Production Operation Management

Saroj K. Jena
 Operations Management
• Operations management is the administration of
business practices to create the highest level of
efficiency possible within an organization.
• It is concerned with converting materials and labor
into goods and services as efficiently as possible to
maximize the profit of an organization.
 Operations Management Definition
• Operations management
 It is defined as the design, operation, and
improvement of the system that create and deliver
the firm’s primary products and services.

• Operations management
 It is the business function responsible for
planning, coordinating, and controlling the
resources needed to produce products and services
for a company.
 What is the function of operations management?

• Operations management (OM) is the business

function responsible for managing the process of
creation of goods and services.
• It involves planning, organizing, coordinating, and
controlling all the resources needed to produce a
company's goods and services.
 What are the objectives of operations management?

Objectives of Operations Management

• Customer Service: The primary objective of
operations management, is to utilize the resources
of the organization, to create such products or
services that satisfy the needs of the consumers, by
providing “right thing at the right price, place and
time”.
 What are the 5 performance objectives?

• According to Andy Neely, author of the book

“Business Performance Measurement: Unifying
Theory and Integrating Practice,” there are five main
operational performance objectives:
– speed,
– quality,
– costs,
– flexibility, and
– dependability.
Typical Organization Chart
 Why Study Operations Management?
Systematic Approach
to Org. Processes

Business Education/ Operations Increase Competitive

Career Opportunities Management Advantage/Survival

Cross-Functional
Applications
 What is Role of OM?

• OM Transforms inputs to outputs

– Inputs are resources such as
• People, Material, and Money
– Outputs are goods and services
 What are the benefits of operations management?

• Operations managers apply ideas and technologies

to increase productivity and reduce costs, improve
flexibility to meet rapidly changing customer needs,
shorten delivery time, enhance product quality, and
improve customer service.
Operations Decision Making
OM Decision
 Operations Decisions
• System Design
– capacity
– location
– arrangement of departments
– product and service planning
– acquisition and placement of equipment
 More Operations Decisions
• System operation
– personnel
– inventory
– scheduling
– project management
– quality assurance
 What are the components of operations management?

• The three components of operations:

1. Inputs,
2. Transformation processes and
3. Outputs.
• Operations management involves the systematic
direction and control of the processes that transform
resources (inputs) into finished goods or services for
customers or clients (outputs).
OM’s Transformation Process
 What are the activities of operations management?

• Operations management focuses on -

carefully managing the processes to produce and
distribute products and services.
• Major, overall activities often include
– product creation,
– development,
– production and
– distribution.
 Goods & Services
• Manufacturing • Services
• Tangible product • Intangible product
• Product can be inventoried • Product cannot be
• Low customer contact inventoried
• Longer response time • High customer contact
• Capital intensive • Short response time
• Labor intensive
 Goods & Services
• Both use technology
• Both have quality, productivity, & response issues
• Both must forecast demand
• Both will have capacity, layout, and location issues
• Both have customers, suppliers, scheduling and
staffing issues
• Manufacturing often provides services
• Services often provides tangible goods
 What are the 10 decisions of operations management?

1. Design of Goods and Services.

2. Quality Management.
3. Process and Capacity Design.
4. Location Strategy.
5. Layout Design and Strategy.
6. Human Resources and Job Design.
7. Supply Chain Management.
8. Inventory Management.
9. Scheduling.
10. Maintenance.
 Key OM Concepts
• Efficiency - Doing something at the lowest possible
cost

• Effectiveness - Doing the right things to create the

most value for the organization

• Value - Quality divided by price

 Operations Management - Overview

Process Analysis Process Control Supply Chain Project

and Design and Improvement Management Management

Operations Quality Supply Chain

Strategy Management Strategy

Process Analysis Statistical Just in Time

Process Control
Job Design Planning for Production
Consulting and
Manufacturing Reengineering Capacity Management

Facility Layout Aggregate

Planning
Services Inventory Control

Waiting Line Analysis Materials Requirement

and Simulation Planning
 What is Operation 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.
 Operations Strategy
Strategy Process Example

Customer Needs More Product

Corporate Strategy Increase Org. Size

Operations Strategy Increase Production Capacity

Decisions on Processes
Build New Factory
and Infrastructure
 Competitive Dimensions
• Cost
• Quality and Reliability
• Delivery
– Flexibility
– Speed
– Reliability
• Coping with Changes in Demand
• New Product Introduction
– Speed
– Flexibility
 Productivity

Outputs
Productivity =
Inputs

•Partial measures
• output/(single input)
•Multi-factor measures
• output/(multiple inputs)
•Total measure
• output/(total inputs
 Example
• 10,000 Units Produced

• Sold for $10/unit

• 500 labor hours What is the

labor productivity?
• Labor rate: $9/hr

• Cost of raw material: $5,000

• Cost of purchased material: $25,000

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Thank You