Chapter 1

Introduction to Operations Management

Operations Management
by

R. Dan Reid & Nada R. Sanders

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BRIEF COURSE OUTLINE

15. Textbook(s):
Reid , R. D., and Sanders, N.(7th ed.), Operations
Management: An Integrated Approach, John Wiley
,ISBN: ES8-1-119-49738-7 , electronic edition
 
You can have access to the textbook through the
following link: (Ctrl + click)
http://bcs.wiley.com/he-bcs/Books?action=index&itemI
d=0470524588&bcsId=5290

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BRIEF COURSE OUTLINE
17. Other resources used (e.g. e-Learning, field visits, periodicals,
software, etc.):
 www.wiley.com/college/reid, for cases, web links, and additional
resources and information.
 Additional Material: VIDEOS WITH VOICE NARRATION FROM
SPEAKERS WITH EXECUTIVE RANKS FOR ALL CHAPTERS CAN BE
ACCESSED USING THE FOLLOWING LINKS:
Chapter 01: https://www.youtube.com/watch?v=DEuzzLled6k
Chapter 02: https://www.youtube.com/watch?v=b0YfKoK2uF0
Chapter 03: https://www.youtube.com/watch?v=XWeVn6Tt1Ag
Chapter 04: https://www.youtube.com/watch?v=kFCEMGYeHww
Chapter 05: https://www.youtube.com/watch?v=qoBfvPazi10
Chapter 12: https://www.youtube.com/watch?v=BiIeViq61jE
Chapter 16: https://www.youtube.com/watch?v=EtPWXu3qfkc

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BRIEF COURSE OUTLINE
20. Course assessment:

Assessment
Number Weight Date(s)
Type

Continuous  
Assessment   15 %
 

Engagement  
Activities   15%

Case study Tuesday, 30/3/2021

  1 10 % at 10:30 am

TEST Tuesday, 20/04/2021

  1 20 % at 10:30 am

Final 05/06/2021
examination From 08:30-10:30 am
1 40 %
(lockdown)

Total   100%  
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 Introduction
 Every company has an production management department
which is responsible for the making of goods and services.
 All other business departments in the company, such as
marketing, finance, human resources, etc. , are there to support
the production management department. Without production
management, there would be no goods or services produced,
and therefore, there will be no need for other departments to
exist. Other departments exist because production management
exits.
Production management is also known as operations management.
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 Operations Management

Operations management can be defined as

follows: it is the managerial function responsible
for the design, planning, organizing, and control
of resources to produce goods and services to
satisfy customers’ wants and achieve
organizational objectives.

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 The role of
operations management
The major role of operations management (OM)
is to transform or change inputs into outputs.
Inputs can be tangible like
labor, material, capital, energy, or intangible
like skill, time and information.
Outputs can be tangible (goods) or intangible
(services)
© Wiley 2010 7
The role of OM, continued
The following figure shows the transformation process:
customer feedback

Process
Inputs Outputs

performance feedback

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The role of OM, continued
The transformation of inputs into outputs
is done through the process which makes
a physical change of inputs into output.

The customer feedback and the

performance feedback are used to adjust
the inputs and the process.

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The role of OM, continued
For operations management to be successful,
it must
 add value during the transformation process.

This means the value of the output should be

higher than the value of the inputs.
 Perform the activities efficiently.
Efficiency means performing the necessary
activities very well at the lowest possible cost.
© Wiley 2010 10
 The role of OM, continued
Differences between goods and services:
1. Goods are tangible but services are intangible.
2. Goods can be transferred from one person to another
but services cannot be.
3. Goods can be produced ahead of time and be
inventoried but services cannot be.
4. Goods are capital-intensive but services are labor-
intensive.
5. There is no direct customer contact during the making
of goods, but in services there is a direct contact.
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In addition to the transformation of inputs into
outputs, OM is also responsible for other activities
in the company such as
designing products, designing processes, deciding
what resources are needed, arranging schedules,
equipment and facilities, managing inventory,
controlling quality, planning capacity, designing
jobs to make the product and designing work
methods.

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 OM Decisions
The decisions taken by operations management
can be divided into strategic decisions and
tactical decisions
 Strategic decisions

Strategic decisions set the direction for the entire

company; they are broad in scope and long-term
in nature.
Examples: which product should be produced?,
what is the best location for the new factory?
What market do we plan to compete in?
© Wiley 2010 13
OM Decisions, continued
Tactical decisions: they are specific and short
term in nature. They focus on specific day-to-
day issues. They are made more frequently
and routinely.
Examples: who will work in the second shift
tomorrow? What time the shift starts or
finishes? And other issues related to timing and
quantities.

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Historical Developments of OM
Many events helped shape and improve
operations management. Some of them are:
The industrial revolution
 an industry movement that changed

production by relying on machine power

(steam engine) instead of human power.
 the concept of factory appeared.

 specialization and division of labor was

introduced.
 production management was born.

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Historical Developments, continued
Scientific management
 an approach to management that focuses on

improving output by redesigning jobs and

determining acceptable levels of worker
output.
 a scientific approach, using observation,

measurement and analysis, was used in

studying labor productivity
 workers were thought to be motivated

only by money
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Historical developments, continued
 the separation between management
and labor
 work measurement, stopwatch and time
studies were introduced
 workers were not happy with scientific
management approach. They thought that
management used this approach to unfairly
increase output without paying them
accordingly or treating them like human
beings.
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 Historical developments, continued
Human Relations Movement
 Researchers in Sociology and Psychology who studied the
conflict between workers and management introduced this
movement of human relations which focused on giving more
consideration to workers’ needs and understanding the human
elements in the job such as motivations and job satisfaction.
 Those researchers discovered that factors other than money
can contribute to worker productivity. Examples on these
factors are attention, understanding and consideration given to
workers, as well as improving working conditions.
 This movement also showed that scientific management had
made jobs too repetitive and boring.
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Historical developments, continued.

 To reduce the effect of repetitiveness and boredom,

the ideas of ‘job enlargement’ and ‘job enrichment’
were introduced by this movement.
 Job enlargement is an approach in which workers are
given a larger portion of the total task to do.
 Job enrichment is an approach in which workers are
given a role in planning and decision making.

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Historical Developments, continued

Management Science Approach

 A field of study that focuses on the use of
quantitative techniques to solve operations problems
 Many quantitative tools have been developed to
solve problems in forecasting, quality control,
inventory control, project management, planning and
decision making problems.
 A popular example on these tools is linear
programming, and other mathematical and statistical
models used in quality and inventory control.
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 Historical developments, continued
The computer age
 in the 1970s, the use of computers in business became
widespread.
 Processing large amount of data became easier, and
huge mathematical models could be solved with speed
and accuracy.
 new soft wares have been developed and new fields of
study related to computers were introduced like
management information systems, artificial intelligence,
decision support systems, robotics, etc.
 the fast growth in the internet, telecommunication and
other computing capabilities continue to impact OM. 21
 Historical developments, continued
New great concepts
The introduction of these concepts helps to improve and develop
operations management.
Examples on these concepts are:
1. Just-in-time(JIT).
A philosophy designed to achieve high volume of production using
minimum (or zero) inventory through coordinated movement of
materials so that the right materials arrive at the right place in the
right quantity and at the right time. This will eliminate waste, reduce
costs and increase efficiency of the company

2.Total quality management(TQM).

A philosophy seeks to improve quality by eliminating
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Historical developments, continued
all possible causes of product defects and by making quality the
responsibility of everyone in the organization.
3. Business Process Reengineering
Redesigning the company’s processes to make them more efficient,
improve quality and reduce costs. Reengineering requires asking
why things are done in a certain way for a long time.
4. Flexibility.
This is the ability of the company to adopt to changes in customers
preferences and expectations. There are two dimensions of
flexibility: product flexibility which means offering a wider variety
of products and the ability to quickly add new products needed by
customers and quickly drop a product which is not doing well, and
volume flexibility which means the company’s ability to rapidly
increase or decrease production to accommodate changes in the
demand. 23
Historical developments, continued

5.Time-based competition.
A strategy focusing on efforts to develop new products,
and deliver them to customers faster than competitors.
6. Supply chain management.
Management of the flow of materials from suppliers to
manufacturers and the flow of goods and information
from manufacturers to distributors and to final
customers to reduce overall costs and increase
responsiveness to customers .

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 Historical developments, continued
The network of companies that is involved in producing
and delivering a finished product to the final customer is
called a supply chain END CUSTOMERS

which looks like this figure: DISTRIBUTORS

A SUPPLY CHAIN
MANUFACTURING
COMPANY
7.Global marketplace.
Companies are urged to view their SUPPLIERS

customers, competitors, and suppliers in terms of global

marketplace to compete effectively. Global competition
has forced companies to reach higher levels of
excellence.
 Historical developments, continued
8. Sustainability or green operations.
Society has placed great pressure on companies to reduce waste,
and recycle and reuse products, parts and packaging in order to
preserve the environment and focus on air and water quality. OM
plays a key role in redesigning and producing products and
processes that can meet or even exceed environmental quality
standards.

9. E-commerce.
The use of the internet to conduct business activities such as
buying and selling, communication, and data transfer.
E- commerce can be either B2B, B2C, or C2C.
 Historical developments, continued
10. Lean systems. Implement efficient operations and use the best
practice concepts mentioned above.
11. Enterprise resource planning(ERP).
Large sophisticated software systems used for planning the
enterprise-wide resources needed to coordinate all activities
involved in producing and delivering products.
12. Customer relationship management(CRM).
Software solutions that enable the company to collect customer
data and know their requirements to help the company identify
profiles of its customers and to be able to anticipate their
demands.

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13.Cross-functional decision making.
The coordinated interaction and decision making that
occur between the different functions of the company.
The following figures show examples of cross-functional
decision making PRESIDENT OR CEO

STRATEGIC DECISIONS

SALES & DEMAND REQUIREMENTS OPERATIONS FINANCIEL NEEDS

MARKETING OPERATIONS FINANCE

THE ABILITY TO MEET SALES & DEMAND THE ABILITY TO FINANCE THE NEEDS

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