The Basics Of Operations

Management
Operations Management
The process of managing the resources that are
needed to produce an organizations goods and
services.
Operations managers focus on managing the five Ps
of the firms operations:
People, plants, parts, processes, and planning and control
systems.


Input
A resource required for the manufacture of a
product or service.
Conversion System
A production system that converts inputs (material
and human resources) into outputs (products or
services); also the production process or
technology.
Output
A direct outcome (actual product or service) or
indirect outcome (taxes, wages, salaries) of a
production system.

The Production System
The Basic Production System
Why to study OM
Cost and profit breakdown
at a typical manufacturing company
How to make more profit?
Cost cutting.
Which costs affect the revenue?
Management of operations is critical to create and
maintain competitive advantages
Operations management: The management of the efficient transformation of inputs
into outputs to effectively satisfy customers.
The active role of operations:
Inputs become Outputs after some Transformation (Process or Operation)
Food processing example:

Operations in services: Health care
Inputs Processes
Outputs
Operations are everywhere !
Operations Examples
Goods producing Farming, mining, construction
Storage/transportation Warehousing, trucking, mail, taxis, buses, hotels
Exchange Trade, retailing, wholesaling, renting, leasing, loans
Entertainment Radio, movies, TV, concerts, recording
Communication Newspapers, journals, radio, TV, telephones, satellite
Three basic functions
Operations/Production
Goods oriented (manufacturing and assembly)
Service oriented (health care, transportation and retailing)
Value-added (the essence of the operations functions)
Finance-Accounting
Budgets (plan financial requirements)
Provision of funds (the necessary funding of the operations)
Marketing
Selling, Promoting
Assessing customer wants and needs

OM at the core of Businesses
Finance Operations Marketing
Production of goods
Tangible products
Automobiles, Refrigerators, Aircrafts, Coats, Books, Sodas
Services
Repairs, Improvements, Transportation, Regulation
Regulatory bodies: Government, Judicial system, FAA, FDA
Entertainment services: Theaters, Sport activities
Exchange services: Wholesale/retail
Appraisal services: Valuation, House appraisal
Security services: Police force, Army
Financial services: Banks
Education: Universities, K-12 schools

Manufacturing vs. Service Operations
Differences with respect to
Customer contact
Uniformity of input
Labor content of jobs
Uniformity of output
Measurement of productivity
Production and delivery
Quality assurance
Amount of inventory

Manufacturing vs. Service Operations
Manufacturing vs. Services
Following decisions focus on specifics -
Tactical decision
Tactical decisions: focus on specific day-to-day issues like
resource needs, schedules, & quantities to produce
are frequent
Strategic decisions less frequent
Tactical and Strategic decisions must align

OM Decisions
Industrial revolution Late 1700s
Scientific management Early 1900s
Hawthorne Effect 1930s
Human relations movement 1930s-
Management science 1940s-
Computer age 1960s-
Environmental Issues 1970s-
JIT & TQM* 1980s-


Reengineering 1990-
Global competition 1980-
Flexibility 1990-
Time-Based Competition 1990-
Supply chain Management 1990-
Electronic Commerce 2000-
Outsourcing & flattening of world 2000-

Historical Development of OM
Customers demand better quality, greater speed, and lower
costs
Companies implementing lean system concepts a total
systems approach to efficient operations
Recognized need to better manage information using ERP and
CRM systems
Increased cross-functional decision making

Todays OM Environment
OM has the most diverse organizational function
Manages the transformation process
OM has many faces and names such as;
V. P. operations, Director of supply chains,
Manufacturing manager
Plant manger, Quality specialists, etc.
All business functions need information from OM in
order to perform their tasks

OM in Practice
Business Information Flow
Operations Strategy
It is a plan specifying how an organization will allocate resources in order
to support infrastructure and production.
Operational strategy looks at the long term issues on how to manage the
resources which produce products and services.
Operations strategy is the means by which operations implements the
firms corporate strategy and helps to build a customer-driven firm.

It links long-term and short-term operations decisions to corporate
strategy.

It is the core of managing processes and value chains.

Operations
Strategy Model
Consistent pattern of decisions
Internal
analysis
External
analysis
Mission
Distinctive
Competence
Objectives
(cost, quality, flexibility, delivery)
Policies
(process, quality,
capacity, and inventory)
Operations Strategy
Business strategy
Functional strategies in
marketing, finance,
engineering, human
resources, and
information systems
Results
Corporate strategy
Operations Strategy
Service-enhanced
Product or
Delivered Service
Policy
Satisfied Customer
Corporate Strategy
Focus: Survival
Business Strategy
Focus: Distinctive Competence
Cost Leadership
Product Differentiation
Focus (cost or differentiation)
Operations Strategy
Focus: Competitive Priorities
Cost Flexibility Quality Delivery
Implementation Capability Building
Resources
Process Product
Structure Infrastructure
Other Functional
Strategies
Marketing
Finance
Human Resources
Engineering
Information Systems
Developing an Operations Strategy
Operations Strategy is a plan for the design and management of
operations functions
Operation Strategy developed after the business strategy
Operations Strategy focuses on specific capabilities which give it a
competitive edge competitive priorities
Operations Strategy Designing the
Operations Function
Competitive Priorities- The Edge


Four Important Operations Questions: Will you compete on
Cost?
Quality?
Time?
Flexibility?

Competing on Cost?
Offering products/services at a low price relative to competitors.
Typically high volume products
Often limit product range & offer little customization
May invest in automation to reduce unit costs
Can use lower skill labor
Probably use product focused layouts
Low cost should not mean low quality

Competing on Quality?
Quality is sometimes subjective
Quality may be defined differently by customers versus employees
Quality dimensions:
High performance design:
Superior features, high durability, & excellent customer service
Product & service consistency:
Meets design specifications
Close tolerances
Error free delivery
Quality issues to address:
Product design quality products/services must meet requirements
Process quality will produce error-free products/services

Competing on Time?
Time is one of the most important competitive priorities
Being first-to-deliver often wins the race
Time related issues:
Fast delivery:
Focused on shorter time between order placement and delivery
On-time delivery:
Deliver product exactly when needed every time
Rapid development speed
Using concurrent processes to shorten product development time

Competing on Flexibility?
The companys environment often changes rapidly
Flexibility is needed to accommodate these changes
Product flexibility:
Easily switch production from one item to another
Easily customize product/service to meet specific requirements of a customer
Volume flexibility:
Ability to ramp production up and down to match market demands

Elements of Operational Strategies
1. Designing of Production System.
2. Facilities for production and services.
3. Product or Service design and development.
4. Technology development and process development.
5. Allocation of resources.
6. Facility and Capacity Planning.