MBL912L

OPERATIONS MANAGEMENT
STUDY SCHOOL 1

Ozias Ncube
Email:

ncubeo@unisa.ac.za
oncube@sbleds.ac.za

Tel:

+27 11 652 0331

PRESENTATION LAYOUT
Lesson 1: Introduction to
operations and
productivity
Chapters 1-2

Lesson 3: Quality and

Standardization
Chapter 6

Lesson 4: Forecasting
Chapters 4

Lesson 5: Project
Management
Chapters 3

Lesson 2: Development and

designing for effective
operations
Chapters 5,7,8,9,10
Design
Goods
Services

Strategy
Process
Location
layout

INTRODUCTION TO OPERATIONS IN
A GLOBAL ECONOMY

Lesson 1
Chapters 1, 2

What Is Operations Management?

Offer product of good value at low cost that is convenient
for the customer to buy and at the same time keeping a
regular contact with the customer and noting their needs, it is
likely that both customer and organisation will be satisfied.

Operations management is the activity of

managing the resources which are devoted to the
production and delivery of products and services.

OPERATIONS MANAGEMENT
Definition
Doing things that your customers want, at an
acceptable cost to the organisation

Operations mix

Product
Cost
Convenience of purchase
Customer service

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Some inputs are transformed resources

Some inputs are transforming resources
Transformed
resources
Materials
Information
Customers
Input
resources

Transformation process

Output
products
and services

Transforming
resources
Facilities
Staff

Outputs are products and services that add value

for customers

Customers

Operations system
System entity composed of interdependent parts
which contribute to the characteristics of the
whole
Operations function consists of those activities
that produce the goods and services
Operating system composed of three
subsystems:
Conversion or transformation subsystem
Support subsystem
Planning and control subsystem
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Operating system
internal environment
information

External environment
information

Planning, control
subsystem

Demand of
output
Cost of inputs
Technological
trends

Objectives
Strategies
Policies

System status
information

Plans, decisions, corrective actions

Govt regulations

inputs
Human effort
Materials
Capital

Conversion or
Transformation

subsystem

Products, services
Tangibility
Storability

Information
energy

outputs

Support
subsystem

Transportability
Simultaneity
Customer contact
quality

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operating structures
Environment
(domain)
Time, Quality, Quantity

Control
Raw materials

Policies
Rules
Plans
targets

management

Labour
Information
money

Project
Batch
continuous

inputs

Services
Products
Sales
distribution

outputs

transformation
Equipment, facilities, capital

support

Customer
care
market

The Value Chain and Its Support Functions

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Operations is not the same as operational

Operations are the resources that create products and services

Operational is the opposite of strategic, meaning day-to-day

and detailed
So, one can examine both the operational and the strategic
aspects of operations

What Operations Managers Do

Basic Management Functions

Planning
Organizing
Staffing
Leading
Controlling

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The Critical Decisions

1.

2.

3.

4.

5.

Design of goods and services

What good or service should we offer?
How should we design these products and
services?
Managing quality
How do we define quality?
Who is responsible for quality?
Process and capacity design
What process and what capacity will
these products require?
What equipment and technology is
necessary for these processes?
Location strategy
Where should we put the facility?
On what criteria should we base the
location decision?
Layout strategy
How should we arrange the facility?
How large must the facility be to meet our
plan?

6.

7.

8.

9.

10.

Human resources and job design

How do we provide a reasonable work
environment?
How much can we expect our employees to
produce?
Supply-chain management
Should we make or buy this component?
Who should be our suppliers and how can we
integrate them into our strategy?
Inventory, material requirements planning,
and JIT
How much inventory of each item should we
have?
When do we re-order?
Intermediate and shortterm scheduling
Are we better off keeping people on the
payroll during slowdowns?
Which jobs do we perform next?
Maintenance
How do we build reliability into our
processes?
Who is responsible for maintenance?

The Operations function can provide a competitive advantage through its

performance at the five competitive objectives
Quality

Speed

Dependability

Flexibility

Cost

Being RIGHT
Being FAST

Being ON TIME

Being ABLE TO CHANGE

Being PRODUCTIVE

What do the terms quality, speed, dependability, flexibility and

cost mean in the context of operations?
Which enables you to do things cheaply (cost advantage)?
Which enables you to change what you do (flexibility advantage)?
Which enables you to do things quickly (speed advantage)?
Which enables you to do things on time (dependability advantage)?
Which enables you to do things right (quality advantage)?

Significant Events in OM

Figure 1.3
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New Challenges in OM
From

To

Local or national focus

Global focus

Batch shipments

Just-in-time

Low bid purchasing

Supply-chain partnering

Lengthy product development

Rapid product development,

alliances

Standard products
Job specialization

2011 Pearson Education, Inc. publishing as Prentice Hall

Mass customization
Empowered employees,
teams

Characteristics
Goods

Service

Tangible product

Intangible product

Consistent product definition

Produced and consumed at

same time

Production usually separate

from consumption

Often unique

Can be inventoried

High customer interaction

Low customer interaction

Inconsistent product definition

Often knowledge-based
Frequently dispersed

Concept of product

Service

Product

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Good

Products: Bundles of Goods and Services

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New Trends in OM

Ethics
Global focus
Rapid product development
Environmentally sensitive production
Mass customization
Empowered employees
Supply-chain partnering
Just-in-time performance

2011 Pearson Education, Inc. publishing as Prentice Hall

Ethics and Social Responsibility

Challenges facing operations managers:
Developing and producing safe, quality products
Maintaining a clean environment

Providing a safe workplace

Honouring stakeholder commitments

2011 Pearson Education, Inc. publishing as Prentice Hall

Reasons to Globalize
Reasons to Globalize
Tangible
Reasons

Intangible
Reasons

1.
2.
3.
4.
5.
6.

Reduce costs (labor, taxes, tariffs, etc.)

Improve supply chain
Provide better goods and services
Understand markets
Learn to improve operations
Attract and retain global talent

2011 Pearson Education, Inc. publishing as Prentice Hall

Cultural and Ethical Issues

Cultures can be quite different
Attitudes can be quite different towards
Punctuality

Thievery

Lunch breaks

Bribery

Environment

Child labor

Intellectual
property
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Mission
Mission - where are you
going?
Organizations purpose
for being
Answers What do we
provide society?
Provides boundaries
and focus
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Factors Affecting Mission

Philosophy and
Values
Profitability and
Growth

Environment
Mission
Customers

Public Image

Benefit to
Society

2011 Pearson Education, Inc. publishing as Prentice Hall

Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers expectations.

Sample Operations Management Mission

To produce products consistent with the companys mission
as the worldwide low-cost manufacturer.

2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 2.3

Strategic Process
Organizations
Mission

Functional Area
Missions

Marketing

Operations

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Finance/
Accounting

Strategy
Action plan to achieve
mission
Functional areas have
strategies
Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
2011 Pearson Education, Inc. publishing as Prentice Hall

Operations strategy
1.
2.
3.

How?
Where?
When?
Pattern of decisions and actions

Set the role, objectives, activities

Contribute to and support

Business strategy (macro level)
Operations strategy of the business (micro level)

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Strategies for Competitive Advantage

Differentiation better, or at least different

Uniqueness can go beyond both the physical characteristics and service

attributes to encompass everything that impacts customers perception of value

Cost leadership cheaper

Uniqueness can go beyond both the physical characteristics and service

attributes to encompass everything that impacts customers perception of value

Response rapid response

Flexibility is matching market changes in design innovation and volumes

Reliability is meeting schedules
Timeliness is quickness in design, production, and delivery

2011 Pearson Education, Inc. publishing as Prentice Hall

OMs Contribution to Strategy

10 Operations
Decisions
Product
Quality
Process
Location
Layout

Approach

Example

Competitive
Advantage

DIFFERENTIATION
Innovative design
Broad product line
After-sales service
Experience
COST LEADERSHIP
Low overhead
Effective capacity
use
Inventory
management

Differentiation
(better)

Human
resource
Supply chain
Inventory

RESPONSE
Flexibility
Reliability
Quickness

Response
(faster)
Cost
leadership
(cheaper)

Scheduling
Maintenance
2011 Pearson Education, Inc. publishing as Prentice Hall

Figure 2.4

Top-down Approach to OM Strategy

Operations Strategy Decisions
Strategic (long-range)
Needs of customers
(capacity planning)

Tactical (medium-range)
Efficient scheduling of
resources

Operational planning
and control (short-range)
Immediate tasks and
activities

The four perspectives on operations strategy

Top-down
perspective
What the business
wants operations to
do

Operations
resources
perspective
What operations
resources can do

Operations
strategy

What day-to-day
experience suggests
operations should do

Bottom-up
perspective

Market
requirement
perspective
What the market
position requires
operations to do

OM Strategy/Issues

Product Life Cycle

Introduction

Growth

Product design
and development
critical

Forecasting critical

Standardization

Frequent product
and process design
changes

Product and
process reliability
Competitive
product
improvements and
options

Fewer product
changes, more
minor changes

Short production
runs
High production
costs
Limited models
Attention to
quality

Increase capacity
Shift toward
product focus

Enhance
distribution

Maturity

Optimum capacity
Increasing stability
of process
Long production
runs
Product
improvement and
cost cutting

Decline
Little product
differentiation
Cost
minimization

Overcapacity
in the industry
Prune line to
eliminate items
not returning
good margin
Reduce
capacity

Figure 2.5
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SWOT Analysis
Mission
Internal

External

Strengths

Opportunities

Internal

Analysis

Weaknesses

External
Threats

Strategy
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Four International Operations

Strategies
High

Figure 2.9
Global Strategy

Cost Reduction Considerations

Standardized product
Economies of scale
Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator

Transnational Strategy
Move material, people, ideas
across national boundaries
Economies of scale
Cross-cultural learning
Examples
Coca-Cola
Nestl

Import/export or
license existing
product

Multidomestic Strategy
Use existing
domestic model globally
Franchise, joint ventures,
subsidiaries

Examples
U.S. Steel
Harley Davidson

Examples
Heinz
McDonalds

International Strategy

The Body Shop

Hard Rock Cafe

Low
Low

High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)

2011 Pearson Education, Inc. publishing as Prentice Hall