Course Code: MBA 632

Credit Hours: 3
By: Messele Kumilachew (PhD)
Chapter-1: Introduction to Operation Management
Chapter-2: Competitiveness, Strategies, and
Productivity in Operations
Chapter-3: Product and Service Design
Chapter-4: Facility Location and Layout strategies
Chapter-5: Capacity Planning, Aggregate Planning,
and Scheduling in Operations
Chapter-6: Quality, Quality Controls, and TQM
Chapter-7: Just in Time (JIT), Kaizen, and Lean
System
 Chase Richard B. and Aquilano N.J (1998).
Production and Operations management:
manufacturing and services. 8th Ed. McGraw-
Hill
 Russell Roberta S. and Taylor Bernard W. (2011).

Operations Management-Creating Value Along

the Supply Chain, 7th ed., John Wiley & Sons, Inc.
 Stevenson J. William (2002). Operation

Management, 7th ed., McGraw-Hill.

Assessment Types Weight
Individual Assignment/Field visit Report 10%
Project Work in group and Presentation 20%
Midterm exam 20%
Attendance & Class participation 10%
Final exam 40%
Total 100%
 

Grade Scale:
[100,90]= A+, (90,85]=A, (85, 80]=A-, (80, 75]=B+, (75,70]=B, (70, 65]=B-,
(65, 60]=C+, (60,50]=C, (50,45]=C-, (45, 40]=D, <40=F
INTRODUCTION TO OPERATIONS
MANAGEMENT
 Where we apply Operations ?

 What is Operations Management?

 Sample

The New Spirit of Africa

Cost based competition

Service based Competition

Operations management is the process of
obtaining and utilizing resources to produce
useful goods and services so as to meet the goals
of the organization.

 Management of conversion process, which

converts inputs such as land, labor, capital, and
information into desired outputs of Goods and
Services.
OM is management theory specifically concerned
with the activities and decisions through which
organizations transform resource inputs into
producers output.

Resource Inputs
OM Product Outputs
Materials
Goods
Capital
Or
People
Services
Information obtaining and storing raw material
Ls Technology Scheduling the utilization of this materials
Creating finished goods and/or services
via combined efforts of people and technology
We have both Manufacturing and Service Operations
Manufacturing Operations is concerned with the
manufacturing of Physical goods:
Examples of physical goods:
Cars

Books

Chairs

Houses

Etc….
 Service Operations is concerned with the
service delivery of service providing companies
Examples of services:
. retailing/food
. banking
. education
. health care
. utilities
. insurance
. government agencies
. Transportation
etc.
Operations management considers how the input
are transformed into goods or services.
Simply said, OM is the study of decision making
in the operations function.

In manufacturing companies, the operation may

be called the manufacturing, production, or
Operations dep’t.
In service organizations, the operation function is
called Operations dep’t.
EXAMPLE OF OPERATIONS MANAGEMENT PROCESS
Automobile factory
Input Output
steel, plastic Car
glass, paint
tools Transformation
equipment process
machines
personnel, buildings
utilities, etc.
1. OM is one of the three major functions of an
Organization, i.e. Finance, marketing, and
operations.
2. To know how goods and services are
produced
3. To understand what Operation managers do
4. It is a costly part of an organization
5. Cross functionality of OM with other activities
of an organization.
 Finance
Accounting
 Human resources
 Logistics
 Management Information Systems/MIS
 Marketing
 Purchasing, etc
 It is applicable both in manufacturing and service
organizations.

 It is just important for banks, public agencies,

hospitals, stores, and schools to manage its
production function.

It is important for decision making in the area of:

1. Capacity decisions
 How much production capacity is needed?
 How flexible should this capacity be?

2. Facilities Decisions
 Where should facilities be located?
 How many are needed and of what sizes?

3. Work flow and technology decisions

 What workflow layouts are best?
 What technologies should be used?

4. Managerial and inventory decisions
 How often should materials be obtained?
 How large should inventories be?

5. Quality decisions
 What level of product quality is needed?
 How do we achieve the desired quality?
 OM plays an important role in societies in which
we live
 OM affects nearly all aspects of our day-to-day

activities.
 Among others OM contributes:

1)Higher standard of living to societies

2)Better quality of goods and services
3)Concern for the Environment
4)Improved working conditions
 Human resources are still essential to the
success of any operations process.
In the midst of technological developments,
however, managers must understand their
potential job design and staffing implications.
Workers of tomorrow will need advanced
technical skills to work with a variety of
information-based computer systems
They will need the skills to work together in more
flexible and adaptive organizations structures.
 The success of computerized operations will
depend not only on the quality of the underlying
technology and its design, but also on the
continued involvement of the human factor.
 A system is a set of interrelated parts that must
work together.
 In a business organization, the organization can

be thought of as a system composed of sub-

systems (marketing sub system, operations
subsystem, finance subsystem, etc...), which in
turn composed of lower sub systems.
 The systems approach emphasizes
interrelations among subsystems
 Is that ‘the whole is greater than the sum of
its individual parts’.

 The production system is ‘that part of an

organisation, which produces products of an
organisation.
 It is that activity whereby resources, flowing
within a defined system, are combined and
transformed in a controlled manner to add
value in accordance with the policies
communicated by management’.
The production system has the following characteristics:
1. Production is an organised activity, so every production
system has an objective.
2. The system transforms the various inputs to useful
outputs.
3. It does not operate in isolation from the other
organisation system.
4. There exists a feedback about the activities, which is
essential to control and improve system performance.
 Organizations goals are achieved more
efficiently by the concerted efforts of a group of
people than by individuals working alone.
Organizations

Finance Operations Marketing

 The above three functions, and other supporting
functions, perform different but related activities
necessary for the operation of the organization.
 The functions must interact to achieve the goals

and objectives of the organization.

 Often the success of an organization depends

not only on how well each area performs but also

on how well the areas interface with each other.
 Manufacturing Services
The product is tangible The service is intangible
The product can be resold No resale is possible
The product can be demonstrated The product does not exist before
before purchase purchase
The product can be stored in The product can not be stored
inventory
Production precedes consumption Production and consumption are
simultaneous
Production and consumption can be Production and consumption must
spatially separated occur at the same location
The product can be transported The product can not bee transported
Indirect contact is possible In most cases direct contact is
needed
The product can be exported The service can not normally be
exported, but the service delivery
system can be.
Business is organized by functions, Sales and production can not be
with sales and production separated separated functionally.
1. Service and Manufacturing
Service and manufacturing are highly interrelated
in today’s economy.
2. Customer directed Operations
Every operations should be externally directed to
meet customer requirement. This notion is
consistency with the marketing concept.
3. Continuous improvement
It is the key to remaining competitive in today’s
business world.
Operations no longer be design to meet fixed
standards without emphasis on future
improvement as customer needs changes and
better ideas are developed.
4. Integration of Operations with Other functions
Cross functional integration is very important for
critical decisions.
5. Environmental Concerns
Every one in society must help, protect the
environment including those in operations.
Operations have come a long way in reducing
pollution of the environment but there is still a
long way to go.
6. Globalization of Operations
Strategies for operations should be formulated
with global effect in mind. For example, facility
location should be considered in view of its global
implications.
Operations are now become global.
7. Time Reduction
The operations function in many companies is
dramatically reducing the time it takes to make
products or services (the lead time).
For example, 1.Motorola reduced the time to make a
pager from a matter of weeks to two hours.
2. Kodak reduced the time to make 35mm from
70weeks to 38 weeks with 25% production cost
reduction per camera.
3. Federal Mogul from 20 weeks to 3 days
The above seven themes are critical to high
performing operations. They need more emphasis
in business and can be the basis for rapid and
continual improvement of operations.
End of the First Chapter