Operations

Management
Concepts ( Part 2)
 Describe the Operations
Management objectives.

OBJECTIVES Understand Managing

Global Operations. 2

Discuss the Scope of

Production and Operations
Management.
 OPERATIONS MANAGEMENT
Operations management is the administration of business practices
to create the highest level of efficie n cy p o ssib le w ith in a n
organization. It is concerned with converting materials and labor into
goods and services as efficiently as possible. Investopedia

Operations management is a field of business concerned with the

administration of business practices to maximize efficiency within an
organization. It involves planning, organizing, and overseeing the
organization’s processes to balance revenues and costs and achieve
the highest possible operating profit. https://corporatefinanceinstitute.com/
 OPERATIONS MANAGEMENT

Operation managers are concerned with planning,

organizing, and controlling the activities which affect human
behaviour through models. S.Anil Kumar/ N. Suresh
 PLANNING
Activities that establishes a course of action and guide future decision-
making.
Ø The operations manager defines the objectives for the
operations subsystem of the organization, and the policies, and
procedures for achieving the objectives.

Ø This stage includes clarifying the role and focus of operations in

the organization’s overall strategy.

Ø It also involves product planning, facility designing and using the

conversion process.
 ORGANIZING
Activities that establishes a structure of tasks and authority.
Ø Operation managers establish a structure of roles
and the flow of information within the operations
subsystem.
Ø They determine the activities required to achieve
the goals and assign authority and responsibility
for carrying them out.
 CONTROLLING
Activities that assure the actual performance in accordance
with planned performance.
Ø The operations manager must exercise control by
measuring actual outputs and comparing them to
planned operations management.
Ø Controlling costs, quality, and schedules are the
important functions here.
 MODELS
Operation managers simplify their difficulties by using
models:
ü Aggregate planning models for examining how best to use
existing capacity in short-term,
ü Break even analysis to identify break even volumes,
ü Linear programming and computer simulation for capacity
utilisation,
ü Decision tree analysis for long-term capacity problem of
facility expansion,
ü Simple median model for determining best locations of
facilities etc.
 BEHAVIOUR
Ø Operation managers are concerned with how their efforts to
plan, organize, and control affect human behaviour.

Ø They also want to know how the behaviour of subordinates can

affect management’s planning, organizing, and controlling
actions.
 Objectives of Operations Management
Objectives of operations management can be
categorised into customer service and resource
utilisation.

§ CUSTOMER SERVICE
The operating system must provide something to a
specification which can satisfy the customer in terms of cost
and timing.
Thus, primary objective can be satisfied by providing the
‘right thing at a right price at the right time’.
 Objectives of Operations Management
§ RESOURCE UTILISATION
Operations management is concerned essentially with the
utilisation of resources, i.e., obtaining maximum effect from
resources or minimising their loss, under utilisation or waste.
§ The extent of the utilisation of the resources’ potential
might be expressed in terms of the proportion of available
time used or occupied, space utilisation, levels of activity,
etc.
 MANAGING GLOBAL OPERATIONS
GLOBALIZATION
§ Globalization is a term used to describe how trade and
technology have made the world into a more connected
and interdependent place. National geographic society

§ Globalization, or globalisation, is the process of interaction

and integration among people, companies, and
governments worldwide. Wikipedia
§ Global Integration the process by which a company combines different activities
around the world so that they operate using the same methods, etc.: Global
integration can involve the processes of product standardization and technology
development centralization.
 MANAGING GLOBAL OPERATIONS
§ There are four developments, which have spurred the
trend toward globalization. These are:
1. Improved transportation and communication technologies;
2. Opened financial systems;
3. Increased demand for imports; and
4. Reduced import quotas and other trade barriers.
 MANAGING GLOBAL OPERATIONS
Managing global operations would focus on the following key issues:
§ To acquire and properly utilize the following concepts and those
related to global operations, supply chain, logistics, etc.
§ To associate global historical events to key drivers in global operations
from different perspectives.
§ To develop criteria for conceptualization and evaluation of different
global operations.
§ To associate success and failure cases of global operations to political,
social, economical and technological environments.
§ To envision trends in global operations.
§ To develop an understanding of the world vision regardless of their
country of origin, residence or studies in a respectful way of
perspectives of people from different races, studies, preferences,
religion, politic affiliation, place of origin, etc.
 MANAGING GLOBAL OPERATIONS
Ø When a firm sets up facilities abroad it involves some added
complexities in its operation.
Ø Global markets impose new standards on quality and time.
Managers should not think about domestic markets first and then
global markets later, rather it could be think globally and act
locally.
Ø Also, they must have a good understanding of their competitors.
Ø Some other important challenges of managing multinational
operations include other languages and customs, different
management style, unfamiliar laws and regulations, and different
costs.
§ Following are the activities which are listed under
production and operations management functions:
1. Location of facilities
2. Plant layouts and material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management
o LOCATION OF FACILITIES
It deals with the questions such as ‘where our main
operations should be based?’
o LOCATION OF FACILITIES
§ The selection of location is a key-decision as large
investment is made in building plant and machinery.
§ It should be based on the company’s expansion plan
and policy, diversification plan for the products,
changing sources of raw materials and many other
factors.
§ The purpose of the location study is to find the optimal
location that will results in the greatest advantage to
the organization.
o PLANT LAYOUT AND MATERIAL HANDLING
§ Plant layout refers to the physical arrangement of
facilities. It is the configuration of departments, work
centres and equipment in the conversion process.
o PLANT LAYOUT
§ The overall objective of the plant layout is to design a
physical arrangement that meets the required output
quality and quantity most economically.
§ According to James Moore, “Plant layout is a plan of an
optimum arrangement of facilities including personnel,
operating equipment, storage space, material handling
equipments and all other supporting services along with
the design of best structure to contain all these facilities”.
 MATERIAL HANDLING
§ ‘Material Handling’ refers to the ‘moving of materials from the
store room to the machine and from one machine to the next
during the process of manufacture’.
§ It is also defined as the ‘art and science of moving, packing and
storing of products in any form’.
 q PRODUCT DESIGN
§ Product design deals with conversion of ideas into reality. Every business
organization have to design, develop and introduce new products as a survival
and growth strategy.
 q PRODUCT DESIGN
§ The entire process of need identification to physical
manufactures of product involves three functions: marketing,
product development, manufacturing.
Ø Product development translates the needs of customers
given by marketing into technical specifications and designing
the various features into the product to these specifications.
Ø Manufacturing has the responsibility of selecting the
processes by which the product can be manufactured.
Ø Product design and development provides link between
marketing, customer needs and expectations and the
activities required to manufacture the product.
 PROCESS DESIGN
§ Process design is a macroscopic decision-making of an overall process route
for converting the raw material into finished goods.
§ These decisions encompass the selection of a process, choice of technology,
process flow analysis and layout of the facilities.
§ Hence, the important decisions in process design are to analyse the workflow
for converting raw material into finished product and to select the workstation
for each included in the workflow.
 PRODUCTION PLANNING AND CONTROL
§ Production planning and control can be defined as the
process of planning the production in advance, setting the
exact route of each item, fixing the starting and finishing
dates for each item, to give production orders to shops
and to follow up the progress of products according to
orders.
Main functions of production planning and control includes
planning, routing, scheduling, dispatching and follow-up.

is deciding in advance what to do, how to do

it, when to do it and who is to do it.

may be defined as the selection of path which

each part of the product will follow, which being
transformed from raw material to finished products.
 determines the programme for the
operations. Scheduling may be defined as ‘the fixation
of time and date for each operation’ as well as it
determines the sequence of operations to be followed.
§ Dispatching is ‘release of orders and instruction for
the starting of production for any item in acceptance
with the route sheet and schedule charts’.
§ The function of follow-up is to report daily the
progress of work in each shop in a prescribed
proforma and to investigate the causes of deviations
from the planned performance.
 QUALITY CONTROL
§ Quality Control (QC) may be defined as ‘a system that is
used to maintain a desired level of quality in a product
or service’.

§ Quality control aims at prevention of defects at the

source, relies on effective feed back system and
corrective action procedure.

§ It is the entire collection of activities which ensures that the

operation will produce the optimum quality products at
minimum cost.
 QUALITY CONTROL
The main objectives of quality control are:
To improve the companies income by making the production more
acceptable to the customers i.e., by providing long life, greater usefulness,
maintainability, etc.
§ To reduce companies cost through reduction of losses due to
defects.
§ To achieve interchangeability of manufacture in large scale
production.
§ To produce optimal quality at reduced price.
§ To ensure satisfaction of customers with productions or services or
high quality level, to build customer goodwill, confidence and reputation
of manufacturer.
§ To make inspection prompt to ensure quality control.
§ To check the variation during manufacturing.
 MATERIALS MANAGEMENT
Materials management is that aspect of management
function which is primarily concerned with the
acquisition, control and use of materials needed
and flow of goods and services connected with the
production process having some predetermined
objectives in view.
 MATERIALS MANAGEMENT
The main objectives of materials management are:
§ To minimise material cost.
§ To purchase, receive, transport and store materials
efficiently and to reduce the related cost.
§ To cut down costs through simplification, standardisation,
value analysis, import substitution, etc.
§ To trace new sources of supply and to develop cordial
relations with them in order to ensure continuous supply at
reasonable rates.
§ To reduce investment tied in the inventories for use in other
productive purposes and to develop high inventory turnover
ratios.
 MAINTENANCE MANAGEMENT
§ In modern industry, equipment and machinery are
a very important part of the total productive effort.
Therefore, their idleness or downtime becomes
are very expensive.
 MAINTENANCE MANAGEMENT
The main objectives of maintenance management are:
1. To achieve minimum breakdown and to keep the plant in
good working condition at the lowest possible cost.
2. To keep the machines and other facilities in such a
condition that permits them to be used at their optimal
capacity without interruption.
3. To ensure the availability of the machines, buildings and
services required by other sections of the factory for the
performance of their functions at optimal return on
investment.