Introduction of Operations Management Written Report
Introduction of Operations Management Written Report
Dagupan City
INSTITUTE OF GRADUATE AND PROFESSIONAL STUDIES
Presented to:
DR. FERDINAND L. TIMBANG
Professor
Presented by:
ARJOE S. DE GUZMAN, MM, MBA
February 2025
I. What is Operation Management and Why Does it is Matter?
Operations management executes backend business functions. It is an exciting career field that
oversees manufacturing, inventory, and quality control to prepare products for the market. Efficient
operations enable businesses to thrive and succeed.
Operations Management is a field that focuses on the management of resources and processes to
create and deliver goods or services. It is a relatively new domain, only emerging as a different
discipline in the early 20th century. Operations management is concerned with all aspects of an
organization’s operations, including the design, planning, control, and execution of processes.
Operations management aims to ensure that the organization’s operations are efficient and effective.
This blog post will explore the nature, scope, and fundamentals of operations management. We will
also discuss some of the challenges faced by operations managers.
Before moving ahead and understanding the nature of operations management, check out our
Advanced Certificate in Operations, Supply Chain and Project Management which has all the
necessary learning resources you require to be an operations manager.
1. Ensure that the organization’s production systems can meet customer demand.
Operations management is the process of ensuring that business operations are efficient with
regards to using as few resources as necessary and effective in terms of meeting customer demand.
The ultimate goal and nature of operations management are to improve the efficiency and
effectiveness of an organization’s operations while also reducing costs.
4. Improve the quality of the goods and services made by the organization.
The objective of operations management is to improve the quality of the goods and services of the
organization. It can be done through a variety of means, such as improving the efficiency of
production processes, ensuring that products are produced to meet customer specifications, and
reducing waste and defects in finished products. Improving quality can lead to increased customer
satisfaction and loyalty, which can, in turn, lead to higher sales and profits for the organization.
It is the process of planning, organizing, directing, and controlling the resources needed to produce
goods and services. The scope of operations management includes all the activities necessary to
plan, design, and manage the production and distribution process.
1) Facility layout planning: This step involves deciding how best to utilize the space in a factory or
office to optimize workflow.
2) Workforce planning and management: This includes ensuring that there are enough employees
with the right skills to do the work required and managing employee performance.
3) Inventory management: This encompasses everything from raw materials to finished products
and ensuring that inventory levels are maintained at an optimum level.
4) Scheduling: This is creating a production schedule that meets customer demand while
maximizing efficiency.
5) Quality control: Quality control is essential to ensuring that products meet customer expectations
and standards.
6) Transportation and logistics: Operations managers must plan to move goods from suppliers to
customers efficiently.
8) Project management: Many operations require project management to ensure that they are
completed within time and budget.
Forecasting
Forecasting is a critical component and nature of operations management. It helps organizations
make informed decisions about future production needs and capacity requirements. There are
several vital elements to consider when developing a forecasting system, including:
An effective forecasting system takes all of these factors into account and provides accurate
information that can be used to make sound operational decisions.
Just In Time
Just In Time (JIT) is a manufacturing philosophy that arose in the 1970s. Its main goal is to
eliminate waste throughout the production process by producing only what is needed and in the
quantities needed.
This philosophy was born out of necessity as businesses increasingly felt the squeeze of overseas
competition. To survive and thrive, they had to find ways to operate more efficiently and cut costs
wherever possible. JIT became one of the most popular methods for achieving this.
When properly implemented, JIT can result in significant cost savings, improved quality control,
and customer satisfaction. It can also lead to shorter lead times, increased flexibility, and reduced
inventories.
Inventory Management
It is the process of tracking inventory levels and making decisions about what levels are acceptable.
This includes both raw materials and finished goods. The aim should be to strike a good balance
between having too much inventory (which ties up cash and can lead to obsolescence) and too little
inventory (which can lead to stockouts and lost sales).
An effective inventory management system must take into account both the physical and financial
aspects of inventory. The physical aspect includes the actual goods or materials that make up the
inventory, while the financial aspect encompasses the costs associated with procuring, storing, and
transporting the inventory.
An effective inventory management system will minimize both the physical and financial risks
associated with excess or obsolete inventory. Excess inventory can tie up valuable resources and
lead to storage costs, while obsolete inventory can result in lost sales and customers.
1) A clear understanding of customer demand: This involves forecasting future demand for products
or services and ensuring that there is enough inventory on hand to meet this demand.
2) An efficient procurement process: This ensures that the right products are ordered from suppliers
at the right time and in their required quantities.
3) An effective warehousing strategy: This involves storing inventory in a way that minimizes
damage, loss, or theft while maximizing space utilization.
4) A well-designed transportation network: This ensures that finished goods are delivered to
customers within the stipulated time and in good condition.
II. Historical Evolution and Key Milestone in the Field
Management Industrial Evolution Operations Management began in the 1770s at England and
spread at the rest of Europe and to the United States during the 19th century. It substituted machine
power for human power wherein the most significant machine used is the steam engine. Because of
this, production became fast and low cost, economies become scale, standard gauging system was
developed, factories grew rapidly, and countless jobs were provided.
Scientific Management
Scientific Management widely changed the management of factories. It was developed by Frederick
Winslow Taylor, the father of scientific management. This management is hugely based on
observation, measurement, analysis and improvement of work methods and economic incentives
wherein different procedures were studied to identify the best method in doing each job. During this
evolution, Henry Ford practically adopted the scientific management principles for Taylor. The
moving assembly line was introduced which hugely affected many industries. The mass production
was also introduced to the automotive industry.
Henry Ford's invention of the assembly line in the early twentieth century, which significantly
increased productivity and enabled mass production of automobiles, making them more affordable
to the general public, was a watershed moment in operations management; this marked a significant
shift toward standardized manufacturing processes.
Division of labor is one of the most important concepts in social science, not just for economics but
for the study of societies in general. Many scholars, such as Ibn Kalduhn in the 14th century, or
Emile Durkheim in the 20th, have considered the importance of division of labor for how societies
function. But Adam Smith’s discussion in The Wealth of Nations united two key concepts: division
of labor as a motor for generating prosperity, and market systems based on self-interest as a fuel for
that motor.
Lionel Robbins famously gave a definition of his field: "Economics is the science which studies
human behavior as a relationship between ends and scarce means which have alternative uses."
Although Robbins is rightly seen as one of the foremost free market economists of the early 20th
century, we have been ill-served by this narrow and technical definition.
The reason that division of labor increases wealth, if voluntary exchange is allowed, is what
economists call “increasing returns.” If four people separately produce everything each one needs,
each will be independent but very poor. If the same four people specialize, with one making shoes
and clothing, one growing grain and vegetables, one focusing only on hunting for meat, and one
becoming skilled in making and repairing housing, then the cooperating group will be wealthier by
far than when they were living independently.
Such artisanal specialization was common in the Stone Age, and explains why many of us still have
ancient guild names: Coopers made barrels. Bakers made bread. Smiths worked with iron. Barber,
Brewer, Shoemaker, Skinner, Tailor: the knowledge that allowed a single artisan to have a trade and
make a living is a way of increasing wealth. But it is not yet division of labor, because it is not yet
commerce. Commerce requires (among other things) the division of labor within a specialization.
Since, as Smith pointed out, division of labor is limited by the extent of the market, the greater the
expansion of commerce to new participants the greater the increase in “opulence,” as Smith
charmingly called it, for everyone.
One of Adam Smith’s great contributions was the recognition that the desire to cooperate, in and of
itself, does not ensure prosperity. The institutional form in which cooperation is embedded makes
all the difference. In fact, once cooperation is established, the desire for cooperation as a primary
goal can sometimes be dispensed with. The institutional setting is commerce in a market system; the
new form of cooperation is division of labor.
In 1801, Whitney demonstrated to the U.S. Government how muskets could be constructed using
standardized interchangeable parts. After 1801, interchangeable parts helped grow the First
Industrial Revolution in the United States.
Interchangeable parts are components of manufactured goods that are standardized and are easily
replaced with new parts. The concept of interchangeable parts allows for manufactured goods to be
mass-produced rather than individually crafted.
The first example of interchangeable parts was developed for muskets so that soldiers on the
battlefield could easily and quickly repair their muskets. Interchangeable parts were then found in
the cotton gin, which helped clean cotton fibers. Today, interchangeable parts can be found in
appliances and the automotive industry. For example, car parts can be easily replaced with new
parts quickly and without always requiring a great deal of skill or training.
Interchangeable parts were the concept that manufactured goods could be assembled using
standardized parts, which could be replaced in the item as needed with new parts. Before this
concept, manufactured goods were constructed by skilled craftsmen. Items were crafted by hand
and each item was unique, which meant production was slow and if the item broke it could not be
easily repaired.
III. The Role of Operations Management in various industries, including manufacturing and
services
1. Product Design
Product design involves creating a product that will be sold to the end consumer. It involves
generating new ideas or expanding on current ideas in a process that will lead to the production of
new products. The operations manager’s responsibility is to ensure that the products sold to
consumers meet their needs, as well as match current market trends.
Consumers are more interested in the quality of the product more than the quantity, and the
organization should create systems that ensure the products produced meet the needs of the
consumer.
2. Forecasting
Forecasting involving making predictions of events that will occur in the future based on past data.
One of the events that the operations manager is required to predict is the consumer demand for the
company’s products.
The manager relies on past and present data on the uptake of the company’s products to determine
future trends in consumption. The forecasts help the company know the volume of products needed
to meet the market demand.
The operations manager manages the supply chain process by maintaining control of inventory
management, the production process, distribution, sales, and sourcing of suppliers to supply
required goods at reasonable prices. A properly managed supply chain process will result in an
efficient production process, low overhead costs, and timely delivery of products to consumers.
4.Delivery Management
The operations manager is in charge of delivery management. The manager ensures that the goods
are delivered to the consumer in a timely manner. They must follow up with consumers to ensure
that the goods delivered are what the consumers ordered and that they meet their functionality
needs.
If the customer is unsatisfied with the product or is complaining about certain features of the
product, the operations manager receives the feedback and forwards it to the relevant departments.
Unlike the marketing or finance departments, where managers are responsible for their departments,
operations management is a cross-department role where the manager assumes an array of
responsibilities across multiple disciplines. To be successful, an operations manager must possess
the following skills:
1. Organizational Abilities
Organizational abilities refer to the ability of the operations manager to focus on different projects
without getting distracted by the many processes. The operations manager should be able to plan,
execute, and monitor each project to the end without losing focus.
If a manager is not organized, uncompleted tasks will pile up, important documents will get lost in
the process, and a majority of the time will be spent finding lost documents that could be easily
accessible had the manager been organized. Good organization skills can increase production
efficiency and help the manager save time.
2. Coordination
An operations manager needs to have good coordination by knowing how to integrate resources,
activities, and time to ensure proper use of the resources toward the achievement of the
organization’s goals. Coordination involves carrying out specific activities simultaneously and
switching between the activities with ease. It also involves dealing with interruptions, obstacles, and
crises, and efficiently going back to the normal routine functions to prevent further interruptions.
3. People Skills
Most of the responsibilities of an operations manager involve dealing with people. This means that
they must know how to relate with the employees, outside stakeholders, and other members of
senior management. An operations manager should know how to manage the fine lines with other
colleagues by knowing how to communicate, listen, and relate to them on professional and personal
levels.
Since workplaces are made up of people from diverse cultures, the operations manager needs to
show tolerance and understanding to other people. Also, the manager should be able to resolve
conflicts and mediate disputes between employees and members of the senior staff.
4. Tech-savvy
In this age of rapidly advancing technologies, an operations manager needs to have an affinity for
technology in order to be in a position to design processes that are both efficient and tech-
compliant. Modern organizations are becoming increasingly tech-dependent in order to gain a
competitive advantage in the market.
This means that most of the processes conducted manually, such as procurement, must transition to
more efficient automated processes. When an operations manager is familiar with the latest
innovations in the tech industry, they can use the innovations to improve internal processes.
A transformation process is any activity or group of activities that takes one or more inputs,
transforms, and adds value to them, and provides outputs for customers or clients. Where the inputs
are raw materials, it is relatively easy to identify the transformation involved, as when milk is
transformed into cheese and butter. Where the inputs are information or people, the nature of the
transformation may be less obvious. For example, a hospital transforms ill patients (the input) into
healthy patients (the output).
Often all three types of input – materials, information, and customers – are transformed by the same
organization. For example, withdrawing money from a bank account involves information about the
customer's account, materials such as cheques and currency, and the customer. Treating a patient in
hospital involves not only the ‘customer's’ state of health, but also any materials used in treatment
and information about the patient.
service – the treatment of customers or the storage of materials (for example hospital wards,
warehouses).
Several different transformations are usually required to produce a good or service. The overall
transformation can be described as the macro-operation, and the more detailed transformations
within this macro-operation as micro operations.
The role of operations management impacts on all functional areas of a business organization
including Marketing, Human Resources (HR) and Finance.
In general, the Operations Department depends on other departments in the firm, if it is to run
smoothly. It is because it is concerned with providing the right products in the right quantities, at
the right quality level, to the right customers, in a cost-effective and timely manner.
How is operations management linked with other business functions?
The relationship between operations and the other business functions is fairly easy to understand, so
let’s take a look.
Product, price, promotion, and distribution play an important part in the overall Marketing Mix. The
production method used will affect both the quality and the individuality of the product. An
exclusive product means that it can be marketed at a high price due to its uniqueness and high
quality. However, when there are likely to be plenty of substitutes of the product available on the
market, prices will be much more competitive. Promotional strategies are also more impersonal and
aggressive in order to gain market share from rival firms. Marketing will ask questions where to
distribute products. Businesses that rely on high volume sales to gain high profits such as
supermarkets aim to increase the number of distribution channels to ensure maximum sales. The
correct types of packaging to appeal to customers. Process, physical evidence and people also play
an important part in the extended Marketing Mix. Research and Development (R&D) of products
will be done jointly by the operations department and marketing department.
Example 1: Customers of the car brand Lamborghini are invited by a sales manager to meet in
person and discuss personal requirements for their super cars. By contrast, mass produced
products such as Coca-Cola or BigMac are standardized and sold in millions every single day.
The role of operations management has a direct impact on Human Resource (HR) management.
Any change in production methods can either increase or decrease the size of the workforce. Job
production will increase the number of workers required while mass production uses capital-
intensive technologies, so it tends to deskill the workforce. Motivation will also be affected by
aspects of operations management. Whilst flow production suffers from a lack of teamwork and
group dynamics, cell production benefits from using the individual skills of people working within
a team. There are also training implications when it comes to different production methods – both
training and organizing training for staff. Job production techniques require more training whereas
mass production requires minimal instructional training only. When it comes to recruitment, it is
relatively easy to hire workers for mass production whereas attractive remuneration packages may
be needed to entice specialist workers for job production. Crisis management can be highly
disruptive and unsettling for people, so effective contingency plans are needed. The Human
Resources (HR) department will also need to handle any disputes and grievances involving staff.
Example 2: Many multinational companies managed to enter China prior to its membership of the
World Trade Organization (WTO) by setting up labor-intensive operations – manufacturing plants
where the operations could easily be automated.
Different types of products require different production techniques. Questions will be asked which
supplies to use. Capital intensity and lean production require heavy investment in machinery and
equipment. This is expensive although with mass production the fixed investment costs can be
spread over time. Capital-intensive firms are likely to use investment appraisal techniques to assess
whether the risks are worthwhile. They are also likely to need external sources of finance to fund
the investment projects. A contingency fund, which is finance kept for emergency use, may also be
reserved in case of machinery breakdowns or late deliveries from a supplier, which would delay
production. On another hand, labor-intensive production requires a greater proportion of a firm’s
cost to go into remunerating labor with wages, salaries and other financial benefits. Methods of
payment to be used for employees departmental budgeting. Operations management will also
suggest efficient ways of warehousing the produced products.
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