Overview of Operations

Management

Dr. T. T. Kachwala
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Overview of Operations Management

 What is Operations Management – Learning's from Video

 Integrated Supply Chain

 Importance of Operations in Integrated Supply Chain

 Integrated Transformation for Service Sector

 Operations Management integrated with other Business Functions

 Historical Milestones in OM

 Classification of Operations Management

 Models of Operations

 Process view of Operations Management

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(Learning's from Video -What is OM?)

1. Operations Management affects all parts of business operations from purchasing

of raw material to delivery of final goods & services.
2. Managing the Supply chain effectively can make a difference between success &
failure of a product or service. When choosing Suppliers the goal is to find the
best product available for the best price (example McDonald)
3. An efficient manufacturing process delivers quality products in the most cost
effective way possible (Example Hillerich manufacturer of base ball bats) –
some times that needs introducing new technology like ERP
4. Company that provide a service rather than a product also must find the most
efficient processes (Example Disney Land) in order to keep customers happy
and profits up
5. Measuring is an important element of Operations Management to know your
process for your product or service – It is the only way to track improvement or
failure in a process (example Honda Car)
6. Exceeding customer expectations is a powerful function within the hotel
(Example Hotel Monaco of the Crimpton Group)
7. Operations Management is the key to making any business more successful
(example ABTCO)
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Introduction to Operations Management

 Of the many functions in business, there are three primary

functions: Operations, Marketing & Finance.
 An earlier name for Operations was Production and Operation
management (POM). The management approaches and tools
were originally applied primarily in manufacturing companies
where the focus was on production management. These
approaches were later applied to service organizations where the
focus was on managing an organization’s operations.
 Today this discipline is generally referred as operations
management and it includes both the management of production
activities and the management of other operations.
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Integrated Supply Chain
 A supply chain is the sequence of Organizations – their facilities,
functions & activities – that are involved in producing &
delivering a product or service. An integrated supply chain
model with the material flow stream is as follows:
 Purchasing Operations Distributions
 Purchasing is the buying from suppliers and / or subcontractors
of the necessary raw materials, components and services.
 Operations is the manufacturing and assembly in work centers of
these raw material and components into finished goods.
 Distribution of the finished product to the customer and is often
referred as business logistics or physical distribution
management.
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Importance of Operations in Integrated Supply Chain

 Within each phase of the integrated supply chain are numerous

operations necessary to keep the activity functioning efficiently as
enlisted below:
 Under Purchasing: We have operational activities such as sourcing,
subcontractor selection, supplier selection, quality management in
purchasing, inventory management of raw material etc.
 Under Operations: We have planning of operations, layout of
facilities, quality management of the process, design of products, cost
control, inventory management of different types of material, just-in-
time, TQM etc.
 Under Distribution: We have warehousing for finished goods and
spare parts, transportation and distribution of goods, inventory
management of finished goods, final customer services, forecasting for
future needs etc.
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Importance of Operations in Integrated Supply Chain

 The three more important challenges to a firm are

quality products, promised delivery times and
acceptable cost. Therefore, it is vital that there is
proper management and control of these
operations in the integrated supply chain.
 Supply chain is perhaps better conceptualized in
manufacturing since there is a physical flow of
goods (Example a supply chain of bread).
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Integrated Transformation for Service Sector

 First example, consider College Education:

 Input Transformation Output

 Inputs include books, research reports, video tapes, CDs,

knowledge of Professors & Class mates.
 Transformation are the acquisition of knowledge and gaining of
new insights, understanding of relationships, improved ability to
think, to evaluate situations and to make better informed
decisions.
 Outputs include new knowledge and insight and students who
are better qualified to pursue objectives towards which they are
working
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Integrated Transformation for Service Sector

 Second example, consider Hospital:

 Input Transformation Output

 Inputs include Doctors, Nurses, Hospital, Medical

Supplies, Equipment Laboratories.
 Transformation are the examination, Surgery,
Monitoring, Medication & Therapy
 Outputs include healthy patient
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Operations Management integrated with other
Business Functions
 Operations Management is not an isolated subject. It is totally
integrated with other business functions for e.g.
1. In operations one must control cost and this is where cost
accounting plays a role
2. In all operations, capital investment is required for machine
equipment and building and so finance accounting is important.
3. In operations one needs motivated and productive people and
this is the link with human resource management
4. Products that are made by operations have to conform to
customer requirements and hence the strong link with
marketing
5. The operations of the firm has to abide by the current laws
including worker safety, working hours, ecological environment
rules etc. and hence linkage with legal aspects.
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Historical Milestones in OM

1. Ancient times (Before 1700s): for example the Egyptian Pyramids, the
Great Wall of China, the Aqueducts of the Roman Empire.

2. 1700s in England, Industrial Revolution: substitution of machine power

for human power. Invention of Steam Engine ( James Watt 1764), Flying
shuttle for weaving Textiles, Concept of interchangeable parts (Whitney
1790) etc.

3. 1800s Gasoline Engines & Electricity were developed.

4. Mid 1800s factory systems replace traditional systems of making products.

5. 1900s Scientific Management: Frederick Taylor popularized Time Study,

Method Study, & Efficiency – getting output with minimum wastage.
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Historical Milestones in OM

6. 1920s Henry Ford Model ‘T’: used assembly lines (straight line
production). Parts were moved by automatic Conveyor belts. The
results were outstanding. Assembly time reduced from 728 hours to
only 93 minutes <Snap Shot on Scientific Management at Ford
Plant>
7. Post World War I: Human Relations Movement began.
Contributions of Elton Mayo, Maslow, Herzberg & McGregor.
8. World War II: Operations Research developed as a discipline to
optimize objective function in Decision Making.
9. Post World War II: Service Revolution with a spectacular
contribution to national economy for example; banks, hotels,
information technology, hospitals etc.
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Historical Milestones in OM

11. Computer Revolution: Many Operations activities can be performed

more quickly because of Computer technology. Software applications
like Enterprise Resource Planning (ERP) software such as SAP,
PeopleSoft, Oracle allows for real time information about inventory
levels, customer orders, current work loads, orders to vendors etc.
Internet Revolution is a relatively recent development with a strong
impact on Business. Firms are involved in e-business using the
internet.

12. CNC, CAD, SPC, TQM, ISO standards, Benchmarking & SCM have
all impacted Operations.
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Classification of Operations Management

 Production (Manufacturing) is an intentional act of organizing the

manufacturing resources for the purpose of transformation of raw

materials into a saleable product at optimum quality and minimum
costs.

 Production Management seeks to optimize the intentional act of

planning, organizing, directing and coordinating the manufacturing

resources for the purpose of transformation of raw materials into a
saleable product at optimum quality and minimum cost, by controlling
the manufacturing cost, quality and inventory within the specific limits
laid down by the production plan, product design and available
resources of skills and capital (money)
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Classification of Operations Management

 Service Industry also provides a product, but this product is intangible and cannot be
described in the same dimensional terms as manufactured goods. The type of
service industries are: Airlines where output is travel, Banking where output is
loans, Software where output is application program, Entertainment where output is
games & enjoyment, Hotels where output is a comfortable stay. These service
outputs cannot be held as finished goods inventory.

 In the service industry there is generally more client contact in all phases of
operating environment than there is in manufacturing. Those persons in services are
more people oriented as opposed to those in manufacturing, where there is usually a
higher proportion of technicians and engineers. Service Providers should be warm &
courteous and have good interpersonal skills for the job that entails significant
contact with customers.
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Classification of Operations Management

Service Organization’s Operations systems are similar to a manufacturing Organization.

For example, an Airline company is a service Operation & involves the activities of
 capacity planning (right number of planes in the right places)
 locating facilities (which cities to provide services, maintenance facilities)
 scheduling (planes for flights & maintenance, pilots, flight attendants, ground crew)
 motivating employees (in all phases of operations)
 ordering & managing supplies & inventories (food & beverages, first aid
equipments, magazines, pillows & blankets)
 selecting & maintaining equipment (airplanes, airport facilities)
 satisfying Quality Standards (dealing with customers at ticket counters, check in, &
reservations)
 & above all satisfying Customers
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Classification of Operations Management

 Service Business can also be characterized on the basis of

(i) Degree of Customization (highly standardized or highly
customized) & (ii) Degree of Complexity (skill, equipment
& capital investment). The following are examples for the
four possibilities:
(i) Customized & High Complexity: Doctor, Lawyer,
(ii) Standard & High Complexity: College Education, Auto Service
(iii) Customized & Low Complexity: Restaurants, House Painting
(iv) Standard & Low Complexity: Dry Cleaning, Fast Food
 The skill set & other resource requirements will be different
for each category of Service Business
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Classification of Operations Management

College Doctors
H Co
Education Lawyers

Complexity
Restaurant
Dry Cleaning
House Paints
L Co

L.Cu
H.Cu
(Std)

Customization
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Separation of Manufacturing & Services

 The separation of manufacturing and services is clearly not a black and white
matter. Some service firms violate the intangible product rule as illustrated
below:
1. Engineering and Construction Service firms build bridges
2. Food services or restaurants provide meals
3. Retail store are service organization involved in sale of tangible end product
 On similar lines, within all manufacturing industry there are service elements
for example
1. An after sales service for repairs
2. Legal service for employee rights
3. Purchasing services to improve quality of supplied products
4. Internal company training services to ensure effective performance
5. Human Resource department is a service for hiring employees, following
promotions, administering salaries, welfare activities etc.
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Separation of Manufacturing & Services

Insurance

Restaurant
Service

. Steel Product

Manufacturing
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Models of Operations

A simple model for operations comprises three basic blocks: inputs, transformation
and outputs. Such a model is illustrated below:

Industry Inputs Transform Outputs

Food Cocoa Grinding / Blending Chocolate

Automobile Steel Machining / Assembly Motor Vehicle

Chemicals Crude Oil Refining / Reformulation Plastic Utensils

Distribution Bulk Product Sorting / Packaging Customer Pack

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Process View of Operations Management

 A process is an activity or a group of activities that takes one or

more inputs and transforms them by adding value to one or

more outputs for its customers.

 For example, many parts of a restaurant like the designer of the

facility, the cooks, buyer, suppliers, hostess, parking attendant

and others support the server in providing customers with a
good meal and pleasant dining experience. They all play a part
in seeing that the customer is well-served.
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Process View of Operations Management

 Accounting process prepares financial & cost accounting information

 Finance process manages cash flow & capital investment requirements

 Human resources process hires & trains employees to match

organization needs

 Management information system process develops information &

decision support systems

 Marketing process satisfies customer needs

 Operations process transform inputs into products & services

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Process View of Operations Management

 Transformation processes can be categorized as :

1. Physical (manufacturing)

2. Location (Transportation)

3. Exchange (Retailing)

4. Storage (Warehousing)

5. Physiological (Health Care)

6. Educational (Colleges)