A Process consists of one or more actions that transform inputs  primary function is to guide the system by decision

into outputs. making.

 Key figure in the system.
PROCESS MANAGEMENT
 Has the ultimate responsibility for the creation of
 A key aspect of operations management. goods and provision of services.
 The central role of all managements.
The chief role of an operations manager is that of planner
 A discipline in operations management in which
and decision maker and their daily concerns include costs
people use various methods to discover, model,
(budget), quality, and schedules (time).
analyze, measure, improve, optimize, and
automate business processes.

3 CATEGORIES OF BUSINESS PROCESSES:

1. Upper-management processes- govern the operation of System design- strategic decisions that usually require long-
the entire organization. term commitment of resources.
2. Operational processes- core processes that make up the System operation- tactical and operational decisions.
value stream.

3. Supporting processes- support the core processes.

Key decisions of operations management professionals that
affect the entire organization;
2 MAJOR ASPECTS OF PROCESS MANAGEMENT What: What resources are needed, and in what amounts?
1) Managing a process to meet demand When: When should the work be scheduled?

Where: Where will the work be done?

How: How will the work be done?

Who: Who will do the work?

2) Process Variation GENERAL APPROACHES TO DECISION MAKING

4 basic sources of variation: (MQPADSE)

1. The variety of goods or services being offered- 1. Model- an abstraction of reality; a simplified
the greater the variety of goods and services, the greater representation of something.
the variation in production or service requirements.
Classifies as;
2. Structural variation in demand-includes trends
Physical models- look like their real-life
and seasonal variations which are generally predictable.
counterparts.
3. Random variation- natural variability present to
Schematic models- more abstract than their
some extent in all processes, as well as in demand for
physical counterparts such as drawings
services and products and it cannot generally influence by
managers. Mathematical models- most abstract such as
numbers.
4. Assignable variations- caused by defective input,
incorrect work methods, out-of-adjustment equipment, Modelling is a key tool used by all decision makers because
and so on. these are generally easy to use and less expensive.

2. Quantitative Approaches- frequently seeks to obtain a

mathematically optimal solution to certain managerial
Operations Function requires both strategic and day-to-day
problems. (calculators and computers)
production of goods.
3. Performance Metrics- use to manage and control
operations.
Role of the Operations Manager
4. Analysis of Trade-offs- A trade-off is giving up one thing The Markula Center for Applied Ethics at Santa Clara
in return for something else. It means analyzing the University identifies five principles for thinking ethically:
advantages and disadvantages.
(URFCV)
5. Degree of Customization- a major influence on the entire
The Utilitarian Principle – the good done by an action or
organization is the degree of customization of products or
inaction should outweigh any harm it causes.
services being offered to its customers.
The Rights Principle – actions should respect and protect
6. Systems Approach- Emphasizes interrelationships among
the moral rights of others.
subsystems.
The Fairness Principle – equals should be held to, or
7. Establishing Priorities- managers discover issues that are
evaluated, by the same standards.
important and this allows them to focus their attention to
those efforts that will do the best. The Common Good Principle – actions should contribute to
the common good of the community

The Virtue Principle – actions should be consistent with

Pareto phenomenon (Pareto Analysis) states that 20% of
certain ideal virtues.
the things done in the right manner produce 80% of the
desired results.

INTRODUCTION TO OPERATION MANAGEMENT

Operations is what business do. It is the work of managing

the inner workings of a business so it would run smoothly.

Manufacturing- makes products.

Merchandising- sell products

Service- provide services

Hybrid- combination of all.

KEY ISSUES FOR TODAY’S BUSINESS OPERATIONS

3 BASIC FUNCTIONAL AREAS OF BUSINESS ORGANIZATIONS
(EIQRCC)
(OFM)
Economic conditions- recession, slow recovery in various
sectors 1) Operations
Innovating- finding new or improved products or services - producing goods/providing services
Quality problems- due to operations failures 2) Finance
Risk Management- financial crises, accidents, natural and - securing financial resources
manmade disasters, and economic ups and downs
3) Marketing
Cyber-security- need to guard against intrusions from
hackers - Selling and promoting.

Competing in a global economy- outsourcing, changing Operations Management

designs, and working to improve productivity.
- the management of systems or processes that are
part of the operations that will create goods
and/or provide services.
Environmental Concerns- “green initiatives” - Its main concern is with designing and controlling
the systems and processes of production and
Ethical Conduct- Many organizations have developed codes
redesigning the business operations in the
of ethics to guide employees’ or members’ conduct.
production of goods and services.
Ethics – a standard of behavior that guides how - All businesses need operations management in
one should act in various situations. order to function.

SIMILARITIES AND DIFFERENCES BETWEEN PRODUCTION

OF GOODS AND SERVICE OPERATIONS
  Production of goods results in tangible output,
anything that we can see or touch.
 Delivery of service generally implies an act. Usually
produce intangible products.
 Goods are produced and services are performed.
 Production of goods and delivery of service are
often different in terms of what (tangible and
intangible) is done but quite similar in terms of
how it is done.

DIFFERENCES

SIMILARITIES

a. forecasting and capacity planning to match supply and

demand

b. process management

c. managing variations

d. monitoring and controlling costs and productivity

e. managing the supply chain

f. location planning, inventory management, quality control

and scheduling

WHY LEARN OPERATIONS MANAGEMENT?

- Because every aspect of business affects or is

affected by operations.
- Operations and sales are two line functions in a
business organization.
The essence of a business organization is the products 2. Competitor-Based - by studying how a
and services it offers. competitor operates and its products and
services, many useful ideas can be generated.
KEY QUESTIONS;
Reverse engineering – dismantling and inspecting
Buyer’s standpoint;
a competitor’s product to discover product
Cost and quality/performance improvements.

Seller’s standpoint; 3. Research-Based - organized efforts to increase

scientific knowledge or product innovation.
1. Is there a demand for it? (market size, demand
profile)
Basic research - has the objective of advancing the
2. Can we do it? (manufacturability, serviceability) state of knowledge about a subject without any near-
3. What level of quality is appropriate? (customer term expectation of commercial applications.
expectations, competitor quality, fit with current Applied research - has the objective of achieving
offering) commercial applications.
4. Does it make sense from an economic standpoint? Development - converts the results of applied
(Liability issues, ethical considerations, sustainability research into useful commercial applications.
issues, costs and profits)
Product liability - the responsibility a manufacturer
has for any injuries or damages caused by a faulty
The main forces that initiate design or redesign are product. Strong incentive for design improvements.
market opportunities and threats. The factors that Cultural Factors - This can result in different designs
give rise to these can be one or more changes in: for different countries or regions.
(ESPCCT)

Economic – low demand, excessive warranty claims, Product and service design is a focal point in the quest
the need to reduce costs for sustainability. Key aspects include the following:
Social and Demographic – aging baby boomers, Cradle-to-grave assessment (Life Cycle Analysis)
population shifts
- It is the assessment of the environmental
Political, liability, or legal – government changes, impact of a product or service throughout its
safety issues, new regulations useful life
Competitive – new or changed products or services, End-of-Life Programs
new advertising/promotions
- These programs deal with products that have
Cost or availability – raw materials, components, reached the end of their useful lives. The
labor, water, energy purpose of these programs is to reduce the
Technological – in product components, processes dumping of products in landfills.

The Three Rs: Reduce, Reuse, and Recycle

Main Sources of Design Ideas (Idea Generation)  Reduce: Value Analysis

Ideas for new or redesigned products or services may Value Analysis – refers to examination of the
come from a variety of sources. It is classified into function of parts and materials in an effort to
three categories: reduce the cost and/or improve the performance
of a product.
1. Supply chain-based - ideas can come from
anywhere in the supply chain such as:  Re-Use: Remanufacturing
customers suppliers, distributors, employees, Remanufacturing - refurbishing used products by
maintenance and repair personnel. replacing worn-out or defective components. It means
removing some of the parts and components of old 4. Reliability
products and reusing them in new products.
It is the ability of a product, part, or system to
 Recycling perform its intended function under a prescribed set
of conditions. The term “failure” is used to describe a
Recycling - recovering materials for future use.
situation in which an item does not perform as
intended.

The phases in product design and development 5. Robust design

Other Design Considerations
It is a design that results in products or services that
(SDMRRDQT) can function over a broad range of conditions.

1. Strategies for Product or Service Life Stages – most, 6. Degree of Newness

but not all, products and services go through a series
It could be a modification of an existing product or
of stages over their useful life, sometimes referred to
service, expansion of an existing product line, clone of
as their life cycle.
a competitor’s product or service, or a new product or
- Introduction- So it is important to have a reasonable service.
forecast of initial demand so an adequate supply of
7. Quality Function Deployment
product or service capacity is in place.
This is an approach that integrates the “voice of the
- Growth- over time, design improvements and
customer” into both product and service
increasing demand yield higher reliability and lower
development. The purpose of QFD is to ensure that
costs, leading the growth in demand.
customer requirements are factored into every aspect
- Maturity- in this phase, demand levels off. of the process.

- Decline- in this phase, decisions must be made 8. The Kano Model

whether to discontinue a product or service and
It is a theory of product and service design developed
replace it with new ones or abandon the market.
by Dr. Noriaki Kano, a Japanese Professor, who
2. Degree of Standardization offered a perspective on customer perceptions of
quality different from the traditional view that “more
Standardization – refers to the extent to which there is better”.
is an absence of variety in a product, service, or
process.

Standardized products are made in large quantities of

identical items.

Standardized service implies that every customer or

item processed receives essentially the same service.

3. Mass customization

This one is a strategy of producing basically

standardized goods or services, but incorporating
some degree of customization in the final product or
service.

Delayed differentiation – is a process of producing,

but not quite completing, a product or service until
customer preferences are known. It is a
postponement tactic.

Modular design – this is a form of standardization in

which component parts are grouped into modules
that are easily replaced or interchanged.
 MIDTERMS Operational capacity- scheduling problems may occur
when an org has differences in equipment capabilities
Strategic capacity planning
among alternative pieces of equipment or difference
Capacity- upper limit or ceiling on the load that an in job requirements.
operating unit can handle.
Supply chain factors- must be taken into account in
The goal of strategic capacity planning is to achieve a capacity planning if substantial capacity changes are
match between the long-term supply capabilities of involved.
an organization and the predicted level of long-term
External factors- pollution standards on products and
demand.
equipment often reduce effective capacity.
Overcapacity- operating costs are too high
Capacity planning decisions involve both long-term
Undercapacity- strained resources and possible loss of (over-all level of capacity requirements) and short-
customers. term considerations (probable variations in capacity
requirements).
2 useful definitions:
In-house operation- activity performed within the
1. design capacity- maximum output rate or service business, using the company’s assets and employees.
capacity an operation is designed for. It is the
maximum rate of output achieved under ideal or Outsourcing- involves hiring outside assistance, often
perfect conditions. thru another business, to perform activities instead of
using internal assets or employees.
2. effective capacity- design capacity minus
allowances such as personal time and maintenance. FACTORS TO CONSIDER WHEN DECIDING WHETHER
Always less than design capacity. TO PERFORM IN-HOUSE OR OUTSOURCE (AEQTCR)

Available capacity- organization has the resources, it

often makes sense to produce an item.

Expertise- if a firm lacks the expertise to do a job

satisfactory, buying might be a reasonable alternative.

Quality considerations- firms that specialize can

usually offer higher quality than an organization can
attain itself.

The nature of demand- when demand is high and

steady, the org is often better off doing the work
itself.

Determinants of effective capacity (FPPHPOSE) Cost- any cost savings achieved from buying or making
must be weighed against the preceding factors.
Facilities- design and size is the key. Locational factors
also. Risks- buying goods or services may entail
considerable risks. Loss of direct control over
Product and service factors- more uniform output is,
operations, knowledge sharing, and the possible need
greater can be standardization of materials and
to disclose proprietary info are three risks.
process and greater can be the utilization of capacity.

Process factors- quantity capability of a process is an

obvious determinant of capacity. Productivity also
affects capacity.

Human factors- tasks that make up a job, variety of

activities involved.

Policy factors- management policy can affect capacity

by allowing or not allowing capacity options.
Capacity in “chunks” refers to large stepwise increases
that are frequently encountered in capacity decisions.

Bottleneck operation- an operation in a sequence of

operations whose capacity is lower than of the other
operations.
 PROCESS SELECTION TERMINOLOGIES

Process selection- ways organizations choose to Technological innovation- discovery and development
produce or provide their goods. of new or improved product or processes for
producing them.
2 key considerations in an organization approach
process selection: Technology- application of scientific knowledge to the
development and improvement of products and
1) capital intensity- mix of equipment and labor that
services and operations processes.
will be used by the org.
High technology- most advanced and developed
2) process flexibility- degree to which the system can
equipment and/or methods
be adjusted to changes in processing requirements
due to factors. Process technology- methods, procedures and
equipment used to produce goods and provide
Process choice is demand-driven. Meaning, the choice
services.
of what process to use in making goods and providing
services is motivated or caused by economic demand. Information technology- science and use of
computers and other electronic equipment to store,
2 primary questions bear on process selection:
process and send information.
1) how much variety will process need to be able to
handle?
LAYOUT
2) how much volume will process need to be able to
handle? Refers to the configuration of departments,
work centers, and equipment, with particular
Volume- quantity of a product to satisfy demand
emphasis on movement of work (customers or
Variety- varieties of goods/services to be produced. materials) thru systems.

Why layout decisions are important?

5 basic process types; 1. they require substantial investments of money and

effort.
1. JOB SHOP (low-high)
2. they involve long-term commitments which makes
Used when low-volume of high-variety goods difficult to overcome.
or services will be needed.
3. they have significant impact on the cost and
2. BATCH (moderate-moderate) efficiency of operations.
Used when a moderate volume of goods or
services is desired and it can handle a moderate
variety in products or services. LAYOUT DESIGNS

3. REPETITIVE (higher-more standardized) Basic objective: to facilitate a smooth flow of work,

material, and information thru system.
Used when higher volumes of more
standardized good or services needed. Supporting objectives;

4. CONTINUOUS (very high-highly standardized) 1. facilitate product or service quality

Used when a very high volume of non- 2. use workers and space efficiently
discrete, highly standardized output is desired.
3. avoid bottlenecks
5. PROJECT (non-routine,non-repetitive)
4. minimize material handling costs
Used for work that is non-routine, non-
5. eliminate unnecessary movement of workers or
repetitive activities directed toward a unique goal
material
within a limited time frame.
6. minimize production time or customer service time
7. design for safety

PRODUCT LAYOUT INVENTORY

A layout that uses standardized processing Stock or store of goods.

operations to achieve smooth, rapid, high-volume
Manufacturing firms- carry supplies of raw materials
flow. Often used for repetitive processing (repetitive
or continuous). Department stores- carry clothing

Hospitals- store drugs

Supermarkets- stock fresh and canned foods

PROCESS LAYOUTS

Can handle varied processing requirements.

Used for intermittent processing – a discontinuous
workflow (job shop and batch processing). These are
occasionally called as functional layouts because FUNCTIONS OF INVENTORIES
process is designed such that operations of similar
1. to meet anticipated customer demand
nature or function are grouped together.
2. to smooth production requirements

3. to decouple operations
COMPARISON
4. to protect against stock outs
Product layouts are sequential and are used for
repetitive processing (repetitive and continuous) 5. to take advantage of order cycles
whereas process layouts are functional and are used
6. to hedge against price increases
for intermittent processing (job shop and batch
processes) 7. to permit operations

8. to take advantage of quantity discounts

What are two main concerns of inventory

management?

Inventory management is the supervision of

inventories, mainly to keep it in an adequate amount
to meet customer demand and also be cost-effective.

1. level of customer service- having the right goods

available in the right quantity in the right place at the
right time.

2. costs of ordering and carrying inventories- overall

objective of inventory management is to achieve
satisfactory levels of customer service, while keeping
inventory costs within reasonable bounds.
What are the requirements for effective inventory
management?

1. a system keep track of inventory

2. a reliable forecast of demand

3. knowledge of lead time and lead time variability

4. reasonable estimates of holding costs, ordering

costs, shortage costs.

5. a classification system for inventory items.

2 inventory counting systems

1. periodic system- physical count of items in

inventory is made at periodic & fixed intervals in order
to decide how much to order for each item.

2. perpetual inventory system- keeps track of

removals from inventory continuously. Known as
continuous review system.
FINALS 4. managing customer relationships

Supply chain- sequence of organizations- facilities and 5. being able to quickly identify problems and respond
functions & activities- that are involved in producing to them.
and delivering a product or service.

- The heart of an organization and people that

An important aspect of SCM is flow management.
run it are the lifeblood.
- Sometimes a value chain- reflects the concept 3 types;
that value is added as goods and services
progress through the chain. 1. product and service flow- movement of goods and
services from suppliers to customers as well as
2 components handling customer service needs and product returns.
1) supply component- starts at the beginning of the 2. information flow- sharing forecasts and sales data,
supply chain and ends with the internal operations of transmitting orders, tracking shipments, and updating
the organization. order status.
2) demand component- starts at the point where the 3. financial flow- credit terms, payments, and
organization’s output is delivered to its immediate consignment and title ownership arrangements
customer and ends with the final customers.

3 important aspects of an effective supply chain

Trends affecting supply chain design and
1. effective communication management;
2. the speed in which information moves through the 1. measuring supply chain ROI- enables manager to
supply chain incorporate economics
3. having performance metrics 2. “greening” the supply chain- reducing pollution and
choosing green suppliers.

3. re-evaluating outsourcing- lower labor costs-

Supply chain management
freeing up capital to devote to other needs.
- strategic coordination of business functions
4. integrating IT- produces real-time data.
within a business organization and
throughout its supply chain for the purpose of 5. adopting lean principles- improves the performance
integrating supply and demand management. of their supply chains.
- An expansive and complex undertaking that
relies on each partner to run well. 6. managing risks- develops strategies to manage risks
- Goal- match supply to demand as effectively
and efficiently as possible.
- Supply chain managers- people at various First step to manage risks is to identify potential risks.
levels of the organization who are responsible Supply chain risks include;
for managing supply and demand both within 1) supply chain disruption
and across business organizations.
2) quality issues
Logistics- part of supply chain involved with the
forward and reverse flow of goods, services, cash, and 3) loss of control of sensitive information
information.

Quality- the ability of a product or service to

Key aspects of supply chain management consistently meet or exceed customer expectations.

1. determining appropriate levels of outsourcing Customers are the ultimate judge of quality.

2. managing procurement

3. managing suppliers The foundations of modern quality; The Gurus

Walter Shewhart- father of statistical quality control.
Developed control charts for analyzing the output of
processes to determine when corrective action was
necessary.

W.Edwards Deming- Deming prize- a prize awarded

annually to firms that distinguish themselves with
quality management programs. He complied a famous
list of 14 points.

Joseph M. Juran- can be regarded as a major force in

Japan’s success in quality. He viewed quality as fitness
for use. He described quality management in terms of
trilogy consisting of quality planning, quality control,
and quality improvement.

Armand Feigenbaum- quality is a “total field” and

customer defines quality.

Philip B. Crosby- developed the concept of zero

defects and popularized the phrase “do it right the
first time”

Kaoru Ishikawa- cause-and-effect diagram (also

known as fishbone diagram) for problem solving and
implementation of quality circles.

Genichi Taguchi- best known for Taguchi loss function,

involves a formula for determining the cost of poor
quality.

Taiichi Ohno and Shigeo Shingo- Kaizen- continuous

improvement at Toyota.

Customer expectations can be broken down into

categories or dimensions that customers use to judge
the quality of a product or service.