INDUSTRIAL

MANAGEMENT
Topic 1:
BASIC CONCEPTS IN
OPERATION MANAGEMENT
UiTM Shah Alam
Lecturer: Dr. Noor Azlina Mohd. Salleh
T1-A14-8C

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 Learning outcomes
At the end of this lesson students should be able
to :
1. Discuss the nature of production/operations
management
2. Recognize the functions of production/operations
manager
3. Compare and contrast the differences between goods
and services operation’s management
4. Identify the current trends and issues in
production/operations management

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 Operations Management (1)
• Operations Management is:
The management of systems or processes
that create goods and/or provide services

• Operations Management affects:

– Companies’ ability to compete
– Nation’s ability to compete internationally

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 Operations Management (2)

Production is the creation of goods

and services
Operations management is the set
of activities that creates value in the
form of goods and services by
transforming inputs into outputs

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 Types of Operations
Table 1.4

Operations Examples
Goods Producing Farming, mining, construction,
manufacturing, power generation
Storage/Transportation Warehousing, trucking, mail
service, moving, taxis, buses,
hotels, airlines
Exchange Retailing, wholesaling, financial
advising, renting or leasing
Entertainment Films, radio and television,
concerts, recording
Communication Newspapers, radio and TV
newscasts, telephone, satellites
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 What Operations
Managers Do
Basic Management Functions
 Planning
 Organizing
 Staffing
 Leading
 Controlling
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 Overview of Operations Management
Model

Operations management considers how the input are

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 Value-Added Process
The operations function involves the conversion of
inputs into outputs
Value added
Inputs
Transformation/ Outputs
Land
Conversion Goods
Labor
process Services
Capital
Feedback

Control
Figure 1.2
Feedback Feedback

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Value-Added and Product Packages

1. Value-added elements make the

difference between the cost of inputs and
the value or price of outputs.
2. Product packages are a combination of
goods and services.
3. Product packages can make a company
more competitive.

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 Apple Juice Factory
Table 1.2

Inputs Processing Outputs

Apples Cleaning Apple juice
Bottles Washing bottles
Water Cutting
Energy Blending
Labor Quality Inspection
Building Puoring into bottles
Equipment Labeling

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 Food Processor
Table 1.2

Inputs Processing Outputs

Raw vegetables Cleaning Canned
Metal sheets Making cans vegetables
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment

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 Hospital
Table 1.2

Inputs Processing Outputs

Doctors, nurses Examination Treated
Hospital Surgery patients
Medical supplies Monitoring
Equipment Medication
Laboratories Therapy

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 The Organization
The Three Basic Functions

Organization

Finance Operations Marketing

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 Organization

 Essential functions:
 Marketing – generates demand
 Production/operations – creates the
product
 Finance/accounting – tracks how well the
organization is doing, pays bills, collects
the money

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 Example of Organizational Charts
Manufacturing

Operations Finance/ Marketing

Facilities accounting Sales
Construction; maintenance Disbursements/ promotion
Production and inventory control credits Advertising
Scheduling; materials control Receivables Sales
Quality assurance and control Payables
General ledger Market
Supply chain management research
Funds Management
Manufacturing
Tooling; fabrication; assembly Money market
International
Design exchange
Product development and design
Detailed product specifications Capital requirements
Industrial engineering Stock issue
Efficient use of machines, space, Bond issue
and personnel and recall
Process analysis
Development and installation of Figure 1.1(C)
production tools and equipment
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 Example of Organizational Charts

Commercial Bank

Operations Finance Marketing

Teller Investments Loans
Scheduling Security Commercial
Check Clearing Real estate Industrial
Collection Financial
Transaction Accounting Personal
processing
Facilities Mortgage
design/layout
Auditing
Vault operations
Trust Department
Maintenance
Security
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 Example of Organizational Charts
Airline

Operations Finance/ Marketing

Ground support accounting Traffic
equipment Accounting administration
Maintenance Payables Reservations
Ground Operations Receivables Schedules
General Ledger Tariffs (pricing)
Facility Sales
maintenance Finance
Catering Cash control Advertising
Flight Operations International
exchange
Crew scheduling
Flying
Communications
Dispatching
Figure 1.1(B)
Management science
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 Why Study OM?

1. OM is one of three major functions

(marketing, finance, and operations) of any
organization
2. We want (and need) to know how goods and
services are produced
3. We want to understand what operations
managers do
4. OM is such a costly part of an organization

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 Manufacturing Goods/ Products or
Providing Service?

Tangible Act

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 The Goods–Service Continuum
Figure 1.3

Goods Service

Surgery, teaching

Song writing, software development

Computer repair, restaurant meal

Automobile repair, fast food

Home remodeling, retail sales

Automobile assembly, steel making

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 Key Differences:
Table 1.3 Goods vs. Service
Characteristic Goods Service
Customer contact Low High
Uniformity of input High Low
Labor content (predictable) Low High
Uniformity of output High Low
Output; production & delivery Tangible Intangible
Measurement of productivity Easy Difficult
Opportunity to correct problems;Quality High Low
Assurance
Inventory Much Little
Evaluation Easier Difficult
Patentable Usually Not usually
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 Manufacturing/ Production of Goods
vs.
Delivery of Services
1. Production of goods – tangible output
2. Delivery of services – an act
3. Service job categories
 Government
 Wholesale/retail
 Financial services
 Healthcare
 Personal services
 Business services
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 Ten Critical Decisions
Ten Decision Areas Chapter(s)
1. Design of goods and services 5
2. Managing quality 6, Supplement 6
3. Process and capacity 7, Supplement 7
design
4. Location strategy 8
5. Layout strategy 9
6. Human resources and 10, Supplement 10
job design
7. Supply chain 11, Supplement 11
management
8. Inventory management 12, 14, 16
9. Scheduling 13, 15
10. Maintenance 17 Table 1.2
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 The Critical Decisions
1. Design of goods and services
 What good or service should we offer?
 How should we design these products
and services?
2. Managing quality
 How do we define quality?
 Who is responsible for quality?

Table 1.2 (cont.)

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 The Critical Decisions
3. Process and capacity design
 What process and what capacity will
these products require?
 What equipment and technology is
necessary for these processes?
4. Location strategy
 Where should we put the facility?
 On what criteria should we base the
location decision? Table 1.2 (cont.)

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 The Critical Decisions
5. Layout strategy
 How should we arrange the facility?
 How large must the facility be to meet
our plan?
6. Human resources and job design
 How do we provide a reasonable work
environment?
 How much can we expect our employees
to produce?
Table 1.2 (cont.)
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 The Critical Decisions
7. Supply chain management
 Should we make or buy this component?
 Who are our suppliers and who can
integrate into our e-commerce program?
8. Inventory, material requirements
planning, and JIT
 How much inventory of each item should
we have?
Table 1.2 (cont.)
 When do we re-order?
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 The Critical Decisions
9. Intermediate and short–term
scheduling
 Are we better off keeping people on the
payroll during slowdowns?
 Which jobs do we perform next?
10.Maintenance
 Who is responsible for maintenance?
 When do we do maintenance?
Table 1.2 (cont.)
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 • Operations Management includes:
1. Forecasting
2. Capacity planning
3. Scheduling
4. Managing inventories
5. Assuring quality
6. Motivating and training employees
7. Locating facilities
8. Supply chain management
9. And more . . .

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 Where are the OM Jobs?

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 Trends in Business
• Major trends
1. The Internet, e-commerce, e-business
2. Management technology
3. Globalization
4. Management of supply chains
5. Outsourcing
6. Agility
7. Ethical behavior

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 Other Important Trends
1. Operations strategy
2. Working with fewer resources
3. Revenue management
4. Process analysis and improvement
5. Increased regulation and product liability
6. Lean production
7. Industrial 4.0
https://www.youtube.com/watch?v=Y990kaGbJD0
Industry 4.0 - Germany's 4th industrial revolution
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 Industrial 4.0
• The Fourth Industrial Revolution is an overarching industrial transformation that covers every aspect of
industries and economic activities including every aspect of living. It is a total transformation of all sectors into
new system and/or way of life that will change the way we do businesses. Current technological advances at
times also considered as ‘disruptive technologies’ due to the convergence of the physical, digital and
biological worlds.

• Industry 4.0 is referred to as production or manufacturing based industries digitalisation transformation, driven
by connected technologies. Industry 4.0 introduces what is referred to as “smart factory” in which cyber
physical systems monitor real time physical progress of the factory and are able to make decentralized
decisions. Other terminology includes Smart Manufacturing. Some regard Industry 4.0 as a subset of the
Fourth Industrial Revolution.

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 Industrial 4.0

The nine (9) technology drives/pillars are:

• Autonomous Robots
• Big Data Analytics
• Cloud Computing
• Internet of Things (IoT)
• Additive Manufacturing (3D Printing)
• System Integration
• Cybersecurity
• Augmented Reality
• Simulation.

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 Industrial 4.0
• Different countries are using different terms to describe
their national strategy in terms of Industry 4.0. Among
other terms used include:
• “Smart Manufacturing” in the United States;
• “Made in China 2025” for China;
• “Manufacturing Innovation 3.0” (South Korea);
• “Industrial Value Chain Initiative” Japan; and
• “Smart Nation Programme” (Singapore)

• Benefits of industries moving in to Industry 4.0 are:

Increase in flexibility;Increased productivity, efficiency,

quality and reduced time to market; More R&D&D activities; 39
and Development of new skills and talent globally.
 Ethical Issues
1. Financial statements
2. Worker safety
3. Product safety
4. Quality
5. Environment
6. Community
7. Hiring/firing workers
8. Closing facilities
9. Worker’s rights

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 Learning outcomes
At the end of this lesson students should be able
to :
1. Discuss the nature of production/operations
management
2. Recognize the functions of production/operations
manager
3. Compare and contrast the differences between goods
and services operation’s management
4. Identify the current trends and issues in
production/operations management

4/11/2018 NY_MEM 575: Courtesy of Mc Graw Hills & 41

Pearson-Prentice Hall