Derek Poon

ELM Graduate School

 Introduction to Operations Management
What Is Operations Management?

Exercise (10 min. group work)

Divide into groups. Each group to:
Assume you are Operations
Directors/Managers of Corporations.

❑ Define what is “Operations”

❑ Define what is “Operations Management”

Note:You may refer to your text book or search the internet

 Introduction to Operations Management
Operations

❑ Core Value Adding Work of any organization

❑ Involves some kind of transformation

❑ That customers are willing to pay for

 Introduction to Operations Management
Operations as Transformation

INPUT
•Material
•Machines
•Facilities OUTPUT
TRANSFORMATION
•Suppliers PROCESS •Goods
•Labor •Services
•Knowledge/
Management
•Capital

Feedback & Requirements

 Introduction to Operations Management
Types of Transformation Process
❑ Physical: as in manufacturing operations
❑ Locational: as in transportation or warehouse
operations
❑ Exchange: as in retail operations
❑ Physiological: as in health care
❑ Psychological: as in entertainment
❑ Informational: as in communication
 Introduction to Operations Management

Characteristics of Goods

❑ Tangible product
❑ Consistent product
definition
❑ Production usually
separate from
consumption
❑ Can be inventoried
❑ Low customer
interaction
 Introduction to Operations Management
Characteristics of Service
❑ Intangible product
❑ Produced and
consumed at same time
❑ Often unique
❑ High customer
interaction
❑ Inconsistent product
definition
❑ Often knowledge-based
❑ Frequently dispersed
 Introduction to Operations Management
Gradation between Goods and
Services
Automobile assembly, steel making
Computer
Home remodeling, retail sales
Fast-food Meal
Restaurant Meal
Auto Repair
Hospital Care
Advertising Agency
Investment Management
Consulting Service
Surgery, Teaching,Counseling

100 75 50 25 0 25 50 75 100
Percent of Product that is a Good Percent of Product that is a Service
 Introduction to Operations Management
What Is Operations Management?
Production is the creation of goods and
services
Operations management (OM) is the
set of activities that create value in the
form of goods and services by
transforming inputs into outputs
(Slack, 2001)

Operations management is the activity

of managing the resources which are
devoted to the production and delivery
of products and services
(Slack, 2014)
 Introduction to Operations Management
What Is Operations Management?
Operations management (OM) is the business function
responsible for managing the process of creation of goods and
services.
It involves planning, organizing, coordinating, and controlling
all the resources needed to produce a company’s goods and
services.
Because operations management is a management function, it
involves managing people, equipment, technology, information,
and all the other resources needed in the production of goods
and services.
Operations management is the central core function of every
company. This is true regardless of the size of the company, the
industry it is in, whether it is manufacturing or service, or is for-
profit or not-for-profit.

CSCMP & Sander, N.R., 2013, Definitive Guide to Manufacturing and

Service Operations, The: Master the Strategies and Tactics for
Planning, Organizing, and Managing How Products and Services Are
Produced, Pearsons
 Introduction to Operations Management
What Operations Managers Do

Basic Management Functions

▶Planning
▶Organizing
▶Staffing
▶Leading
▶Controlling
 Introduction to Operations Management

Operations-The ‘Central’ Department

❑ Operations
❑ Marketing
❑ Finance &
Accounting
❑ Human
Resources
❑ Suppliers
 Introduction to Operations Management
The Critical Decision Areas
Group Work (15 minutes)
1. Divide into groups and appoint a presenter
2. Choose an organization e.g. bank, airline, manufacturer, etc
3. You are the Operations Director of the new startup.
Note: The other directors are the Marketing and Sales
Director, the Finance Director, HR Director and the
Managing Director etc.

❑ What are the key matters you have to consider in

order to put in place a viable operation?
❑ Categorize them. Find as many categories as
possible.
❑ For each category/area list 2 key questions.
 Introduction to Operations Management
The Critical Decision Areas

1. Design of goods and services

1. What goods or services should we offer?
2. What is the specification, cost and timing of
product?
2. Managing quality
1. What are the customers’ quality
expectations?
2. How do we ensure consistency and
repeatability?
3. How do we continuously improve on our
product and services?
 Introduction to Operations Management
The Critical Decision Areas

3. Process & Capacity design

❑ How is a good/service produced?
❑ What equipment and technology is
necessary for these processes?
❑ What is the investment and the capacity of
the operations?
4. Location strategy
❑ Where should we locate our facility?
❑ How do we optimize our operations in view
of the location of our facilities?
 Introduction to Operations Management
The Critical Decision Areas

5. Layout Strategy
❑ How do we layout all the resources at each
facility?
❑ How do we ensure optimised flow
throughout the facility?
6. Human resources and job design
❑ What is essential in a reasonable work
environment?
❑ How much can we expect our employees to
produce? Job Design
❑ Recruitment, Talent Management,
Compensation, Industrial Relations?
 Introduction to Operations Management
The Critical Decision Areas

7. Supply-chain management
❑ What should we make and what should we
buy?
❑ Who should be our suppliers and how can
we integrate them into our strategy?
8. Inventory, material requirements planning,
and JIT
❑ What inventory should we have?
❑ How much inventory of each item should
we have?
❑ When do we re-order? How much to
reorder?
 Introduction to Operations Management
The Critical Decision Areas

9. Intermediate and short–term scheduling

❑ How do we plan our production?
❑ From forecasts, from orders
❑ Is it a pull or push approach?
❑ What shall we produce first? Next?

10. Maintenance
❑ How do we build reliability into our facilities?
❑ What should be our approach to maintenance?
❑ Should we apply TPM, Life Cycle Costing?
 Introduction to Operations Management
The Critical Decisions
Product
Design
Maintenance
Quality
Mgmt

Process &
Scheduling Capacity
Design

Operations
Mgmt

Inventory Location of
Mgmt facilities

Layout of
Supply Chain
facilities
Mgmt
HR Mgmt
Job Design
 Introduction to Operations Management
Application Example - University

❑What is the transformation process?

❑What is the product/service?

❑Key Questions for the Operations Director

 Introduction to Operations Management
Application Example – eCommerce Portal

❑What is the transformation process?

❑What is the product/service?

❑Key Questions for the Operations Director

 Introduction to Operations Management
Application Example – fashion house

❑What is the transformation process?

❑What is the product/service?

❑Key Questions for the Operations Director

 Introduction to Operations Management
Evolution of Operations and Supply Chain
Management
❑ Craft production
❑process of handcrafting products or services for
individual customers

❑ Division of labor
❑dividing a job into a series of small tasks each performed
by a different worker

❑ Interchangeable parts
❑standardization of parts that enabled mass production

❑Scientific management
❑systematic analysis of work methods
 Introduction to Operations Management
Evolution of Operations and Supply Chain
Management
❑ Mass production
❑high-volume production of a standardized product for a
mass market

❑ Quality revolution
❑an emphasis on quality and the strategic role of operations

❑ Lean production
❑adaptation of mass production that prizes quality and
flexibility
 Introduction to Operations Management
Evolution of Operations and Supply Chain
Management
Supply chain management
❑ management of the flow of information, products, and
services across a network of customers, enterprises, and
supply chain partners
 Introduction to Operations Management
Historical Events in Operations Management

Era Events/Concepts Dates Originator

Steam engine 1769 James Watt
Industrial
Division of labor 1776 Adam Smith
Revolution
Interchangeable parts 1790 Eli Whitney
Principles of scientific
1911 Frederick W. Taylor
management
Frank and Lillian
Scientific Time and motion studies 1911 Gilbreth
Management Activity scheduling chart 1912 Henry Gantt
Moving assembly line 1913 Henry Ford
 Introduction to Operations Management
Historical Events in Operations Management

Era Events/Concepts Dates Originator

Hawthorne studies 1930 Elton Mayo
Human 1940s Abraham Maslow
Relations Motivation theories 1950s Frederick Herzberg
1960s Douglas McGregor
Linear programming 1947 George Dantzig
Digital computer 1951 Remington Rand
Simulation, waiting
Operations Operations research
line theory, decision 1950s
Research groups
theory, PERT/CPM
1960s, Joseph Orlicky, IBM
MRP, EDI, EFT, CIM
1970s and others
 Introduction to Operations Management
Historical Events in Operations Management

Era Events/Concepts Dates Originator

JIT (just-in-time) 1970s Taiichi Ohno (Toyota)
TQM (total quality W. Edwards Deming,
1980s
management) Joseph Juran
Quality Strategy and Wickham Skinner,
1980s
Revolution operations Robert Hayes
Michael Hammer,
Reengineering 1990s
James Champy
Six Sigma 1990s GE, Motorola
 Introduction to Operations Management
Historical Events in Operations Management

Era Events/Concepts Dates Originator

Internet Internet, WWW, ERP, 1990s ARPANET, Tim
Revolution supply chain management Berners-Lee SAP,
i2 Technologies,
ORACLE, Dell
E-commerce 2000s Amazon, Yahoo,
eBay, Google, and
others
Globalization WTO, European Union, 1990s China, India,
Global supply chains, 2000s Emerging
Outsourcing, Service economies
Science
 Introduction to Operations Management
Historical Events in Operations Management
Era Events/Concepts Dates Originator
Sustainability Global warming Today Numerous
Carbon footprint companies,
Green products statesmen,
governments,
Corporate social
responsibility (CSR) United Nations,
World Economic
UN Global Compact Forum

Industry 4.0 Data Analytics Current Various

Internet of Things (IOT)
AR/VR
Artificial Intelligence (AI)
?
 Introduction to Operations Management
Globalization

❑ Why “go global”?

❑favorable cost
❑access to international markets
❑response to changes in demand
❑reliable sources of supply
❑latest trends and technologies
❑ Increased globalization
❑results from the Internet and falling trade barriers
 Introduction to Operations Management

Measures of Productivity/
Operations Performance

1-
32
 Introduction to Operations Management

Measurement Problems

1. Quality may change while the

quantity of inputs and outputs remains
constant
2. External elements may cause an
increase or decrease in productivity
3. Precise units of measure may be
lacking
 Introduction to Operations Management
Strategy and Operation
Mission
and Vision

Corporate
Strategy

Marketing Operations Financial

Strategy Strategy Strategy
 Introduction to Operations Management
Strategies for Competitive Advantage

❑ Differentiation – better, or at least

different

❑ Cost leadership – cheaper

❑ Response – more responsive

 Introduction to Operations Management

OM’s Contribution to Strategy

10 Operations Competitive
Decisions Strategy Example Advantage

Product DIFFERENTIATION:
Innovative design Safeskin’s innovative gloves
Broad product line Fidelity Security’s mutual funds
Quality After-sales service Caterpillar’s heavy equipment
service
Process Experience Hard Rock Café’s dining
experience

Location COST LEADERSHIP:

Low overhead Franz-Colruyt’s warehouse-type Differentiation
stores
Layout (better)
Effective capacity Southwest Airline’s
use aircraft utilization
Human
resource Inventory Walmart’s sophisticated Response
management distribution system (faster)
Supply chain Cost
RESPONSE: leadership
Inventory Flexibility Hewlett-Packard’s response to (cheaper)
volatile world market
Reliability FedEx’s “absolutely, positively,
Scheduling on time”
Quickness Pizza Hut’s 5-minute guarantee
at lunchtime
Maintenance
 Introduction to Operations Management
Overview of course
Add Value
Value Chain $ +$$ $$$
Input Output
• Material • Goods
Supplier • Machines/Facilties Transformation • Service Customer
• Labour Process
• Suppliers
• Knowledge/Mgmt
Supply Chain • Capital
Feedback

Operations

Products/ HR/ Schedule

Process/ Supply Mainte-
Services Location Layout Job Inventory / Quality
Capacity Chain nance
Design Design Planning

Design Manage and Control Improve

Quality System
Operations Strategy
Data/Tools
Decision Analysis Forecasting Optimisation/ Statistical
Tranportation Model Process Control

Operations Management
 Introduction to Operations Management
Systems View of Operations Management

From Meredith and Shafer (note the different transformation processes)