INTRODUCTION TO
OPERATIONS MANAGEMENT
Ferdous Sarwar, PhD
Lecture
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10
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12
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Topic
Production Operations System
Forecasting (Quantitative & Qualitative)
Capacity Planning
Location and Facility Layout Planning
Work Design and Measurement
Management of Quality
Midterm
Operations Scheduling (PERT/CPM)
Inventory Control
Materials Requirement Planning
Just-in-time & Lean Management
Supply Chain Management
Scheduling
Final
Quiz
Q1
Q2
Q3
Q4
WHAT IS OPERATIONS MANAGEMENT?
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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 and/or services.
Operations Management is the set of activities that
creates goods and services by transforming inputs into
outputs
Focuses on carefully managing the processes to produce and
distribute products and services.
Inputs
(customers
and/or
materials)
Transformation Process
(components)
Outputs
(goods
and
services)
WHY STUDY OM?
4
Systematic Approach
to Org. Processes
Business Education/
Career Opportunities
Operations
Management
Cross-Functional
Applications
Increase Competitive
Advantage/Survival
WHY STUDY OM?
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OM is one of three major functions (marketing,
finance, and operations) of an organization
OM often includes substantial measurement and
analysis of internal processes, because a great deal
of focus is on efficiency and effectiveness of
processes.
Ultimately, the nature of how operations
management is carried out in an organization
depends very much on the nature of products or
services in the organization.
Historical Development of OM
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Prior to 1900
Cottage industry produced custom-made goods.
Watt’s steam engine in 1785.
Whitney’s standardized gun parts in 1801.
Industrial Revolution began at mid-century.
Historical Development of OM (cont.)
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Scientific Management (Frederick W. Taylor)
Systematic approach to increasing worker
productivity through time study, standardization of
work, and incentives.
Viewed workers as an interchangeable asset.
Other Management Pioneers
Frank and Lillian Gilbreth
Motion study and industrial psychology
Henry L. Gantt
Scheduling and the Gantt chart
Historical Development of OM (cont.)
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Moving Assembly Line (1913)
Labor specialization reduced assembly time.
Hawthorne Studies
Yielded unexpected results in the productivity of
Western Electric plant workers after changes in
their production environment.
Led to recognition of the importance of work design
and employee motivation.
Historical Development of OM (cont.)
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Operations Research (Management Science)
Outgrowth of WWII needs for logistics control and
weapons-systems design.
Seeks to obtain mathematically optimal
(quantitative) solutions to complex problems.
OM Emerges as a Field
1950–1960, OM moved beyond industrial
engineering and operations research to the view of
the production operation as a system.
Historical Development of OM (cont.)
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OM Emerges as a Field
1950–1960, OM moved beyond industrial
engineering and operations research to the view of
the production operation as a system.
The Marriage of OM and IT
Integrated solutions approaches
Business process reengineering
Supply chain management
Systems integration (SAP)
Historical Development of OM (cont.)
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Operations Management in Services
OM concepts can apply to both manufacturing and
service operations.
Integration of Manufacturing and Services
Conducting world class operations requires
compatible manufacturing and service operations.
Managerial Issues
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Shift in balance of power to consumers
Globalization of business and markets
E-commerce
Achieving higher levels of productivity
Creating higher quality products
Delivering better customer service
Achieving shorter delivery times
Reducing labor and material costs
Top-down Approach to OM Strategy
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Operations Strategy Decisions
Strategic (long-range)
Needs of customers
(capacity planning)
Tactical (medium-range)
Efficient scheduling of
resources
Operational planning
and control (short-range)
Immediate tasks and
activities
An Operational-Level OM Perspective
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OM’s function focuses on adding value
through the transformation process
(technical core) of converting inputs into
outputs.
Physical: manufacturing
Locational: transportation
Exchange:retailing
Storage: warehousing
Physiological: health care
Informational: telecommunications
Factors of Production
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Land
Labor
Capital
Enterprise
The Transformation Process within OM
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Productive Use of Resources
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Input=Output + Waste
Input/Input=Output/Input + Waste/Input
1=Productivity + Wastivity
Productivity=Output/Input
Operations Decision Making
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Marketplace
Corporate Strategy
Finance Strategy
Operations Strategy
Marketing Strategy
Operations Management
People
Materials &
Customers
Plants
Parts
Processes
Planning and Control
Input
Products &
Services
Output
The Transformation Process (value adding)
Value Chain
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Customer
(requirements
on suppliers)
Input from
Suppliers
Conversion/Transformation Process
Process primarily adds value to
inputs to provide outputs to the
customer
Requirements on management
Effective and efficient use of all
factors of conversion/transformation
Customer
Requirements
Output to
Customer
The Value Chain and Its Support Functions
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Key OM Concepts
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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
Input-Transformation-Output Relationships for
Typical Systems
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OM’s Contributions to Society
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Higher Standard of Living
Ability to increase productivity
Lower cost of goods and services
Better Quality Goods and Services
Competition increases quality
Concern for the Environment
Recycling and concern for air and water quality
Improved Working Conditions
Better job design and employee participation
Services as a Percent of Gross Domestic
Product (GDP) for Different Countries
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Differences Between Goods and Services
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Goods
Services
Tangible
Intangible
Can be inventoried
Cannot be
No interaction
inventoried
Direct interaction
between customer
and process
between customer
and process
Most Products Are a “Bundle” of Goods and
Services
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An Expanded Definition of Quality
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Quality is important in all functional areas of an
organization.
Quality is now much more than the technical
requirements for manufactured goods.
Service quality (customer relationships) is
equally important.
A New Paradigm for OM
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Post-War U.S. Dominance in Manufacturing
Available capacity built to support the war effort
Pent-up demand for consumer goods
Destruction of overseas production capabilities
Proactive Operations Function
Add value to products, increase profit margins.
Compete on dimensions other than costs:
Quality
Speed of delivery
Process flexibility
The Ever-Changing World of OM
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Increased Global Competition
Transformation into a global economy
Pressure to excel on multiple competitive
dimensions
Increased emphasis on logistics
Advances in Technology
Information technology (IT)
Internet and e-commerce (B2B)
Automation and robotics
Ford Escort 2013
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Ford’s Global Network to Support the
Manufacturing of the Escort
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Linking OM to Customers and Suppliers
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Benefits of Buffering the Transformation Process
The process was not disturbed by environmental
interaction.
The process was often more efficient than input and
distribution processes.
Productivity was maximized when processes
operated at continuous rates.
Process management skills were different from
those of other functional activities.
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Linking OM to Customers and
Suppliers
Disadvantages of Buffering the Transformation
Process
Information lag in interaction with other functional
activities.
Lack of communication between customers and the
shop floor for problem solving.
Value Chain
Steps an organization requires to produce a good or
a service regardless of where they are performed.
Line and Staff Jobs in OM
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Inputs Provided by OM to Other Functional Areas
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WHAT OPERATIONS MANAGERS DO?
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Plan
Organize
Staff
Lead
Control
Planning
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The process of deciding what to do.
Planning is forward looking.
When planning is operational, the planning
horizon is shorter and the level of detail within is
greater.
When strategic, the planning horizon is long and
done in less detail.
Planning(contd.)
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Effective planning seeks to answer questions such as:
What should the firm do? The output of this process are
goals and objectives.
When must the firm achieve these goals? The output is a
schedule defining milestones and due dates.
Who is responsible for doing it? The outputs are assigned
responsibilities.
How should this be done? The outputs may be
directions or plans of action.
How should performance be measured? The output
includes standards of performance.
ANALYSING
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The process of making sense of data that is
often: poorly structured, incomplete,
inconsistent, inaccurate, and/or available in
overwhelming quantities.
Analysis supports the planning process by
providing the “facts” in useful formats that can
then be used to evaluate business alternatives.
Analyzing also supports management’s control
activity by providing the basis for corrective
actions.
ORGANIZING
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The process of building organization structures
and interrelated task coordination teams. In the
past, organizing dealt mostly with humans, but
increasingly it involves data-gathering.
A good organizer seeks for
The right person
The right information
In the right form
At the right time
DIRECTING/IMPLEMENTING
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An action-oriented process that carries out
the outputs of the first three management
activities.
This is where money is made and lost (!).
In this process, management expends
resources to perform the tasks defined by the
planning process.
CONTROLLING
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The process of measuring the results of the
other four management activities.
Were the plans any good?
Did the analysis provide meaningful information to
the other processes?
How well did we organize our resources to get the
job done?
How well did we do it?
10 CRITICAL DECISIONS
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Service, product design
Quality management
Process, capacity design
Location
Layout design
Human resources, job design.
Supply-chain management
Inventory management
Scheduling
Maintenance
ENVIRONMENTAL CONCERNS
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Solid Waste
Liquid Waste
Atmospheric Pollution
Noise Pollution
SECTION OF OM
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Procurement (Purchasing) Practices
reviews guidelines for buying various materials
from suppliers and vendors - materials,
including computers, services from lawyers,
insurance, etc.
Management Control and Coordinating
Function
includes a broad range of activities to ensure
that organizational goals are consistently being
met in an effective and efficient fashion
SECTION OF OM
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Product and Service Management
the major activities involved in product and service
management are similar to those in operations
management. However, operations management is
focused on the operations of the entire organization,
rather than managing a product or service.
Quality Management
is crucial to effective operations management,
particularly continuous improvement. More recent
advancements in quality, such as benchmarking and
Total Quality Management, have resulted in
advancements to operations management as well.
SECTION OF OM
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Inventory Management
Costs can be substantial to store and move
inventory. Innovative methods, such as Justin-Time inventory control, can save costs
and move products and services to
customers more quickly.
Logistics and Transportation Management
Focused on the flow of materials and goods
from suppliers, through the organization and
to the customers, with priority on efficiency
and cost effectiveness.
SECTION OF OM
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Facilities Management
Depnds a great deal on effective management of
facilities, such as buildings, computer systems, signage,
lighting, etc.
Configuration Management
It's important to track the various versions of products
and services. Consider the various versions of software
that continually are produced, each with its own
version number.
Distribution Channels
The means of distribution depend very much on the
nature of the product or service.
WHERE ARE THE OM JOBS?
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Technology/methods
Facilities/space utilization
Strategic issues
Response time
People/team development
Customer service
Quality
Cost reduction
Inventory reduction
Productivity improvement
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