MODULE 1

PRELIM
Lecture

WHAT IS OPERATION MANAGEMENT?

Operation management focuses on carefully managing the process to produce and distribute products and services. A great
deal of focus is on efficiency and effectiveness of processes. Therefore, operations management often includes substantial
measurement and analysis of internal processes

THE IMPORTANCE OF OPERATIONS MANAGEMENT

Operation management serves as the engine room of the organization, planning and driving manufacturing or services. To
compete in an ever-charging market, operations managers must survival. At most companies, there are many operations
employees, and the department’s budget is large.
Operation management is a process that involves planning, organizing, managing, controlling and supervising the production
and manufacturing processes. The major aim of an operation manager is to ensure timely delivery of the products and to
successfully turn the raw materials into the finished products (input to output). Operations Management plays a vital role to run
any project successfully. Its benefits include:

 Operation management involves similar management for every industry or business irrespective of their nature of the
operation. Planning, organizing, staffing, monitoring controlling, directing and motivating are its significant elements.
Operation management is obligatory for organizations to manage the daily activities seamlessly. With its help, an
organization is able to make good use of its resources like labor, raw material, money and other resources.
 Operation Management is important to improve the overall productivity. The ratio of input to output is termed as
productivity. It gives a measure of the efficiency of the manager as well as the employees. Since the discipline focuses on
using the available resources in the best possible way to achieve end goals, so it improves the overall productivity.
 Operation management is the management of the various business activities that take place within an organization and
contributes in making the products to align with customer’s requirements. Operation management is the heart of an
organization as it controls the entire operation If the products are made catering to the needs of the customers then, they’ll
be sold at a rapid rate.
 Under operation management, there is the optimum utilization of resources leading to enormous profits of the
organization. The efforts of the employees and the various raw materials are efficiently utilized and converted into the
services and goods required by the organization. Operation management plays a crucial role in an organization as it
handles issues like design, operations, and maintenance of the system used for the production of goods.
 Earlier everyone believed that the operation management was not that important for the organization, but later on, it
was discovered that it is actually important for the functioning of the organization. It was found that the manufacturing of
raw materials to make the goods and selling them along with management of sales is necessary, and this is done efficiently
by managing the operations.

RELATIONSHIP OF OPERATION MANAGEMENT TO OTHER DEPARTMENTS

The ideal situation for a business organization is to achieve an economic match of supply and demand. The key functions on the
supply side are operations and supply chains, and sales and marketing on the demand side
While the operations function is responsible for producing products and/or delivering services, it needs the support and input from
other areas of the organization. Business organizations have three basic functional areas, as shown in Figure 1:Finance,
marketing, and operations. It doesn’t matter whether the business is a retail store, a hospital, a manufacturing firm, a car
wash, or some other type of business; all business organizations have these three basic functions.

- Figure 1 -
Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the
organization, as well as budgeting, analyzing investment proposals, and providing funds for operations. Marketing is responsible
for assessing consumer wants and needs, and selling and promoting the organization’s goods or services. Operations are
responsible for producing the goods or providing the services offered by the organization.

Operations and supply chains are intrinsically linked, and no business organization could exist without both. A supply chain is the
sequence of organizations—their facilities, functions, and activities—that are involved in producing and delivering a product or
service. The sequence begins with basic suppliers of raw materials and extends all the way to the final customer, as seen in Figure
2.

- Figure 2 -

Facilities might include warehouses, factories, processing centers, offices, distribution centers, and retail outlets. Functions and
activities include forecasting, purchasing, inventory management, information management, quality assurance, scheduling,
production, distribution, delivery, and customer service.

The creation of goods or services involves transforming or converting inputs into outputs. Various inputs such as capital, labor, and
information are used to create goods or services using one or more transformation processes. To ensure that the desired outputs
are obtained, an organization takes measurements at various points in the transformation process ( feedback ) and then compares
them with previously established standards to determine whether corrective action is needed ( control ). Figure 3. depicts the
conversion system.

- Figure 3 -

Table 1. provides some examples of inputs, transformation processes, and outputs. Although goods and services are listed
separately in Table 1, it is important to note that goods and services often occur jointly. For example, having the oil changed in
your car is a service, but the oil that is delivered is good. Similarly, house painting is a service, but the paint is good. The goods–
service combination is a continuum. It can range from primary goods, with little service, to primarily service, with few goods.

Operations management involves managing business processes that occur during the conversion of inputs, which include raw
materials and labor, into outputs in the form of goods and/or services. From an operations perspective, then, goods and/or services
are the creation of value that consumers desire or expect. In this regard, goods and services are referred to in their traditional
sense.

 SERVICES are intangible and without physical attributes. On the other hand, GOODS are tangible and can be weighed or
measured based on their physical aspects.
  SERVICES cannot exist separate from the customer. For instance, a doctor needs a patient in order to conduct a
diagnosis, which is a medical service. On the other hand, GOODS do not require customer interaction in order to be goods.
For instance, a bottle of soda is a good even before it reaches the customer.
 SERVICES are susceptible to changes in the consistency of how they are delivered, while GOODS can be created
consistently using the same process and materials.
 SERVICES can’t be preserved for future use. GOODS on the other hand, can be stored

MODULE 2
PRELIM
II. Lecture

An operational plan can be defined as a plan prepared by a component of an organization that clearly defines actions it will take
to support the strategic objectives and plans of upper management. However, to fully understand operational plans, we should first
look at the overall planning process within a business.

This diagram shows the three level of planning

Type of
Created By Scope Includes Level of Detail
Plan

Strategic Top Mission of the company, future goals Very broad and
Entire organization
plan management and ambitions general

Single area of the business as a Specific actions and

Mid-level Specific actions to support or work
Tactical plan whole (e.g. a division of the ideas, but not very
management towards the strategic plan
company) detailed

A unit within a single area of Specific plans for low level and day-to- Extremely detailed
Operational Low-level
the business (e.g. a department day activities and processes that will (who, what, where
plan management
within a division) support and enable the tactical plan and when)

PRINCIPLES OF OPERATIONS MANAGEMENT

RANDALL SCHAEFER, CPIM described THE 10 PRINCIPLES OF OPERATIONS MANAGEMENT at his presentation at the 2007
conference of the American production and inventory control society (APICS).
 Reality – there is no universal solution to the problems in your business.
 Organization – you must organize all aspects of production into a coherent whole.
 Fundamentals – adhere to fundamentals, such as accurate inventory records.
 Accountability – people try harder when they’re held accountable.
 Variance – variance is part of every process.
 Causality – problems are often symptoms. Get to the root cause.
 Managed passion – people with a passion for their jobs will drive your company.
 Humility – you don’t have to know everything.
 Success – define success, and change with the market.
 Change – every manufacturing solution is temporary.

Typical Operations Management activities include:

 Forecasting – statement about the future

 Capacity planning- process of determining the production capacity needed by an organization
 Scheduling- to have a schedule to follow and ensure for accurate delivery times while also keeping an eye on inventory
levels.
 Managing inventories- supervision of stock items.
 Assuring quality – concerned with assuring quality to the consumer by a management process, which attempts to prevent
poor quality happening, rather than detecting when goods or services fail to meet quality standards.
 Recruiting, training, and motivating employees -

FUNCTIONS AND ROLES IN OPERATIONS MANAGEMENT

 The field of operations management includes a diverse set of functions and roles, which can differ among industries and
different-sized companies:
 Planning and implementing manufacturing plants
 Managing projects
 Planning information systems
 Helping to design and develop products and services
 Managing inventory through the supply chain
 Managing delivery to customers in a timely manner
 Optimizing quality control
 Conducting procurement/purchasing
 Managing logistics
 Managing transportation and distribution
 Managing and maintaining facilities
 Conducting enterprise resource planning
 Forecasting for planning
 Planning for capacity
 Navigating industrial labor relations
 Analyzing the value chain
 Optimizing resource usage
 Eliminating waste
 Continuously improving processes
 Executing a company’s strategic plan

To carry out these tasks well, operations managers need to be organized, analytical, creative, resourceful, versatile, and skilled
in leading people. Now more than ever, they also need to be tech savvy in a rapidly changing market. They make multiple decisions
every day that affect the company’s ability to compete.

MODULE 3
Lecture

All operations processes have one thing in common, they all take their ‘inputs’ like, raw materials, knowledge, capital,
equipment and time and transform them into outputs (goods and services).

THE FOUR V’s OF OPERATION MANAGEMENT

1. VOLUME - Essential to their operation is the repeatability of the tasks, as well as the systemization of the work. From this,
standards and procedures drive the way in which each part of the job is carried out and then by combining in this way
provides the organization with a low-cost base.
2. VARIETY - relates to the variety of goods/service to be produced and sold to customer. This V is all about diversity. High
variety give more company’s the flexibility to produce goods and/or services to match the customer’s requirements. Variety
and volume correlates, the higher the variety the lower the volume of the products or services
3. VARIATION - this refers to the how much the level of demand changes over a time period due to external factors.
4. VISIBILITY - is the ability to accurately and completely view the processes, transactions and other activities operating
within an enterprise

EFFECTIVELY MANAGE OPERATIONS WITH SMARTSHEET

Effectively managing operations planning to reduce over or under production is essential for companies to meet their goals
and maximize profitability. That’s why it’s important to find the right tool to help you plan, track, and manage all the details.
Smartsheet is a work management and automation platform that enables sales enterprises and teams to work better.
With smartsheet, operations teams can improve transparency to process and procedure, optimize operations with cross-
department collaboration, and accelerate team output. Since operations is critical to all other company functions, it’s useful to
implement a solution that works well for other teams across the organization. Plus, smartsheet integrates with several tools that
many teams already use. Form big picture progress to detailed execution, smartsheet helps operations professionals focus on what
matters most.
OPERATIONS MANAGEMENT SPECIFIC ROLES

CHIEF OPERATING OFFICER

 also called the chief operations officer, is one of the highest-ranking executive positions in an organization, comprising part of
the “C_SUITE”. the COO is responsible for the daily operation of the company, and routinely reports to the highest-ranking
executive, usually the chief executive officer. The COO is usually the second in command at the firm, especially if the highest-
ranking executive is the Chairman and CEO.

OPERATION MANAGER
A useful definition of the role of an operations manager comes from Investopedia:

 "Operations management is the administration of business practices to create the highest level of efficiency possible within
an organization.
 Operations management is concerned with converting materials and labor into goods and services as efficiently as possible.
 Corporate operations management professionals try to balance costs with revenue to maximize net operating profit."

They oversee product development and delivery, inventory and supply chain management, operations staffing and job design,
and production. They oversee an organization's key operations and, thus, they usually have a wide and strategic view of the
organization. The specific duties of the role depend on the nature of the product and service that the company produces and
provides, for example, in agriculture, industry or construction.

Module 4

II. Lectures
OPERATIONS MANAGEMENT STRATEGIES
Today’s operations manager is deeply involved in strategy, along with their daily production role. Here are several key
strategy and tactics points:
 Use of Data – analytics are essential for strong planning, adjustments, and decision making. Two common types are
efficiency metric and effectiveness metrics.
 Inventory Analysis – to manage inventory in the supply chain, ABC analysis (also called Pareto Analysis) comes into play. It
divides inventory into three categories A, B, and C; has the most value and tightest controls, and C has the least.
 Data Challenges – data is often soiled, which makes it difficult to compare. But never systems and set ups are making this
easier and helping analysts and managers examine data in new, helpful ways.
 Process Design – researching, forecasting, and developing a sound process takes expertise and energy, but the results can
be lasting.
 Forecasting and Goal Setting – the best forecasting often combines a look at history data with analysis of changing
conditions.
 Collaboration among Departments – with good communication and collaboration, operations management can work
effectively with finance, sales, marketing, human resources, and other departments.
 Being Green – ecological soundness has become a strategic and legal necessity at companies nowadays, especially in
manufacturing.

TIPS FOR GOOD OPERATIONS MANAGEMENT

Once again. Our seven experts highlight the importance of technology and people. We’ve asked each of our experts to weigh in
with their three top pieces of advice to achieve good operations management:
 Keep current on innovation trends, and take the time to listen to suggestions of tech-savvy employees; only use technology
that is simple to use and engaging for employees at every skill level; invest in educating managers and employees on the
goals of implementing new systems; and make sure to build in rewards so that everyone is motivated to learn and use new
technology.” – IRIS TSIDON
 Have good communication. Make sure that processes, rules, and policies are well-communicated to everyone. Have a smart
marketing plan and be up to date. Pattern your marketing plan a after whatever is on trend. Use that concrete plan with a
timeline until a new trend arrives. Have weekly reports of everything about the company. Then, from there, manage
everything based on the need of each category.” --- DAISY JING
 Collect data electronically. Having team members write down their processing numbers for data collection can lead to
inaccurate data and not give you the results you need to run your operations efficiently. Use report dashboards and rely on
data and analysis to augment your process and continually improve your operations. Be customer-focused: Design your
processes with the end customer in mind. Think about what they see as value and what they’re willing to pay for, as well
as how quickly they expect to get results.” KATHARINE LEONARD
 Listen to your internal and external teams. Field level employees, internal sales, and vendors have invaluable information
and know what is going on with your product/services and the competition. Measure and analyze. We are constantly
 examining our internal processing times and employee performance and measuring success rates. Measuring your internal
performance allows you to exceed customer demand. Expand your network. Managers from competitive firms change jobs.
A friendly relationship can become a key alliance. Vendor partnerships in developing new products/services allow you to
grow your operations while controlling costs. Joint ventures that benefits both parties can substantially increase your
knowledge base while increasing your speed to market.” DAVID SHELTON
 Slow down. It’s important to consider the side effects of each decision and how you relay communication to the team.
People tend to like working for (and have higher engagement with) leaders who maintain a level head and aren’t too quick
to pass judgment. Be proactive and strategic. It’s important that leaders aren’t reacting all day. The constant reactionary
environment can turn great leaders into fire chasers, which tends to devolve their communication. Stay focused on the
numbers. If something isn’t working like it should, it’s better to focus on the measurable data than on the emotion of the
disappointment or the result. When you can tweak a process and measure it along the way, you remove the subjectivity
and remain objective.” MATT WILHELMI
 Make sure any project has an internal owner, or it can go off track. Understand the key performance indicators that will
drive the business. “just because you can measure it doesn’t mean it matters. “Protect the data. Operations managers have
to safeguard the info.” Consider leveraging infrastructure as a service, with hosting, security and redundancy-built in.”
CHRIS WEGAND
 Read a lot. Learn a lot. Keep up with your field. If you’re logistics manager, connect with your tech people. “now you need
to work much more closely with them. “get trained so you understand tech trends. “understand the tidal wave.” RICHARD
LOWE, Jr
People in all functional areas need to have a basic understanding of Operations Management to
 Interact with or support operations:
 Manufacturing and/or Service Operations
 Finance and Accounting
 Marketing
 Sales
 Research, Advanced Development, Development, Engineering
 Human Resource
THE BIGGEST OPERATIONS MANAGEMENT CHALLENGES
 The biggest challenges in operations are related to keeping up with the pace of innovation. Millennials are the largest
population entering the workforce. They expect that the companies they work for are going to be as tech savvy as they
are, yet existing employees resist change and implementing new technologies. So, there is a clash between generations,
and operations management needs to balance between the two.” IRIS TSIDON CEO of Okapi Vision
 Making sure that we get the right people and maintain their good performance for years to come.” DAISY JING CEO and
founder of Banish Beauty Product
 It’s when you don’t have the right resources and the time or leadership support to solve business problems and instead a
band aid on problems. Because of this, teams end up overcomplicating their processes and relying on a few experts, who
become the single point of failure for your business.” KATHARINE LEONARD Co-Founder of Shift change
 Managing the operations of small and medium-sized businesses comes down to effective communication. There are so
many distractions in today’s workplace that we sometimes lose sight of how we communicate. In our experience, effective
communication means being consistent and fair. The challenge in effective communication is that sometimes an operations
manager needs to encourage and other times needs to discipline/coach. This all happens while maintaining the vision he or
she casts for the team. – MATT WILHELMI Associate Business Consultant.
 The internet of things- the interconnection of computerized devices via the Internet- has the potential to drive efficiency,
but it also brings challenges in complexity and cost. To be efficient, companies need a location infrastructure using
addressable maps and technologies, like Bluetooth beacons. An example is a hospital knowing the real time location of its
infusion pumps and other devices to organize their usage. A big challenge is that companies often store data in separate
database, leaving analysts to pull it into spreadsheets to compare. “there’s no single dashboard to bring it into.” CHRIS
WIEGAND CEO of the Jibe stream
 The technology is changing so quickly, it makes it hard on an operations manager to keep up. The whole model of the way
things is working is changing. “using the example of trucking for product distribution, concepts such as robotic trucks and
location aware tracking bring challenges along with advancement. “it’s a lot more data to manage. “Technology training
presents challenges too. “how do you keep people up to speed with new technologies?
 MODULE 5
PRELIM
Lecture

Strategic Planning: Understand the Operational Process

 Because strategic planning is about improving the status quo, looking at how to improve operations is the key. Operations
produce and deliver the goods and services to customers. These processes encompass managing your creation of customer
value. Service companies may be tempted to think that processes aren’t managed in this area, but consider how you
deliver your service. It doesn’t happen by magic. You take specific steps to deliver what you do; these steps are
operational processes.

Operations Management covers four Generic Processes:

Developing and Sustaining Supplier or Vendor Relationships: Bringing raw material and goods into your company is a set
of processes that feed into how you produce products and services. Do you effectively manage your supplier relationships to ensure
that you obtain the total lowest cost of the products and services you buy? Are you efficiently sourcing, moving, storing, and
inspecting the raw materials you use?
Producing Products and Services: At the heart of your operational processes is the production of your product and service. Are
you efficient at production, thereby lowering production costs and increasing your asset utilization? Are you effectively producing
your product with minimal scrap, error rates, or returns?
Delivering the Product or Service to your Customer: Just like with managing your suppliers, you also have processes that
manage your distribution. Are you efficiently delivering your products or services to your customers? Are you effective at reaching
your customers through your distribution channels?
Managing Operating Risk: Not all companies have direct operating risk, but most companies are exposed to some kind of risk
associated with market fluctuations. Processes in this area deal with effectively and efficiently reducing costs associated with capital
costs and taxes

Meeting the Challenges

There are multiple challenges that operations managers face on a daily basis. Here’s the following;

 Globalization
Globalization101.org defines globalization as: “a process of interaction and integration among the people, companies, and
governments of different nations.” It is driven by a reduction in trade barriers, advancements in information technology, and
transportation technology. Operation managers face competition from the company across the street, as well as, from across the
country and across the world. Tishta Bachoo, Accounting Professor at Curtin University in Australia, explains that companies who
compete with others abroad will have to improve quality while lowering prices to remain competitive. This falls on the operations
manager as he or she is the one who “engages in the four functions of planning, organizing, leading, and controlling to ensure that
the product or service remains competitive in the market.” Batchoo adds that the operations manager must tap into their creative
skills as innovation will be a key factor of success as will knowledge about
international business and the myriad cultures of the businesses around the globe.

 Sustainability
In her article, business definition of operational Sustainability, Kay Miranda, journalist
for the Houston Chronicle, defines business operational sustainability as a “method of
evaluating whether a business can maintain existing practices without putting future
resources at risk.” When discussing the concept of sustainability, it is often referred to
as the Three Pillars of Sustainability which are social, environmental, and
economic. Operations managers must concern themselves with the outcome of each
of the pillars including how their work affects safety, welfare, communities, the
environment and economic sustainability.

Effective operations managers must implement best practices with a concern for all three pillars of sustainability. They also need to
initiate and verify corrective action when any outcome of one of the three pillars becomes jeopardized.
  Ethical Conduct
Education site ManagementStudyGuide.com takes special note of the role ethics plays in production. Ethics is defined as a
subset of business ethics that is “meant to ensure that the production function and/or activities are not damaging to either the
consumer or the society.” In particular organizations should consider the effects new technologies, defective services, animal
testing and business deals have on people, safety, and the environment.Unethical behavior has significantly contributed to the
demise of successful corporations like Enron, Tyco, and many varied firms doing business on Wall Street. Being ethical across all
business functions such as accounting, human resource management, marketing and sales, and production are clearly within the
purview of the operations manager. Unethical behavior, regardless of its origin, becomes a stain on the company as a whole. The
recently noted ethics breach at Wells Fargo is just one poignant example.
 Effective Communication
Being consistent and effective when communicating can be difficult anyone in any position within an organization. The challenge for
the operations manager is to be able to communicate effectively with all internal and external stakeholders. Whether they are
talking to someone on the factory floor, or in the boardroom, they must be able to effectively communicate their message as well
as process the messages being directed to them. Mastering oral, written, and non-verbal communication is integral to making day-
to-day operations run smoothly. Effective and efficient communication is also necessary for building employee morale and
deepening trust with management. Operations managers who take the time to be self-reflective, the initiative to be authentic, and
the effort to work on their communication skills are bound to be both productive and successful. The development of these skills
are frequently the most requested of upper level management of their new and mid-level managers and required to be successful
in any company.

 System Design
In Key Issues in Operations, the relationship between system design and operational management, the main theme is that
organizations must develop systems capable of “producing quality goods and services in demanded quantities in acceptable time
frames.” Designing the system, planning the system, and managing the system present a wide variety of challenges to even the
most operations managers.
As operations managers work in multidisciplinary environments, they must be aware of and effectively respond to the challenges
presented by globalization, sustainability, ethical conduct, effective communication, and system design. Doing this calls for
operations managers to excel in the business, technical, and interpersonal aspects of their work as they actively support the
mission and vision of their organization.