create a culture of accountability.
e. Use work teams.
f. Give your employees varied work.
g. Invest in training.
h. Commit to improvement.
Method 3. Employing Technology
a. Purchase technology that works with a
minimum of time and effort.
b. Get the workers the computers they need.
c. Provide the technology your workers need to
work wherever they are.
d. Use virtual meetings and task tracking.
e. Have your employees use to-do list
applications.
f. Invest in multiple programs for specific tasks,
rather than trying to do more with one
program.
PRODUCTIVITY VARIABLES
1. Labor
1. Basic education appropriate for an
effective labor force.
2. Diet of the labor force.
3. Social overhead that makes labor
available, such as transportation and
sanitation.
2. Capital – the tools used to produce goods or
services.
3. Management – in charge with the production
of usage of resources to increase productivity.
OPERATIONS STRATEGY AND
COMPETITIVENES
Operations Strategy
• is a set of decisions an organization makes
regarding the production and delivery of its
goods.
• Organizational considerations towards each
step they take toward manufacturing or
delivering a product an operation, and all
decisions regarding these various operations.
DEVELOPING MISSIONS AND STRATEGIES
• MISSION – the purpose or rationale for an
organization’s existence. It provides
boundaries and focus for organizations and
the concept around which the firm can rally.
MISSION THREE CONCEPTUALWAYS
1. DIFFRENTIATION – better, or at least different
2. COST LEADERSHIP – cheaper
3. RESPONSE – more responsive
COMPETING ON DIFFERENTIATION
• Distinguishing the offerings of an organization
in a way that the customer perceives as
adding value.
• Engaging a customer with a product through
imaginative use of the five senses, so the
customer “experiences” the product –
experience differentiation.
COMPETING ON COST
• Achieving maximum value as perceived by the
customer – low-cost leadership.
COMPETING ON RESPONSE
• A set of values related to rapid, flexible, and
reliable performance.
DEVELOPING MISSIONS AND STRATEGIES
• STRATEGIES – how an organization expects to
achieve its missions and goals.
GLOBAL OPERATIONS STRATEGY OPTIONS
 • MULTINATIONAL COPORATION (MNC) – is a Global Strategy
firm that has extensive involvement in
*Standardized product
international business, owning or controlling
*Economies of scale
facilities in more than one country.
*Cross-cultural learning
• INTERNATIONAL BUSINESS – a firm that
engages in cross border transactions. Transnational Strategy
*Move material, people, or ideas across national
boundaries
FOUR INTERNATIONAL OPERATIONS *Economies of scale
*Cross-cultural learning
STRATEGIES
International Strategy

1. INTERNATIONAL STRATEGY – a strategy in *Import/export or license existing product

which global markets are penetrated using Multidomestic Strategy
exports and licenses.
*Use existing domestic
2. MULTIDOMESTIC STRATEGY – a strategy in model globally
which operating decisions are decentralized *Franchise, joint ventures, subsidiaries
to each country to enhance local
responsiveness.

3. GLOBAL STRATEGY – a strategy in which

operating decisions are centralized and
headquarters coordinates the standardization
and learning between facilities.

4. TRANSNATIONAL STRATEGY – a strategy that

combines the benefits of global-scale
efficiencies with the benefits of local
responsiveness.