2. Definition
• Operations Management (OM)
management of activities that lead to the
creation of goods and services through the
transformation of inputs to outputs
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3. Operations Management (Definition Contd…)
Operations management is an area of management concerned with
overseeing, designing, and redesigning business operations in the
production of goods and/or services.
It involves the responsibility of ensuring that business operations are
efficient in terms of using as little resources as needed, and effective
in terms of meeting customer requirements.
It is concerned with managing the process that converts inputs (in the
forms of materials, labor, and energy) into outputs (in the form of
goods and/or services).
The relationship of operations management to senior management in
commercial contexts can be compared to the relationship of line
officers to the highest-level senior officers in military science. The
highest-level officers shape the strategy and revise it over time, while
the line officers make tactical decisions in support of carrying out the
strategy 3
4. OM - Critical Decisions
1. Managing quality
2. Design of goods and services
3. Process and capacity design
4. Layout design
5. Human resources
6. Location strategies
7. Supply-chain management
8. Inventory management
9. Scheduling
10. Maintenance
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5. The Critical Decisions - 1
• Quality management
– Who is responsible for quality?
– How do we define quality?
• Goods and services design
– What product or service should we offer?
– How should we design these products and
services?
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6. The Critical Decisions - 2
• Process and Capacity design
– What processes will these products require
and in what order?
– What equipment and technology is
necessary for these processes?
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7. The Critical Decisions - 3
• Layout design
– How should we arrange the facility?
– How large a facility is required?
• Human resources and job design
– How do we provide a reasonable work
environment?
– How much can we expect our employees
to produce?
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8. The Critical Decisions - 4
• Supply chain management and JIT
“Just-in-time” Inventory, Material
Requirements Planning
– Should we make or buy this item?
– Who are our good suppliers and how many
should we have?
– How much inventory of each item should
we have?
– When do we re-order?
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9. The Critical Decisions - 5
• Immediate, short term, and project scheduling
– Is subcontracting production a good idea?
– Are we better off keeping people on the payroll during
slowdowns?
• Maintenance
– Who is responsible for maintenance?
• Location
– Where should we put the facility
– On what criteria should we base this location
decision?
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10. Output of most Operations a Mixture of
Goods and Services
PURE GOODS
Tangible
CRUDE OIL PRODUCTION
Can be stored
Production precedes
ALUMINIUM SMELTING
SPECIALIST MACHINE TOOL consumption
Low customer
contact
MANUFACTURER
Can be transported
RESTAURANT Quality is evident
COMPUTER SYSTEMS
SERVICES
PSYCHOTHERAPY CLINIC
CONSULTANCY
MANAGEMENT
Intangible
Cannot be stored
Production and
consumption are
simultaneous
High customer contact
Cannot be transported
Quality difficult to judge
PURE SERVICES 10
11. Goods Versus Services
Goods Service
Can be resold Reselling unusual
Can be inventoried Difficult to inventory
Some aspects of Quality difficult to
quality measurable measure
Selling is distinct Selling is part of
from production service
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12. Goods Versus Services (Contd...)
Goods Service
• Product is transportable • Provider, not product is
• Site of facility important transportable
for cost • Site of facility important
• Often easy to automate for customer contact
• Revenue generated • Often difficult to
primarily from tangible automate
product • Revenue generated
primarily from intangible
service.
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13. The Transformation Model
Input Resources Output Services
+ Products
Input Transformed
Resources
Materials
Information
Customers
Transformation
Customers
Process
Input Transforming
Resources
Facilities
Staff
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14. Economic System Transforms
Inputs to Outputs
Inputs Process Outputs
Economic system
Land, Labour, transforms inputs to
Goods and
Capital, outputs at about an Services
Management annual 1% increase in
productivity:
- capital 1/6 of 1%
- labour 1/6 of 1%
- management 2/3 of 1%
Feedback Loop
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15. Macro and Micro Operations
• Micro
– An operation or process that can not be split
up into smaller operations and processes
• Macro
– An operation or process that can be split up
into smaller operations and processes
• All Macro operations are made up of many
Micro operations
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16. Internal Customer Concept
• To treat internal suppliers and customers
as if they were independent external
organisations
• Each micro-operation should identify its
internal customers and internal suppliers
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17. The Four V’s
• Volume of demand
– How many the organisation makes
– Service vs. Mass Production
• Variety in operations
– The ability to adapt the transformation process to meet needs of
the customer
– Taxi vs. Train
• Variation in demand
– Adapting to changing demand
• Visibility of transformation
– How much of the operations functions are visible to the customer
– Some operations have mixed high/low visibility
eg Restaurant Front and Kitchen
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18. A Typology of Operations
Electricity generator Television plant
factory
Fast food restaurant
Gourmet restaurant
Pioneering surgery Low Volume High Routine surgery
Taxi service Mass rapid transport
Bespoke tailor Off-the-peg suit plant
University tutorials University lectures
Corporate tax advice High Variety Low Financial audits
Department store Jeans shop
Electricity utility Bread bakery
Financial audits Variation Consultancy advice
Emergency service High Low Shopping mall security
London underground
in Demand Trucking operation
Health care Most manufacturing
"Cook at your Prepackaged sandwich
table" restaurant maker
Dentist
High Visibility Low
Dental technicians
Music teacher Distance learning
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