OPERATIONS MANAGEMENT

Management of systems or processes

that create goods and or services.

What is Management ?
getting things done thru other
people
 GOODS
SERVICES
Output Tangible Intangible
Uniform Output High Low
Labor Content Low High
Customer Contact Low High
Measure Productivity Easy Difficult
Chance to Correct
Quality Problem High Low
OPERATIONS MANAGER’S JOB

Systems Design
how much capacity is needed
good location due to lowest cost
product design - customer wants
work system – productivity
layout – arrangement of
machines
OPERATIONS MANAGER’S JOB

Systems Operations
inventory – how much to order
Scheduling – who’ll do the job
quality control- performance
against standard
Why study Prod & Ops
Mgt?
 POM is at the core of all business
organization

 50% or more of all jobs are in POM

related areas

 All other areas of business

organization are related to POM
 Historical Evolution of Prod & Ops
Mgt
 INDUSTRIAL REVOLUTION
1. Craft Production- highly skilled worker
using simple tools(custom-made)
2. Development of Standard Gauging
System- interchageable parts
3. Substitute Machine Power to Human
Power
4. Economies of Scale- cost decrease as
volume increase
 DESCRIPTION
CRAFT PRODUCTION
1. high variety customized output
2. Few highly skilled worker to
complete entire unit of output
MASS PRODUCTION
1. High volume of standard output
2. Division of Labor, specialized
equipment, interchageable part.
EXAMPLES OF GOODS & SERVICES

CRAFT PRODUCTION
Landscaping, Tailoring,
Diagnosis and Treatment of
injuries, surgery.
MASS PRODUCTION
Automobile, Computers, mail
sorting
 ADVANTAGES

CRAFT PRODUCTION
More choices; tailored to
customer needs.

MASS PRODUCTION
low cost per unit; requires low
skilled workers
 DISAVANTAGES

CRAFT PRODUCTION
slow; high cost; requires high
skilled workers

MASS PRODUCTION
rigid system; volume at expense
of quality
Historical Evolution of Prod & Ops
Mgt

 SCIENTIFIC MANAGEMENT
1. Taylor’s Best Method of Doing Things-based
on observation, measurement, analysis,
improvement and economic incentives.
(abuse the worker)
2. Henry Ford’s Mass Production: Division of
Labor, Interchangeable
3. Workers are Regarded as Robots
Historical Evolution of Prod & Ops
Mgt
 HUMAN RELATIONS MOVEMENT
1. Lilian Gilbreth- human factors in work
2. Maslov’s Motivational Theory-
physiological, safety, recognition
3. McGregor’s Theory X & Theory Y- how
employee view work
4. Ouchi’s Theory Z- lifetime employment,
problem solving, consensus
Historical Evolution of Prod & Ops
Mgt

 MANAGEMENT SCIENCE
1. Quantitative Technique - W W II
2. Use of Computers
Historical Evolution of Prod & Ops
Mgt

 INFLUENCE OF JAPANESE MFG

1. Started the Quality Revolution
2. Characteristics:
Continuous Improvement
Worker Empowerment
Customer Satisfaction
 BUSINESS

O M
F P A
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N R K
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 BUSINESS

O M
F P A
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N R K
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 OPERATIONS

CORE of business organizations

- responsible for creation of goods
and services
 BUSINESS

O M
F P A
I E R
N R K
A A E
N T T
C I I
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 FINANCE

Securing resources and allocating

them throughout the
organization.
 BUSINESS

O M
F P A
I E R
N R K
A A E
N T T
C I I
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N G
S
 MARKETING

Focus on promotion and selling

goods and services.
 BUSINESS

O M
F P A
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N R K
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C I I
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 PURCHASING

Procurement of materials, supplies

and equipments.
 HUMAN RESOURCES

Recruitment and training of

personnel.
 MAINTENANCE

Repair of
equipment,
buildings
and
grounds.
 INDUSTRIAL ENGINEERING

Scheduling, performance standard,

work methods and quality
control.
 PUBLIC RELATIONS

Maintaining
positive
public
image.
 OPERATIONS
Activities directly related to producing goods and
/or providing services

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 ENVIRONMENT
Things that are outside the production
system but influences it.
1. CUSTOMERS – changes in needs/wants
2. GOVT REGULATIONS – product safety
3. COMPETITORS – new product
4. TECHNOLOGY - new advances
5. SUPPLIERS – supply and prices
6. ECONOMY - inflation
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 INPUT (M’s)

1. EQUIPMENT – tools
2. SUPPLY – things
3. CAPITAL – fund
4. LABOR – knowledge & skills
5. TIME – available for operations
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 TRANSFORMATION
1. ALTER – change into a new form
 Physical Change – cut, assemble,
formed, etc
 Sensual Change – cold into heat,
beauty, music, etc
 Psychological Change – feeling of
worth, feeling of friendship
 TRANSFORMATION

2. TRANSPORT – more value if there

is change of location

 Brought to us – delivery of goods

 Removed from us – disposal of

waste
 TRANSFORMATION

3. STORAGE – keep in safe place

 Warehouse
 Bank
 Day Care
 Hotel
 TRANSFORMATION
4. INSPECTION – evaluate properties
before purchase

 Safety Certificate
 Quality Standard
 Appraisal Value
 Medical Examination
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 OUTPUT
1. PRODUCTS – physical goods
2. SERVICES – abstract or nonphysical

All value-adding transformations are

services, there may or may not be a set
of accompanying facilitating goods.
 ENVIRONMENT

INPUT CONVERSI OUTPUT

Land, ON Goods
Process
Labor Services
Capital

CONTR
OL
 MONITORING AND CONTROL

MONITORING – must tell the manager

when changes(errors) are occurring
in any part of production system

CONTROL - manager must apply

corrective actions to alter the input
or transformation system
 OPERATIONS MANAGERS AND
DECISION MAKING (TOOLS)

1. MODELS
Simplified version of something:
PHYSICAL – looks like their real life;
miniature cars, airplane,..
SCHEMATIC – less resemblance;
pictures, drawings,…
MATHEMATICAL- don’t look alike;
formulas, symbols, …
 OPERATIONS MANAGERS AND
DECISION MAKING

1. MODELS
Advantages:
 Easy to use and less expensive
than when dealing with actual
 bring the power of mathematics
 Better understanding of the
problem
 OPERATIONS MANAGERS AND
DECISION MAKING

2. QUANTITATIVE APPROACHES
Mathematical optimum allocation of
scarce resources.
Linear Programming, Queuing
Techniques, Inventory Models,
Forecasting Techniques, PERT-CPM

.
 OPERATIONS MANAGERS AND
DECISION MAKING

3. ANALYSIS OF TRADE-OFF
Considers the pros and cons of a
certain course of action to
determine the consequences of the
decision.
Example:
overtime vs quality
inventory vs customer service
 OPERATIONS MANAGERS AND
DECISION MAKING

4. SYSTEMS APPROACH
The whole is greater than the sum of
its individual parts.
The objective of the organization as
a whole takes precedence over those
of any one system.
example:
Optimal solution vs
dept/division/plant
 OPERATIONS MANAGERS AND
DECISION MAKING

5. ESTABLISHING PRIORITIES
Certain elements are more
importance than others.
Effort must be directed where
they will do the most good and to
avoid wasting time and energy on
insignificant elements.
 OPERATIONS MANAGERS AND
DECISION MAKING

5. ESTABLISHING PRIORITIES
example:
PARETO PHENOMENON
Some things (few) are more
important for achieving the
objective and others (many) are
not.
 OPERATIONS MANAGERS AND
DECISION MAKING
6. ETHICS
Ethical issues arise in many aspects of operations:
worker’s safety- good working environment
quality- avoid hidden defects
community- good neighbor
don’t harm the environment

- don’t do things that will harm the environment