OPERATIONS MANAGEMENT

 Management Science is the study and development of

techniques for the formulation and analysis of management
and related business problems. Operations research models
are often helpful in this process.
 Operations Research is the application of techniques
developed in mathematics, statistics, engineering and the
physical sciences to the solution of problems in business,
government, industry, economics and the social sciences.

Quantitative Methods employ mathematical models to reach a

wide variety of business decisions.
• They give modern managers a competitive edge
• Managers do not need to have great mathematical skills
• Familiarity allows one to:
• Ask the right questions Key Concepts
• Recognize when additional analysis is necessary Production system: the way a firm acquires inputs then converts
• Evaluate potential solutions and disposes outputs.
•Make informed decisions Operations managers: responsible for the transformation process
from inputs to outputs.
Qualitative Methods. Like more traditional methods, qualitative
methods come in many varieties. Different Scope of Operations Management
researchers focus on different sources of data: The operations function includes many interrelated activities such
• One's own immediate experience as:
• Others' experiences, which we might seek to understand  Forecasting
through:  Capacity planning
• their speech or writing,  Facilities and layout
• their other behaviors,  Scheduling
• their products - technology, artwork, footprints, etc.  Managing inventories
 Assuring quality
What is Production and Operations Management (POM)?  Motivating employees
• Production is the creation of goods and services  Deciding where to locate facilities  And more . . .
• Production and/or Operations Management are the activities that
transform resources into goods and services. Role of Operations Manager
The Operations Function consists of all activities directly related to
Why Study POM? producing goods or providing services.
• It is one of the 3 critical parts of any organization: A primary function of the operations manager is to guide the
• Marketing – generates demand system by decision making.
• Operations – creates the product • System Design Decisions
• Finance/accounting – tracks organizational performance, pays • System Operation Decisions
bills, collects money
• It shows us how goods and services are produced System Design Decisions
• It shows us what POM managers do • System Design
• It is the costliest part of any organization – Capacity
– Facility location
What is Operations Management? – Facility layout
• Operations management (OM) is the science and art of ensuring – Product and service planning
that goods and services are created and delivered successfully to – Acquisition and placement of equipment
customers. – These are typically strategic decisions that:
 Design of goods, services, and the processes that create them. • usually require long-term commitment of resources
 Day-to-day management of those processes. • determine parameters of system operation
 Continual improvement of these goods, services, and System Operation Decisions
processes. • System Operation
• These are generally tactical and operational decisions
– Management of personnel
– Inventory management and control
– Scheduling
• Efficiently using processes to transform inputs into valuable – Project management
outputs – Quality assurance
• Seeks to provide a competitive advantage. – Operations managers spend more time on system
• Successful operations management results from careful allocation operation decision than any other decision area
of: • They still have a vital stake in system design
• Human Resources
• Capital
• Information
• Materials Operations Managers have such titles as:
• Chief Operating Officer
Processes and Operations • Hotel or Restaurant Manager
• Vice President of Manufacturing

1|klowiijii
 OPERATIONS MANAGEMENT

• Customer Service Manager 8. Profitability: Executed properly, all of the above foundations
• Plant Manager lead to a strong bottom line
• Field Services Manager
• Supply Chain Manager Operations Management Concepts
• Process design
OM’s Contributions to Society • When a new product is to be introduced, the best way to produce
• Higher Standard of Living it must be determined.
• Ability to increase productivity • This involves charting the detailed steps needed to make the
• Lower cost of goods and services product.
• Better Quality Goods and Services • Inventory management
• Competition increases quality • Inventory is tightly controlled to keep cost down and to avoid
• Concern for the Environment production that isn't needed.
• Recycling and concern for air and water quality • Inventory is taken every four weeks and adjusted in the inventory
• Improved Working Conditions management system accordingly.
• Better job design and employee participation
Scheduling and Capacity
Top-down Approach to OM Strategy •Production schedules are created to ensure that enough product is
available for both retail and wholesale customers, taking into
• Operations Strategy Decisions account such factors as current inventory and production capacity.
• Strategic (long-range)
• Needs of customers (capacity planning) Quality management
• Goods and services that are reliable and perform correctly.
• Tactical (medium-range) ❑ Quality allows customers to receive the performance that they
• Efficient scheduling of resources expect.
• Operational planning and control (short-range) • Each product is inspected and must conform to the highest quality
• Immediate tasks and activities standards.
• If a product does not conform to standard (for example, wrong
color, improper packaging, improper labeling, improper weight,
size, or shape), then it is removed from inventory to determine
where the process broke down and to initiate corrective action.

Planning and budgeting

• Representing the production area in all meetings, developing
annual budgets and staffing plans, and watching technology that
might affect them.
Three Issues at the Core of Operations Management
Inventory management
1. Efficiency • Overseeing the management of inventory for items
2. Cost
3. Quality Efficiency
• The amount of input to produce a given output.
Role of OM within an Organization • The less input required, the lowers cost and waste

Responsiveness to customers
• Actions taken to respond to customer needs.
• Firm must react quickly and correctly to customer needs as they
arise.

Productivity
Foundations of OM
1. Planning: Operations managers must constantly forecast,
plan, and adjust to optimize processes based on conditions.
2. Process: Production of goods or services requires having
strong, repeatable processes. ❑ Partial measures
3. Efficiency: Managers must troubleshoot bottlenecks, • output/(single input)
inadequate resources, and downtimes to create optimal
efficiency. ❑ Multi-factor measures
4. Cost Control: Production is typically a major part of a • output/(multiple inputs)
company’s cost structure, and you must manage it wisely. ❑ Total measure
5. Quality: Good quality control is necessary to maintain • output/(total inputs)
customer satisfaction and the company’s reputation.
Companies can greatly suffer without it. Example on Labor Productivity
6. Continuous Improvement: To remain competitive,
companies need to have processes in place to consistently 10,000 units/500hrs = 20 units/hour ...
seek better ways of doing things. ... or we can arrive at a unitless figure
7. Technology: Underlying all of these foundations is (10,000 unit x P10/unit)/ (500hrs x P9/hr) = 22.22
technology. Well-used technology keeps a company ahead of
the curve. Example for Productivity Measurement

2|klowiijii
 OPERATIONS MANAGEMENT

❑ You have just determined that your service employees have

used a total of 2400 hours of labor this week to process 560
insurance forms. Last week the same crew used only 2000 hours of
labor to process 480 forms.
❑ Is productivity increasing or decreasing?

Understanding Goods and Services

• A good is a physical product that you can see, touch, or possibly

consume.
• Examples of goods include: oranges, flowers, televisions, soap,
airplanes, fish, furniture, coal, lumber, personal computers, paper,
and industrial machines.
• A service is any primary or complementary activity that does not
directly produce a physical product.

Similarities between Goods and Services

1. Goods and services provide value and satisfaction to customers
who purchase and use them.
2. They both can be standardized or customized to individual wants
and needs.
3. A process creates and delivers each good or service, and
therefore, OM is a critical skill.

Key Differences between Goods and Services

Current Challenges in OM
1. Technology
2. Globalization
3. Changing customer expectations
4. Changing job designs
5. Quality
6. Global manufacturing

3|klowiijii