Fundamentals of managing business operation

1. Fundamentals of Managing
Business Operations

2. Introduction
• Operation is that part of as organization,
which is concerned with the transformation
of a range of inputs into the required output
(services) having the requisite quality level.

3. • The set of interrelated management activities,
which are involved in manufacturing certain
products, is called as production
management.
• If the same concept is extended to services
management, then the corresponding set of
management activities is called as operations
management.

4. Evolvement of production &
operations
• Adam Smith in 18th century
– recommended
• breaking of jobs down into subtasks and
• recognises workers to specialized tasks in which they
would become highly skilled and efficient

5. • Production Management becomes the
acceptable term from 1930s to 1950s.
– As F.W. Taylor’s works become more widely
known, managers developed techniques that
focused on economic efficiency in manufacturing
– Workers were studied in great detail to eliminate
wasteful efforts & achieve greater efficiency.
• With the 1970s, As service sector became
more prominent, the change from production’
to ‘operations’ emphasized the broadening of
our field to service organizations.

7. Concept of production
• Production is defined as ‘the step-by-step
conversion of one form of material into
another form through chemical or mechanical
process to create or enhance the utility of the
product to the user’.

8. Some other key terms

9. Value-added
• When blending inputs into a product or service,
the increased value of outputs compared to the
sum of value of inputs.
• For all operations general goal is to create some
value addition so that outputs are worth more to
the consumers.

10. Random Fluctuations
• Unplanned or uncontrollable environmental
influences that cause planned and actual output to
differ.
• External Sources – fire, floods or lightning
• Internal Sources – imperfections in material or
equipment, simple human error

11. Feedback
• Information in the control process that allows
management to decide whether organizational
activities needs adjustment

12. Technology
• The level of scientific sophistication in plant,
equipment and skills in the conversion process.
• Soft-drink – highly mechanized, capital intensive
• Scientific research lab – Highly trained,
professional scientists and scientific equipments.

13. Productivity
• A measure of the efficiency of a person, machine, factory,
system, etc., in converting inputs into useful outputs.
• Productivity is computed by dividing average output per
period by the total costs incurred or resources (capital,
energy, material, personnel) consumed in that period.

14. Manufacturing vs Service
• Rather think of every process on the
manufacturing-service continuum.
• Let’s take an example of food chain industry.
• So try to find that whether it’s a more like a
manufacturing process or service process.

15. Manufacturing process or service
process?
Manufacturer Service Provider
Nature of output Physical and Durable Intangible, perishable
Nature of inventories Can be inventoried Can’t be inventoried
Customer Contact (with
production process)
Low High
Response Time Long Short
Consumption of output Slower Fast
Capital intensity Higher Lower
Quality measurement Objective and easier Subjective and difficult

16. Competitive priorities
• Creating competitive advantage requires a
determination of the factors that may put a
firm in a better position in relation to its
competitors in the marketplace.

17. 1. Cost
• cost leadership in which the features of this
strategy are:
– low cost relative to competitors,
– related and standardised products,
– and economies of scale.
– A cost leadership strategy requires
• intense supervision of labour, tight cost control,
frequent and detailed control reports and structured
firm and responsibility

18. 2. Quality
• Provides products that meet or exceed
customer needs and expectations
• Top Consistent Quality
– Performance
– Features
– Reliability
– Conformance
– Durability
– Serviceability
– Perceived Quality

19. 3. Time
• Quick Delivery
• On-time Delivery
• New Product/development speed

20. 4. Flexibility
• Customization
• Variety
• Volume Flexibility

21. Order Winners
• Order winners are the competitive
advantages that cause a firm's customers to
select that company's products or services.
• It is the main reason why customers purchase
a company's product.

22. Order Qualifiers
• An order qualifier is a characteristic of a
product or service that is required in order for
the product/service to even be considered by
a customer.
• Meets the minimum threshold level.

23. Core competencies
• Research and Development
• Large scale of the business
• Human Skills
• System and processes
• Immense capital