Operations Management Value added - difference between the cost of inputs and the
Module 1 value or price of outputs
Definition of Terms:
Operations Management - management of processes that
transform an organization's inputs into goods and services
that add value for the customer
- GOAL is to maximize efficiency by producing products
at a lower cost while being able to fulfill and satisfy
customer needs
- deals with creation and management of goods and
services
Operations - function in an organization that is responsible for
creating goods and/or services
Goods - tangible items produced by the organization
- production may occur in the factory or elsewhere, like
farms, restaurants, etc.
Services - activities that they render to the customers
- deals with performance of an act
- involve elements of time, location, form or
psychological value that organizations perform
- professional services of doctors, lawyers, professors,
repair services etc.
- has variability and quality assurance is more difficult
Logistics - involves in shipping of goods to warehouses, retail
outlets, or final customers
Standardized output - high degree of uniformity in goods or
services
Customized output - designed for a specific case or individual
System - a set of interrelated parts that must work together
Craft production - system in which highly skilled workers use
simple, flexible tools to produce small quantities of
customized goods
Mass production - system in which lower-skilled workers use
specialized machinery to produce high volumes of
standardized goods
Interchangeable parts - parts of a product made to such
precision that they do not have to be custom fitted.
Frank Gilbreth - industrial engineer often referred to as father
of motion study . Developed motion economy
Henry Gantt - Recognized the value of non monetary rewards
to motivate workers. developed system for scheduling
Gantt Chart - a system for scheduling developed by Henry
Gantt
Harrington Emerson - encouraged the use of organizational
efficiency
Henry Ford - Great industrialist and employed scientific
management techniques in his factories
Manufacturing - produces a tangible output, in the form of a
good
 - where inputs and outputs are standard or has more
control of both their inputs and desired output
- PATENTS are more applicable here
Supply Chain - sequence of how the organization produces
and delivers products and services
- involves the facilities, functions and all activities related
to sourcing the raw materials until the products and
services reach the final customers
- necessary in determining how one problem in one link
could disrupt or affect the flow of the next one in the
chain
Strategy - An organization’s action plan to achieve the mission
- steps to achieve mission
Mission Statement - statement defining the
purpose/destination of an organization's existence
- discusses the present business of the organization and
serves as a basis for its goals and strategies
DLSL Mission-Vision Statement
Inspired by our faith in God, by our Catholic traditions, and
by the charism of St. John Baptist de La Salle, educational
innovator par excellence, we, together and by association, are
committed to giving quality human and Christian education to
all, building a society founded on equity and justice and on
sustainable and inclusive development
Core Competencies - attributes that give an organization a
competitive edge
Economies of Scale - phenomenon where the average costs
per unit of output decrease with the increase in the scale or
magnitude of the output being produced by a firm
- able to increase production while lowering operating
costs
❖ Scope & Nature of Operations Management
production of goods and delivery of services differ in
terms of:
➢ customer contact - service (H), goods (L)
➢ input and output variability - service (H), goods
(L)
 ➢ quality assurance - service (L), goods (H)
➢ productivity - service (L), goods (H)
➢ inventory - service (L), goods (H)
❖ Importance of Operations Management
- decisions in organizations are cross-functional thus
understanding operations is necessary even if you
work in other functions
- In the model, inputs (capital, labor, information, etc.)
are transformed through different processes in order
to create outputs (goods or services) that provide value
to customers (value-added). Measurements (feedback)
are likewise taken at various points of the process and
are compared to standards to determine necessary
corrective action (control).

❖ Responsibilities and Skills of an Operations Manager

❖ Three (3) major functional areas of operations and how
they relate
-
1. Operations - producing goods and/or delivering the
services; CORE of organization
❖ Historical Development of Operations Management
2. Finance - allocating the resources of the
(Stevenson, 2018)
organization and securing their financial resources
1. Industrial Revolution (1770s)
3. Marketing - assessing the needs and wants of the
- PRE-INDUSTRIAL: craftsmen and their
consumers and in selling and promoting the
apprentices produced goods; no machines yet
organization’s goods and services
so rely on simple tools and skills, production
was slow and costly
(Other functions such as Human Resources, Information
- INDUSTRIAL : labor being slowly replaced by
Systems, Research & Development, Sourcing & Logistics,
machines; invention of steam engine; source of
Accounting, etc.)
power for factories; wooden to iron machines;
standard gauging system (non-customizing)
❖ Stage of Transformation Process (Input/Output
- lacks progressive management theory and
Transformation Model)
practice
2. Scientific Management
- Frederick Winslow Taylor: father of scientific
management; improved work methods by
identifying how work is done and the best way
of doing the job
: selection and training
of workers
- Frank Gilbreth: father of motion study (dividing
work into small tasks)
- Henry Gantt: Gantt charts (systematical
scheduling of work)
- Harrington Emerson: organizational efficiency
- Henry Ford: mass production (producing LARGE
volumes of standardized goods by
LOW-SKILLED workers thru specialized
equipment
: scientific management techniques
in producing cars
: division of labor
3. Human Relations Movement
- considered the importance of human in the
process
- Frank and Lilian Gilbreth: analyzing fatigue
experience
- Elton Mayo: motivation among workers to
improve productivity (Hawthorne studies)
- Douglas McGregor: Theory X and Y
: X- workers need to be
controlled bc they don’t like their work; Y-
workers are committed
4. Decision Models and Management Science
- Quantitative tools: use of mathematical models
and statistics
- World War II: use of statistical sampling for
military tactics and production output
5. The Influence of Japanese Manufacturers
- W. Edwards Deming and Joseph Juran:
American citizens worked on Japan for National
Consensus
: taught Statistical Quality Control
which spurred quality revolution
❖ Trends and Challenges Facing Operations
Management
1. Economic Conditions
- e.g. covid crisis affecting tourism industry,
airline operations, hotel & restaurant
- results in strategic planning for the survival of
their business and their future as well
2. Intense Competition
- due to this, operations managers aim to
provide the best products and services in order
 to satisfy their customers and have a
competitive edge
- cutting cost: outsourcing their products or
inputs from a third party, locating to an area
with a low labor costs, improving product and
service designs and increasing their
productivity
- DIFFERENTIATING themselves from the
competition
3. Technology / Innovations
- finding new ways of improving their products
and services in order to create more value for
their customers
- e.g. launching of Iphone 12 and Iphone 12 Pro
because of the major updates
4. Environmental Concerns - increasing awareness on
the impact of pollution and environmental degradation
of businesses
- strict environmental compliance, sustainability,
reducing carbon footprint and environmental
waste
- e.g. pursuing eco-friendly packaging and
materials, limiting their use of plastic and other
non-biodegradable inputs, encouraging their
employees to practice the 3Rs
5. Ethical Issues - being ethically responsible positively
affects how the general public sees them
- they do not have to spend generously
on other advertisements and promotions, word-of-mouth
(WOM) would encourage repeat business
6. Cyber Security - threats on businesses: hacking,
phishing
- assure the confidentiality and
privacy of their customers so that customers would not
choose to do business elsewhere
- e.g. banking
Module 2
❖ Operations Strategy vs. Organization Strategy
Operations strategy - defining the role and activities of
operations function in the organization
- Focuses on the capabilities that enable the firm
to gain competitive advantage
- A well-thought-of strategy is useless if not
implemented
1. Defining Mission - destination of organization
2. Establishing Strategies (Three Basic Business
Strategies)
- low cost (offering product at a lower price thru
locating a place w/ low labor cost and achieving economies of
scale)
 - differentiation (product or service features,
quality, reputation, or customer service)
- responsiveness (how quick and flexible the
organization responds to the needs or the demands of their
customers)
❖ Strategies Formulation of An Organization
Competitiveness - refers to how effective an
organization is in terms of meeting the needs and wants of
other companies that offer similar output
❖ Reasons Behind Failure of Organizations
“Organizations have to understand the different reasons why
organizations fail so they can avoid the same fate.”
Causes of Business Failure
1. only focus on making plans, but does poorly
when it comes to execution
2. Doesn’t do environmental scanning
3. doesn’t have long-term and short-term plans
4. Poor management of operations (issues on
providing adequate inventory, missing
deadlines and operations schedule, and
neglecting human resources)
Environmental Scanning - SWOT Analysis
- strengths and weakness (internal),
opportunities and threats (external)
Order Winners - characteristics of an organization's
output that are perceived by customers to be better than their
counterparts
Order Qualifiers - refer to characteristics that
customers perceive as minimum standards before they
consider one product for purchase
Quality-based strategies - focus on improving the
quality of an organization's output
Time-based strategies - want to reduce time in terms of
introducing innovations or responding to customer demand
❖ Productivity of Organizations
- productivity is difficult to measure in service unlike in
manufacturing where you could easily compute for
productivity by dividing outputs over inputs
- It is well to be up before daybreak, for such habits
contribute to health, wealth and wisdom. (Aristotle)
- Productivity: means making efficient use of your
resources, which is in your case, your time and energy
: refers the effective use of their resource,
or the ratio of output to input
: can be computed based on a single input
(partial productivity), on more than one input (multifactor
productivity), or on all inputs (total productivity)
Productivity = 𝑜𝑢𝑡𝑝𝑢𝑡/ 𝑖𝑛𝑝𝑢𝑡
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 − 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
Productivity Growth = 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦
𝑥 100
Factors Affecting Productivity:
1. Manpower
2. Management
3. Methods
4. Capital
5. Quality
6. Technology
Business Compete Using Marketing:
1. Identifying customer wants and needs
2. Pricing
3. Advertising and Promotion
Business Compete Using Operations: MPCLQ^2 FIS^2
1. Manager and workers
2. Cost
3. Product and Service Design
4. Location
5. Quality
6. Quick Response
7. Flexibility
8. Inventory management
9. Supply Chain Management
10. Service