OPERATIONS MANAGEMENT AND

TQM● 1.1 Nature of Operations Management *Operations and supply chains are intrinsically
linked, and no business organization could exist
Operations Activity - This is fundamental that all without both.
business organizations do.
Supply Chain - is the sequence of organizations their
Business operations - are processes that either facilities, functions, and activities that are involved in
provide services or create goods . producing and delivering a product or service.
- The sequence begins with basic suppliers of
Operations - core of what a business raw materials and extends all the way to the
The
organization does. final customer.
- Part of a business organization that is
responsible for producing goods or services. Example of a simple product supply chain:
- Literally a Managing activity
- take place in businesses such as restaurants,
gasoline stations, retail stores, supermarkets,
factories, hospitals, and even in colleges and
universities.
- In other words, Operations Management Example of the supply chain for a bread manufacturer:

Operations Management - defined as

the
management of systems or processes that create
goods and/or provide services.
- Is a large term for several smaller subject.
- Is at work , when a company wants to operate
smoothly, grow its business, satisfy
customers, and make money.
- Management of systems or processes that
create goods or provides services.

Why Study Operations Management?

Every aspect of business affects or is affected by *Business provides goods and services to the
operations. customers. The creation of goods or services
involves transforming or converting inputs into
Many service jobs are closely related to operations outputs.
such as financial services, marketing services,
accounting services, and Information Services. *Various inputs such as capital, labor, and
information are used to create goods or services
Through learning about operations and supply using one or more transformation processes (e.g.,
chains you will have a better understanding of: storing, transporting, repairing).
- The world you live in
- The global dependencies of companies and
nations
- Reasons that companies succeed or fail
- The importance of working with others

3 Basic Functions that should be present to be

Functional in Managing a Business Organization:

The essence of the operations function is to add

value during the transformation process:

Value-added - is the term used to describe the

*Operations cannot stand on its own, it requires difference between the cost of inputs and the value
other external organizations before reaching the or price of outputs.
customers.
OPERATIONS MANAGEMENT AND
TQM
Feedback - measurement is taken at various points 1.2. Production of Goods and Services
in the transformation process.
Good and services often go hand in hand, there are
Control - the comparison of feedback against some very basic differences between the two,
previously established standards to determine if differences that impact the management of the
corrective action is needed. goods portion versus management of the service
portion.

*Goods - defined as physical items that include raw

materials, parts, and sub-assemblies. As well as, final
products.
- These cost the consumer money that
goods
is sold by a business.
- Supermarket goods, Automobiles, computers,
Oven.

*Services - are activities that provide a combination

of time, location, form, or psychological value.
- These are also provided by a business.
- Air travel, Education, Haircut, Legal Counsel

Manufacturing/Production Vs. Service

Similarities between managing the production of

products and managing services. When there are
important service considerations, these are
highlighted in separate sections. Here are some of
the primary factors for both:

- Forecasting and capacity planning to match

supply and demand.
- Process management
- Managing variations
- Monitoring and controlling
costs and productivity
- Supply chain management
- Location planning, inventory management,
quality control, and scheduling
- Note that many service activities are
essential in goods-producing companies.
These include training, human resource
management, customer service, equipment
OPERATIONS MANAGEMENT AND TQM
repair, procurement, and - Lead time data
administrative services.
1.3 Scope and Decision Making in Operations However, there are other functional units that are
Management part of the decisions such as:

Operations management people - are involved in ➔ Purchasing - responsibility for procurement

product and service design, process selection, of materials, supplies, and equipment.
selection and management of technology, design of ➔ industrial engineering - often concerned with
work systems, location planning, facilities planning, scheduling, performance standards, work
and quality improvement of the methods, quality control, and material
products or services. organization’s handling.
➔ Maintenance - is responsible for general
Process Management - a key aspect of operations upkeep and repair of equipment, buildings
management decision. and grounds, heating and air conditioning;
- central role of all management removing toxic wastes; parking and security.
➔ Accounting - has responsibility for preparing
Process - consists of one or more actions that the financial statements (BS, IS, and CF)
transform inputs into outputs. ➔ Personnel Is concerned with recruitmen
-
and training of personnel. Labort relations,
3 Categories of Business Processes: contract negotiation, wage and salary
administration.
❖ Upper-Management Processes - ➔ public relations - has responsibility for
govern the operation of theThese entire building and maintaining a positive public
organization. image of the organization.
- Examples organizational ➔ Distribution - involves the shipping of goods
include governance organizational to warehouses, retail outlets, or final
strategy and customers.
.
❖ Operational Processes - These are the cor
processes that make up the value stream. e
-Examples include purchasing,
production and/or service, marketing,
and sales.
❖ Supporting Processes - These support the
core processes.
- Examples include accounting, human
resources, and IT (information
technology).

Decision Making in an organization usually

Scope of Operations Management
overlapping in the three basic functions:
The scope of operations management ranges across
the organization.

The operations function includes many interrelated

activities such as:
- Forecasting
- Capacity planning
- Facilities and layout
- Scheduling
- Managing inventories
- Assuring quality
- Motivating employees
- Deciding where to locate facilities and more
Finance & Operations
- Budgeting Operations manager - the chief role is that of planner
- Economic Analysis of Investment Proposals and decision-maker.
- Provision of funds - exerts considerable influence over the degree
Marketing & Operations to which the goals and objectives of the
- Demand data organization are realized. Most decisions
- Product and service design involve many possible alternatives that can
- Competitor analysis
OPERATIONS MANAGEMENT AND TQM
have quite different impacts on costs or
profits.

A primary function of the operating manager is to Benefits of Models

guide the system by decision making: 1. Models are generally easier to use and less
expensive than dealing with the real system.
❖ System design decisions 2. Require users to organize and sometimes
These are typically strategic decisions that: quantify information
- Usually require long term commitment of 3. Increase understanding of the problem
resources 4. Enable managers to analyze “What if?”
- Determine parameters of system operation. questions
System Design 5. Serve as a consistent tool for evaluation and
- Capacity provide a standardized format for analyzing a
- Facility Location problem.
- Facility Layout 6. Enable users to bring the power of
- Product and service planning mathematics to bear on a problem.
- Acquisition and placement of equipment
2. Quantitative Approaches - decision-making
❖ System Operation Decisions approach that frequently seeks to obtain a
- Operations managers spend more time on mathematically optimal solution
system operation decisions than any other - Supported by computer calculations
decision area. - Often work together with qualitative
- They still have a vital stake in system design approaches.
These are generally tactical and operational
decisions 3. Performance Matrix - All use
- Management of personnel managers
metrics to manage and control operations
- Inventory management and control - Profits, costs, quality, productivity, flexibility,
- Scheduling inventories, schedules, and forecast accuracy.
- Project management
- Quality assurance. 4. Analysis of Trade-Offs - giving up one thing in
return for something else.
*Difference is that System Design is before while - Carrying more inventory (an expense) in order
System Operation is during. to achieve a greater level of customer service.

5. A system approach
Decision-Making *System - a set of interrelated parts that must work
Tools:
1. Models - the key tool used by together.
all
decision-makers .
- Usually, organizations use to attain the most Subsystems of Business Organization
correct decision - Marketing subsystem
- Abstraction of reality simplifies the - Operations subsystem
representation of something. - Finance subsystem
- They simplifications of real-life
are phenomena The Systems Approach
- omit unimportant details of the real-life - Emphasize interrelationships among
Theysystems they mimic so that attention can be subsystems
focused on the most important aspects of - The main theme is that the whole is greater
the real-life system than the sum of its parts.
- The output and objectives of the organization
Classification: take precedence over those of any one
❖ Physical Models - look like their real-life subsystem.
counterparts.
- (Miniature of a house) 6. Establishing priorities - Pareto phenomenon
❖ Schematic Models - are more abstract than - In nearly all cases, certain issues or items are
their physical counterparts ; that is, they have more important than others.
less resemblance to physical reality. - Recognizing this allows managers to focus
- (Graphs, Blueprint) their attention on those efforts that will do the
❖ Mathematic Models - are the most abstract: most good.
- numbers, formulas, and symbols
(Production budget)
OPERATIONS MANAGEMENT AND
TQM
*Pareto Phenomenon - a few factors account for a 1.4 Historical Evolution and Trends in Operations
high percentage of occurrence of some event(s) Management
- critical few factors should receive the
These
highest priority. The Historical Evolution of OM is divided in five(5)
- This is a concept that is appropriately applied Era namely:
to all areas and levels of management.
*Pre-industrial revolution
7. Ethics/Environmental concerns - concern Craft Production - system in highly skilled
about global warming and pollution has had workers use simple which
flexible tools to produce small
an increasing effect on how businesses quantities of customized goods.
operate. 1. Industrial Revolution - began in England in
the 1770s
*Sustainability - using resources in ways that do not - Division of labor - Adam Smith, 1776
harm ecological systems that support human - Wealth of the nation is the people in
existence. production - labor.
- Application of the “rotative” steam
engine, the 1780s. (Thomas Savery
introduced this concept)
- In 1793, Eli Whitney invented Eli
Whitney’s Cotton Gin and
Interchangeable parts.

2. Scientific Management
Frederick Winslow Taylor - father of science of
management.
- Emphasis was on maximizing output.
- Based on observation, measurement,
analysis, and improvement of work methods,
and economic incentives.

*Management - responsible for planning, carefully

selecting, and training workers, finding the best way
to perform each job, achieving cooperation between
management and workers.

3. Human Relations Movement -human

relations movement emphasized the
importance of the human element in job
design
*Lilian Gilbreth - Application of psychology
*Analysis of Therbligs - Arms and body movement.

*Elton Mayo - Hawthorne studies on worker

motivation, 1930.
- Value of worker.

*Abraham Maslow - motivation theory, 1940s;

hierarchy of needs, 1954.

*Frederick - Two Factor Theory,

Herzberg 1959.
- Satisfier and Dissatisfier.

*Douglas McGregor - Theory X and Theory Y,

(Motivation) 1960s
- What type of leadership approach
OPERATIONS MANAGEMENT AND
TQM
*William Ouchi - Theory Z.
- It is focused on increasing employee loyalty Kinds of Technology
to the company by providing a job for life with
a strong focus on the well-being of the Product and Service -refers to the
employee, both on and off. Technology
discovery and development of new products and
services.
4. Decision Models and Management Science
*Ford Whitman Harris - a mathematical model for Process - refers to methods, procedures,
inventory management, 1915. Technology
and equipment used to produce goods and provide
- ECQ (Economic Order Quantity) services.
- - engineer, management scientist,
patent attorney holder Information - refers to the science and
Technology
use of computers and other electronic equipment to
*Walter Shewart - statistical procedures for sampling store, process, and send information.
and quality control, the 1930s.

*George Dantzig - linear programming, 1947

*Henry Gantt - Gantt Chart

5. Influence of Japanese Manufacturers

Refined and developed management practices that
increased productivity
- Credited with fueling the “quality revolution”
- Just in time production (no inventory)
- Continuous improvements
- Worker teams and empowerment
- Achieving customer satisfaction

Key Issues for Operations Managers Today:

- Economic conditions
- Innovating
- Quality problems
- Risk management Other Important
- Competing in a global economy Trends
1. Operations strategy
2. Working with fewer resources
The following are the major recent trends that occur 3. Revenue Management
in managing the operations of a business: 4. Process analysis and improvement and
quality improvement
- The internet, e-commerce and e-business *Six Sigma - a process reducing costs, improving
- Management of technology quality, and increasing customer satisfaction.
- Globalization 5. Increased regulation and product liability
- Management of supply chain issues.
- Outsourcing is the process obtaining a 6. Lean production system - it uses minimal
product or service from outside the amounts of resources to produce a high
organization volume of high quality with some variety.
- Agility is the ability of an organization to
respond quickly to demands or opportunities
- Ethical Behavior

E-business - use of the internet to transact business.

E-commerce - consumer to business transaction

Technology - the application of scientific to the

development and improvement of goods and
services.

Additional Information (Video):

OPERATIONS MANAGEMENT AND
TQM
Operations Management - can be defined as the Forecasting, capacity planning, facilities and layout,
management of the entire process that transfers scheduling, managing inventories, assuring quality,
inputs into outputs. motivating and training employees, locating facilities,
purchasing, distribution, and maintenance.
Inputs - material, manpower, and machines.
Outputs - physical goods or services. *Forecasting - identifying trends in a company’s past
data in order to plan for the future.
A central aspect of operations management is the - Allows a company to be able to order raw
improvement of the transformation processes which materials, hire and fire employees, and
can be accomplished by concepts such as Total identify the products that will be the most
Quality Management, Kanban, or Total Productive profitable in the near future.
Maintenance.
*Forecasting goes hand in hand with capacity
Additional Informations (Video): planning as well as, purchasing. These activities
would not be completed without forecasting.
E-commerce, global competition, customer service,
productivity, and quality are all parts of OM. Without *Managing inventories also is closely related to
globalization, it is impossible for a company to capacity planning, purchasing, and forecasting.
expand into a larger more beneficial market. If the However, inventories are managed more often and
company does not have good customer service then with less lead time than previously mentioned
it will not satisfy customers. And therefore, no activities.
business and no profits. Productivity and Quality
must at a maximum in order for them to make the *Distribution is similar to managing inventories
most money for a business. All of these elements because of the lack of lead time given before a
need to work together to create a successful product need to arrive at a customer.
business.
*Motivating and training employees is an activity
Supply Chain - is a process that is put in place by a connected to assuring quality for the company if a
company in order to gather materials, produce, and company’s employees are motivated and excited to
distribute their product. These supply chains can work then the quality of a product is going to better if
include a business’ facilities, functions, and activities an employee didn’t have that motivation
that are involved in producing, and delivering a
product or service. *Placement of facilities is essential in the distribution
of products to the customer and the transportation
- A supply chain sequence begins with raw of raw materials to a company. Locating the
materials and concludes at the final product placement of a facility is based on the closeness of
which the customer purchases. the supplier, as well as, the cost of distribution, and
the distance to the customers
3 Types of Interrelated Process that Businesses are
Composed of: Why learn Operations Management?

Each of these is different and corresponds to Businesses are created to be profitable

different levels of a company similar to their titles. and
successful. Things like forecasting, location
planning, and Quality Assurance are essential in
*All businesses no matter what size, use these basic creating a profitable business without these tools
processes to produce and provide the products and that wouldn’t be possible.
services that we as consumers desire.

❖ Upper Management Processes - includes

many activities that a company uses to allow
it to run more smoothly.
❖ Operational Processes
❖ Supporting Processes

Operations Management’s Activities: