Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs to acheive organsiaiton productivity.

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Operations Management
BSS064-6
Operations Management
and PRODUCTIVITY
Dr Nasrullah K. Khilji
Senior Lecturer in Project and Operation Management
Leading and Managing
Organisational Resources

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Learning Objectives
In the end of this session you should be
able to:
1. Define operations management
2. Explain the distinction between goods and services
3. Explain the difference between production and
productivity
4. Compute single-factor productivity
5. Compute multifactor productivity
6. Identify the critical variables in enhancing productivity
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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What Is
Operations Management?
Production is the creation of goods and services
Operations management (OM)
is the set of activities that
creates value in the form of
goods and services by
transforming inputs into
outputs
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Organizing to Produce
Goods and Services
Essential functions:
 Marketing – generates demand
 Production/operations –
creates the product
 Finance/accounting – tracks
how well the organization is
doing, pays bills, collects the
money
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Organizational Charts
Operations
Teller
Scheduling
Check Clearing
Collection
Transaction
processing
Facilities
design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust
Department
Commercial Bank

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Operations
Ground support
equipment
Maintenance
Ground Operations
Facility
maintenance
Catering
Flight Operations
Crew scheduling
Flying
Communications
Dispatching
Management science
Finance/
accounting
Accounting
Payables
Receivables
General Ledger
Finance
Cash control
International
exchange
Airline
Marketing
Traffic
administration
Reservations
Schedules
Tariffs (pricing)
Sales
Advertising
Organizational Charts

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Marketing
Sales
promotion
Advertising
Sales
Market
research
Operations
Facilities
Construction; maintenance
Production and inventory control
Scheduling; materials control
Quality assurance and control
Supply chain management
Manufacturing
Tooling; fabrication; assembly
Design
Product development and design
Detailed product specifications
Industrial engineering
Efficient use of machines, space,
and personnel
Process analysis
Development and installation of
production tools and equipment
Finance/
accounting
Disbursements/
credits
Receivables
Payables
General ledger
Funds Management
Money market
International
exchange
Capital requirements
Stock issue
Bond issue
and recall
Manufacturing
Organizational Charts

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Ten Critical Decisions
Ten Decision Areas
 Design of goods and services
 Managing quality
 Process and capacity design
 Location strategy
 Layout strategy
 Supply chain management
 Inventory management
 Scheduling
 Maintenance
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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10 Decision Areas
OPERATIONS Management
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Productivity Challenge
Productivity is the ratio of outputs (goods and
services) divided by the inputs (resources such
as labour and capital)
The objective is to improve
productivity!
Important Note!
Production is a measure of output
only and not a measure of efficiency
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Service Productivity
 Typically labour intensive
 Frequently focused on unique individual
attributes or desires
 Often an intellectual task performed by
professionals
 Often difficult to mechanize
 Often difficult to evaluate for quality
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Product / Service
Design Process
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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► Organisations exist to provide goods or
services to society
► Great products are the key to success
► Top organisations typically focus on core
products
► Customers buy satisfaction, not just a
physical good or particular service
► Fundamental to an organisation's strategy
with implications throughout the
operations function
Goods and Services Selection
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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► Limited and predicable life cycles
requires constantly looking for,
designing, and developing new products
► Utilize strong communication among
customer, product, processes, and
suppliers
► New products generate substantial
revenue
Goods and Services Selection
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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The objective of the
product decision is to
develop and implement
a product strategy
that meets the
demands of the
marketplace with a
competitive advantage
Product Decision
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Product Strategy Options
► Differentiation
 Shouldice Hospital
► Low cost
 Taco Bell
► Rapid response
 Toyota
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Generating New Products
1. Understanding the
customer
2. Economic change
3. Sociological and
demographic change
4. Technological change
5. Political and legal
change
6. Market practice,
professional standards,
suppliers, distributors
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Product Development
Stages
Scope of
product
development
team
Scope for
design and
engineering
teams
Evaluation
Introduction
Test Market
Functional Specifications
Design Review
Product Specifications
Customer Requirements
Feasibility
Concept

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Robust Design
► Product is designed so
that small variations in
production or assembly
do not adversely affect
the product
► Typically results in lower
cost and higher quality
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Adding Service Efficiency
▶ Service productivity is
notoriously low partially
because of customer
involvement in the design
or delivery of the service,
or both
▶ Complicates product
design
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Service
Products & Services as a Continuum
Service in a
Manufacturing Setting
• Traditional approaches to services in a
manufacturing organisation
– After-sales service supply chains
• Latest trends
– “From services that support the product to services that
support the client”
‘Servitisation’
‘Productisation’
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Products and
services should
be designed in
such a way that
they can be
created effectively
Designing the
product or
service
Processes should
be designed so
they can create all
products and
services which the
operation is likely
to introduce
Designing the
process
Product / service
design has an
impact on the
process design
and vice versa
Process DESIGN:
Product / Service
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Process Analysis
and Design
• Questions
– Is the process designed to achieve competitive advantage in
terms of differentiation, response, or low cost?
– Does the process eliminate steps that do not add value?
– Does the process maximize customer value as perceived by the
customer?
– Will the process win orders?
• Tools
– Flow Diagrams: A diagram used to analyze movement of people or
material. (E.g., diagram on process focus)
– Process Charts: Charts using symbols to analyze the movement of
people or material.
– Time-Function/Process Mapping: A flow diagram with time added
on the horizontal axis.
– Service Blueprinting: A process analysis technique that lends itself
to a focus on the customer and the provider’s interaction with the
customer.

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Techniques for Improving
Productivity
• Layout
• Human Resources
• Technology
• Sustainability issues
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Productivity
OPERATIONS Management
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Quality and Strategy
► Managing quality supports
differentiation, low cost,
and response strategies
► Quality helps firms increase
sales and reduce costs
► Building a quality
organization is a
demanding task
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Two Ways Quality
Improves Profitability
Improved
Quality
Increased
Profits
• Increased productivity
• Lower rework and scrap costs
• Lower warranty costs
Reduced Costs via
• Improved response
• Flexible pricing
• Improved reputation
Sales Gains via
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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The Flow of Activities:
Integration and Transformation
Organizational Practices
Leadership, Mission statement, Effective operating
procedures, Staff support, Training
Yields: What is important and what is to be accomplished
Quality Principles
Customer focus, Continuous improvement,
Benchmarking, Just-in-time, Tools of TQM
Yields: How to do what is important to be accomplished
Employee Fulfillment
Empowerment, Organizational commitment
Yields: Employee attitudes that can accomplish
what is important
Customer Satisfaction
Winning orders, Repeat customers
Yields: An effective organization with
a competitive advantage

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Continuous Improvement
• Never-ending process of
continuous improvement
• Covers people, equipment,
suppliers, materials,
procedures
• Every operation can
be improved
Dr Nasrullah K. Khilji ‘Business School, University of Bedfordshire’

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Guided Learning
• Chapter - 1
Operations and Productivity (pp 37-62)
Heizer, J. and Render, B., (2014), 11th Global Ed

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Any Question Please ….