OPERATIONS

MANAGEMENT
Prepared by:
Course Instructor

PRELIMINARY TERM
LECTURE
OPERATIONS
MANAGEMENT
The management of
systems or
processes that
create goods and/or
provide services.
OPERATIONS
Refer to the part of an organization
that is responsible for producing
goods and/or services.

GOODS - are physical items

inclusive or raw materials, parts,
sub-assemblies such as engine
system used in cars and final
products such as computers.

SERVICES - are activities that

provide a combination of time,
location, form, and psychological
values.
3 THREE BASIC
FUNCTIONAL AREAS
1. FINANCE - is 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
operations.

2. MARKETING - is responsible for assessing

consumer wants and needs, and selling and
promoting the organization’s goods or services.

3. OPERATIONS - are responsible for

producing the goods or providing the services
offered by the organization.
The creation of goods or services involves transforming or
converting inputs into outputs.

INPUTS TRANSFORMATION OUTPUTS

Land Cutting  Houses

Human Drilling  Automobiles
 Clothing
Capital Transporting  Computers
Raw Materials Teaching  Machines
Equipment Farming  Health Care
Facilities Mixing  Entertainment
 Car Repair
OTHER ( Information, Packing  Delivery
Time, Legal Copying  Legal
Constraints, Faxing  Innovation
Governments
 VALUE-ADDED

The difference
between the cost
of inputs and the
value or price of
outputs.
 TRANSFORMATION
INPUTS
/ PROCESSING

Raw Vegetables Cleaning

Metal Sheets Making Cans
Water Cutting
Energy Cooking
Labor Packing
Building Labeling
Equipment
OUTPUT:
Canned Vegetables
MANUFACTURING and SERVICE are often different in terms of
what is done but quite similar of how it is done. Both involve
design and operating decisions.
Service
Manufacturer organization
s must decide (e.g., hospitals)
what size of must decide
what size
building is
factory is
needed. needed.

Both must make

decisions on
location, work
schedules,
capacity, and
allocation of
scarce resources.
THE SCOPE OF OPERATIONS MANAGEMENT
The scope of operations management ranges across
the organization. Operations management people are
involved in product and service design, process
selection, selection and management of technology,
design of work systems, location planning, facilities
planning, and quality improvement of the
organization’s products and services.

The operations function includes many interralated

activities such as;
 Forecasting
 Capacity Planning
 Scheduling
 Managing Inventories
 Assuring Quality
 Motivating and Training employees
 Location Facilities
OPERATIONS MANAGEMENT
AND DECISION MAKING
The chief role of an operation managers is that a
planner and decion maker. Operation Management
professionals make a number of key decisions that
affect the entire organization. These include the
following:

 WHAT : What resources will be needed, and in

what amounts?
 WHEN : When will each resource be needed?
When should the work be scheduled? When should
materials and other supplies be ordered? When is
corrective action needed?
 WHERE : Where will work be done?
 HOW : How will the product or service be
designed? How will the work be done? How will
resources be allocated?
 WHO : Who will be done?
END
OF
DISCUSSION!
COMPETITIVENESS I STRATEGY I PRODUCTIVITY
COMPETITIVENESS
Relates to the
effectiveness of an
organization in the
marketplace relative to
other organizations that
offer similar products or
services. Operations and
marketing have a major
impact on
Marketing influences competitiveness in several ways these include:
1. IDENTIFYING CONSUMER WANTS AND/OR NEEDS - is a basic
input in an organization’s decision making process, and central to
competitiveness.

2. PRICING - is usually a key factor in consumer buying decision. It is

important to understand the trade-off decision consumers make
between price and other aspects of a product or service such as
quality.

3. ADVERTISING AND PROMOTION - are ways organizations can

Operation has a major influence on competitiveness through:
1. PRODUCT AND SERVICE DESIGN - should reflect joint effort s of many areas of the
firm to achieve a match between financial resources, operations capabilities, supply
chain capabilities, and consumer wants and needs.

2. COST - of an organization’s output is a key variable that affects pricing decisions and
profits. Cost-reduction efforts are generally ongoing in buisness organizations.

3. LOCATION - can be important in terms of cost and convenience for customers.

Location near iniputs can result in lower input cost.

4. QUALITY - refers to materials, workmanship, design, and service. Consumers judge

quality in terms of how well they think a product or service will satisy its intended
purpose.

5. QUICK RESPONSE - can be a competitive advantage. One way is quickly bringing

6. FLEXIBILITY - is the ability to respond to changes. Changes might relate to alterations
in design features of a product or service, or to the volume demanded by consumers.

7. INVENTORY MANAGEMENT - can be a competitive advantage by effectively matching

supplies of goods with demand.

8. SUPPLY CHAIN MANAGEMENT - involves coordinating internal and external

operations (buyers and suppliers) to achieve a timely and cost-effective delivery of goods
throughout the system.

9. SERVICE - might involve after-sale activities customers perceive as value-adding such

as delivery, setup, warranty work, and technical support.

10. MANAGERS AND WORKERS - are the people at the heart and soul of an
organization, and if they are competent and motivated, they can provide a distinct
competitive edge by their skills and the ideas they create.
WHY SOME ORGANIZATIONS FAIL?
Organizations fail, or perform poorly, for a
variety of reasons. Being aware of those reasons
can help managers avoid making similar
mistakes. Among the chief reasons are the
following:

1. Putting too much emphasis on short-term

financial performance at the expense of research
and development.
2. Failing to take advantage of strengths and
opportunities, and/or failing to recognize
competitive threats.
3. Neglecting operations strategy.
4. Placing too much emphasis on product and
service design and not enough on process design
and improvement.
5. Neglecting investments in capital and human
resources.
STRATEGIES are plans for achieving
organizational goals. The importance of
strategies cannot be overstated; an
organization’s strategies have a major impact
on what the organization does and how it does
it.
 MISSION
An organization’s mission is the
reason for its existence. It is
expressed in its mission
statement, which states the
purpose of an organization.

GOAL
A mission statement
serves as the basis for
organization’s goals, which
provide detail and descibe
the scope of the mission.
TACTICS
Are the methods and actions
used to accomplish
strategies. They are more
specific than strategies.
Mark is a high school student in the Philippines. He
would like to have a career in business, have a good job,
and earn enough income to live confortably.

A possible scenario for achieving his goals might look

something like this:

MISSION : Live a good life.

GOAL : Successful career, good income.

STRATEGY : Obtain a college education.

TACTICS : Select a college and a major; decide how to

finance college.

OPERATIONS : Register, buy books, take courses, study.

PRODUCTIVITY is a measure of the effective use of resources,
usually expressed as the ratio of output to input.

Output
Productivity =
Input
Determine the productivity for this case:

A. Four workers installed 720 square meters of carpeting in

eight hours.
Meters of carpet installed
A. Productivity =
Labor hours worked

720 Square Meters

=
4 Workers x 8 hours/worker

720 Meters
=
32 Hours

= 22.5 meters/hour
END
OF
DISCUSSION
!
FORECAST
A statement about
the
future value of a
variable of interest.
 TWO USES FOR FORECASTS

1. PLAN THE SYSTEM

Planning the system generally
involves long-range plans about
the type of products and services
to offer, what facilities and
equipment to have, where to
locate, and so on.
2. PLAN THE USE OF THE SYSTEM
Planning the use of the system refers to
hort-range and intermediate-range
lanning, which involve tasks such as
lanning inventory and workforce levels,
lanning purchasing and production,
udgeting, and scheduling.
 USES OF FORECASTS IN BUSINESS ORGANIZATIONS

1. ACCOUNTING 2. FINANCE 3. HUMAN RESOURCES

New product/process Equipment replacement Hiring activities, including
cost estimates, profit needs, timing and amount of recruitment, interviewing,
projections, cash funding/borrowing needs. training, layoff planning,
management. including outplacement,
counseling.
 6. OPERATIONS
Schedules, capacity planning,
work assignments and
workloads, inventory planning,
make-or-buy decisions,
outsourcing, project
4. MARKETING management.
Pricing, and promotion,
e-business strategies,
global competition
strategies.

7. PRODUCT AND SERVCIE

DESIGN
Revision of current features,
5. MIS design of new products or
New/revised information services.
systems, internet
services.
 ELEMENTS OF A GOOD FORECAST
A properly prepared forecast should fulfill certain requirements:
1. The forecast should be timely.
2. The forecast should be accurate.
3. The forecast should be reliable.
4. The forecast should be expressed in meaningful units.
5. The forecast should be in writing.
6. The forecasting technique should be simple to understand and use.
7. The forecast should be cost-effective.
STEPS IN THE FORECASTING PROCESS
There are six basic steps in the forecasting process:

Determine the purpose of the forecast

Establish a time horizon
Select a forecasting techniques
Obtain, clean, and analyze appropriate data
Make the forecast
Monitor the forecast
FORECASTS BASED ON JUDGMENT AND OPINION

EXECUTIVE OPINIONS
A small group of upper-level
managers (e.g., in marketing,
operations, and finance) may meet
and collectively develop a forecast.
This approach is often used as a part
of long-range planning and new
product development.
FORECASTS BASED ON JUDGMENT AND OPINION

SALESFORCE OPINIONS
Members of the sales staff or
the customer service staff are
often good sources of
information because of their
direct contact with consumers.
They are often aware of any
plans the customers may be
considering for the future.
FORECASTS BASED ON JUDGMENT AND OPINION

CONSUMER SURVEYS
Because it is the consumers
who ultimately determine
demand, it seems natural to
solicit input from them. In
some instances, every
customer or potential
customer can be contacted.
 FORECASTS BASED ON TIME-SERIES DATA

TIME SERIES – A time-ordered sequence of

observations taken at regular intervals (e.g.,
hourly, daily, weekly, monthly, quarterly, and
annually).
 1. TREND
Refers to a long-term upward or downward
movement in the data. Population shifts changing
incomes, and cultural changes often account for such
 2. SEASONALITY
Refers to short-term, fairly regular variations generally
related to factors such as the calendar or time of day.
Restaurants, supermarkets, and theaters experience weekly
and even daily “seasonal” variations.
 3. CYCLES
Are wavelike variations of more than one
year’s duration. These are often related to a
variety of economic, political, and even
agricultural conditions.
 4. IRREGULAR VARIATIONS
Are due to unusual circumstances such as severe
weather conditions, strikes, or a major change in a product
or service. They do not reflect typical behavior, and their
conclusions in the series can distort the overall picture.
END
OF
DISCUSSION!