INTRODUCTION TO

OPERATIONS MANAGEMENT &

QUALITY MANAGEMENT

Unit 1
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
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What Is Operations Management?
• Operations Management
– Management of the conversion process
which transforms inputs such as raw
material and labor into outputs in the
form of finished goods and services.

Inputs Outputs
(customers Transformation Process (goods
and/or (components) and
materials) services)

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The Transformation Process within OM

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 Kinds of Transformation
• Physical as in Manufacturing
• Location as in Transportation
• Exchange as in Retailing
• Storage as in Warehousing
• Physiological as in Hospitals
• Attitudinal as in Reading
• Informational as in Entertainment

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 Input-Transformation-Output
Relationships for Typical Systems

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Product – Service Continuum

Combined
Pure Service Product & Pure Product

Service

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Most Products Are a “Bundle”
of Goods and Services

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 Goods versus Services
Goods Services

Pure Goods Core Goods Core Services Pure Services

Tangible
Intangible
Less interaction with customers
Interaction with customer required
Not perishable – can be
inventoried Perishable/time dependent

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Business Functions are Interconnected

Operations

Finance Marketing

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Productivity Calculation

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 Example
• In a car assembly shop, for a typical working shift, the revenues
earned from cars assembled (Output) = Rs. 5,00,00,000.
• Inputs required & their costs:
Raw Materials = Rs. 2,80,00,000;
Power = Rs. 50,00,000;
Manpower = Rs. 50,00,000;
Other inputs = Rs. 40,00,000.
• Calculate: (i) Total productivity for the shift
(ii) Partial productivity w.r.t. Manpower
(iii) Multifactor Productivity w.r.t. Raw Materials & Power.

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Defining Quality
• “Quality is a subjective term for which each person has his or
her own definition”(ASQ)
• Quality is conformance to requirements or specifications.
(Crosby 1979)
• Quality is fitness for use. (Juran 1974)
• The quality of a product or service is the fitness of that product
or service for meeting its intended used as required by the
customers.
• In technical usage, quality can have two meanings:
– the characteristics of a product or service that bear on its
ability to satisfy stated or implied needs, and
– a product or service free of deficiencies

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 Costs of Quality
Appraisal costs – costs of
Prevention costs – sum of
the inspection and testing
all the costs to prevent
to ensure that the product
defects
or process is acceptable

Quality
Costs

Internal failure costs – External failure costs –

costs for defects incurred costs for defects that pass
within the system through the system

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 Basic QC Tools
• Histogram
• Cause & Effect Diagram (Fishbone Diagram)
• Pareto Diagram
• Scatter Diagram
• Control Charts
• Check Sheet
• Process Flow Diagram
• Stratification

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 Definition : Total Quality Management (TQM)
A management philosophy embracing all activities
through which the needs and expectations of the
CUSTOMERS and STAKEHOLDERS, and the objectives
of the organization are satisfied in the most efficient and
cost effective manner by maximising the potential of ALL
employees in a continuing drive for improvement.

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 Total Quality Management (TQM)
• Total quality management: managing the entire
organization so that it excels on all dimensions of
products and services that are important to the
customer

• Two fundamental operational goals

– Careful design of the product or service
– Ensuring that the organization’s systems can consistently
produce the design

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 Total Quality Management (TQM)
The way of managing organization to achieve excellence
• Total – everyone, everywhere, everytime
• Quality – degree of excellence
• Management – art, act or way of organizing,
controlling, planning, directing to achieve certain goals

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Thank You

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