Managing the operations function

1. MANAGING
THE
OPERATIONS
FUNCTION

2. Operations management is about delivering products
and services to customers to meet or surpass their
expectations. It is designing, developing, and executing
the Enterprise Delivery System (EDS), from sourcing
of the necessary input to the transformation of these
input into the final output which, in turn assure the
intended outcome of delighting the customers.The
final output, which come in the form of goods or
services (or both), must carry all the features and
attributes that customers are looking for.

3. All operations managers must, therefore, begin with the
customer's wants and desires in mind.These wants and
desires can be classified into three customer outcome
expectations:
◦(1) quality expectations;
◦(2) delivery expectations; and
◦ (3) price expectations.

4. Thus, the customers' quality, delivery, and price (QDP)
expectations are crucial to the operations function.

5. For some products, especially industrial goods, the
exact technical specifications demanded by the
customers become the quality parameters.
Industrial customers will surely specify the exact
size, weight, strength, color, shape, chemical
composition, and performance level of the products
that they want to purchase. Industrial customers are
also operating under strict production schedules.

6. Therefore, they will demand some regularity in the
delivery of the products so that they can practice
"just-in-time" production. Industrial customers are
also competing in the global marketplace. Hence,
they have alternative global suppliers who can
provide relatively lower prices.

7. Thus, price expectations become important. For
other products or services, especially customized
orders, the Quality, Delivery, and Price expectations of
customers might differ from order to order,
depending on their preferences.Take the example of a
movie actress who usually has her hair serviced by her
favorite hairstylist. Depending on the occasion she is
attending and the mood she is in, she would be
specifying a different style and treatment for her hair.
Her QDP expectations may change from occasion to
occasion.

8. Thus, the customers' quality, delivery, and price
expectations necessarily define the EDS.

9. EDS starts from the Input (resources mobilized),
proceeds to theThroughput (or the transformation
process where input is converted into output) and
produces the Output (the product).The output is
then marketed to the customers (in the case of
goods) or experienced by the customers (in the case
of services).The customer satisfaction level, revenues
generated, and the profits realized from the
transactions are the customer, market, and financial
outcomes of the EDS.

10. The Six Ms of Operations
◦The six Ms of the operations function cover
the input portion of the EDS Design
Framework.To better illustrate how the six Ms
work across the EDS Design Framework

11. Customers Outcomes Resources
Transformation Products Marketing and
Customer Mobilized Process Customer.
Servicing Expectations • Money
Conversion of Goods made or Services
rendered Marketing Program • Quality
Input into Output • Delivery • Men Service
Level Experience • Price • Machines Market
• Materials Expectations • Methods •
Revenues/Sales • Market Share •
Management • Market Reach Finance
Expectations • Profits • Return on
Investment

12. The input is composed of six Ms: Money,
Manpower, Management, Methods,
Materials, and Machinery.These six Ms are
transformed into the right output through
a highly productive system, meaning one
with high efficiency, economy, and
effectiveness.The transformation process is
called theThroughput System.

13. The first M, that is, Money should flow
through theTransformation Process
before (or just in time) as the five
other Ms are needed.

14. The second M, that is Management
should also come ahead of the other
Ms in order to design and develop the
transformation process.

15. technology for the transformation process
should have already been chosen by the EDS
designer and developer.This technology comes
in the form of hardware (i.e., all the machinery
and equipment) and software (i.e., all the
operating systems and work methods).This
gives us the two additional Ms: Machinery and
Methods.The technology will likewise dictate
the last two Ms: Materials and Manpower.
Materials are the input that must be converted
to the final output. Manpower enables the
entire transformation process to operate by

16. Aside from the choice of technology,
the designer and developer of the
transformation process should also
determine the organizational modality
of the Enterprise Delivery System.

17. The organizational modality specifies
what parts of the EDS would be
implemented by the enterprise itself
and what parts would be outsourced or
subcontracted.

18. external entities will accomplish particular
work processes and under what legal
arrangements or contracts. Organizational
modality will also define the precise
relationships between and among the different
departments, divisions, and sections of the
enterprise as goods and services are being
produced. It will stipulate the terms of
reference between the enterprise and its
organizational network of subsidiaries,
subcontractors, franchisees, affiliates, or
strategic allies.

19. In summary, therefore, the
technology chosen and the
organizational modality selected will
establish and operationalize the Input-
Throughput-Output continuum.

20. The Nine Critical Sub-Processes or Sub-
Systems in theTransformation Process
◦The transformation process or throughput
system is what differentiates a well-
managed from a poorly-managed EDS.
There are nine critical sub-processes or
sub-systems that must be managed well in
the transformation process.

21. Technology Application and
Utilization
◦ The enterprise managers and technicians must understand how
the technology works and how it should be properly utilized.The
technology provider should be tasked to transfer all the relevant
technical and procedural information, train the key operators of
the technology, provide after-sales and maintenance services, supply
spare parts, and continue giving advisory services. If the technology
being applied and utilized is quite common and known to many,
then there will probably be no technology contracts with the
suppliers.

22. The OperatingWork Flow (OWF)
◦should follow the rationale of the technology bre
being adopted and used. It is the step-by-step
process of sourcing and storing the input, lent
converting these input into output and delivering
the output to the customers.Two lion guiding
principles should dictate the OWE

23. 1.The OWF must be very efficient in
terms of time, movement, and utilization
pees of resources.
◦ Long waiting times, lag times, down times, and wasted times ton should
be avoided.There should be as little distance as possible between steps
This of the sequential work process.The movement of people and
materials should ent) be kept to the minimum without sacrificing the
quality of the product or the two service. In general, inventory levels
should be kept as low as possible.There two should be minimal reworks
and returns.The former disrupts the workflow anal while the latter
negates whatever speed or movement efficiencies have been / the
attained. Good operations flow mapping, good factory or service shop
layout, and good standardization of work processes would serve the
operations manager well.

24. 2.The OWF must be balanced
capacity-wise.
◦ There should not be significant disparities in the capacity
of each step in the process. Otherwise, the steps with
very little capacity would create operating bottlenecks
and limit the overall production of the expected output.
That is why many operations managers want a balanced
production line.The entrepreneur should accept a
reduction in overall capacity caused by difficult products
if they would generate substantially more profits than
the easier products.

25. Layouting
◦ The operating work flow must translate into an appropriately-designed and executed
physical layout of the factory or service shop.
◦ The space available for operations must be able to accommodate all the machinery
and equipment, the inventory of raw materials, work-in-process and finished goods,
and the operating and quality control personnel. For service shops, there should be
adequate space for holding customers waiting to be served, customers being served,
and customers being processed for payment.The dimensions of the service facility
should be configured correctly to provide enough "elbow room" or human space to
serve the customers comfortably and expeditiously.The working environment should
be conducive for carrying out the operating activities with as little physical, emotional,
and mental stress as possible.

26. The layout should follow four
principles:
◦ 1.The physical layout must allow the goods or the customers being processed to go from one step
to another with very little distance and time spent between steps.
◦ 2.There should be minimal or no crisscrossing of goods or customers within the physical space.
This means that the goods or the customers should not go back and forth from one workplace to
another in a confusing manner.The goods or the customers must follow a sequence of steps that
correspond to the physical layout of the factory or service shop.
◦ 3.The layout should capture the physical and psychological atmosphere desired. On the physical
level, there are the aspects of lighting,ventilation, energy-consumption,and waste management to
consider. On the psychological level, the layout should provide enough "roominess" or human
working space,the proper ambience and the desired sense of safety, security,and human sensitivity.
◦ 4. From the management perspective,the layout must be easy to see, follow, monitor, and control.

27. When the factory or the service shop goes
into full operations, management must be able
to easily track the movement and flow of all
materials, goods, and people as they pass
through the different processes in the different
workspaces.This would allow management to
easily spot bottlenecks and work inefficiencies.
Operations monitoring and quality control are
likewise easier to do when the sequence of
operating activities follow a well-designed and
well-executed physical layout.

28. Production Programming and Scheduling
Operations management is responsible for
Production Programming and Scheduling
(PPS).
◦It is the proper determination of:
◦ (1) what goods or services to produce,
◦ (2) in what sizes and packaging,
◦ (3) in what machinery and equipment (or production/service line),
◦ (4) in how many units, and
◦ (5) precisely when.

29. For enterprises with multiple products or
services, PPS can be a very daunting and
complicated activity.
◦Operations must consider four critical factors in determining
the right PPS.These are:
◦ (1) market demand in terms of volume expectations, trends, cycles,
and seasonality;
◦ (2) capital investment and financing requirements;
◦ (3) product line profitability and capacity utilization; and
◦ (4) the number of products and market segments the enterprise
wants to serve and their implications on the complexity and dexterity
of the production system.

30. of this, enterprises prefer to produce just
enough goods or services to meet the demand.
Good market forecasting should therefore
dictate the PPS. However, consumer tastes
change over time, competing products become
more aggressive, substitutes enter the
marketplace and seasons of the year create
peaks and valleys of demand. One solution is to
have excess production capacity to meet
unexpected sales increases.Another solution is
to outsource or subcontract production to
other producers. However, these have capital

31. Having sufficient production capacity to meet
excess demand will require a fairly large
production facility. Unfortunately, the larger the
facility, the larger the capital investment and
financing requirements needed. Because of this,
the enterprise must decide whether it is better
to have a very large production capacity in
order to meet peak demand periods, or to have
just a small capacity but accumulate the needed
inventory during the lean months of the year.

32. The third critical factor in determining the
PPS is a good product line analysis. Each
product line of the enterprise has its own
demand and supply analysis.At the end of the
day, the operations manager must figure out
how much production capacity a particular
product line would potentially consume.
◦This would depend on two things:
◦ (1) the estimated demand for the product line; and
◦ (2) the number of machine and labor hours the product line would
consume in the factory or service shop.

33. The operations manager must also compute
for the contribution margin of each product
line.This can be derived by subtracting the unit
variable cost of the product from the unit price
of the product.This unit contribution margin
should then be multiplied by the total expected
sales volume of the product line to derive the
total profit contribution of the product line. Of
course, it would be natural for the operations
manager to give priority to the product lines
that yield the greatest profit contributions.

34. The fourth critical factor is the
number of products and market
segments the enterprise wants to
serve.Without discussing the
marketing ramifications of having too
many products, the production system
is bound to become more and more
complex as product lines are added.

35. QUALITY CONTROL
◦ Quality, Delivery, and Productivity
measurement, monitoring and evaluation
system at and every stage of the Enterprise
Delivery System.

36. Before the input is accepted by theTransformation
Process, it must conform strictly the inp to certain
QDP specifications at this input acceptance stage.
The materials and supplies selectit used must adhere
to strict technical standards that would produce the
desired output.The and del input must be delivered
to the factory or service shop at optimal schedules.
They should shop u1 also come at a reasonably low
cost, arrive in sufficient quantities, and be adequately
improvi prepared for easy convertibility into output
in order to ensure high productivity. cost, an

37. Every step in theTransformation Process must also be
measured, monitored, and evaluated according to the QDP
standards of the transformation stage. Every machine,
every worker, and every conversion process has an impact
on the customers' QDP expectations. Some of these
machines, workers, and processes are critical because they
are the major determinants of Quality, or of Delivery, or of
Productivity and Cost, which affects Price. Some affect all
three. More rigor and emphasis should be exerted on these
critical factors.

38. Finally, there are QDP specifications at the output
stage. If the QDP at the input and the throughput
stages were done properly, then the output should
pass the final QDP tests.The output should be very
acceptable to customers.They should be delivered
at the right times and under the best terms and
conditions.They should be produced at high levels of
productivity and at relatively low costs, enabling the
enterprise and its customers to settle at a mutually
acceptable price.

39. Operating Systems and Procedures
◦ Operating Systems and Procedures (OSP) are the enterprise standards for running
the entire operations of the factory or service shop.They are "engineered
methods."
◦ This means that these operating systems or methods have been subjected to
conceptual, analytical, critical, and creative thinking processes.They have been
experimented on and tested successfully in the actual work setting.They have
been judged optimally for the market being served.They have been proceduralized
and standardized for consistency and manualized for replicability (i.e., Operations
Manual).The optimal OSP would differ from enterprise to enterprise depending
on the environmental conditions and the market dynamics of supply and demand.

40. Operations Management,
Supervision, and Control
◦Post the outpi transforn
◦Quality ControlThe Quality, Delivery, and
◦Price expectations of customers must be
matched with the

41. Pre-operations management is
concerned with:
◦ (a) designing and developing the EDS;
◦ (b) choosing the operations site and the technology to be used;
◦ (c) acquiring the technology, machinery and equipment, and all the relevant
service contracts;
◦ (d) constructing, layouting, installing, and testing the operations facilities and
systems;
◦ (e) planning and programming the production of goods and services; and
◦ (f) standardizing and manualizing all the operating and administrative
processes and procedures.

42. Operations proper implements and runs the
factory or service shop that converts the
input into output or goods and services.
◦Operations managers are responsible for:
◦ (a) selecting, sourcing, and storing the appropriate raw materials and
supplies;
◦ (b) recruiting and deploying the right manpower;
◦ (c) running and maintaining the factory or service shop using all the
proper technical, supervisory, and control methods;
◦ (d) continuously improving operations and upgrading facilities;
◦ (e) quality assurance; and
◦ (f) productivity, cost, and profit management.

43. Good operations management,
supervision, and control should focus, on:
◦ (1) creating the right metrics of performance;
◦ (2) perfecting the enterprise operating methods;
and
◦(3) optimizing the mix of men, materials, and
machines.The metrics should measure efficiency,
economy, and effectiveness.

44. Efficiency measurements relate the output
produced to the input provided.The higher the
output to input ratio, the better the efficiency.
Efficiency also looks at the throughput or the
cycle time to convert input into output.The
shorter the time, the more efficient the
operating system is.Another efficiency
measure is the level of wastage or rejects.The
lower the wastage or reject level, the more
efficient the system is.

45. Economy measures the cost of the input,
the cost of transforming the input into
output, and the cost of the final output. It
also measures the investment cost in
relation to the benefits, revenues, returns,
or profits generated. Effectiveness measures
the results or the outcomes realized by the
enterprise in relation to the resources
utilized and time and effort exerted to
produce these outcomes.

46. Effectiveness evaluates the QDP
satisfaction levels of customers, the
marketing results (sales volume, market
share, market reach, market leadership),
and the financial outcomes (rates of return,
profits, stock prices). Methods included are
the operating systems, technologies,
practices, and procedures, and are used by
the enterprise in order to obtain the best
performance metrics.

47. Methods are ways of doing things.They
are engineered by the enterprise
through constant experimentation,
testing, application, evaluation, and
reinvention. Methods also include
control mechanisms that allow the
enterprise to monitor and correct the
operating system.

48. The proper mix of Men, Machines, and
Materials maximizes and optimizes the
productivity and performance of the operating
system.The operations manager must match
the proficiency of Men with the rated capacity
of the Machines and the suitability of the
Materials used.The production line must be
balanced and running at the right tempo. Each
of the three vital elements of Men, Machines,
and Materials must not, in any way, hinder the
full potential of the other elements.

49. Worker Motivation, Skilling, Deployment,
Compensation, and Control
◦ People run factories and service establishments. Even factories with the most automated machines require
good people to calibrate and maintain the machines.
◦ For service shops, people are everything. No customer will patronize a bad barber or a lousy chef. Hiring
the right people is the first step to good operations management. Once hired, the job of the operations
manager is to properly motivate the people.A good working environment and professionally-run
establishment are good starting points. Beyond that the operations manager must be able to inspire the
people to exert and do their best.Advising, coaching, and mentoring people are critical to this inspirational
process. Giving' people a sense of belonging in the workplace is another important ingredient.Allowing
people to participate in the planning and decision-making processes will give them a sen of authorship and
a degree of empowerment. If people see a future in the enterprise they feel that their work is valued, then
they can be readily motivated. Job enlargem and job enhancement programs will definitely help raise the
morale of people.They ha to be sufficiently challenged to aspire for higher levels of production and
productivity.