OPERATIONS MANAGEMENT
Operations – process or steps and
activities, that create goods or
provide services; a daily basis
o Goods/Products
a) Tangible
b) Intangible
o Services
a) Experience
b) Attitude VALUE-ADDED AND PRODUCT PACKAGES
c) Other factors Value-added is the difference
NOTE: Goods/products are easier between the cost of inputs and the
to measure than services (despite value or price of outputs.
being in the same company)
because of certain factors (skills,
experience, etc.) Product packages are a
Management – organize, control, combination of goods and services.
lead, etc. resources (human, Product packages can make a
physical, etc.) company more competitive.
Operations Management – is the | GOODS-SERVICE CONTINUUM
management of systems or It is a category assigned for different
processes that create goods goods/services offered in the market,
and/or provide services. which can be a combination of goods or
| OPERATIONS MANAGEMENT AFFECTS services or either of them.
1) Companies’ ability to compete
2) Nations’ ability to compete
internationally
THE THREE BASICS FUNCTIONS OF AN
ORGANIZATION
1) Finance – funds
2) Operations – process
3) Marketing – reach a wider Example:
audience/target market FOOD PROCESSOR
INPUTS PROCESSING OUTPUTS
Raw Cleaning Canned
Materials vegetables
Metal Making cans
Sheets
Water Cutting
| VALUE-ADDED PROCESS (Operations) Energy Cooking
The operations functions involve the Labor Packing
conversion of inputs into outputs. Building
Equipment Labeling
HOSPITAL PROCESS Output Tangibl Intangible
INPUTS PROCESSING OUTPUTS e
Doctors, Examination Healthy Measurement of Easy Difficult
Nurses Patients Productivity
Hospital Surgery Opportunity to High Low
Medical Monitoring correct problems
Supplies Inventory/ Amount Much Little
Equipment Medication of Inventory
Laboratories Therapy Evaluation Easier Difficult
(of Work)
Manufacturing or Service? Patentable Usually Not Usual
(Ability to Patent
Design)
Production and
Delivery
Quality Assurance
| SCOPE OF OPERATIONS MANAGEMENT
Tangible (Goods) and Act (Services) must
Operation Management includes:
be balanced.
Forecasting
| PRODUCTION OF GOODS VS.
Capacity Planning
DELIVERING OF SERVICES
Scheduling
PRODUCTION OF DELIVERING OF
GOODS SERVICES Managing Inventories
Tangible Outputs Intangible Outputs Assuring Quality
An act Motivating Employees
Service Job Deciding where to locate facilities
Categories: GWFHPBE Supply Chain Management
1. Government
And others…
2. Wholesale or
Retail | TYPES OF OPERATIONS
3. Financial 1) Goods Producing
Services Farming, mining,
4. Healthcare construction,
5. Personal manufacturing, power
Services
6. Business
generation, etc.
Services 2) Storage/Transportation
7. Education Warehousing, trucking,
mail service, moving, taxis,
| 10 KEY DIFFERENCES BETWEEN GOODS buses, hotels, airlines, etc.
AND SERVICES 3) Exchange
GOODS vs. SERVICES Retailing, wholesaling,
CHARACTERISTICS GOODS SERVICES banking, renting, leasing,
Customer Contact Low High library, loans, etc.
Uniformity of Input High Low
4) Entertainment
Labor Content Low High
(of Jobs) Films, radio and television,
Uniformity of Output High Low concerts, recording, etc.
5) Communication
Newspapers, radio and Project Management
television newscasts, Quality Assurance
telephone, satellites, etc. 3) Models
| DECLINE IN MANUFACTURING JOBS A model is an abstraction
Productivity of reality.
o Increasing productivity Kinds of Models:
allows companies to a. Physical
maintain or increase their b. Schematic
output using fewer c. Mathematical
workers. 6 BENEFITS 4 LIMITATIONS
Outsourcing Easy to use, Quantitative
o Some manufacturing work less expensive information
has been outsourced to may be
more productive emphasized
companies. over
qualitative
| OM IN DECISION-MAKING
Require users Models may be
Operations management uses different
to organize incorrectly
styles/techniques in decision-making. Few applied and
examples are models, quantitative results
approaches, analysis of trade-offs, system misinterpreted
approaches, establishing priorities, and Increase Nonqualified
ethics. understanding users may not
| KEY DECISIONS OF OPERATIONS of the problem comprehend
MANAGERS the rules on
What resources or amounts how to use the
When needed/scheduled/ordered model
Where work to be done Enable “what- Use of models
Who to do the work if” questions does not
How designed guarantee
good decisions
| KINDS OF DECISION-MAKING IN OM
Consistent
1) System Design
tool for
Capacity
evaluation and
Location standardized
Arrangement of format
departments Power of
Product and service mathematics
planning
Acquisition and placement 4) Quantitative Approaches
of equipment Kinds of Quantitative
2) System Operation Approaches:
Personnel a) Linear
Inventory Programming
Scheduling
b) Queuing Worker’s Rights
Techniques | BUSINESS OPERATIONS OVERLAP
c) Inventory
Models
d) Project Models
e) Statistical
Models
5) Analysis of Trade-offs
OPERATIONS INTERFACES
Decision on the amount of
inventory to stock
Increased cost of
holding inventory
VS.
Level of customer
service
6) System Approach
“The whole is greater than
the sum of the parts.”
Sub-optimization
7) Pareto Phenomenon HISTORICAL EVOLUTION OF OPERATIONS
A few factors account for a MANAGEMENT
high percentage of the 1) Industrial Revolution (1770s) –
occurrence of some used of people and organization
event(s). 2) Scientific Management (1911) –
80/20 Rule – 80% of started using of machineries
problems are caused by Mass production
20% of the activities. Interchangeable parts
How do we identify the Division of labor
vital few? 3) Human Relations Movement
8) Ethical Issues (1920-60) – rights to be recognized
Can be seen/felt as humans not as machineries
everywhere, it could be in 4) Decision Models (1915, 1960-70s)
the: 5) Influence of Japanese
Financial manufacturers (Fishbone model)
Statements | TRENDS IN BUSINESS
Worker Safety Examples of major trends are:
Product Safety The internet, E-commerce, E-
Quality business
Environment o E-commerce is a sub-set of
Community e-business
Hiring/Firing o E-business refers to the
Workers entire spectrum of running
Closing Facilities a business electronically
Management technology TOTAL QUALITY MANAGEMENT
Globalization Total Quality Management – is the
Management of supply chains integration of all functions and
Outsourcing processes within an organization in
Agility order to achieve continuous
Ethical behavior improvement of the quality of
| MANAGEMENT TECHNOLOGY goods and services.
Technology: The application of NOTE:
scientific discoveries to the Operations Management and Total
development and improvement of Quality Management are similar
goods and services because they involve in goods and
Product and Service Technology services.
Process Technology Quality can be associated with
Information Technology conformance to standards,
| SUPPLY CHAIN satisfaction of customers, etc.
A sequence of activities and “Total,” which means all levels of
organizations involved in production, there must be quality
producing and delivering a good or management.
service | CONCEPT OF TQM
Simple Product Supply Chain: TQM is based on a number of ideas
The watchword is the “continuous
improvement (Kaizen)”
a) It is considered an
Supply Chain for Bread w/ Value investment of an
Added: organization because
continuous improvements
may grab potential
customers.
The goal is customer satisfaction.
Any activity or process that does
not add value to the customer is
| OTHER IMPORTANT TRENDS considered to be waste.
Ethical Behavior The concept of TQM is the
Operations Strategy satisfaction of customers at each
Working with Few Resources and every stage.
Revenue Management Common phrase for TQM “Doing
Process Analysis and Improvement things right, first time”
Increased Regulation and Product The Two Primary Objectives of
Liability TQM are:
Lean Production a) Zero defects – minimal
defects, if not zero
b) 100% customer
satisfaction
Cost of Rectifying vs. Cost of NOTE:
Avoiding Customer – the one who
| TERMS RELATED TO TQM buys/purchases the
What is Quality? product/service; “the act of
Quality is customer buying”
satisfaction Consumer – the one who
Quality is Fitness for Use consumer/uses the
The American National Standards product/service; the end user; “the
Institute (ANSI) and the American act of using”
Society for Quality (ASQ) define Remember that a customer can be
quality as: a consumer, but not all customers
“The totality of features are consumers. And a consumer
and characteristics of a doesn’t always have to be the one
product or service that who pays.
bears on its ability to Businesses are primarily concerned
satisfy given needs.” with attracting and retaining
NOTE: customers, as that’s where the
Features – are often concrete and revenue comes from. However,
directly related to something that understanding consumer behavior
is designed or implemented is also crucial to ensure their
Characteristics – are more general products and services are meeting
and inherent user needs.
What is a customer? What is a product?
Anyone who is impacted The output of the process
by the product or process carried out by the
delivered by an organization. It may be
organization. goods (e.g. automobiles,
Types of Customer: missiles), software (e.g. a
a) External computer code, a report),
Customer- The end or service (e.g. banking,
user of the insurance)
product. Other Types of Goods/Products:
external customers a) Semi-finished
may not be Goods – can be
purchasers but sold at a lesser
may have some price than the
connection with finished goods
the product. b) Finished Goods
b) Internal Customer- | HOW IS CUSTOMER SATISFACTION
other divisions of ACHIEVED?
the company that Customer satisfaction is achieved through
received the two dimensions, which are the following:
processed product.
1. Product Features – refers to the
quality of design
Examples in the
Manufacturing Industry
Performan
ce
Reliability
Durability
Ease of
Use
Examples in the Service
Industry
Accuracy
Timeliness
Friendline
ss and Courtesy
Knowledg
e of Service
2. Freedom from Deficiencies –
refers to the quality of
conformance (the standards set
are followed)
NOTE: Higher
conformance means fewer
complaints and increased
customer satisfaction.
| QUALITY PERSPECTIVES
Everyone defines quality based on their
own perspective of it. Typical responses
about the definition of quality would
include:
Perfection
Consistency
Eliminating Waste
Speed of Delivery
Compliance with Policies and
Procedures
Doing it Right the First Time
Delighting or Pleasing Customers
Total Customer Satisfaction and
Service
KINDS OF PERSPECTIVE product. This approach
views quality as an
Quality management is a comprehensive
objective reality that can
field that encompasses various
be quantified and
perspectives on what constitutes "quality."
compared.
These perspectives help organizations to
3) User-based Perspective
define, measure, and improve the quality
“Fitness for intended use.”
of their products and services. Here are
Individuals have different
explanations of the different perspectives:
needs and wants, and
1) Judgmental Perspective hence different quality
“Goodness of a product” standards
Shewhart’s transcendental Ex. Nissan offering models
definition of quality in US markets under the
“Absolute and universally brand name Datson which
recognizable, a mark of the US customer didn’t
uncompromising prefer.
standards and high The user-based perspective
achievement.” considers quality as
Ex.: Rolex watches, Lexus dependent on the needs,
Cars preferences, and
The judgmental experiences of the end
perspective on quality is user. Quality is determined
subjective and relies on by how well the product or
personal or collective service meets user
judgments about what expectations and
constitutes quality. This requirements.
perspective often involves 4) Value-based Perspective
aesthetic and experiential “Quality product is the one
evaluations. that is as useful as
2) Product-based Perspective competing products and is
“Function of a specific, sold at a lesser price.”
measurable variable and US auto market –
that differences in quality Incentives offered by the
reflect differences in Big Three are perceived to
quantity of some product be compensation for lower
attributes.” quality.
Ex. Quality and price The value-based
perceived relationship perspective assesses
The product-based quality based on the
perspective defines quality balance between the
in terms of specific benefits provided by a
measurable attributes or product or service and its
characteristics of a cost. It considers whether
the customer perceives as a reminder that quality is
they are getting good ultimately about exceeding
value for their money. expectations and creating
5) Manufacturing-based Perspective something truly special.
“The desirable outcome of
| QUALITY LEVELS
a engineering and
manufacturing practice, or There are different quality levels that needs
conformance to to meet in order to achieve the primary
specification.” objectives of total quality management.
Engineering specifications
are the key! 1) Organizational Level – in this level,
Ex. Coca-Cola: “Quality is we need to ask the following
about manufacturing a questions:
product that people can a. Which products and
depend on every time they services meet your
reach for it.” expectations?
The manufacturing-based b. Which products and
perspective defines quality services you need that you
based on conformance to are not currently
specifications and the receiving?
absence of defects. It 2) Process Level – in this level, we
focuses on the consistency need to ask the following
and reliability of the questions:
production process. a. What products and
services are most
Each perspective provides a different lens important to the external
through which quality can be assessed and customer?
managed, and they are often used in b. What processes produce
combination to provide a holistic view of those products and
quality in an organization. services?
c. What are the key inputs to
NOTE:
those processes?
By considering all these d. Which processes have
perspectives, organizations can most significant effects on
develop a more holistic approach the organization’s
to quality management. They can performance standards?
ensure products are well-made 3) Individual Job Level – in this level,
(product-based), meet customer we need to ask the following
needs (user-based), and offer good questions:
value (value-based), all while a. What is required by the
maintaining efficient production customer?
processes (manufacturing-based). b. How can the requirements
The judgmental perspective, while be measured?
challenging to quantify, can serve
c. What is the specific
standard for each
measure?
