1.

INTRODUCTION TO OM
1GE303 OPERATIONS
MANAGEMENT

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 Introduction to OM

Agenda
1. Introduction to OM
1.1. Historical perspective

1.2. Definition of OM

1.3. Classification of operations and goods vs services

1.4. Characteristics of the production / operations function

1.5. Operations strategy and operations KPIs (Key Performance Indicators)

2 | OM 2023-24 Note: The images included in this presentation were taken from the adopted books (or previous editions of them)
 Introduction to OM

1.1. Historical perspective

OM goes back to the Industrial Revolution
(England, from the end of the 18th century to the beginning of
the 19th century)

▪ Industrial Revolution (18th century)

▪ Era of Scientific Management (early 20th century) - Ford, Taylor,
Gantt
▪ Age of Human Relations (1930s) - Mayo
▪ Era of Management Science (1940s and 1950s) – Operation
Research
▪ JIT / Lean Production Philosophy (1970s / 80s)
▪ TQM, Six sigma, Supply Chain Management, E-commerce…
▪ Reverse logistics, Business Process Reengineering,…
▪ Sustainability
▪ Industry 4.0

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1.1. Historical perspective

Evolution in Automotive industry:

• Ford: Model T (1908–1927) –

• https://www.youtube.com/watch?v=S4KrIMZpwCY
“Customer can have a car painted any color that he wants, so long as it is black” (Henry Ford)

• Toyota Production System (1980s):

• https://www.youtube.com/watch?v=P-bDlYWuptM

• Industry 4.0 in the Volkswagen Group (2010s):

• https://www.youtube.com/watch?v=BQEVtzcVFkE

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1.1. Historical perspective

Challenges for the future of OM

▪ Coordinate operational relations between partner companies

▪ Optimize distribution, production and supply networks
▪ Encourage the co-production of goods and services.
▪ Efficiently manage customer contact
▪ Globalization
▪ New Information Technologies

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1.2. Definition
The Association for Operations Management (APICS) defines Operations Management as:

The field of study that focuses on the effectively planning, scheduling, use, and control of a manufacturing or
service organization through the study of concepts from design engineering, industrial engineering,
management information systems, quality management, production management, inventory management,
accounting, and other functions as they affect the organization.

It is the analysis and management of the

operations performed by an organization

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1.2. Definition
What is managing operations?

An example from

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1.2. Definition
What are operations?

Set of processes required for you as a company to transform your resources into the products you
provide to your customers.

Goods and services

- Physical Materials
- Location Capital
- Exchange Equipment
- Storage Labor
- Physiological Energy
- Informative Information, etc.

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1.2. Definition
Examples

Try to complete the table

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1.2. Definition

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1.3. Classification of operations

▪ Regarding its nature:
- Repetitive Operations
- Non-repetitive Operations

▪ Regarding its output:

- Goods Operations
- Services Operations

Main differences between Goods Operations (GO) and Service Operations (SO):
▪ Intangibility of SO outputs
▪ Heterogeneity of SO outputs
▪ Concurrency in space of production and consumption of services
▪ Simultaneity in time of production and consumption of services

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1.3. Classification of operations

Goods vs Services

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1.4. Characteristics of the production/operations function

▪ Centrality
▪ Specificity
▪ Relative importance

Multifunctional relationships of OM

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1.5. Operations Strategy and Operations KPIs

Types of decisions

Operations management decisions can be classified into:

▪ Strategic or long term decisions

▪ Tactical or medium term decisions
▪ Operational or short-term decisions (day-to-day)

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1.5. Operations Strategy and Operations KPIs

Types of decisions

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1.5. Operations Strategy and Operations KPIs

Types of decisions
Decision level
Activity Strategic Tactical Operational
Locate and size warehouses, factories,
Location stores

Stocks Stock location and control policies Safety stock levels Replenishment

Transportation Mode selection Subcontract seasonal equipment Transportation routes

Order processing Design order reception and processing Processing orders and
backorders

Client service Setting levels Priority rules for client orders Dispatch products

Storage Equipment selection and layout design Seasonal rent Picking and replenishment

Procurement Develop supplier-buyer relationships Contracts, supplier selection and Posting orders and dispatch
purchase anticipation supplies

16 | OM 2023-24 Adapted from Ballou (2004)

 Introduction to OM

1.5. Operations Strategy and Operations KPIs

Hierarchy of decisions

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1.5. Operations Strategy and Operations KPIs

Five objectives for operational performance

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1.5. Operations Strategy and Operations KPIs

Five objectives for operational performance - Example

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1.5. Operations Strategy and Operations KPIs

Determine which competitive priorities are important

Company positioning

Seldom a company can deliver everything

(low cost, fast response, production flexibility, high quality and timely deliveries)
simultaneously to the market.

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1.5. Operations Strategy and Operations KPIs

Types of objectives

“order-qualifiers” –
Features that customers perceive as the minimum standard for acceptance.

“order-winners” –
Features that customers perceive as superior features of the product or service over
competitors

What influences the goals?

Customers, competitors, life cycle stage, ...

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1.5. Operations Strategy and Operations KPIs

Types of objectives

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