Operations

Management
Unit-I: Introduction
Dr. A. Dalpati
Professor, IPED, SGSITS, Indore
 Unit-I: Contents
• Introduction, Importance, Evolution of OM
• Systems Concept, Difference between Production &
Operations management
• Decisions, Organization, Objectives, and
• Types of production system.
 Introduction to OM

• Operations management (OM) is defined as the

design, operation, and improvement of the systems
that create and deliver the firm’s primary products
and services.
• Concerned with the management of the entire
system that produces a good or delivers a service.
Why Study Operations Management?

Systematic Approach
to Org. Processes

Business Education Operations Career Opportunities

Management

Cross-Functional
Applications
CAREERS IN OPERATIONS MANAGEMENT
• Plant manager • Business process analyst
• Hospital administrator • Quality control manager
• Materials manager • Lean system manager
• Call center manager • Project manager
• Production control
• Supply chain manager analyst
• Purchase/Stores manager • Facilities manager
LO 5
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

6
 DECISION MAKING IN OM
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?
 SYSTEM DESIGN DECISIONS
System Design Decisions-
– Capacity
– Facility location
– Facility layout
– Product and service planning
– Process planning
– Technology planning
– Acquisition and placement of equipment, etc.
These are typically strategic decisions that require-
• long-term commitment of resources
• Determine parameters of system operation 8
 SYSTEM OPERATION DECISIONS
System Operation Decisions -
– Management of personnel
– Inventory management and control
– Scheduling
– Project management
– Quality assurance, etc.

Operations managers spend more time on system

operation decision than any other decision area but
they still have a vital stake in system design. 9
 HISTORICAL EVENTS IN OM
 Industrial Revolution (1770s)
 Scientific Management (1911)
 Human Relations Movement (1920-1960)
 Decision Models – Management Science (1915, 1940-70s)
 Influence of Japanese Manufacturers- Quality
Revolution & JIT (1970s-1990s )
 Globalization (1980s- )
 Information Age/Internet Revolution (1990s-)
 Historical Development of OM
• Lean manufacturing, JIT, and TQC
• Manufacturing strategy paradigm
• Service quality and productivity
• Total Quality Management (TQM) and quality certifications
• Business Process Reengineering (BPR), Theory of Constraints
• Six-sigma quality
• Supply chain management
• Electronic commerce

LO 6
NEW TRENDS AND ISSUES IN OM
Mass Customization
Supply Chain Management
Outsourcing
Lean manufacturing
Agility
E-Business and E-Commerce
Management of Technology
Globalization, Ethical Behavior,
Sustainability etc.
 The Conversion Process
Value-Added

Inputs Transformation/ Outputs

•Land Conversion •Goods
•Labor •Services
•Capital Process
•Information

Measurement
and Feedback
Measurement Measurement
and Feedback and Feedback
Control

Feedback = measurements taken at various points in the transformation process

Control = The comparison of feedback against previously established standards
to determine if corrective action is needed.
CONVERSION PROCESS OF A CANNED FOOD PROCESSOR

Inputs Processing Outputs

Metal sheets • Cleaning Canned
Raw vegetables • Making cans vegetables
Water • Cutting
Energy • Cooking
Labor • Packing
Building • Labeling
Equipment
CONVERSION PROCESS OF A HOSPITAL

Inputs Processing Outputs

Doctors, nurses Examination Healthy
Hospital Surgery patients
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
Goods-Service Continuum

Goods Services
Surgery, Teaching

Songwriting, Software Development

Computer Repair, Restaurant Meal

Home Remodeling, Retail Sales

Automobile Assembly, Steelmaking

 Manufacturing v/s Service Organizations
1. Degree of customer 6. Production and delivery
contact 7. Quality assurance
2. Uniformity of input 8. Amount of inventory
3. Labor content of jobs 9. Evaluation of work
4. Uniformity of output 10. Ability to patent design
5. Measurement of
productivity
 GOODS VS. SERVICES (1 of 3)
CHARACTERISTICS GOODS SERVICE
Customer contact Low High
Uniformity of inputs and outputs High Low
Labor content Low High
Automation Easy Generally difficult
Output Tangible Intangible, often unique
Measurement of productivity Easy Difficult
Opportunity to correct problems High Low
Inventory Much Little
Quality evaluation Easier Difficult
Production activities Obvious Not so obvious
 GOODS VS. SERVICES (2 of 3)
CHARACTERISTICS GOODS SERVICE

Production and consumption Separate Generally take place

at the same time

Location Centralized Generally dispersed

Locational factors to be considered Cost-oriented Revenue-oriented

Reselling Possible Not possible
Patentability Usually Not usually
Activities Smooth and Slower and awkward
efficient

Inventoriability andTransportability Inventoriable & Non inventoriable

Transportable and so
nontransportable
 GOODS VS. SERVICES (3 of 3)
CHARACTERISTICS GOODS SERVICE

Job structure More Less structured

structured
Worker skill levels Generally Generally
higher lower
Employee turnover Generally Generally
lower higher
 Managing Services is Challenging
1. Jobs in services are often less structured than in manufacturing
2. Customer contact is generally much higher in services
3. In many services, worker skill levels are low compared to those of
manufacturing employees
4. Services are adding many new workers in low-skill, entry-level positions
5. Employee turnover is high in services, especially in low-skill jobs
6. Input variability tends to be higher in many service environments than in
manufacturing
7. Service performance can be adversely affected by many factors outside of
the manager’s control (e.g., employee and customer attitudes)
 Historical Development of OM

• JIT and TQC

• Manufacturing Strategy Paradigm
• Service Quality and Productivity
• Total Quality Management and Quality Certification
 Historical Development of OM (cont’d)

• Business Process Reengineering

• Supply Chain Management

• Electronic Commerce
 Current Issues in OM

• Coordinate the relationships between mutually supportive

but separate organizations.
• Optimizing global supplier, production, and distribution
networks.
• Increased co-production of goods and services
 Current Issues in OM (cont’d)

• Managing the customer’s experience during the

service encounter
• Raising the awareness of operations as a significant
competitive weapon