OPERATIONS

MANAGEMENT
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is Operations Management.mp4
INTRODUCTION

OPERATIONS MANAGEMENT IS THE MANAGEMENT OF SYSTEMS OR

PROCESSES THAT CREATE GOODS AND/OR PROVIDE SERVICES.

OPERATION – refers to the part of an organization that is responsible for producing goods and/or
services.

GOODS – are physical items inclusive of raw materials, parts, subassembles such as the engine
system used in a car, and final products such as computers and machineries.

SERVICES- are activities that provide a combination of time, location, form and psychological
value.
THREE BASIC FUNCTIONAL AREAS
OF A BUSINESS ORGANIZATION

Finance Operations Marketing

FINANCE
 Responsible for securing financial resources at
favorable prices and allocating those resources
throughout the organization, as well as, budgeting,
analyzing, investment proposals, and providing funds
for the operation.
MARKETING OPERATION
 -responsible for assessing consumer wants  -is responsible for producing the goods or
and needs, and selling and promoting the providing the service offered by the
organization’s goods or services. organization.

 -the core of what the organization does.

THE OPERATION FUNCTION INVOLVES THE
CONVERSION OF INPUTS INTO OUTPUTS.

INPUT OUTPUT
 GOODS
 LAND
 SERVICES
 LABOR
 CAPITAL
 INFORMATION

VALUE-ADDED
-used to describe the difference between the cost of inputs
and the value or price of outputs.
DIFFERENCE BETWEEN MANUFACTURING AND
SERVICE
MANUFACTURING SERVICE

 Manufacturers – must decide what what  Service organizations like hospitals must
size of the factory is needed. decide what size building is needed.

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production line 😎 shorts.mp4
1. Degree of Customer Contact – service involves a much higher degree of customer contact than manufacturing.
- the point of consumption occurs when a service provider interacts with customers, and this results in a “moment of
truth” where the service is being performed and its performance is being judged by the customers.

- while in manufacturing, it allows a separation between production and consumption, so that manufacturing can
occur away from the customer.

2. Uniformity of Input – Service operations are subject to greater variability of inputs than typical manufacturing
operations while manufacturing operations have the ability to control the amount of variability of inputs.

3. Labor content of jobs – services needed more labor content than manufacturing.

4. Uniformity of Output – because high mechanization generates products with low variability, manufacturing tends to
be smooth and efficient ; service activities sometimes appear to be slow and awkward, and output is more variable.

5. Measurement of Productivity – more straightforward in manufacturing due to the high degree of uniformity of most
manufactured items. In service operations, variations in demand intensity and in requirements from job to job make
productivity measurement considerably more difficult.
6. Production and Delivery – customers receive 7. Quality Assurance – it is more challenging in
the service as it is performed. services when production and consumption occur
at the same time.
 Amount of Inventory – Evaluation of Work – because goods are Ability to Patent Design – Product design
manufacturing have more tangible and there is often a time interval are often easier to patent than service
between production and delivery, design, and some service design cannot be
inventory on hand than service evaluation of output is less demanding patented, making it easier to patent than
firms. than it is for services. service designs.
INTERRELATED
ACTIVITIES INVOLVED IN
OPERATION FUNCTION
 Forecasting

 Capacity Planning

 Scheduling

 Managing Inventories

 Assuring quality

 Motivating Employees

 Deciding where to locate facilities

A primary function of an operations
manager is to guide the system by decision
making. Certain decisions affect the design
of the system, and others affect the
operation of the system.
SYSTEM DESIGN
Involves decisions that relate to system capacity, the geographic location of facilities,
arrangements of departments and placement of equipment within physical structures,
product and service planning, and acquisition of equipment.
 SYSTEM Involves management of
personnel , inventory planning
and control, scheduling, project

OPERATION management, and quality

assurance.
OTHER AREAS THAT
ARE PART OF THE
OPERATION FUNCTION
 Purchasing – has responsibility for procurement of
materials, supplies, and equipment.
 Industrial engineering – concerned with scheduling,
performance standards, work methods, quality control, and
material handling.
 Distribution – involves the shipping of goods to
warehouses, retail outlets, or final customers.
 Maintenance – is responsible for general upkeep and
repair of equipment, buildings and grounds, heating and
air-conditioning, removing toxic wastes , etc.
“The importance of operations management, both for
organizations and for society, should be fairly obvious:
The consumption of goods and services is an
integral part of our society. Operations Management
is responsible for creating those goods and services.
Organizations exist primarily to provide services or
create goods. Hence, operation is the core function of
an organization.”
ASSIGNMENT :

1. What managerial
2. Why does service
challenges do services
management present
present that
more challenges than
manufacturing does
manufacturing?
not?
THE CHALLENGES OF
MANAGING SERVICES
Jobs in service
In many services, worker
environments are often Customer contact is
skill levels are low
less structured than in usually much higher in
compared to those of
manufacturing services.
manufacturing workers.
environments.

Service performance can

Services are adding many Employee turnover is often be adversely affected by
new workers in low-skill, higher, especially in the workers’ emotions,
entry-level positions. low-skill job. distractions, customers’
attitudes.
OPERATIONS
MANAGEMENT AND
DECISION MAKING
 We will encounter the broad range of decisions
that operations managers must make, and you
will be introduced to the tools necessary to
handle those decisions. We will use models,
quantitative methods, analysis of trade-offs,
establishing priorities, ethics, and the systems
approach.
MODEL
- is an abstraction of reality.
-this is a decision-making aids and simplifications of
more complex real-life phenomena.
QUANTITATIVE
APPROACH
- embody an attempt to obtain
mathematically optimal solutions to managerial
problems.
- uses different methods mathematically to
know the cost, the scarcity of a product,
forecasting techniques and uses of software are
much easier for a company to use this approach.
ANALYSIS OF
TRADE-OFFS
- Operations personnel frequently encounter
decisions that can be described as trade-off decisions.

- For example : in deciding on the amount of

inventory to stock, the decision maker must take into
account the trade-off between the increased level of
customer service that the additional inventory would
yield and the increased costs required to stock that
inventory.
SYSTEMS APPROACH
- A system can be defined as a set of interrelated
parts that must work together. It emphasizes
interrelationships among subsystems, but its main
theme is that the whole is greater than the sum of its
individual parts.
ESTABLISHING
PRIORITIES
Sample : a car
a car will not function if its parts are in critical
system.
the brakes, electrical system, and cooling system.

Pareto phenomenon – means that all things are not

equal ; some things will be very important for
achieving an objective or solving a problem, and other
things will not.
ETHICS
 In making decisions, managers must consider how
their decisions will affect shareholders, management,
employees, customers, the community at large, and
the environment.
 Finding solutions that will be in the best interests of
all of these stakeholders is not always easy, but it is a
goal that all managers should strive to achieve.
ETHICAL ISSUES ARISE IN MANY ASPECTS
OF OPERATIONS MANAGEMENT, INCLUDING
:

Financial The
Worker Safety Product Safety Quality
Statements environment

The Hiring and Closing Workers’

community Firing workers facilities rights
WHY STUDY
OPERATIONS
MANAGEMENT?
1. 50 percent or more of all jobs are in
operations management or related fields. So,
all the parts of a business organization must
work together for the organization to function
successfully.
2. Though individual courses have a narrow
focus, in practice, there is significant
interfacing and collaboration among the
various functional areas, involving exchange
of information and cooperative decision
making.
OPERATIONS INTERFACES
WITH A NUMBER OF
SUPPORTING FUNCTIONS

Legal Department – must be Accounting – supplies Management Information Personnel or Human Public Relations – responsible
consulted on contracts with information to management on System (MIS) – is concerned Resources – is concerned with for building and maintaining a
employees, customers, cost of labor, materials, and with providing management recruitment and training of positive public image of the
suppliers, and transporters, as may provide reports on items with the information it needs personnel, labor relations, organization.
well as on liability and such as scrap, downtime and to effectively manage. This contract negotiations, wage
environmental issues. inventories. occurs mainly through and salary administration.
designing systems to capture
relevant information and
designing reports.
CAREER
OPPORTUNITIES
1. Operations Manager
2. Production Analyst
3. Production Manager
4. Industrial Engineer
5. Time Study Analyst
6. Inventory Manager
7. Purchasing Manager
8. Schedule Coordinator
9. Distribution Manager
10. Supply Chain Manager
11. Quality Analyst
12. Quality Manager

People Skills – political awareness, mentoring ability,

negotiation and communication skills

Knowledge skills- product/service knowledge,

industry and global knowledge.
 THE
HISTORICAL
EVOLUTION OF
OPERATIONS
MANAGEMENT
 Angkor Wat
Great Wall of China
THE INDUSTRIAL REVOLUTION
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FREDERICK WINSLOW
TAYLOR
 Father of Scientific Management

 Believed in a “science of management” based on observations,

measurement, analysis and improvement of work methods, and
economic incentives.
 He believed that management should be responsible for planning,
carefully selecting and training workers, finding the best way to
perform each job and separating management activities from work
activities.
FRANK
GILBRETH
 Was an industrial engineer who is often
referred to as the father of motion study. He
developed principles of motion economy that
could be applied to incredibly small portions of
a task.
HENRY
GRANTT
He recognized the value of nonmonetary rewards
to motivate workers, and developed a widely used
system for scheduling, called GRANT CHARTS.
HARRINGTON
G EMERSON
 Applied Taylor’s ideas to
organization structure and
encouraged the use of experts to
improve organizational efficiency.
HENRY FORD

 The great industrialist

 Employed scientific
management techniques in his
factories.
 Owner of Ford industries
FORD’S CONCEPTS IN
THE INDUSTRY
 MASS PRODUCTION – a system of production
in which large volumes of standardized goods are
produced by low-skilled or semiskilled workers
using highly specialized, and often costly,
equipment.
 DIVISION OF LABOR – the breaking up of a
production process into small tasks, so that each
worker performs a small portion of the overall job.
THE HUMAN
RELATIONS
MOVEMENT
LILIAN
GILBRETH
A psychologist and the wife of Frank
Gilbreth
She focused on the importance of the human
element in job design.
DECISION MODELS AND
MANAGEMENT SCIENCE
The onset of World War II generated
tremendous pressures on manufacturing
output, and specialists from many
disciplines combined efforts to achieve
advancements in the military and in
manufacturing. After the war, efforts to
develop and refine quantitative tools for
decision making continued, resulting in
decision models for forecasting,
inventory management, project
management, and other areas of
operations management.
THE INFLUENCE OF
JAPANESE
MANUFACTURERS
This approach emphasized quality and
continual improvement, worker teams
and empowerment, and achieving
customer satisfaction.
The Japanese can be credited with
spawning the “quality revolution” that
occurred in industrialized countries, and
with generating widespread interest in
time-based management.
TRENDS IN
BUSINESS
THE INTERNET
-OFFERS GREAT POTENTIAL FOR BUSINESS
ORGANIZATIONS, BUT THE POTENTIAL AS WELL AS THE
RISKS MUST BE CLEARLY UNDERSTOOD IN ORDER TO
DETERMINE IF AND HOW TO EXPLOIT THIS POTENTIAL.
MANAGEMENT
TECHNOLOGY
 Continuous changes in
technology
SUPPLY CHAIN

- a sequence of
activities and
organizations involved in
producing and delivering
a good or service.

OUTSOURCING – Obtaining a product or

service from outside the organization.
AGILITY

- the ability of an
organization to respond quickly
to demands or opportunities.
- a strategy that involves
maintaining a flexible system
that can quickly respond to
changes in either the volume of
demand or changes in
product/service offerings.