2. 2
◦ Introduction to Operations Management,
◦ Why Study Operations Management?
◦ Organizational Model/OM in the Organizational Chart,
◦ Why study OM?
◦ Operations/Production Systems,
◦ Historical Development of OM,
◦ Current Issues in Operations Management

3. 3
 Operations management is the management of an organization’s
productive resources or its production system.
 A production system takes inputs and converts them into outputs.
 The conversion process is the predominant activity of a production
system.
 The primary concern of an operations manager is the activities of the
conversion process.
 Nirmal_i@yahoo.com
 +919867570665

4. 4
Operations Management (OM)
is the process, which combines and transforms various resources
(inputs) used in the production/operations subsystem of the
organization into value added product/services in a controlled manner
as per the policies of the organization
is that function of an organization, which is concerned with the
transformation of a range of inputs into the required products/services
having the requisite quality level
Is the set of interrelated management activities, which are involved in
this transformation process
is defined as the design, operation, and improvement of the
systems that create and deliver the firm’s primary products and
services

5. 5
Operations & Supply Management (OSM)
is defined as the design, operations and improvement of the system that
create and deliver the firm’s primary products and services
like other line functions viz. Marketing, Finance, is also a functional field
with clear line management responsibilities
Operations & Supply Management (OSM) Vs. Operations Research
(OR), Management Science (MS) and Industrial Engineering (IE)
While OSM is a field of Management whereas OR/MS is the applications
of quantitative methods to decision making in all the fields and IE is an
engineering discipline
While OSM managers uses decision making tools of OR/MS (Critical path
scheduling) and are concerned with many of the issues of IE (factory
automation), OSM’s distinct management role distinguishes it from others

6. 6
Finance
Sales HRM
OM
QA
Marketing
MIS Accounting
Engineering

7. 7
OM in the Organization Chart
Finance Operations
Operations Marketing
Plant
Plant Operations
Operations Director
Director
Manager
Manager Manager
Manager
Manufacturing, Production control,
Manufacturing, Production control,
Quality assurance, Engineering,
Quality assurance, Engineering,
Purchasing, Maintenance, etc
Purchasing, Maintenance, etc

8. 8
Systematic Approach
to Org. Processes
Business Education Operations Career Opportunities
Management
Cross-Functional
Applications

9. 9
 Purchasing planner/buyer
 Production (or operations) supervisor
 Production (or operations) scheduler/controller
 Production (or operations) analyst
 Inventory analyst
 Quality specialist

10. 10
 Operations as a System
 Decision Making in OM

11. 11
Production System
Conversion
Inputs Outputs
Subsystem
Control
Subsystem

12. 12
 External
◦ Legal, Economic, Social, Technological
 Market
◦ Competition, Customer Desires, Product Info.
 Primary Resources
◦ Materials, Personnel, Capital, Utilities

13. 13
 A transformation process uses resources to convert inputs into some desired
outputs
 Inputs may be raw material, efforts, knowledge or finished product from some
other system
 Categories of Transformation Process
◦ Physical (as in manufacturing)
◦ Locational (as in transportation)
◦ Exchange (as in retail)
◦ Storage (as in distribution)
◦ Physiological (as in health care)
◦ Informational (as in Telecommunication)
 These Transformations are not mutually exclusive (Example : Departmental
Store – allows price comparison by shoppers(informational), Stores SKUs
(Storage), Sells goods (exchange)

14. 14
 Direct
◦ Products
◦ Services
 Indirect
◦ Waste
◦ Pollution
◦ Technological Advances

15. 15
 Companies cannot compete with marketing, finance, accounting, and
engineering alone
 We focus on OM as we think of global competitiveness, because that
is where the vast majority of a firm’s workers, capital assets, and
expenses reside
 To succeed, a firm must have a strong operations function teaming
with the other organization functions

16. 16
Strategic Decisions  Examples include deciding:
These decisions are of strategic ◦ how much finished-goods inventory to
importance and have long-term carry
significance for the organization. ◦ the amount of overtime to use next
week
Examples include deciding:
◦ the details for purchasing raw material
◦ the design for a new product’s next month
production process Control Decisions
◦ where to locate a new factory  These decisions concern the day-to-
◦ whether to launch a new-product day activities of workers, quality of
development plan products and services, production
Operating Decisions and overhead costs, and machine
These decisions are necessary if the
maintenance
 Examples include deciding:
ongoing production of goods and
services is to satisfy market demands ◦ labor cost standards for a new product
and provide profits ◦ frequency of preventive maintenance
◦ new quality control acceptance criteria

17. 17
 Information about the outputs, the conversions, and the inputs is fed
back to management.
 This information is matched with management’s expectations
 When there is a difference, management must take corrective action
to maintain control of the system
Set Goals
Measure (Info on
(Management
O/P,I/P &
Expectations-
Conversion)
Targets)
Control Process Closed Loop
Implement Compare with
Corrective Actions Goals & Identify
for Variances Gaps

18. 18
 Example : Typical Systems
System Primary Input Resources Primary Transformation Typical desired
Function(s) Output
Hospital Patients Doctors, Nurses, Health care (physiological) Healthy
Medical Supplies, Individual
Equipment
Restaurant Hungry Food, Chef, Well prepared, well served Satisfied
Customer Waiters, food, good environment Customers
Environment (Physiological & exchange)
College or High school Teachers, Books, Imparting Knowledge & Educated
University Grads classrooms skills (Informational) Individuals
Distribution Stock keeping Storage bins, stock Storage & redistribution Fast Delivery,
Center units (SKUs) pickers (Storage) Availability of
SKUs
Airlines Travelers Airplanes, Crews, Move to destination On-time, safe
Scheduling/ticketin (Locational) delivery to
g system destination

19. 19
Five differences
First, Service is an intangible process that cannot be weighed or measured while good is
a physical output of a process that has physical dimensions
◦ Service innovation unlike product innovation can not be patented imposing threat of
competition replicating it
◦ Intangibility is a problem for customer as service can not be tried out and tested
before it is purchased
Second, Service requires some interaction with customers for it to be a service and must
be designed to handle customer presence. Goods, however are a re generally produced
in facilities separate from customer
Third, Services are inherently heterogeneous, they vary from day to day and even hour
by hour, as a function of attitude of customers and the servers.. Thus even the highly
scripted work such as that in call centers can produce unpredictable results. Goods
however can be produced with very tight specifications and with essentially zero
variability w.r.t. time
Service as a product are perishable and time dependent unlike Goods and can not be
stored
Specifications of a service are defined and evaluated as a package of features that
effect the five senses (Perception)

20. 20
 Core services are basic things that customers want from products
they purchase
Core Services Performance Objectives
Quality
Operations
Flexibility Speed
Management
Price (or cost
Reduction)

21. 21
 Value-added services differentiate the organization from competitors
and build relationships that bind customers to the firm in a positive
way
 Value-Added Service Categories
Problem Solving
Information Operations Sales Support
Management
Field Support

22. 221-22

23. 231-23
 JIT and TQC
 Manufacturing Strategy Paradigm
 Service Quality and Productivity
 Total Quality Management and Quality Certification
 Business Process Reengineering
 Six-Sigma Quality
 Supply Chain Management
 Electronic Commerce
 Service Science

24. 24
 Service science, Management & Engineering (SSME) is a term introduced by IBM to
describe service science, an interdisciplinary approach to the study, design, and
implementation of services systems – complex systems in which specific arrangements
of people and technologies take actions that provide value for others
 SSME has been defined as the application of science, management, and engineering
disciplines to tasks that one organization beneficially performs for and with another
 Today, SSME is a call for academia, industry, and governments to focus on becoming
more systematic about innovation in the service sector, which is the largest sector of
the economy in most industrialized nations, and is fast becoming the largest sector in
developing nations as well
 SSME is also a proposed academic discipline and research area that would
complement – rather than replace – the many disciplines that contribute to knowledge
about service
 The interdisciplinary nature of the field calls for a curriculum and competencies to
advance the development and contribution of the field of SSME

25. 25
Year Concept Tool Originator
1910's Principles of scientific mgmt Formalized time-study and work-study Frederick Taylor
Industrial psychology Motion study Frank & Lillian Gilbreth
Moving assembly line Activity scheduling chart Henry Ford & Henry Gantt
Economic lot size EOQ applied to inventory control F.W. Harris
Sampling inspection & statistical tables for Walter Shewhart, H.F.
1930's Quality control
quality control Dodge, & H.G. Romig
Hawthorne Studies of worker motivation Activity sampling for work analysis Elton Mayo & L.H.C. Tippett
Multidisciplinary team approaches to Operations research groups
1940's Simplex method of lineary programming
complex system problems and George B. Dantzig
Simulation, waiting-line theory, decision theory,
1950's- Extensive development of operations
mathematical programming, project scheduling Many researchers
60's research tools
& CPM
Shop scheduling, inventory control, forecasting, Led by computer
1970's Widespread use of computers in business
project management, MRP manufacturers
Service quality & productivity Mass production in the service sector McDonalds

26. 26
Year Concept Tool Originator
1980's Manufacturing strategy paradigm Manufacturing as a competitive weapon Harvard Business
Kanban, poka-yokes, CIM, FMS, CAD/CAM, Tai-Ichi Ohno, W.E.
JIT, TQC, and factory automation
robots, et Deming, J.M. Juran
Synchronous manufacturing Bottleneck analysis, OPT, theory of constraints Eliyahu M. Goldratt
Baldrige quality award, ISO 9000, QFD, value
1990's Total quality management & concurrent engineering, continuous NIST, ASQ, ISO
improvement
M. Hammer & major
Business process reengineering Radical change
consulting firms
US Government, Netscape,
Electronic enterprise Internet, WWW
Microsoft
Supply chain management SAP/R3, client/server SAP, Oracle
2000's E-commerce Internet, WWW Amazon, eBay, AOL, Yahoo

27. 27
 Synergies must exist with other functional areas
of the organization
 Operations account for 60-80% of the direct
expenses that burden a firms profit.

28. 28
 Global Competition
 Quality, Customer Service, and Cost Challenges
 Rapid Expansion of Advanced Technologies
 Continued Growth of the Service Sector
 Scarcity of Operations Resources
 Social-Responsibility Issues

29. 29
 Coordinate the relationships between mutually supportive
but separate organizations
 Optimizing global supplier, production, and distribution
networks
 Increased co-production of goods and services
 Managing the customers experience during the service
encounter
 Raising the awareness of operations as a significant
competitive weapon

30. 30
 OM important in any organization
 Global competition forces rapid evolution of OM
 Decision based framework focus of course
◦ Strategic, Operating, and Control

31. 31

32. 32
A major objective of today’s topic is to show how smart
managers can do which of the following?
a.Improve efficiency by lowering costs
b.Improve effectiveness by creating value
c.Increasing value by reducing prices
d.Serving customers well
e.All of the above
Answer: e. All of the above

33. 33
In the Input-Transformation-Output Relationship,
a typical “input” for a Department Store is which
of the following?
a.Displays
b.Stocks of goods
c.Sales clerks
d.All of the above
e.None of the above
Answer: e. None of the above (The above are
considered “Resources” of a department store.
The correct answer is “Shoppers”.)

34. 34
In which of the following decades did the
concept of quality control originate?
a. 1920’s
b. 1930’s
c. 1940’s Answer: b. 1930’s (Tools such
d. 1950’s
as sampling inspection and
e. 1970’s
statistical tables where first
developed by Walter
Shewhart, H. F. Dodge, and H.
G. Romig.)