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Lesson 1

This document provides an overview of operations management. It defines operations management as the set of activities that transform inputs into outputs through the production of goods and services. Key concepts covered include the input-transformation-output model, differences between goods and services, and the role and typical activities of an operations manager. The document also discusses operations strategy, competitive priorities around cost, quality, time and flexibility, and methods for measuring productivity.

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147 views

Lesson 1

This document provides an overview of operations management. It defines operations management as the set of activities that transform inputs into outputs through the production of goods and services. Key concepts covered include the input-transformation-output model, differences between goods and services, and the role and typical activities of an operations manager. The document also discusses operations strategy, competitive priorities around cost, quality, time and flexibility, and methods for measuring productivity.

Uploaded by

ravi_nyse
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Operations Management

Lesson 1 Fundamentals of Operations Management

Prepared by Sudarsan Jayasingh


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Learning Objectives
What you will learn in this unit: Define Operations Management? The role and activities of operation management The input-transformation-output model Difference between goods and services What is Operations strategy Performance objectives of operations strategy Productivity Measurement
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What is Operations Management?


Operation Management is the set of

activities that create goods and services through the transformation of inputs into outputs.

(Slack, 2001)

Typical Organization Chart

Source: Reid and Sanders, 2005.

Activities of Operations manager


Understand the operations strategic objectives Developing an operations strategy for the organization Designing the operations products, services and processes Planning and controlling the operation Improving the performance of the operation.
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Some Activities of Ikea Operations Manager


Design elegant products which can be flat packed efficiently
Storage Quality

Design Store Layout Site Location


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OMs Transformation Role

Source: Reid and Sanders, 2005.

The input-transformation-output model


T ransformed resources Materials Information Customers

Input
T ransforming resources Facilities Staff

Transformation process

Out put

Goods and services

Source: Slack, 2001

Inputs
Transformed resources the resources that are treated, transformed or converted in some way. The transformed resources which operations take in are usually a mixture of materials, information and customers. Transforming resources the resources that act upon the transformed resources. Facilities and staff are the two types of transforming resources. Facilities include building, equipment, plant and process technology etc., Staff includes all those who operate, maintain, plan and manage the operation.
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The output from most operations is a mixture of goods and services


PURE GOODS
CRUDE OIL PRODUCTION ALUMINIUM SMELTING

SPECIALIST MACHINE TOOL MANUFACTURER

Tangible Can be stored Production precedes consumption Low customer contact Can be transported Quality is evident
RESTAURANT COMPUTER SYSTEMS SERVICES

PSYCHOTHERAPY CLINIC

MANAGEMENT CONSULTANCY

Intangible Cannot be stored Production and consumption are simultaneous High customer contact Cannot be transported Quality difficult to judge

PURE SERVICES Source: Slack, 2001

Similarities-Service/Manufacturers

All use technology Both have quality, productivity, & response issues All must forecast demand Each will have capacity, layout, and location issues All have customers and suppliers All have scheduling and staffing issues
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Historical Development of OM

Industrial revolution Scientific management Human relations movement Management science Computer age Just-in-Time Systems (JIT) Total quality management (TQM) Reengineering Flexibility Time-Based Competition Supply chain Management Global Competition Environmental Issues Electronic Commerce

Late 1700s Early 1900s 1930s to 1960s Mid-1900s 1970s 1980s 1980s 1990s 1990s 1990s 1990s 1990s 1990s Late 1990s

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Todays OM Environment

Customers demand better quality, faster deliveries, and lower costs Increased cross-functional decision making Recognized need to better manage information using ERP and CRM systems
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The activities of operations management


ENVIRONMENT
INPUT TRANSFORMED RESOURCES MATERIALS INFROMATION CUSTOMERS

OPERATIONS STRATEGY

IMPROVEMENT DESIGN PLANNING AND CONTROL

INPUT
FACILITIES STAFF INPUT TRASNFORMED RESOURCES

GOODS OUTPUT AND SERVICES

ENVIRONMENT

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Highlights

OM is function that manages the resources that add value Its role is to transform inputs into products or services Key differences between mfg. and service companies are tangibility of product and degree of customer contact Historical milestones range from 1700s Industrial Revolution to the modern Electronic Commerce age OM must understand and implement major process changes like JIT, TQM, supply chain management, and environmental changes OM works closely with all other business functions

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Operations Strategy

Operations strategy is the total patterns of decisions and actions which set the role, objectives and activities of the operation so that they contribute to, and support, the organisations business strategy
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Operations Strategy Designing the Operations Function

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The Wal-Mart Strategy and Operations Structure


Corporate Strategy
(Gain competitive advantage by) providing customers access to quality goods, when and where needed, at competitive prices

Operations Structure Operations Strategy


Short cycle times Low inventory levels EDI Fast transportation system Focused locations Communication between retail stores
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Competitive Advantage
Competitive advantage is term as the extra edge that a firm has over their industry peers (Reid and Sanders, 2005).
The capability of a firm in managing their operation can be transform into their competitive advantage if there can identify and tap into their intangible resources.
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Competitive Priorities- The Edge

Four Important Operations Questions: Will you compete on Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?
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Source: Reid and Sanders, 2005.

Competitive Priorities- The Edge 0r Performance Objectives

Quality Time (Speed and Dependability) Flexibility Cost

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Lower prices (or higher profits) Cost Speed Dependability

Faster customer response

On-time deliveries

Quality

Flexibility

Error-free products and services

Wider variety More customisation More innovation Cope with volume fluctuations
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Are There Priority Tradeoffs?

Which priorities are Order Qualifiers? e.g. Must have excellent quality since everyone expects it Which priorities are Order Winners? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonalds competes on consistency FedEx competes on speed Custom tailors compete on flexibility Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it

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Measuring Productivity

Productivity is a measure of how efficiently inputs are converted to outputs


Productivity = output/input

Total Productivity Measure

Total Productivity = $sales/inputs $

Partial Productivity Measure

Partial Productivity = cars/employee

Multifactor Productivity Measure

Multi-factor Productivity = sales/total $costs


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Source: Reid and Sanders, 2005.

Highlights

Business Strategy is a long range plan. Functions develop supporting plans Strategy must address mission, environment, and core competencies Business strategy provides a guide for designing operations strategy Operations strategy must consider which competitive priorities are essential to meet business objectives

Competitive priorities are cost, quality, time, and flexibility Productivity measures how effectively a firm is using resources Productivity is computed as a ratio of outputs divided by inputs

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References

Reid R.D., and Sanders N. R., (2005) Operations Management, 2nd Edition, Wiley Publication. Slacks Nigel and Lewis Mike, (2002) Operations Management, Prentice Hall.

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