Introduction to

Operations Management

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Content
⚫ Introduction & Definition ⚫ Operational Strategy for
⚫ World today in OM Competitiveness
⚫ Philosophy ⚫ Strategic role

⚫ OM organizational chart ⚫ Trade off

structure ⚫ Kaplan Norton Generic
⚫ Objectives, scope, functions, Strategy
⚫ TPS model ⚫ Treacy Wiersema model

⚫ Productivity measurement ⚫ OS framework

⚫ Activity

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What is operations?
The part of a business organizations that is responsible for
producing goods and services.

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If, there is no “Operations Management”?
Manufacturing Sector Service Sector
Automobile Airline
Steel Telecom
TV Hospital
Mobile Restaurant
Laptop Web Search
Chocolate Transport
Oil Resort
Drug TV Channel
Cement Movie
Medicine and Pharma Legal Advice

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OM - Organization Chart

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Why to study OM?
⚫ Business Education would be incomplete without understanding
modern approach and concepts operations management.
⚫ OM provides systematic way of looking organizational processes.
⚫ OM provides enormous scope and career opportunities.
⚫ Concepts and tools of OM widely used in others functions of
organization & management.

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 Why to study OM?
Exchange of information and cooperative decision making

PR
Operations
Accountin
g
MIS
Operations
Finance Marketing

Legal HR

Three major functional areas overlap in every business Operations interfaces with supporting functions
organizations.
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Definition of OM
⚫Operations Management - … is defined as design, operation and
improvement of the systems that create and deliver the firm’s
primary products & services.
⚫OM is pure management & ORMS – operation research &
management science, would possibly ‘perspectives of
IE – industrial engineering’.

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Philosophy : Focusing on…..
⚫Efficiency
⚫Effectiveness
⚫Value

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World Today……current scenario of OM

⚫Automated inventory control Automated inventory control is a

modern process that uses advanced technology to manage
inventory within the supply chain. With software automation
and integrated hardware, such as barcodes and scanners,
warehouse management can efficiently monitor stock levels.
⚫Continuous customer feedback
⚫Customized products
⚫Personalized services providing customer experiences that are
tailored to the consumer's individual needs and preferences.

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Resource Courtesy:, Chase, Aquilano & Jacobs, Operations Management for competitive
advantage, 11th Edition, Chapter 1,P-10.

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Focus – Production, Cost, Quality, Customization

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Source: https://www.raconteur.net/manufacturing/manufacturing-gets-personal-industry-5-0/ bschool.cms.ac.in
Objectives of OM

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In a nut-shell-Objectives of OM

Right Quality

Right Quantity

Pre-determined time

Pre-established cost
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Scope of Operations Management

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Scope of Operations Management
⚫ To illustrate a service organization’s operations system. The system
consists of the airplanes, airport facilities, and maintenance facilities,
sometimes spread out over a wide territory. The activities include:

◦ Forecasting- weather
◦ Capacity planning- right number of planes
◦ Locating facilities- major hubs, service and maintenance
◦ Facilities and layout- effective use of employees and equipment.
◦ Scheduling-flights, maintenance, pilots, attendants, crew.
◦ Managing inventories-food and beverages, first aid, life preservers.
◦ Assuring quality- flying, safety, reservations and check-ins
◦ Motivating and training employees-all phases of operations.
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Functions of Operations

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 Functions categorized based on design & control issues, and long
term & short term issues

⚫ Design issues ⚫ Control issues

◦ Product design and ◦ Forecasting
development ◦ Production and planning control
◦ Process design ◦ Supply chain management
◦ Quality management ◦ Materials management
◦ Capacity planning ◦ Continuous improvement of
◦ Location and layout of facilities operations

• Decisions based on time horizon perspective

• Long time decisions made once every 5-10 years
• Short time decisions made in fixed cycles in a year, even for a week or less.

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Operations Management and Decision Making
⚫ What: What resources will be 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? When is
corrective action needed?
⚫ Where: Where will the work be done?
⚫ How: How will the product or service be designed? How will the
work be done (organization,
⚫ methods, equipment)? How will resources be allocated?
⚫ Who: Who will do the work?
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Analysis of Trade-Offs

Trade-off decisions are decisions which the operations personnel takes at times on different
functions.

Example 1. To decide the amount of inventory to stock: the operations personnel needs to
trade-off between the increased level of customer service and increased cost required to stock
the inventory.

Example 2. In selecting the equipment: the decision maker should evaluate the advantages of
extra features relative to the cost of the extra features.

Example 3. In scheduling of overtime to increase output: the decision maker must weigh the
value of the increased output against the higher cost of overtime.
 Differences between
Manufacturing Vs Services Operations

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 Exercise (E.1) – Check yourself….
1.Which one of following is not 2.Which one of following is not applicable as
represented in philosophy of OM? a focus of historical evolution of OM?
a) Cost
a) Value
b) Quality
b) Material c) Customization
c) Efficiency d) Value
d) Effectiveness

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TPS -Transformation Process System
(Input – Throughput- Output)

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TPS – continued…..

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TPS – Introspective outlook…

Source: Operations Management by William J Stevenson. 2018 13 th

edition
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Process Model – Examples…
(Resource Courtesy:, Chase, Aquilano & Jacobs, Operations Management for competitive advantage,
11th Edition, Chapter 1,P-11.)

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 16

What is Productivity?
⚫Productivity is a common measure on how
Improvement of Productivity
well resources are being used. In the
broadest sense, it can be defined as the ⚫ Controlling / Optimizing input
following ratio: ⚫ Improving the quality of process to yield high
output
Productivity = Output / Input ⚫ Improving the technology

P = O/I

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Total Measure Productivity

⚫Total Measure Productivity = Outputs
Inputs

TMP = Goods and services produced

All resources used
(Capital +Labor+ Energy+ Material)

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 18

Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output

Labor Capital Materials Energy

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 19

Multifactor Measure Productivity

Multifactor measures of productivity =

Output
Labor + Capital + Energy

or

Output
Labor + Capital + Materials

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 Exercise (E.2) – Check yourself….
1.Which one of following is not 2. ……..Stage ‘change or
represented in Productivity transformation’ happens in TPS
measurement? model.
a) Value a) Input
b) Material b) Output
c) Labor c) Throughput
d) Capital d) Feedback

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Operations Strategy
Gaining Competitive Leverage

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Content
⚫ Introduction to operations ⚫ Process performance metrics
strategy with ⚫ Process understanding
competitiveness ⚫ Process analysis
⚫ Competitive dimensions ⚫ Process Leveraging
⚫ Trade off ⚫ Activities
⚫ Balance scorecard & Treacey
Wiersema

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 Operations Strategy
⚫ OS – is setting broad policies and plans for using resources of the
firms in operations processes to best support its long term
competitive strategy.

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Operations Strategies Examples
 Current issues
⚫ Coordinating operations which mutually supportive, but
functions as separate.
⚫ Optimizing global supplier, producer and distribution network.
⚫ Increased co-production of goods & services.
⚫ Managing customer touch points.
⚫ Raising senior level management’s awareness on operation’s
significance as competitive weapon.

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 Competitiveness – OM Dimensions
⚫ Cost or Price – make the product & deliver the services at
cheaper cost
⚫ Quality- greater quality products & greater quality services
⚫ Flexibility – variety or wide portfolio, rate of new production
introduction
⚫ Delivery - Speed (quickly), Demand (changes in volume) &
Reliability (deliver when it promised)
⚫ Other support services – technical liaison support, meeting
launch date (projects), after sales support & other dimensions.

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OM – category of services
⚫ Core Services- Classic by ⚫ Value- Added Services -Modern
by nature.
nature.
⚫ Information
⚫ Quality
⚫ Problem Solving
⚫ Flexibility
⚫ Sales Support
⚫ Delivery Speed & Reliability
⚫ Field Support
⚫ Cost or Price

Competitive Strategy

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 Competitive Priorities- The Edge
⚫ Four Important Operations Questions: Will you compete on –
Cost?
Quality?
Time?
Flexibility?
⚫ All of the above? Some? Tradeoffs?

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 Competing on Cost?-Xiomi Mobile
⚫ Offering product at a low price relative to competition
◦ Typically high volume products
◦ Often limit product range & offer little customization
◦ May invest in automation to reduce unit costs
◦ Can use lower skill labor
◦ Probably use product focused layouts
◦ Low cost does not mean low quality

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Competing on Quality?- Sony

⚫ Quality is often subjective

⚫ Quality is defined differently depending on who is defining it
⚫ Two major quality dimensions include
◦ High performance design:
● Superior features, high durability, & excellent customer service
◦ Product & service consistency:
● Meets design specifications
● Close tolerances
● Error free delivery
⚫ Quality needs to address
◦ Product design quality – product/service meets requirements
◦ Process quality – error free products

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 Competing on Time?- Zomato
⚫ Time/speed one of most important competition priorities
⚫ First that can deliver often wins the race
⚫ Time related issues involve
◦ Rapid delivery:
● Focused on shorter time between order placement and delivery

◦ On-time delivery:
● Deliver product exactly when needed every time

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 Competing on Flexibility?- Packaging companies
⚫ Company environment changes rapidly
⚫ Company must accommodate change by being flexible
◦ Product flexibility:
● Easily switch production from one item to another
● Easily customize product/service to meet specific requirements of a customer
◦ Volume flexibility:
● Ability to ramp production up and down to match market demands

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Notion – Trade Off
⚫ PWP – Plant Within Plant- ⚫ Order Qualifier Customer
Divided Organically and consider you in line, when
Physically into different they need a product.
plants ⚫ Order Winner
A
B Customer considers only you
amongst others, when they
⚫ Straddling –Maintain need a product.
existing position and match
benefit of successful
position
A +b
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 Process - Metrics
⚫ Cycle time
a …. b ….. c ……d ……e ……f….g
◦ Utilization Time
⚫ Lead time A Cycle time of A task

Lead time of Assembly job = A + B + C + D + E + F

A B C D E F

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Cycle time - Example

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 Lead time - Example
⚫ Placing order for Pizza
⚫ Placing order for car
⚫ Admitting patient for treatment
⚫ Repairing the car/bike by mechanic

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 KPIs -Key Performance Indicators
Operation Time = Run Time + Setup Time
Cycle Time = The time between starting and completing a job. (For ex: Molding,
Drilling, Grinding, Welding, Fitting)
Cycle Time = Molding Job
Throughput Time = The time between receiving order and completing order. (For
ex: Molding, Drilling, Grinding, Welding, Fitting + waiting times)
Throughput Time = M + D + G+ W+ F+ WT
Throughput Rate = It is output rate the process is that expected to produce over a
period of time. If 120 units per hour, then, 2/minutes.
Little’s Law
Throughput time = work in progress / throughput rate
I = R * T (Inventory Arrival rate, average processing time)

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 Activity: 1.1
Identify “5 goods and 5 services” examples of the given below table.
(Sl.No 0 has been given as sample answer).

Sl.No Industry / Domain / Input Throughput Output

Topic
0 Biscuit Wheat flour Mixing, forming, baking and Salt Biscuits,
Sugar, Salt cooling Sweet Biscuits,
Dry fruits, Milk & Sweet & Salt Biscuits
Water , other ingredients

1 Goods
2 Goods
3 Goods
4 Goods
5 Goods
6 Services
7 Services
8 Services
9 Services
10 Services

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