OM

Exam Preparation Note for Operations Management

1. Define Operations Management

 Definition:
Operations Management (OM) is the field of management concerned with designing,
overseeing, and controlling production processes and redesigning business operations in the
production of goods or services.

o It ensures that business operations are efficient, using as few resources as possible.

o It also ensures effectiveness in meeting customer requirements.

 Key Elements of Operations Management:

o Planning, organizing, and supervising the production process.

o Aligning resources, technology, and labor to achieve organizational goals.

2. Describe Operations Management, Its Scope, and Activities

 Scope of Operations Management:

1. Product Design:

 Focus on creating goods or services that satisfy customer needs and provide
competitive advantages.

2. Process Design:

 Deciding the sequence of operations and methods to achieve production

objectives efficiently.

3. Supply Chain Management:

 Overseeing materials, information, and financial flows from suppliers to end

customers.

4. Inventory Management:

 Ensuring optimal stock levels to avoid overstocking or stockouts.

5. Quality Management:

 Maintaining product and process quality standards.

 Activities of Operations Management:

 o Planning: Setting production objectives, forecasting demand, and resource allocation.

o Organizing: Structuring teams, resources, and workflows.

o Coordinating: Synchronizing activities across departments and supply chains.

o Controlling: Monitoring performance metrics, costs, and schedules.

3. Understand Operations Strategy and Competitiveness

 Operations Strategy:
A plan that determines how an organization’s operational resources contribute to achieving
business objectives.

 Competitive Priorities in Operations Strategy:

1. Cost Leadership:

 Minimizing costs to offer competitive prices.

 Examples: Efficient manufacturing processes, economies of scale.

2. Quality:

 Producing high-quality goods and services to meet customer expectations.

 Examples: Total Quality Management (TQM), Six Sigma.

3. Flexibility:

 Ability to adjust to changes in product design, volume, or demand.

 Example: Customizable products or modular production systems.

4. Delivery:

 Ensuring on-time delivery of goods and services.

 Example: Just-in-Time (JIT) inventory systems.

 Link Between Operations Strategy and Competitiveness:

o An effective operations strategy enables an organization to deliver value to customers

while maintaining a competitive edge in cost, quality, and innovation.

4. Describe Decisions in Designing and Controlling the Operations System

 Decisions in Operations System Design:

1. Product and Service Design:

 Deciding product features, quality standards, and market requirements.

  Example: Launching a product with eco-friendly packaging.

2. Process Design:

 Selecting the production process (e.g., batch, continuous flow, job shop).

3. Capacity Planning:

 Determining production capacity needed to meet demand.

 Example: Expanding production lines during peak seasons.

4. Technology Selection:

 Deciding on machinery, software, and automation tools.

 Example: Investing in AI-driven inventory management systems.

5. Facility Location and Layout:

 Choosing where to locate a facility and how to layout equipment and

workstations.

 Decisions in Controlling the Operations System:

o Scheduling: Determining timelines for production activities.

o Inventory Control: Managing stock levels to avoid shortages or surpluses.

o Quality Assurance: Monitoring and maintaining product quality.

o Cost Control: Ensuring expenses stay within budget.

5. Understand Facility Location and Layout

 Facility Location:

o Refers to choosing the optimal geographical location for production or service delivery.

o Factors to Consider:

 Proximity to Customers: Minimizing transportation costs and improving delivery

times.

 Infrastructure: Availability of transportation, utilities, and communication

networks.

 Labor Availability: Skilled workforce at competitive wages.

 Government Policies: Tax incentives, regulations, and subsidies.

 Facility Layout:

o Refers to the arrangement of machines, workstations, and resources within a facility.

 o Types of Layouts:

1. Process Layout: Resources are grouped based on similar processes.

 Suitable for job shops or customized production.

2. Product Layout: Resources are arranged in a sequence to produce standardized

goods.

 Example: Assembly lines for cars.

3. Fixed-Position Layout: The product remains stationary, and resources move to

it.

 Example: Construction sites, shipbuilding.

4. Hybrid Layout: Combines elements of process and product layouts.

 Example: Supermarkets with both departments and aisles.

6. Discuss Aggregate Planning

 Definition:
Aggregate planning determines the overall production levels, workforce, and inventory
requirements to meet anticipated demand over a medium-term horizon (3-18 months).

 Objectives of Aggregate Planning:

o Minimize production costs.

o Balance supply and demand.

o Maintain stable workforce and production rates.

 Strategies for Aggregate Planning:

1. Chase Strategy: Adjust production rates to match demand.

 Example: Hiring or laying off workers during demand fluctuations.

2. Level Strategy: Maintain a steady production rate and workforce.

 Example: Building inventory during low demand periods to meet peak season
demand.

3. Hybrid Strategy: Combines chase and level strategies for flexibility and cost-efficiency.

 Tools for Aggregate Planning:

o Linear Programming: Optimize resources under constraints.

o Simulation Models: Test different scenarios to identify the best plan.

 o Forecasting Techniques: Use historical data to predict future demand.

7. Apply Selected Quantitative Tools

 Quantitative Tools for Operations Management:

1. Forecasting Models:

 Time Series Analysis: Predicts demand using historical patterns.

 Exponential Smoothing: Assigns more weight to recent data for demand

forecasting.

2. Linear Programming:

 Solves optimization problems like maximizing profit or minimizing cost.

 Example: Determining the optimal product mix given resource constraints.

3. Queuing Theory:

 Optimizes service processes by analyzing customer wait times and resource

utilization.

 Example: Reducing waiting times in hospitals or call centers.

4. Economic Order Quantity (EOQ):

 Calculates the optimal order size to minimize inventory holding and ordering
costs.

5. ABC Analysis:

 Categorizes inventory items into three groups based on value and usage
frequency:

 A: High-value, low-quantity items.

 B: Moderate-value items.

 C: Low-value, high-quantity items.

6. Statistical Quality Control:

 Uses control charts to monitor processes and ensure product quality.

 Example: Detecting defects in production lines.