CHAPTER 1

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 Operations Management
“ Operation Management is the management of activities that
create goods and services through the transformation of
inputs into outputs.”

• Operations management is an area of management

concerned with overseeing, designing, and controlling the
process of production and redesigning business operations in
the production of goods or services.

• It deals with both Products and services.

 The Operations areas : Subject Framework

• Introduction To Operations Management

1.Operations in manufacturing
2.Operations in Services
3.Operations strategy

• The production and manufacturing systems.

• The Total quality control studies.
• The lean concepts and six sigma introduction
• Supply chain management concepts

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Operations management
• It involves the responsibility of ensuring that business operations
are efficient in terms of using as few resources as needed
and effective in terms of meeting customer requirements.

• The operations management involves the delivery of goods to

customers. This includes ensuring products are delivered within the
agreed time commitment.
• Operations management also typically follows up with customers to
ensure the products meet quality and functionality needs.

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Operations :Construction

• Operations: Construction Process

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Operations – Manufacturing Products

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Operations- Supply Chain

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Operations: Quality, TQM, Six
Sigma

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Operations : Services

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The Significance of Operations
Development
 The Main Phases

1. Agrarian System
2. Pre Industrial system
3. Indutrial system
4. Service based economy
5. The experience economy
 Industrial Revolution
• It Changed the entire system of Operations
• The factory System
• The use of Machines
• The division of Labour
• The standardization of parts and Interchangable
parts.
Historical Development of OM
• Industrial revolution Late 1700s
• Scientific management Early 1900’s
• Human relations movement 1930s to 1960s
• Management science Mid-1900s
• Computer age 1970s
• Just-in-Time Systems (JIT) 1980s
• Total quality management (TQM) 1980’s
• Reengineering 1990s
• Flexibility 1990s
• Time-Based Competition 1990s
• Supply chain Management 1990’s
• Global Competition 1990s
• Environmental Issues 1990s
• Electronic Commerce Late 1990s
• Internet-Cloud Based Systems After 2000 AD
• Artificial Intelligence
• Internet of Things

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Operations management in
Services
• The operations has the functional
responsibility for producing the services of
an organization and providing them
directly to its customers
• The six types of decisions made by
operations managers in service
organizations are: process, quality,
capacity, scheduling, inventory, service
supply chain, and information technology.
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Services and Manufacturing
Differences
• There are 5 essential differences in terms
of this :

• Tangible-Intangible
• Perishability
• Heterogeneity
• Simultaneity
• The Customer Involvement
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 Manufacturing vs. Services

Characteristic Manufacturing Service

Output Tangible Intangible
Customer contact Low High
Uniformity of output High Low
Labor content Low High
Uniformity of input High Low
Measurement of productivity Easy Difficult
Opportunity to correct quality problems Easy Difficult

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The Good-Services Continuum
• The products offered are a combination of
Goods and services.
• There is a range from Pure goods To Pure
services.

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Servitization : It is the concept that any
product can be delivered ‘as a service’.

•An example of this is Rolls-Royce ‘Power by the Hour’ model where

no longer would they simply sell jet engines and warranties, they would
instead offer the operator flight-hours – the responsibility would then be
entirely on Rolls Royce to deliver the contracted number of hours whilst
achieving certain availability metrics.

•It helps in more care for the product and also more customer retention.

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 The latest in Operations
• Artificial Intelligence
• Machine Learning

SUSTAINABILITY
• IoT,IIoT
• Big Data Analytics
• Industry 4.0
 Marketing-OM-Finance-HR-should work
together

Operations
Industrial
Engineering Maintenance

Marketing
Finance

Distribution
Public
Operations Relations

Purchasing Personnel
Accounting20
 Systems (Holistic) Approach
• Emphasize interrelations among subsystems.
• A systems approach is essential whenever something is being
designed, redesigned, implemented, or improved. It is
important to take into account the impact on all parts of the
system.
• Example: A new feature is added to a product.
– Designer must take into account how customers will view
the change, instructions for using new feature, the cost,
training of workers, production schedule, quality standard,
advertising must be informed about the new feature.

“The whole is greater than

the sum of the parts.”
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Strategy
• Strategy (from Greek stratēgia, "art of troop
leader; office of general, command, generalship) is
a high level plan to achieve one or more goals
under conditions of uncertainty.

• Strategy is important because the resources

available to achieve these goals are usually limited.

• Strategy generally involves setting goals,

determining actions to achieve the goals, and
mobilizing resources to execute the actions. A
strategy describes how the ends (goals) will be
achieved by the means (resources).
Operations Strategy

•A plan specifying how an organization

will allocate resources in order to support
infrastructure and production.
•An operations strategy is typically driven by the overall business
strategy of the organization, and is designed to maximize
the effectiveness of production and support elements while
minimizing costs.
•A plan of action implemented by a firm that describes how they
will employ their resources in the production of a product or service.
•An operational strategy is a necessary element for a business and
supports the firm's corporate strategy.
Operations Strategy
Strategy Process Example

Customer Needs More Product

Corporate Strategy Increase Org. Size

Operations Strategy Increase Production Capacity

Decisions on Processes
and Infrastructure Build New Factory
• Operational effectiveness means
performing similar activities better than
rivals perform.
Competitive Dimensions

• Cost
• Quality
• Speed
• Dependability
• Flexibility
 Dealing with Trade-offs

For
Forexample,
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Straddling
• It occurs when a company seeks to match the
benefits of a successful position while
maintaining its existing position.
• It adds new elements to its product or service.
• Occurs when a company seeks to match what a
competitor is doing by just adding new
features, services, or technologies to existing
activities. This often creates problems due to the
compromises that may need to be made.
• Example Continental trying to copy South west
Operations by setting up continental lite. "airline
within an airline"
Order Qualifiers and Winners

•Order qualifiers are the basic

criteria that permit the firms
products to be considered as
candidates for purchase by
customers

•Order winners are the criteria that

differentiates the products and
services of one firm from another
Strategic Decision in Operations
Options
Operation Strategy Options
Product Portfolio

• Product portfolio pertains to decisions on

– what products the organization wants to produce
– the number of variations in each product line
– the extent of customization offered to customers

• Product portfolio as a strategic option

– Wide product portfolio: Overall strategic objective is to provide

highly differentiated set of products and services to the customer eg
Unilever

– Narrow product portfolio: Overall strategic objective is one of cost

leadership eg : Ferrari
Operation Strategy Options
Process Choices

– Continuous streamlined flow

– Intermittent or batch flow
– Jumbled flow

• Choice of process will be consistent with product

portfolio decisions

– A manufacturer emphasizing on production volumes, fewer varieties

and less cost will make process choices pertaining to continuous
streamlined flow (Hero Honda)

– An organization wishing to satisfy an objective of providing wide

range of products to the customers will adopt batch/intermittent flow
type the need to provide a very large variety and practically a
production volume of one or few will adopt jumbled flow (BHEL)
Operation Strategy Options
Supply Chain issues
• Supply chain refers to the network of entities supplying components
and raw material to an organization as well as those distributing the
finished goods of an organization to the customers through alternative
channels
• Designing an appropriate supply chain calls for a better understanding
of the product profile for which the supply chain is configured

• Two types of supply chains can be configured:

– Efficient supply chain: objective is cost optimization and better utilization

of resources employed in supply chain operations; typically used in the
case of functional products (machine tools, engineered equipments)

– Responsive supply chain: the key objective is to develop a capability to

respond fast to the market requirements; typically used in the case of
innovative products (iPhone, Fancy Garments, trendy Electronics Goods)
 Ten Critical Decisions
1. Design of goods and services
2. Managing quality
3. Process and capacity design
4. Location strategy
5. Layout strategy
6. Human resources and job design
7. Supply-chain management
8. Inventory, MRP, JIT
9. Scheduling
10. Maintenance
 The Critical Decisions
1. Design of goods and services
– What good or service should we offer?
– How should we design these products and services?

2. Managing quality
– How do we define quality?
– Who is responsible for quality?

3. Process and capacity design

– What process and what capacity will these products
require?
– What equipment and technology is necessary for these
processes?

4. Location strategy
– Where should we put the facility?
– On what criteria should we base the location decision?
 The Critical Decisions

5. Layout strategy
– How should we arrange the facility?
– How large must the facility be to meet our plan?

6. Human resources and job design

– How do we provide a reasonable work environment?
– How much can we expect our employees to produce?

7. Supply-chain management
– Should we make or buy this component?
– Who should be our suppliers and how can we integrate
them into our strategy?

8. Inventory, material requirements planning, and JIT

– How much inventory of each item should we have?
– When do we re-order?
The Critical Decisions

9. Intermediate and short–term

scheduling
– Are we better off keeping people on the
payroll during slowdowns?
– Which jobs do we perform next?
10. Maintenance
– How do we build reliability into our
processes?
– Who is responsible for maintenance?
Introduction:
https://www.youtube.com/watch?v=leMOReAE2hk

Operations: Manufacturing
https://www.youtube.com/watch?v=SJZk9vNS8NE

Tesla Parallel manufacturing:

https://newatlas.com/automotive/tesla-manufacturing-innovation/

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