Operations Management

Lecture 1 : Intro and overview

1.1 what is OM
1.2 importance of OM
1.3 process= input-transformation-outputs
1.4 the process hierarchy
1.5 OM characteristics (features)
1.6 The activities of OM

Definitions
Management: 5 factors of management H.F,
Planning, Commanding, controlling, organizing (coordinating is part of commanding)
Operations: process of creating a service and delivering it to selected clients
Process: planning, implementing steps, work towards an end goal
System: set of regulations, methods and tools applied to manage an operation
Project: new activity, non-repetitive, time limit, limited budget. Define milestone
 Should be split into different parts (to receive payment for the parts that were
achieved)
Objective: SMART: specific, measurable, achievable, realistic, timely. A result that is
suggested to individual/team to achieve within a time limit using defined resources.
Outcome#output(tangible results)
Operational: practical aspect of implementing a plan (to confuse with operations)
Operational management:
 how organizations design, deliver, and improve continuously (after production, to
better quality, activities of production, and profits), all while taking into consideration
sustainability
 Resource management and process (products/delivery/ planning) to deliver goods and
services

General learning OUTCOMES:

- What is OM, importance? OM & O strategy, what is O sys?
- Significance of operating sys in manufacturing and service org.
- Supply chain management
- Lean sys methods
 - Operations simulations: important because low cost / price) preventive measures,
enables to confirm data/predicted results.
We should understand:
The link between general business strat. and strategic O manag.
 Key issue is awareness of different approach avail for the design and op. sys
 The role of Op consultancy

Hierarchy of levels of management

TOP: strategic management: conceptualizing

Middle: tactical management: split the plan on each depart of organizations
Bottom: Operational management: put to practice the tasks/activities

 General to detailed
 Unfocalized to localized
 Long term to short term
 Project activity to random activity (repetitive)

Organization is a sys, composed of different departments; each have their own results that
they aim to achieve.
More process = more results Used in Operations Management in
order to create and deliver
Management of process => goods+services to clients outside or
organization
Management of sys =>

Organizations nowadays design, create and deliver:

 services and products, ( not exclusively one of them)!!
Managers ( resource, financial,operations, mkt ):
 manage processes and serve on both internal & external level, being part of their
activities in operations
OM COURSE 2

1.1. What is OM?

As a transformation processes where e.g., materials, labor is transformed into goods/
services.

A transformation processes where results are typically neither purely services or purely goods
– based.

Type of transformation process

- Physical – manufacturing operations;

- Locational – transportation / warehousing;
- Exchange – retail;
 - Physiological – health care;
- Psychological – entertainment;
- Informational – communication.

OM like part of IKEA’s:

- Arranging the store layout to give smooth and effective flow to customer (process
layout design);
- Designing stylish product that can be flat packed efficiently (product design);
- Making sure that all staff can contribute to the company success (job design);
- Locating store of an appropriate size in the most effective place (supply network
design);
- Arranging for delivery of products to store (supply chain management);
- Overcoming demand fluctuation (capacity management);
- Avoid running out of product for sale (inventory management);
- Monitoring and enhancing quality of services to customer (quality management);
- Continually examining and improving operations practices (operations improving).

What is challenging for operations:

- Promoting the creativity;
- Must find the solution to technological and environmental challenges;
- Difficult to define areas of knowledges management;
- Is the center with so many of the changes that affecting the business;
- Each aspect of business affects or is affected by operations;

Facts about OM
Many services jobs are closely related to operations;
o Financial services;
o Marketing services;
o Accounting services;
o Information services.

There is a significant amount of interactions and collaboration among the functional

area.
It provides an excellent vehicle for understanding the world in which company make
business.

1.2. Why is important OM?

Are 3 core functions in any organizations:

- The marketing functions;
- The service/product development functions;
- The operations functions.

The operations functions

- Is the part of the org. (like structure) that is responsible for op. activities;
- Every org. has op. functions = because everyone produce some types of products or
services.

CORE OPERATIONS FUNCTIONS

- Core functions: THE MARKETING FUNCTIONS (included sales): is responsible
for communicating the org. services and products to its markets in order to generate
customer request for them.
- Core functions: THE SERVICE/ PRODUCT DEVELOPMENT FUNCTIONS: is
responsible for developing new and upgrading offerings in order to generate future
customer request for products.
- Core functions: THE OPERATIONS FUNCTIONS: responsible for fulfilling
customer request for services through the creation and delivery products.

SUPPORT OPERATIONS FUNCTIONS

- the ACCOUNTING and FINANCE functions: provide the information to help
economical decision-making the manages the financial resource of the organization
- the HR functions: responsible for recruitment and develops the org. staff as well as
looking after their welfare
OM COURSE 3

Examples about NON-operational FUNCTION

ORG. FUNCTION PROCESSES OUTPUTS CLIENTS
MK & SALES -planning -mk and sales plans -top mang.
FUNCTION -forecasting -sales forecast -sales staff ( supplu),
-order taking process -confirmed orders planners
-operations
FINANCE & -budgeting -budget -staff organis.
ACCOUNTING -capital approval -capital request -top management
-invoincing evaluation -ext. clients
-invoices
HR -payroll -salary statements -employee
-recruitment -new hires -other departments
-training process -trained employee -other departments
IT -system review -system evaluated -other departments
-helpdesk -advice -other departments
-system -project -other departments
implementation implemented
project

Op manag. Use RESOURCE to APPROPRIATELY CREATE outputs that fulfil defined

market requirements.
Resources:
-experience
-people (knowledge)
-machines
-partners

APPROPRIATELY
-effectively
-efficiently
-creativity

CREATE
-produce
-change
-sell
-assemble
-move
-cure
-shape

OUTPUTS
-ideas
-products
-services

FULFIL:
-match
-satisfy
-exceed
-delight

DEFINED:
-potential
-perceived
-current
-emerging
-real

MARKET
-citizen
-clients
-customer
-society

REQUIREMENTS:
-dreams
-demands
-needs
-concerns
1.3. The inputs- transform – output process for OM
All operations create products by changing inputs into outputs using the input-transform-
output process
-automotive assembly factory = OM uses machines to efficiently assembly products that
satisfy current customer (not client) demands
-management consultant = OM uses people to effectively create the products that will fulfill
current and potential clients/customer needs
- advertising agency = OM use knowledge and experience to creatively present ideas that
delight clients (not customer) and address customer’s real needs

Transform process is the MAIN FOCUS of the OM

Transform resources (type): customers, materials, information

- for customer change:

- their psychically properties: hairdresser, cosmetic surgeon
- their location: from A to B
- their psychological state: ill to healthy, theatre, music, drink
- for materials change:
- their psychically properties: shape, composition, structure
- their location: parcel delivering company, positioning commodities on shelfs
- for information change:
- their informational properties: checked, calculated, linked (data to info), structure
- their location: libraries, in communications (from one person to others)
- their possession: selling info (marketing research)
- their store location: archives, internet supplier, cloud supplier

1.4. The processes hierarchy

In org. we have 2 meanings of operations:

1. Operations like a FUNCTIONS = meaning the part of the org. (department) which
create and delivery the product for external clients
2. Operations as an ACTIVITY = meaning action (management) of the process within
any of the org. functions at any level of org.
- Any operations is a mechanism that transform input in output and called process
 - A process is a logical arrangement of resources that produce some mixture of
product and services.
- These processes make an internal network within an operations
- Each process is/has in some time, an internal supplier and an internal customer from
other processes
- The internal customer MUST TREATHING with the same degree of care as external
customer is so the effectiveness of hole operations can be improved

Different approaches of processes in org.

HIGH
Categories of Business processes
- Upper strategical processes -represent the operations of the all org.
- Tactical processes -are the processes at the functions level
- Operational processes -are core processes that make up value
stream
- Supporting processes -are the support the core processes

LOW
- Level of hierarchy processes are linked with:
o Number of processes;
o Number of participants job;
o Number of functions/departments/organizations participants;

For upper complexity – strategical processes – investing in manufacturing and

product;
For middle complexity – department processes – tactical p. - manufacturing the
product;
For base processes – at operational level – turning on the device, read the instruction.

Business can be analyzed at three processes level:

- Simple process – a set of linked activities (or tasks) with added value;
- Group of processes – a set of processes with design, deliver and improve products
- Supply network – mixt operations linked between them
Operations can be seen as a network of the business level or a collection of a processes.

Conclusions: OM is RELEVANT at all parts of the business level.

OPERATIONS can be approach as a group of subprocesses such as:

 End to end business process (process concept used in org. in order to create value)
Entire complex activity/ subprocesses for the customer needs, for each product that are
fulfilled by on business process (will cross the departments of org.)
 Re-engineering (BPR) (process concept used in org. in order to create more value)
Reorganizing the process boundaries and organizational responsibilities around the
business process (sound like a kind of philosophy).
OM COURSE 4

1.5. OM characteristics (features)

All processes are similar of: inputs – transformation – outputs.

The processes are different in: VOLUME, VARIETY, VARIATION, VISIBILITY
These different characteristics must be identified, understood, and adapted.

The VOLUME dimensions (approach of a process)

- Must have repeatability = > systematization => low unit cost

Is possible when volume

increase: standard procedures

- Doing the same thing every time

- Standards procedure for all jobs
- Use specialized tools
- Clear link between processes
- Clear hierarchisation of processes
- Clear tracking of the red thread – the end-to-end process
- High quantity of the products
- Less workers
- The same level of the quality
- Low raw materials cost
- Worker’s specialisation
- High level of ROI
- This dimension has advantage and disadvantage

The VARIETY of their output (approach of a process)

- Flexibility => high unit cost => example: TAXI – customized activity
- Systematization => low unit cost => ex: BUS – low customized activity

Variety decrease: Is possible when volume

standardization increase: standard procedures
Flexibility is required by operations, and the level is important.

The VARIATION dimension (approach of a process)

- Unexpected problem => bottleneck => unsatisfied clients
- Routine (standardization) => predictable activities / operations => satisfied clients

Examples:

The operations must change

- Pattern for hotel, restaurant, or shop capacity
o No clients
o Too many clients at the cash desk Predict the likely level of demand

Opposite situation:

- Transform this pattern in routine

o Predictable
o Satisfied clients

Source of variations:

- Poor management
- Incorrect specifications
- Incomplete quality system
- The technology process
- Bad raw materials (tools)
- Operator errors

Causes of variations:
- Lack of knowledge
- Lack of processes resource
- Non-involvement of the clients
- Ignorance of the standard or criteria used
- Difficult operations (tasks)
 - Poor maintenance
- Inadequate metrology
- Reception control
- Poor training
- Use of inappropriate equipment

Reduction measures of variation:

- Processes improvement
- standardization
- testing products / or part of them
- partners with suppliers
- involvement operators
- training, self-control

Source of variation Conclusion

MANY of goods or services The GREATER the variety of goods offered, the GREATER
being offered the variation in production or service requirements
STRUCTURAL variation These are GENERALY PREDICTABLE. They are
in demand important for capacity planning. Must understand the
demand (too many clients in one period of time, too many
product / clients)
RANDOM variation Natural variation that is present in all processes. Generally,
it can not be reduced, or eliminated or influenced by
managers. Must be predicted.
ASSIGNABLE variation This type of variation has identifiable resource. Can be
reduced, can be eliminated, by analysis or corrective action.
Variations can be disruptive to operations. They may result additional costs, delays
and shortage, poor quality, and inefficient work system.
 OM COURSE 5

The VISIBILITY dimension (approach of a process)

In front of the The VISIBILITY dimension

customer

o Customer contact skills High visibility operation Short waiting tolerance

p
o
s
i
Inside of the factory High specialization or Complex products
t
e complex device

Low or block visibility Is better to identify the degree of visibility which

process for customer customer have of the production of their output

IMPLICATION IMPLICATION
-high repeatability
- Low repetition
HIGH - high specialization- high
- performs more of jobs
VOLUME systematization
- less systematization
- high capital intensive
- high unit cost
LOW
- low unit cost

- flexibility LOW -well defined

- complex VARIETY - high level of routine
- match customer need - standardized
HIGH
- high unit cost - low unit cost
 - changing the capacity - stable
- should be anticipated LOW - routine
- flexibility - like a result: foreseeable
VARIATION
- linked with demand - high utilization
- high unit cost HIGH
- low unit cost

-high time lag

- short waiting tolerance
- standardization
- customer perception LOW
- low contact skill
- customer contact skill
VISIBILITY - high staff utilization
- feedback variety
HIGH - centralization
- high unit cost
- low unit cost

1.6. The activity of OM

Some activities are seen as the prime responsibility (strategical one) of operational and
others are cross-functional (tactical) part of other departments (functions).

Key issue:
-Economic conditions
A primary function is to guide the -innovating
system by DECISION making - quality problems
DIRECTING - risk management
- global competitions

DESIGNING DEVELOPING

OUTPUTS
INPUTS

DELIVERING
This is general model of OM activities with a wide range of decision, raging from strategical
one to tactical.

Prime responsibility (strategical one)

Typical operations DECISIONS include (base on key issue)
- What: What resources are needed, and in what amounts?
- When: When will each resource be needed? When should the work be scheduled?
- How: How will be product or service be designed?
- When: When should the materials and other supplies be ordered?
- How: How will work be done? How will resource be allocated?
- Where: Where the work will be done?
- Who: Who will do the work?

How do make our decision (Operations Managers) quick, mistake must have a small impact
and be at low costs.
Modelling is a key tool used by all DECISIONS makers.
Model – an abstraction of reality – use a simplification of something.