Operations

Management
(TQM)

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
 INTRODUCTION
 The success of companies in the global marketplace depends on their
ability to provide quality products and services at competitive prices.
 Companies have begun to recognize that their futures depend on the
effectiveness and efficiency of their manufacturing operations and
operations management is crucial to the long-run competitiveness of the
company
 Industries continuing struggle to compete effectively I the international
marketplace has increasingly focused on operation as the principal path to
industrial resurgence.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
WHAT IS OPERATIONS
MANAGEMENT?
 activities that relate to the creation of goods and
services through the transformation of inputs and
outputs.
 encompasses the body of knowledge concerning
management of the day-to-day operations of any
type of company, whether the company is primarily a
producer of physical goods or a provider of intangible
services.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
FUNCTIONS WITHIN BUSINESS
ORGANIZATIONS
A typical business organization has three basic
functions:
1. Production/Operation
2. Finance
3. Marketing

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
PRODUCTION/OPERATIONS
The operational function consists of all activities
directly related to producing goods or providing
services.
The production function exist not only in
manufacturing and assembly operations, which are
goods oriented, but also in areas such as health care,
transportation, food handling, and retailing with one
primarily service-oriented.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
PRODUCTION/OPERATIONS
The operations function is the core most of business
organizations;
it is responsible for the creation of an organization’s
goods or services.
Inputs are used to obtain finished goods or services
using one or more transformation process.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
PRODUCTION/OPERATIONS
To ensure that the desired outputs are obtained,
measurements are taken at various points in the
transformation process (feedback) and then
compared with previously established standards to
determine whether corrective action is needed
(control)

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
 The Operations Function
involves the conversion of
inputs into outputs

Value-added – is the difference between the cost of inputs and the value or price of outputs.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
 FINANCE
 The finance function comprises activities related to securing
resources at favorable prices and allocating those resources
throughout the organization.
 Finance and operations management personnel cooperate
by exchanging information and expertise in such activities as:
1. Budgeting
2. Economic analysis of investment proposals
3. Provisions of funds
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
 MARKETING
Marketing consist of selling and/or promoting the goods or
services of an organizations. Some of the duties and functions
of marketing people are as follows:
1. Marketing people make advertising and pricing decisions.
2. Responsible for assessing customer wants and needs.
3. Communicating information to operations people and to
design people.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
 Marketing, design and production must work closely
to successfully implement design changes and to
develop and produce new products.
 One important piece of information marketing
needs from operation is the manufacturing or
service lead-time in order to give customers realistic
estimates of how long it will take to fill their orders.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
Marketing, Operations
And Finance must
interface on product
and process design,
forecasting, setting
realistic schedules,
quality and quantity
decisions, and keeping
each other informed
on the other’s
strength and
weaknesses.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
 OTHER FUNCTIONS (External)
There are host of other supporting function that interface with
operations, finance, and marketing. Among them are:
1. Accounting – has responsibility for preparing the financial
statements, including the income statement and balance sheet. It
also supplies information to management on cost of labor, materials,
and overhead, and may provide reports on items such as scrap,
downtime, and inventories. It must keep track of receivables,
payables, and insurance cost, and prepare tax statements for the
firm.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
2. Purchasing – has responsibility for procurement of
materials, supplies, and equipment. Close contact
with operations is necessary to ensure correct
quantities and timing of purchases. The purchasing
department is often called on to evaluate vendors for
quality, reliability, service, price, and ability to adjust
to changing demand. Purchasing is also involved in
receiving and inspecting the purchased goods.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
3. Personnel Department – is concerned with
recruitment and training of personnel, labor relations,
contract negotiations, wage and salary administration,
assisting in manpower projections, and ensuring the
health and safety of employees.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
4. Public Relations – has responsibility for building and
maintaining a positive public image of the organization. This
involves news releases announcing promotions, and new
products or services. Good public relations provides many
potential benefits such as: Marketplace, Public awareness of the
organization as a good place to work (labor supply), improved
chances of approval of zoning change request, community
acceptance of expansion plans, and instilling a positive attitude
among employees.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
5. Industrial Engineering – is often concerned with
scheduling, performance standards, work methods,
quality control, and material handling. Manufacturing
plants of medium and large firms typically include this
function.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
6. Distribution – involves the shipping of goods to
warehouse, retail outlets, or final consumers.

7. Maintenance – is responsible for general upkeep

and repair of equipment, buildings and grounds,
heating and air-conditioning; removing toxic wastes;
parking; and perhaps security.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
 IMPORTANCE OF
PRODUCTION/OPERATIONS MANAGEMENT
Both for organizations and society, production/operations management
are important because:
 The consumption of goods and services is an integral part of our
society and production/operation management is responsible for
creating those goods and services.
 Organizations exist primarily to provide services or create goods.
Hence, production is the core function of an organization. Without this
core, there would be no need for any of the other functions – the
organizations would have no purpose.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
WHY STUDY OM?
We study OM for four reasons:
1. To learn how people organize themselves for
productive enterprise
2. To learn how goods and services are produced
3. To understand how operations managers do
4. Because OM is a costly part of an organization
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
WHAT OPERATIONS
MANAGERS DO?
Management Process – the application of planning,
organizing, staffing, and controlling to achieve
objectives
About 40% of all jobs are in OM. Operations
Managers possess job titles such as plant manager,
quality manager, process improvement consultant,
and operations analyst.

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
Ten major OM decisions are
required of Operations Managers:
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources, job design, and work measurement
7. Supply-chain management
8. Inventory, material requirements planning, and JIT (just-in-time)
9. Immediate and short-term scheduling
10. Maintenance

CATANDUANES STATE UNIVERSITY

COLLEGE OF BUSINESS AND ACCOUNTANCY
 THE HERITAGE OF
OPERATIONS MANAGEMENT?
Significant events in OM can be classified into five eras:
1. Early Concepts (1776 – 1880) – Labor Specialization (Smith, Babbage), Standardized Parts (Whitney).
2. Scientific Management (1880 – 1910) – Gantt Charts (Gantt), Motion and Time studies (Gilbreth), Process
Analysis (Taylor), Queuing Theory (Erlang).
3. Mass Production (1910 – 1980) – Assembly Line (Ford/Sorensen), Statistical Sampling (Shewart), Economic
Order Quantity (Harris), Linear Programming (Dantzig), PERT/CPM (DuPont), Material Requirements
Planning.
4. Lean Production (1980 – 1995) – Just-in-time, computer-aided design, electronic data interchange, total
quality management, Baldrige Award, empowerment, kanbans.
5. Mass Customizations (1995 – present) – Globalization, Internet/e-commerce, enterprise resource planning,
international quality standards, finite scheduling, supply-chain management, mass customization, build-to-
order, sustainability.
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
EXITING NEW TRENDS IN OPERATIONS
MANAGEMENT - current challenges for Operations
Managers include:
1. High ethical and social responsibility; increased legal and professional standards
2. Global focus; international collaborations
3. Rapid product development; design collaboration
4. Environmentally sensitive production; green manufacturing; sustainability
5. Mass customization
6. Empowered employees; enriched jobs
7. Supply-chain partnering; joint venture; alliances
8. Just-in-time performance; lean; continuous improvement
CATANDUANES STATE UNIVERSITY
COLLEGE OF BUSINESS AND ACCOUNTANCY