Introduction
During the early part of the
Operations management is commonly defined
as the administration of the processes used in
the production of goods and services. All
businesses depend on operations
management for its success. A company can
assemble a great marketing team only to fail
because its product could not deliver what was
promised in the advertisement. A product can
be a good or a service. Many organizations
today provide both. The operations department
is managed by the operations manager who
ensures that the company produces its
product/s according to set standards. World-
class companies like Ford Motors attribute its
success to an effective and efficient operations
management.
History of Operations Management
“Systems for production have existed since
ancient times. The Great Wall of China, the
Egyptian pyramids, the ships of the Roman and
Spanish empires, and the roads and aqueducts
of the Romans provide examples of the human
ability to organize for production. The
production of goods for sale and the modern
factory system had their roots in the Industrial
Revolution.
The Industrial Revolution began in the 1770s in
England and spread to the rest of Europe and
to the United States during the nineteenth
century. Prior to that time, goods were
produced in small shops by craftsmen and their
apprentices. Only simple tools were available;
the machines that we use today had not been
invented. Then, a number of innovations
changed the face of production forever by
substituting machine power for human power.
Perhaps, the most significant of these was the
steam engine, made practical by James Watt
around 1764, because it provided a source of
power to operate machines in factories. Ample
supplies of coal and iron ore provided materials
for generating power and making machinery.
Despite the major changes that were taking
place, management theory and practice had
not progressed much from early days. What
was needed was an enlightened and more
systematic approach to management.
In the earliest days of manufacturing, goods
were produced using craft production (system
in which highly skilled workers use simple,
flexible tools to produce small quantities of
customized goods) highly skilled workers using
simple, flexible tools produced goods according
to customer specifications.
The scientific-management era brought
widespread changes to the management of
factories. The movement was spearheaded by
the efficiency engineer and inventor Frederick
Winslow Taylor, who is often referred to as the
father of scientific management. Taylor
believed in a science of management based on
observation, measurement, analysis and
improvement of work methods and economic
incentives.
twentieth century, automobiles were just
coming into vogue in the United States. Ford’s
Model T was such a success that the company
had trouble keeping up with the order for the
cars. In an effort to improve the efficiency of
operations Ford adopted the scientific
management principles espoused by Frederick
Winslow Taylor. Ford also introduced the
moving assembly line. A second concept used
by Ford was the division of labor, which Adam
Smith wrote about in the Wealth of Nations.
A number of other pioneers also contributed
heavily to this movement, including the
following:
 Frank Gilbreth was an industrial
engineer who is often referred to as the
father of motion study. He developed
principles of motion economy that could
be applied to incredibly small portions
of a task.
 Henry Gantt recognized the value of
nonmonetary rewards to motivate
workers, and developed a widely used
system for scheduling, called Gantt
charts.
 Harrington Emerson applied Taylor's
ideas to organization structure and
encouraged the use of experts to
improve organizational efficiency. He
testified in a congressional hearing that
railroads could save a million dollars a
day by applying principles of scientific
management.
 Henry Ford, the great industrialist,
employed scientific management
techniques in his factories.
Whereas the scientific-management movement
heavily emphasized the technical aspects of
work design, the human relations movement
emphasized the importance of human element
in job design. During the 1930s, Elton Mayo
conducted studies at the Hawthorne division of
Western Electric. His studies revealed that in
addition to the physical and technical aspects
of work, worker motivation is critical for
improving productivity. During the 1940s,
Abraham Maslow developed motivational
theories, which Frederick Hertzberg refined in
the 1950s. Douglas McGregor added Theory X
and Theory Y in the 1960s. These theories
represented the two ends of the spectrum of
how employees view work.
Whereas the scientific management movement
heavily emphasized the technical aspects of
work design, the human relations movement
emphasized the importance of the human
element in job design. The scientific
management movement primarily focused on
the technical aspects of work design while the
human relations movement emphasized the
importance of the human element in job
design. Lillian Gilbreth, a psychologist,
collaborated with her husband Frank Gilbreth,
and studied the human factor in work,
particularly worker fatigue in the 1920s. In the
following years, there was a significant
emphasis on worker motivation. Elton Mayo
conducted studies in the 1930s at Western
Electric, which revealed that motivation plays a
crucial role in improving productivity. In the
1940s, Abraham Maslow developed
motivational theories that were later improved
by Frederick Hertzberg in the 1950s. Douglas
McGregor introduced Theory X and Theory Y
in the 1960s, which depicted the opposite ends
of how employees view work. Theory X
assumes that workers dislike work and need to
be controlled through rewards and punishment
to perform well, which was prevalent in some
industries, but was later reconsidered due to
global competition. Theory Y, on the other
hand, assumes that workers enjoy their work
and become committed to it. The Theory X
approach resulted in a hostile work
environment, whereas the Theory Y approach
led to empowered and cooperative workers. In
the 1970s, William Ouchi introduced Theory Z,
which combined the Japanese approach of
lifetime employment, problem-solving and
consensus building with the traditional Western
approach of short-term employment,
specialists, and individual decision-making and
responsibility.
The factory movement in the early 20th century
was accompanied by the development of
several quantitative techniques for managing
industrial processes. One of the first models
developed was by F. W. Harris in 1915, which
was a mathematical model for determining the
optimal order size for inventory. In the 1930s,
H. F. Dodge, H. G. Romig, and W. Shewhart at
Bell Telephone Labs developed statistical
procedures for sampling and quality control.
L.H.C. Tippett conducted studies in 1935 that
provided the foundation for statistical-sampling
theory.
Initially, these quantitative models were not
widely adopted in industry. However, the
pressures of World War II on manufacturing
output led to increased use of these techniques
to improve efficiency and output. After the war,
efforts to develop and refine these quantitative
tools for decision making continued, resulting in
decision models for forecasting, inventory
management, project management, and other
areas of operations management.
During the 1960s and 1970s, management
science techniques were highly regarded in the
industry. However, their popularity waned in
the 1980s. The widespread use of personal
computers and user-friendly software in the
workplace in the 1990s and 2000s helped to
revive the use of these techniques, making
them more accessible and easier to implement
for companies of all sizes.
Computers have had an enormous influence
on the practice of operations management,
particularly in scheduling and inventory control.
Because they are capable of rapid, error-free
computations and keeping track of thousand of
bits of information with instantaneous retrieval,
computers have had a major impact on
operations management. Moreover, the
growing availability of software packages
covering virtually every quantitative technique
has greatly increased management’s use of the
computer,” (Stevenson, 2017).
Below refers to the table presenting a timeline
of important events and advancements in the
history of operations management.
Span of Operations Management
The operations manager is responsible for the
management of the following areas needed in
production: (1) demand forecasting; (2) product
design; (3) capacity management; (4) process
selection; (5) facility layout; (6) inventory
management; (7) location; (8) scheduling and
(9) quality management. There is
interdependence among the areas. A failure in
one area will lead to failure in another. The
operations manager should plan and execute
well to produce a quality product that the
company can offer to its customers.
Operations management encompasses many
aspects of an organization, including product
and service design, process selection,
technology management, work system design,
location planning, facility planning, and quality
improvement. The operations function includes
a wide range of interrelated activities, such as
forecasting, capacity planning, scheduling,
inventory management, quality assurance,
employee motivation, and facility location. An
example of a service organization's operations
system can be seen in an airline company,
which includes airplanes, airport facilities, and
maintenance facilities. These activities include
forecasting demand, capacity planning,
facilities and layout, scheduling, inventory
management, quality assurance, employee
motivation, and facility location. On the other
hand, a bicycle factory is a different type of
operation, primarily involving assembly of
components and some fabrication work. Key
management tasks include scheduling
production, deciding on components to make
or buy, ordering parts and materials,
determining the style and quantity of bicycles to
produce, purchasing new equipment,
maintaining equipment, motivating workers,
and ensuring quality standards are met. Both
types of operations have similarities such as
scheduling, employee motivation, inventory
management, equipment maintenance, and
quality assurance, with the goal of satisfying
customers. The success of both types of
operations depend on short-term and long-term
planning.
The operations function encompasses all
activities directly related to the production of
goods or provision of services, and can be
found in both manufacturing and service-
oriented industries. The role of an operations
manager is to make decisions that guide the
system, both in terms of design and operation.
Decisions related to system design include
capacity, location, layout, product and service
planning, and equipment acquisition, which
often require long-term commitments and are
considered strategic. Decisions related to
system operation include management of
personnel, inventory, scheduling, project
management, and quality assurance, which are
generally tactical and operational. The
operations manager plays a crucial role in
system design, as it ultimately determines
factors such as costs, space, capacities, and
quality. They may not make all design
decisions, but they can provide relevant
information to decision-makers.
It is the operations manager's responsibility to
oversee the production and delivery of goods
or services in the organization. Management is
the core job of an operations manager,
regardless of the type of industry or
organization.
Manufacturing and service industries play
important roles in the economy. Service
sectors are the considered largest industry in
the country with a stunning growth of 9.2
percent in 2022 , Among the top five
contributors to growth in Services were
Financial and insurance activities, which
increased by 9.8 percent; Transportation and
storage, 19.2 percent; Professional and
business services, 10.0 percent; and
Accommodation and food service activities,
36.1 percent. In addition, service sector
workers are on the rise, while manufacturing
workers are on the decline. This decline in
manufacturing jobs is due to advancements in
technology and productivity allowing for fewer
workers to produce the same or even more
output, as well as companies outsourcing
manufacturing to other countries with lower
labor costs. These topics will be discussed
further in later chapters.
I. Production of Goods versus Delivery of
Services
While goods and services frequently go hand in
hand, there are some very simple differences
between the two, differences that have an
effect on the management of the portion of
goods versus the management of the portion of
services. There are also a lot of parallels
between the two.
Production of products results in visible
performance, such as cars, eyeglasses, golf
balls, refrigerators—anything we can see or
touch. It can take place in a warehouse, but it
can happen elsewhere. Farming, for example,
creates non-manufactured products. On the
other hand, service delivery usually requires an
act. Examples of services include a doctor's
consultation, TV and vehicle repair, lawn care,
and film screening in a theatre.
To further differentiate Good and Services
Goods are physical items that include raw
materials, parts, subassemblies, and final
products.
 Automobile
 Computer
 Oven
 Shampoo
Services are activities that provide some
combination of time, location, form or
psychological value.
 Air travel
 Education
 Haircut
 Legal counsel
Products are typically neither purely service- or
purely goods-based. Many factors affect the
design and management of operations
systems. Among them is the degree of
involvement of customers in the process and
the degree to which technology is used to
produce and/or deliver a product or service.
The greater the degree of customer
involvement, the more challenging it can be to
design and manage the operation.
Technology choices can have a major impact
on productivity, costs, flexibility, and quality and
customer satisfaction.
Note: The greater the degree of customer
involvement, the more challenging it can be to
design and manage the operation
Manufacturing and Service Organizations differ
chiefly because manufacturing is goods-
oriented and service is act-oriented.
 1.Degree of customer contact
 2.Uniformity of input
 3.Labor content of jobs
 4.Uniformity of output
 5.Measurement of productivity
 6.Production and delivery
 7.Quality assurance
 8.Amount of inventory
 9.Evaluation of work
 10.Ability to patent design
II.Role of the Operations Manager – as to
function.
A primary function of the operations manager is
to guide the system by decision making. they
are consists of:
 System Design Decisions
 System Operation Decisions
System Design Decisions - These are typically
strategic decisions that usually require a long-
term commitment of resources to determine
parameters of system operation
System Operation Decisions - These are
generally tactical and operational decisions.
Examples are:
 Management of personnel
 Inventory management and control
 Scheduling
 Project management
 Quality assurance
Operations managers spend more time on
system operation decisions than any other
decision area and they still have a vital stake in
system design.
Lastly, the operations manager is the key figure
in the system.
III. Role of the Operations Manager – as to
Supply and Demand
Supply Chains and operations sides deal with
the supply and the sales and marketing on the
demand.
Note:
 if Supply > demand = Wasteful and
CostlyWasteful, Costly
 if Supply < demand = Opportunity
Loss , Customer Dissatisfaction
 if Supply = demand = Ideal for the
organization.
IV. Role of the Operations Manager – as to
Supply Chain
Supply Chain – a sequence of activities and
organizations involved in producing and
delivering a good or service
Supply chains are both external and internal to
the organization. The external parts of a supply
chain provide raw materials, parts, equipment,
supplies, and/or other inputs to the
organization, and they deliver outputs that are
goods to the organization’s customers. The
internal parts of a supply chain are part of the
operations function itself, supplying operations
with parts and materials, performing work on
products and/or services, and passing the work
on to the next step in the process.
The figure above provides another illustration
of a supply chain: a chain that begins with
wheat growing on a farm and ends with a
customer buying a loaf of bread in a
supermarket. Notice that the value of the
product increases as it moves through the
supply chain
V. Role of the Operations Manager – as
to Transformation Process
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 (e.g., storing, transporting,
repairing).
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).
The essence of the operations function is
to add value during the transformation
process is the term used to describe the
difference between the cost of inputs and the
value or price of outputs. In nonprofit
organizations, the value of outputs (e.g.,
highway construction, police, and fire
protection) is their value to society; the greater
the value-added, the greater the effectiveness
of these operations. In for-profit organizations,
the value of outputs is measured by the prices
that customers are willing to pay for those
goods or services.
Firms use the money generated by value-
added for research and development,
investment in new facilities and equipment,
worker salaries, and profits. Consequently, the
greater the value-added, the greater the
number of funds available for these purposes.
Value can also be psychological, as
in branding.
Module 2
Introduction
A business can effectively compete in the
marketplace with a good product and service
design. A product that the company can
produce efficiently and satisfies the needs or
wants of customers is certain to bring profits.
Designing products is process that a company
should continuously do to achieve long-term
success and is commonly done through a
research and development department.
A new design for a product can be proposed by
the company’s owner, employee, customer and
supplier. It can even be inspired by a
competitor’s product. The company should be
open to accepting new ideas and should be
willing to invest in its research and
development. Successful companies are
known to make their research and
development department work with operations
and purchasing departments to ensure that
products in development can be produced by
the company’s facilities and that the
components needed can be sourced from
suppliers.
Concepts in Product and Service Design
Reverse Engineering is when a product is
deconstructed to determine how it was made
and what are its parts. Companies that intend
to follow a competitor’s product do this.
Standardization is using the same parts for
different products of the company. It is
commonly used to save on costs and simplify
purchasing of components.
Robust Design is drawing up a product that is
more durable and long-lasting even when used
in tough conditions or subjected to harsh
conditions.
Concurrent Engineering is the collaboration of
design, production and purchasing staff in the
development of a new product to ensure its
viability.
of the majority of people, who have limited
incomes and limited living spaces. This is how
IKEA succeeds in offering well-designed,
functional products at prices so low that most
people can afford them. In order to make
products saleable and right for the IKEA
identity, IKEA co-workers in product design and
product development focus on price and
quality, design and function, environment and
health. They scrutinise every product idea with
regard to the best use of raw materials and
manufacturing opportunities,”
Summary

Computer-Aided Design is the use of a A business can effectively compete in the

computer-software to draw and view a new marketplace with a good product and service
product. design. A new design for a product can be
proposed by the company’s owner, employee,
Quality Function Deployment is an approach customer and supplier. It can even be inspired
wherein customers’ suggestions are factored-in by a competitor’s product. The important
in the design of the product. concepts in product and service design are: (1)
reverse engineering, (2) standardization, (3)
Remanufacturing is the reconditioning of a robust design, concurrent engineering, (4)
used product by replacing its worn-out parts computer-aided design, (5) quality function
with new ones. deployment, (6) remanufacturing, and (7)
customer contact. A product’s design may also
Customer Contact means that the service evolve as it goes through its lifecycle.
provider will directly interact with the customer
in the process of giving the service. The Quality Function Deployment
service design should be based on the service
strategy of the company. A Quality Function Deployment is an approach
that integrates the “voice of the customer” into
Product Life Cycle and Product Design both product and service development. The
purpose is to ensure that customer
“Many new products and services go through a requirements are factored into every aspect of
life cycle in terms of demand. When an item is the process. Listening to and understanding
introduced, it may be treated as a curiosity. the customer is the central feature of QFD.
Demand is generally low because potential Lastly, it is considered a quality tool used in
buyers are not yet familiar with the item. Many quality management.
potential buyers recognize that all of the bugs
have probably not been worked out and that Basic QFD (refer to the image below)
the price may drop after the introductory
period. Production methods are designed for
low volume. With the passage of time, design
improvements usually create a more reliable
and less costly product. Demand then grows
for these reasons and because of increasing
awareness of the product or service. Higher
production volume will involve different
methods and contribute lower costs. At the
next stage in the life cycle, the product or
service reaches maturity: there are few, if any,
design changes, and demand levels off.
Eventually, the market becomes saturated,
which leads to a decline in demand. In the last
stage of a life cycle, some firms adopt a
defensive research posture whereby they
attempt to prolong the useful life of a product or
service by improving its reliability, reducing
costs of producing it, redesigning it, or
changing the packaging,” (Stevenson, 2017).

Case: Ikea’s Design and Product

Development

“The design of home furnishings products at

IKEA starts with an understanding of people’s
everyday needs at home, especially the needs
The more elaborate and comprehensive QFD
(otherwise known as House of Quality)
The structure of QFD is based on a set of
matrices. Quality Function Deployment
encompasses the following matrices:
1. Customer requirements (wants)
Technical Requirements (how)
2. Competitive Assessment (Competitive
evaluation/technical benchmark)
3. Design Requirement (Product
characteristics)
4. Relationship matrix`
5. Specifications (Trade-off matrix) Adding
trade-offs, targets & developing product
specifications
6. Target Values (Setting Targets)
An example QFD used in determining
consumer wants in a Printer (refer to the image
below)
An analysis using this format is shown in the
figure above. The data relate to a commercial
printer (customer) and the company that
supplies the paper. At first glance, the display
appears complex. It contains a considerable
amount of information for product and process
planning. Therefore, let's break it up into
separate parts and consider them one at a
time. To start, a key part is the list of customer
requirements on the left side of the figure.
Next, note the technical requirements, listed
vertically near the top. The key relationships
and their degree of importance are shown in
the center of the figure. The circle with a dot
inside indicates the strongest positive
relationship; that is, it denotes the most
important technical requirements for satisfying
customer requirements. Now look at the
“importance to customer” numbers that are
shown next to each customer requirement (3 is
the most important). Designers will take into
account the importance values and the
strength of correlation in determining where to
focus the greatest effort.
Next, consider the correlation matrix at the
top of the “house.” Of special interest is the
strong negative correlation between “paper
thickness” and “roll roundness.” Designers will
have to find some way to overcome that or
make a trade-off decision.
On the right side of the figure is a competitive
evaluation comparing the supplier's
performance on the customer requirements
with each of the two key competitors (A and B).
For example, the supplier (X) is worst on the
first customer requirement and best on the third
customer requirement. The line connects the X
performances. Ideally, design will cause all of
the Xs to be in the highest positions.
Across the bottom of the figure are importance
weightings, target values, and technical
evaluations. The technical evaluations can be
interpreted in a manner similar to that of the
competitive evaluations (note the line
connecting the Xs). The target values typically
contain technical specifications, which we will
not discuss. The importance weightings are the
sums of values assigned to the relationships
(see the lower right-hand key for relationship
weights). The 3 in the first column is the
product of the importance to the customer, 3,
and the small (Δ) weight, 1. The importance
weightings and target evaluations help
designers focus on desired results. In this
example, the first technical requirement has the
lowest importance weighting, while the next
four technical requirements all have relatively
high importance weightings.
QFD – The house of quality sequence
The house of quality approach involves a
sequence of “houses,” beginning with design
characteristics, which leads to specific
components, then production processes, and
finally, a quality plan. The sequence is
illustrated in the figure above. Although the
details of each house are beyond the scope,
This house of quality sequence provides a
conceptual understanding of the progression
involved.