Central Luzon State University

Science City of Muñoz 3120

Nueva Ecija, Philippines

Instructional Module for the Course

MNGT 3108: Operations Management
Module 1

Overview of Operations
Management

In this module, we will focus on providing you an overview of

Operations Management, its significance and scope. You are
expected to develop a clear understanding of the topic upon
completing this module

Objectives:
Upon completion of this module, you are expected to:
1. Explain the nature and concept of operations
2. Determine the different functions used in creating goods
and services
3. Recognize the significance of Operations Management
4. Discuss the scope of operations management in an
organizations

A. Operations Management

Operations management (OM) is the set of activities that creates

value in the form of goods and services by transforming inputs into
outputs. Activities creating goods and services take place in all
organizations. The ideal situation for a business organization is to
achieve a match of supply and demand. (Heizer & Render, 2014, p.4)

a. Goods are physical items produced by business organizations.

b. Services are activities that provide some combinations of time,
location, form, and psychological value.
 Moreover, Stevenson (2012) states that operations and
supply chains are intrinsically linked and no business organizations
could exist without both. A SUPPLY CHAIN is the sequence of
organizations-their facilities, functions, and activities- that are
involved in producing and delivering a product of services. The
sequence begins with basic suppliers of raw materials and extends
all the way to the final customers.

FARMER PRODUCER BOTTLER DISTRIBUTOR RETAILER

The creations of goods and services involves transforming or

converting inputs into outputs. Various inputs such as capital, labor
and information are used to create goods and services using one or
more transformation process. (e.g., storing, transporting and
repairing). To ensure that the desired outputs are obtained, an
organization takes measurements at various points in the
transformation process and then compares them with previously
established standards to determine whether corrective actions is
needed.

B. Organizing the Produce Goods or Services

According to Heizer & Render (20140) To create goods and services,

all organizations perform three functions and these functions are the
necessary ingredients not only for productions but also for organization’s
survival.
They are:
1. MARKETING- which generates the demands, or at least
takes the order for a product or services.
2. PRODUCTIONS/OPERATIONS- which creates,
produces and delivers the product.
3. FINANCE AND ACCOUNTING- which tracks how well
the organization is doing, pay the bills and collects the
money.

ORGANIZATIONS

FINANCE OPERATIONS MARKETING

C. Significance of Managing Operations
Heizer & Render (2014) provides four (4) reason to study Operations
Management:

1. OM is one of the three major functions of any operations, and it

is integrally related to all the other business functions.
2. We study OM because we want to know how goods and services
are produced.
3. We study OM to understand what operations manager do;
4. We study OM because it is such a costly part of an organization.

D. Scope and Operations

The scope and operations management ranges across the

organization. The operations functions includes many interrelated activities
such as the following;

1. DESIGN OF GOODS AND SERVICES

- Defines much of what is required of operations in each of the
other OM decisions. For instance, product design usually
determine the lower limits of cost and the upper limits of
quality, as well as the major implications for sustainability and
the human resources required.

2. MANAGING QUALITY
- Determine the customer’s quality expectations and
established policies and procedures to identify and achieve
that quality;

3. PROCESS AND CAPACITY STRATEGY

- Determines how a good or services is produced (i.e., the
process of production) and commits management to specific
technology, quality, human resources, and capital
investments that determine much of the firm’s basic cost
structure.

4. LOCATION STRATEGY
- Requires judgments regarding nearness to customers,
suppliers, and talent while considering cost, infrastructure,
logistics and government.

5. LAYOUT STRATEGY
 - Requires integrating capacity needs, personal levels,
technology, and inventory requirements to determine the
efficient flow of materials, people and information.

6. HUMAN RESOURCES
- Determine how to recruit, motivate and retain personnel with
the required talent and skills. People are an integral and
expensive part of the total system design.

7. SUPPLY CHAIN MANAGEMENT

- Decides how to integrate the supply chain into the firms
strategy, including decisions that determine what is to be
purchased from whom and under what conditions.

8. INVENTORY MANAGEMENT
- Considers inventory ordering and holding decisions and how
to optimize them as customers satisfactions, supplier
capability, and production schedules are considered;

9. SCHEDULING
- Determine and implements intermediate- and short-term and
schedules that effectively and efficiently utilize both personnel
and facilities while meeting customer’s demands.

10. MAINTENANCE
- Requires decisions that consider facility capacity, production
demands, and personnel necessary to maintain a reliable and
stable process (Heizer & Render, 2014)