OPERATIONS

MANAGEMENT
Introduction to Operations
Management
OPERATIONS MANAGEMENT

Operations Management is:

The management of systems or processes
that create goods and/or provide services.

Operations Management affects:

 Companies’ ability to compete
 Nation’s ability to compete internationally.
OPERATIONS MANAGEMENT
OPERATIONS MANAGEMENT

Supply chain is a sequence of activities

and organizations involved in producing
and delivering a good or service.
OPERATIONS MANAGEMENT

Value-added is the difference between

the cost of inputs and the value or price of
outputs.
OPERATIONS MANAGEMENT
OPERATIONS MANAGEMENT

Product packages are a combination of

goods and services.

Product packages can make a company

more competitive.
OPERATIONS MANAGEMENT
OPERATIONS
MANAGEMENT
Production of Goods
versus Delivery of Services
GOODS vs. SERVICES
 GOODS vs. SERVICES

Production of goods results in a tangible

output, such as an automobile,
eyeglasses, a golf ball, a refrigerator—
anything that we can see or touch.

Delivery of service, on the other hand,

generally implies an act.
 GOODS vs. SERVICES
The majority of service jobs fall into
these categories:
a.Professional services (financial, health
care, legal);
b.Mass services (utilities, internet);
c.Service shops (tailoring, appliance repair);
d.Personal care (beauty salon, spa,
barbershop);
 GOODS vs. SERVICES
The majority of service jobs fall into
these categories:
e.Government (medicare, mail, police, fire);
f.Education (schools, universities);
g.Food service (restaurants, fast foods);
h.Services within organizations (accounting,
payroll, IT, HR);
i.Shipping and delivery (truck, railroad, boat)
 GOODS vs. SERVICES
The majority of service jobs fall into
these categories:
j.Residential services (lawn care, painting);
k.Transportation (mass transit, taxi, airlines);
l.Travel and hospitality (hotels, resorts);
m.Miscellaneous services (copy service,
temporary help)
 GOODS vs. SERVICES

 Manufacturing and service are often

different in terms of what is done but quite
similar in terms of how it is done.
 GOODS vs. SERVICES

Consider these points of comparison:

a.Degree of customer contact
b.Labor content of jobs
c.Uniformity of inputs
d.Measurement of productivity
e.Quality assurance
f.Inventory
g.Wages
h.Ability to patent
GOODS vs. SERVICES
OPERATIONS
MANAGEMENT
Process
Management
 PROCESS MANAGEMENT

A process consists of one or more actions

that transform inputs into outputs. In
essence, the central role of all
management is process management.
 PROCESS MANAGEMENT

Three categories of business processes:

1. Upper-management processes
These govern the operation of the entire
organization. Examples include
organizational governance and
organizational strategy.
 PROCESS MANAGEMENT

Three categories of business processes:

2. Operational processes
These are the core processes that make up
the value stream. Examples include
purchasing, production and/or service,
marketing, and sales.
 PROCESS MANAGEMENT

Three categories of business processes:

3. Supporting processes
These support the core processes.
Examples include accounting, human
resources, and IT (information technology).
 PROCESS VARIATION

Variation occurs in all business processes.

It can be due to variety or variability. For
example, random variability is inherent in
every process; it is always present. In
addition, variation can occur as the result
of deliberate management choices to offer
customers variety.
 PROCESS VARIATION
There are four basic sources of variation:
1. The variety of goods or services being
offered
2. Structural variation in demand – includes
trends and seasonal variations
3. Random variation – natural variability
4. Assignable variation – caused by
defective inputs, incorrect work methods, out-
of-adjustment equipment
OPERATIONS
MANAGEMENT
The Scope of Operations
Management
THE SCOPE OF OPERATIONS
MANAGEMENT

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 or services.
THE SCOPE OF OPERATIONS
MANAGEMENT

The operations function includes many

interrelated activities, such as forecasting,
capacity planning, scheduling, managing
inventories, assuring quality, motivating
employees, deciding where to locate
facilities, and more.
THE SCOPE OF OPERATIONS
MANAGEMENT
Example in an airline company:
1. Forecasting - weather and landing
conditions, seat demand for flights, and
growth in air travel;
2. Capacity planning – maintain cash flow
and make a reasonable profit;
3. Facilities and layout – important in
achieving effective use of workers and
equipment;
THE SCOPE OF OPERATIONS
MANAGEMENT
Example in an airline company:
4. Scheduling of planes for flights and for routing
maintenance; scheduling of pilots and flight
attendants;
5. Managing of inventories – food and
beverages, first-aid equipment, in-flight
magazines;
6. Assuring quality – emphasis is on safety;
dealing with customers at ticket counters, check-
in, telephone and electronic services;
THE SCOPE OF OPERATIONS
MANAGEMENT
Example in an airline company:
7. Motivating and training employees
8. Locating facilities according to
manager’s decisions on which cities to
provide service for
THE SCOPE OF OPERATIONS
MANAGEMENT
THE SCOPE OF OPERATIONS
MANAGEMENT
A number of other areas are part of, or
support, the operations function, including:
1. Purchasing – responsibility for
procurement of materials, supplies and
equipment;
2. Industrial engineering – scheduling,
performance standards, work methods,
quality control, and material handling
THE SCOPE OF OPERATIONS
MANAGEMENT
A number of other areas are part of, or
support, the operations function, including:
3. Distribution – shipping of goods to
warehouses, retail outlets, or final
customers;
4. Maintenance – general upkeep and
repair of equipment, buildings and grounds,
heating and airconditioning
THE SCOPE OF OPERATIONS
MANAGEMENT
Finance and operations management
personnel cooperate by exchanging information
and expertise in such activities as the following:
1. Budgeting - Budgets must be periodically
prepared to plan financial requirements.
Budgets must sometimes be adjusted, and
performance relative to a budget must be
evaluated.
THE SCOPE OF OPERATIONS
MANAGEMENT
Finance and operations management
personnel cooperate by exchanging information
and expertise in such activities as the following:
2. Economic analysis of investment
proposals - Evaluation of alternative
investments in plant and equipment requires
inputs from both operations and finance people.
THE SCOPE OF OPERATIONS
MANAGEMENT
Finance and operations management
personnel cooperate by exchanging information
and expertise in such activities as the following:
3. Provision of funds - The necessary funding
of operations and the amount and timing of
funding can be important and even critical
when funds are tight. Careful planning can help
avoid cash-flow problems.
Reference:
Operations Management, Eleventh Edition,
by William J. Stevenson