Fall 2023

Course name: Operations Management

Course code: MGSC 5128
 Lecture -1

Instructor: Dr. Samiul Islam

 Lecture Outline

➢ What is operations management (OM)?

➢ Three basic functions within organizations
➢ The scope of operations management
➢ Differentiating goods and services
➢ Operations manager’s job
➢ Operations managers and decision making
➢ The historical evolution of operations management
➢ Major trends

3
3
Service Operations Examples

4
 What is Operations Management?

OM is the management of processes that create goods

and/or provide services.

Companies use OM to improve:

• Efficiency (operating to minimize cost and time)
• Effectiveness (achieving intended goals: quality &
timeliness)

5
What is Operations Management?

Detail the following OM activities for each company

OM Activities Airline company Bicycle factory

(services) (goods)
Forecasting
Capacity planning
Scheduling
Managing inventories
Assuring quality
Motivating employees
Where to locate facilities
6
Why Study Operations Management?

Opportunity!
• A large percentage of a company’s expenses occur in
OM area (more efficient operations = more profits).
• A large number of all jobs are in OM area (purchasing,
quality, planning, scheduling, inventory, etc.).
• Activities in all other areas( finance, human resources,
marketing, ) are interrelated with OM activities.
• Operations innovations lead to the marketplace and
strategic benefits (Toyota Production System, Dells’
direct shipping of personal computers).

7
Careers and Professional Certifications in OM

• Supply Chain Management Association (SCMA)

• Canadian Institute of Traffic and Transportation (CITT)
• Canadian Supply Chain Sector Council (CSCSC)
• American Production and Inventory Control Society
(APICS), now known as the Association for Supply
Chain Management
• American Society for Quality (ASQ)
• Project Management Institute (PMI)

8
 Functions Within Organizations
• A typical organization (manufacturing or service) has three basic
functions.
• Operations: creates goods and services.
• Finance: provide funds and the economic analysis of investment
proposals.
• Marketing: assess customer wants and needs and communicate
them to others.

Figure 1-1 The three basic functions of an organization and flows between them.

9
Three Basic Functions Interact

• The functions must interact to achieve the

goals and objectives of the organization.
• Each functional area makes an important
contribution to organizational success.

Operations

Marketing Finance

10
 Operations Interfaces

Operations
interfaces with a
number of
supporting
functions.

Figure 1-4

11
Operations Function

Figure 1-2 The operations function involves the conversion of inputs into outputs.

12
 Three Basic Functions: Airline

This shows how the operations function relates to an airline

company.
Note: this is an example of how operations apply to a service-
based business.
Airline Company

Finance/
Marketing
Operations Accounting

Flight Ground Facility

Catering
Operations Support Maintenance

13
Transformation Process at a Food
Processor

F Inputs Process Output

o
o Raw Materials Cleaning Canned
d Vegetables
Metal sheets Making cans
P
r
Water Cutting
o
c Energy Cooking
e Labour Packing
s Building Labelling
s
o Equipment
r
14
Transformation Process at a Hospital

Inputs Process Output

Sick patients, doctors, Examination Healthy

nurses patients
H
o Building Surgery
s
p
Medical supplies and Monitoring
i
drugs
t
a Equipment Medication
l Laboratories Therapy

15
 Types of Operations
Operations Examples

Goods Producing Farming, mining, construction

manufacturing, power generation
Services
Warehousing, trucking, mail
Storage/Transportation
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, banking,
renting, leasing, library, loans
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and television
newscasts, telephone, satellites

16
The Goods-Service Continuum

Figure 1-3

17
 Goods vs. Services

Answer using the words like tangible, intangible, high, low, easy, difficult

Differences Goods Services

(Produce a car) (Teach a class)
Output Tangible Intangible
Customer contact Low High
Uniformity of input High Low
Labour content Low High
Uniformity of output High Low
Measurement of Easy Difficult
productivity
Quality assurance Easy Difficult

18
 Goods or Service?

Tangible Act

Most systems are a blend of both good & service.

The service sector accounts for > 79% of jobs in
Canada.

19
 Goods vs. Services in Canada
Percentage of the total labour force by industry.

Figure 1-5

20
The Scope of Operations Management

• Capacity
Designing • Location
Decisions • Equipment

• Personnel
Planning/Control • Inventory
Decisions • Scheduling
• Quality assurance
21
The Operations Manager’s Job
The operations manager must coordinate the use of resources through the
management activities of planning, organizing, directing, and controlling.
Planning Organizing
Capacity Degree of centralization
Location Departments
Mix of products Subcontracting
Production process Suppliers
Layout Staffing
Controlling Directing
Inventory Control Scheduling
Quality control Issuance of work orders
Production pace Job assignments
Motivation Purchasing
Cost control Logistics
Table 1-4
22
Operations Managers and Decision Making

Models

Quantitative
Ethics
techniques

Establishing Analysis of trade-

Priorities offs

Systems approach

23
 Models
A model is an abstraction of reality. Used to support the decision
process.

Physical

Mathematical Schematic

24
Quantitative Approaches

• Linear programming
• Queuing techniques
• Inventory techniques
• Project techniques
• Statistical techniques

25
Analysis of Trade-Offs

• Decision on the amount of inventory to stock

• Increased cost of holding inventory

vs.

• Level of customer service

26
 The Systems Approach

Figure 1-6
27
 Establishing Priorities
Pareto Phenomenon
➢ A few factors account for a high percentage of the
occurrence of some event(s).

➢ 80/20 Rule - 80% of problems are caused by 20% of

the activities.

• How do we identify the vital few?

28
 Ethical Issues

Financial
statements

Hiring/firing Worker
workers safety

Product
Community
safety

Environment Quality

29
The Historical Evolution of OM

Decision
Human Models Japanese
Earliest Industrial relations and Manu-
days revolution Movement Computer facturers
(1980+)
(1960+)
Craft Interchangeable Improve
production (no Manage- TQM
Parts (Eli Whitney, Productivity (Elton
economies of
1700) Mayo, 1930) ment revolution
scale), Science,

Motivational
Mercant- Division of Labour Theories lean
ilism (Adam Smith, 1776) (Abraham production
EDI,
Maslow), 1940s

Scientific
Management Employee World Class
(1920s, Frederick Problem Solving Mftg
Taylor, Frank and (William Ouchi), ERP
Lillian Gilbreth, 1970s
Henry Gantt, Henry
Ford)

30
A comparison of craft, mass and lean
production

31
 Trends in Business

The Internet and e-commerce

Management technology

Globalization

Management of supply chains

Sustainability

32
 Supply Chain
A sequence of activities and organizations involved in
producing and delivering a good or service.

Figure 1-8

33
 Chapter Summary (1)
• Operations management is responsible for planning and coordinating
the use of the organization’s resources to convert inputs into outputs.
• The operations function is one of three primary functions of
organizations; the other two are marketing and finance.
• Operations decisions involve design decisions and planning/control
decisions.
• Design decisions relate to capacity planning, product design, process
design, the layout of facilities, and selecting locations for facilities.
• Planning/control decisions related to quality assurance, production
planning, scheduling and control, inventory management, and project
management.
• Service differs from goods production in customer contact and labour
content, lack of inventories, variation in inputs and outputs, and
difficulties in productivity measurement and quality assurance.

34
 Chapter Summary (2)
• Operations managers plan, organize, control, and direct
the operations of an organization.
• They use models, quantitative techniques, trade-off
analysis, systems approach, priorities, and ethics in
decision making.
• Operations management evolved through craft, mass,
and lean production systems.
• Major trends currently are e-commerce, technology,
globalization, supply chains, and sustainability.

35
 Answer the following
Why is operations management important to any
organization?

1. Because a large % of a company’s expenses occur in operations, e.g.,

purchasing materials and workforce salaries, more efficient
operations can increase profits.
2. A number of management jobs are in OM.
3. Activities in any organization’s other areas are interrelated with OM.
4. Operations innovations lead to the marketplace and strategic
benefits.

36
Learning Checklist
What is operations management (OM)?
Three basic functions within organizations
Differentiating goods and services
Operations manager’s job
Operations managers and decision making
The historical evolution of operations
management
Major trends

37
Next class, we will learn ----
Competitiveness, Strategic, and Productivity.

38
The end

39