OPERATIONS MANAGEMENT

OPERATIONS MANAGEMENT (OM)

 is the administration of business practices to create the highest level of efficiency possible within
an organization. It is concerned with converting materials and labor into goods and services as
efficiently as possible to maximize the profit of an organization.

OPERATION FUNCTION

The Vice President of each of these functions reports directly to the President or CEO of the company.
Marketing is responsible for sales, generating customer demand, and understanding customer wants
and needs. Finance is responsible for managing cash flow, current assets, and capital investments. MIS is
responsible for managing flows of information.

WHAT OPERATION MANAGEMENT DO?

 is the business function responsible for managing the process of the creation of goods and
services. It involves planning, organizing, coordinating, and controlling all the resources needed
to produce a company’s goods and services.
 Because operations management is a management function, it involves managing people,
equipment, technology, information, and all the other resources needed in the production of
goods and services.
 Operations management is the central core function of every company. This is true regardless of
the size of the company, the industry it is in, whether it is manufacturing or service, or is for-
profit or not-for-profit.

THE TRANSFORMATION ROLE OF OPERATIONS MANAGEMENT

We say that operations management performs a transformation role in the process of converting inputs
such as raw materials into finished goods and services. These inputs include human resources, such as
workers, staff, and managers; facilities and processes, such as buildings and equipment; they also include
materials, technology, and information. In the traditional transformation model outputs are the goods
and services a company produces.
At a manufacturing plant, the transformation is the physical change of raw materials into products, such
as transforming steel into automobiles, cloth into jackets, or plastic into toys.

This is equally true of service organizations. At a university, OM is involved in organizing resources, such
as faculty, curriculum, and facilities, to transform high school students into college graduates. At an
airline, it involves transporting passengers and their luggage from one location to another.

WHAT IS THE DIFFERENCE BETWEEN GOODS (MANUFACTURING) AND SERVICES?

MANUFACTURING AND SERVICE OPERATIONS

MANUFACTURERS SERVICES

Tangible product. Intangible product.

Product can be inventoried. Product cannot be inventoried.

Low customer contact. High customer contact.

Longer response time. Short response time.

Capital intensive. Labor intensive.

THE ROLE OF MANUFACTURING AND SERVICE OPERATIONS IN THE ORGANIZATION AND SUPPLY CHAIN

Operations management plays a critical role in the organization and supply chain. Without OM there
would be no products to sell. However, operations cannot work in isolation from other business
functions. Recall that each business function manages unique aspects of the business, and they all must
work together. For example, operations must work with marketing to understand the exact wants of a
particular group of customers.

It can then design the exact products customers want and create the production processes to efficiently
produce these products.

Marketing, on the other hand, must understand operations’ capabilities, including the types of products
it can produce and the limitations of the production process.

Without communication between marketing and operations, the company may find itself in a situation
where it is producing products the customers don’t want.
Operations must also work closely with purchasing to understand the availability of materials, cost and
quality issues, availability of sources of supply, and lead times. Operations links marketing—with its ties
to customers—to sourcing—with links to sources of supply.

Operations must understand exactly what customers want and be able to ensure that sourcing can get
the materials needed at the right price and at the right time to support product designs or offer
alternative material options.

WHAT IS BUSINESS-TO-BUSINESS (B2B)?

Business-to-business (B2B), also called B-to-B, is a form of transaction between businesses, such as one
involving a manufacturer and wholesaler, or a wholesaler and a retailer.

Business-to-business refers to a business that is conducted between companies, rather than between a
company and individual consumer.

WHAT IS BUSINESS-TO-CONSUMER (B2C)?

The term business-to-consumer (B2C) refers to the process of selling products and services directly
between a business and consumers who are the end-users of its products or services. Most companies
that sell directly to consumers can be referred to as B2C companies.

E-COMMERCE AND ITS IMPACT ON OPERATIONS MANAGEMENT

E-commerce is a business model that takes advantage of the Internet to buy and sell goods and
services using a number of technology platforms.

Build an online store to present services or products. Register customer information and take online
payments. Provide an order management system or shopping cart.

THE IMPACT OF GLOBALIZATION

Globalization impacts operations strategies in both negative and positive ways.

Global factors that can be used as an operations strategy include global sourcing, economies of scale,
scanning and learning, and research and development.

Global sourcing can create a bigger skill base for a business as they have access to skills that they may
not be able to available in local areas.

Although when global sourcing is used the business may be at a higher risk of losing data that they
would not lose when using domestic suppliers.

The main advantage of Economies of scale is specialization, when the company decides to become
bigger it becomes more practical to sub-divide the processes of the business, which can increase the
overall productivity of the workers and products made.

Scanning and learning can help a business to have insight and be flexible when an issue arises,
experience of others who worked in similar situations helps the business to know how to react to
situations that they may not have thought about previously.

If a business chooses to learn from companies that had faults in their strategies they may repeat these
and continue with loss of profit.
 Research and development can give an advantage to a business they can offer the customer something
they have never seen before, if they create a product that has high desire it can result in increased sales.

Even though a business can have increased sales when they use research and development the cost of
the research and development can be quite expensive.

WHAT IS MEANT BY COMPETITIVENESS IN OPERATIONS MANAGEMENT?

We define competitiveness as the ability and performance of a firm to sell and supply goods and
services in a given market, in relation to the ability and performance of other firms.

In other words, how will one firm win over customers in order to become the product or service of
choice.
Customer satisfaction should always be the key objective of any business

LESSON 2: OPERATION STRATEGY

WHAT IS OPERATION STRATEGY?

According to Joseph G. Monks, Operations Management is defined as “the process through which a
defined system’s resources are merged and converted in a controlled way in order to provide value-
addition as per the policies conveyed by management”.

Operation management manages the whole production or service-related system which includes a
transformation process to convert input (raw material, machinery, labor, etc.) into outputs (finished
goods or services).

OPERATIONS MANAGEMENT AND STRATEGY

To enhance operational efficiency, all functions and other elements such as technology, equipment,
finance, marketing, HR, information, etc. are supposed to be aligned together to get a more competitive
advantage.

So, operations management in an organization should be aligned with strategies that are compatible
with the overall business strategy of an organization.

BASIC ELEMENTS OF OPERATIONS STRATEGY

Time and Quality are considered basic components of operations strategy. these factors are described
below in detail:

TIME QUALITY
This aspect is related to the timely delivery of products or This element or component is the driving force
services to meet the expectations of customers. In a global for any business as customers always look to buy
business environment, the timelines of developing and any product or service based on the value of the
marketing new products are becoming crucial. So, to grow money they are investing in. Customers are
the business, the time required at each stage in operations often ready to buy products of high quality at a
needs to be shortened. Different elements that are high price even. So, quality is also one of the
supposed to be reduced during operations are planning main factors of operations strategy.
time, designing time, processing time, delivery time, time
involved in providing a response to customer complaints.
 PROCESS OF STRATEGIC MANAGEMENT

The top management takes different decisions that result in a business strategy. This provides an outline
for the optimum utilization of resources that are specifically meant for achieving the objectives of an
organization.

Strategic management also includes formulating and designing action plans with timelines, the hierarchy
of authorities, and mechanisms for feedback. This also includes considering different situations that may
arise such as the likely consequences and contingency plans if any such situation arises.

COMPETITIVE PRIORITIES IN OPERATIONS

Expertise in Product or Service (fast, affordable, interior e-design services)

 Organizations can become the market leaders of products/ services in which they acquire
expertise using operational strengths in specific aspects such as process capabilities and
functionalities.

Fast and Delivery Speed Time

 Customer satisfaction can be obtained by adopting flexible capacity in the production, process,
and timely supply. Delivery time or speed is considered an important competitive weapon.
 Organizations today compete with each other to deliver a better quality of products/ services in
a shorter time as much as possible.

Flexibility in Production

 The process of adapting the change starts with monitoring the trends of the environment in
order to make compatibility with the requirements of society through environmental scanning.
 In case competitors have a competitive advantage through widening their product lines, quality
improvement, or reducing the cost of products, then, it may lead to a threat to similar products
of competing organizations.

Less cost-based production and processes

 In order to meet the competition, it is required to lower down the per-unit cost of each product.
Also, organizations must access the cost review on different production costs such as labor,
overhead, and material costs.
 An organization having a sound production system and operations strategy will provide feasibility
for reducing costs. This results in eliminating all wastage as well.

BALANCED SCORECARD (BSC)

This is used as a tactical tool and an organization technique. It is generally used in every organization to
bring into line the company’s performance towards its objectives and vision.

This scorecard is also used to develop communication and response between the management and
employees for monitoring the goals of the organization. As the name suggests, it is designed not only to
evaluate the performance of an organization but also to evaluate other aspects like customers problems,
augmentation of learning tools etc.
 TRENDS IN OPERATIONS MANAGEMENT FOR 2021

The world of manufacturing is changing. With the unexpected disruptions caused by the 2020 global
pandemic, it can be hard to predict what the following year will hold.

Within any production facility or organization, it is crucial to have adequate and advantageous
operations management to ensure that production runs smoothly, even in the case of unexpected
disruptions.

1. INCREASED ENTERPRISE DATA

2021 will see an increase in the amount of enterprise data at all levels of the organization. Enterprise
data represents all data that is shared by the users of an organization.

As the loss of enterprise data can accrue significant loss for your company, it is crucial that you prepare
to have efficient ways of managing and organizing it.
Having a single platform that can allow your employees to access all of the information they need will
also be helpful in reducing the time wasted looking for relevant information.

2. INVESTING IN YOUR EMPLOYEES

One of the major determinants in employee satisfaction at work is their perception of how much they
are benefiting from working at a company.

This is much more than simply receiving a paycheck. Motivated employees that share your vision for
the company will be highly beneficial.

3. INCREASED COMMUNICATION

In the next year, an emphasis on company-wide, mobile communication is predicted. With so many
people now working from home, it is crucial to ensure clear and efficient communication to improve
productivity.

Mobile communication will ensure timely correspondence between all levels of the organization and
allow everyone to have access to important information, wherever they are.
 4. AGILITY

With the events of 2020, consumers' priorities dramatically shifted. Some manufacturers saw demand
for their products soar while others remained with excess inventory. As things will remain uncertain for
some time, it is important for your company to improve its demand responsiveness.

This can be achieved by increasing the agility of your operations to be able to the quickly changing
customer demands. This may mean shortening your planning horizon to be able to quickly adjust your
production schedule as the 'new normal' settles in.

5. FOCUS ON CUSTOMERS

As customers are expecting higher levels of customizations, short lead time, and lower costs, your
company will be able to maintain their competitive advantage by listening to the needs of your
customers.

Companies may want to consider adding options for customizations of their products to give then an
additional advantage within the market competition.

LESSON 3: PRODUCT AND SERVICES

PRODUCT DESIGN

 the process of imagining, creating, and iterating products that solve users' problems or address
specific needs in a given market. The key to successful product design is understanding the end-user
customer, the person for whom the product is being created.

EFFECTIVE PRODUCT DESIGN

 Organization success is dependent on customer satisfaction and delight. Customer satisfaction is

achieved through development of product and service, which have all attributes required by the
customer. A success product or services do not only have attractive package design but should be
also able to provide robust performance.

 Thus, product design must be practical enough for production and powerful enough to provide a
competitive advantage.

A GOOD PRODUCT DESIGN HAS FOLLOWING COMMON FEATURES:

 UTILITY PROFITABILITY

The product design should make product utility as Product design should make economic sense as to
per expectation of customers and provide steady deliver value to customer and sustainability to the
performance through the product life. organization.

AESTHETICS DIFFERENTAIBLE

Product aesthetics is important in success of the A good product design should enable product to
product. The product aesthetics is dependent on be differentiate among its competition. This can be
market and end customer. achieved by attractive packaging and also by
providing additional service on the product.
 STAGES OF PRODUCT DESIGN
Product design is a creative process which looks at all the available options and beyond. The process is
can be divided into three stages:

 First stage: This stage involves brainstorming, bringing ideas and analysis of customer and market
feedback.

 Second Stage: Idea is converted into a feasible solution to satisfy the customer expectation, using
available resource and technology.

 Third Stage: This is the last stage in which the product is introduced in the market

FACTORS AFFECTING PRODUCT DESIGN

1. CORRECT TEAM SELECTION

This is very essential to get the correct team in place which has expert designers who are not only aware
and comfortable with technology but also understanding of customer expectation.

2. CUSTOMER INVOLEMENT

Involvement of customer in product design and testing can provide insight into the direction of the
project.

3. PROTOTYPING AND TESTING

Product design is high risk concept as it involves commitment of capital and man-power; therefore, it is
imperative that extensive prototyping and testing are done with customer and market.

4. RAW MATERIAL

It is essential that raw material to be used in the production meets the quality standards of the end
product. Furthermore, procurement system needs to be in place to ensure continuous, cost effective
supply.

5. PRODUCTION METHOD AND PROCESS LAYOUT

Feasibility of production method and process layout determines future success of the product.

PRODUCT DEVELOPMENT AND PROCESS

 THE ROLE OF TECHNOLOGY IN THE DESIGN PROCESS

 Technology plays a vital role in design. The quality and profit for the designer or producer can be
upgraded by the consumption of appropriate technology.

 The usage of modern technology performs the tasks in effective time and reasonable cost.
Electronic storage tools are making products in a better and quicker way.

TECHNOLOGIES USED IN DESIGN AND PRODUCTION

Marketing

 Marketed products are quick and effective with the help of technology. Like TV, internet, radio etc.

Communication

 The advancement in technology gave us mobile phones, SMS, internet, digital cameras, emails, MS
word and etc.

Research

 For the research purpose, we have internet, scanners, printers, digital cameras, MS office and etc.

Management

 Keeping records of projects, expenses, and employee, technology provided us MS office especially
MS Excel.

 Sometimes in production, robots are used to make the product faster and in a more accurate way
and then fewer people are involved in the production process.

 Designers can manufacture prototypes designs with the rapid technology of prototyping.

 The designers can make new products which are cheaper and stronger than before with the help
new materials technology invent.

DISADVANTAGES OF TECHNOLOGY IN THE DESIGN PROCESS

 Machines and advancement that is used in the process are expensive at the start.

 Unskilled employees aren’t given the job.

 Unemployment causes society many problems.

 Machinery can be pretty expensive when it comes to its maintenance and repair.

LESSON 4: PROCESSES AND TECHNOLOGIES

WHAT IS A PRODUCTION PROCESS?

 A production process is the method of using economic input or resources, like labor, capital
equipment or land, to provide goods and services to consumers.
 The production process typically covers how to efficiently and productively manufacture products
for sale to reach customers quickly without sacrificing the quality of the product.

 There are many different types of production processes businesses can follow, according to their
manufacture goals, production numbers and technology tools or software

TYPES OF PRODUCTION PROCESSES

Stores - Internal Transport - Production - Quality Inspection - Packaging

ELEMENTS OF A PRODUCTION DECISION

 Amount to produce

 Technology to use

 Input combinations to use

 Whether to move forward with mass production

MASS PRODUCTION

In mass production, employees continuously produce the same items. Team members typically split up
into different workstations for everyone to use at once. Each workstation typically represents one
material or addition to a product.

Once the product gets to the end of the line, it's fully complete and ready to deliver to the customer. As
one part of the product is being worked on, another is operating as well.

CRAFT PRODUCTION

This is a non-automated process that's usually used on products that need personal care and attention in
order to deliver a quality product to the consumer.

Many companies use this type of production when customers order customized products that include
certain unique colors, shapes, patterns or words on the design.

BATCH PRODUCTION

Organizations typically use batch productions when they need to produce several groups of items. When
this occurs, employees work in subsections of each group to complete different sections of certain
batches.

It operates similarly to a mass production process, but instead of creating just one product, the
organization builds several different products and splits them into various groups.

MASS CUSTOMIZATION

This type of process is a mass production line that creates products unique and customized according to
consumers' needs. The customer may have the option to select certain customization options from a list
of colors, shapes or patterns. When they select certain options, the mass customization process
completes a unique and automated process for each individual item. For example, many clothing and
merchandising stores use this process to make clothing and accessory items according to customers'
measurements or color preferences.
 PROCESS PLANNING AND ANALYSIS

WHAT IS THE MEANING OF BUSINESS PROCESS REENGINEERING?

Business Process Reengineering involves the radical redesign of core business processes to achieve
dramatic improvements in productivity, cycle times and quality.

In Business Process Reengineering, companies start with a blank sheet of paper and rethink existing
processes to deliver more value to the customer.

FACILITY MANAGEMENT

TYPES OF FACILITY LAYOUT

Proper facility layout is an important enabler of efficient operations. However, when designing or
improving a manufacturing plant or warehouse layout, it is easy to underestimate how many factors one
needs to consider.
 WHAT IS OPTIMAL FACILITY LAYOUT?

Optimal facility layout aims to create a safe and simple flow of people, work-in-process and information.
In other words, an optimal facility layout means the most effective arrangement of the 3 Ms:

- Men

- Materials (Work-in Process)

- Machines

This is where operational efficiency professionals have a role to play. They can optimize facility layout to
eliminate waste such as motion, waiting, inventory (work-in process) material handling, transportation
and thus improve throughout to meet customer demand.

HOW TO BEGIN OPTIMIZING YOUR LAYOUT

Facility layout is never a just-do-it project and requires planning, yet poor front-end planning is a
frequent mistake we encounter. This is true for manufacturing as well as warehousing.

Planning involves establishing a layout team with core members (e.g. operations team) and support
staff (e.g. sales team) to ensure that you put some thinking into it.

FACILITY LAYOUT FOR MANUFACTURERS

For manufacturers, there are four basic types of layouts depending on the nature of demand, volume
and product variety:

A product or line layout (e.g. automotive assembly line)

A process or functional layout (e.g. fabrication or machining job shops)

A fixed position layout that is used for larger products (airplanes)

Cellular layouts (e.g. L –shaped and U-shaped,)

There is no one-size fits all solution. Each of these basic layouts

come with their own set of advantages and disadvantages. Beyond
these basic layouts, a combination of these is also an option.

DESIGNING PROCESS LAYOUT

What are the three steps in designing process layouts?

(1) gather information about space needs, space availability, and closeness requirements of
departments;

(2) developing a block plan or schematic of the layout; and

(3) developing a detailed layout.

 DESIGNING A PRODUCT LAYOUT

The steps for designing an product layout are:

(1) identify tasks that need to be performed and their immediate predecessors;

(2) determine output rate;

(3) determine cycle time;

(4) computing the theoretical minimum number of work stations,

(5) assigning tasks to workstations; and

(6) computing efficiency and balance

HYBRID LAYOUTS

There are many ways a business can arrange its manufacturing facilities. These include process layouts,
product layouts, and fixed-position layouts.

We're going to look at how these layouts can be combined in different ways to increase productivity.

These are referred to as a hybrid layout, which is a layout that is a combination of the three main
manufacturing layouts