INTRODUCTION TO

OPERATIONS MANAGEMENT
DBA

JOUHARA G. SAN JUAN

DBA STUDENT

DR. SONNY FERRERAS

Professor Lecturer
WHAT IS OPERATIONS MANAGEMENT

• The management of systems or processes that

creates value in the form of goods and services by
transforming inputs into desired outputs

• The design, operation and improvement of the

systems or processes that create goods and/or
provide services

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ROLE OF THE OPERATIONS MANAGER
The Operations Function consists of all activities directly
related to producing goods or providing services.

A primary function of the operations manager is to guide the

system by decision making.
– System Design Decisions
– System Operation Decisions

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 SYSTEM DESIGN DECISIONS
System Design Decisions
– Capacity
– Facility location
– Facility layout
– Product and service planning
– Process planning
– Technology planning
– Acquisition and placement of equipment

These are typically strategic decisions that require

• long-term commitment of resources
• Determine parameters of system operation 4
 SYSTEM OPERATION DECISIONS
System Operation
– Management of personnel
– Inventory management and control
– Scheduling
– Project management
– Quality assurance

Operations managers spend more time on system operation

decision than any other decision area but they still have a
vital stake in system design

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 OPERATIONS MANAGEMENT AND
DECISION MAKING
Most operations decisions involve many alternatives that can have quite
different impacts on costs or profits
Typical operations decisions include:

What: What resources are needed, and in what amounts?

When: When will each resource be needed? When should the work
be scheduled? When should materials and other supplies be ordered?

Where: Where will the work be done?

How: How will he product or service be designed? How will the work
be done? How will resources be allocated?

Who: Who will do the work?

OPERATIONS MANAGEMENT AND
DECISION MAKING

 Models
 Quantitative approaches
 Analysis of tradeoffs
 Systems approach
 Establishing priorities
 GENERAL APPROACH TO DECISION
MAKING
Modeling is a key tool used by all decision makers
– Model - an abstraction of reality; a simplification
of something.
– Common features of models:
 They are simplifications of real-life phenomena
 They omit unimportant details of the real-life systems
they mimic so that attention can be focused on the
most important aspects of the real-life system

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 MODELS

Types of Models:
– Physical Models
Look like their real-life counterparts
– Schematic Models
Look less like their real-life counterparts than
physical models
– Mathematical Models
Do not look at all like their real-life
counterparts
 UNDERSTANDING MODELS

Keys to successfully using a model in decision

making
– What is its purpose?
– How is it used to generate results?
– How are the results interpreted and used?
– What are the model’s assumptions and limitations?

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 BENEFITS OF MODELS
 Models are generally easier to use and less expensive than dealing
with the real system
 Require users to organize and sometimes quantify information
 Provide a systematic approach to problem solving
 Increase understanding of the problem
 Enable managers to analyze “What if?” questions
 Enable managers to specify objectives
 Serve as a consistent tool for evaluation and provide a
standardized format for analyzing a problem
 Enable users to bring the power of mathematics to bear on a
problem.
 MODEL LIMITATIONS
Quantitative information may be emphasized at the
expense of qualitative information
Models may be incorrectly applied and the results
misinterpreted
This is a real risk with the widespread availability of
sophisticated, computerized models are placed in the
hands of uninformed users.
The use of models does not guarantee good
decisions.
 QUANTITATIVE APPROACHES
(ANALYTICAL TOOLS USED IN OM)
A decision making approach that frequently seeks to obtain a
mathematically optimal solution

 Linear programming
 Queuing techniques
 Inventory models
 Project models
 Statistical models
 Simulation
 Decision analysis
 METRICS AND TRADE-OFFS
• Performance Metrics • Analysis of Trade-Offs
– All managers use – A trade-off is giving up
metrics to manage and one thing in return for
control operations something else
• Profits • Carrying more
• Costs inventory (an
• Productivity expense) in order to
achieve a greater
• Forecast accuracy
level of customer
service

Tradeoffs 14
 DEGREE OF CUSTOMIZATION
• Relative to other standardized products and services customized products:
– Tend to be more labor intensive
– Tend to be more time consuming
– Tend to require more highly-skilled people
– Tend to require more flexible equipment
– Have much lower volume of output
– Have higher price tags
• Degree of customization has a significant influence on the entire
organization
– Process selection
– Job design
– Affects marketing, sales, accounting, finance, and information systems

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 ESTABLISHING PRIORITIES
In nearly all cases, certain issues or items are more
important than others
Recognizing this allows managers to focus their attention to
those efforts that will do the most good
Pareto Phenomenon - a few factors account for a high
percentage of occurrence of some event(s)
The critical few factors should receive the highest priority
80/20 Rule- 80% of the problems are caused by 20% of
the activities
This is a concept that is appropriately applied to all areas
and levels of management
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 SYSTEMS APPROACH
 System - a set of interrelated parts that must work together
 The business organization is a system composed of subsystems
 marketing subsystem
 operations subsystem
 finance subsystem
 The systems approach
 Emphasizes interrelationships among subsystems
 Main theme is that the whole is greater than the sum of its parts
 The output and objectives of the organization take precedence
over those of any one subsystem

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 ETHICAL ISSUES IN OPERATIONS
Ethical issues arise in Financial statements
many aspects of Worker safety
operations Product safety
management: Quality
The environment
The community
Hiring and firing workers
Closing facilities
Workers rights
EXCITING NEW CHALLENGES IN
OPERATIONS MANAGEMENT
OPERATION TOUR
 NEW CONCEPTS AND TRENDS IN
OM
Mass Customization
Supply Chain Management
Outsourcing
Lean manufacturing
Agility
Electronic Commerce
 MASS CUSTOMIZATION

Mass Customization is a term used to describe the

ability of a company to deliver highly customized
products and services to different customers
The rapid, low cost production of goods and services
that fulfill constantly changing and increasingly
unique customer desires.
 SUPPLY CHAIN MANAGEMENT
 The management of the sequence of organizations-
their facilities, functions and activities- that are
involved in producing and delivering a product or
service

 SCM requires the application of a systems approach

to managing the flow of information, materials and
services from raw material suppliers through
factories and warehoses to the end user (customer)
 SUPPLY CHAIN

Supply Chain – a sequence of activities and

organizations involved in producing and delivering a
good or service

A simple supply chain :

Suppliers’ Direct Final

Producer Distributor
suppliers suppliers Customers
 OUTSOURCING

Buying goods or services rather than producing goods

or performing services within the organization. ie.
The act of moving a firm’s internal activities and
decision responsibility to outside providers
 REASONS TO OUTSOURCE

 Organizationally-driven

 Improvement-driven

 Financially-driven

 Revenue-driven

 Cost-driven

 Employee-driven
 LEAN MANUFACTURING
• Systems that use minimal amounts of resources - less
space, less inventory, fewer workers, fewer levels of
management- to produce a high volume of high-
quality goods with some variety
• An adaptation of mass production that prizes quality
and flexibility
• Incorporates advantages of mass production (high
volume, low unit cost) and craft production (variety
and flexibility)
 AGILITY

The ability of an organization to respond quickly to

demands or opportunities.
Involves maintaining a flexible system that can
quickly respond to changes in either the volume of
demand or changes in product/service offerings
 ELECTRONIC COMMERCE

The use of computer networks, primarily the

internet, to buy and sell products, services, and
information.
 Importance of Operation
Management in an Organization
 Operations management helps to achieve the
objectives of the company. 
 Operation management improves the
productivity of employees. 
 Operation management improves goodwill and
presence of the organization.
 The manager will become more able to utilize
resources.
***Thank You and God Bless***