Chapter-1
Introduction to Operations Management
What is Operations?
• Operations is that part of a business organization that is responsible for
producing goods and/or services.
• Goods are physical items that include raw materials, parts, subassemblies such
as motherboards that go into computers, and final products such as cell
phones and automobiles.
• Services are activities that provide some combination of time, location, form,
or psychological value.
Operations management & Supply Chain
• Operations management is the management of systems or processes that
create goods and/or provide services.
• A supply chain is the sequence of organizations—their facilities,
functions, and activities—that are involved in producing and delivering a
product or service.
Transformation Process
• Goods or services are created by converting inputs into outputs.
• Inputs may include:
o Capital: This means money or physical assets (like machinery, tools, and
buildings) used to run the business and make products.
o Labor: This is the human effort — both physical and mental — used in
the production process. Workers, managers, engineers, etc., are all labor.
o Information: Data and knowledge used to make decisions and guide the
process. For example, customer orders, market trends, or production
schedules.
• These inputs are used through one or more transformation processes, such as:
o Storing: Keeping materials, parts, or finished goods in warehouses or
storage areas until they are needed or shipped. Example: Keeping phones
in a warehouse before they are sent to stores.
o Transporting: Moving goods from one place to another — within a
factory, between suppliers, or to customers. Example: Delivering raw
materials from a supplier to a factory.
o Repairing: Fixing broken or faulty products or machinery to make them
useful again. Example: Repairing a machine on an assembly line so
production can continue.
• Throughout the process, organizations:
o Take measurements at various points (feedback)
o Compare results with pre-established standards
o Decide whether corrective actions are needed (control) to achieve the
desired outputs.
Production of Goods vs Delivery of services
Scope of operations Management
• Forecasting: Predicting future needs for products, materials, and resources.
• Capacity Planning: Making sure the business can handle demand efficiently
without wasting resources.
• Facilities and Layout: Organizing machines and equipment properly to use
space and resources well.
• Scheduling: Planning when and how to use machines, spaces, and people
effectively.
• Managing Inventories: Keeping the right amount of stock to avoid extra costs.
• Motivating and Training Employees: Keeping workers motivated and giving
them the right training to do their jobs well.
• Locating Facilities: Choosing the best places to set up factories or offices by
considering costs and convenience.
Operations Today
Technology and global competition have changed how companies operate and
compete, especially through the use of the Internet.
• E-business: Using the internet to run a business. It changes how companies
deal with customers and suppliers.
• E-commerce: The part of e-business where people buy things or get info
online. It also includes business-to-business deals like online purchasing
between companies.
• Technology: Using science to make better products or services. It includes
tools, knowledge, and methods. High technology means the latest and most
advanced tools and techniques.
Operations management is primarily concerned with three kinds of technology:
product and service technology, process technology, and information technology
(IT).
• Product and Service Technology: This is about creating new products or
services. Researchers and engineers work on new ideas using science and turn
them into useful things people can buy or use.
• Process Technology: This involves the ways and tools used to make products
or deliver services. It includes how things are done inside a company and how
they work with others in the supply chain.
• Information Technology (IT): This is about using computers and electronics to
handle information — like saving, processing, and sharing data.
Elements of Supply chain
Productivity
One of the primary responsibilities of a manager is to achieve productive use of an
organization’s resources. The term productivity is used to describe this.
Productivity is an index that measures output (goods and services) relative to the
input (labor, materials, energy, and other resources) used to produce it. It is usually
expressed as the ratio of output to input:
Productivity = Output / Input
Productivity Growth: Productivity growth is the increase in productivity from one
period to the next relative to the productivity in the preceding period.
Current Productivity − Previous Productivity
Productivity Growth = X 100
Previous Productivity
Computing Productivity
Productivity measures can be based on a single input (partial productivity), on more
than
one input (multifactor productivity), or on all inputs (total productivity).
Computing Productivity (Example)
Factor affecting Productivity
1. Standardizing processes and procedures wherever possible to reduce mistakes
and boosts both work speed and quality.
2. Quality differences may distort productivity measurements. For example,
factories today produce better-quality goods than 30 years ago, but it's hard to
include that improvement in productivity numbers.
3. Use of the Internet can lower costs of a wide range of transactions, thereby
increasing productivity.
4. Computer viruses can slow down or stop work, causing a big drop in
productivity.
5. Searching for lost or misplaced items wastes time, hence negatively affecting
productivity.
6. Scrap rates or producing damaged goods shows poor use of materials and
reduces productivity.
7. New workers usually work slower than experienced ones, so fast-growing
companies may see a drop in productivity at first.
8. When workers leave, it takes time for new ones to learn the job, which lowers
productivity.
9. How a workspace is set up affects how well people work. For example, keeping
tools nearby helps them work faster and better.
