OPERATION MAMAGEMENT -AY ’23-24 SS

INTRODUCTION to OPERATION MANAGEMENT

MODULE 1 Proper

In the midst of the crisis that world experience in past years like the oil crises, business scandals, natural calamities like typhoon,
earthquakes , famine and present times pandemic. Hence results a negative impact on most company’s earnings. But why do some
company thrive while the others struggle or fail? There are a variety of reasons to be sire. However, an important key in a company’s
success or failure is how well it manages its operations.

1.0 Operation Management

a. Operation management is the management of that part of an organization that is responsible for producing goods and /or
services.
Examples The goods and services all around you, every video you watch, every email you send, every telephone
conversation you have, every medical treatment you receive involves the operations functions of one or more organizations
b. The operations function in business can also be viewed from a more far-reaching perspective, hence operations management
is the management of systems or processes that creates goods and/or provide services.

1.1 Three Basic Function of Business Organization

Business organizations typically have three basic functional areas finance, operations and marketing. It doesn’t matter whether the
business is a retail store, a hospital, a manufacturing firm, car wash or some other type of business; all business organizations have
these three basic functions

Organization

Finance Operations Marketing

 Finance is responsible for securing financial resources at favorable prices and allocating those resources throughout the
organizations, as well as budgeting, analyzing investment proposals, and providing funds for organizations.
  Marketing is responsible for creating the customer wants and needs, and selling and promoting the organization’s goods and
services.

 Operations is responsible for producing the goods or providing the services offered by the organization .

If a business organization were a car, operations would be its engine and just as the engine is a core of what a car does. In a
business organization, operation is the core of what the car does.
Operation management is responsible for managing the core
Hence, Operation management is the management of system or processes that create goods and /or provide services.

1.2 WHY STUDY OPERATION MANAGEMENT?

If your major field is not operation management, you may be wondering why you need to study operation management.
There are compelling reasons for studying operation management:
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 a. Fifty percent or more of all jobs are in operation management or related fields . Recall the image of a business
organization as a car, with operations as its engine. In order for a car to function properly, all of the parts must function
properly, all of the parts must work together .So too, all of the parts of the business organization must work together in order
for the organization to function successfully.
b. Working together successfully means all members of the organization understand not only of their own role, they
also understand the role of others.
This is precisely why all business students regardless of their particular major, are require to take a common core of
courses that will enable them to learn about all the aspect of business - because operation management is central to the
functioning of all business organizations.

2.0 OPERATION: CORE FUNCTION OF EVERY BUSINESS

Operation management is responsible for creating those goods and services. Organizations exist primarily to provide
services or create goods. Hence the operation is the core function of the organization. Without this core, there would be no
need for any of the other functions- the organization would have no purpose. Given the nature of its function it is not
surprising that more than half of all employed people have jobs in operation. Operation function is responsible for a major
portion of the assets in most business organization.

a. Operation Interfaces with number of supporting function

Legal Public Personnel and

Relations Human
Resource
OPERATIONS
MIS
Accounting

b. Marketing and operation are line function

c. Operation and supply chain are interdependent

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 d. Operations functions involves the conversion of inputs into outputs

3.0 SCOPE of OPERATION MANAGEMENT

Most of the activities performed by the management and employees fall into the realm of operations management:
a. Competitiveness ,Strategy and Productivity
b. Forecasting-
c. Strategic Capacity Planning for Product and Services
d. Design of work System-Scheduling
e. Inventory Management-Managing Inventories
f. Total Quality Management- Assuring Quality
g. Managing and Training Employees
h. Location Planning and Analysis
i. Supply Chain Management
j. Just in Time and Lean Operation

3.1 Other areas of Operation Function

a. Purchasing has responsibility for procurement of materials, supplies , equipment. Close contact with operation is necessary to
ensure correct quantities and timing of purchases. The purchasing department is often called to evaluate vendors for quality,
reliability, service, price, and ability to adjust changing demand. Purchasing is also involves in receiving and inspecting the
purchased goods.
b. Industrial Engineering is often concerned with scheduling, performance standards, works methods , quality control and
material handling
c. Distribution involves the shipping of goods to warehouse, retail outlets, or final customer.
d. Maintenance is responsible for general upkeep and repair of equipment, buildings and grounds, heating and air conditioning ,
removing toxic waste, parking and perhaps security

3.2 What are the kinds of jobs of an operation manager?

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Operation Manager has the ultimate responsibility for the creation of goods or provision of services. Operation manager oversee
tremendously from organization to organizations largely because of the different products or services involved.

4.0 Trends in Business

Business organization must be organized of current trends and take them into account in their strategic planning. Advances in
information technology and global competition have influence the major trends. Although different organizations have different priorities,
and hence are differently affected by various trends, a representative list of major trends includes:
a. Internet - offers great potential for business organization, but the potential as well the risk must be clearly understood in order
to determine if and how to exploit this potential. The internet has altered the way companies compete in the market place.
b. E-commerce, and e-business- involves the use of the internet to transact business. E-business is changing the way business
organizations interact with their customer and the supplier. Consumer business transaction such as buying online or
requesting information. Business to business transaction such as e-procurement represents an increasing share of e-
business. E-business is receiving increased attention from business owners and managers in developing strategies, planning
and decision making.
c. Globalization and the need for global supply chains have broadened the scope of supply chain management
d. Outsourcing is buying goods and services rather than producing goods and services within the organization.

4.1 Other Important Trends in Business

There must be greater issues that must be addressed:
a. Operation Strategy-more and more companies are recognizing the importance of operation strategy on the overall success of
the business as well as the necessity for relating it to their overall business strategy
b. Working with fewer resources due to layoffs, corporate downsizing , and general cost cutting is forcing managers to make
trade-off decisions on resource allocations, and to place increased emphasis on cost control and productivity improvement’
c. Revenue management (Yield management) is a method used by some companies to maximize the revenue they received
from fixed operating capacity by influencing demand through price manipulations
d. Process Analysis and improvement, and quality improvement-includes costs and time reduction, productivity improvement ,
process yield improvement, and quality improvement and increasing customer satisfaction-(sometimes referred to six sigma)
e. Lean production a new approach to production. It incorporates a recent trends with emphasis on quality, flexibility, time
reduction and team work. This has led to a flattened organizational structure with fewer level of management. Lean system
are highly skilled worker and flexible equipment.

LEARNING RESOURCES
Book/E-book:
 Production and Operation Management 2012 Ed. Stevenson, Sum,Mc Graw Hill Companies
 Operation Management 2009 Ed. 10th Edition William J. Stevenson,Mc Graw Hill Companies
 Fundamental Marketing in the Philippine Setting,2nd Ed .Josiah Go, Chiqui Escaller-Go.Mansmith

Online resources:

END OF MODULE 1 Introduction to Operation Management

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College of Business and Accountancy Prepared by Reynaldo N. Salvador

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San Mateo Municipal College Module 1 CBME1 Page 1

College of Business and Accountancy Prepared by Reynaldo N. Salvador