Introduction to Operations

Management (OM)
Outline

n  Why Study Operations Management?

n  The Heritage of Operations Management
n  What is Operations Function?
n  What is Operations Management?
n  What Operations Managers Do?
n  Case
 Why Study Operations Management?
OM Provides a Systematic Approach to
Observing Organizational Processes

Business Education
(understanding of OM Interesting Career
essential to the Opportunities in OM
Operations such as supply chain
student’s development
as a manager ) Management mgt., quality assurance,
purchase

OM Tools have Cross-Functional

Applications

- Operating costs are the largest chunk; dollar saved is a dollar increase in profit
- Not as glamorous as M&As or advertising but high impact & reliable
- OM tools have cross-functional applications, for example project management in Marketing campaigns
 Historical Events In P/OM
Industrial Revolution
Steam engine 1769 James Watt
Division of labor 1776 Adam Smith
Interchangeable parts 1790 Eli Whitney

Scientific Management
Principles 1911 Frederick W. Taylor
Time / motion study 1911 Frank & Lillian Gilbreth
Activity scheduling chart 1912 Henry Gantt
 Human Relations
Hawthorne studies 1930 Elton Mayo
Motivation theories 1940s Abraham Maslow
Two factor theory 1950s Frederick Herzberg
Theory X and Y 1960s Douglas McGregor

Management Science
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, PERT/CPM, 1960 Research groups
Waiting line theory
MRP 1960s Joseph Orlicky, IBM
 Quality Revolution
JIT 1970s Taiichi Ohno, Toyota
TQM 1980s W. Edwards Deming,
Joseph Juran, et. al.
Reengineering 1990s Hammer, Champy
 Information age and Globalization

EDI, RFID, 1970s Numerous individuals and

-90s companies
Internet, World Wide Web 1990s
Worldwide markets 2000s
and operations
SCM
Electronic commerce
Mass customization (postponement)
 The Operations Function
Three Perspectives

n  1. Operations as a basic function

n  2. Operations as the technical core

n  3. Operations as a transformation process

 1. Operations As A Basic Function
n  Marketing
-identifies/generates demand
-takes the order for a product or service

n  Operations
-creates and distributes product or service
n  Finance/Accounting
-tracks how well the organization is doing
-pays the bills, collects the money
-provides financial resources necessary to
produce, market and distribute product

n  Product Development

- gives “technological” specification of its product and services.
 Exercise: Identify some activities of
different business functions
Marketing Accounting Product Operations
& Finance Development
Temple ? ? ? ?

Fast Food ? ? ? ?
Chain
University ? ? ? ?

Furniture ? ? ? ?
Manufactur
er
2. Operations As The
Technical Core

Capital Markets, Stockholders

Finance

Personnel
Purchasing
Suppliers

Workers
Operations

Marketing

Customers
 3. Operations as a transformation Process

Input Environment
transformed
resources
Output
Material
Information Goods
Customers
Transformation OUTPUT
INPUT
process
Facilities Output
Staff
Services
Input
transforming
resources Environment
Illustration of Input-Output Model

Operation Input Resources Transformation Output

Process
Airline Aircraft, pilots, crew, Move passengers Transported
passengers passengers

Department Goods for sale, staff, Display goods, sell Customers & goods
customer goods, Sales advice together
Store
Dentist Dental surgeons, Check & treat teeth, Patients with healthy
equipment, patients give preventative teeth & gums
advice

Zoo Zoo keepers, animals, Display animal, Entertained /

customers educate customers informed customers
breed animal

Police Police officers, Prevent / solve crime, Lawful society, public

information, public arrest criminal with feeling of
security
 Input: Transformed Resources
n  Mixture of i) material, ii) information & iii) customers

Predominantly Predominantly Predominantly

materials processors information processors customer processors
All mfg. operations Accountants Hairdressers
Mining & extraction Bank headquarters Hotels
Retail operations Market research company Hospitals
Warehouse Financial analysts Mass rapid transports
Postal services News service Theatres
Container shipping line Univ. research unit Theme Parks
Trucking company Telecom company Dentists
Output from most operations is a mixture
of goods and services:
Tangibility, storability, transportability, simultaneity, customer contact &
quality
PURE GOODS
Tangible
CRUDE OIL PRODUCTION

Can be stored
Production precedes
consumption

SPECIALIST MACHINE TOOL

ALUMINIUM SMELTING

Low customer
contact
MANUFACTURER Can be transported
Quality is evident
RESTAURANT

COMPUTER SYSTEMS
SERVICES

PSYCHOTHERAPY CLINIC
CONSULTANCY
Intangible

MANAGEMENT
Cannot be stored
Production and
consumption are
simultaneous
High customer contact

Quality difficult to judge

PURE SERVICES
How operations differ from each other

Four V’s of Operations

Volume – how many units of products or services are made by the

operation?

Variety – how many different types of products or services are

made by the operation?

Variation (seasonality) – how much does the level of demand

change over time?

Visibility (customer contact) – how much of the operation’s

internal working are ‘exposed’ to its customers?
 EXAMPLES EXAMPLES
Television plant
Generator factory
Gourmet restaurant Fast food restaurant
Pioneering surgery Low VOLUME High Routine surgery
Taxi service Mass rapid transport

Bespoke tailor Ready-made apparel

Tutorials University lectures
High VARIETY Low
Financial audits
Corporate tax advice
Department store Steel mill

Electricity utility Bread bakery

Financial audits Consultancy advice
High VARIATION IN DEMAND Low
Emergency service Shopping mall security
Taxi service Trucking operation

Health care Most manufacturing

"Cook at your table" Prepackaged sandwich
restaurant High VISIBILITY Low maker
Dentist Dental technicians
Music teacher Distance learning
 Implications of four Vs on operations
IMPLICATIONS IMPLICATIONS
Low repetition High repeatability
Each staff member Low VOLUME High Specialization
performs more jobs Systemization
Less systemization Capital intensive
High unit cost Low unit cost

Flexible Well defined

Complex Routine
Match customer High VARIETY Low
Standardized
needs Regular
High unit cost Low unit costs

Changing capacity Stable

Anticipation Routine
Flexibility High VARIATION IN DEMAND Low
Predictable
In touch with High utilization
demand Low unit cost
High Unit cost

Short waiting tolerance Time lag between

Satisfaction governed prodn & consumptn
by customer perception High VISIBILITY* Low
Standardized
Customer contact skills Low contact skills
needed
*Customer contact
What is Operations Management?

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
 The activities of operations
managers
ENVIRONMENT
INPUT
TRANSFORMED Operations
RESOURCES strategy
MATERIALS
INFROMATION
CUSTOMERS
Improvement
Design GOODS
INPUT OUTPUT AND
SERVICES
FACILITIES Planning &
STAFF control
INPUT
TRASNFORMED
RESOURCES ENVIRONMENT
Operations Management Responsibilities

Design Planning and control

* product design * aggregate planning
* capacity planning * inventory control
* facility location * MRP
* facility (layout)design * scheduling
*process design
*quality assurance * distribution & logistics
*job design
The Critical Design Decisions
n  Goods and services design
n  What product or service should we offer?
n  How should we design these products and services?

n  Process and Capacity design

n  What processes will these products require and in what
order?
n  What equipment and technology is necessary for these
processes?

n  Facility Layout design

n  How should we arrange the facility?
n  How large a facility is required?
The Critical Design Decisions -
continued
n  Location
n  Where should we put the facility
n  On what criteria should we base this location
decision?
n  Human resources and job design
n  How do we provide a reasonable work
environment?
n  How much can we expect our employees to
produce?
n  Quality management
n  Who is responsible for quality?
n  How do we define quality?
The Critical Operating Decisions
n  Inventory, Material Requirements
Planning
n  Should we make or buy this item?
n  Who are our good suppliers and how many
should we have?
n  How much inventory of each item should
we have?
n  When do we re-order?
 Case: OM in Snacks (p. 21)
Consider some operations: Roadside Thela, Udipi
Restaurant, Grocery Stores, Movie Theatres, Car
Service Centre, Banks.

Q1. Identify major micro-operations within this

operation and represent these micro-operations as
input-transformation-output model.

Q2. Where will you place this operation in 4 Vs.

Q3. Identify critical OM decisions (design & planning

and control). How these are made?