INTRODUCTION TO

OPERATION MANAGEMENT
CHAPTER 1
MGT 345
INTRODUCTION
⚫ DEFINITION OF PRODUCTION
⚫ The creation of good and service

⚫ DEFINITION OF OPERATION MANAGEMENT

Operation Management can be defined as activities
related to the creation of goods or services by process of
transforming or converting inputs into outputs.
 OBJECTIVE OF OPERATION
MANAGEMENT
⚫ To produce product or service that meets the specified
standard at minimum cost
⚫ To utilize labor, equipment and material (and other
resources) efficiently.
⚫ To enhance productivity through efficiency of production
process
⚫ To achieve customer satisfaction by providing quality
goods and service at competitive cost and affordable
prices within reasonable time schedule
⚫ To produce goods to meet expected demand and meeting
the required delivery date.
CHARACTERISTIC OF SERVICE AND
MANUFACTURED PRODUCTS
⚫ CHARACTERISTIC OF SERVICE
⚫ Intangible Outputs
Services can be defined as an act/performance or an
effort or a deed. Basically services are intangible.
⚫ Outputs cannot be inventoried
It cannot be stored or inventoried.
⚫ Extensive Customer Contact
Most high contact services require the customer to
participate in the creation and service delivery process
⚫ Short Lead Times
Service may need to be delivered immediately when the
customers wants to service.
⚫ Labor-Intensive
In high contact services, personnel plays an important
role in the service process because service delivery
requires customer to interact face
CHARACTERISTIC OF
MANUFACTURED GOODS
⚫ Tangible Products
Goods are tangible: Can be seen and touched and must
delivered to customer.
⚫ Products can be inventoried
Products can be produced in advanced and held as inventories
until the customers need them.
⚫ Little Contact with Customer
In manufacturing operation customers are not involved in the
production process. Goods are produced in advance, sale and
consumption comes later.
CHARACTERISTIC OF
MANUFACTURED GOODS
CONCEPT OF AN OPERATION
SYSTEM
⚫ A system is an organized complex of interdependent
components or subsystems designed to achieve some
objectives. It can also be defined as a collection of objects
united by some form of regular interaction and
interdependence.
⚫ The operations manager takes these interacting variables
design a system to achieve a particular objective or
mission.
⚫ A system also contain smaller systems which have their
own goals and objectives .These systems are known as
subsystem.
⚫ These systems are known as subsystems.
⚫ Subsystem is a system that provides inputs to another
system.
 OPERATIONS SYSTEM MODEL
TRANSFORMATION OUTPUTS
INPUTS PROCESS

Human
Resource Fabrication and
Information assembly Goods
Raw Materials Room Reservation Services
Surgical Procedures

FEEDBACK
Production System
⚫ Consist of four basic components :
1)Input
⚫ Whatever entities that go into a transformation process to
produce output.

2 ) Conversion Process
⚫ The process of changing inputs of labor, capital, land and
management into outputs of goods and services.
3)Output
⚫ The accomplishment of production systems in the form of
goods and services.

4) Control/Feedback Loop
The process of making sure that the desired output
are obtained by taking actions at various points in the
transformation process and then comparing to previously
established standards to determine if corrective action is
needed.

Random fluctuation – unplanned or uncontrollable

environment influences (such as strikes, flood etc)
 Inputs Transformation Outputs

LAND
PROCESSES
HUMAN
-Cutting, Drilling
-Physical
-Storing
-Intellectual GOODS
-Transporting
-Houses
-Teaching
RAW MATERIAL -Automobiles
-Farming
-Energy -Clothing
-Extracting
-Water -Computing
-Mixing
-Chemicals -Machines
-Packing
-Metals -Televisions
-Canning
-Woods -Food
-Consulting
EQUIPMENT
-Advising
FACILITIES
-Copying, Faxing
INFORMATION
TIME
RELATIONSHIP OF OPERATIONS SYSTEM
AND OTHER FUNCTIONS IN THE ORGANIZATION
⚫ Environment influences operation system either directly or
indirectly.
⚫ Internal environment consists of three primary functions:
Finance
Marketing
Operation/Production
⚫ FINANCE
⚫ Finance function comprises of activities related to secure
resources such as raising fund. Allocating these resources
throughout the firm.
⚫ MARKETING
⚫ Marketing is responsible for assessing customer wants and
needs and communicating these needs to the operations
people.
⚫ External environment exists outside the organization for
example:
-government laws
-regulation
-supplier
-competitors
-economic
-political situations
Assumption of system and
subsystem concept:
⚫ Each system has their own goal and objectives.

⚫ Each system or subsystem has boundaries the limit the

nature and types of activities it performs.

⚫ Each system or subsystem is made up of subsystems that

are interrelated in many complex ways.

⚫ Each system or subsystem engages in efforts and activities

to ensure its goal are satisfactorily achieved.