Introduction to

Operations Management
By Prof. Rupesh Siyodia
Operations Management
Definition
 An operations system is defined as one in which
 several activities are performed
 to transform a set of inputs into useful output
 using a transformation process
 Operations Management is
 a systematic approach to
 address all the issues pertaining to
 the transformation process that converts some inputs
into output that are useful, and
 could fetch revenue to the operations system
What is Operations Management?

 The Business function responsible for planning,

coordination, controlling the resources needed
to produce product and services for a company.

 “The Science and Art of ensuring, goods and

services are created and delivered successfully to
customer”
The Transformation Process

Quality of inputs Quality of outputs

monitored monitored

Random disturbances

INPUTS Transformation OUTPUTS

Process

Feedback Mechanisms
Operations Management (OM)
Salient Aspects

 OM is a systematic approach
 using scientific tools & techniques and
solution methodologies to analyze problems
 Transformation processes are central to
Operations
 Focusing on keeping costs to the
minimum
 Developing a set of measures to assess
performance of the system
Why Operations Management?
 OM is integrative body of knowledge: whose skills are needed in
industries as diverse as health care, education, telecommunications,
hospitality, food service, banking, consulting and Manufacturing.

 OM is one of the four major functions of any organization and it is

integrally related to all other business functions.

 To know how goods and services are produced.

 To understand what operations managers do.

Video Insight 1.1
Operations Management Issues in a Healthcare
System

Right click on the URL below to open the hyperlink in the web browser…

http://www.youtube.com/watch?v=Or9dvnuST-g
 Manufacturing & Service
Similarities & Differences
Manufacturing Organizations Service Organizations

Differences
Physical durable product Intangible, perishable product

Output can be inventoried Output can’t be inventoried

Low customer contact High customer contact

Long response time Short response time

Regional, national, Intl. markets Local markets

Large facilities Small facilities

Capital intensive Labour intensive

Quality easily measured Quality not easily measured

Similarities
Is concerned about quality, productivity & timely response to its customers

Must make choices about capacity, location, layout

Has suppliers to deal with

Has to plan its operations, schedules and resources

Balance capacity with demand by a careful choice of resources

Has to make an estimate of demand

Service Operations
Salient Features

 Tangibility: Services are performances and

actions rather than objects, therefore
having poor tangibility
 Heterogeneity: High variability in the
operation system performance
 Simultaneous Production & Consumption:
Degree of customer contact is very high
 Perishability: Services cannot be
inventoried as in the case of
manufactured products.
The Transformation Process For a Purely Manufacturing
Organization (A Refrigerator Manufacturer)

• Random disturbances High Quality of

Machines & Quality of turnover of workers and managers outputs
Equipments inputs • Recession monitored
monitored • Government’s taxation
Building • policy
• Strikes instigated by trade
Components, • unions
parts, sub-
assemblies, etc. Customers satisfied with:
Transformation • Good cooling performance
Workers Process • Less consumption with
electricity
Office • Good after-sales service
infrastructure • New advanced features
(computers,
furniture, etc.)
Packaging
material
Capital Feedback Mechanisms
Managers • Rising sales volume
• Lesser customer complaints
• Positive response of customers in
INPUTS the feedback forms Productivity OUTPUTS
 The Transformation Process
For a Service Organization (An MBA Institute)
• Random disturbances
• absenteeism of students, teachers
or staff Quality of outputs
Quality of inputs • Undue interference of the monitored
monitored government in the working of
institutions
Raw minds
(students)

Teachers

Enlightened students with:

Class rooms
• Good communication skills
Transformation Process • Pleasant personalities
Computer lab • Leadership qualities
• Good analytical ability
Library • Team spirit
• Decision making abilities
Projectors • Computer skills
(OHP, LCD etc)

Feedback Mechanisms
Administrative staff • Success at placement interviews
• Grades obtained in examinations
• Rising career graph of alumni in the industry
INPUTS OUTPUTS
• Number of applications for admission
• in the institute
• Ratings of surveys
The Transformation Process For a Hybrid Service
& Manufacturing Organization
(A Restaurant)

Random disturbances
• High turnover of chefs,
waiters, etc. Quality of outputs
Customers Quality of inputs monitored
• Inflation
monitored
Building • Government’s taxation
Chef policy

Vegetables
Furniture
Customers satisfied with:
Mutton, • Good preparation of the
Transformation
chicken, food
Process
pork, etc. • Pleasant behavior and
personality of the waiter
Cooking oil, • Genuine prices charged
Spices, etc.

Waiters

Manager
Feedback Mechanisms
• Rising Revenues
INPUTS • Repeat Customers OUTPUTS
• Appreciation of customers
The Service – Product Continuum
Product Domination Service Domination

Materials, Assets, Products… Services, People, Interactions…

Passenger Cars, Machine Tools

Facilities Maintenance, Turnkey Project Execution …

Logistics, Tourism, Travel and Entertainment Sectors

Health Care System (Hospitals)

Restaurants, Fitness Centres

Professional Consulting, Legal Services

Operations
A key functional area in an
Organisation

Finance

Operations

Marketing HRM
 Operations Function
Linkages with other functions
Operations Support Layer
Customer Layer
Marketing Maintenance Quality

Ultimate Dealers
Customer Retailers Costing Planning Tooling

Material IT Design IE

Core Operations Layer

Testing Assembly
Layer of
Innovation
Fabrication Machining
Innovation Supplier Layer
Strategy Service Delivery system
Sub-contractors Suppliers
Research &
Development
Other service providers

Source: B Mahadevan, The New Manufacturing Architecture, Tata McGraw Hill, New Delhi, 1999.
 Operations Management
A systems Perspective

Forecasting

PROCESSING
Labour Process & Purchasing & Goods

OUTPUT
Product Inventory
INPUT
Design Control
Material

Capital Operations Material & Services

Planning & Capacity
Control Planning

Feedback
Quality Maintenance Process
Management Management Improvement
Video Insight 1.2
Manufacturing of Mahindra’s XUV
500

Right click on the URL below to open the hyperlink in the web browser…

http://www.youtube.com/watch?v=q5-7ZeORixk
Operations Management
Functions
Design Issues Operational Control Issues
Product & Service Design Forecasting the Demand
Process Design Operations Planning & Control
Quality Management Supply Chain Management
Location & Layout of Facilities Maintenance Management
Capacity Planning Continuous Improvement of
Operations

• Design issues in Operations Management lay down overall

constraints under which the operations system functions
• Operational Control issues focuses on optimizing the use of
available resources in the short-term while delivering goods and
services as per plan under the given design constraints
Operations Management
Challenges

 Competitive Pressures due to economic

reforms
 Falling Prices
 The on road price of a Hyundai Santro has not
changed much between 2000 and 2014
 Shrinking Delivery Quote
 Textile Manufacturers are expected to cut their
lead time from order placement to final delivery
down to 2 months
 Build-to-Order Requirements
 Need systems that allows customers to self-
configure, customize and visualize their own
version of products & services
 Operations Management
Challenges

 Growing customer expectations

 Examples: Tariff plans and options provided by mobile
operators, options in passenger car

 Customers tend to demand more and refine their

expectations

 Manufacturing & Service organizations must learn to

respond to these expectations

 Need to develop capabilities to bring newer products and

services faster and yet profitably
 Operations Management
Challenges

 Today’s businesses are constantly challenged

by the rapid technological advancements
 Example 1: ATMs & Internet Banking. Customers need not visit a
bank branch. Drafts and cheques replaced with electronic
payment gateways & fund transfer mechanisms.
 Example 2: Buying a train ticket. By visiting a Web site like
http://www.irctc.co.in/, a customer can accomplish all tasks
pertaining to ticket booking and cancellation at leisure.
 Example 3: Procurement of goods & services. A manufacturing
organization can procure goods & services by organizing a reverse
auction on the Internet. In 3 to 4 hours, the best price for a
component and the supplier willing to provide the component at
a desired quality can be located.
 Example 4: New Product Development. A team of design
personnel from across different geographical locations can
participate in new product development using technological
tools.
 Operations Management
Challenges
 Environmental Issues
 When Government of India announced a scheme for special economic
zones (SEZs), it generated controversies and social concerns.
 Growing industrialization raises concerns regarding the depletion of
natural resources and the waste generated from production systems
and end-of-life products.
 Growing urbanization creates societal problems arising out of scarcity
of available resources and generation of solid wastes.
 Consumption of energy and water in countries like India is on the rise.
Such a situation requires better practices and newer methods of
addressing these requirements using better operational practices.
 Increasingly, firms are under pressure to take responsibility of
restoring, sustaining, and expanding the planet’s ecosystem instead of
merely exploiting it.
 OM practices must address environmental concerns in
order to ensure a sustainable world
 Operations Management
Implications & Priorities

 Relate operations system to Customer/

Market
 Acquire Capabilities to tolerate product
proliferation
 Develop systems and procedures that
promote learning
 Develop Green Manufacturing Practices
Operations Management: Trends & Issues
Chapter Highlights
 Operations Management is a systematic
approach to address all issues pertaining to the
transformation process that converts some
inputs
 From an operations management perspective,
the notion of a ‘pure product’ and ‘pure
service’ is just the two ends of the spectrum.
 In reality, a vast majority of operations
share a continuum of products and services.
 Despite several important differences between
products & services, from an OM perspective
there are several similarities between the two
Operations Management: Trends & Issues
Chapter Highlights…
 Decision context in operations management
can be broadly classified as
 Design and operations control issues
 Long term and short term decisions
 Some of the challenges faced by operation
firms include
 Need to address increased competition due to
economic reforms
 Addressing the growing expectations of the
customers
 Rapid technological advances
 Emerging environmental concerns