LGT 2106

Principles of Operations Management

2023/24, Semester 1
Lecture 1
Introduction
Time and Venue
Subject Code : LGT2106
Subject Title : Principles of Operations Management
Teaching Mode : face-to-face

Lecture Session Day Time Venue Instructor

LGT 2106 Friday 3:30pm - 5:20pm Z211 Jinzhi Bu

TUT001 Friday 5:30pm - 6:20pm MN102C (weeks 1-8) Jinzhi Bu

Z210 (weeks 9-13)
TUT002 Monday 3:30pm - 4:20pm MN102C (weeks 1-8) Siyuan Chen
R402 (weeks 9-13)
TUT003 Monday 5:30pm - 6:20pm MN102C (weeks 1-8) Siyuan Chen
QR611 (weeks 9-13)
TUT004 Monday 11:30am - 12:20pm MN102C (weeks 1-8) Tao Zhang
N101 (weeks 9-13)
TUT005 Monday 10:30am - 11:20pm MN102C (weeks 1-8) Tao Zhang
P309 (weeks 9-13)
Class Regulation

• Please arrive at the classroom before the lecture starts

• Students are expected to actively participate in classroom activities

• All lectures and tutorials will be video-taped and uploaded to the Blackboard for your reference
Lecture Topics
• Introduction to Operations Management

• Capacity Management

• Materials Management

• Facility Planning

• Operations Scheduling

• Projects Management

• Quality Management

• Supply Chain Management

Textbooks
• Recommended Textbooks:
• Jacobs, F.R. and Chase, R.B. (2021). Operations and Supply Chain Management (16th ed.), McGraw-Hill.
• Jacobs, F.R., and Chase, R.B. (2020). Operations and Supply Chain Management: The Core (5th ed.), McGraw-
Hill.
• Heizer, J., Render, B. and Munson, C. (2020). Operations Management: Sustainability and Supply Chain
Management (13th ed.), Pearson/Prentice Hall.
• Useful References:
• Krajewski, L.J., Malhotra, M.K. and Ritzman, L.P. (2015). Operations Management: Processes and Supply Chains
(11th ed.), Pearson/Prentice Hall.
• Schroeder, R.G., Rungtusanatham, M.J. and Goldstein, S.M. (2017). Operations Management in the Supply Chain:
Decisions and Cases (7th ed.), McGraw-Hill.
• Casey, M.J. and Wong, P. (2017). Global supply chains are about to get better, thanks to blockchain, Harvard
Business Review (https://hbr.org/2017/03/global-supply-chains-are-about-to-get-better-thanks-to-blockchain).
• Guar, V. and Gaiha, A. (2020). Building a transparent supply chain: Blockchain can enhance trust, efficiency, and
speed, Harvard Business Review, May-June, 94-103.
Assessment Components

Assessment % contribution Due Date

Quizzes 5% Small online quiz after each lecture topic

Class Participation 5% Tutorial Attendance

Week 7 (20 October 2023, lecture time)
Midterm Test 20%
Tentative
Individual Project 20% Week 11 (19 November 2023)

Final Exam 50%

Individual Project Report (20%)
The project
Your task is to analyze the operations of a company at your own choice with ONE to TWO
quantitative techniques (i.e., Lectures 2-7). Data can be obtained through the company
websites, reports, newspapers, journals, case studies, databases or even made up by yourself
in a reasonable way. Make sure that you provide references of all information sources with
proper citations. You may choose a small-scale company or a large enterprise, depending on
how much data you could obtain to do the quantitative analysis.

Cover page Indicate your name, Student ID, essay title and word count
Introduction Company background and its operations management issues/problems
Methodology Source of data and/or data collection method and data analyses
Results Quantitative analysis results

Discussion Recommendations, conclusion, implications, limitations based on the analysis if any

Reference Citation according to APA referencing system.
(source: https://libguides.lb.polyu.edu.hk/english-for-university/referencing)
Individual Project Report (20%)
• Format
• Individual
• Delivery
• A project report with 1200-1500 words (excluding tables and references)
• Assessment criteria
• Introduction (15%)
• Methodology (10%)
• Results (30%)
• Discussion / Recommendations (20%)
• Structure (15%)
• English (10%)
• Submission requirements
• Format: MS Word or PDF
• Submission: to Turnitin on Blackboard by (overall similarity <=25%, and
similarity index with any single source ≤ 15%)
• Due date: before 23:59pm, 19 November 2023 (Sunday)
• Honour declaration form (no form, no mark)
Subject Learning Outcomes
(a) Distinguish the main principles of operations management

(b) Demonstrate how service and manufacturing operations create value in the processes

(c) Apply the various models and approaches of operations management to inform decision making in a
real business situation

(d) Apply data science techniques in solving operations management problems and evaluate their
effectiveness and managerial implications
Learning Outcomes of Lecture 1

1. Understand the concept of operations management

2. Identify the elements of transformation processes

3. Differentiate between goods and services

4. Define operations strategy

5. Identify order winners and order qualifiers

References: Jacobs & Chase, 16th ed, Chapters 1, 2.

Why IKEA Popular?
• Founded in Sweden in 1943, IKEA has been the world's
largest furniture retailer since 2008
• In 2017, 2.3 billion website visits, 936 million store visits
Why Amazon Successful?
• Founded in 1994, Amazon started as an online marketplace for books but expanded to sell electronics,
software, video games, furniture, food, toys, and jewelry
• One of the Big Five companies in the U.S. information technology industry, along
with Google, Apple, Microsoft, and Facebook
What is Operations Management?

• Operations management is the management of the conversion process which

transforms inputs such as raw material and labor into outputs in the form of
finished goods and services

Inputs Outputs
(materials or Transformation Process (goods
customers, (components) and
Labor) services)

• Concerned with the management of the entire production/delivery system


The Transformation Process within OM
Input-Transformation-Output Relationships
Operations As An Essential Functional Field
Organization

Marketing Operations Finance

• Marketing: generating demand, selling, promotion

• Operations: creating and delivering the goods/services Operations
• Finance: tracking how well the organization is doing, paying bills,
collecting the money
• Overlap between Finance & Operations
• Budgeting
Finance Marketing
• Provision of funds
• Overlap between Marketing & Operations
• Analyze demand data
• Product and service design
• Competitor analysis
 Operations are Everywhere

• Restaurant, e.g., VA Student Canteen

• Producing food, noodles-in-soup, bakery items and beverages; hiring cooks; purchasing raw
material and produces from suppliers

• Hospital, e.g., University Health Service

• Providing primary medical care and emergency service; hiring/scheduling nurses; restocking
medical supplies; scheduling doctor appointments

• Financial institutions, e.g., Hang Seng Bank

• Credit servicing; trade processing and report production; client servicing, position and order
management of asset managers
OM’s Contributions to Society
• Higher Standard of Living
• Ability to increase productivity
• Lower cost of goods and services

• Better Quality Goods and Services

• Quality control tools to guarantee high-quality standards and increase competitiveness

• Concern for the Environment

• Recycling of waste materials

• Improved Working Conditions

• Better job design and more employee participation
Why Study Operations Management?
• Every aspect of business affects or is affected by operations

• Many service jobs are closely related to operations

• Financial services
• Marketing services
• Accounting services
• Information services

• Through learning operations management, you will have a better understanding of

• The world you live in
• The global dependencies of companies and nations
• Reasons that companies succeed or fail
• The importance of working with others
Career in Operations Management
• Operations management careers specialize in managing the planning,
production, and distribution of goods and services

• Careers in OM
• Plant manager
• Supply chain manager
• Quality control manager
• Project manager
• Business process improvement analyst

• Your knowledge of OM will prove to be a great asset

• Today’s manager cannot ignore how the real work of the organization is done
Operations Management versus Supply Chain Management

Operations Supply Chain

Management Management

Manufacturing and
Processes that move
service processes
information, material,
used to transform
and funds to and from
resources into
the firm
products
Supply Chain Management
• A sequence of activities and organizations involved in producing and delivering a good
or service

Suppliers’ Direct Final

Producer Distributor
suppliers suppliers customers

• Links would represent various production and/or service operations such as factories,
storage facilities, and modes of transportation (trains, railroads, ships, planes, cars, and
people)

• If any one of the links fails, that can interrupt the flow in the supply chain for the
following portion of the chain
Five Categories of Operations Processes
• Planning – processes needed to operate an existing supply chain

• Sourcing – selection of suppliers that will deliver the goods and services needed to
create the firm’s product

• Making – producing the major product or service

• Delivering – logistics processes such as selecting carriers, coordinating the movement

of goods and information, and collecting payments from customers

• Returning – receiving worn-out, excess, and/or defective products back from

customers
Operations and Supply Chain Process
Goods or Services
• Goods are physical items that include raw materials, parts, subassemblies,
and final products
• Automobile
• Computer
• Oven
• Toothbrush

• Services are activities that provide some combination of time, location, or

psychological values
• Air travel
• Education
• Health care
Differences between Goods and Services
• Unique characteristics of services (compared to goods)
• Intangible
• Interaction with customers
• Heterogeneous
• Perishable and time dependent
• Package of features

• A product offering is typically a combination of goods and services

The Goods-Services Continuum
Efficiency, Effectiveness, and Value
• Efficiency - doing something at the lowest possible cost

• Effectiveness - doing the right things to create the most value for the company

• Value - quality divided by price

• Quality - the attractiveness of the product, considering its features and durability
Sustainable Strategy
• The firm’s strategy describes how it will create and sustain value for its current
shareholders
• Shareholders – individuals or companies that legally own one or more shares of stock in the company
• Stakeholders – individuals or organizations who are directly or indirectly influenced by the actions of
the firm, e.g., investors, employees, customers, and suppliers

• Many companies today have expanded the scope of their strategy to include not only the
shareholders, but also stakeholders

• Adding a sustainability requirement means meeting value goals without compromising

the ability of future generations to meet their own needs
A Sustainable Strategy: Triple Bottom Line

➢ Compensate shareholders
Triple bottom line – evaluating ➢ Promote growth and grow long-term value
the firm against social, economic, ➢ Provide lasting economic benefit
and environmental criteria

➢ Fair and beneficial business

➢ Protect environment practices toward labor, the
➢ Manage consumption of community, and the region
natural resources ➢ Never use child labor
➢ Reduce waste ➢ Pay fair salary
➢ Maintain a safe work
environment
Different Levels of OM Strategy: Top-down Approach
• Operations Strategy Decisions

• Strategic planning (long-range)

• Needs of customers (capacity planning)

• Tactical planning (medium-range)

• Efficient scheduling of resources

• Operational planning
and control (short-range)
• Immediate tasks and activities
Major Competitive Dimensions

• The competitive position of a firm is specified by various competitive dimensions

• Price: make the product or deliver the service cheap

• Quality: make a great product or deliver a great service

• Delivery speed: make the product or deliver the service quickly

• Delivery reliability: deliver it as promise

• Coping with changes in demand: change its volume

• Flexibility and new product introduction speed: offering a large variety of products
Notion of Trade-Offs
• An operation cannot excel simultaneously on all competitive dimensions

• Management must decide which parameters of performance are critical and concentrate
resources on those characteristics

• Straddling: seeking to match a successful competitor while maintaining its existing

position
• It adds features, services, or technology to existing activities
• Often a risky strategy
• Example: competition between Apple and Huawei in photography
Order Qualifiers and Winners
• Order qualifiers: those dimensions that are necessary for a firm’s products to be considered for purchase
by customers
• Features customers will not forego

• Order winners: criteria used by customers to differentiate the products and services of one firm from those
of other firms
• Features that customers use to determine which product to ultimately purchase

• For example, I want to buy a new notebook computer, on which I can do some casual drawing (e.g., for
online teaching). Then,
• Qualifying criteria: cost, screen size, weight, battery life, good OS
• Order-winning feature: touch screen and e-pen
Competitive Strategy of IKEA
• Founded in Sweden in 1943, the world's largest furniture retailer since 2008

• Design and sell ready-to-assemble furniture, kitchen appliances and home accessories, among other goods
and home services

• How IKEA gets you to impulsively buy more - YouTube

• Competitive strategy
• Targets young, low cost buyers
• Uses a self-service model displaying furniture in familiar settings
• Designs its own low-cost, modular, ready-to-assemble furniture
• Stores stock the products in boxes, and customers pick their own boxes from inventory
• Offers in-store restaurant, child care, and extended hours
Competitive Strategy of Southwest Airlines
• Established on March 15, 1967, and headquartered in Dallas, Texas

• One of the major airlines of the United States and the world's largest low-cost carrier airline

• 10 things about Southwest Airlines. - YouTube

• Competitive strategy
• Serve price-sensitive and convenience-sensitive travellers
• Fewer aircraft types and smaller airports to reduce costs
• Fast turnarounds at the gate (10 mins)
• No assigned seats, no premium classes of service
• Flexible cancellation policy, credit scheme
• Emphasize recruiting and retaining motivated employees