CHAPTER 1: INTRODUCTION TO OPERATIONS MANAGEMENT

1.1 WHAT IS OPERATIONS MANAGEMENT?

- Production is the creation of goods and services.

- Operations Management is the set of activities that creates value in the form of
goods and services by transforming inputs into outputs.
(Heizer and Render, 2008).

1.2 IMPORTANCE OF OPERATIONS MANAGEMENT

Here are three importance reasons why it is necessary to study operations

management.

1. Operations management is one of the three major functions in an organization.

There are marketing, finance and operations functions as well. So, it is important
to know how operations management works.

2. Operations management enables us to know how goods and services are

produced, as it is concerned with the activities related to the creation of goods
and services.

3. Operations management allows us to understand what operations managers

do. As operations manager is the person who is responsible in the operations
department.
1.3 OPERATIONS SYSTEM / PRODUCTIONS SYSTEM MODEL

INPUTS TRANSFORMATION
• Raw materials PROCESS OUTPUTS
• Financial support • Assembling • Goods
• Human Resources • Painting • Services
• Equipment • Testing or
• Information checking

FEEDBACK

These four (4) components

1. Inputs
Also known as resources which are the basic materials needed for the purpose
of producing goods and services. Examples of inputs are raw materials, financial
support, human resources, equipment and information.

2. Transformation Process
The process of conversion from input into output through a series of value-added
activities such as baking cakes, building houses, treating patients etc.

3. Outputs
The final results obtained after the transformation process, which include goods
or services such as a cake, completed house, healthy patients etc.

4. Feedback
A control mechanism, measuring the actual performance against the expected
standard such as customer complaint because time taken to deliver the pizza is
more than 30 minutes, customer compliment on well cooked meal etc.
EXAMPLES

Transformation
Organization Inputs Outputs Feedback
Process
• Cleaners • Negotiating • Cleaned area • Suggestions

Cleaning • Managers • Mopping • Complaints

Services • Cleaning • Brushing • Loyalty

Equipment

• Engineers • Assembling • Automobiles • Suggestions

• Engines and • Testing • Complaints

Automobile
parts • Painting • Loyalty
Industry
• Assembling

equipment

Bakery

Hospital
1.4 THE OBJECTIVES OF OPERATIONS MANAGEMENT (PRODUCTION SYSTEM)

1. Achieving customer’s satisfaction

The aim of operations management is to ensure customer’s satisfaction by
providing them with what they want from a product or service. The operating
system must provide something which can satisfy the customers’ needs, in term
of cost and timing.

2. Using resource efficiently

Operations management is concerned with obtaining maximum use from
resources. The utilization of the resources might be expressed in term of the
workforce needed, available time used or occupied, space utilization levels,
machines and materials, and so on.

3. Smooth production processes

Operations management is also concerned with the transformation process. An
efficient production process enables the organization to produce a greater
amount of outputs with lesser inputs.

4. Meeting expected demand and delivery dates

With efficient use of resources and a smooth production process, the
organization is able to fulfill and deliver customer’s demands on time. This will
lead to customer satisfaction.

5. Adapting for future survival

Operations management enables a flexible production system. Thus, the
organization is able to respond rapidly to changes in a product or process design
in future.
1.5 CHARACTERISTICS OF SERVICES AND MANUFACTURED PRODUCTS/GOODS

SERVICES MANUFACTURED PRODUCTS/GOODS

▪ Intangible outputs ▪ Tangible products
Cannot be seen, touched or Can be seen, touched and must be
displayed such as transportation delivered to customers such as
services, delivery services, medical automobiles, shirt and furniture.
services etc.
▪ Outputs that cannot be inventoried ▪ Outputs that can be inventoried
Impossible to store them as inventory. Goods are often produced and stored
For example, a courier company until customers need them. For
needs to perform quick delivery instance, Perodua produces Aruz and
services, i.e. immediately or as stores them until customers place an
demanded by customers. order for the cars.
▪ High interaction with customers ▪ Low interaction with customers
Customers need to be present to Customers do not specify what they
specify what they want from the want from manufactured products.
services. Customers have different They just purchase the products that
demands in term of services suit their needs.
(uniqueness).
▪ Labor-intensive ▪ Capital intensive
Employees play an important role in Companies producing goods tend to
the service process because service use high technology machine during
delivery requires customers to the operations. They thus need to
interact face-to-face with the service invest a huge capital to purchase the
provider. machine.
▪ Difficult in measuring quality ▪ Ease in measuring quality
Service quality may vary from one There are certain standards and
situation to another. The same service specifications that are set by the
delivered to different customers may manufacturer in order to produce
result in different acceptance levels tangible products.
from them.
1.6 WHERE ARE THE OM JOBS?

There are ten critical decisions (areas) of operations management. Which are:-

TEN DECISION AREAS

Service and product design Supply-chain management
✓ Cost, quality and human resource ✓ Mutual trust between buyer and
decisions are often determined by supplier is necessary for effective
design decisions. purchasing.
✓ Designs usually determine the lower Consideration in term of quality,
limits of cost and upper limits of delivery and innovation must be
quality. made.
Quality management Human resources and job design
✓ The customer’s quality expectations ✓ The quality of work life provided, the
must be determined and policies talent and skill required, and their
and procedures established to cost must be determined.
identify and achieve that quality.
Process and capacity design Inventory
✓ Process decisions commit ✓ Inventory decisions can be
management to specific optimized only when customer
technology, quality, human satisfaction, suppliers, production
resource use and maintenance. schedules and human resource
planning are considered.
Location Scheduling
✓ Facility location decisions for both ✓ Feasible and efficient schedules of
manufacturing and service production must be developed; the
organizations may determine the demands on human resources and
firm’s ultimate success. facilities must be determined and
controlled.
Layout design Maintenance
✓ Material flows, capacity needs, ✓ Decisions must be made regarding
personnel levels, technology desired levels of reliability and
decisions and inventory stability, and systems must be
requirement influence layout. established to maintain that
reliability and stability.
EXERCISES

FINAL EXAM QUESTIONS (PART B)

Dec 2019 Explain 4 objectives of operations management. (8m)
With the aid of a diagram, describe the important elements of a
Jun 2019
hospital operation system. (8m)
Explain with example 4 key components of an operations system.
Dec 2018
(8m)
State 4 characteristics of manufactured product and 4
Jun 2018
characteristics of service. (8m)
Jan 2018 Explain 4 objectives of an operations system. (8m)
Mar 2017 Discuss the 4 basic components of an operations system. (8m)
a) Define operations management. (2m)
Oct 2016
b) Describe services and product characteristics. (6m)
a) With the aid of diagram, identify the 4 basic components in an
March 2016 operation system. (4m)
b) List any 4 objectives of operation management. (4m)
Briefly explain any 2 differences between manufactured products
Sept 2015
and services. (4m)
a) Define operations management. (2m)
Mar 2015
b) Explain briefly the operations system of a children nursery. (6m)
a) With an aid of diagram, describe the importance elements of a
Sept 2014
hospital operation system. (8m)
a) Identify 2 objectives of operations management. (2m)
Mar 2014 b) Briefly explain 3 differences between characteristics of services
and products. (6m)
a) Define operations management. (2m)
b) Identify the basic components of the operation system for:-
Sept 2013
i) College (3m)
ii) Hospital (3m)