Managing Operations

Module 1
Introduction and Overview

The key to competitive advantage

A comprehensive management
function
Acknowledgement

 The concepts and ideas presented in the following

slides are based on concepts and ideas in the books
mentioned in your sessions plan and material freely
available on the internet, journals and other sources.
These have been put together for teaching, easy
understanding and study purposes only. The concepts
or ideas do not belong to the undersigned.

 Prof. Pintoo Shome

Operations Management
Definition
◼ “Is a Cross Functional discipline of
systematically and analytically
looking at business systems and
processes in order to design, plan,
operate maintain and improve the
systems”.
Operations Management
Definition
◼ An operations system is defined as one in
which
 several activities are performed
 to transform a set of inputs into useful output
 using a transformation process
◼ Operations Management is
 a systematic approach to
 address all the issues pertaining to
 the transformation process that converts some
inputs into output that are useful, and
 could fetch revenue to the operations system
OM - What it is and is not
 It is not Operations Research / Management
Science which are application of quantitative
methods to decision making.
 It is not Industrial Engineering which is an
engineering discipline
 It is not Human Relations Management
 It is not even only Production Management

Yet,
It is an effective use of any of these or any
combination of these resources for Design,
Operation and Improvement of the systems that
create and deliver the firms primary products
and services
 Look at this tree
Air
Rain/ Sun
water

Soil
The tree draws its resources from the soil, air , water, sunrays etc.
Is the tree or its fruits soil, air, water ?
An Operations Manager is the farmer who manages the tree (organisation and its
processes) and ensures desired fruits (products), that can be sold in a
competitive market, using all the resources at his disposal including a shovel.
 What we may require to use in OM
 Principles of scientific Total Quality Management
management JIT, TQC, OPT, Kaizen, QFD
 Industrial engineering ,TPM
 Industrial psychology Certification processes, ISO
9000, awards etc.
/ HRM
Supply chain management
 Statistical Quality Business Process
Control Reengineering
 Operations research ERP
techniques and tools E- commerce / E-
 Use of computers in operations
business Benchmarking
 Internet
Why Operations Management ?

1. Business education is incomplete without an

understanding of modern approaches to managing
operations.
Example: All organisations produce some product /
service.
One must know how to do this effectively.

2. Operations Management provides a systematic way

of looking at organisational processes – analytical
thinking to deal with real life problems.
Why Operations Management ?

3. Operations Management presents interesting

career opportunities.

4. The concept & tools of Operations

Management are widely used in managing
other functions of a business. – All managers
need to plan work, control quality & ensure
productivity of individuals under their
supervision.
 Operations Management
Efficiency-Effectiveness-Value

Efficiency Effectiveness Value

Produce at
Doing the right Efficiency &
lowest possible cost
things to create value Effectiveness acting
(Service/ Product)
for the company. together creates value.
i.e. using minimum
inputs or resources
Example:
Could be conflicting goals. Same Car Value
Example: Customer Service Counter at lower price
at a Bank. Better Car Value
Efficiency requires fewest people to at lower price
manage the counter. Better Car Value
Effectiveness requires minimizing the time at same price
spent by each customer at the counter.
▪ Operations Management is concerned with the
management of entire operations that produces a good
and delivers a product. Example :
Management decisions divided into three broad areas
within the operations function :

▪ Strategic (long term) decisions.

▪ Tactical (intermediate) decisions.
▪ Operating planning and control (short term) decisions.

Strategic : Broad -

How will we make the product ?

When do we locate the facility / facilities ?
How much capacity to add, when ?
Tactical :
Decisions within the framework of Strategies taken-
How many workers do we need?
When do we need them?
Should we work overtime/ second shift?
Should we have finished goods inventory?

Operating planning and control : Short term-

What jobs do we work on today/ next ?

Whom do we assign the tasks ?
What jobs have priority ?
 Production Systems

A Production System uses resources to

transform inputs into some desired output.

Resources
A Production System may be of various types.
Transformation process can be as follows :

▪Physical (Manufacturing)
▪ Location (Transportation)
▪ Exchange (Retailing)
▪ Storage (Warehousing)
▪ Physiological (Health Care)
▪ Informational (Telecommunication)

These may not be mutually exclusive. Example : A

departmental store can have all or any of these.
 Difference between Services & Goods
Production

Goods Services
▪ Tangible ▪ Intangible
▪ If dropped on your foot ▪ Not feasible to drop or
will hurt
hurt your foot
▪ Location is not so
important ▪ Location is very
important.
▪ Direct customer
involvement in creating ▪ Direct customer
the output not there. involvement in the
▪ Not perishable output.
immediately ▪ Perishable
Note: Many shades of grey. All goods production may involve a
considerable amount of the services part in the Tertiary part of the
Product. (i.e. other than the core product)
 Typical Differences- Goods and Services

Characteristic Goods Services

Output Tangible Intangible

Uniformity of Output High Low

Uniformity of Input High Low

Labour content Low High

Measurement of productivity Easy Difficult

Customer contact Low High

Opportunity to correct quality problems High Low

before delivery
Evaluation Easier More
difficult
Patentable Usually Not usually
 Important to Remember

There is no water tight demarcation between these systems

between products & services.
Production itself can be viewed as a service department to
Marketing & Sales. This concept will eliminate conflicts.

Example: Small order quantities, Urgent schedules,

assorted sizes or product varieties, Quality are often causes
for friction.
Difficult to produce items-Product Variety- Quality- are
always at conflict.
 Classification of Production System
BASIS CLASSIFICATION EXAMPLE

Consumer Goods-
Furniture, TV, Radio.
Producer Goods-
Lathe, Milling etc.
Products
Type of Output
Services Transportation, health,
entertainment,
banking services,
education system,
IT & ITes.
 Classification of Production System
BASIS CLASSIFICATION EXAMPLE

Construction of bridge,
dam, roads
Projects
Hospital, auto repair, furniture

Job Shop

Type of Flow Making High volume TV,

Auto Factory.
Flow Shop
Batch Shop
Postal services,
telephone company,
Continuous Process power corporation,
oil refinery,
chemical plant
 Classification of Production System
BASIS CLASSIFICATION EXAMPLE

Customised Medical care, legal service.

Type of
Specification
under Service
Type

Standardised Insurance, wholesale stores.

 Schematic Representation of an Production / Operations
Subsystems
Forecast Location & Layout

Product Design & Analysis, Work Study Products

&/ or
Production Control Services

I Scheduling & O M
Aggregate
N Control U A
Manufacturing
P MRP T R
Line Balancing
U P K
U E
T Master
Single M/c T T
Production Capacity
Plng Scheduling
Scheduling
Flow Shop Scheduling
Job Shop

Inventory Quality
Control Control
 Contemporary Issues

 Mergers and acquisitions

 Supply Chain – A chain is perceived as being
flexible. A supply chain is not. To make it flexible
is the OM challenge.
 Globalisation – managing global suppliers,
production, distribution, networks
 Extensive use of the Internet is a foregone
conclusion. Effective use of the Internet is not.
Contemporary Issues

 Value added services – Just good products is no longer

good enough
 Achieving the “service factory’ - high volume
personalised service much like a mass production
manufacturing plant
 Stay Healthy, Lean and Efficient
 ‘Satisficing’ (borrowed from Managerial Economics) is
the goal. Not maximising or minimising which are
mathematical concepts.
 Harmony ( not discord) within and between processes /
systems is the natural rule. Ensuring this makes you a
natural winner.
 Important Points to keep in
mind
 Do not allow a tool or concept to carry you so far away
that you forgot your goal.
 Every situation is a unique one for which there is no
ready made tool or solution. This is where your
managerial skills are necessary.
 All models are only as good as the name implies. It is
not the real thing, just a crude approximation of the
reality. Results need your intervention and
interpretation.
 This is where you step in as an
Operations Manager
End of Module-1
(Acknowledgement)

 The concepts and ideas presented in the slides are

based on concepts and ideas in the books mentioned
in your sessions plan and material freely available on
the internet, journals and other sources. These have
been put together for teaching, easy understanding
and study purposes only. The concepts or ideas do
not belong to the undersigned.
 These slides are meant as a guide and revision notes
only and are not sufficient.
 Therefore, Reading from Books is a
MUST
- Thank you -
 Prof. Pintoo Shome